Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q
(Mark One)
 
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
or
 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______

Commission file number 814-00813

OFS CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
 
46-1339639
State or Other Jurisdiction of
 
I.R.S. Employer Identification No.
Incorporation or Organization
 
 
 
 
 
10 S. Wacker Drive, Suite 2500, Chicago, Illinois
 
60606
Address of Principal Executive Offices
 
Zip Code
 
 
 
 
(847) 734-2000
 
                                      Registrant’s Telephone Number, Including Area Code
 
 
 
Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value per share
OFS
The Nasdaq Global Select Market
6.25% Notes due 2023
OFSSG
The Nasdaq Global Select Market
6.375% Notes due 2025
OFSSL
The Nasdaq Global Select Market
6.50% Notes due 2025
OFSSZ
The Nasdaq Global Select Market
5.95% Notes due 2026
OFSSI
The Nasdaq Global Select Market

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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý     No  ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ¨     No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
¨
Accelerated filer
ý
 
 
 
 
Non-accelerated filer
¨  
Smaller reporting company
¨
 
 
 
 
Emerging growth company
¨
 
 




If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨     No  ý

The number of shares of the issuer’s Common Stock, $0.01 par value, outstanding as of November 4, 2020 was 13,406,402.



OFS CAPITAL CORPORATION

TABLE OF CONTENTS
 
 
Item 1.
 
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
Item 1.
Item 1A.
Item 2
Item 3.
Item 4.
Item 5.
Item 6.

2


Defined Terms
We have used "we," "us," "our," "our company" and "the Company" to refer to OFS Capital Corporation in this report. We also have used several other terms in this report, which are explained or defined below:
Term
Explanation or Definition
1940 Act
Investment Company Act of 1940, as amended
Administration Agreement
Administration Agreement between the Company and OFS Services dated November 7, 2012
Affiliated Account
Another account managed by OFS Advisor or an affiliate of OFS Advisor
ASC
Accounting Standards Codification, as issued by the FASB
ASU
Accounting Standards Updates, as issued by the FASB
BDC
Business Development Company under the 1940 Act
BLA
Business Loan Agreement, as amended, with Pacific Western Bank, as lender, which provides the Company with a senior secured revolving credit facility
BNP Facility
A secured revolving credit facility that provides for borrowings in an aggregate principal amount up to $150,000,000 issued pursuant to a Revolving Credit and Security Agreement by and among OFSCC-FS, the lenders from time to time parties thereto, BNP Paribas, as administrative agent, OFSCC-FS Holdings, LLC, a wholly owned subsidiary of the Company, as equityholder, the Company, as servicer, Citibank, N.A., as collateral agent and Virtus Group, LP, as collateral administrator

Board
The Company's board of directors
CLO
Collateralized loan obligation
Code
Internal Revenue Code of 1986, as amended
Company
OFS Capital Corporation and its consolidated subsidiaries
DRIP
Distribution reinvestment plan
EBITDA
Earnings before interest, taxes, depreciation and amortization
Exchange Act
Securities Exchange Act of 1934, as amended
FASB
Financial Accounting Standards Board
GAAP
Accounting principles generally accepted in the United States
HPCI
Hancock Park Corporate Income, Inc., a Maryland corporation and non-traded BDC for whom OFS Advisor serves as investment adviser
ICTI
Investment company taxable income, which is generally net ordinary income plus net short-term capital gains in excess of net long-term capital losses
Indicative Prices
Market quotations, prices from pricing services or bids from brokers or dealers
Investment Advisory Agreement
Investment Advisory and Management Agreement between the Company and OFS Advisor dated November 7, 2012
LIBOR
London Interbank Offered Rate
NBIP
Non-binding indicative price
Net Loan Fees
The cumulative amount of fees, such as discounts, premiums and amendment fees that are deferred and recognized as income over the life of the loan
OCCI
OFS Credit Company, Inc., a Delaware corporation and a non-diversified, closed-end management investment company for whom OFS Advisor serves as investment adviser
OFS Advisor
OFS Capital Management, LLC, a wholly owned subsidiary of OFSAM and registered investment advisor under the Investment Advisers Act of 1940, as amended
OFS Services
OFS Capital Services, LLC, a wholly owned subsidiary of OFSAM and affiliate of OFS Advisor
OFSAM
Orchard First Source Asset Management, LLC, a full-service provider of capital and leveraged finance solutions to U.S. corporations
OFSCC-FS
OFSCC-FS, LLC, an indirect wholly owned subsidiary of the Company
OFSCC-FS Assets
Assets held by the Company through OFSCC-FS
OFSCC-MB
OFSCC-MB, Inc., a wholly owned subsidiary taxed under subchapter C of the Code that generally holds the equity investments of the Company that are taxed as pass-through entities



