UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended
OR
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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
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices)
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(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
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.
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).
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.
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Large accelerated filer |
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Accelerated filer |
☐ |
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☒ |
Smaller reporting company |
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Emerging growth company |
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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
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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None |
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None |
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None |
As of November 14, 2022, the Company had outstanding
Table of Contents
Part I. Financial Information
Item 1. Consolidated Financial Statements.
TriLinc Global Impact Fund, LLC
Consolidated Statements of Assets and Liabilities
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As of |
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September 30, |
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December 31, |
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2022 |
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2021 |
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ASSETS |
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(Unaudited) |
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Investments owned, at fair value (amortized cost of $ $ |
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$ |
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$ |
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Cash |
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Interest receivable |
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Due from affiliates (see Note 5) |
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Other assets |
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Total assets |
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LIABILITIES |
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Due to unitholders |
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Management fee payable |
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Incentive fee payable |
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Note payable |
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— |
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Unit repurchases payable |
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Accrued distribution and other fees |
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Other payables |
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Total liabilities |
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Commitments and Contingencies (see Note 5) |
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NET ASSETS |
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$ |
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$ |
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ANALYSIS OF NET ASSETS: |
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Net capital paid in on Class A units |
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$ |
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$ |
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Net capital paid in on Class C units |
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Net capital paid in on Class I units |
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Net capital paid in on Class W units |
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Net capital paid in on Class Y units |
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Net capital paid in on Class Z units |
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Offering costs |
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( |
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Net assets (equivalent to $ on total units outstanding of |
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$ |
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$ |
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Net assets, Class A (units outstanding of |
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$ |
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$ |
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Net assets, Class C (units outstanding of |
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Net assets, Class I (units outstanding of |
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Net assets, Class W (units outstanding of |
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Net assets, Class Y (units outstanding of |
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Net assets, Class Z (units outstanding of |
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NET ASSETS |
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$ |
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$ |
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See accompanying notes to the consolidated financial statements.
1
TriLinc Global Impact Fund, LLC
Consolidated Statements of Operations
(Unaudited)
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For the Three Months Ended |
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For the Nine Months Ended |
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September 30, |
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September 30, |
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September 30, |
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September 30, |
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2022 |
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2021 |
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2022 |
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2021 |
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INVESTMENT INCOME |
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Interest income |
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$ |
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$ |
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$ |
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$ |
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Interest from cash |
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— |
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Total investment income |
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EXPENSES |
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Asset management fees |
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Incentive fees |
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Professional fees |
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General and administrative expenses |
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Interest expense |
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— |
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Board of managers fees |
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Total expenses |
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NET INVESTMENT INCOME |
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Net change in unrealized depreciation on investments |
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( |
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( |
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( |
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( |
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Realized loss on investments |
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— |
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— |
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— |
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( |
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Foreign exchange loss |
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— |
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( |
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— |
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( |
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NET CHANGE IN NET ASSETS RESULTING FROM OPERATIONS |
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$ |
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$ |
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$ |
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$ |
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NET INVESTMENT INCOME PER UNIT - BASIC AND DILUTED |
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$ |
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$ |
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$ |
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$ |
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EARNINGS PER UNIT - BASIC AND DILUTED |
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$ |
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$ |
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$ |
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$ |
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WEIGHTED AVERAGE UNITS OUTSTANDING - BASIC AND DILUTED |
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See accompanying notes to the consolidated financial statements.
2
TriLinc Global Impact Fund, LLC
Consolidated Statements of Changes in Net Assets
(Unaudited)
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For the Nine Months Ended |
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September 30, |
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September 30, |
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2022 |
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2021 |
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INCREASE FROM OPERATIONS |
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Net investment income |
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$ |
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$ |
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Foreign exchange loss |
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— |
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( |
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Net change in unrealized depreciation on investments |
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( |
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( |
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Realized loss on investments |
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— |
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( |
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Net increase from operations |
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DECREASE FROM DISTRIBUTIONS |
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Distributions to Class A unitholders |
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( |
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( |
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Distributions to Class C unitholders |
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( |
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( |
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Distributions to Class I unitholders |
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( |
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( |
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Distributions to Class W unitholders |
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( |
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( |
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Distributions to Class Y unitholders |
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( |
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( |
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Distributions to Class Z unitholders |
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( |
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( |
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Net decrease from distributions |
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( |
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( |
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INCREASE FROM CAPITAL TRANSACTIONS |
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Issuance of Class A units |
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Issuance of Class C units |
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Issuance of Class I units |
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Issuance of Class Y units |
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Repurchase of Class A units |
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( |
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( |
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Repurchase of Class C units |
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( |
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( |
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Repurchase of Class I units |
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( |
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( |
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Repurchase of Class Y units |
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( |
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( |
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Offering costs |
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( |
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( |
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Distribution and other fees |
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Net increase from capital transactions |
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NET CHANGE IN NET ASSETS |
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( |
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Net assets at beginning of period |
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Net assets at end of period |
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$ |
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$ |
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See accompanying notes to the consolidated financial statements.
3
TriLinc Global Impact Fund, LLC
Consolidated Statements of Cash Flows
(Unaudited)
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For the Nine Months Ended |
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September 30, |
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September 30, |
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2022 |
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2021 |
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Cash flows from operating activities |
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NET CHANGE IN NET ASSETS RESULTING FROM OPERATIONS |
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$ |
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$ |
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ADJUSTMENT TO RECONCILE NET CHANGE IN NET ASSETS RESULTING FROM OPERATIONS TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES |
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Purchase of investments |
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— |
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( |
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Proceeds from disposition of investments |
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Payment-in-kind interest |
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( |
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( |
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Net change in unrealized depreciation on investments |
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Realized loss on investments |
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— |
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Foreign exchange loss |
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— |
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Accretion of discounts on investments |
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( |
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( |
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Changes in assets and liabilities: |
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Increase in interest receivable |
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( |
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( |
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Increase in other assets |
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( |
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( |
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Decrease in due to unitholders |
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( |
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( |
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Increase (Decrease) in management and incentive fees payable |
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( |
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Increase (Decrease) in other payables |
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( |
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NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES |
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( |
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Cash flows from financing activities |
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Net proceeds from issuance of units |
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Distributions paid to unitholders |
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( |
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( |
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Repayment of debt |
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( |
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— |
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Payments of offering costs |
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( |
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( |
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Repurchase of units |
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( |
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( |
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NET CASH USED IN FINANCING ACTIVITIES |
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( |
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( |
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TOTAL DECREASE IN CASH |
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( |
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( |
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Cash at beginning of period |
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Cash at end of period |
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$ |
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$ |
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Supplemental information |
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Cash paid for interest during the period |
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$ |
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$ |
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Supplemental non-cash information |
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Issuance of units in connection with distribution reinvestment plan |
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$ |
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$ |
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Change in accrual of distribution and other fees |
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$ |
( |
) |
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$ |
( |
) |
See accompanying notes to the consolidated financial statements.
