10-Q


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarter Ended March 31, 2016
¨
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission File Number: 814-01025
AMERICAN CAPITAL SENIOR FLOATING, LTD.
(Exact name of registrant as specified in its charter) 
Maryland
 
46-1996220
(State of Incorporation)
 
(I.R.S. Employer
Identification No.)
 
 2 Bethesda Metro Center
14th Floor
Bethesda, MD 20814
 
 
 (Address of principal executive offices)
 
 
301-968-9310
 
 
(Registrant’s telephone number, including area code)
 
     
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. 
Large accelerated filer
¨
 
Accelerated filer
x
 
 
 
 
 
Non-accelerated filer
¨
(Do not check if a smaller reporting company)
Smaller reporting company
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange     Act).    Yes  ¨    No  x
The number of shares of the issuer's common stock, $.01 par value, outstanding as of May 3, 2016 was 10,000,100.




AMERICAN CAPITAL SENIOR FLOATING, LTD.
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2016
TABLE OF CONTENTS

 
 
 
 
PAGE
PART I. FINANCIAL INFORMATION
 
 
 
 
Item 1.
Financial Statements
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
PART II. OTHER INFORMATION
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
Item 5.
 
 
 
Item 6.
 
 
 
 
 
 
 




2



PART I. FINANCIAL INFORMATION



Item 1. Financial Statements

AMERICAN CAPITAL SENIOR FLOATING, LTD.
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(in thousands, except share and per share data)
 
 
March 31, 2016
(unaudited)
 
December 31, 2015
Assets:
 
 
 
 
Investments, fair value (cost of $248,657 and $261,875, respectively)
 
$
216,018

 
$
229,056

Cash and cash equivalents
 
2,607

 
2,474

Receivable for investments sold
 

 
3,096

Deferred financing costs
 
250

 
273

Interest receivable
 
546

 
583

Prepaid expenses and other assets
 
386

 
89

Receivable from affiliate (see notes 3 and 4)
 
238

 
234

Total assets
 
$
220,045

 
$
235,805

Liabilities:
 
 
 
 
Secured revolving credit facility payable (see note 7)
 
$
98,800

 
$
110,200

Payable for investments purchased
 
2,150

 
5,437

Distributions to stockholders payable (see note 10)
 
970

 
970

Management fee payable (see note 3)
 
497

 
536

Interest payable (see note 7)
 
34

 
52

Taxes payable (see note 8)
 
65

 
278

Payable to affiliate (see note 4)
 
209

 
217

Other liabilities and accrued expenses
 
133

 
186

Total liabilities
 
102,858

 
117,876

Commitments and contingencies (see note 11)
 
 
 
 
Net Assets:
 
 
 
 
Common stock, par value $0.01 per share; 10,000,100 issued and outstanding, respectively; 300,000,000 authorized
 
100

 
100

Paid-in capital in excess of par
 
150,903

 
150,903

Undistributed net investment income
 
1,528

 
1,560

Accumulated net realized loss from investments
 
(2,705
)
 
(1,815
)
Net unrealized depreciation on investments
 
(32,639
)
 
(32,819
)
Total net assets
 
117,187

 
117,929

Total liabilities and net assets
 
$
220,045

 
$
235,805

Net asset value per share outstanding
 
$
11.72

 
$
11.79












See notes to the consolidated financial statements.


3




AMERICAN CAPITAL SENIOR FLOATING, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share data)
 
 
Three Months Ended March 31,
 
 
2016
 
2015
Investment Income:
 
 
 
 
Interest
 
$
4,345

 
$
4,741

Total investment income
 
4,345

 
4,741

Expenses:
 

 
 
Interest and commitment fee (see note 7)
 
641

 
658

Management fee (see note 3)
 
497

 
578

Insurance
 
111

 
118

Amortization of deferred financing costs
 
23

 
97

Other general and administrative expenses (see note 4)
 
406

 
405

Total expenses
 
1,678

 
1,856

Expense reimbursement (see notes 3 and 4)
 
(238
)
 
(245
)
Net expenses
 
1,440

 
1,611

Net investment income before taxes
 
2,905

 
3,130

Income tax provision (see note 8)
 
(27
)
 
(70
)
Net investment income
 
2,878

 
3,060

Net (loss) gain on investments:
 
 
 
 
Net realized (loss) gain on investments
 
(890
)
 
307

Net unrealized appreciation on investments
 
180

 
424

Net (loss) gain on investments
 
(710
)
 
731

Net increase in net assets resulting from operations (Net Earnings)
 
$
2,168

 
$
3,791

 
 
 
 
 
Net investment income per share
 
$
0.29

 
$
0.31

Net Earnings per share (see note 5)
 
$
0.22

 
$
0.38

Distributions to stockholders declared per share
 
$
0.29

 
$
0.29

Weighted average shares outstanding
 
10,000

 
10,000















See notes to consolidated financial statements.


4




AMERICAN CAPITAL SENIOR FLOATING, LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(unaudited, in thousands)
 
 
 
Three Months Ended March 31,
 
 
2016
 
2015
Operations:
 
 
 
 
Net investment income
 
$
2,878

 
$
3,060

Net realized (loss) gain
 
(890
)
 
307

Net unrealized appreciation on investments
 
180

 
424

Net Earnings
 
2,168

 
3,791


 
 
 
 
Distributions to stockholders:
 
 
 
 
From net investment income
 
(2,910
)
 
(2,900
)
Net (decrease) increase in net assets
 
(742
)
 
891

 
 
 
 
 

 
 
 
 
Net assets beginning of period
 
117,929

 
144,235

Net assets end of period
 
$
117,187

 
$
145,126

 
 
 
 
 
Undistributed net investment income included in net assets
 
$
1,528

 
$
293

Common shares outstanding
 
10,000

 
10,000


 




















See notes to consolidated financial statements.


5



AMERICAN CAPITAL SENIOR FLOATING, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
 
 
Three Months Ended March 31,
 
 
2016
 
2015
Cash Flows from Operating Activities:
 
 
 
 
Net Earnings from operations
 
$
2,168

 
$
3,791

Adjustments to reconcile net increase in net assets resulting from operations:
 
 
 
 
Net realized loss (gain) on investments
 
890

 
(307
)
Net unrealized appreciation on investments
 
(180
)
 
(424
)
Accretion of CLO interest income
 
(1,657
)
 
(1,709
)
Net amortization of discount on loans
 
(58
)
 
(10
)
Amortization of deferred financing costs
 
23

 
97

Purchase of investments
 
(8,995
)
 
(36,180
)
Proceeds from disposition of investments
 
23,038

 
42,440

Decrease (increase) in receivable for investments sold
 
3,096

 
(10,949
)
Increase (decrease) in payable for investments purchased
 
(3,287
)
 
8,912

Increase in receivable from affiliate
 
(4
)
 
(81
)
Decrease in interest receivable
 
37

 
139

Increase in prepaid expenses and other assets
 
(297
)
 
(230
)
Decrease in interest payable
 
(18
)
 
(2
)
(Decrease) increase in other liabilities and accrued expenses
 
(53
)
 
54

Decrease in payable to affiliate
 
(8
)
 
(28
)
(Decrease) increase in management fee payable
 
(39
)
 
1

Decrease in taxes payable
 
(213
)
 
(10
)
Net cash provided by operating activities
 
14,443

 
5,504

Cash Flows from Financing Activities:
 
 
 
 
Distributions to stockholders paid
 
(2,910
)
 
(2,900
)
Payments on revolving credit facility, net
 
(11,400
)
 
(2,200
)
Net cash used in financing activities
 
(14,310
)
 
(5,100
)
Net increase in cash and cash equivalents
 
133

 
404

Cash and cash equivalents at beginning of period
 
2,474

 
1,757

Cash and cash equivalents at end of period
 
$
2,607

 
$
2,161

Supplemental disclosure of cash flow information:
 
 
 
 
Cash paid for interest and commitment fees
 
$
659

 
$
660

Cash paid for income taxes
 
$
240

 
$
80

Distributions to stockholders declared and payable during the period
 
2,910

 
2,900

 


See notes to consolidated financial statements.


6



AMERICAN CAPITAL SENIOR FLOATING, LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS
MARCH 31, 2016
(unaudited, in thousands)


Description

Maturity

Interest
Rate (1)

Basis 
Point
Spread
Above
Index 
(2)

LIBOR
Interest Rate Floor
 
Industry

Par
Amount

Cost

Fair
Value
Non-Control/Non-Affiliate Investments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
First Lien Floating Rate Loans —140.1% of Net Assets
 







24 Hour Fitness Worldwide, Inc. (5)

05/28/21

4.75
%

L+ 3.75

1.00%
 
Hotels, Restaurants & Leisure

$
1,967


$
1,962


$
1,905

Acosta, Inc. (5)

09/26/21

4.25
%

L+ 3.25

1.00%
 
Media

2,466


2,431


2,415

ADMI Corp. (5)

04/29/22

5.50
%

L+ 4.50

1.00%
 
Health Care Providers & Services

546


545


547

Aegis Toxicology Sciences
Corporation
(5)

02/24/21

5.50
%

L+ 4.50

1.00%
 
Health Care Providers & Services

1,637


1,629


1,425

Agrofresh Inc. (3), (5)

07/31/21

5.75
%

L+ 4.75

1.00%
 
Chemicals

646


644


630

Air Medical Group Holdings, Inc. (5)

04/28/22

4.25
%

L+ 3.25

1.00%
 
Health Care Providers & Services

1,985


1,989


1,942

Albertson's LLC (5)

12/21/22

5.50
%

L+ 4.50

1.00%
 
Food & Staples Retailing

990


966


993

AlixPartners, LLP (5)

07/28/22

4.50
%

L+ 3.50

1.00%
 
Diversified Financial Services

1,990


1,985


1,989

Alliant Holdings Intermediate, LLC (5)

08/12/22

4.50
%

L+ 3.50

1.00%
 
Insurance

1,042


1,040


1,033

American Tire Distributors, Inc. (5)

09/01/21

5.25
%

L+ 4.25

1.00%
 
Distributors

1,475


1,468


1,472

Amneal Pharmaceuticals LLC (5)

11/01/19

4.50
%

L+ 3.50

1.00%
 
Pharmaceuticals

990


990


986

AmWINS Group, LLC (5)

09/06/19

5.25
%

L+ 4.25

1.00%
 
Insurance

2,927


2,938


2,938

Anchor Glass Container Corporation (5)

07/01/22

4.25
%

L+ 3.25

1.00%
 
Containers & Packaging

935


931


934

AqGen Ascensus, Inc. (5)
 
12/05/22
 
0.50
%
 
L+ 4.50
 
1.00%
 
Capital Markets
 

 

 
2

AqGen Ascensus, Inc. (5)
 
12/05/22
 
5.50
%
 
L+ 4.50
 
1.00%
 
Capital Markets
 
939

 
884

 
911

Aquilex LLC (5)

12/31/20

5.00
%

L+ 4.00

1.00%
 
Commercial Services & Supplies

968


966


912

Ardent Legacy Acquisitions, Inc. (5)

08/04/21

6.50
%

L+ 5.50

1.00%
 
Health Care Providers & Services

332


329


332

Arnold and S. Bleichroeder Holdings,
Inc.
(5)

12/01/22

4.75
%

L+ 4.00

0.75%
 
Capital Markets

713


699


705

Ascend Learning, LLC (5)

07/31/19

5.50
%

L+ 4.50

1.00%
 
Diversified Consumer Services

586


585


586

Asurion, LLC (5)

05/24/19

5.00
%

L+ 3.75

1.25%
 
Commercial Services & Supplies

938


939


927

Asurion, LLC (5)

08/04/22

5.00
%

L+ 4.00

1.00%
 
Commercial Services & Supplies

1,231


1,226


1,207

Avaya Inc. (5)
 
05/29/20
 
6.25
%
 
L+ 5.25
 
1.00%
 
Software
 
994

 
814

 
669

BJ's Wholesale Club, Inc. (5)

09/26/19

4.50
%

L+ 3.50

1.00%
 
Food & Staples Retailing

1,468


1,468


1,431

Blackboard Inc. (5)

10/04/18

4.75
%

L+ 3.75

1.00%
 
Software

2,429


2,430


2,269

Blue Coat Holdings, Inc. (5)

05/20/22

4.50
%

L+ 3.50

1.00%
 
Communications Equipment

1,995


1,996


1,969

BWay Intermediate Company, Inc. (5)

08/14/20

5.50
%

L+ 4.50

1.00%
 
Containers & Packaging

2,450


2,432


2,383

C.H.I. Overhead Doors, Inc. (5)

07/29/22

4.75
%

L+ 3.75

1.00%
 
Building Products

332


331


328

Calceus Acquisition, Inc. (5)

01/31/20

5.00
%

L+ 4.00

1.00%
 
Textiles, Apparel & Luxury Goods

2,331


2,339


1,716

Camp International Holding Company (5)

05/31/19

4.75
%

L+ 3.75

1.00%
 
Transportation Infrastructure

1,955


1,974


1,898

Carecore National, LLC (5)

03/05/21

5.50
%

L+ 4.50

1.00%
 
Health Care Providers & Services

2,042


2,041


1,919


See notes to consolidated financial statements.
7



AMERICAN CAPITAL SENIOR FLOATING, LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
MARCH 31, 2016
(unaudited, in thousands)


Description

Maturity

Interest
Rate (1)

Basis 
Point
Spread
Above
Index 
(2)

LIBOR
Interest Rate Floor
 
Industry

Par
Amount

Cost

Fair
Value
First Lien Floating Rate Loans (continued) —140.1% of Net Assets
 
 
 
 
 
 
 
 
CCM Merger Inc. (5)
 
08/06/21
 
4.50
%
 
L+ 3.50
 
1.00%
 
Hotels, Restaurants & Leisure
 
$
862

 
$
857

 
$
862

CEC Entertainment, Inc. (5), (7)
 
02/12/21
 
4.00
%
 
L+ 3.00
 
1.00%
 
Hotels, Restaurants & Leisure
 
748

 
721

 
729

Checkout Holding Corp. (5)
 
04/09/21
 
4.50
%
 
L+ 3.50
 
1.00%
 
Media
 
2,456

 
2,455

 
2,105

CityCenter Holdings, LLC (5)
 
10/16/20
 
4.30
%
 
L+ 3.25
 
1.00%
 
Hotels, Restaurants & Leisure
 
1,461

 
1,468

 
1,461

CNT Holdings III Corp (5)
 
01/22/23
 
5.25
%
 
L+ 4.25
 
1.00%
 
Internet & Catalog Retail
 
500

 
495

 
501

Compuware Corporation (5)

12/15/21

6.25
%

L+ 5.25

1.00%
 
Software

2,965


2,902


2,847

Cotiviti Corporation (5)

05/14/21

4.50
%

L+ 3.50

1.00%
 
Professional Services

1,108


1,100


1,093

CPG International Inc. (5)

09/30/20

4.75
%

L+ 3.75

1.00%
 
Building Products

1,933


1,933


1,884

CPI Buyer, LLC (5)

08/16/21

5.50
%

L+ 4.50

1.00%
 
Trading Companies & Distributors

985


974


944

CT Technologies Intermediate Holdings, Inc. (5)

12/01/21

5.25
%

L+ 4.25

1.00%
 
Health Care Technology

496


494


490

Dell International LLC (5)

04/29/20

4.00
%

L+ 3.25

0.75%
 
Technology Hardware, Storage & Peripherals

2,481


2,488


2,483

Deltek, Inc. (5)

06/25/22

5.00
%

L+ 4.00

1.00%
 
Software

2,872


2,866


2,863

Dole Food Company, Inc. (5)

11/01/18

4.50
%

L+ 3.50

1.00%
 
Food Products

2,506


2,503


2,500

Duff & Phelps Corporation (5)

04/23/20

4.75
%

L+ 3.75

1.00%
 
Capital Markets

3,412


3,414


3,395

DynCorp International Inc. (5)

07/07/16

6.27
%

L+ 4.50

1.75%
 
Aerospace & Defense

2,189


2,190


2,123

Electrical Components
International, Inc.
(5)

05/28/21

5.75
%

L+ 4.75

1.00%
 
Electrical Equipment

1,829


1,833


1,815

Emerald Expositions Holding, Inc. (5)

06/17/20

4.75
%

L+ 3.75

1.00%
 
Media

2,615


2,632


2,608

Energy Transfer Equity, L.P. (5)
 
12/02/19
 
3.25
%
 
L+ 2.50
 
0.75%
 
Oil, Gas & Consumable Fuels
 
1,000

 
812

 
896

Epicor Software Corporation (5)

06/01/22

4.75
%

L+ 3.75

1.00%
 
Software

993


990


945

eResearchTechnology, Inc. (5)

05/08/22

5.50
%

L+ 4.50

1.00%
 
Life Sciences Tools & Services

993


988


992

Erie Acquisition Holdings, Inc. (5), (7)

03/01/23

5.75
%

L+ 4.75

1.00%
 
Commercial Services & Supplies

500


490


503

EWT Holdings III Corp. (5)

01/15/21

4.75
%

L+ 3.75

1.00%
 
Machinery

978


974


960

Expro Finservices S.à r.l. (3), (5)

09/02/21

5.75
%

L+ 4.75

1.00%
 
Energy Equipment & Services

1,970


1,946


1,341

Fairmount Minerals, Ltd. (5)

09/05/19

4.50
%

L+ 3.50

1.00%
 
Metals & Mining

1,928


1,935


1,031

Filtration Group Corporation (5)

11/23/20

4.25
%

L+ 3.25

1.00%
 
Industrial Conglomerates

995


995


994

Fitness International, LLC (5), (7)

07/01/20

5.50
%

L+ 4.50

1.00%
 
Hotels, Restaurants & Leisure

1,784


1,757


1,725

Gates Global LLC (5)

07/06/21

4.25
%

L+ 3.25

1.00%
 
Machinery

1,464


1,462


1,385

Global Tel*Link Corporation (5)

05/23/20

5.00
%

L+ 3.75

1.25%
 
Diversified Telecommunications Services

1,680


1,658


1,527

Gruden Acquisition, Inc. (5)

08/18/22

5.75
%

L+ 4.75

1.00%
 
Road & Rail

332


329


291

HFOTC LLC (5), (7)
 
08/19/21
 
4.25
%
 
L+ 3.25
 
1.00%
 
Oil, Gas & Consumable Fuels
 
499

 
454

 
454

HGIM Corp. (5)

06/18/20

5.50
%

L+ 4.50

1.00%
 
Marine

1,462


1,466


799

Hyland Software, Inc. (5)

07/01/22

4.75
%

L+ 3.75

1.00%
 
Software

2,476


2,456


2,470

Immucor, Inc. (5)

08/19/18

5.00
%

L+ 3.75

1.25%
 
Health Care Equipment & Supplies

982


987


952

Indra Holdings Corp. (5)

05/01/21

5.25
%

L+ 4.25

1.00%
 
Textiles, Apparel & Luxury Goods

1,190


1,182


1,030


See notes to consolidated financial statements.
8



AMERICAN CAPITAL SENIOR FLOATING, LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
MARCH 31, 2016
(unaudited, in thousands)


Description

Maturity

Interest
Rate (1)

Basis 
Point
Spread
Above
Index 
(2)

LIBOR
Interest Rate Floor
 
Industry

Par
Amount

Cost

Fair
Value
First Lien Floating Rate Loans (continued) —140.1% of Net Assets
 
 
 