Term
Explanation or Definition
OID
Original issue discount
Order
An exemptive relief order from the SEC to permit us to co-invest in portfolio companies with certain funds managed by OFS Advisor in a manner consistent with our investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors, subject to compliance with certain conditions
Parent
OFS Capital Corporation
PIK
Payment-in-kind, non-cash interest or dividends payable as an addition to the loan or equity security producing the income.
Portfolio Company Investment
A debt or equity investment in a portfolio company. Portfolio Company Investments exclude Structured Finance Notes
Prime Rate
United States Prime interest rate
PWB Credit Facility
Senior secured revolving credit facility between the Company and Pacific Western Bank, as lender
Reunderwriting Analysis
A discount rate method based upon a hypothetical recapitalization of the entity given its current operating performance and current market condition
RIC
Regulated investment company under the Code
SBA
U.S. Small Business Administration
SBCAA
Small Business Credit Availability Act
SBIC
A fund licensed under the SBA small business investment company program
SBIC Acquisition
The Company's acquisition of the remaining ownership interests in SBIC I LP and OFS SBIC I GP, LLC on December 4, 2013
SBIC Act
Small Business Investment Act of 1958, as amended
SBIC I LP
OFS SBIC I, LP, a wholly owned SBIC subsidiary of the Company
SEC
U.S. Securities and Exchange Commission
Securities Act
Securities Act of 1933, as amended
Secured Revolver Amendment
The amended Business Loan Agreement with Pacific Western Bank, as lender, dated October 7, 2020
Stock Repurchase Program
The open market stock repurchase program for shares of the Company’s common stock under Rule 10b-18 of the Exchange Act
Structured Finance Notes
CLO mezzanine debt and CLO subordinated debt positions
Synthetic Rating Analysis
A discount rate method that assigns a surrogate debt rating to the entity based on known industry standards for assigning such ratings and then estimates the discount rate based on observed market yields for actual rated debt
Transaction Price
The cost of an arm's length transaction occurring in the same security
Unsecured Notes
The combination of the Unsecured Notes Due September 2023, Unsecured Notes Due April 2025, Unsecured Notes Due October 2025 and Unsecured Notes Due October 2026
Unsecured Notes Due April 2025
The Company’s $50.0 million aggregate principal amount of 6.375% notes due April 30, 2025
Unsecured Notes Due October 2025
The Company’s $46.0 million aggregate principal amount of 6.5% notes due October 30, 2025
Unsecured Notes Due October 2026
The Company's $54.3 million aggregate principal amount of 5.95% notes due October 31, 2026
Unsecured Notes Due September 2023
The Company’s $25.0 million aggregate principal amount of 6.25% notes due September 30, 2023



Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about us, our current and prospective portfolio investments, our industry, our beliefs and our assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “would,” “should,” “targets,” “projects” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including without limitation:
our ability and experience operating a BDC or an SBIC, or maintaining our tax treatment as a RIC under Subchapter M of the Code;
our dependence on key personnel;
our ability to maintain or develop referral relationships;
our ability to replicate historical results;
the ability of OFS Advisor to identify, invest in and monitor companies that meet our investment criteria;
the belief that the carrying amounts of our financial instruments, such as cash, receivables and payables approximate the fair value of such items due to the short maturity of such instruments and that such financial instruments are held with high credit quality institutions to mitigate the risk of loss due to credit risk;
actual and potential conflicts of interest with OFS Advisor and other affiliates of OFSAM;
constraint on investment due to access to material nonpublic information;
restrictions on our ability to enter into transactions with our affiliates;
our ability to comply with SBA regulations and requirements;
the use of borrowed money to finance a portion of our investments;
our ability to incur additional leverage pursuant to the SBCAA and the impact of such leverage on our net investment income and results of operations;
competition for investment opportunities;
our plans to focus on lower-yielding, first lien senior secured loans to larger borrowers and the impact on our risk profile, including our belief that the seniority of such loans in a borrower's capital structure may provide greater downside protection against the impact of the coronavirus ("COVID-19") pandemic;
the percentage of investments that will bear interest on a floating rate or fixed rate basis;
interest rate volatility, including the decommissioning of LIBOR;
the ability of SBIC I LP to make distributions enabling us to meet RIC requirements;
plans by SBIC I LP to repay its outstanding SBA debentures;
our ability to raise debt or equity capital as a BDC;
the timing, form and amount of any distributions from our portfolio companies;
the impact of a protracted decline in the liquidity of credit markets on our business;
the general economy and its impact on the industries in which we invest;
changes in political, economic or industry conditions, the interest rate environment or conditions affecting the financial and capital markets, including with respect to changes from the impact of the COVID-19 pandemic; the length and duration of the COVID-19 pandemic in the United States as well as worldwide and the magnitude of the economic impact of the outbreak; the effect of the COVID-19 pandemic on our business, financial condition, results of operations and cash flows and those of our portfolio companies (including the expectation that a shift from cash interest to PIK interest will result from concessions granted to borrowers due to the COVID-19 pandemic), including our and their ability to achieve our respective objectives; the effect of the disruptions caused by the COVID-19 pandemic on our ability to continue to effectively manage our business (including our belief that new loan activity in the market in which we operate has slowed) and on the availability of equity and debt capital and our use of borrowed money to finance a portion of our investments;

1


the belief that we have sufficient levels of liquidity to support our existing portfolio companies and deploy capital in new investment opportunities;
the belief that one or more of our investments can be restored to accrual status in the near term, or otherwise;
uncertain valuations of our portfolio investments, including our belief that reverting back to an equal weighting of the Reunderwriting Analysis method and Synthetic Rating Analysis method more accurately captures certain data related to the observed return of market liquidity and the historic correlative relationship between these markets; and
the effect of new or modified laws or regulations governing our operations.
Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, those assumptions also could be inaccurate. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this Quarterly Report on Form 10-Q should not be regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include, among others, those described or identified in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 and in "Part II, Item 1A. Risk Factors" in this Quarterly Report on Form 10-Q. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Quarterly Report on Form 10-Q.
We have based the forward-looking statements on information available to us on the date of this Quarterly Report on Form 10-Q. Except as required by the federal securities laws, we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. The forward-looking statements and projections contained in this Quarterly Report on Form 10-Q are excluded from the safe harbor protection provided by Section 21E of the Exchange Act.

2


PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
OFS Capital Corporation and Subsidiaries
Consolidated Statements of Assets and Liabilities
(Dollar amounts in thousands, except per share data)

September 30,
2020

December 31,
2019

(unaudited)


Assets





Investments, at fair value:





Non-control/non-affiliate investments (amortized cost of $359,108 and $396,201, respectively)
$
324,059


$
372,535

Affiliate investments (amortized cost of $114,141 and $131,950, respectively)
124,185


135,679

Control investment (amortized cost of $10,811 and $10,520, respectively)
8,084


8,717

Total investments at fair value (amortized cost of $484,060 and $538,671, respectively)
456,328