4
TriLinc Global Impact Fund, LLC
Consolidated Schedule of Investments
As of September 30, 2022
(Unaudited)
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Investment Type / Country |
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Portfolio Company |
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Sector |
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Description |
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Interest |
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Fees (2) |
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Maturity (3) |
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Principal Amount |
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Participation % (4) |
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Amortized Cost |
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Fair Value |
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% of Net Assets |
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Senior Secured Term Loans (1) |
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Brazil |
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Usivale Industria E Commercio Ltda (5), (6) |
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Sugarcane and Sugar Beets |
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Sugar Producer |
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% |
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$ |
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$ |
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$ |
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% |
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Chile |
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Itelecom Holding Chile SPA (5), (6) |
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Electric Services |
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LED Lighting Service Provider |
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% |
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% |
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Ecuador |
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Other Investments |
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Corrugated and solid fiber boxes |
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Sustainable Packaging Manufacturer |
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9.44% Cash/2.20% PIK |
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% |
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% |
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Hong Kong |
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Limas Commodities House Limited (5) |
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Coal and Other Minerals and Ores |
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Resource Trader |
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11.50% PIK |
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% |
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% |
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Indonesia |
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Other Investments |
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Chocolate and Cocoa Products |
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Cocoa Processor |
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% |
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% |
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Malaysia |
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Vikudha Malaysia Sdn Bhd (5) |
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Chemicals and Allied Products |
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Wholesale Distributor |
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% |
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% |
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Mexico |
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Blue Arrow Biojet Holdings, LLC |
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Refuse Systems |
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Waste to Fuels Processor |
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15.50% PIK |
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% |
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% |
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Peru |
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Kinder Investments, Ltd. |
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Sanitary Paper Products |
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Diaper Manufacturer II |
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8.0% Cash/3.0% PIK |
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% |
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% |
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Singapore |
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Triton Metallics Pte Ltd. (5) |
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Coal and Other Minerals and Ores |
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Non-Ferrous Metal Trader |
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13.50% PIK |
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% |
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% |
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Total Senior Secured Term Loans |
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% |
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Senior Secured Term Loan Participations (1) |
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Botswana |
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Other Investments |
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Short-Term Business Credit |
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SME Financier |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Brazil |
|
Qintess Tecnologia e Participacoes Ltda |
|
Computer Related Services, NEC |
|
IT Service Provider |
|
10.75% Cash/3.25% PIK |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Brazil |
|
Other Investments |
|
Boatbuilding and Repairing |
|
Ship Maintenance & Repair Service Provider |
|
8.00% Cash/10.0% PIK |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Cabo Verde |
|
TRG Cape Verde Holdings Ltd (5) |
|
Hotels and Motels |
|
Hospitality Service Provider |
|
10.0% Cash/3.5% PIK |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Colombia |
|
Other Investments |
|
Personal Credit Institutions |
|
Consumer Lender II |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Ghana |
|
Other Investments |
|
Petroleum and Petroleum Products |
|
Tank Farm Operator |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Jersey |
|
Africell Holding Limited |
|
Telephone Communications |
|
Mobile Network Operator |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Kenya |
|
Multiple ICD (Kenya) Limited (5) |
|
Freight Transportation Arrangement |
|
Freight and Cargo Transporter |
|
10.29% Cash/4.00% PIK |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Namibia |
|
Trustco Group Holdings Ltd. (5), (6) |
|
Land Subdividers and Developers |
|
Property Developer |
|
8.50% Cash/4.0% PIK |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Netherlands |
|
Other Investments (4) |
|
Motor Vehicle Parts and Accessories |
|
Wheel Manufacturer |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Nigeria |
|
Helios Maritime I (5) |
|
Towing and Tugboat Service |
|
Marine Logistics Provider |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Romania |
|
Other Investments |
|
Retail Bakeries |
|
Frozen Bakery Products Manufacturer |
|
7.0% Cash/7.0% PIK |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Uganda |
|
Agilis Partners Holding LLC (5) |
|
Corn |
|
Grain Processor G |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Uganda |
|
Agilis Partners (5) |
|
Corn |
|
Grain Processor F |
|
3.50% Cash/8.00% PIK |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Total Senior Secured Term Loan Participations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||||
|
Senior Secured Trade Finance Participations (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Argentina |
|
Compania Argentina de Granos S.A. (5), (6) |
|
Soybeans |
|
Agriculture Distributor |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Argentina |
|
Sancor Cooperativas Unidas Ltda (5) |
|
Dairy Farms |
|
Dairy Co-Operative |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Argentina |
|
Frigorifico Regional Industrias Alimentarias, S.A., Sucursal Uruguay (5), (6) |
|
Beef Cattle, Except Feedlots |
|
Beef Exporter |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Argentina |
|
Algodonera Avellaneda S.A. (5), (6) |
|
Cotton Ginning |
|
Cotton Producer |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Cameroon |
|
Producam SA (5) |
|
Chocolate and Cocoa Products |
|
Cocoa & Coffee Exporter |
|
9.50%, 6.0% |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Hong Kong |
|
Conplex International Ltd. (5), (6) |
|
Telephone and Telegraph Apparatus |
|
Mobile Phone Distributor |
|
14.0%, 12.0% |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Indonesia |
|
Other Investments |
|
Chocolate and Cocoa Products |
|
Cocoa Processor |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Morocco |
|
Mac Z Group SARL (5), (6) |
|
Secondary Nonferrous Metals |
|
Scrap Metal Recycler |
|
N/A |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Nigeria |
|
Other Investments (4) |
|
Farm Products |
|
Cocoa Trader III |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Nigeria |
|
Other Investments (4) |
|
Farm Products |
|
Cocoa Trader II |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
South Africa |
|
Applewood Trading 199 Pty, Ltd. (5), (6) |
|
Salted and Roasted Nuts and Seeds |
|
Fruit & Nut Distributor |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
United Arab Emirates |
|
Global Pharma Intelligence Sarl (5), (6) |
|
Drugs, Proprietaries, and Sundries |
|
Pharmaceuticals Distributor |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Total Senior Secured Trade Finance Participations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||||
|
Other Investments (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
N/A |
|
IIG TOF B.V. (5), (6) |
|
Miscellaneous Business Credit |
|
Receivable from IIG TOF B.V. |
|
|
|
|
|
|
% |
|
N/A |
|
|
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Equity Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Mexico |
|
Blue Arrow Biojet Holdings, LLC (7) |
|
Refuse Systems |
|
Waste to Fuels Processor |
|
N/A |
|
|
N/A |
|
|
N/A |
|
N/A |
|
|
N/A |
|
|
|
— |
|
|
|
|
|
|
|
|
% |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
||||
See accompanying notes to the consolidated financial statements.