 
 
 
 
 
Informatica Corporation (5)

08/05/22

4.50
%

L+ 3.50

1.00%
 
Software

$
1,990


$
1,986


$
1,958

Information Resources, Inc. (5)
 
09/30/20
 
4.75
%
 
L+ 3.75
 
1.00%
 
Professional Services
 
1,950

 
1,960

 
1,955

Inmar, Inc. (5)
 
01/27/21
 
4.25
%
 
L+ 3.25
 
1.00%
 
Commercial Services & Supplies
 
1,965

 
1,951

 
1,915

Ion Media Networks, Inc. (5)

12/18/20

4.80
%

L+ 3.75

1.00%
 
Media

1,960


1,969


1,953

IPC Corp. (5)

08/06/21

5.50
%

L+ 4.50

1.00%
 
Software

1,485


1,479


1,390

Jaguar Holding Company II (5)
 
08/18/22

4.25
%

L+ 3.25

1.00%
 
Life Sciences Tools & Services

1,489


1,482


1,478

Jazz Acquisition, Inc. (5)

06/19/21

4.50
%

L+ 3.50

1.00%
 
Aerospace & Defense

1,966


1,970


1,754

Keurig Green Mountain, Inc. (5)
 
03/03/23
 
5.25
%
 
L+ 4.50
 
0.75%
 
Food Products
 
473

 
464

 
474

Key Safety Systems, Inc. (5)

08/29/21

4.75
%

L+ 3.75

1.00%
 
Auto Components

1,193


1,188


1,189

Kronos Acquisition Intermediate Inc. (3), (5)

08/26/22

6.00
%

L+ 5.00

1.00%
 
Household Products

995


972


962

La Frontera Generation, LLC (5)

09/30/20

4.50
%

L+ 3.50

1.00%
 
Independent Power and Renewable Electricity Producers

1,778


1,786


1,742

Landslide Holdings, Inc. (5)

02/25/20

5.00
%

L+ 4.00

1.00%
 
Software

980


977


965

Language Line, LLC (5)

07/07/21

6.50
%

L+ 5.50

1.00%
 
Commercial Services & Supplies

935


926


932

Learning Care Group (US) No. 2 Inc. (5)

05/05/21

5.00
%

L+ 4.00

1.00%
 
Diversified Consumer Services

1,013


1,013


1,014

Life Time Fitness, Inc. (5)

06/10/22

4.25
%

L+ 3.25

1.00%
 
Hotels, Restaurants & Leisure

496


494


491

Mallinckrodt International Finance
S. A.
 (3), (5)

03/19/21

3.25
%

L+ 2.50

0.75%
 
Pharmaceuticals

569


532


550

Manitowoc Foodservice, Inc. (3), (5)
 
03/03/23

5.75
%

L+ 4.75

1.00%
 
Machinery

750


735

 
755

Mitchell International, Inc. (5)

10/13/20

4.50
%

L+ 3.50

1.00%
 
Software

2,395


2,404


2,319

Moneygram International, Inc. (3), (5)

03/27/20

4.25
%

L+ 3.25

1.00%
 
IT Services

600


572


565

National Financial Partners Corp. (5)

07/01/20

4.50
%

L+ 3.50

1.00%
 
Insurance

2,460


2,473


2,410

New Millennium Holdco, Inc. (5)

12/21/20

7.50
%

L+ 6.50

1.00%
 
Health Care Providers & Services

323


323


308

Onex Carestream Finance LP (5)

06/07/19

5.00
%

L+ 4.00

1.00%
 
Health Care Equipment & Supplies

1,683


1,688


1,565

Opal Acquisition, Inc. (5)

11/27/20

5.00
%

L+ 4.00

1.00%
 
Health Care Providers & Services

2,928


2,912


2,591

Ortho-Clinical Diagnostics S.A. (3), (5)

06/30/21

4.75
%

L+ 3.75

1.00%
 
Health Care Providers & Services

2,470


2,407


2,297

Peabody Energy Corporation (3), (5), (9)

09/24/20

4.25
%

L+ 3.25

1.00%
 
Oil, Gas & Consumable Fuels

987


890


368

PetSmart, Inc. (5)

03/11/22

4.25
%

L+ 3.25

1.00%
 
Specialty Retail

993


988


990

Phillips-Medisize Corporation (5)
 
06/16/21

4.75
%

L+ 3.75

1.00%
 
Health Care Equipment & Supplies

1,205


1,204

 
1,196

Plaskolite, LLC (5)
 
11/03/22
 
5.75
%
 
L+ 4.75
 
1.00%
 
Chemicals
 
550

 
545

 
548

Plaze, Inc. (5)
 
07/31/22
 
5.25
%

L+ 4.25

1.00%
 
Chemicals

832


831


830

Presidio, Inc. (5)
 
02/02/22
 
5.25
%
 
L+ 4.25
 
1.00%
 
IT Services
 
1,336

 
1,336

 
1,315

PrimeLine Utility Services LLC (5)
 
11/14/22
 
6.50
%
 
L+ 5.50
 
1.00%
 
Construction & Engineering
 
998

 
988

 
985

Quikrete Holdings, Inc. (5)

09/28/20

4.00
%

L+ 3.00

1.00%
 
Constructions Materials

2,086


2,093


2,086

RCHP, Inc. (5)
 
04/23/19
 
6.00
%
 
L+ 5.00
 
1.00%
 
Health Care Providers & Services
 
1,965

 
1,953

 
1,957

Renaissance Learning, Inc. (5)
 
04/09/21
 
4.50
%
 
L+ 3.50
 
1.00%
 
Software
 
1,960

 
1,959

 
1,907


See notes to consolidated financial statements.
9



AMERICAN CAPITAL SENIOR FLOATING, LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
MARCH 31, 2016
(unaudited, in thousands)


Description

Maturity

Interest
Rate (1)

Basis 
Point
Spread
Above
Index 
(2)

LIBOR
Interest Rate Floor
 
Industry

Par
Amount

Cost

Fair
Value
First Lien Floating Rate Loans (continued) —140.1% of Net Assets
 
 
 
 
 
 
 
 
 
 
RGIS Services, LLC (5)
 
10/18/17
 
5.50
%
 
L+ 4.25
 
1.25%
 
Commercial Services & Supplies
 
$
2,888

 
$
2,880

 
$
2,144

Riverbed Technology, Inc. (5)
 
04/25/22
 
5.75
%
 
L+ 4.75
 
1.00%
 
Communications Equipment
 
990

 
986

 
994

Scientific Games International, Inc. (3), (5)
 
10/01/21
 
6.00
%
 
L+ 5.00
 
1.00%
 
Hotels, Restaurants & Leisure
 
985

 
977

 
957

Sears Roebuck Acceptance Corp. (3), (5)
 
06/30/18
 
5.50
%
 
L+ 4.50
 
1.00%
 
Multiline Retail
 
985

 
975

 
943

Securus Technologies Holdings, Inc. (5)
 
04/30/20
 
4.75
%
 
L+ 3.50
 
1.25%
 
Diversified Telecommunications Services
 
1,880

 
1,861

 
1,754

Shearer's Foods, LLC (5)
 
06/30/21
 
5.25
%
 
L+ 4.25
 
1.00%
 
Food Products
 
499

 
494

 
494

Solera, LLC (3), (5)
 
02/28/23
 
5.75
%
 
L+ 4.75
 
1.00%
 
Software
 
500

 
485

 
500

Sterigenics-Nordion Holdings, LLC (5)
 
05/16/22
 
4.25
%
 
L+ 3.25
 
1.00%
 
Life Sciences Tools & Services
 
902

 
894

 
897

STS Operating, Inc. (5)
 
02/12/21
 
4.75
%
 
L+ 3.75
 
1.00%
 
Trading Companies & Distributors
 
1,960

 
1,969

 
1,715

Surgery Center Holdings, Inc. (5)
 
11/03/20
 
5.25
%
 
L+ 4.25
 
1.00%
 
Health Care Providers & Services
 
1,975

 
1,967

 
1,955

Syniverse Holdings, Inc. (5)
 
04/23/19
 
4.00
%
 
L+ 3.00
 
1.00%
 
Wireless Telecommunication Services
 
1,500

 
1,471

 
1,125

Thermasys Corp. (5)
 
05/03/19
 
5.26
%
 
L+ 4.00
 
1.25%
 
Machinery
 
453

 
454

 
367

TPF II Power, LLC (5)
 
10/02/21
 
5.50
%
 
L+ 4.50
 
1.00%
 
Independent Power and Renewable Electricity Producers
 
981

 
975

 
962

Travelport Finance (Luxembourg)
S.à r.l. (3), (5)
 
09/02/21
 
5.75
%
 
L+ 4.75
 
1.00%
 
Internet Software & Services
 
1,972

 
1,953

 
1,973

Turbocombustor Technology, Inc. (5)
 
12/02/20
 
5.50
%
 
L+ 4.50
 
1.00%
 
Aerospace & Defense
 
3,421

 
3,398

 
3,045

U.S. Renal Care, Inc. (5)
 
12/30/22
 
5.25
%
 
L+ 4.25
 
1.00%
 
Health Care Providers & Services
 
499

 
494

 
498

Univision Communications Inc. (5)
 
03/01/20
 
4.00
%
 
L+ 3.00
 
1.00%
 
Media
 
1,484

 
1,485

 
1,471

USI, Inc. (5)
 
12/27/19
 
4.25
%
 
L+ 3.25
 
1.00%
 
Insurance
 
1,950

 
1,962

 
1,925

USIC Holdings, Inc. (5)
 
07/10/20
 
4.00
%
 
L+ 3.00
 
1.00%
 
Construction & Engineering
 
1,451

 
1,456

 
1,428

Weight Watchers International, Inc. (3), (5)
 
04/02/20
 
4.00
%
 
L+ 3.25
 
0.75%
 
Diversified Consumer Services
 
995

 
819

 
739

William Morris Endeavor
Entertainment, LLC (5)
 
05/06/21
 
5.25
%
 
L+ 4.25
 
1.00%
 
Media
 
1,960

 
1,958

 
1,963

WP CPP Holdings, LLC (5)
 
12/28/19
 
4.50
%
 
L+ 3.50
 
1.00%
 
Aerospace & Defense
 
2,428

 
2,425

 
2,252

Total First Lien Floating Rate Loans
 
 
 
 
 
 
 
 
 
$
174,359

 
$
172,965

 
$
164,186

Second Lien Floating Rate Loans —15.2% of Net Assets
 
 
 
 
 
 
 
 
 
 
 
 
Advantage Sales & Marketing Inc. (5)
 
07/25/22
 
7.50
%
 
L+ 6.50
 
1.00%
 
Professional Services
 
$
1,000

 
$
994

 
$
911

Ameriforge Group Inc. (6), (9)
 
12/21/20
 
8.75
%
 
L+ 7.50
 
1.25%
 
Energy Equipment & Services
 
500

 
477

 
99

Applied Systems, Inc.
 
01/24/22
 
7.50
%
 
L+ 6.50
 
1.00%
 
Software
 
980

 
975

 
929

Asurion, LLC (5)
 
03/03/21
 
8.50
%
 
L+ 7.50
 
1.00%
 
Commercial Services & Supplies
 
1,000

 
990

 
942

Camp International Holding Company 
 
11/29/19
 
8.25
%
 
L+ 7.25
 
1.00%
 
Transportation Infrastructure
 
1,000

 
1,000

 
914

Checkout Holding Corp. (5)
 
04/11/22
 
7.75
%
 
L+ 6.75
 
1.00%
 
Media
 
1,000

 
1,002

 
625

Cotiviti Corporation (5)
 
05/13/22
 
8.00
%
 
L+ 7.00
 
1.00%
 
Professional Services
 
1,250

 
1,241

 
1,182

Del Monte Foods, Inc. (3), (5)
 
08/18/21
 
8.25
%
 
L+ 7.25
 
1.00%
 
Food Products
 
1,500

 
1,499

 
1,080

EWT Holdings III Corp.
 
01/15/22
 
8.50
%
 
L+ 7.50
 
1.00%
 
Machinery
 
1,000

 
996

 
938


See notes to consolidated financial statements.
10



AMERICAN CAPITAL SENIOR FLOATING, LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
MARCH 31, 2016
(unaudited, in thousands)


Description

Maturity

Interest
Rate (1)

Basis 
Point
Spread
Above
Index 
(2)

LIBOR
Interest Rate Floor
 
Industry

Par
Amount

Cost

Fair
Value
Second Lien Floating Rate Loans (continued) —15.2% of Net Assets
 
 
 
 
 
 
 
 
Filtration Group Corporation(5)
 
11/22/21
 
8.25
%
 
L+ 7.25
 
1.00%
 
Industrial Conglomerates
 
$
126

 
$
125

 
$
125

Jazz Acquisition, Inc. (5)
 
06/19/22
 
7.75
%
 
L+ 6.75
 
1.00%
 
Aerospace & Defense
 
1,250

 
1,255

 
937

Jonah Energy LLC (5), (6)
 
05/12/21
 
7.50
%
 
L+ 6.50
 
1.00%
 
Oil, Gas & Consumable Fuels
 
500

 
495

 
257

Landslide Holdings, Inc.
 
02/25/21
 
8.25
%
 
L+ 7.25
 
1.00%
 
Software
 
1,000

 
995

 
895

Performance Food Group, Inc. (5)
 
11/14/19
 
7.21
%
 
L+ 5.00
 
1.00%
 
Food & Staples Retailing
 
1,229

 
1,224

 
1,232

Ranpak Corp. (5)
 
10/03/22
 
8.25
%
 
L+ 7.25
 
1.00%
 
Containers & Packaging
 
1,375

 
1,374

 
1,210

Road Infrastructure Investment, LLC (5)
 
09/30/21
 
7.75
%
 
L+ 6.75
 
1.00%
 
Chemicals
 
2,000

 
2,007

 
1,920

Sedgwick Claims Management
Services, Inc. (5)
 
02/28/22
 
6.75
%
 
L+ 5.75
 
1.00%
 
Insurance
 
2,500

 
2,405

 
2,328

Solenis International, L.P. (5)
 
07/31/22
 
7.75
%
 
L+ 6.75
 
1.00%
 
Chemicals
 
500

 
498

 
423

U.S. Renal Care, Inc. (5)
 
12/29/23
 
9.00
%
 
L+ 8.00
 
1.00%
 
Health Care Providers & Services
 
500

 
490

 
494

WP CPP Holdings, LLC (5)
 
04/30/21
 
8.75
%
 
L+ 7.75
 
1.00%
 
Aerospace & Defense
 
493

 
501

 
427

Total Second Lien Floating Rate Loans
 
 
 
 
 
 
 
 
 
 
 
$
20,703

 
$
20,543

 
$
17,868

CLO Equity —28.9% of Net Assets
 
 
 
 
 
 
 
 
 
 
 
 
Apidos CLO XIV, Income Notes (3), (4), (6)
 
04/15/25
 
12.81
%
 
 
 
 
 
 
 
$
5,900

 
$
4,452

 
$
3,130

Apidos CLO XVIII, Income
Notes (3), (4), (6)
 
07/22/26
 
11.54
%
 
 
 
 
 
 
 
2,500

 
1,888

 
1,256

Ares XXIX CLO Ltd., Subordinated Notes (3), (4), (6)
 
04/17/26
 
11.61
%
 
 
 
 
 
 
 
4,750

 
3,826

 
2,128

Avery Point II CLO, Income
Notes (3), (4), (6)
 
07/17/25
 
17.06
%
 
 
 
 
 
 
 
3,200

 
2,214

 
1,054

Babson 2015-1, Income Notes (3), (4), (6)
 
04/20/27
 
14.82
%
 
 
 
 
 
 
 
2,500

 
2,092

 
1,649

Blue Hill CLO, Ltd., Subordinated
Notes (3), (4), (6)
 
01/15/26
 
13.93
%
 
 
 
 
 
 
 
5,400

 
4,202

 
1,300

Blue Hill CLO, Ltd., Subordinated Fee Notes (3), (4), (6)
 
01/15/26
 
32.27
%
 
 
 
 
 
 
 
99

 
70

 
79

Betony CLO, Ltd., Subordinated
Notes (3), (4), (6)
 
04/15/27
 
11.17
%
 
 
 
 
 
 
 
2,500

 
2,040

 
1,224

Carlyle Global Market Strategies CLO 2015-3, LTD., Subordinated
Notes (3), (4), (6)
 
07/28/28
 
21.96
%
 
 
 
 
 
 
 
3,000

 
2,356

 
2,195

Cent CLO 18 Limited, Subordinated Notes (3), (4), (6)
 
07/23/25
 
10.51
%
 
 
 
 
 
 
 
4,675

 
3,479

 
2,033

Cent CLO 19 Limited, Subordinated Notes (3), (4), (6)
 
10/29/25
 
8.18
%
 
 
 
 
 
 
 
2,750

 
2,127

 
1,150

Dryden 30 Senior Loan Fund, Subordinated Notes (3), (4), (6)
 
11/15/25
 
19.19
%
 
 
 
 
 
 
 
2,500

 
1,614

 
1,223

Dryden 31 Senior Loan Fund, Subordinated Notes (3), (4), (6)
 
04/18/26
 
10.78
%
 
 
 
 
 
 
 
5,250

 
3,851

 
2,395

Galaxy XVI CLO, Ltd., Subordinated Notes (3), (4), (6)
 
11/17/25
 
11.51
%
 
 
 
 
 
 
 
2,750

 
2,063

 
1,233

Halcyon Loan Advisors Funding 2014-1 Ltd., Subordinated Notes (3), (4), (6)
 
04/18/26
 
23.31
%
 
 
 
 
 
 
 
3,750

 
2,875

 
942

Highbridge Loan Management 2013-2, Ltd., Subordinated Notes (3), (4), (6)
 
10/20/24
 
19.06
%
 
 
 
 
 
 
 
1,000

 
718

 
589

Magnetite VIII, Limited, Subordinated Notes (3), (4), (6)
 
04/15/26
 
12.29
%
 
 
 
 
 
 
 
3,000

 
2,495

 
1,828

Neuberger Berman CLO XV, Ltd., Subordinated Notes (3), (4), (6)
 
10/15/25
 
11.18
%
 
 
 
 
 
 
 
3,410

 
2,305

 
1,449


See notes to consolidated financial statements.
11



AMERICAN CAPITAL SENIOR FLOATING, LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
MARCH 31, 2016
(unaudited, in thousands)


Description

Maturity

Interest
Rate (1)

Basis 
Point
Spread
Above
Index 
(2)

LIBOR
Interest Rate Floor
 
Industry

Par
Amount

Cost

Fair
Value
CLO Equity (continued) —28.9% of Net Assets
 
 
 
 
 
 
 
 
Octagon Investment Partners XIV, Ltd., Income Notes (3), (4), (6)
 
08/12/26
 
8.93
%
 
 
 
 
 
 
 
$
2,500

 
$
2,052

 
$
1,235

Octagon Investment Partners XX, Ltd., Subordinated Notes (3), (4), (6)
 
01/15/24
 
9.49
%
 
 
 
 
 
 
 
5,500

 
3,727

 
1,992

OZLM VI, Ltd., Subordinated
Notes
(3), (4), (6)
 
04/17/26
 
38.85
%
 
 
 
 
 
 
 
2,000

 
1,022

 
1,048

OZLM VII, Ltd., Subordinated
Notes (3), (4), (6)
 
07/17/26
 
39.06
%
 
 
 
 
 
 
 
1,000

 
530

 
547

THL Credit Wind River 2014-1 CLO Ltd., Subordinated Notes (3), (4), (6)
 
04/18/26
 
16.09
%
 
 
 
 
 
 
 
4,000

 
3,151

 
2,138

Total CLO Equity
 
 
 
 
 
 
 
 
 
 
 
$
73,934

 
$
55,149

 
$
33,817

Common Equity —0.1% of Net Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New Millennium Holdco, Inc. (9,446 shares) (5), (6), (10)
 
 
 
 
 
 
 
 
 
 
 
$

 
$

 
$
147

Total Common Equity
 
 
 
 
 
 
 
 
 
 
 
$

 
$

 
$
147

Total Non-Control/Non-Affiliate Investments (8) — 184.3% of Net Assets
 
 
 
$
268,996

 
$
248,657

 
$
216,018

Liabilities in Excess of Other Assets — (84.3%) of Net Assets
 
 
 
 
 
 
 
 
 
 
 
(98,831
)
Net Assets — 100.0%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
117,187


(1)
For each debt investment we have provided the weighted-average interest rate in effect as of March 31, 2016. For each CLO investment we have provided the accounting yield as of March 31, 2016 determined using the effective interest method that will be applied to the current amortized cost of the investment as adjusted for credit impairments, if any, in the following quarter. See Note 2 in this Quarterly Report on Form 10-Q regarding the recognition of Investment Income on CLOs.
(2)
Floating rate debt investments typically accrue interest at a predetermined spread relative to an index, typically the London Interbank Offered Rate (“LIBOR” or “L”) or the prime index rate (“PRIME” or “P”), and reset monthly, quarterly or semi-annually. These instruments may be subject to a LIBOR or PRIME rate floor.
(3)
Investments that are not “qualifying assets” under Section 55(a) of the 1940 Act. Under the 1940 Act, we may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of our total assets. As of March 31, 2016, qualifying assets represented 78% of total assets.
(4)
These securities are exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions that are exempt from registration, normally to qualified institutional buyers.
(5)
Assets are held at ACSF Funding and are pledged as collateral for the Credit Facility.
(6)
Fair value was determined using significant unobservable inputs and are classified as Level 3 in the fair value hierarchy.
(7)
All or a portion of this position has not settled as of March 31, 2016.
(8)
Net estimated unrealized loss for federal income tax purposes is $(38,611) as of March 31, 2016 based on a tax cost of $254,628. Estimated aggregate gross unrealized loss for federal income tax purposes as of March 31, 2016 is $(39,203); estimated aggregate gross unrealized gain for federal income tax purposes as of March 31, 2016 is $592.
(9)
Investment is on non-accrual as of March 31, 2016 and therefore considered non-income producing. All subsequent cash received from investment will be used to reduce its cost basis until the investment is placed back on accrual status or the cost basis has been collected.
(10)
Common stock is non-income producing.