516,931

Cash
18,297


13,447

Interest receivable
2,790


3,349

Receivable for investments sold
1,453



Prepaid expenses and other assets
2,807


4,461

Total assets
$
481,675


$
538,188







Liabilities





Revolving lines of credit
$
24,650


$
56,450

SBA debentures (net of deferred debt issuance costs of $1,415 and $1,904, respectively)
127,355


147,976

Unsecured notes (net of deferred debt issuance costs of $5,168 and $4,798 respectively)
172,682


148,052

Interest payable
2,055


3,505

Payable to adviser and affiliates (Note 3)
2,773


4,106

Payable for investments purchased
1,494


10,264

Accrued professional fees
426


621

Other liabilities
328


587

Total liabilities
331,763


371,561







Commitments and contingencies (Note 6)











Net assets





Preferred stock, par value of $0.01 per share, 2,000,000 shares authorized, -0- shares issued and outstanding as of September 30, 2020, and December 31, 2019, respectively
$


$

Common stock, par value of $0.01 per share, 100,000,000 shares authorized, 13,406,402 and 13,376,836 shares issued and outstanding as of September 30, 2020, and December 31, 2019, respectively
134


134

Paid-in capital in excess of par
186,979


187,305

Total distributable earnings (losses)
(37,201
)

(20,812
)
Total net assets
149,912


166,627







Total liabilities and net assets
$
481,675


$
538,188







Number of shares outstanding
13,406,402


13,376,836

Net asset value per share
$
11.18


$
12.46


See Notes to Consolidated Financial Statements.

3


OFS Capital Corporation and Subsidiaries
Consolidated Statements of Operations (unaudited)
(Dollar amounts in thousands, except per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019
Investment income











Interest income:











Non-control/non-affiliate investments
$
8,014


$
10,181


$
25,319


$
28,110

Affiliate investments
1,708


2,647


5,794


7,640

Control investment
201


262


606


784

Total interest income
9,923


13,090


31,719


36,534

Payment-in-kind interest and dividend income:











Non-control/non-affiliate investments
275


96


800


289

Affiliate investments
72


347


532


899

Control investment
91


28


278


83

Total payment-in-kind interest and dividend income
438


471


1,610


1,271

Dividend income:











Affiliate investments




100


173

Control investment






89

Total dividend income




100


262

Fee income:











Non-control/non-affiliate investments
80


285


844


781

Affiliate investments
3


6


16


216

Control investment
43


6


49


39

Total fee income
126


297


909


1,036

Total investment income
10,487


13,858


34,338


39,103

Expenses











Interest expense
4,448


4,464


14,301


11,564

Management fee
1,871


2,164


5,759


6,062

Incentive fee
234


1,214


1,332


3,622

Professional fees
422


510


1,530


1,413

Administration fee
436


396


1,456


1,250

Other expenses
364


257


1,110


651

Total expenses before incentive fee waiver
7,775


9,005


25,488


24,562

Incentive fee waiver (see Note 3)




(441
)


Total expenses, net of incentive fee waiver
7,775


9,005


25,047


24,562

     Net investment income
2,712


4,853


9,291


14,541

Net realized and unrealized gain (loss) on investments











Net realized gain (loss) on non-control/non-affiliate investments
(33
)

51


(10,046
)

(843
)
Net unrealized appreciation (depreciation) on non-control/non-affiliate investments, net of taxes
4,649


(6,534
)

(10,965
)

(9,506
)
Net unrealized appreciation on affiliate investments
10,120


4,765


6,316


5,305

Net unrealized appreciation (depreciation) on control investment
577


(1,373
)

(924
)

(650
)
Net gain (loss) on investments
15,313


(3,091
)

(15,619
)

(5,694
)
Loss on extinguishment of debt
(187
)



(336
)


Loss on impairment of goodwill
(1,077
)



(1,077
)


Net increase (decrease) in net assets resulting from operations
$
16,761


$
1,762


$
(7,741
)

$
8,847

Net investment income per common share – basic and diluted
$
0.20


$
0.36


$
0.69


$
1.09

Net increase (decrease) in net assets resulting from operations per common share – basic and diluted
$
1.25


$
0.13


$
(0.58
)

$
0.66

Distributions declared per common share
$
0.17


$
0.34


$
0.68


$
1.02

Basic and diluted weighted average shares outstanding
13,399,767


13,366,515


13,389,830


13,361,757

See Notes to Consolidated Financial Statements.