|
1 |
|
|
2 |
|
|
3 |
|
|
4 |
|
|
5 |
|
|
6 |
|
|
7 |
|
5
TriLinc Global Impact Fund, LLC
Consolidated Schedule of Investments
December 31, 2021
|
Investment Type / Country |
|
Portfolio Company |
|
Sector |
|
Description |
|
Interest |
|
|
Fees (2) |
|
|
Maturity (3) |
|
Principal Amount |
|
|
Participation % (4) |
|
|
Amortized Cost |
|
|
Fair Value |
|
|
% of Net Assets |
|
|||||||
|
Senior Secured Term Loans (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Brazil |
|
Usivale Industria E Commercio Ltda (12), (17), (18) |
|
Sugarcane and Sugar Beets |
|
Sugar Producer |
|
|
|
|
|
|
% |
|
|
|
$ |
|
|
|
N/A |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
% |
||
|
Chile |
|
Itelecom Holding Chile SPA (5), (17) |
|
Electric Services |
|
LED Lighting Service Provider |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Colombia |
|
Other Investments (20) |
|
Personal Credit Institutions |
|
Consumer Lender |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Ecuador |
|
Other Investments |
|
Corrugated and solid fiber boxes |
|
Sustainable Packaging Manufacturer |
|
9.16% Cash/2.20% PIK |
|
|
|
|
% |
|
|
|
|
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Hong Kong |
|
Limas Commodities House Limited (11) |
|
Coal and Other Minerals and Ores |
|
Resource Trader |
|
11.50% PIK |
|
|
|
|
% |
|
|
|
|
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Indonesia |
|
Other Investments |
|
Chocolate and Cocoa Products |
|
Cocoa Processor |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Malaysia |
|
Vikudha Malaysia Sdn Bhd (7) |
|
Chemicals and Allied Products |
|
Wholesale Distributor |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Mexico |
|
Blue Arrow Biojet Holdings, LLC (9) |
|
Refuse Systems |
|
Waste to Fuels Processor |
|
14.50% PIK |
|
|
|
|
% |
|
|
|
|
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Peru |
|
Kinder Investments, Ltd. (16) |
|
Sanitary Paper Products |
|
Diaper Manufacturer II |
|
8.00% Cash/3.00% PIK |
|
|
|
|
% |
|
|
|
|
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Singapore |
|
Triton Metallics Pte Ltd. (17) |
|
Coal and Other Minerals and Ores |
|
Non-Ferrous Metal Trader |
|
6.00% PIK |
|
|
|
|
% |
|
|
|
|
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Total Senior Secured Term Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Senior Secured Term Loan Participations (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Botswana |
|
Other Investments |
|
Short-Term Business Credit |
|
SME Financier |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Brazil |
|
Qintess Tecnologia e Participacoes Ltda (13) |
|
Computer Related Services, NEC |
|
IT Service Provider |
|
10.00% Cash/3.00% PIK |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Brazil |
|
Other Investments |
|
Boatbuilding and Repairing |
|
Ship Maintenance & Repair Service Provider |
|
8.00% Cash/8.00% PIK |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Cabo Verde |
|
TRG Cape Verde Holdings Ltd (6), (17) |
|
Hotels and Motels |
|
Hospitality Service Provider |
|
10.00% Cash/4.75% PIK |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Colombia |
|
Other Investments |
|
Personal Credit Institutions |
|
Consumer Lender II |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Ghana |
|
Other Investments (6) |
|
Petroleum and Petroleum Products |
|
Tank Farm Operator |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Jersey |
|
Africell Holding Limited (10) |
|
Telephone Communications |
|
Mobile Network Operator |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Kenya |
|
Multiple ICD (Kenya) Limited (17) |
|
Freight Transportation Arrangement |
|
Freight and Cargo Transporter |
|
7.75% Cash/4.00% PIK |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Namibia |
|
Trustco Group Holdings Ltd. (14), (17) |
|
Land Subdividers and Developers |
|
Property Developer |
|
8.50% Cash/4.00% PIK |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Netherlands |
|
Other Investments (9) |
|
Motor Vehicle Parts and Accessories |
|
Wheel Manufacturer |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Nigeria |
|
Helios Maritime I (15), (17) |
|
Towing and Tugboat Service |
|
Marine Logistics Provider |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Romania |
|
Other Investments (8) |
|
Retail Bakeries |
|
Frozen Bakery Products Manufacturer |
|
7.00% Cash/7.00% PIK |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Uganda |
|
Other Investments |
|
Corn |
|
Grain Processor G |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Uganda |
|
Other Investments |
|
Corn |
|
Grain Processor F |
|
3.50% Cash/8.00% PIK |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Total Senior Secured Term Loan Participations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Senior Secured Trade Finance Participations (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Argentina |
|
Compania Argentina de Granos S.A. (17), (18) |
|
Soybeans |
|
Agriculture Distributor |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Argentina |
|
Sancor Cooperativas Unidas Ltda (17) |
|
Dairy Farms |
|
Dairy Co-Operative |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Argentina |
|
Frigorifico Regional Industrias Alimentarias, S.A., Sucursal Uruguay (17), (18) |
|
Beef Cattle, Except Feedlots |
|
Beef Exporter |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Argentina |
|
Algodonera Avellaneda S.A. (17), (18) |
|
Cotton Ginning |
|
Cotton Producer |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Cameroon |
|
Producam SA (17) |
|
Chocolate and Cocoa Products |
|
Cocoa & Coffee Exporter |
|
9.5%, 6.0% |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Hong Kong |
|
Conplex International Ltd. (17), (18) |
|
Telephone and Telegraph Apparatus |
|
Mobile Phone Distributor |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Indonesia |
|
Other Investments |
|
Chocolate and Cocoa Products |
|
Cocoa Processor |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Morocco |
|
Mac Z Group SARL (17) |
|
Secondary Nonferrous Metals |
|
Scrap Metal Recycler |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Nigeria |
|
Other Investments (9) |
|
Farm Products |
|
Cocoa Trader III |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Nigeria |
|
Other Investments (9) |
|
Farm Products |
|
Cocoa Trader II |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
South Africa |
|
Applewood Trading 199 Pty, Ltd.(17), (18) |
|
Salted and Roasted Nuts and Seeds |
|
Fruit & Nut Distributor |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
United Arab Emirates |
|
Global Pharma Intelligence Sarl (17), (18) |
|
Drugs, Proprietaries, and Sundries |
|
Pharmaceuticals Distributor |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Total Senior Secured Trade Finance Participations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Other Investments (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
N/A |
|
IIG TOF B.V. (17), (18), (19) |
|
Miscellaneous Business Credit |
|
Receivable from IIG TOF B.V. |
|
|
|
|
|
|
% |
|
N/A |
|
|
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
% |
||
|
Equity Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Mexico |
|
Blue Arrow Biojet Holdings, LLC |
|
Refuse Systems |
|
Waste to Fuels Processor |
|
N/A |
|
|
N/A |
|
|
N/A |
|
N/A |
|
|
N/A |
|
|
|
— |
|
|
|
|
|
|
|
|
% |
||||
|
Total Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
||||
See accompanying notes to the consolidated financial statements.
|
1 |
Refer to Notes 2, 3 and 4 of the consolidated financial statements for additional information on the Company’s investments. |
|
2 |
Fees may include upfront, origination, commitment, facility and/or other fees that the borrower must contractually pay to the Company. Fees, if any, are typically received in connection with term loan transactions and are rarely applicable to trade finance transactions. |
|
3 |
6
|
Trade finance borrowers may be granted flexibility with respect to repayment relative to the stated maturity date to accommodate specific contracts and/or business cycle characteristics. This flexibility in each case is agreed upon between the Company and the sub-advisor and between the sub-advisor and the borrower. |
|
4 |
Percentage of the Company’s participation in total borrowings outstanding under sub-advisor provided financing facility. |
|
5 |
|
|
6 |
|
|
7 |
|
|
8 |
|
|
9 |
|
|
10 |
|
|
11 |
|
|
12 |
|
|
13 |
Interest includes a stated coupon rate plus additional contingent interest payments based on a percentage of earnings before interest, taxes, depreciation and amortization (“EBITDA”) after a minimum threshold has been achieved by the borrower. |
|
14 |
|
|
15 |
|
|
16 |
|
|
17 |
|
|
18 |
Investment on non-accrual status. |
|
19 |
|
|
20 |
|
7
TRILINC GLOBAL IMPACT FUND, LLC
Notes to Consolidated Financial Statements
September 30, 2022
(Unaudited)
Note 1. Organization and Operations of the Company
TriLinc Global Impact Fund, LLC (the “Company”) was organized as a Delaware limited liability company on
TriLinc Global, LLC (the “Sponsor”) is the sponsor of the Company and employs staff who operate both the Advisor and the Company. The Sponsor owns
In May 2012, the Advisor purchased
Although the Company was organized and intends to conduct its business in a manner so that it is not required to register as an investment company under the Investment Company Act of 1940, as amended, the consolidated financial statements are prepared using the specialized accounting principles of the Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 946, Financial Services — Investment Companies. Overall, the Company’s management believes the use of investment company accounting makes the Company’s financial statements more useful to investors and other financial statement users since it allows a more appropriate basis of comparison to other entities with similar objectives.
To assist the Company in achieving its investment objective, the Company makes investments via wholly owned subsidiaries (each a “Subsidiary” and collectively, the “Subsidiaries”), all of which are Cayman Islands exempted companies. The Subsidiaries own all of the Company’s investments. As of September 30, 2022, the Company’s subsidiaries are as follows:
|
|
• |
TriLinc Global Impact Fund – Asia, Ltd. |
|
|
• |
TriLinc Global Impact Fund – Latin America, Ltd. |
|
|
• |
TriLinc Global Impact Fund – Trade Finance, Ltd. |
|
|
• |
TriLinc Global Impact Fund – African Trade Finance, Ltd. |
|
|
• |
TriLinc Global Impact Fund – Africa, Ltd. |
|
|
• |
TriLinc Global Impact Fund – Latin America II, Ltd. |
|
|
• |
TriLinc Global Impact Fund – African Trade Finance II, Ltd. |
|
|
• |
TriLinc Global Impact Fund – Latin America III, Ltd. |
|
|
• |
TriLinc Global Impact Fund – Asia II, Ltd. |
|
|
• |
TriLinc Global Impact Fund – Asia III, Ltd. |
|
|
• |
TriLinc Global Impact Fund – Asia IV, Ltd. |
|
|
• |
TriLinc Global Impact Fund – African Trade Finance III, Ltd. |
|
|
• |
TriLinc Global Impact Fund – Europe, Ltd. |
|
|
• |
TriLinc Global Impact Fund – North America, Ltd. |
|
|
• |
TriLinc Global Impact Fund – Africa Latin America, Ltd. |
|
|
• |
TriLinc Global Impact Fund - Africa Latin America Trade Finance, Ltd |
8
|
|
• |
TriLinc Global Impact Fund – Cayman, Ltd. |
Through September 30, 2022, the Company has made, through its Subsidiaries, loans in a number of countries located in South America, Asia, Africa, North America, and Europe.