See notes to consolidated financial statements.
12

AMERICAN CAPITAL SENIOR FLOATING, LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS
DECEMBER 31, 2015
(in thousands)


Description
 
Maturity
 
Interest Rate (1)
 
Basis 
Point
Spread
Above
Index 
(2)
 
LIBOR
Interest Rate Floor
 
Industry
 
Par
Amount
 
Cost
 
Fair
Value
Non-Control/Non-Affiliate Investments
 
 
 
 
 
 
 
 
 
 
 
 
First Lien Floating Rate Loans —143.8% of Net Assets
 
 
 
 
 
 
 
 
 
 
 
 
24 Hour Fitness Worldwide, Inc. (5)
 
05/28/2021
 
4.75
%
 
L+ 3.75
 
1.00
%
 
Hotels, Restaurants & Leisure
 
$
1,972

 
$
1,966

 
$
1,846

Acosta, Inc. (5)
 
09/26/2021
 
4.25
%
 
L+ 3.25
 
1.00
%
 
Media
 
2,475

 
2,438

 
2,361

ADMI Corp. (5)
 
04/29/2022
 
5.50
%
 
L+ 4.50
 
1.00
%
 
Health Care Providers & Services
 
547

 
546

 
548

Aegis Toxicology Sciences Corporation (5)
 
02/24/2021
 
5.50
%
 
L+ 4.50
 
1.00
%
 
Health Care Providers & Services
 
1,642

 
1,633

 
1,384

Agrofresh Inc. (3), (5)
 
07/31/2021
 
5.75
%
 
L+ 4.75
 
1.00
%
 
Chemicals
 
647

 
646

 
638

Air Medical Group Holdings, Inc. (5)
 
04/28/2022
 
4.50
%
 
L+ 3.50
 
1.00
%
 
Health Care Providers & Services
 
1,990

 
1,995

 
1,932

Albertson's LLC (5)
 
03/21/2019
 
5.50
%
 
L+ 4.50
 
1.00
%
 
Food & Staples Retailing
 
993

 
989

 
991

AlixPartners, LLP (5)
 
07/28/2022
 
4.50
%
 
L+ 3.50
 
1.00
%
 
Diversified Financial Services
 
1,995

 
1,990

 
1,984

Alliant Holdings Intermediate, LLC (5)
 
08/12/2022
 
4.50
%
 
L+ 3.50
 
1.00
%
 
Insurance
 
1,045

 
1,042

 
1,022

American Tire Distributors, Inc. (5)
 
09/01/2021
 
5.25
%
 
L+ 4.25
 
1.00
%
 
Distributors
 
1,478

 
1,472

 
1,459

Amneal Pharmaceuticals LLC (5)
 
11/01/2019
 
4.50
%
 
L+ 3.50
 
1.00
%
 
Pharmaceuticals
 
992

 
992

 
976

AmWINS Group, LLC (5)
 
09/06/2019
 
5.25
%
 
L+ 4.25
 
1.00
%
 
Insurance
 
2,934

 
2,946

 
2,932

Anchor Glass Container Corporation (5)
 
07/01/2022
 
4.54
%
 
L+ 3.50
 
1.00
%
 
Containers & Packaging
 
963

 
959

 
962

AqGen Ascensus, Inc. (5), (7)
 
12/05/2022
 
5.50
%
 
L+ 4.50
 
1.00
%
 
Capital Markets
 
941

 
885

 
885

Aquilex LLC (5)
 
12/31/2020
 
5.00
%
 
L+ 4.00
 
1.00
%
 
Commercial Services & Supplies
 
968

 
966

 
929

Ardent Legacy Acquisitions, Inc. (5)
 
08/04/2021
 
6.50
%
 
L+ 5.50
 
1.00
%
 
Health Care Providers & Services
 
332

 
329

 
331

Arnhold and S. Bleichroeder Holdings, Inc. (5)
 
12/01/2022
 
4.75
%
 
L+ 4.00
 
0.75
%
 
Capital Markets
 
714

 
700

 
698

Ascend Learning, LLC (5)
 
07/31/2019
 
5.50
%
 
L+ 4.50
 
1.00
%
 
Diversified Consumer Services
 
588

 
586

 
586

Asurion, LLC (5)
 
05/24/2019
 
5.00
%
 
L+ 3.75
 
1.25
%
 
Commercial Services & Supplies
 
943

 
943

 
886

Asurion, LLC (5)
 
08/04/2022
 
5.00
%
 
L+ 4.00
 
1.00
%
 
Commercial Services & Supplies
 
1,244

 
1,238

 
1,141

Avaya Inc. (5)
 
05/29/2020
 
6.25
%
 
L+ 5.25
 
1.00
%
 
Software
 
997

 
806

 
700

BJ's Wholesale Club, Inc. (5)
 
09/26/2019
 
4.50
%
 
L+ 3.50
 
1.00
%
 
Food & Staples Retailing
 
1,471

 
1,472

 
1,414

Blackboard Inc. (5)
 
10/04/2018
 
4.75
%
 
L+ 3.75
 
1.00
%
 
Software
 
2,435

 
2,436

 
2,345

Blue Coat Holdings, Inc. (5)
 
05/20/2022
 
4.50
%
 
L+ 3.50
 
1.00
%
 
Communications Equipment
 
2,000

 
2,001

 
1,938

BWay Intermediate Company, Inc. (5)
 
08/14/2020
 
5.50
%
 
L+ 4.50
 
1.00
%
 
Containers & Packaging
 
2,456

 
2,437

 
2,369

C.H.I. Overhead Doors, Inc. (5)
 
07/29/2022
 
4.75
%
 
L+ 3.75
 
1.00
%
 
Building Products
 
332

 
332

 
327

Calceus Acquisition, Inc. (5)
 
01/31/2020
 
5.00
%
 
L+ 4.00
 
1.00
%
 
Textiles, Apparel & Luxury Goods
 
2,337

 
2,345

 
2,092

CAMP International Holding
Company
(5)
 
05/31/2019
 
4.75
%
 
L+ 3.75
 
1.00
%
 
Transportation Infrastructure
 
1,960

 
1,980

 
1,908

Carecore National, LLC (5)
 
03/05/2021
 
5.50
%
 
L+ 4.50
 
1.00
%
 
Health Care Providers & Services
 
2,047

 
2,047

 
1,781

CCM Merger, Inc. (5)
 
08/06/2021
 
4.50
%
 
L+ 3.50
 
1.00
%
 
Hotels, Restaurants & Leisure
 
883

 
877

 
880

Checkout Holding Corp. (5)
 
04/09/2021
 
4.50
%
 
L+ 3.50
 
1.00
%
 
Media
 
2,463

 
2,461

 
1,982

CityCenter Holdings, LLC (5)
 
10/16/2020
 
4.25
%
 
L+ 3.25
 
1.00
%
 
Hotels, Restaurants & Leisure
 
1,774

 
1,783

 
1,764

Compuware Corporation (5)
 
12/15/2021
 
6.25
%
 
L+ 5.25
 
1.00
%
 
Software
 
2,972

 
2,906

 
2,780


See notes to consolidated financial statements.
13

AMERICAN CAPITAL SENIOR FLOATING, LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
DECEMBER 31, 2015
(in thousands)


Description
 
Maturity
 
Interest Rate (1)
 
Basis 
Point
Spread
Above
Index 
(2)
 
LIBOR
Interest Rate Floor
 
Industry
 
Par
Amount
 
Cost
 
Fair
Value
First Lien Floating Rate Loans (continued) —143.8% of Net Assets
 
 
 
 
 
 
 
 
 
 
Cotiviti Corporation (5)
 
05/14/2021
 
4.50
%
 
L+ 3.50
 
1.00
%
 
Professional Services
 
$
1,111

 
$
1,102

 
$
1,078

CPG International Inc. (5)
 
09/30/2020
 
4.75
%
 
L+ 3.75
 
1.00
%
 
Building Products
 
1,938

 
1,938

 
1,831

CPI Buyer, LLC (5)
 
08/16/2021
 
5.50
%
 
L+ 4.50
 
1.00
%
 
Trading Companies & Distributors
 
988

 
976

 
949

CT Technologies Intermediate Holdings, Inc. (5)
 
12/01/2021
 
5.25
%
 
L+ 4.25
 
1.00
%
 
Health Care Technology
 
498

 
495

 
482

Dell International LLC (5)
 
04/29/2020
 
4.00
%
 
L+ 3.25
 
0.75
%
 
Technology Hardware, Storage & Peripherals
 
2,488

 
2,495

 
2,472

Deltek, Inc. (5)
 
06/25/2022
 
5.00
%
 
L+ 4.00
 
1.00
%
 
Software
 
2,872

 
2,866

 
2,845

Dole Food Company, Inc. (5)
 
11/01/2018
 
4.50
%
 
L+ 3.50
 
1.00
%
 
Food Products
 
2,513

 
2,509

 
2,502

Duff & Phelps Corporation (5)
 
04/23/2020
 
4.75
%
 
L+ 3.75
 
1.00
%
 
Capital Markets
 
3,421

 
3,423

 
3,356

DynCorp International Inc. (5)
 
07/07/2016
 
6.25
%
 
L+ 4.50
 
1.75
%
 
Aerospace & Defense
 
2,189

 
2,191

 
2,097

Electrical Components International,
Inc. (5)
 
05/28/2021
 
5.75
%
 
L+ 4.75
 
1.00
%
 
Electrical Equipment
 
1,970

 
1,974

 
1,964

Emerald Expositions Holding, Inc. (5)
 
06/17/2020
 
4.75
%
 
L+ 3.75
 
1.00
%
 
Media
 
2,622

 
2,640

 
2,587

Epicor Software Corporation (5)
 
06/01/2022
 
4.75
%
 
L+ 3.75
 
1.00
%
 
Software
 
995

 
993

 
974

eResearchTechnology, Inc. (5)
 
05/08/2022
 
5.50
%
 
L+ 4.50
 
1.00
%
 
Life Sciences Tools & Services
 
995

 
991

 
978

Evergreen Acqco 1 LP (5)
 
07/09/2019
 
5.00
%
 
L+ 3.75
 
1.25
%
 
Multiline Retail
 
621

 
623

 
509

EWT Holdings III Corp. (5)
 
01/15/2021
 
4.75
%
 
L+ 3.75
 
1.00
%
 
Machinery
 
980

 
976

 
965

Expro Finservices S.à r.l. (3), (5)
 
09/02/2021
 
5.75
%
 
L+ 4.75
 
1.00
%
 
Energy Equipment & Services
 
1,975

 
1,950

 
1,334

Fairmount Minerals, Ltd. (5)
 
09/05/2019
 
4.50
%
 
L+ 3.50
 
1.00
%
 
Metals & Mining
 
2,933

 
2,945

 
1,463

Filtration Group Corporation (5)
 
11/23/2020
 
4.25
%
 
L+ 3.25
 
1.00
%
 
Industrial Conglomerates
 
998

 
998

 
973

Fitness International, LLC (5)
 
07/01/2020
 
5.50
%
 
L+ 4.50
 
1.00
%
 
Hotels, Restaurants & Leisure
 
1,288

 
1,279

 
1,194

Gates Global LLC (5)
 
07/06/2021
 
4.25
%
 
L+ 3.25
 
1.00
%
 
Machinery
 
1,489

 
1,487

 
1,400

Global Tel*Link Corporation (5)
 
05/23/2020
 
5.00
%
 
L+ 3.75
 
1.25
%
 
Diversified Telecommunications Services
 
1,685

 
1,662

 
1,239

Gruden Acquisition, Inc. (5)
 
08/18/2022
 
5.75
%
 
L+ 4.75
 
1.00
%
 
Road & Rail
 
333

 
330

 
320

HGIM Corp. (5)
 
06/18/2020
 
5.50
%
 
L+ 4.50
 
1.00
%
 
Marine
 
1,466

 
1,470

 
872

Hyland Software, Inc. (5)
 
07/01/2022
 
4.75
%
 
L+ 3.75
 
1.00
%
 
Software
 
2,482

 
2,461

 
2,451

Immucor, Inc. (5)
 
08/19/2018
 
5.00
%
 
L+ 3.75
 
1.25
%
 
Health Care Equipment & Supplies
 
985

 
990

 
940

Indra Holdings Corp. (5)
 
05/01/2021
 
5.25
%
 
L+ 4.25
 
1.00
%
 
Textiles, Apparel & Luxury Goods
 
1,190

 
1,181

 
1,113

Informatica Corporation (5)
 
08/05/2022
 
4.50
%
 
L+ 3.50
 
1.00
%
 
Software
 
1,995

 
1,990

 
1,926

Information Resources, Inc. (5)
 
09/30/2020
 
4.75
%
 
L+ 3.75
 
1.00
%
 
Professional Services
 
1,955

 
1,965

 
1,945

Inmar, Inc. (5)
 
01/27/2021
 
4.25
%
 
L+ 3.25
 
1.00
%
 
Commercial Services & Supplies
 
1,970

 
1,956

 
1,927

Ion Media Networks, Inc. (5)
 
12/18/2020
 
4.75
%
 
L+ 3.75
 
1.00
%
 
Media
 
1,965

 
1,975

 
1,941

IPC Corp. (5)
 
08/06/2021
 
5.50
%
 
L+ 4.50
 
1.00
%
 
Software
 
1,489

 
1,482

 
1,404

Jaguar Holding Company I (5)
 
08/18/2022
 
4.25
%
 
L+ 3.25
 
1.00
%
 
Life Sciences Tools & Services
 
1,493

 
1,485

 
1,454

Jazz Acquisition, Inc. (5)
 
06/19/2021
 
4.50
%
 
L+ 3.50
 
1.00
%
 
Aerospace & Defense
 
1,971

 
1,975

 
1,791

Key Safety Systems, Inc. (5)
 
08/29/2021
 
4.75
%
 
L+ 3.75
 
1.00
%
 
Auto Components
 
1,481

 
1,475

 
1,444

Kronos Acquisition Intermediate
Inc.
 (3), (5)
 
08/26/2022
 
6.00
%
 
L+ 5.00
 
1.00
%
 
Household Products
 
998

 
974

 
971

La Frontera Generation, LLC (5)
 
09/30/2020
 
4.50
%
 
L+ 3.50
 
1.00
%
 
Independent Power and Renewable Electricity Producers
 
1,783

 
1,792

 
1,693


See notes to consolidated financial statements.
14

AMERICAN CAPITAL SENIOR FLOATING, LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
DECEMBER 31, 2015
(in thousands)


Description
 
Maturity
 
Interest Rate (1)
 
Basis 
Point
Spread
Above
Index 
(2)
 
LIBOR
Interest Rate Floor
 
Industry
 
Par
Amount
 
Cost
 
Fair
Value
First Lien Floating Rate Loans (continued) —143.8% of Net Assets
 
 
 
 
 
 
 
 
 
 
Landmark Aviation FBO Canada,
Inc.
(3), (5)
 
10/25/2019
 
4.75
%
 
L+ 3.75
 
1.00
%
 
Aerospace & Defense
 
$
75

 
$
75

 
$
75

Landslide Holdings, Inc. (5)
 
02/25/2020
 
5.00
%
 
L+ 4.00
 
1.00
%
 
Software
 
983

 
979

 
963

Language Line, LLC (5)
 
07/07/2021
 
6.50
%
 
L+ 5.50
 
1.00
%
 
Commercial Services & Supplies
 
956

 
947

 
953

Learning Care Group (US) No. 2 Inc. (5)
 
05/05/2021
 
5.00
%
 
L+ 4.00
 
1.00
%
 
Diversified Consumer Services
 
1,016

 
1,016

 
1,012

Leonardo Acquisition Corp. (5)
 
01/29/2021
 
4.25
%
 
L+ 3.25
 
1.00
%
 
Internet & Catalog Retail
 
2,940

 
2,950

 
2,930

Life Time Fitness, Inc. (5)
 
06/10/2022
 
4.25
%
 
L+ 3.25
 
1.00
%
 
Hotels, Restaurants & Leisure
 
498

 
495

 
486

LM U.S. Member LLC (5)
 
10/25/2019
 
4.75
%
 
L+ 3.75
 
1.00
%
 
Aerospace & Defense
 
1,895

 
1,902

 
1,889

Mallinckrodt International Finance
S.A.
(3), (5), (7)
 
03/19/2021
 
3.25
%
 
L+ 2.50
 
0.75
%
 
Pharmaceuticals
 
570

 
532

 
555

Mitchell International, Inc. (5), (7)
 
10/13/2020
 
4.50
%
 
L+ 3.50
 
1.00
%
 
Software
 
2,401

 
2,411

 
2,283

Moneygram International, Inc. (3), (5)
 