4

OFS Capital Corporation and Subsidiaries
Consolidated Statements of Changes in Net Assets (unaudited)
(Dollar amounts in thousands)



 
Preferred Stock
 
Common Stock
 
Paid-in capital in excess of par
 
Total distributable earnings (losses)
 
Total net assets
 
Number of shares
 
Par value
 
Number of shares
 
Par value
Balances at January 1, 2019

 
$

 
13,357,337


$
134


$
187,540


$
(12,651
)

$
175,023

Net increase in net assets resulting from operations:
 
 
 
 
 
 
 
 
 
 
 
 
 
  Net investment income

 

 






14,541

 
14,541

  Net realized loss on investments

 

 






(843
)
 
(843
)
  Net unrealized depreciation on investments, net of taxes

 

 






(4,851
)

(4,851
)
  Tax reclassifications of permanent differences

 

 

 

 
183


(183
)


Distributions to stockholders:
 
 
 
 
 
 
 
 
 
 
 
 
 
  Common stock issued from reinvestment of stockholder distributions

 

 
14,114

 

 
167

 

 
167

  Dividends declared

 

 






(13,631
)

(13,631
)
Net increase (decrease) for the period ended September 30, 2019

 

 
14,114

 

 
350

 
(4,967
)
 
(4,617
)
Balances at September 30, 2019

 
$

 
13,371,451

 
$
134

 
$
187,890

 
$
(17,618
)
 
$
170,406

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balances at June 30, 2019

 
$

 
13,366,461


$
134


$
187,814


$
(14,816
)
 
$
173,132

Net increase in net assets resulting from operations:
 
 
 
 
 
 
 
 
 
 
 
 
 
  Net investment income

 

 






4,853


4,853

  Net realized gain on investments

 

 






51


51

  Net unrealized depreciation on investments, net of taxes

 

 






(3,142
)
 
(3,142
)
  Tax reclassifications of permanent differences

 

 

 

 
18


(18
)


Distributions to stockholders:
 
 
 
 
 
 
 
 
 
 
 
 
 
  Common stock issued from reinvestment of stockholder distributions

 

 
4,990




58




58

  Dividends declared

 

 






(4,546
)

(4,546
)
Net increase (decrease) for the period ended September 30, 2019

 

 
4,990

 

 
76

 
(2,802
)
 
(2,726
)
Balances at September 30, 2019

 
$

 
13,371,451

 
$
134

 
$
187,890

 
$
(17,618
)
 
$
170,406

 
 
 
 
 
 
 
 
 
 
 
 
 
 

5

OFS Capital Corporation and Subsidiaries
Consolidated Statements of Changes in Net Assets (unaudited)
(Dollar amounts in thousands)


 
Preferred Stock
 
Common Stock
 
Paid-in capital in excess of par
 
Total distributable earnings (losses)
 
Total net assets
 
Number of shares
 
Par value
 
Number of shares
 
Par value
Balances at January 1, 2020

 
$

 
13,376,836


$
134


$
187,305


$
(20,812
)

$
166,627

Net decrease in net assets resulting from operations:
 
 
 
 
 
 
 
 
 
 
 
 
 
  Net investment income

 

 

 

 

 
9,291

 
9,291

  Net realized loss on investments

 

 

 

 

 
(10,046
)
 
(10,046
)
  Loss on extinguishment of debt

 

 

 

 

 
(336
)
 
(336
)
  Loss on impairment of goodwill

 

 

 

 

 
(1,077
)
 
(1,077
)
  Net unrealized depreciation on investments, net of taxes

 

 

 

 

 
(5,573
)
 
(5,573
)
  Tax reclassifications of permanent differences

 