Liquidity
The COVID-19 pandemic and its lingering effects has adversely impacted many of the Company’s borrowers both directly and indirectly. First, the adverse impact on the global supply chain has been one of the largest challenges for our borrowers, as most of them are exporters directly tied to global trade. Some of these challenges include: demand from suppliers to be paid in cash rather than supplier credit, significant increases in shipping costs (when and if shipping is reliably available), and delays in the payment of receivables, all of which put pressure on borrowers’ working capital needs. Although not as severe as they once were, supply chain problems continue to be aggravated by China’s rolling lockdowns to control COVID-19 and the conflict between Russia and Ukraine. Second, our borrowers experienced challenges related to the decrease in global demand during 2020 and 2021, which decreased revenue for many of them. Additionally, input costs remain high and the conflict between Russia and Ukraine has increased the disruption, instability and volatility in global markets and industries. The Company expects some of the regions in which it invests to achieve economic normalization once the lingering supply chain disruptions and input cost increases dissipate. However, the Company believes certain regions, industries and borrowers may experience further material economic distress due to the compound impact of more than two years of economic hardship and some borrowers may find it difficult or impossible to recover. If the continuing impacts of COVID-19 combined with rising input costs further adversely affect borrowers’ businesses, financial condition and results of operations, borrowers may be unable to make required payments in the near term, which could impact the fair value of the Company’s investments.
While inflation and rising interest rates are major issues in most advanced economies, the Company believes they are not core issues in the Company’s markets. The Company continues to believe that the central issue driving results is that borrowers are struggling to recover from the compound impact of more than two years of economic hardship. Indeed, although the Company’s NAV per unit modestly decreased by $
As a result of the current macro-economic environment, the Company has experienced decreased liquidity; however, it expects this will be short-lived, as the decline in liquidity is primarily the result of the inconsistent cash flows generated from the existing portfolio caused by these economic uncertainties. The decrease in liquidity has the potential to impact the Company’s ability to cover its future distributions to its unitholders or meet other Company obligations. In order to address the Company’s temporary liquidity needs, on September 1, 2022, the Company sold $
Note 2. Significant Accounting Policies
Basis of Presentation
The Company’s financial information is prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The Company follows the accounting and reporting guidance in the FASB ASC Topic 946 — Financial Services, Investment Companies (“ASC 946”). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's knowledge of current events and actions it may undertake in the future, actual results may differ from these estimates. In particular, the COVID-19 pandemic has adversely impacted and is likely to further adversely impact the Company's business, the businesses of the Company's borrowers and the global markets generally. The full extent to which the pandemic will directly or indirectly impact the Company's business, results of operations and financial condition, including fair value measurements, and asset impairment charges, will depend on future developments that are highly uncertain and difficult to predict. These developments include, but are not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or address its impact, governmental actions to contain the spread of the pandemic and respond to the reduction in global economic activity, and how quickly and to what extent normal economic and operating conditions can resume.
9
The interim consolidated financial statements and notes are presented as permitted by the requirements for Quarterly Reports on Form 10-Q. Certain financial information that is normally included in annual financial statements, including certain financial statement footnotes, prepared in accordance with GAAP is not required for interim reporting purposes and has been omitted herein. These consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes related thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on March 30, 2022.
The results of operations for the nine months ended September 30, 2022 are not necessarily indicative of the results that ultimately may be achieved for the full year ending December 31, 2022.
The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries, which were established to hold certain investments of the Company. The Company owns
Cash
Cash consists of demand deposits at a financial institution located in the U.S. Such deposits may be in excess of the Federal Deposit Insurance Corporation insurance limits. The Company considers the credit risk of this financial institution to be remote and has not experienced and does not expect to experience any losses in any such accounts. The Company limits its credit risk by selecting financial institutions considered to be highly creditworthy.
Revenue Recognition
The Company records interest income on an accrual basis to the extent that the Company expects to collect such amounts. The Company does not accrue as a receivable interest on loans for accounting purposes if there is reason to doubt the ability to collect such interest. Structuring, upfront and similar fees are recorded as a discount on investments purchased and are accreted into interest income, on a straight-line basis over the life of the associated loan, which the Company has determined not to be materially different from the effective yield method.
The Company records prepayment fees for loans and debt securities paid back to the Company prior to the maturity date as income upon receipt.
The Company generally places loans on non-accrual status when there is a reasonable doubt that principal or interest will be collected. If, however, management believes the principal and interest will be collected, a loan may be left on accrual status during the period the Company is pursuing repayment of the loan. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment of the financial condition of the borrower. Non-accrual loans are generally restored to accrual status when past due principal and interest is paid and, in the Company’s management’s judgment, is likely to remain current over the remainder of the term.
Valuation of Investments
The Company carries all of its investments at fair value with changes in fair value recognized in the consolidated statement of operations. Fair value is the price that would be received when selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The fair value measurement guidance establishes a hierarchal disclosure framework that prioritizes and ranks the level of market price observability of inputs used in measuring investments at fair value. Market price observability is affected by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.
Based on the observability of the inputs used in the valuation techniques, the Company is required to provide disclosures on fair value measurements according to the fair value hierarchy. The fair value hierarchy ranks the observability of the inputs used to determine fair values. Investments carried at fair value are classified and disclosed in one of the following three categories:
|
|
• |
Level 1 — Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. |
|
|
• |
Level 2 — Valuations based on inputs other than quoted prices included in Level 1, which are either directly or indirectly observable. |
10
|
|
• |
Level 3 — Valuations based on inputs that are unobservable and where there is little, if any, market activity at the measurement date. The inputs for the determination of fair value may require significant management judgment or estimation and is based upon management’s assessment of the assumptions that market participants would use in pricing the assets or liabilities. |
These investments include debt and equity investments in private companies or assets valued using the income, market or cost approach and may involve pricing models whose inputs require significant judgment or estimation because of the absence of any meaningful current market data for identical or similar investments. The inputs in these valuations may include, but are not limited to, capitalization and discount rates and earnings before interest, taxes, depreciation and amortization (“EBITDA”) multiples. The information may also include pricing information or broker quotes, which include a disclaimer that the broker would not be held to such a price in an actual transaction. Certain investments may be valued based upon a collateral approach, which uses estimated value of underlying collateral and include adjustments deemed necessary for estimates of costs to obtain control and liquidate available collateral. The non-binding nature of consensus pricing and/or quotes accompanied by disclaimer would result in classification as Level 3 information, assuming no additional corroborating evidence.
The inputs used in the determination of fair value may require significant judgment or estimation.