03/27/2020
 
4.25
%
 
L+ 3.25
 
1.00
%
 
IT Services
 
602

 
571

 
552

National Financial Partners Corp. (5)
 
07/01/2020
 
4.50
%
 
L+ 3.50
 
1.00
%
 
Insurance
 
2,466

 
2,480

 
2,376

New Millennium Holdco, Inc. (5)
 
12/21/2020
 
7.50
%
 
L+ 6.50
 
1.00
%
 
Health Care Providers & Services
 
323

 
323

 
299

Onex Carestream Finance LP (5)
 
06/07/2019
 
5.00
%
 
L+ 4.00
 
1.00
%
 
Health Care Equipment & Supplies
 
1,708

 
1,713

 
1,547

Opal Acquisition, Inc. (5)
 
11/27/2020
 
5.00
%
 
L+ 4.00
 
1.00
%
 
Health Care Providers & Services
 
2,934

 
2,917

 
2,453

Ortho-Clinical Diagnostics Holdings Luxembourg S.À R.L. (3), (5)
 
06/30/2021
 
4.75
%
 
L+ 3.75
 
1.00
%
 
Health Care Providers & Services
 
1,970

 
1,968

 
1,682

P2 Lower Acquisition, LLC (5)
 
10/22/2020
 
5.50
%
 
L+ 4.50
 
1.00
%
 
Health Care Providers & Services
 
1,895

 
1,890

 
1,876

Peabody Energy Corporation (3), (5)
 
09/24/2020
 
4.25
%
 
L+ 3.25
 
1.00
%
 
Oil, Gas & Consumable Fuels
 
990

 
903

 
475

PetSmart, Inc. (5)
 
03/11/2022
 
4.25
%
 
L+ 3.25
 
1.00
%
 
Specialty Retail
 
995

 
991

 
971

Phillips-Medisize Corporation (5)
 
06/16/2021
 
4.75
%
 
L+ 3.75
 
1.00
%
 
Health Care Equipment & Supplies
 
1,208

 
1,207

 
1,181

Plaskolite, LLC (5)
 
11/03/2022
 
5.75
%
 
L+ 4.75
 
1.00
%
 
Chemicals
 
550

 
545

 
547

Plaze, Inc. (5)
 
07/31/2022
 
5.25
%
 
L+ 4.25
 
1.00
%
 
Chemicals
 
832

 
831

 
828

Presidio, Inc. (5)
 
02/02/2022
 
5.25
%
 
L+ 4.25
 
1.00
%
 
IT Services
 
1,340

 
1,340

 
1,311

PrimeLine Utility Services LLC (5)
 
11/14/2022
 
6.50
%
 
L+ 5.50
 
1.00
%
 
Construction & Engineering
 
1,000

 
990

 
993

Quikrete Holdings, Inc. (5)
 
09/28/2020
 
4.00
%
 
L+ 3.00
 
1.00
%
 
Constructions Materials
 
2,086

 
2,093

 
2,066

RCHP, Inc. (5)
 
04/23/2019
 
6.00
%
 
L+ 5.00
 
1.00
%
 
Health Care Providers & Services
 
1,970

 
1,957

 
1,947

Renaissance Learning, Inc. (5)
 
04/09/2021
 
4.50
%
 
L+ 3.50
 
1.00
%
 
Software
 
1,965

 
1,964

 
1,887

RGIS Services, LLC (5)
 
10/18/2017
 
5.50
%
 
L+ 4.25
 
1.25
%
 
Commercial Services & Supplies
 
2,931

 
2,923

 
2,089

Riverbed Technology, Inc. (5)
 
04/25/2022
 
6.00
%
 
L+ 5.00
 
1.00
%
 
Communications Equipment
 
993

 
988

 
990

Scientific Games International,
Inc.
(3), (5)
 
10/01/2021
 
6.00
%
 
L+ 5.00
 
1.00
%
 
Hotels, Restaurants & Leisure
 
988

 
979

 
903

Sears Roebuck Acceptance Corp. (3), (5)
 
06/30/2018
 
5.50
%
 
L+ 4.50
 
1.00
%
 
Multiline Retail
 
987

 
976

 
931

Securus Technologies Holdings, Inc (5)
 
04/30/2020
 
4.75
%
 
L+ 3.50
 
1.25
%
 
Diversified Telecommunications Services
 
1,885

 
1,864

 
1,371

Shearer's Foods, LLC (5), (7)
 
06/30/2021
 
5.25
%
 
L+ 4.25
 
1.00
%
 
Food Products
 
500

 
495

 
494


See notes to consolidated financial statements.
15

AMERICAN CAPITAL SENIOR FLOATING, LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
DECEMBER 31, 2015
(in thousands)


Description
 
Maturity
 
Interest Rate (1)
 
Basis 
Point
Spread
Above
Index 
(2)
 
LIBOR
Interest Rate Floor
 
Industry
 
Par
Amount
 
Cost
 
Fair
Value
First Lien Floating Rate Loans (continued) —143.8% of Net Assets
 
 
 
 
 
 
 
 
 
 
Spin Holdco Inc. (5)
 
11/14/2019
 
4.25
%
 
L+ 3.25
 
1.00
%
 
Diversified Consumer Services
 
$
2,442

 
$
2,442

 
$
2,352

Sterigenics-Nordion Holdings, LLC (5)
 
05/16/2022
 
4.25
%
 
L+ 3.25
 
1.00
%
 
Life Sciences Tools & Services
 
905

 
896

 
882

STS Operating, Inc. (5)
 
02/12/2021
 
4.75
%
 
L+ 3.75
 
1.00
%
 
Trading Companies & Distributors
 
1,965

 
1,975

 
1,886

Surgery Center Holdings, Inc. (5)
 
11/03/2020
 
5.25
%
 
L+ 4.25
 
1.00
%
 
Health Care Providers & Services
 
1,980

 
1,972

 
1,962

Syniverse Holdings, Inc. (5)
 
04/23/2019
 
4.00
%
 
L+ 3.00
 
1.00
%
 
Wireless Telecommunication Services
 
1,500

 
1,468

 
1,107

Thermasys Corp. (5)
 
05/03/2019
 
5.25
%
 
L+ 4.00
 
1.25
%
 
Machinery
 
453

 
454

 
400

TPF II Power, LLC (5)
 
10/02/2021
 
5.50
%
 
L+ 4.50
 
1.00
%
 
Independent Power and Renewable Electricity Producers
 
984

 
978

 
966

Travelport Finance (Luxembourg)
S.à r.l.
 (3), (5)
 
09/02/2021
 
5.75
%
 
L+ 4.75
 
1.00
%
 
Internet Software & Services
 
1,980

 
1,960

 
1,943

Turbocombustor Technology, Inc. (5)
 
12/02/2020
 
5.50
%
 
L+ 4.50
 
1.00
%
 
Aerospace & Defense
 
3,430

 
3,406

 
3,018

Tyche Holdings, LLC (5)
 
11/12/2021
 
4.75
%
 
L+ 3.75
 
1.00
%
 
IT Services
 
1,832

 
1,827

 
1,820

U.S. Renal Care, Inc. (5), (7)
 
12/30/2022
 
5.25
%
 
L+ 4.25
 
1.00
%
 
Health Care Providers & Services
 
500

 
495

 
497

Univision Communications Inc. (5)
 
03/01/2020
 
4.00
%
 
L+ 3.00
 
1.00
%
 
Media
 
1,488

 
1,489

 
1,459

USI, Inc. (5)
 
12/27/2019
 
4.25
%
 
L+ 3.25
 
1.00
%
 
Insurance
 
1,955

 
1,968

 
1,899

USIC Holdings, Inc. (5)
 
07/10/2020
 
4.00
%
 
L+ 3.00
 
1.00
%
 
Construction & Engineering
 
1,455

 
1,460

 
1,370

Weight Watchers International,
Inc.
 (3), (5)
 
04/02/2020
 
4.00
%
 
L+ 3.25
 
0.75
%
 
Diversified Consumer Services
 
997

 
810

 
741

William Morris Endeavor Entertainment , LLC (5)
 
05/06/2021
 
5.25
%
 
L+ 4.25
 
1.00
%
 
Media
 
1,965

 
1,963

 
1,936

WP CPP Holdings, LLC (5)
 
12/28/2019
 
4.50
%
 
L+ 3.50
 
1.00
%
 
Aerospace & Defense
 
2,435

 
2,431

 
2,272

Total First Lien Floating Rate Loans
 
 
 
 
 
 
 
 
 
$
182,373

 
$
181,367

 
$
169,580

Second Lien Floating Rate Loans —19.1% of Net Assets
 
 
 
 
 
 
 
 
 
 
 
 
Advantage Sales & Marketing Inc. (5)
 
07/25/2022
 
7.50
%
 
L+ 6.50
 
1.00
%
 
Professional Services
 
$
1,000

 
$
994

 
$
902

Ameriforge Group Inc. (6), (9)
 
12/21/2020
 
8.75
%
 
L+ 7.50
 
1.25
%
 
Energy Equipment & Services
 
500

 
489

 
42

Applied Systems, Inc.
 
01/24/2022
 
7.50
%
 
L+ 6.50
 
1.00
%
 
Software
 
980

 
975

 
912

Asurion, LLC (5)
 
03/03/2021
 
8.50
%
 
L+ 7.50
 
1.00
%
 
Commercial Services & Supplies
 
1,000

 
989

 
860

CAMP International Holding Company
 
11/29/2019
 
8.25
%
 
L+ 7.25
 
1.00
%
 
Transportation Infrastructure
 
1,000

 
1,000

 
974

Checkout Holding Corp. (5)
 
04/11/2022
 
7.75
%
 
L+ 6.75
 
1.00
%
 
Media
 
1,000

 
1,002

 
573

Cotiviti Corporation (5)
 
05/13/2022
 
8.00
%
 
L+ 7.00
 
1.00
%
 
Professional Services
 
1,250

 
1,240

 
1,236

Del Monte Foods, Inc. (3), (5)
 
08/18/2021
 
8.25
%
 
L+ 7.25
 
1.00
%
 
Food Products
 
1,500

 
1,499

 
1,235

EWT Holdings III Corp.
 
01/15/2022
 
8.50
%
 
L+ 7.50
 
1.00
%
 
Machinery
 
1,000

 
996

 
965

Filtration Group Corporation (5)
 
11/22/2021
 
8.25
%
 
L+ 7.25
 
1.00
%
 
Industrial Conglomerates
 
126

 
125

 
123

Jazz Acquisition, Inc. (5)
 
06/19/2022
 
7.75
%
 
L+ 6.75
 
1.00
%
 
Aerospace & Defense
 
1,250

 
1,255

 
1,125

Jonah Energy LLC (5)
 
05/12/2021
 
7.50
%
 
L+ 6.50
 
1.00
%
 
Oil, Gas & Consumable Fuels
 
500

 
494

 
318

Landslide Holdings, Inc.
 
02/25/2021
 
8.25
%
 
L+ 7.25
 
1.00
%
 
Software
 
1,000

 
994

 
920

P2 Lower Acquisition, LLC
 
10/22/2021
 
9.50
%
 
L+ 8.50
 
1.00
%
 
Health Care Providers & Services
 
500

 
498

 
495


See notes to consolidated financial statements.
16

AMERICAN CAPITAL SENIOR FLOATING, LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
DECEMBER 31, 2015
(in thousands)


Description
 
Maturity
 
Interest Rate (1)
 
Basis 
Point
Spread
Above
Index 
(2)
 
LIBOR
Interest Rate Floor
 
Industry
 
Par
Amount
 
Cost
 
Fair
Value
Second Lien Floating Rate Loans (continued) —19.1% of Net Assets
 
 
 
 
 
 
 
 
 
 
Performance Food Group, Inc. (5)
 
11/14/2019
 
6.25
%
 
L+ 5.25
 
1.00
%
 
Food & Staples Retailing
 
$
2,038

 
$
2,030

 
$
2,038

Ranpak Corp. (5)
 
10/03/2022
 
8.25
%
 
L+ 7.25
 
1.00
%
 
Containers & Packaging
 
1,375

 
1,374

 
1,363

Road Infrastructure Investment, LLC (5)
 
09/30/2021
 
7.75
%
 
L+ 6.75
 
1.00
%
 
Chemicals
 
2,000

 
2,008

 
1,860

Sedgwick Claims Management Services, Inc. (5)
 
02/28/2022
 
6.75
%
 
L+ 5.75
 
1.00
%
 
Insurance
 
2,000

 
1,963

 
1,820

Solenis International, L.P. (5)
 
07/31/2022
 
7.75
%
 
L+ 6.75
 
1.00
%
 
Chemicals
 
500

 
498

 
402

TWCC Holding Corp. (5)
 
06/26/2020
 
7.00
%
 
L+ 6.00
 
1.00
%
 
Media
 
2,000

 
1,993

 
1,997

Tyche Holdings, LLC (5)
 
11/11/2022
 
9.00
%
 
L+ 8.00
 
1.00
%
 
IT Services
 
1,500

 
1,501

 
1,474

U.S. Renal Care, Inc. (5), (7)
 
12/29/2023
 
9.00
%
 
L+ 8.00
 
1.00
%
 
Health Care Providers & Services
 
500

 
490

 
493

WP CPP Holdings, LLC (5)
 
04/30/2021
 
8.75
%
 
L+ 7.75
 
1.00
%
 
Aerospace & Defense
 
493

 
502

 
448

Total Second Lien Floating Rate Loans
 
 
 
 
 
 
 
 
 
$
25,012

 
$
24,909

 
$
22,575

CLO Equity —31.3% of Net Assets
 
 
 
 
 
 
 
 
 
 
 
 
Apidos CLO XIV, Income
Notes
(3), (4), (6)
 
04/15/2025
 
14.32
%
 
 
 
 
 
 
 
$
5,900

 
$
4,616

 
$
3,524

Apidos CLO XVIII, Income
Notes
(3), (4), (6)
 
07/22/2026
 
12.39
%
 
 
 
 
 
 
 
2,500

 
1,936

 
1,351

Ares XXIX CLO Ltd., Subordinated Notes (3), (4), (6)
 
04/17/2026
 
11.04
%
 
 
 
 
 
 
 
4,750

 
3,947

 
2,612

Avery Point II CLO, Limited, Income
Notes
(3), (4), (6)
 
07/17/2025
 
14.09
%
 
 
 
 
 
 
 
3,200

 
2,351

 
1,286

Babson 2015-1, Income Notes (3), (4), (6)
 
04/20/2027
 
16.32
%
 
 
 
 
 
 
 
2,500

 
2,161

 
1,716

Blue Hill CLO, Ltd., Subordinated Notes (3), (4), (6)
 
01/15/2026
 
11.86
%
 
 
 
 
 
 
 
5,400

 
4,315

 
1,520

Blue Hill CLO, Ltd., Subordinated Fee
Notes
(3), (4), (6)
 
01/15/2026
 
27.45
%
 
 
 
 
 
 
 
100

 
74

 
62

Betony CLO, Ltd., Subordinated
Notes
(3), (4), (6)
 
04/15/2027
 
11.90
%
 
 
 
 
 
 
 
2,500

 
2,096

 
1,289

Carlyle Global Market Strategies CLO 2015-3, Ltd., Subordinated
Notes
(3), (4), (6)
 
07/28/2028
 
21.83
%
 
 
 
 
 
 
 
3,000

 
2,491

 
2,436

Cent CLO 18 Limited, Subordinated Notes (3), (4), (6)
 
07/23/2025
 
12.26
%
 
 
 
 
 
 
 
4,675

 
3,595

 
2,296

Cent CLO 19 Limited, Subordinated Notes (3), (4), (6)
 
10/29/2025
 
10.67
%
 
 
 
 
 
 
 
2,750

 
2,184

 
1,431

Dryden 30 Senior Loan Fund, Subordinated
Notes
(3), (4), (6)
 
11/15/2025
 
17.79
%
 
 
 
 
 
 
 
2,500

 
1,676

 
1,205

Dryden 31 Senior Loan Fund, Subordinated
Notes
(3), (4), (6)
 
04/18/2026
 
11.21
%
 
 
 
 
 
 
 
5,250

 
4,008

 
2,373

Galaxy XVI CLO, Ltd., Subordinated
Notes
(3), (4), (6)
 
11/17/2025
 
11.31
%
 
 
 
 
 
 
 
2,750

 
2,123

 
1,344

Halcyon Loan Advisors Funding 2014-1 Ltd., Subordinated
Notes
(3), (4), (6)
 
04/18/2026
 
20.65
%
 
 
 
 
 
 
 
3,750

 
3,045

 
1,474

Highbridge Loan Management 2013-2, Ltd., Subordinated Notes (3), (4), (6)
 
10/20/2024
 
22.16
%
 
 
 
 
 
 
 
1,000

 
728

 
665

Magnetite VIII, Limited, Subordinated
Notes
(3), (4), (6)
 
04/15/2026
 
13.42
%
 
 
 
 
 
 
 
3,000

 
2,557

 
2,133

Neuberger Berman CLO XV, Ltd., Subordinated Notes (3), (4), (6)
 
10/15/2025
 
9.14
%
 
 
 
 
 
 
 
3,410

 
2,414

 
1,495


See notes to consolidated financial statements.
17

AMERICAN CAPITAL SENIOR FLOATING, LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
DECEMBER 31, 2015
(in thousands)


Description
 
Maturity
 
Interest Rate (1)
 
Basis 
Point
Spread
Above
Index 
(2)
 
LIBOR
Interest Rate Floor
 
Industry
 
Par
Amount
 
Cost
 
Fair
Value
CLO Equity (continued) —31.3% of Net Assets
 
 
 
 
 
 
 
 
 
 
Octagon Investment Partners XIV, Ltd., Income Notes (3), (4), (6)
 
01/15/2024
 
9.49
%
 
 
 
 
 
 
 
$
5,500

 
$
3,924

 
$
2,790

Octagon Investment Partners XX, Ltd., Subordinated Notes (3), (4), (6)
 
08/12/2026
 
10.46
%
 
 
 
 
 
 
 
2,500

 
2,121

 
1,548

THL Credit Wind River 2014-1 CLO Ltd., Subordinated Notes (3), (4), (6)
 
04/18/2026
 
13.54
%
 
 
 
 
 
 
 
4,000

 
3,237

 
2,304

Total CLO Equity 
 
 
 
 
 
 
 
 
 
$
70,935

 
$
55,599

 
$
36,854

Common Equity —0% of Net Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New Millennium Holdco, Inc. (9,446 shares) (5), (6), (10)
 
 
 
 
 
 
 
 
 
 
 
$

 
$

 
$
47

Total Common Equity
 
 
 
 
 
 
 
 
 
$

 
$

 
$
47

Total Non-Control/Non-Affiliate Investments (8) — 194.2% of net assets
 
 
 
 
 
$
278,320

 
$
261,875

 
$
229,056

Liabilities in Excess of Other Assets — (94.2%)
 
 
 
 
 
 
 
 
 
 
 
(111,127
)
Net Assets — 100.0%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
117,929


(1)
For each debt investment we have provided the weighted-average interest rate in effect as of December 31, 2015. For each CLO investment we have provided the accounting yield as of December 31, 2015 determined using the effective interest method that will be applied to the current amortized cost of the investment as adjusted for credit impairments, if any, in the following quarter. See Note 2 in this Quarterly Report on Form 10-Q regarding the recognition of Investment Income on CLOs.
(2)
Floating rate debt investments typically accrue interest at a predetermined spread relative to an index, typically LIBOR or PRIME, and reset monthly, quarterly or semi-annually. These instruments may be subject to a LIBOR or PRIME rate floor.
(3)
Investments that are not “qualifying assets” under Section 55(a) of the 1940 Act. Under the 1940 Act, we may not acquire any non-qualifying assets unless, at the time such acquisition is made, qualifying assets represent at least 70% of our total assets. As of December 31, 2015, qualifying assets represented 79% of total assets.
(4)
These securities are exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions that are exempt from registration, normally to qualified institutional buyers.
(5)
Assets are held at ACSF Funding and are pledged as collateral for the Credit Facility.
(6)
Fair value was determined using significant unobservable inputs and are classified as Level 3 in the fair value hierarchy.
(7)
All or a portion of this position has not settled as of December 31, 2015.
(8)
Net estimated unrealized loss for federal income tax purposes is $(38,561) as of December 31, 2015 based on a tax cost of $267,617. Estimated aggregate gross unrealized loss for federal income tax purposes as of December 31, 2015 is $(38,671); estimated aggregate gross unrealized gain for federal income tax purposes as of December 31, 2015 is $110.
(9)
Investment is on non-accrual as of December 31, 2015 and therefore considered non-income producing. All subsequent cash received from investment will be used to reduce its cost basis until the investment is placed back on accrual status or the cost basis has been collected.
(10)
Common stock is non-income producing.