 

 

 
(454
)

454



Distributions to stockholders:
 
 
 
 
 
 
 
 
 
 
 
 
 
  Common stock issued from reinvestment of stockholder distributions

 

 
29,566

 

 
128

 

 
128

  Dividends declared

 

 

 

 

 
(9,102
)
 
(9,102
)
Net increase (decrease) for the period ended September 30, 2020

 

 
29,566

 

 
(326
)
 
(16,389
)
 
(16,715
)
Balances at September 30, 2020

 
$

 
13,406,402

 
$
134

 
$
186,979

 
$
(37,201
)
 
$
149,912

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balances at June 30, 2020

 
$

 
13,399,694


$
134


$
187,437


$
(52,174
)

$
135,397

Net increase in net assets resulting from operations:
 
 
 
 
 
 
 
 
 
 
 
 
 
  Net investment income

 

 






2,712


2,712

  Net realized loss on investments

 

 






(33
)

(33
)
  Loss on extinguishment of debt

 

 

 

 

 
(187
)
 
(187
)
  Loss on impairment of goodwill

 

 

 

 

 
(1,077
)
 
(1,077
)
  Net unrealized appreciation on investments, net of taxes

 

 






15,346


15,346

  Tax reclassifications of permanent differences

 

 




(490
)

490



Distributions to stockholders:
 
 
 
 
 
 
 
 
 
 
 
 
 
  Common stock issued from reinvestment of stockholder distributions

 

 
6,708




32




32

  Dividends declared

 

 






(2,278
)

(2,278
)
Net increase for the period ended September 30, 2020

 

 
6,708

 

 
(458
)
 
14,973

 
14,515

Balances at September 30, 2020

 
$

 
13,406,402

 
$
134

 
$
186,979

 
$
(37,201
)
 
$
149,912

See Notes to Consolidated Financial Statements.

6


OFS Capital Corporation and Subsidiaries
Consolidated Statements of Cash Flows (unaudited)
(Dollar amounts in thousands)
 
Nine Months Ended September 30,
 
2020
 
2019
Cash flows from operating activities
 
 
 
Net increase (decrease) in net assets resulting from operations
$
(7,741
)

$
8,847

Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:





Net realized loss on investments
10,046


843

Loss on impairment of goodwill
1,077

 

Loss on extinguishment of debt
336

 

Net unrealized depreciation on investments, net of taxes
5,573


4,851

Amortization of Net Loan Fees
(1,006
)

(788
)
Amendment fees collected
54


103

Payment-in-kind interest and dividend income
(1,610
)

(1,271
)
Accretion of interest income on structured finance notes
(4,141
)
 
(2,001
)
Amortization of debt issuance costs
1,258


942

Amortization of intangible asset
152


146

Purchase and origination of portfolio investments
(80,990
)

(169,638
)
Proceeds from principal payments on portfolio investments
60,071


30,750

Proceeds from sale or redemption of portfolio investments
67,409


30,368

Proceeds from distributions received from structured finance notes
4,614


1,976

Changes in operating assets and liabilities:





Interest receivable
559


(511
)
Interest payable
(1,450
)

(746
)
Payable to adviser and affiliates
(1,333
)

349

Receivable for investment sold
(1,453
)
 

Payable for investments purchased
(8,770
)
 
924

Other assets and liabilities
(160
)

(493
)
Net cash provided by (used in) operating activities
42,495


(95,349
)
 
 
 
 
Cash flows from financing activities
 
 
 
Distributions paid to stockholders
(8,974
)

(13,464
)
Borrowings under revolving lines of credit
78,800


128,675

Repayments under revolving lines of credit
(110,600
)

(48,200
)
Proceeds from unsecured notes offering, net of discounts
24,250

 

Repayments of SBA debentures
(21,110
)


Payment of deferred financing costs
(11
)

(1,857
)
Repurchases of common stock under Stock Repurchase Program

 
(3
)
Net cash provided by (used in) financing activities
(37,645
)

65,151

Net increase (decrease) in cash
4,850


(30,198
)
   Cash at beginning of period
13,447


38,172

   Cash at end of period
$
18,297


$
7,974

 
 
 
 
Supplemental Disclosure of Cash Flow Information:
 
 
 
Cash paid for interest
$
14,494


$
11,368

Reinvestment of distributions to stockholders
128


167

 
See Notes to Consolidated Financial Statements.