Investments for which market quotations are readily available are valued at those quotations. Most of the Company’s investments are loans to private companies, which are not actively traded in any market and for which quotations are not available. For those investments for which market quotations are not readily available, or when such market quotations are deemed by the Advisor not to represent fair value, the Company’s board of managers has approved a multi-step valuation process to be followed each fiscal quarter, as described below:
|
|
1. |
Each investment is valued by the Advisor on a quarterly basis; |
|
|
2. |
Materiality is assessed quarterly on all investments to determine whether an independent review is appropriate. The Advisor engages a third-party valuation firm to conduct an independent review of the reasonableness of the Advisor’s internal estimates of fair value on qualifying loans, and to provide an opinion of whether they concur with the Advisor’s analysis. The independent assessment occurs on a discretionary basis based on qualifications that takes into account both quantitative thresholds and qualitative considerations, as determined by the Advisor. The analysis performed by the independent valuation firm was based upon data and assumptions provided to it by the Company and received from third party sources, which the independent valuation firm relied upon as being accurate without independent verification. The results of the analyses performed by the independent valuation firm are among the factors taken into consideration by the Company and its management in making its determination with respect to the fair value of such investments, but are not determinative. The Company and its management are solely and ultimately responsible for determining the fair value of the Company’s investments in good faith; |
|
|
3. |
The audit committee of the Company’s board of managers reviews and discusses the preliminary valuation prepared by the Advisor and any report rendered by the independent valuation firm; and |
|
|
4. |
The board of managers discusses the valuations and determines the fair value of each investment in the Company’s portfolio in good faith based on the inputs which include but are not limited to, inputs of the Advisor, the independent valuation firm and the audit committee. The Company and its board of managers are solely and ultimately responsible for the determination, in good faith, of the fair value of each investment. |
Below is a description of factors that the Company’s board of managers may consider when valuing the Company’s investments.
Any potential valuation adjustments are subject to a materiality threshold as determined by the Advisor. Due to the fact that all non-Watch List investments are performing loans, with no macroeconomic indicator or other event observed that would reasonably be expected to have a material impact on the underlying performance or collateral value of the investment, most of these investments generally do not deviate materially from the amortized cost. If, pursuant to the Company's quarterly review, the Company determines that one or more material valuation adjustments are appropriate, then the Company adjusts the fair value. Historically, in most cases when these adjustments that have resulted in a fair value that is materially different from the investment’s amortized cost, the Company has determined to place it on the Watch List. Fixed income investments are typically valued utilizing a market approach, income approach, collateral based approach, or a combination of these approaches (and any others, as appropriate). The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including the sale of a business) and is used less frequently due to the private nature of the Company’s investments. The income approach uses valuation techniques to convert future amounts (for example, interest and principal payments) to a single present value amount (Discounted Cash Flow or “DCF”) calculated based on an appropriate discount rate. The measurement is based on the net present value indicated by current market expectations about those future amounts. For Watch List investments, the Company predominantly uses the income approach, but may also use a collateral based approach (also known as a liquidation or net recovery approach), or a hybrid approach consisting of the income approach and the collateral based approach. The collateral based approach uses estimates of the collateral value of the borrower’s assets using an expected recovery model. When using the collateral based approach, the Company determines the fair value of the remaining assets, discounted to reflect the anticipated amount of time to recovery and the uncertainty of recovery. The Company also may make further adjustments to account for anticipated costs of recovery, including legal fees and expenses. In following a given approach, the types of factors that the Company may take into account in valuing the Company’s investments include, as applicable:
|
|
• |
Macro-economic factors that are relevant to the investment or the underlying borrower |
|
|
• |
Industry factors that are relevant to the investment or the underlying borrower |
|
|
• |
Historical and projected financial performance of the borrower based on most recent financial statements |
|
|
• |
Borrower draw requests and payment track record |
11
|
|
• |
Loan covenants, duration and drivers |
|
|
• |
Performance and condition of the collateral (nature, type and value) that supports the investment |
|
|
• |
Sub-Advisor recommendation as to possible impairment or reserve, including updates and feedback |
|
|
• |
For participations, the Company’s ownership percentage of the overall facility |
|
|
• |
Key inputs and assumptions that are believed to be most appropriate for the investment and the approach utilized |
|
|
• |
Applicable global interest rates |
|
|
• |
Impact of investments placed on non-accrual status |
With respect to warrants and other equity investments, as well as certain fixed income investments, the Company may also look to private merger and acquisition statistics, public trading multiples discounted for illiquidity and other factors, valuations implied by third-party investments in the portfolio companies, option pricing models or industry practices in determining fair value. The Company may also consider the size and scope of a portfolio company and its specific strengths and weaknesses, as well as any other factors the Company deems relevant in measuring the fair values of the Company’s investments.
Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation on Investments
The Company records all of its investment transactions on a trade date basis. The Company measures net realized gains or losses by the difference between the net proceeds from the repayment or sale on investments and the amortized cost basis of the investment including unamortized upfront fees and prepayment penalties. Realized gains or losses on the disposition of an investment are calculated using the specific identification method, utilizing the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized. Net change in unrealized appreciation or depreciation reflects the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized.
Payment-in-Kind Interest
The Company has investments that contain a payment-in-kind, or PIK, interest provision. For loans with contractual PIK interest, any interest will be added to the principal balance of such investments and be recorded as income, if the valuation indicates that such interest is collectible as of September 30, 2022. For the three and nine months ended September 30, 2022, the Company earned and capitalized PIK interest of $
Distribution and Ongoing Dealer Manager and Service Fees
The Company pays a distribution fee equal to
The Company accounts for the distribution fees as a charge to equity at the time each Class C unit was sold in the Offering and recorded a corresponding liability for the estimated amount to be paid in future periods. The Company accounts for the ongoing dealer manager fees and service fees paid in connection with the sale of Class I and Class W units in the private placement in the same manner. At September 30, 2022, the estimated unpaid distribution fees for Class C units amounted to $
Income Taxes
The Company is classified as a partnership for U.S. federal income tax purposes. As such, the Company allocates all income or loss to its unitholders according to their respective percentage of ownership, and is generally not subject to tax at the entity level. Therefore, no provision for federal or state income taxes has been included in these financial statements.
12
The Company and its subsidiaries may be subject to withholding taxes on income and capital gains imposed by certain countries in which the Company invests. The withholding tax on income is netted against the income accrued or received. Any reclaimable taxes are recorded as income. The withholding tax on realized or unrealized gain is recorded as a liability.
The Company follows the guidance for uncertainty in income taxes included in the ASC 740, Income Taxes. This guidance requires the Company to determine whether a tax position of the Company is more likely than not to be sustained upon examination by the applicable taxing authority, including the resolution of any related appeals or litigation processes, based on the technical merits of the position.
As of September 30, 2022,
Unitholders are individually responsible for reporting income or loss, to the extent required by the federal and state income tax laws and regulations, based upon their respective share of the Company’s income and expense as reported for income tax purposes.
Calculation of Net Asset Value
The Company’s net asset value is calculated on a quarterly basis. As of September 30, 2022, the Company has six classes of units: Class A units, Class C units, Class I units, Class W units, Class Y units and Class Z units. All units participate in the income and expenses of the Company on a pro-rata basis based on the number of units outstanding. Under GAAP, pursuant to SEC guidance, the Company records liabilities for (i) ongoing fees that the Company currently owes to the dealer manager under the terms of the dealer manager agreement and (ii) for an estimate of the fees that the Company may pay to the dealer manager in future periods. As of September 30, 2022, under GAAP, the Company has recorded a liability in the amount of $
The Company does not deduct the liability for estimated future distribution fees in its calculation of net asset value per unit for Class C units. Further, the Company does not deduct the liability for estimated future dealer manager fees in its calculation of the net asset value per unit for Class I units and Class W units. Likewise, the Company does not deduct the liability for estimated future service fees in its calculation of the net asset value per unit for Class W units. The Company believes this approach is consistent with the industry standard and appropriate since the Company intends for the net asset value to reflect the estimated value on the date that the Company determines its net asset value.
Accordingly, the Company believes that its estimated net asset value at any given time should not include consideration of any estimated future distribution, ongoing dealer manager or service fees that may become payable after such date. As a result, as of September 30, 2022, each of the Class A, Class C, Class I, Class W, Class Y and Class Z units have the same net asset value per unit of approximately $
See Note 3 “Investments — Watch List Investments” for additional information.