See notes to consolidated financial statements.
18

AMERICAN CAPITAL SENIOR FLOATING, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(in thousands, except share and per share amounts)


Note 1. Organization
American Capital Senior Floating, Ltd. (which is referred to as “ACSF”, “we”, “us” and “our”) was organized in February 2013 as a Maryland corporation and commenced operations on October 15, 2013. We are structured as an externally managed, non-diversified closed-end investment management company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In November 2013, we formed a wholly-owned special purpose financing vehicle, ACSF Funding I, LLC, a Delaware limited liability company (“ACSF Funding”).
In January 2014, we completed an initial public offering (“IPO”) of 10,000,000 shares of common stock at the public offering price of $15.00 per share for gross proceeds of $150,000. Upon completion of the IPO, we became externally managed by American Capital ACSF Management, LLC (our “Manager”), an indirect subsidiary of American Capital Asset Management, LLC (“ACAM”), which is a wholly-owned portfolio company of American Capital, Ltd. (“American Capital”). Prior to the completion of our IPO, we were wholly-owned by ACAM. Following completion of the IPO, ACAM owned approximately 3% of our outstanding common stock, the maximum amount permissible under the 1940 Act. In conjunction with the IPO, our Manager paid the underwriting commissions of $7,952. Our common stock is listed on the NASDAQ Global Select Market, where it trades under the symbol “ACSF”. We have elected to be treated as a BDC under the 1940 Act and to be taxed as a regulated investment company (“RIC”), as defined in Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).
Investment Objective
Our investment objective is to provide attractive, risk-adjusted returns over the long term primarily through current income while seeking to preserve our capital. We actively manage a leveraged portfolio composed primarily of diversified investments in first lien and second lien floating rate loans principally to large-market U.S.-based companies (collectively, “Senior Floating Rate Loans” or “SFRLs”) which are commonly referred to as leveraged loans. We also invest in equity tranches of collateralized loan obligations (“CLOs”) which are securitized vehicles collateralized primarily by SFRLs and we may invest in debt tranches of CLOs. In addition, we may selectively invest in loans issued by middle market companies, mezzanine and unitranche loans and high yield bonds. Additionally, we may from time to time hold or invest in other equity investments and other debt or equity securities generally arising from a restructuring of Senior Floating Rate Loan positions previously held by us.
Note 2. Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain disclosures accompanying annual financial statements prepared in accordance with GAAP are omitted. In the opinion of management, all adjustments which are of a normal recurring nature and considered necessary for the fair presentation of the financial statements for the interim period have been included. The current period's results of operations are not necessarily indicative of results that ultimately may be achieved for the year. The unaudited interim consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2015.
The consolidated financial statements include our accounts and those of our wholly-owned subsidiary, ACSF Funding. Intercompany accounts and transactions have been eliminated in consolidation. The accounts of ACSF Funding are prepared for the same reporting period as ours using consistent accounting policies. Subsequent events are evaluated and disclosed as appropriate for events occurring through the date the consolidated financial statements are issued.
Use of Estimates
The preparation of our financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amount of income and expenses during the reported period. Changes in the economic environment, financial markets, and any other parameters used in determining such estimates could cause actual results to differ.


19

AMERICAN CAPITAL SENIOR FLOATING, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
(in thousands, except share and per share amounts)


Investment Classification
As required by the 1940 Act, investments are classified by level of control. “Control Investments” are defined as investments in portfolio companies that we are deemed to control, as defined in the 1940 Act. “Affiliate Investments” are investments in those companies that are affiliated companies, as defined in the 1940 Act, other than Control Investments. “Non-Control/Non-Affiliate Investments” are those that are neither Control Investments nor Affiliate Investments.
Generally, under the 1940 Act, we are deemed to control a company in which we have invested if we own more than 25% of the voting securities of such company. We are deemed to be an affiliate of a company if we own 5% or more of the voting securities of such company.
As of March 31, 2016 and December 31, 2015, all of our investments were Non-Control/Non-Affiliate investments.
Fair Value Measurements
We value our investments in accordance with the 1940 Act and Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), as determined in good faith by our Board of Directors. Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. Due to the uncertainty inherent in the valuation process, estimates of fair value may differ significantly from the values that would have been used had a ready market for our investments existed, and the differences could be material. Additionally, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on the investments to be different than the valuations currently assigned.
We undertake a multi-step valuation process to determine the fair value of our investments in accordance with ASC 820. The valuation process begins with the development of a preliminary valuation recommendation for each investment as determined in accordance with our valuation policy by a group of our Manager’s valuation, accounting and finance professionals, which is independent of our Manager's investment team. To prepare the proposed valuation, the group reviews information provided by a nationally recognized independent pricing service, broker-dealers, and may consult with the investment team and other internal resources of our Manager and its affiliates. The preliminary valuation recommendations are then presented to the Investment Committee and reviewed and approved by our Audit and Compliance Committee. The valuation recommendations are then reviewed by our Board of Directors for final approval.
Securities Transactions
Securities transactions are recorded on the trade date. The trade date for loans purchased in the “primary market” is considered the date on which the loan allocations are determined. The trade date for loans and other investments purchased in the “secondary market” is the date on which the transaction is entered into. The trade date for primary CLO equity transactions and any other security transaction entered outside conventional channels is the date we have determined all material terms have been defined for the transaction and (a) we have obtained a right to demand the securities purchased and incur an obligation to pay the price of the securities purchased or (b) we have obtained a right to collect the proceeds of a sale and incurred an obligation to deliver the securities sold. Cost is determined based on consideration given, adjusted for amortization of original issuance discounts (“OID”), market discounts and premiums.
Realized Gain or Loss and Unrealized Appreciation or Depreciation
Realized gain or loss from an investment is recorded at the time of disposition and calculated using the weighted average cost method. Unrealized appreciation or depreciation reflects the changes in fair value of investments as determined in compliance with the valuation policy as discussed in Note 6 in this Quarterly Report on Form 10-Q.
Income Taxes
As a RIC under Subchapter M of the Code, we are not subject to U.S. federal income tax on the portion of our taxable income distributed to our stockholders as a dividend. We intend to distribute 100% of our taxable income, within the Subchapter M rules, and therefore do not anticipate incurring corporate-level U.S. federal or state income tax. As a RIC, we are also subject to a nondeductible federal excise tax if we do not distribute at least 98% of net ordinary income, 98.2% of any capital gain net income and any recognized and undistributed taxable income from prior years.
ASC Topic 740, Accounting for Uncertainty in Income Taxes (“ASC 740”), provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold are recorded as a tax benefit or provision in the current year. Determinations regarding ASC 740 may be subject to review and adjustment at


20

AMERICAN CAPITAL SENIOR FLOATING, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
(in thousands, except share and per share amounts)


a later date based upon factors, including, but not limited to, an ongoing analysis of tax laws, regulations and interpretations thereof. We are not aware of any tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will change materially in the next 12 months.
Investment Income
For debt investments, we record interest income on the accrual basis to the extent that such amounts are expected to be collected. OID and purchased discounts and premiums are accreted into interest income using the effective interest method, where applicable. Loan origination fees are deferred and accreted into interest income using the effective interest method. We record prepayment premiums on loans and other investments as interest income when such amounts are received. We stop accruing interest on investments when it is determined that interest is no longer collectible. As of March 31, 2016, we had two loans on non-accrual status.
Interest income on CLO equity investments is recognized using the effective interest method as required by FASB ASC Subtopic 325-40, Investments-Other, Beneficial Interests in Securitized Financial Assets (“ASC 325-40”). Under ASC 325-40, at the time of purchase, we estimate the future expected cash flows and determine the effective yield of an investment based on these estimated cash flows and our cost basis. Subsequent to the purchase, these estimated cash flows are updated quarterly and a revised yield is calculated prospectively in accordance with ASC 320-10-35, Investment-Debt and Equity Securities. In the event that the fair value of an investment decreases below its current amortized cost basis, we may be required to write down the current amortized cost basis for a credit loss or to fair value depending on our hold expectations for the investment. Current amortized cost basis less the amount of any write down (“Reference Amount”) is used to calculate the effective yield used for interest income recognition purposes over the remaining life of the investment. We are precluded from reversing write downs for any subsequent increase in the expected cash flows of an investment with the effect of increasing total interest income over the life of the investment and increasing the realized loss recorded on the sale or redemption of the investment by the amount of the credit loss write down. In estimating these cash flows, there are a number of assumptions that are subject to uncertainties and contingencies. These include the amount and timing of principal payments (including prepayments, repurchases, defaults and liquidations), the pass through or coupon rate, and interest rate fluctuations. In addition, interest payment shortfalls due to delinquencies on the underlying loans and the timing and magnitude of projected credit losses on the loans underlying the securities have to be estimated. These uncertainties and contingencies are difficult to predict and are subject to future events that may impact our estimates and interest income. As a result, actual results may differ significantly from these estimates. During the three months ended March 31, 2016, we recorded $1.1 million in credit loss write downs to current amortized cost basis on three CLO equity investments.
Cash and Cash Equivalents
Cash and cash equivalents consist of demand deposits and highly liquid financial instruments with original maturities of 90 days or less, including those held in overnight sweep bank deposit accounts. Cash and cash equivalents are carried at cost, which approximates fair value. We place our cash and cash equivalents with financial institutions and, at times, cash held in bank accounts may exceed the Federal Deposit Insurance Corporation insured limit.
Consolidation
As permitted under Article 6 of Regulation S-X and as explained by ASC 946-810-45, Financial Services - Investment Companies - Consolidation, we will generally not consolidate an investment in a company other than an investment company subsidiary or a controlled operating company whose business consists primarily of providing services to us. Accordingly, we have consolidated the results of ACSF Funding in our consolidated financial statements.
Deferred Financing Costs
Deferred financing costs represent fees and other direct expenses incurred in connection with the issuance of debt. These costs are capitalized and amortized into interest expense over the estimated average life of the borrowings.
Distributions to Stockholders
Distributions to stockholders are recorded on the ex-dividend date.
Other General and Administrative Expenses
Other general and administrative expenses include audit and tax, professional fees, board of directors' fees, rent, IT system costs, custody, transfer agent and other operating expenses. These expenses are recognized on an accrual basis.
New Accounting Pronouncements
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities) (“ASU 2016-01”), which makes targeted improvements to the


21

AMERICAN CAPITAL SENIOR FLOATING, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
(in thousands, except share and per share amounts)


recognition, measurement, presentation and disclosure of certain financial instruments. ASU 2016-01 focuses primarily on the accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure requirements for certain financial instruments. Among its provisions for public business entities, ASU 2016-01 eliminates the requirement to disclose the method(s) and significant assumptions used to estimate the fair value of financial instruments measured at amortized cost, requires the use of the exit price notion when measuring the fair value of financial instruments for disclosure purposes and requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables). ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. We are currently evaluating the impact of adopting ASU 2016-01 and do not believe its adoption will have a material impact on our consolidated financial statements.
Note 3. Management Agreement
Our management agreement with our Manager, has a current renewal term expiring January 15, 2017. Under the management agreement, our Manager has agreed to provide investment advisory services to us, in addition to providing personnel, facilities and additional services necessary for our operations. Unless terminated earlier, the management agreement will automatically renew following the expiration of its current term for successive one year periods if approved annually by our Board of Directors or by the affirmative vote of the holders of a majority of our outstanding voting securities, and, in either case if also approved by a majority of our directors who are not “Interested Persons” as defined under the 1940 Act. Our Board of Directors and a majority of our directors who are not “Interested Persons”, as defined under the 1940 Act, have approved a renewal of the management agreement until January 15, 2017 and, subject to stockholder approval, an amendment and restatement of the management agreement, as described below.
Pursuant to the management agreement, our Manager has agreed to be responsible for certain of our operating expenses in excess of 0.75% of our consolidated net assets, less net unrealized appreciation or depreciation, each as determined under GAAP at the end of the most recently completed fiscal quarter for the first 24 months following the date of our IPO (the “Expense Cap”). Operating expenses subject to this reimbursement include both (i) our operating expenses reimbursed to our Manager and its affiliates for the expenses related to our operations incurred on our behalf and (ii) our operating expenses directly incurred by us, excluding the management fee, interest costs, taxes and accrued costs and fees related to actual, pending or threatened litigation, each as determined under GAAP for the most recently completed fiscal quarter. As a result of this Expense Cap, any reimbursements to our Manager and its affiliates could be reduced or eliminated, and in certain instances, our Manager could be required to reimburse us so that our other expenses do not exceed the Expense Cap. Our Manager has agreed to extend the Expense Cap until the date of our 2016 Annual Meeting of Stockholders, at which time we expect to submit to a vote of stockholders an amendment and restatement of the management agreement which would (i) extend the Expense Cap through December 31, 2020, (ii) subject to the Expense Cap, provide for reimbursement by us to our Manager for certain compensation expenses related to legal, compliance and internal audit personnel of our Manager and its affiliates who provide services to us necessary for our operations that are not required to be provided by our Manager under the management agreement and (iii) make certain other immaterial changes. Following the expiration of the Expense Cap, we will be fully responsible for the payment of our operating expenses. For the three months ended March 31, 2016, and 2015 our Manager was responsible for $238 and $245, respectively, of operating expenses as a result of the Expense Cap.
Our Manager receives a management fee from us that is payable quarterly in arrears. The management fee is calculated at an annual rate of 0.80% of our total consolidated assets, excluding cash and cash equivalents and net unrealized appreciation or depreciation, each as determined under GAAP at the end of the most recently completed fiscal quarter. There is no incentive compensation paid to our Manager under the management agreement. For the three months ended March 31, 2016 and 2015, we recognized management fee expenses of $497 and $578, respectively.
Since our Manager has no employees, it has entered into an administrative agreement with both its parent and American Capital pursuant to which our Manager will be provided with personnel, services and resources necessary for our Manager to perform its obligations under the management agreement as well as provide certain additional services.
Note 4. Related Party Transactions
Administrative Services Agreement and Management Agreement
Our Manager has entered into an administrative services agreement whereby our Manager has agreed to reimburse American Capital and its affiliates for certain expenses incurred on our behalf. Pursuant to our management agreement, we are responsible for reimbursing our Manager, American Capital and its affiliates for expenses incurred on our behalf, excluding employment-related expenses of our and our Manager’s officers and any employees of American Capital or its affiliates who provide services to us pursuant to the management agreement or to our Manager pursuant to the administrative services agreement. In addition, our Manager or one of its affiliates may pay for or incur certain expenses and then allocate these expenses to us. For


22

AMERICAN CAPITAL SENIOR FLOATING, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
(in thousands, except share and per share amounts)


the three months ended March 31, 2016 and 2015, we recognized expenses of $194 and $262, respectively, pursuant to the management agreement. Refer to Note 3 in this Quarterly Report on Form 10-Q for additional information on the management agreement.
Securities Transactions    
We may, from time to time, purchase securities from, or sell securities to affiliates of our Manager at fair market value on the trade date. During the three months ended March 31, 2016 and 2015, there were no purchases or sales of securities to affiliates of our Manager.
Note 5. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share for the three months ended March 31, 2016 and 2015:  
 
 
2016
 
2015
Numerator — Net Earnings
 
$
2,168

 
$
3,791

Denominator — weighted average shares
 
10,000,100

 
10,000,100

Net Earnings per share
 
$
0.22

 
$
0.38


Note 6. Investments
We value our investments at fair value in accordance with ASC 820, which defines fair value as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. Due to the uncertainty inherent in the valuation process, estimates of fair value may differ significantly from the values that would have been used had a ready market for our investments existed, and the differences could be material. Additionally, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on the investments to be different than the valuations currently assigned.
ASC 820 provides a framework for measuring the fair value of assets and liabilities and provides guidance regarding a fair value hierarchy, which prioritizes information used to measure fair value and the effect of fair value measurements on earnings. When available, we determine the fair value of our investments using unadjusted quoted prices from active markets. Where inputs for an asset or liability fall into more than one level in the fair value hierarchy, the investment is classified in its entirety based on the lowest level input that is significant to that investment's fair value measurement. We use judgment and consider factors specific to the investment when determining the significance of an input to a fair value measurement. Our policy is to recognize transfers in and out of levels as of the beginning of each reporting period. The three levels of the fair value hierarchy and investments that fall into each of the levels are described below:
Level 1: Inputs are unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. This may include valuations based on executed trades, broker quotations that constitute an executable price, and alternative pricing sources supported by observable inputs which, in each case, are either directly or indirectly observable for the asset in connection with market data at the measurement date.
Level 3: Inputs are unobservable and cannot be corroborated by observable market data. In certain cases, investments classified within Level 3 may include securities for which we have obtained indicative quotes from broker-dealers that do not necessarily represent prices the broker may be willing to trade on.
The valuation techniques used maximize the use of observable inputs and minimize the use of unobservable inputs. Our SFRLs are predominately valued based on evaluated prices from a nationally recognized independent pricing service or from third-party brokers who make markets in such debt investments. When possible, we make inquiries of third-party pricing sources to understand their use of significant inputs and assumptions. We review the third-party fair value estimates and perform procedures to validate their reasonableness, including an analysis of the range and dispersion of third-party estimates, frequency of pricing updates, comparison of recent trade activity for similar securities, and review for consistency with market conditions observed as of the measurement date.
There may be instances when independent or third-party pricing sources are not available, or cases where we believe that the third-party pricing sources do not provide sufficient evidence to support a market participant's view of the fair value of the