7

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments (unaudited)
September 30, 2020
(Dollar amounts in thousands)


Portfolio Company (1)
Investment Type
 
Industry
 
Interest Rate (2)
 
Spread Above Index (2)
 
Initial Acquisition Date
 
Maturity
 
Principal Amount
 
Amortized Cost
 
Fair Value (3)
 
Percent of Net Assets
Non-control/Non-affiliate Investments
 
 




















Debt and Equity Investments
 
 




















All Star Auto Lights, Inc. (4)

Motor Vehicle Parts (Used) Merchant Wholesalers




















Senior Secured Loan



8.50%

(L +7.50%)

12/19/2019

8/20/2024

$
14,328


$
14,194


$
13,633


9.1
%























American Bath Group, LLC (14) (15)

Plastics Plumbing Fixture Manufacturing




















Senior Secured Loan



5.00%

(L +4.00%)

6/24/2019

9/30/2023

1,478


1,473


1,479


1.0
























A&A Transfer, LLC

Construction and Mining (except Oil Well) Machinery and Equipment Merchant Wholesalers




















Senior Secured Loan (15)



8.25%

(L +6.50%)

2/7/2020

2/7/2025

16,848


16,628


17,091


11.5

Senior Secured Loan (Revolver) (5)



n/m (18)

(L +6.50%)

2/7/2020

2/7/2025



(38
)

31















16,848


16,590


17,122


11.5

Bass Pro Group, LLC (14) (15)

Sporting Goods Stores




















Senior Secured Loan



5.75%

(L +5.00%)

6/24/2019

9/25/2024

2,962


2,911


2,942


2.0
























Baymark Health Services, Inc.

Outpatient Mental Health & Sub. Abuse Centers




















Senior Secured Loan



9.25%

(L +8.25%)

3/22/2018

3/1/2025

4,000


3,975


3,951


2.6
























Carolina Lubes, Inc.

Automotive Oil Change and Lubrication Shops




















Senior Secured Loan (4) (8)



8.64%

(L +7.64%)

8/23/2017

8/23/2022

19,840


19,773


19,609


13.2

Senior Secured Loan (Revolver) (5)



n/m (18)

(L +7.25%)

8/23/2017

8/23/2022



(6
)

(34
)














19,840

 
19,767

 
19,575

 
13.2

Community Intervention Services, Inc. (4) (6) (11)

Outpatient Mental Health and Substance Abuse Centers




















Subordinated  Loan



7.0% cash / 6.0% PIK

N/A

7/16/2015

1/16/2021

10,071


7,639




























Confie Seguros Holdings II Co.

Insurance Agencies and Brokerages




















Senior Secured Loan



8.66%

(L +8.50%)

7/7/2015

11/1/2025

9,678


9,537


8,951


6.0
























Connect U.S. Finco LLC (14) (15)

Taxi Service




















Senior Secured Loan



5.50%

(L +4.50%)

11/20/2019

12/11/2026

1,990


1,981


1,934


1.3


8

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued (unaudited)
September 30, 2020
(Dollar amounts in thousands)


Portfolio Company (1)
Investment Type
 
Industry
 
Interest Rate (2)
 
Spread Above Index (2)
 
Initial Acquisition Date
 
Maturity
 
Principal Amount
 
Amortized Cost
 
Fair Value (3)
 
Percent of Net Assets
Constellis Holdings, LLC (10)

Other Justice, Public Order, and Safety Activities




















Common Equity (20,628 common shares)







3/27/2020






$
703


$
696


0.5
%























Convergint Technologies Holdings, LLC

Security Systems Services (except Locksmiths)




















Senior Secured Loan



7.50%

(L +6.75%)

9/28/2018

2/2/2026

3,481


3,439


3,287


2.2
























Custom Truck One Source (14) (15)

Construction, Mining, and Forestry Machinery and Equipment Rental and Leasing




















Senior Secured Loan



4.40%

(L +4.25%)

9/30/2020

4/18/2025

500


499


497


0.3
























Davis Vision, Inc.