Net Income (Loss) per Unit
Basic net income (loss) per unit is computed by dividing net income (loss) by the weighted average number of members’ units outstanding during the period. Diluted net income or loss per unit is computed by dividing net income (loss) by the weighted average number of members’ units and members’ unit equivalents outstanding during the period. The Company did not have any potentially dilutive units outstanding at September 30, 2022 and 2021.
Organization and Offering Costs
The Sponsor has incurred organization and offering costs on behalf of the Company.
13
Recently Issued Accounting Pronouncements
In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 introduces an approach based on expected losses to estimate credit losses for financial instruments measured at amortized cost. ASU 2016-13 also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. ASU 2016-13 is effective for fiscal years beginning after December 15, 2022. The guidance requires companies to apply the requirements in the year of adoption through cumulative adjustment with some aspects of the update requiring a prospective transition approach. The Company believes that the adoption of ASU 2016-13 will not have a material impact on its consolidated financial statements.
Risk Factors
As an externally-managed company, the Company is largely dependent on the efforts of the Advisor, the sub-advisors and other service providers and has been dependent on the Sponsor for financial support in prior periods.
The Company’s sub-advisors are responsible for locating, performing due diligence and closing on suitable acquisitions based on their access to local markets, local market knowledge for quality deal flow and extensive local private credit experience. However, because the sub-advisors are separate companies from the Advisor, the Company is subject to the risk that one or more of its sub-advisors will be ineffective or materially underperform. The Company’s ability to achieve its investment objectives and to pay distributions to unitholders will be dependent upon the performance of its sub-advisors in the identification, performance of due diligence on and acquisition of investments, the determination of any financing arrangements, and the management of the Company’s projects and assets. The Company is subject to the risk that the Company’s sub-advisors may fail to perform according to the Company’s expectations, or the due diligence conducted by the sub-advisors may fail to reveal all material risks of the Company’s investments, which could result in the Company being materially adversely affected.
The Company is subject to financial market risks, including changes in interest rates. Global economies and capital markets can and have experienced significant volatility, which has increased the risks associated with investments in collateralized private debt instruments. Investment in the Company carries risk and there are no guarantees that the Company’s investment objectives will be achieved. The Company relies on the ability of the Advisor and the ability of the sub-advisors’ investment professionals to obtain adequate information to evaluate the potential returns from these investments, which primarily are made in, with or through private companies. If the Company is unable to uncover all material information about these companies or is provided incorrect or inadequate information about these companies from the Company’s subadvisors, the Company may not make a fully informed investment decision, and the Company may lose money on its investments. As described further in “Note 3—Investments—Watch List Investments,” IIG was the sub-advisor with respect to
The Company’s investments consist of loans, loan participations and trade finance participations that are illiquid and non-traded, making purchase or sale of such financial instruments at desired prices or in desired quantities difficult. Furthermore, the sale of any such investments may be possible only at substantial discounts, and it may be extremely difficult to value any such investments accurately.
The value of the Company’s investments in loans may be detrimentally affected to the extent, among other things, that a borrower defaults on its obligations, there is insufficient collateral securing the loan and/or there are extensive legal and other costs incurred in collecting on a defaulted loan, observable secondary or primary market yields for similar instruments issued by comparable companies increase materially or risk premiums required in the market between smaller companies, such as the Company’s borrowers, and those for which market yields are observable increase materially. The majority of the Company’s investments are in the form of participation interests, in financing facilities originated by one of the Company’s sub-advisors. Accordingly, the Company’s counterparty for investments in participation interests generally will be the respective sub-advisor or its affiliate. The Company will not have a contract with the underlying borrower and therefore, in the event of default, will not have the ability to directly seek recovery against the collateral and instead will have to seek recovery through the Company’s sub-advisor counterparty, which
14
increases the risk of full recovery. These risks may be further exacerbated by the adverse impact the COVID-19 pandemic has had and is expected to continue to have on the business of our borrowers. In addition, as of September 30, 2022 and December 31, 2021, all of the Company’s investments were denominated in U.S. dollars. If the U.S. dollar rises, it may become more difficult for borrowers to make loan payments if the borrowers are operating in markets where the local currencies are depreciating relative the U.S. dollar.
In addition, certain of the Company’s investments in loans contain a PIK interest provision. These investments may expose us to higher risks, including an increased risk of potential loss because PIK interest results in an increase in the size of the outstanding loan balance. The Company may also be exposed to the risk that it may be more difficult to value the investments because the continuing accrual of interest requires continuing subjective judgments about the collectability of the deferred payments and the value of the underlying collateral. To the extent the loan is structured as a PIK interest-only loan, the probability and magnitude of a loss on the Company’s investment may increase.
At September 30, 2022, the Company’s largest loan by value was $
Note 3. Investments
As of September 30, 2022, the Company’s investments consisted of the following:
|
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Percentage |
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|
Amortized Cost |
|
|
Fair Value |
|
|
of Total Investments |
|
|||
|
Senior secured term loans |
|
$ |
|
|
|
$ |
|
|
|
|
|
% |
|
Senior secured term loan participations |
|
|
|
|
|
|
|
|
|
|
|
% |
|
Senior secured trade finance participations |
|
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|
|
|
|
|
|
|
|
|
% |
|
Other investments |
|
|
|
|
|
|
|
|
|
|
|
% |
|
Equity warrants |
|
|
— |
|
|
|
|
|
|
|
|
% |
|
Total investments |
|
$ |
|
|
|
|
|
|
|
|
|
% |
As of December 31, 2021, the Company’s investments consisted of the following:
|
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|
|
|
|
|
|
Percentage |
|
|
|
|
|
Amortized Cost |
|
|
Fair Value |
|
|
of Total Investments |
|
|||
|
Senior secured term loans |
|
$ |
|
|
|
$ |
|
|
|
|
|
% |
|
Senior secured term loan participations |
|
|
|
|
|
|
|
|
|
|
|
% |
|
Senior secured trade finance participations |
|
|
|
|
|
|
|
|
|
|
|
% |
|
Other investments |
|
|
|
|
|
|
|
|
|
|
|
% |
|
Equity warrants |
|
|
— |
|
|
|
|
|
|
|
|
% |
|
Total investments |
|
$ |
|
|
|
$ |
|
|
|
|
|
% |
Participations
The majority of the Company’s investments are in the form of participation interests (“Participations”). Participations are interests in financing facilities originated by one of the Company’s sub-advisors. Participations may be interests in one specific loan or trade finance transaction, several loans or trade finance transactions under a facility, or may be interests in an entire facility. The Company’s rights under Participations include, without limitation, all corresponding rights in payments, collateral, guaranties, and any other security interests obtained by the respective sub-advisor in the underlying financing facilities.
Interest Receivable
Depending on the specific terms of the Company’s investments, interest earned by the Company is payable either monthly, quarterly, or, in the case of most trade finance investments, at maturity. In addition, certain of the Company’s investments in term loans accrue deferred interest, which is not payable until the maturity of the loans. Accrued deferred interest included in the interest receivable balance as of September 30, 2022 and December 31, 2021 amounted to approximately $
15
Trade Finance
Trade finance encompasses a variety of lending structures that support the export, import or sale of goods between producers and buyers in various countries and across various jurisdictions. The strategy is most prevalent in the financing of commodities. The Company’s Participations in trade finance positions typically fall into
|
|
• |
nature of the goods or transaction being financed, |
|
|
• |
the terms associated with the sale and repayment of the goods, |
|
|
• |
the execution risk associated with producing, storing and shipment of the goods, |
|
|
• |
the financial and performance profile of both the borrower and end buyer(s), |
|
|
• |
the underlying advance rate and subsequent Loan to Value (“LTV”) associated with lending against the goods that serve to secure the facility or transaction, |
|
|
• |
collateral and financial controls (collection accounts and inventory possession), |
|
|
• |
third party inspections and insurance, and |
|
|
• |
the region, country or jurisdiction in which the financing is being completed. |
Collateral varies by transaction, but is typically raw or finished goods inventory, and/or receivables. In the case of pre-export finance, the transaction is secured by purchase orders from buyers or offtake contracts, which are agreements between a buyer and seller to purchase/sell a future product.