23

AMERICAN CAPITAL SENIOR FLOATING, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
(in thousands, except share and per share amounts)


debt investment being valued. These instances may result from an investment in a less liquid loan such as a middle market loan, a mezzanine loan or unitranche loan, or a loan to a company that has become financially distressed. In these instances, we may estimate the fair value based on a combination of a market yield valuation methodology and evaluated pricing discussed above, or solely based on a market yield valuation methodology. Under the market yield valuation methodology, we estimate the fair value based on a discounted cash flow technique. For these debt investments, the unobservable inputs used in the market yield valuation methodology to measure fair value reflect management's best estimate of assumptions that would be used by market participants when pricing the investment in a hypothetical transaction, including estimated remaining life, current market yield and interest rate spreads of similar loans and securities as of the measurement date. We will estimate the remaining life based on market data for the average life of similar loans. However, if we have information that the loan is expected to be repaid in the near term, we would use an estimated remaining life based on the expected repayment date. The average life to be used to estimate the fair value of our loans may be shorter than the legal maturity of the loans since many loans are prepaid prior to the maturity date. The interest rate spreads used to estimate the fair value of our loans is based on current interest rate spreads of similar loans. If there is a significant deterioration of the credit quality of a loan, we may consider other factors that a hypothetical market participant would use to estimate fair value, including the anticipated proceeds that would be received in a liquidation.
We estimate the fair value of our CLO equity investments using a combination of third-party broker quotes, purchases or sales of the same or similar securities, and cash flow forecasts subject to assumptions that a market participant would use regarding the investments' underlying collateral, including, but not limited to, assumptions for default and recovery rates, reinvestment spreads and prepayment rates. Cash flow forecasts are discounted using market participant's market yield assumptions that are derived from multiple sources, including, but not limited to, third-party broker quotes, industry research reports and transactions of securities and indices with similar structures and risk characteristics. We weight the use of third-party broker quotes, if any, when 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, the depth and consistency of broker quotes and the correlation of changes in broker quotes with underlying performance and other market indices. For the three months ended March 31, 2016, there were no changes to our valuation techniques or to the types of unobservable inputs used in the valuation process compared to the period ended December 31, 2015.
The following fair value hierarchy tables set forth our investments measured at fair value on a recurring basis by level as of March 31, 2016 and December 31, 2015: 
 
 
March 31, 2016
 
 
Total
 
Level 1
 
Level 2
 
Level 3
First lien floating rate loans
 
$
164,186

 
$

 
$
164,186

 
$

Second lien floating rate loans
 
17,868

 

 
17,511

 
357

CLO equity
 
33,817

 

 

 
33,817

Common equity
 
147

 

 

 
147

Total Investments
 
$
216,018

 
$

 
$
181,697

 
$
34,321

 
 
December 31, 2015
 
 
Total
 
Level 1
 
Level 2
 
Level 3
First lien floating rate loans
 
$
169,580

 
$

 
$
169,580

 
$

Second lien floating rate loans
 
22,575

 

 
22,216

 
359

CLO equity
 
36,854

 

 

 
36,854

Common equity
 
47

 

 

 
47

Total Investments
 
$
229,056

 
$

 
$
191,796

 
$
37,260



24

AMERICAN CAPITAL SENIOR FLOATING, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
(in thousands, except share and per share amounts)


The following table provides a summary of the changes in fair value of Level 3 assets for the three months ended March 31, 2016 as well as the portion of net unrealized appreciation (depreciation) for the three months ended March 31, 2016 related to those assets still held as of March 31, 2016:  
 
 
First Lien Floating Rate Loans
 
Second Lien Floating Rate Loans
 
CLO Equity
 
Common Equity
 
Total
Beginning Balance – December 31, 2015
 
$

 
$
359

 
$
36,854

 
$
47

 
$
37,260

Purchases
 

 

 
1,493

 

 
1,493

Repayments (1)
 

 
(11
)
 
(3,600
)
 

 
(3,611
)
Amortization of discount/premium (2)
 

 

 
1,657

 

 
1,657

Net unrealized appreciation (depreciation)
 

 
9

 
(2,587
)
 
100

 
(2,478
)
Ending Balance – March 31, 2016
 
$

 
$
357

 
$
33,817

 
$
147

 
$
34,321

Net change in net unrealized appreciation (depreciation) attributable to our Level 3 assets still held as of March 31, 2016
 
$

 
$
9

 
$
(2,587
)
 
$
100

 
$
(2,478
)
(1)
Includes cash distributions from CLO equity investments.
(2)
Includes income accrual from CLO equity investments determined using the effective interest method.
The following table provides a summary of the changes in fair value of Level 3 assets for the three months ended March 31, 2015 as well as the portion of net unrealized depreciation for the three months ended March 31, 2015 related to those assets still held as of March 31, 2015:  
 
 
First Lien Floating Rate Loans
 
Second Lien Floating Rate Loans
 
CLO Equity
 
Total
Beginning Balance – December 31, 2014
 
$
5,678

 
$
3,240

 
$
51,577

 
$
60,495

Purchases
 

 

 
3,988

 
3,988

Sales
 

 

 
(2,283
)
 
(2,283
)
Repayments (1)
 
(10
)
 

 
(3,244
)
 
(3,254
)
Amortization of discount/premium (2)
 
2

 

 
1,709

 
1,711

Transfers out (3)
 
(2,961
)
 
(3,240
)
 

 
(6,201
)
Transfers in (3)
 
1,249

 
493

 

 
1,742

Realized gains, net
 

 

 
278

 
278

Net unrealized depreciation
 
(26
)
 
(76
)
 
(1,272
)
 
(1,374
)
Ending Balance – March 31, 2015
 
$
3,932

 
$
417

 
$
50,753

 
$
55,102

Net change in net unrealized appreciation (depreciation) attributable to our Level 3 assets still held as of March 31, 2015
 
$
(26
)
 
$
(76
)
 
$
(1,057
)
 
$
(1,159
)
(1)
Includes cash distributions from CLO equity investments.
(2)
Includes income accrual from CLO equity investments determined using the effective interest method.
(3)
Investments were transferred into and out of Level 3 and Level 2 due to changes in the quantity and quality of inputs obtained to support the fair value of each investment. Transfers into and out of the levels are recognized at the beginning of each quarterly period.


25

AMERICAN CAPITAL SENIOR FLOATING, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
(in thousands, except share and per share amounts)


     The following table summarizes the significant unobservable inputs used in the determination of fair value for our Level 3 investments by category of investment and valuation technique as of March 31, 2016
 
 
 
 
 
 
 
 
Range
 
 
 
Fair Value as of March 31, 2016
 
Valuation
Techniques/
Methodology
 
Unobservable
Inputs
 
Minimum
Maximum
Weighted Average
Second lien floating rate loans
 
$
357

 
Third-party vendor pricing service
 
Bid/Ask
 
20
52
43
CLO equity
 
33,817

 
Discounted Cash Flow
 
Discount rate
Prepayment rate
Default rate
 
15.4%
25.0%
2.6%
60.9%
25.0%
4.8%
23.2%
25.0%
3.4%
Common equity
 
147

 
Third-party vendor pricing service
 
Bid/Ask
 
16
16
16
Total
 
$
34,321

 
 
 
 
 
 
 
 
The following table summarizes the significant unobservable inputs used in the determination of fair value for our Level 3 investments by category of investment and valuation technique as of December 31, 2015:
 
 
 
 
 
 
 
 
Range
 
 
 
Fair Value as of December 31, 2015
 
Valuation
Techniques/
Methodology
 
Unobservable
Inputs
 
Minimum
Maximum
Weighted Average
Second lien floating rate loans
 
$
359

 
Third-party vendor pricing service
 
Bid/Ask
 
8
64
57
CLO equity
 
36,854

 
Discounted Cash Flow
 
Discount rate
Prepayment rate
Default rate
 
16.5%
30.0%
1.5%
29.0%
33.3%
1.7%
21.3%
30.2%
1.6%
Common equity
 
47

 
Third-party vendor pricing service
 
Bid/Ask
 
5
5
5
Total
 
$
37,260

 
 
 
 
 
 
 
 
The significant unobservable inputs used in the fair value measurement of CLO equity include the default and prepayment rates used to establish projected cash flows and the discount rate applied in the valuation models to those projected cash flows. An increase in any one of these individual inputs in isolation would likely result in a decrease to fair value. However, given the interrelationship between these inputs, overall market conditions would likely have a more significant impact on our Level 3 fair values than changes in any one unobservable input.


26

AMERICAN CAPITAL SENIOR FLOATING, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
(in thousands, except share and per share amounts)


We use the Global Industry Classification Standard (“GICS®”) to classify the industry groupings of our SFRL investments. The GICS® was developed by MSCI, an independent provider of global indexes and benchmark-related products and services, and Standard & Poor’s, an independent international financial data and investment services company and provider of global equity indexes. The following table shows the SFRL portfolio composition by industry grouping at fair value as a percentage of total Senior Floating Rate Loans as of March 31, 2016 and December 31, 2015. Our investments in CLO equity are excluded from the table.
 
 
March 31, 2016
 
December 31, 2015
Software
 
12.6%
 
11.6%
Health Care Providers & Services
 
9.0%
 
9.2%
Media
 
7.2%
 
7.7%
Insurance
 
5.8%
 
5.2%
Aerospace & Defense
 
5.8%
 
6.6%
Commercial Services & Supplies
 
5.2%
 
4.6%
Hotels, Restaurants & Leisure
 
4.5%
 
3.7%
Professional Services
 
2.8%
 
2.7%
Capital Markets
 
2.8%
 
2.6%
Food Products
 
2.5%
 
2.2%
Containers & Packaging
 
2.5%
 
2.4%
Machinery
 
2.4%
 
1.9%
Chemicals
 
2.4%
 
2.2%
Health Care Equipment & Supplies
 
2.0%
 
1.9%
Food & Staples Retailing
 
2.0%
 
2.3%
Life Sciences Tools & Services
 
1.8%
 
1.7%
Diversified Telecommunications Services
 
1.8%
 
1.4%
Communications Equipment
 
1.6%
 
1.5%
Transportation Infrastructure
 
1.5%
 
1.5%
Textiles, Apparel & Luxury Goods
 
1.5%
 
1.7%
Independent Power and Renewable Electricity Producers
 
1.5%
 
1.4%
Trading Companies & Distributors
 
1.5%
 
1.5%
Technology Hardware, Storage & Peripherals
 
1.4%
 
1.3%
Construction & Engineering
 
1.3%
 
1.2%
Diversified Consumer Services
 
1.3%
 
2.4%
Building Products
 
1.2%
 
1.1%
Constructions Materials
 
1.2%
 
1.1%
Diversified Financial Services
 
1.1%
 
1.0%
Oil, Gas & Consumable Fuels
 
1.1%
 
0.4%
Internet Software & Services
 
1.1%
 
1.0%
IT Services
 
1.0%
 
2.7%
Electrical Equipment
 
1.0%
 
1.0%
Internet & Catalog Retail
 
0.3%
 
1.5%
Other
 
7.3%
 
7.8%
Total
 
100.0%
 
100.0%


27

AMERICAN CAPITAL SENIOR FLOATING, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
(in thousands, except share and per share amounts)


Note 7. Debt
Secured Revolving Credit Facility
On October 29, 2015, ACSF Funding amended and restated its secured revolving credit facility with Bank of America, N.A. (as amended and restated, the “Credit Facility”) to extend the maturity date from December 18, 2015 to December 18, 2018, to decrease the commitment amount from $140,000 to $135,000 and to eliminate the commitment fee when the facility is at least 90% utilized. ACSF Funding may make draws under the Credit Facility from time to time to purchase or acquire certain eligible assets. The Credit Facility is secured by ACSF Funding’s assets pursuant to a security agreement and contains customary financial and negative covenants and events of default. As of March 31, 2016 and December 31, 2015, the fair value of the assets pledged as collateral in ACSF Funding were $178,426 and $187,895, respectively. The Credit Facility is non-recourse to ACSF. Amounts drawn under the Credit Facility bear interest at a rate per annum equal to either (a) LIBOR plus 1.80%, or (b) 0.80% plus the highest of (i) the Federal funds rate plus 0.50%, (ii) Bank of America, N.A.’s prime rate or (iii) one-month LIBOR plus 1%. ACSF Funding may borrow, prepay and reborrow loans under the Credit Facility at any time prior to November 18, 2018, the commitment termination date, subject to certain terms and conditions, including maintaining a borrowing base. Any outstanding balance on the Credit Facility as of the commitment termination date must be repaid by the maturity date unless otherwise extended. Following the amendment to the Credit Facility on October 29, 2015, if ACSF Funding terminates the commitment amount in whole or in part prior to December 18, 2017, ACSF Funding will be required to pay a make-whole fee equal to the sum of the present values of all future spread amounts that would have been payable in respect of the total commitments (or terminated portion thereof) during the period from the termination date through December 18, 2017.
ACSF Funding is required to pay a commitment fee in an amount equal to 0.75% on the actual daily unused amount of the current lender commitments under the Credit Facility to the extent the outstanding amount of committed loans is less than an amount equal to 90% of the aggregate commitments from October 29, 2015 to the commitment termination date, payable quarterly in arrears.
As of March 31, 2016, there was $98,800 outstanding under the Credit Facility, which had a fair value of $98,800 and an interest rate of 2.21%. As of December 31, 2015, there was $110,200 outstanding under the Credit Facility, which had a fair value of $110,200 and an interest rate of 2.02%. The fair value of the Credit Facility is 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 and is measured with Level 3 inputs. As of March 31, 2016 and December 31, 2015, ACSF Funding was in compliance with all covenants of the Credit Facility, including compliance with a borrowing base that applies various advance rates of up to 80% on the investments pledged as collateral by ACSF Funding.
For the three months ended March 31, 2016 and March 31, 2015 we incurred interest and commitment fees on the Credit Facility of $641 and $658, respectively.
Note 8. Taxes
Tax Sharing Agreement
For the period prior to our IPO, during which we were treated as a taxable corporation under Subchapter C of the Code (“C corporation”) for tax purposes, we had a tax sharing agreement with American Capital and other members of its consolidated tax group, under which such members bore their full share of their individual tax obligation and members were compensated for their losses and other tax benefits that were able to be used by other members of the consolidated tax group based on their pro-forma stand-alone federal income tax return.
We applied for retroactive relief under IRC Section 9100 to make a “deemed sale election” whereby we will treat our net unrealized gains (“Net Built-in Gain”) on the date of our IPO as recognized for tax purposes in our final pre-IPO C corporation federal tax return. In March 2016, we received retroactive relief approval from the IRS to make a “deemed sale election”. The late election statement will be filed by American Capital along with its amended 2014 federal consolidated income tax return by May 20, 2016. We have therefore treated the Net Built-in Gain on the date of our IPO as recognized for tax purposes in our final pre-IPO C corporation federal tax return. The federal estimated tax sharing payment that we owed to American Capital attributed to our Net Built-in Gain was $563. The entire amount was treated as a deemed capital contribution to us.
Income Taxes
We have elected to be treated as a RIC for income tax purposes beginning with the date of our IPO. In order to qualify as a RIC, among other things, we are required to distribute annually at least 90% of our ordinary income, including net short term gains in excess of net long term losses. So long as we qualify as a RIC, we are not subject to the entity level taxes on earnings timely distributed to our stockholders. We intend to make sufficient annual distributions to substantially eliminate our corporate level income taxes.


28

AMERICAN CAPITAL SENIOR FLOATING, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
(in thousands, except share and per share amounts)


Income determined under GAAP differs from income determined under tax because of both temporary and permanent differences in income and expense recognition, including (i) unrealized gains and losses associated with debt investments marked to fair value for GAAP but excluded from taxable income until realized or settled, (ii) timing difference on income recognition for our CLO equity investments, (iii) premium amortization and gain adjustments attributable to the Net Built-in Gain recognized upon our IPO and (iv) capital losses in excess of capital gains do not reduce taxable income, and generally can be carried forward to offset capital gains.
At our discretion, we may delay distributions of a portion of our current year taxable income to the subsequent year and pay 4% excise taxes on such deferred distributions as calculated under the Code. If we anticipate paying excise taxes, we accrue excise taxes on a quarterly basis based on our estimates. For the three months ended March 31, 2016 and 2015, we accrued excise tax of $27 and $70, respectively.
Note 9. Consolidated Financial Highlights
 
 
Three Months Ended March 31,
 
 
2016
 
2015
Per Share Data:
 
 
 
 
Net asset value, beginning of period
 
$
11.79

 
$
14.42

Net investment income
 
0.29

 
0.31

Net realized and unrealized (loss) gain on investments
 
(0.07
)
 
0.07

Net Earnings
 
0.22

 
0.38

Distributions to stockholders
 
(0.29
)
 
(0.29
)
Net asset value, end of period
 
$
11.72

 
$
14.51

Per share market value, end of period
 
$
10.03

 
$
13.10

Total return based on market value (1), (5)
 
5.38
%
 
10.52
%
Total return based on net asset value (1), (5)
 
2.66
%
 
2.81
%
Ratios to Average Net Assets:
 
 
 
 
Net investment income (2)
 
9.97
%
 
8.49
%
Operating expenses (2), (3)
 
2.69
%
 
2.38
%
Interest and related expenses (2)
 
2.30
%
 
2.10
%
Total expenses (2), (3)
 
4.99
%
 
4.48
%
Supplemental Data:
 
 
 
 
Net assets, end of period
 
$
117,187

 
$
145,126

Shares outstanding, end of period
 
10,000,100

 
10,000,100

Average debt outstanding
 
$
104,340

 
$
128,958

Asset coverage per unit, end of period (4)
 
2,186

 
2,136

Portfolio turnover ratio (5)
 
4.11
%
 
13.30
%
 
(1)
Total return is based on the change in market price or net asset value per share during the period and takes into account distributions reinvested in accordance with the dividend reinvestment and stock purchase plan.
(2)
Annualized for periods less than one year.
(3)
The ratio of operating expenses to average net assets and the ratio of total expenses to average net assets are shown net of the reimbursement for the Expense Cap. The ratio of operating expenses to average net assets and the ratio of total expenses to average net assets would be 3.51% and 5.81%, respectively, without the expense cap for the three months ended March 31, 2016 and 3.06% and 5.16%, respectively, without the Expense Cap for the three months ended March 31, 2015.
(4)
The asset coverage ratio for a class of senior securities representing indebtedness is calculated on our consolidated total assets, less all liabilities and indebtedness not represented by senior securities, divided by the senior securities representing indebtedness. This asset coverage ratio is multiplied by $1,000 to determine the asset coverage per unit.
(5)
Not annualized for periods less than one year.
Note 10. Capital Transactions
On February 8, 2016, we announced a monthly cash distribution to stockholders of $0.097 per share for each of February, March and April 2016. On May 2, 2015, we announced a monthly cash distribution to stockholders of $0.097 per share for each of May, June and July 2016. Since our January 2014 IPO, we have declared a total of $28.7 million in distributions to stockholders, or $2.872 per share.