Direct Health and Medical Insurance Carriers




















Senior Secured Loan



7.75%

(L +6.75%)

10/31/2019

12/1/2025

405


396


405


0.3
























Diamond Sports Group, LLC (14) (15)

Television Broadcasting




















Senior Secured Loan



3.40%

(L +3.25%)

11/19/2019

8/24/2026

1,980


1,982


1,554


1.0
























DuPage Medical Group (15)

Offices of Physicians, Mental Health Specialists




















Senior Secured Loan



7.75%

(L +7.00%)

8/22/2017

8/15/2025

10,098


10,162


9,916


6.6
























Eblens Holdings, Inc.

Shoe Store




















Subordinated Loan (11)



12.50% cash / 1.50% PIK

N/A

7/13/2017

1/13/2023

9,086


9,029


5,351


3.6

Common Equity (71,250 Class A units) (10)







7/13/2017






713

















9,086


9,742


5,351


3.6

Envocore Holding, LLC (F/K/A LRI Holding, LLC) (4)

Electrical Contractors and Other Wiring Installation Contractors




















Senior Secured Loan



6.75% cash / 4.25% PIK

N/A

6/30/2017

6/30/2022

16,998


16,887


13,960


9.3

Preferred Equity (238,095 Series B units) (10)







6/30/2017






300





Preferred Equity (13,315 Series C units) (10)







8/13/2018






13

















16,998


17,200


13,960


9.3

Excelin Home Health, LLC

Home Health Care Services




















Senior Secured Loan



11.50%

(L +9.50%)

10/25/2018

4/25/2024

4,250


4,195


4,250


2.8

























9

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued (unaudited)
September 30, 2020
(Dollar amounts in thousands)


Portfolio Company (1)
Investment Type
 
Industry
 
Interest Rate (2)
 
Spread Above Index (2)
 
Initial Acquisition Date
 
Maturity
 
Principal Amount
 
Amortized Cost
 
Fair Value (3)
 
Percent of Net Assets
GGC Aerospace Topco L.P.

Other Aircraft Parts and Auxiliary Equipment Manufacturing




















Senior Secured Loan



9.75%

(L +8.75%)

12/29/2017

9/8/2024

$
5,000


$
4,926


$
4,456


2.9
%
Common Equity (368,852 Class A units) (10)







12/29/2017






450


231


0.2

Common Equity (40,984 Class B units) (10)







12/29/2017






50


9















5,000


5,426


4,696


3.1

Inergex Holdings, LLC

Other Computer Related Services




















Senior Secured Loan



8.00%

(L +7.00%)

10/1/2018

10/1/2024

16,464


16,296


15,368


10.2

Senior Secured Loan (Revolver) (5)



8.00%

(Prime + 7.00%)

10/1/2018

10/1/2024

469


450


438


0.3













16,933


16,746


15,806


10.5

Institutional Shareholder Services, Inc.

Administrative Management and General Management Consulting Services




















Senior Secured Loan



8.72%

(L +8.50%)

3/4/2019

3/5/2027

6,244


6,093


6,046


4.0
























Intouch Midco Inc. (15)

All Other Professional, Scientific, and Technical Services




















Senior Secured Loan



4.90%

(L +4.75%)

12/20/2019

8/24/2025

1,985


1,923


1,830


1.2
























Milrose Consultants, LLC (4) (8)

Administrative Management and General Management Consulting Services




















Senior Secured Loan



7.74%

(L +6.74%)

7/16/2019

7/16/2025

19,167


19,041


19,049


12.7




















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