Terms depend on the nature of the facility or transaction being financed. As such, they depend on the credit profile of the underlying financing, as well as the speed and detail associated with the request for financing. Interest can be paid as often as monthly or quarterly on revolving facilities (one year in duration) or at maturity when dealing with specific transactions with shorter duration, which is the case for the majority of the Company’s trade finance positions. At times, settlement can be delayed due to documentation, shipment, transportation or port clearing issues, delays associated with the end buyer or off-taker assuming possession, possible changes to contract or offtake terms, and the aggregation of settlement of multiple individual transactions. Conversely, at times payments are made ahead of schedule, as transactions either clear faster than expected, borrowers decide to prepay or pay down ahead of schedule, counterparties clear multiple individual transactions in one settlement, or less expensive financing is secured by the borrower.
On occasion, the Company may receive notice from the respective sub-advisor that a borrower or counterparty to a financing facility underlying one of the Company’s Participations intends to pay ahead of schedule or in one lump sum (settling multiple draw requests all at once). Depending on timing and the ability to redeploy these funds, combined with projected inflows of fund capital, these outsize payments can negatively impact the Company’s performance. In these situations, the credit profile of the borrower, and the transaction in general, is reviewed with the sub-advisor and a request may be made to either stagger payments, where at all possible, or request that payment only be made at the end of that specific financial quarter. These requests or accommodations, which happen very rarely, will only be made where the Company has strong comfort in and around the credit profile of the transaction or borrower.
Short Term Investments
Short term investments are defined by the Company as investments that generally meet the standard underwriting guidelines for trade finance and term loan transactions and that also have the following characteristics: (1) maturity of
Warrants
Certain investments, including loans and participations, may carry equity warrants, which allow the Company to buy shares of the portfolio company at a given price, which the Company may exercise at its discretion during the life of the portfolio company. The Company’s goal is to ultimately dispose of such equity interests and realize gains upon the disposition of such interests. However, these warrants and equity interests are generally illiquid and it may be difficult for the Company to dispose of them. In addition, the Company expects that any warrants or other return enhancements received when the Company makes or invests in loans may require several years to appreciate in value and may not appreciate at all.
16
Watch List Investments
The Company monitors and reviews the performance of its investments and if the Company determines that there are any significant changes in the credit and collection risk of an investment, the investment will be placed on the Watch List. The Company places an investment on the Watch List when it believes the investment has material performance weakness driven by company-specific and macro events that may affect the timing of future cash flows. For all Watch List investments, the Company evaluates: (i) liquidation value of collateral; (ii) rights and remedies enforceable against the borrower; (iii) any credit insurance and/or guarantees; (iv) market, sector and macro events and (v) other relevant information (e.g., third party purchase of the borrower and potential or ongoing litigation). At September 30, 2022,
As of September 30, 2022, the Company’s Watch List investments consisted of the following:
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|
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|
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|
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|
|
Interest not accrued on Investments on Watch List status |
|
|||||||||||||
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|
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|
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Three Months Ended |
|
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Nine months ended |
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||||||||||
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|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
||||
|
Portfolio Company |
|
Principal Balance |
|
|
Fair Value |
|
|
Accrued Interest |
|
|
Sub-advisor |
|
Valuation Approach |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|||||||
|
Trustco Group Holdings Ltd. (3) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Helios |
|
Collateral based approach |
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
|
TRG Cape Verde Holdings Ltd. |
|
|
|
|
|
|
|
|
|
|
|
|
|
Helios |
|
Hybrid income/collateral based approach |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Helios Maritime |
|
|
|
|
|
|
|
|
|
|
|
|
|
Helios |
|
Hybrid income/collateral based approach |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Compania Argentina de Granos S.A. (2), (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
IIG |
|
Income approach |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Frigorifico Regional Industrias Alimentarias, S.A., Sucursal Uruguay (2), (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
IIG |
|
Collateral based approach |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Sancor Cooperativas Unidas Ltda |
|
|
|
|
|
|
|
|
|
|
|
|
|
IIG |
|
Collateral based approach |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
IIG TOF B.V. (2), (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
IIG |
|
Collateral based approach |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Algodonera Avellaneda S.A. (2), (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
IIG |
|
Collateral based approach |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Triton Metallics Pte Ltd. |
|
|
|
|
|
|
|
|
|
|
|
|
|
TransAsia |
|
Income approach |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Conplex International Ltd. (1), (2), (3) |
|
|
|
|
|
|
|
|
|
|
— |
|
|
TransAsia |
|
Collateral based approach |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Producam S.A. |
|
|
|
|
|
|
|
|
|
|
— |
|
|
Scipion |
|
Hybrid income/collateral based approach |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Global Pharma Intelligence Sarl (1), (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Scipion |
|
Collateral based approach |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mac Z Group SARL (1), (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Scipion |
|
Collateral based approach |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Applewood Trading 199 Pty, Ltd. (1), (3) |
|
|
|
|
|
|
|
|
|
|
— |
|
|
Barak |
|
Hybrid income/collateral based approach |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multiple ICD (Kenya) Limited |
|
|
|
|
|
|
|
|
|
|
|
|
|
Barak |
|
Income approach |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Agilis Partners Holding LLC (1) |
|
|
|
|
|
|
|
|
|
|
— |
|
|
Origin |
|
Income approach |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Agilis Partners |
|
|
|
|
|
|
|
|
|
|
|
|
|
Origin |
|
Income approach |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Usivale Industria E Commercio Ltda (1), (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
Hybrid income/collateral based approach |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Itelecom Holding Chile SPA (1), (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Alsis |
|
Income approach |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Limas Commodities House Limited |
|
|
|
|
|
|
|
|
|
|
— |
|
|
TransAsia |
|
Hybrid income/collateral based approach |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Vikudha Malaysia Sdn Bhd |
|
|
|
|
|
|
|
|
|
|
|
|
|
TransAsia |
|
Hybrid income/collateral based approach |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Total Watchlist |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
1 |
Investments with a fair value equal to less than |
|
2 |
Excludes interest not accrued with respect to investments which the Company may not legally accrue interest, such as those that are the subject of bankruptcy proceedings. |
|
3 |
Investments were on non-accrual status. |
17
As of December 31, 2021, the Company’s Watch List investments consisted of the following:
|
Portfolio Company |
|
Principal Balance |
|
|
Fair Value |
|
|
Accrued Interest |
|
|
Sub-advisor |
|
Valuation Approach |
|||
|
Trustco Group Holdings Ltd. |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Helios |
|
Collateral based approach |
|
TRG Cape Verde Holdings Ltd. |
|
|
|
|
|
|
|
|
|
|
|
|
|
Helios |
|
Hybrid income/collateral based approach |
|
Helios Maritime |
|
|
|
|
|
|
|
|
|
|
|
|
|
Helios |
|
Hybrid income/collateral based approach |
|
Compania Argentina de Granos S.A. (2), (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
IIG |
|
Income approach |
|
Frigorifico Regional Industrias Alimentarias, S.A., Sucursal Uruguay (2), (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
IIG |
|
Collateral based approach |
|
Sancor Cooperativas Unidas Ltda |
|
|
|
|
|
|
|
|
|
|
|
|
|
IIG |
|
Collateral based approach |
|
IIG TOF B.V. (2), (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