29

AMERICAN CAPITAL SENIOR FLOATING, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
(in thousands, except share and per share amounts)


Note 11. Commitments and Contingencies
In the ordinary course of business, we may be a party to certain legal proceedings, including actions brought against us and others with respect to investment transactions. The outcomes of any such legal proceedings are uncertain and, as a result of these proceedings, the values of the investments to which they relate could decrease. We were not subject to any material litigation against us as of March 31, 2016 or December 31, 2015.
We did not engage in any off-balance sheet activities as of March 31, 2016 or December 31, 2015.
Note 12. Subsequent Events
On May 02, 2016, we declared monthly cash distributions to stockholders of $0.097 per share for each of May, June and July 2016. The monthly cash distributions will be paid to common stockholders of record as set forth in the table below:
 
 
Distribution
per Share
 
Record Date
 
Ex-Dividend Date
 
Payment Date
May 2016
 
$0.097
 
May 23, 2016
 
May 19, 2016
 
June 2, 2016
June 2016
 
$0.097
 
June 23, 2016
 
June 21, 2016
 
July 5, 2016
July 2016
 
$0.097
 
July 21, 2016
 
July 19, 2016
 
August 2, 2016



30



Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The information contained in this section should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this report.
Forward-Looking Statements    
Some of the statements in this report constitute forward-looking statements, which relate to future events or our future performance or financial condition. We generally use words such as “anticipates,” “believes,” “expects,” “intends” and similar expressions to identify forward-looking statements. Our actual results could differ materially from those projected in the forward-looking statements for any reason, including any factors set forth in “Risk Factors” and elsewhere in this report. The forward-looking statements contained herein involve risks and uncertainties, including statements as to: (i) our future operating results; (ii) our business prospects and the prospects of our portfolio companies; (iii) the impact of investments that we expect to make; (iv) our contractual arrangements and relationships with third-parties; (v) the dependence of our future success on the general economy and its impact on the industries in which we invest; (vi) the ability of our portfolio companies to achieve their objectives; (vii) our expected financings and investments; (viii) the adequacy of our cash resources and working capital; and (ix) the timing of cash flows, if any, from the operations of our portfolio companies.
We have based the forward-looking statements included in this report on information available to us on the date of this report, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we may file with the SEC in the future, including any annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.
Overview
American Capital Senior Floating, Ltd. (“ACSF”, “we”, “our” and “us”), a Maryland corporation organized in February 2013 that commenced operations on October 15, 2013, is an externally managed, non-diversified closed-end investment management company. We have elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940 (the “1940 Act”). In addition, for tax purposes we have elected to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).
On January 15, 2014, we priced our initial public offering (“IPO”), selling 10.0 million shares of common stock, at a price of $15.00 per share for net proceeds of $149.2 million. Our common stock is listed on the NASDAQ Global Select Market, where it trades under the symbol “ACSF”. We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”), and intend to take advantage of the exemption for emerging growth companies allowing us to temporarily forgo the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002. We do not intend to take advantage of other disclosure or reporting exemptions for emerging growth companies under the JOBS Act.
Our investment activities are managed by American Capital ACSF Management, LLC (our “Manager”) for an annual base management fee of 0.80% of our total consolidated assets, excluding cash and cash equivalents and net unrealized appreciation or depreciation, at the end of the most recently completed fiscal quarter. There is no incentive compensation paid to our Manager. However, in connection with our IPO, our Manager agreed that our annual other operating expenses, as defined in our management agreement, will generally not exceed 75 basis points of ACSF’s quarter end consolidated net assets, excluding unrealized gains or losses (“Expense Cap”) for the first 24 months following our IPO. Our Manager has agreed to extend the Expense Cap until the date of our 2016 Annual Meeting of Stockholders, at which time we expect to submit to a vote of stockholders an amendment and restatement of the management agreement which would (i) extend the Expense Cap through December 31, 2020, (ii) subject to the Expense Cap, provide for reimbursement by us to our Manager for certain compensation expenses related to legal, compliance and internal audit personnel of our Manager and its affiliates who provide services to us necessary for our operations that are not required to be provided by our Manager under the management agreement and (iii) make certain other immaterial changes. Following the expiration of the Expense Cap, we will be fully responsible for the payment of our operating expenses.


31



Investments
Our investment objective is to provide attractive, risk-adjusted returns over the long term primarily through current income while seeking to preserve our capital. We actively manage a leveraged portfolio composed primarily of diversified investments in first lien and second lien floating rate loans principally to large-market U.S.-based companies (collectively, “Senior Floating Rate Loans”, “SFRLs” or “Loan Portfolio”) which are commonly referred to as leveraged loans. Standard and Poor's (“S&P”) defines large-market loans as loans to issuers with earnings before interest, taxes, depreciation and amortization (“EBITDA”) of greater than $50 million. Senior Floating Rate Loans are typically collateralized by a company's assets and structured with first lien or second lien priority on collateral, providing for greater security and potential recovery in the event of default compared to other subordinated fixed-income products. We also invest in equity tranches of collateralized loan obligations (“CLOs”) which are securitized vehicles collateralized primarily by SFRLs and we may invest in debt tranches of CLOs. In addition, we may selectively invest in loans issued by middle market companies, mezzanine and unitranche loans and high yield bonds. Additionally, we may from time to time hold or invest in other equity investments and other debt or equity securities generally arising from a restructuring of Senior Floating Rate Loan positions previously held by us. Under normal market conditions, we will invest at least 80% of our assets in Senior Floating Rate Loans.
Our level of investment activity can vary substantially from period to period depending on many factors, including the amount of debt and equity capital available to U.S. based large-market private companies, the level of merger and acquisition activity for such companies, the general economic environment and the competitive environment for the types of investments we make. As a BDC, we must not acquire any assets other than “qualifying assets” as defined by Section 55(a) of the 1940 Act unless, at the time the acquisition is made, at least 70% of our total assets are qualifying assets (with certain limited exceptions). Qualifying assets include investments in “eligible portfolio companies”. The definition of “eligible portfolio company” includes private operating companies and certain public companies whose securities are listed on a national securities exchange but whose market capitalization is less than $250 million, in each case organized under the laws of and with their principal place of business located in the United States. Investments in debt and equity tranches of CLOs are deemed nonqualified assets for BDC compliance purposes; therefore, under normal market conditions, we intend to limit our CLO investments to 20% of our portfolio.
Investment Income
We generate investment income primarily in the form of interest income from the investment securities we hold and capital gains, if any, on investment securities that we may sell. Our debt investments generally have a stated term of three to seven years and typically bear interest at a floating rate usually determined on the basis of a benchmark LIBOR, commercial paper rate, or the prime rate. Interest on our debt investments is generally payable quarterly but may be paid monthly or semi-annually.
Expenses
We do not have any employees and do not pay our officers any cash or non-cash equity compensation. We pay, or reimburse our Manager and its affiliates, for expenses related to our operations incurred on our behalf, excluding employment-related expenses of our and our Manager's officers and any employees of American Capital or the parent company of our Manager who provide services to us pursuant to the management agreement or to our Manager pursuant to the administrative services agreement. However, in accordance with the terms of our management agreement, our Manager agreed to limit the amount of operating expenses subject to reimbursement by us to the amount of the Expense Cap (See “Management Agreement” in this Quarterly Report on Form 10-Q for further discussion).
During periods of asset growth, we generally expect our general and administrative operating expenses to decline as a percentage of our total assets and increase during periods of asset declines. Interest expense and costs relating to future offerings of securities, among others, may also increase or reduce overall operating expenses based on portfolio performance, interest rate benchmarks, and offerings of our securities relative to comparative periods, among other factors.
Current Market Conditions
Economic and market conditions can impact our business and our investments in multiple ways, including the financial condition of the portfolio companies in which we invest, our investment returns, our funding costs, our access to the capital markets and our access to credit. The leveraged loan market has grown substantially in recent years with the amount of total leveraged loans outstanding exceeding $880 billion as of March 31, 2016. Growth has largely been a function of the resilient performance of the asset class across multiple credit cycles coupled with the changing regulatory and investor landscape and the attractive floating rate nature of the assets. Despite the size and liquidity of the loan market, there continues to be volatility in the loan market as a result of (i) the dynamic correlation between retail fund flows, and (ii) the financial performance of the underlying issuers that comprise the asset class. Despite uncertainties regarding economic and market conditions, the new issue loan pipeline in the leveraged loan market remains active, with first lien and second lien transactions that support leveraged buyouts, strategic acquisitions, plant expansions, recapitalizations and refinancings for large to mid-sized borrowers.


32



During the three months ended March 31, 2016, technical factors in the leveraged loan market slowly began to improve as retail outflows moderated. Retail flows to loan funds and CLO issuance both increased as the quarter progressed, contributing to an overall improvement in loan prices during the three months ended March 31, 2016 as evidenced by an increase in the average bid of the S&P/LSTA Leveraged Loan Index to 91.51 on March 31, 2016, up from the December 31, 2015 average bid price of 91.26. Similarly, technical and fundamental factors resulted in a decline in CLO equity prices. Higher liquidity premiums, largely driven by the broad market risk-off sentiment and lower projected cash flows, primarily as a result of an increase in defaulted loans held by the CLOs as well as forward default expectations, resulted in a corresponding decline in the fair value of CLO equity.  
Portfolio and Investment Activity
As of March 31, 2016, our portfolio was comprised of 76% first lien loans, 8% second lien loans and 16% CLO equity, measured at fair value. The Loan Portfolio consisted of 128 portfolio companies in 46 industries, and the CLO portfolio included 22 CLOs managed by 16 collateral managers with vintages ranging from 2012-2015. Our Loan Portfolio consisted of all floating rate investments with 100% having LIBOR floors ranging between 0.75% and 1.75%. The weighted average LIBOR floor in our Loan Portfolio was 1.01% as of March 31, 2016. The following table depicts a summary of the portfolio as of March 31, 2016:
($ in thousands)
Cost
 
Fair Value
 
Cumulative Net Unrealized Appreciation (Depreciation)
 
Yield
at Cost
Investment Portfolio:
 
 
 
 
 
 
 
First lien floating rate loans
$
172,965

 
$
164,186

 
$
(8,779
)
 
5.11
%
Second lien floating rate loans
20,543

 
17,868

 
(2,675
)
 
8.02
%
Total Senior Floating Rate Loans
193,508

 
182,054

 
(11,454
)
 
5.42
%
CLO equity
55,149

 
33,817

 
(21,332
)
 
9.75
%
Common equity

 
147

 
147

 
%
Total Investment Portfolio
$
248,657

 
$
216,018

 
$
(32,639
)
 
6.38
%
The portfolio is actively managed, with a turnover ratio of 4.11% for the three months ended March 31, 2016. During the three months ended March 31, 2016, Loan Portfolio rotation was reflective of the active management style, which seeks to optimize the portfolio based on current market conditions by rotating into positions that have better relative values. The average yield during the three months ended March 31, 2016 on the Loan Portfolio, CLO equity and total portfolio was 5.42%, 9.75% and 6.38%, respectively. The following tables depict the portfolio activity for the three months ended March 31, 2016:
($ in thousands)
 
First Lien
 
Second Lien
 
CLO Equity
 
Common Equity
 
Total
Fair Value, Beginning
 
$
169,580

 
$
22,575

 
$
36,854

 
$
47

 
$
229,056

Purchases
 
7,062

 
440

 
1,493

 

 
8,995

Sales
 
(6,911
)
 
(1,504
)
 

 

 
(8,415
)
Repayments (1)
 
(7,702
)
 
(3,321
)
 
(3,600
)
 

 
(14,623
)
Non-cash income accrual (2)
 
54

 
4

 
1,657

 

 
1,715

Net realized gains (losses)
 
(905
)
 
15

 

 

 
(890
)
Net unrealized appreciation (depreciation)
 
3,008

 
(341
)
 
(2,587
)
 
100

 
180

Fair Value, Ending
 
$
164,186

 
$
17,868

 
$
33,817

 
$
147

 
$
216,018

(1)
Repayments for CLO equity reflect the amount of cash distributions from CLO investments received during the three months ended March 31, 2016.
(2)
Non-cash income accrual includes amortization/accretion of discount/premium on the Loan Portfolio and income accrued on the CLOs using the effective interest method during the three months ended March 31, 2016.
 
 
Loan Portfolio
CLO
Equity
Total Portfolio
Portfolio Companies, Beginning
 
128
20
148
Purchases (new)
 
9
2
11
Purchases (add-on to existing)
 
4
4
Complete exit
 
(9)
(9)
Portfolio Companies, Ending
 
128
22
150


33



The following table depicts the weighted average portfolio yield by activity type during the three months ended March 31, 2016:
 
 
First Lien
Second Lien
CLO Equity
Total
Beginning Yield
 
5.03
 %
7.90
 %
10.04
 %
6.37
 %
Purchases
 
6.10
 %
7.55
 %
37.75
 %
9.68
 %
Sales
 
(4.72
)%
(8.98
)%
 %
(4.96
)%
Repayments
 
(4.71
)%
(7.44
)%
(13.79
)%
(7.59
)%
Ending Yield
 
5.11
 %
8.02
 %
9.75
 %
6.38
 %
As of December 31, 2015, our portfolio was comprised of 74% first lien loans, 10% second lien loans and 16% CLO equity, measured at fair value. The Loan Portfolio consisted of 128 portfolio companies in 46 industries, and the CLO portfolio included 20 CLOs managed by 15 collateral managers. Our Loan Portfolio consisted of all floating rate investments with 100% having LIBOR floors ranging between 0.75% and 1.75%. The weighted average LIBOR floor in our Loan Portfolio was 1.01% as of December 31, 2015. The following table depicts a summary of the portfolio as of December 31, 2015:
($ in thousands)
Cost
 
Fair Value
 
Cumulative
Net Unrealized Depreciation
 
Yield
at Cost
Investment Portfolio:
 
 
 
 
 
 
 
First lien floating rate loans
$
181,367

 
$
169,580

 
$
(11,787
)
 
4.98
%
Second lien floating rate loans
24,909

 
22,575

 
(2,334
)
 
7.81
%
Total Senior Floating Rate Loans
206,276

 
192,155

 
(14,121
)
 
5.36
%
CLO equity
55,599

 
36,854

 
(18,745
)
 
10.04
%
Common equity

 
47

 
47

 
%
Total Investment Portfolio
$
261,875

 
$
229,056

 
$
(32,819
)
 
6.37
%
The portfolio is actively managed, with a turnover ratio of 13.30% for the three months ended March 31, 2015. The average yield during the three months ended March 31, 2015 on the Loan Portfolio, CLO equity and total portfolio was 5.37%, 13.66% and 6.93%, respectively. The following tables depict the portfolio activity for the three months ended March 31, 2015:
($ in thousands)
 
First Lien
 
Second Lien
 
CLO Equity
 
Total
Fair Value, Beginning
 
$
194,952

 
$
29,841

 
$
51,577

 
$
276,370

Purchases
 
29,701

 
2,491

 
3,988

 
36,180

Sales
 
(31,116
)
 
(3,264
)
 
(2,283
)
 
(36,663
)
Repayments (1)
 
(2,525
)
 
(8
)
 
(3,244
)
 
(5,777
)
Non-cash income accrual (2)
 
7

 
3

 
1,709

 
1,719

Net realized gains (losses)
 
4

 
25

 
278

 
307

Net unrealized appreciation (depreciation)
 
1,705

 
(9
)
 
(1,272
)
 
424

Fair Value, Ending
 
$
192,728

 
$
29,079

 
$
50,753

 
$
272,560

(1)
Repayments for CLO equity reflect the amount of cash distributions from CLO investments received during the three months ended March 31, 2015.
(2)
Non-cash income accrual includes amortization/accretion of discount/premium on the Loan Portfolio and income accrued on the CLOs using the effective interest method during the three months ended March 31, 2015.
 
 
Loan Portfolio
CLO
Equity
Total Portfolio
Portfolio Companies - Beginning
 
117
16
133
Purchases (new)
 
19
2
21
Purchases (add-on to existing)
 
4
4
Complete exit
 
(15)
(1)
(16)
Portfolio Companies - Ending
 
121
17
138


34




The following table depicts the weighted average portfolio yield by activity type during the three months ended March 31, 2015:
 
 
First Lien
Second Lien
CLO Equity
Total
Beginning Yield
 
4.98
 %
7.81
 %
13.64
 %
6.92
 %
Purchases
 
5.34
 %
9.25
 %
17.12
 %
6.60
 %
Sales
 
(5.11
)%
(8.86
)%
(18.93
)%
(6.25
)%
Repayments
 
(5.12
)%
(6.37
)%
(13.64
)%
(9.93
)%
Repricing/Reforecast
 
 %
n/a

 %
 %
Ending Yield
 
5.02
 %
7.81
 %
14.02
 %
7.06
 %
As of March 31, 2016, approximately 75% of our Loan Portfolio, at fair value, was comprised of loans with a facility rating by S&P of at least “B” or higher. The following chart shows the S&P facility credit rating of our Loan Portfolio at fair value as of March 31, 2016:
 
First Lien
 
Second Lien


35



Results of Operations

Operating results for the three months ended March 31, 2016 and 2015 were as follows:

($ in thousands)
 
2016
 
2015
Investment income:
 
 
 
 
First lien floating rate loans
 
$
2,239

 
$
2,432

Second lien floating rate loans
 
449

 
600

CLO equity
 
1,657

 
1,709

Total investment income
 
4,345

 
4,741

Expenses:
 
 
 
 
Interest and other debt related costs
 
664

 
755

Management fee
 
497

 
578

Other expenses, net
 
279

 
278

Net expenses
 
1,440

 
1,611

Net investment income before taxes
 
2,905

 
3,130

Income tax provision
 
(27
)
 
(70
)
Net investment income
 
2,878

 
3,060

Net realized and unrealized (loss) gain on investments:
 
 
 
 
Net realized (loss) gain on investments
 
(890
)
 
307

Net unrealized appreciation on investments
 
180

 
424

Net realized and unrealized (loss) gain on investments
 
(710
)
 
731

Net Earnings
 
$
2,168

 
$
3,791


Investment Income
Investment income decreased $0.4 million to $4.3 million for the three months ended March 31, 2016 over the comparable period in 2015. The decrease was a result of a smaller investment portfolio, on average, during the first quarter of 2016 compared to the first quarter of 2015.
Net Expenses
Net expenses decreased $0.2 million to $1.4 million for the three months ended March 31, 2016 compared to the comparable period in 2015. The decline was driven by a reduction of interest expense due to less debt outstanding and lower management fees as a result of lower Net Assets during the first quarter of 2016 compared to the first quarter of 2015.
The following table outlines the costs associated with our debt financing during the three months ended March 31, 2016 and 2015:
($ in thousands)
 
2016
 
2015
Interest expense
 
$
583

 
$
637

Commitment fees
 
58

 
21

Amortization of debt financing costs
 
23

 
97

Total Debt Financing Costs
 
$
664

 
$
755

 
 
 
 
 
Average debt outstanding
 
$
104,340

 
$
128,958

Average cost of funds (1)
 
2.55
%
 
2.37
%
Weighted average interest rate
 
2.21
%
 
1.98
%
(1) Includes interest, unfunded commitment fees and amortization of debt financing costs


36



Net Realized Gains (Losses)
Sales and repayments of investments during the three months ended March 31, 2016 totaled $23.0 million resulting in net realized losses of $0.9 million. Sales and repayments of investments during the three months ended March 31, 2015 totaled $42.4 million resulting in net realized gains of $0.3 million.
Net Unrealized Appreciation (Depreciation)
During the three months ended March 31, 2016, we recognized net unrealized appreciation on the investment portfolio of $0.2 million primarily driven by net unrealized appreciation of $2.8 million on the Loan Portfolio, offset by $2.6 million of net unrealized depreciation on the CLO Portfolio. The primary driver for the increase in fair value of the Loan Portfolio was higher prices in the broadly syndicated U.S. loan market as a result of improved inflows during the quarter. The decline in fair value of the CLO Portfolio was a result of a widening of spreads, credit and downgrade concerns and low trades in CLO equity. The net unrealized appreciation on the investment portfolio during the three months ended March 31, 2015 was $0.4 million, which was comprised of $1.7 million of unrealized appreciation on the Loan Portfolio, partially offset by $(1.1) million of net unrealized depreciation in CLO equity and $(0.2) million from the reversal of previously recognized net unrealized appreciation upon the exit of one CLO position.
Taxes
We have elected be treated as a RIC for income tax purposes beginning with the date of our IPO. In order to qualify as a RIC, among other things, we are required to meet certain source of income and asset diversification requirements; additionally, we must distribute annually at least 90% of our ordinary income, including net short term gains in excess of net long term losses. So long as we qualify as a RIC, we generally are not subject to the entity level taxes on earnings timely distributed to our stockholders. At our discretion, we may delay distributions of a portion of our current year taxable income to the subsequent year and pay 4% excise taxes on such deferred distributions as calculated under the Code. If we anticipate paying excise taxes, we accrue excise taxes on a quarterly basis based on our estimates. For each of the three months ended March 31, 2016 and 2015, we accrued federal excise taxes of less than $0.1 million.
Financial Condition, Liquidity and Capital Resources
Liquidity and capital resources arise primarily from our Credit Facility and cash flow from operations. In addition, we may use proceeds from any follow-on equity offerings of common stock and other supplementary financing mechanisms as additional sources of capital and liquidity.
In order to qualify as a RIC, we must annually distribute in a timely manner to our stockholders at least 90% of our taxable ordinary income. In addition, we must also distribute in a timely manner to our stockholders all of our taxable ordinary and capital income in order to not be subject to income taxes. Accordingly, our ability to retain earnings is limited.    
Equity Capital
As a BDC, we are generally not able to issue or sell our common stock at a price below our net asset value per share, exclusive of any underwriting discount, except (i) with the prior approval of a majority of our stockholders, (ii) in connection with a rights offering to our existing stockholders or (iii) under such other circumstances as the SEC may permit. As of March 31, 2016, our net asset value was $11.72 per share and our closing market price was $10.03 per share.
Debt Capital
As of March 31, 2016, we had $98.8 million in borrowings outstanding on our Credit Facility and our debt to equity ratio was 0.84x. The fair value of assets pledged as collateral on our Credit Facility as of March 31, 2016 were $178.4 million. As of March 31, 2016, we had approximately $38.8 million of available liquidity consisting of $2.6 million of cash and cash equivalents and $36.2 million of available capacity on our Credit Facility.
As a BDC, we are permitted to issue “senior securities,” as defined in the 1940 Act, in any amount as long as immediately after such issuance our asset coverage is at least 200%, or equal to or greater than our asset coverage prior to such issuance, after taking into account the payment of debt with proceeds from such issuance. Asset coverage is defined in the 1940 Act as the ratio of the value of the total assets, less all liabilities and indebtedness not represented by senior securities, to the aggregate amount of senior securities representing indebtedness. However, if our asset coverage is below 200%, we may also borrow amounts up to 5% of our total assets for temporary purposes even if that would cause our asset coverage ratio to further decline. As of March 31, 2016, our asset coverage was 219% .
Operating and Financing Cash Flows
For the three months ended March 31, 2016, net cash provided by operating activities was $14.4 million and was primarily due to net proceeds from the sale of investments of $23.0 million, offset by $9.0 million of investment purchases. For the three months ended March 31, 2016, net cash used in financing activities was $14.3 million and was primarily used to reduce debt outstanding by $11.4 million and pay $2.9 million of distributions to stockholders. For the three months ended March 31, 2015,


37



net cash provided by operating activities was $5.5 million and was primarily from the collection of interest on our investment portfolio. For the three months ended March 31, 2015, net cash used in financing activities was $(5.1) million and was attributed to $2.9 million for distributions to stockholders paid and a net decrease in debt outstanding of $2.2 million.
Contractual Obligations
A summary of our contractual payment obligations as of March 31, 2016 are as follows:
 
 
Payments Due by Period (in thousands)
 
 
Total
 
Less than 1 Year
 
1 - 3 Years
 
3 - 5 Years
 
More than 5 Years
Credit Facility
 
$
98,800

 
$

 
$
98,800

 
$

 
$


Off-Balance Sheet Arrangements
We do not currently engage in off-balance sheet arrangements.
Distributions to Stockholders
When determining distributions to stockholders, our Board of Directors considers estimated taxable income, GAAP income and economic performance. Actual taxable income may differ from GAAP income due to temporary and permanent differences in income and expense recognition and changes in unrealized appreciation and depreciation on investments. The specific tax characteristics will be reported to stockholders on Form 1099 after the end of the calendar year. We currently expect distributions to stockholders for 2016 to be from ordinary taxable income.


38



The table below details the distributions to stockholders declared on our shares of common stock since the completion of our IPO:
Quarterly
Declaration Date
Ex-Dividend Date
Record Date
Payment Date
Per Share Amount
 
Total Amount
March 17, 2014
March 27, 2014
March 31, 2014
April 10, 2014
$0.180
 
$1,800
June 18, 2014
June 26, 2014
June 30, 2014
July 10, 2014
$0.280
 
$2,800
September 17, 2014
September 26, 2014
September 30, 2014
October 10, 2014
$0.280
 
$2,800
December 18, 2014
December 29, 2014
December 31, 2014
January 9, 2015
$0.290
 
$2,900
March 19, 2015
March 27, 2015
March 31, 2015
April 6, 2015
$0.290
 
$2,900
 
 
 
 
 
 
 
Monthly
Declaration Date
Ex-Dividend Date
Record Date
Payment Date
Per Share Amount
 
Total Amount
March 19, 2015
April 17, 2015
April 21, 2015
May 4, 2015
$0.097
 
$970
May 4, 2015
May 20, 2015
May 22, 2015
June 2, 2015
$0.097
 
$970
May 4, 2015
June 17, 2015
June 19, 2015
July 2, 2015
$0.097
 
$970
May 4, 2015
July 22, 2015
July 24, 2015
August 4, 2015
$0.097
 
$970
August 3, 2015
August 19, 2015
August 21, 2015
September 2, 2015
$0.097
 
$970
August 3, 2015
September 18, 2015
September 22, 2015
October 2, 2015
$0.097
 
$970
August 3, 2015
October 21, 2015
October 23, 2015
November 3, 2015
$0.097
 
$970
November 2, 2015
November 18, 2015
November 20, 2015
December 2, 2015
$0.097
 
$970
November 2, 2015
December 22, 2015
December 24, 2015
January 5, 2016
$0.097
 
$970
November 2, 2015
January 20, 2016
January 22, 2016
February 2, 2016
$0.097
 
$970
February 8, 2016
February 17, 2016
February 19, 2016
March 2, 2016
$0.097
 
$970
February 8, 2016
March 21, 2016
March 23, 2016
April 4, 2016
$0.097
 
$970
February 8, 2016
April 19, 2016
April 21, 2016
May 3, 2016
$0.097
 
$970
May 2, 2016
May 19, 2016
May 23, 2016
June 2, 2016
$0.097
 
$970
May 2, 2016
June 21, 2016
June 23, 2016
July 5, 2016
$0.097
 
$970
May 2, 2016
July 19, 2016
July 21, 2016
August 2, 2016
$0.097
 
$970
Inception to Date Total
 
$2.872
 
$28,720

We maintain an “opt out” dividend reinvestment and stock purchase plan for our common stockholders. As a result, if we declare a distribution, then stockholders' cash distributions will be automatically reinvested in additional shares of our common stock, unless they, or their nominees on their behalf, specifically “opt out” of the dividend reinvestment and stock purchase plan so as to receive cash distributions.
Critical Accounting Policies
The preparation of consolidated financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and revenues and expenses during the periods reported. Actual results could materially differ from those estimates. The following is a summary of our accounting policies that are most affected by judgments, estimates and assumptions, which relate to the estimation of fair value of portfolio investments and revenue recognition.
Valuation of Portfolio Investments
We value our investments in accordance with the 1940 Act and Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), as determined in good faith by our Board of Directors.


39



We undertake a multi-step valuation process to determine the fair value of our investments in accordance with ASC 820. The valuation process begins with the development of a preliminary valuation recommendation for each investment as determined in accordance with our valuation policy by a group of our Manager’s valuation, accounting and finance professionals, which is independent of our Manager's investment team. To prepare the proposed valuation, the group reviews information provided by a nationally recognized independent pricing service, broker-dealers, and may consult with the investment team and other internal resources of our Manager and its affiliates. The preliminary valuation recommendations are then presented to the Investment Committee and reviewed and approved by our Audit and Compliance Committee. The valuation recommendations are then reviewed by our Board of Directors for final approval. There were no changes to our valuation techniques or to the types of unobservable inputs used in the valuation process during the three months ended March 31, 2016
ASC 820 provides a framework for measuring the fair value of assets and liabilities and provides guidance regarding a fair value hierarchy, which prioritizes information used to measure fair value and the effect of fair value measurements on earnings. When available, we determine the fair value of our investments using unadjusted quoted prices from active markets. Where inputs for an asset or liability fall into more than one level in the fair value hierarchy, the investment is classified in its entirety based on the lowest level input that is significant to that investment's fair value measurement. We use judgment and consider factors specific to the investment when determining the significance of an input to a fair value measurement. Our policy is to recognize transfers in and out of levels as of the beginning of each reporting period. The three levels of the fair value hierarchy and investments that fall into each of the levels are described below:
Level 1: Inputs are unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. This may include valuations based on executed trades, broker quotations that constitute an executable price, and alternative pricing sources supported by observable inputs which, in each case, are either directly or indirectly observable for the asset in connection with market data at the measurement date.
Level 3: Inputs are unobservable and cannot be corroborated by observable market data. In certain cases, investments classified within Level 3 may include securities for which we have obtained indicative quotes from broker-dealers that do not necessarily represent prices the broker may be willing to trade on.
The valuation techniques used maximize the use of observable inputs and minimize the use of unobservable inputs. Our SFRLs are predominately valued based on evaluated prices from a nationally recognized independent pricing service or from third-party brokers who make markets in such debt investments. When possible, we make inquiries of third-party pricing sources to understand their use of significant inputs and assumptions. We review the third-party fair value estimates and perform procedures to validate their reasonableness, including an analysis of the range and dispersion of third-party estimates, frequency of pricing updates, comparison of recent trade activity for similar securities, and review for consistency with market conditions observed as of the measurement date.
There may be instances when independent or third-party pricing sources are not available, or cases where we believe that the third-party pricing sources do not provide sufficient evidence to support a market participant's view of the fair value of the debt investment being valued. These instances may result from an investment in a less liquid loan such as a middle market loan, a mezzanine loan or unitranche loan, or a loan to a company that has become financially distressed. In these instances, we may estimate the fair value based on a combination of a market yield valuation methodology and evaluated pricing discussed above, or solely based on a market yield valuation methodology. Under the market yield valuation methodology, we estimate the fair value based on a discounted cash flow technique. For these debt investments, the unobservable inputs used in the market yield valuation methodology to measure fair value reflect management's best estimate of assumptions that would be used by market participants when pricing the investment in a hypothetical transaction, including estimated remaining life, current market yield and interest rate spreads of similar loans and securities as of the measurement date. We will estimate the remaining life based on market data for the average life of similar loans. However, if we have information that the loan is expected to be repaid in the near term, we would use an estimated remaining life based on the expected repayment date. The average life to be used to estimate the fair value of our loans may be shorter than the legal maturity of the loans since many loans are prepaid prior to the maturity date. The interest rate spreads used to estimate the fair value of our loans is based on current interest rate spreads of similar loans. If there is a significant deterioration of the credit quality of a loan, we may consider other factors that a hypothetical market participant would use to estimate fair value, including the anticipated proceeds that would be received in a liquidation.
We estimate the fair value of our CLO equity investments using a combination of third-party broker quotes, purchases or sales of the same or similar securities, and cash flow forecasts subject to assumptions that a market participant would use regarding the investments' underlying collateral, including, but not limited to, assumptions for default and recovery rates, reinvestment spreads and prepayment rates. Cash flow forecasts are discounted using market participant's market yield assumptions that are derived from multiple sources, including, but not limited to, third-party broker quotes, industry research reports and transactions of securities and indices with similar structures and risk characteristics. We weight the use of third-party broker quotes,


40



if any, when 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, the depth and consistency of broker quotes and the correlation of changes in broker quotes with underlying performance and other market indices.
Investment Income
For debt investments, we record interest income on the accrual basis to the extent that such amounts are expected to be collected. OID and purchased discounts and premiums are accreted into interest income using the effective interest method, where applicable. Loan origination fees are deferred and accreted into interest income using the effective interest method. We record prepayment premiums on loans and other investments as interest income when such amounts are received. We stop accruing interest on investments when it is determined that interest is no longer collectible.
Interest income on CLO equity investments is recognized using the effective interest method as required by FASB ASC Subtopic 325-40, Investments-Other, Beneficial Interests in Securitized Financial Assets (“ASC 325-40”). Under ASC 325-40, at the time of purchase, we estimate the future expected cash flows and determine the effective yield of an investment based on these estimated cash flows and our cost basis. Subsequent to the purchase, these estimated cash flows are updated quarterly and a revised yield is calculated prospectively in accordance with ASC 320-10-35, Investment-Debt and Equity Securities. In the event that the fair value of an investment decreases below its current amortized cost basis, we may be required to write down the current amortized cost basis for a credit loss or to fair value depending on our hold expectations for the investment. Current amortized cost basis less the amount of any write down (“Reference Amount”) is used to calculate the effective yield used for interest income recognition purposes over the remaining life of the investment. We are precluded from reversing write downs for any subsequent increase in the expected cash flows of an investment with the effect of increasing total interest income over the life of the investment and increasing the realized loss recorded on the sale or redemption of the investment by the amount of the credit loss write down. In estimating these cash flows, there are a number of assumptions that are subject to uncertainties and contingencies. These include the amount and timing of principal payments (including prepayments, repurchases, defaults and liquidations), the pass through or coupon rate, and interest rate fluctuations. In addition, interest payment shortfalls due to delinquencies on the underlying loans and the timing and magnitude of projected credit losses on the loans underlying the securities have to be estimated. These uncertainties and contingencies are difficult to predict and are subject to future events that may impact our estimates and interest income. As a result, actual results may differ significantly from these estimates.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are subject to financial market risks, including changes in interest rates. As of March 31, 2016, all of our debt investments bore interest at floating rates, and we expect that our investment portfolio will, in the future, primarily include floating rate debt investments. The interest rates on our debt investments are usually based on a floating LIBOR, and the debt investments typically contain interest rate reset provisions that adjust applicable interest rates to current rates on a periodic basis. As of March 31, 2016, 100% of the debt investments in our portfolio had interest rate floors between 0.75% and 1.75%, which, in the current interest rate environment where LIBOR is below 0.75%, has effectively converted those floating rate debt investments to fixed rate debt investments. In contrast, our Credit Facility has a floating interest rate provision with no LIBOR floor, and therefore, our cost of funds will fluctuate with changes in short-term interest rates.
Assuming no changes to our consolidated statement of assets and liabilities as of March 31, 2016, the following table shows the approximate annualized impact to the components of our results of operations from hypothetical base rate changes in interest rates to our SFRL portfolio and debt financing.
($ in thousands except per share data)
Basis point increase (1)
 
Interest income
 
Interest expense
 
Net increase
 
Net increase
per share
 
300
 
$
5,037

 
$
2,958

 
$
2,079

 
$
0.21

 
200
 
$
3,101

 
$
1,972

 
$
1,129

 
$
0.11

 
100
 
$
1,169

 
$
986

 
$
183

 
$
0.02

 
(1) A decline in interest rates would not have a material impact on our consolidated financial statements.
Although management believes that this measure is indicative of our sensitivity to interest rates, it does not reflect any potential impact to the fair value of our investments as a result of changes to interest rates, nor does it adjust for potential changes in the credit market, credit quality, size and composition of the assets in our consolidated statements of assets and liabilities and other business developments that could affect the net increase/(decrease) in net assets resulting from operations or net investment income. Accordingly, no assurances can be given that actual results would not differ materially from those shown above.
The above sensitivity analysis does not include our CLO equity investments. CLO equity investments are levered structures that are collateralized primarily with first lien floating rate loans that may have LIBOR floors and are levered primarily with floating rate debt that does not have a LIBOR floor. The residual cash flows available to the equity holders of the CLOs will


41



decline as interest rates increase until interest rates surpass the LIBOR floors on the floating rate loans. However, the revenue recognized on our CLO equity investments is calculated using the effective interest method which incorporates a forward LIBOR curve in the projected cash flows. Any change to interest rates that is not in-line with the forward LIBOR curve used in the projections, in either the timing or magnitude of the change, will cause actual distributions to differ from the current projections and will impact the related revenue recognized from these investments.
The below graph illustrates the forward LIBOR curve utilized in the projected cash flows from our CLO equity investments as of March 31, 2016(1).
(1) Forward LIBOR curve used to develop the cash flows incorporated in the March 31, 2016 valuations and the cash flows used to calculate the effective yield as of March 31, 2016. Source: Bloomberg as of April 20, 2016.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of March 31, 2016, we, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed in our periodic SEC filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of such possible controls and procedures.
Changes in Internal Control over Financial Reporting
There have been no changes in our “internal control over financial reporting” (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during our quarter ended March 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


42



PART II. OTHER INFORMATION

Item 1. Legal Proceedings
From time to time, we may be a party to certain ordinary routine litigation incidental to our business, including the enforcement of our rights under contracts with our portfolio companies. We are not currently subject to any material litigation nor, to our knowledge, is any material litigation threatened against us.

Item 1A. Risk Factors
The risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015 have not materially changed.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.

Item 3. Defaults Upon Senior Securities
None.

Item 4. Mine Safety Disclosures
Not applicable.

Item 5. Other Information
    
None.

Item 6. Exhibits, Financial Statement Schedules
The following exhibits are filed as part of this report or hereby incorporated by reference to exhibits previously filed with the SEC:
 
Exhibit
Number
  
Description
 
 
*3.1
 
American Capital Senior Floating, Ltd. Articles of Amendment and Restatement, incorporated herein by reference to Exhibit 3.1 of Form 10-Q for the quarter ended March 31, 2014 (File No. 814-01025), filed May 15, 2014.
 
 
 
*3.2
 
American Capital Senior Floating, Ltd. Amended and Restated Bylaws, incorporated herein by reference to Exhibit 3.2 of Form 10-Q for the quarter ended March 31, 2014 (File No. 814-01025), filed May 15, 2014.
 
 
 
*4.1
 
Instruments defining the rights of holders of securities: See Article VI of our Articles of Amendment and Restatement, incorporated herein by reference to Exhibit 3.1 of Form 10-Q for the quarter ended March 31, 2014 (File No. 814-01025), filed May 15, 2014.
 
 
 
*4.2
 
Instruments defining the rights of holders of securities: See Article VII of our Amended and Restated Bylaws, incorporated herein by reference to Exhibit 3.2 of Form 10-Q for the quarter ended March 31, 2014 (File No. 814-01025), filed May 15, 2014.
 
 
 
*4.3
 
Form of Certificate of Common Stock, incorporated herein by reference to Exhibit 2.d.3 of Amendment No. 1 to Form N-2 (Registration Statement No. 333-190357), filed December 20, 2013.
 
 
 
31.1
 
Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 
31.2
 
Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 
32.1
 
Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
 
 
 
 
 
 
* Previously filed
 
 


43



SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 






 
 
 
AMERICAN CAPITAL SENIOR FLOATING, LTD.


Date:
May 9, 2016

By:
/s/ John R. Erickson

 


John R. Erickson
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)



    



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