IIG |
|
Collateral based approach |
|
Algodonera Avellaneda S.A. (2), (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
IIG |
|
Collateral based approach |
|
Triton Metallics Pte Ltd. |
|
|
|
|
|
|
|
|
|
|
|
|
|
TransAsia |
|
Income approach |
|
Conplex International Ltd. (2), (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
TransAsia |
|
Collateral based approach |
|
Producam S.A. |
|
|
|
|
|
|
|
|
|
|
— |
|
|
Scipion |
|
Hybrid income/collateral based approach |
|
Global Pharma Intelligence Sarl (1), (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Scipion |
|
Collateral based approach |
|
Mac Z Group SARL (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Scipion |
|
Collateral based approach |
|
Applewood Trading 199 Pty, Ltd. (1), (3) |
|
|
|
|
|
|
|
|
|
|
— |
|
|
Barak |
|
Hybrid income/collateral based approach |
|
Multiple ICD (Kenya) Limited |
|
|
|
|
|
|
|
|
|
|
|
|
|
Barak |
|
Income approach |
|
Usivale Industria E Commercio Ltda (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
Hybrid income/collateral based approach |
|
Itelecom Holding Chile SPA (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Alsis |
|
Income approach |
|
Total Watchlist |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
1 |
Investments with a fair value equal to less than |
|
2 |
Excludes interest not accrued with respect to investments which the Company may not legally accrue interest, such as those that are the subject of bankruptcy proceedings. |
|
3 |
Investments were on non-accrual status. |
Investments through Helios Investment Partners, LLP (“Helios”) as the Sub-Advisor
Trustco Group Holdings Ltd
In January 2017, the Company purchased a $
TRG Cape Verde Holdings Ltd
In May 2016, the Company purchased a $
18
Helios Maritime I
Between July 2015 and December 2017, the Company purchased six Participations totaling $
The borrower received a term sheet subsequent to the fourth quarter of 2021 to support its performance against its obligations, which requires an $
Investments through IIG as the Sub-Advisor
IIG was the sub-advisor with respect to certain investments that the Company made in South America, including
The SEC previously charged IIG with fraud on November 21, 2019 and revoked IIG's registration as an investment adviser on November 26, 2019. On March 30, 2020, the SEC obtained a final judgment on consent that enjoins IIG from violating the antifraud provisions of the federal securities laws. On July 17, 2020,
Most of the outstanding investments for which IIG was the sub-advisor were purchased from IIG TOF B.V., a Dutch Limited Liability Company advised by IIG. On
Compania Argentina de Granos
Between October 2016 and February 2017, the Company purchased two Participations in a trade finance facility originated by IIG TOF B.V., with Compania Argentina de Granos (“CAGSA”), as borrower. The Company purchased the initial Participation in October 2016 for $
IIG previously informed the Company that it had been in active discussions with CAGSA and other CAGSA lenders to protect its rights under the credit facility. Additionally, IIG had previously informed the Company that IIG is a member of the creditors committee, which would determine all financial and restructuring options of CAGSA, which may include additional equity infusions by the existing shareholders. In February 2019, CAGSA disclosed that it had reached a preliminary settlement with its creditors.
19
Recently, the administrator of IIG TOF B.V.’s bankruptcy proceedings in the Netherlands notified the Company that the settlement discussions with CAGSA’s creditors had resumed and are close to being finalized. The administrator indicated that the terms of the settlement being discussed are different from the terms that had been part of the preliminary settlement that had been reached in February 2019. The settlement is expected to result in the assumption of the entirety of CAGSA’s debt by its parent company, Molinos Cañuelas (“MolCa”), with a portion to be repaid over a period and the remaining portion to be repaid over a period of up to
Frigorifico Regional Industrias Alimentarias, S.A., Sucursal Uruguay and Algodonera Avellaneda S.A.
Between June 2016 and July 2016, the Company purchased two Participations in a trade finance facility originated by IIG TOF B.V., with Frigorifico Regional Industrias Alimentarias, S.A., Sucursal Uruguay (“FRIAR”), an Argentine company that produces, processes and exports beef, as the borrower. In June 2017, IIG called a technical event of default due to non-payment by FRIAR. In an effort to seek repayment from FRIAR, IIG filed the promissory notes for FRIAR in the commercial court in Buenos Aires, Argentina.
In March 2017, the Company purchased a Participation in a trade finance facility originated by IIG TOF B.V., with Algodonera Avellaneda S.A. (“Algodonera”) as the borrower for $
In August 2019, the Company was informed by IIG’s legal counsel that the commercial court proceedings with FRIAR and Algonodera had been terminated due to the parties having reached a settlement. The Company obtained evidence that the settlement proceeds for all participant holders had been placed in an escrow account with a New York law firm. In January 2022, the largest participant holder with respect to claims against the escrow account filed an action in New York district court to release these funds to all the participant holders. The Company expects a final decision by the relevant bankruptcy courts and a final settlement agreement amongst all the creditors regarding the distribution of funds by the end of the first quarter of 2023.
Sancor Cooperativas Unidas Limitada
In April 2016 the Company purchased two Participations in a trade finance facility originated by IIG TOF B.V., with Sancor Cooperativas Unidas Limitada (“Sancor”), an Argentine company that distributes dairy products, as the borrower. IIG had worked with Sancor to restructure the existing loan and extended the maturity to
IIG Trade Opportunities Fund B.V. Receivable
In March 2017, the Company purchased a Participation from IIG TOF B.V. in what the Company at that time believed to be a trade finance facility originated by IIG TOF B.V., with Nacadie Commercial S.A. (“Nacadie”) as the borrower. The Company purchased the Participation in March 2017 for $
20
As noted above, IIG TOF B.V. has been declared bankrupt in the Netherlands, and the Company is seeking to recover amounts to which it is entitled through the bankruptcy proceedings. The Company has applied a discount to the fair value based on the risk created by the uncertainty of the ultimate resolution of the Company’s attempt to recover amounts to which it is entitled through the bankruptcy proceedings in the Netherlands.
Investments through TransAsia Private Capital Ltd. (“TransAsia”) as the Sub-Advisor
Triton Metallics Pte. Ltd.
In November 2019, the Company made an investment in Triton Metallics Pte. Ltd. (“Triton”) totaling $
Conplex International Ltd.
Between November 2018 and May 2019, the Company purchased three Participations totaling $
Vikudha Malaysia Sdn Bhd
Limas Commodities House Limited
In August 2017, the Company provided a $
21
continued impact of COVID-19, in June 2020, the Company executed an extension of final maturity to . Subsequent to June 30, 2022, PT Limas Tunggal, the corporate guarantor of the Company’s facility, entered restructuring legal proceedings in Indonesia, and as a result, the Company issued an Acceleration Notice to the borrower and a Demand Notice to the Guarantor. The restructure legal proceedings concluded during the third quarter of 2022 which extended repayment of the debt and reduced the future interest rate from
Investments through Scipion Capital, Ltd. (“Scipion”) as the Sub-Advisor
Producam SA
Between March 2018 and June 2018, the Company purchased three Participations totaling $
Mac Z Group SARL
Between July 2016 and April 2017, the Company purchased nine Participations totaling $
In addition to conducting its investigation, Scipion issued an event of default and has taken steps to enforce the corporate guarantee, personal guarantee and relevant pledges made for the benefit of Scipion with respect to the facility, which include two insurance policies. Scipion has placed a blocking notice on all of Mac Z’s bank accounts and has requested a freeze order from the Moroccan local courts on the physical assets of the company. Since the initial discovery and actions, Mac Z sold remaining inventory and the Company was paid interest of approximately $
A judgment was received on December 18, 2017, in English court ordering the borrower and the corporate guarantor to make payment. In parallel to its recovery plan with respect to Mac Z, Scipion informed the Company that it has received a judgment in its favor with respect to its claim against the collateral manager under its professional indemnity insurance policy, which covers up to $
Investments through Barak Fund Management Ltd. (“Barak”) as the Sub-Advisor
Multiple ICD (Kenya) Limited
In July 2017, the Company purchased a $
22
Investments through Origin Capital Ltd. (“Origin”) as the Sub-Advisor
Agilis Partners
In 2018, the Company originally provided financing totaling approximately $
Other Investments
Usivale Industria E Commercio Ltda
In December 2013, the Company made an investment in Usivale Industria E Comercio, Ltda. (“Usivale”), a sugar processing company located in Brazil, comprised of two senior secured term loans for an aggregate loan amount of $
23
The industry composition of the Company’s portfolio, at fair value as of September 30, 2022 and December 31, 2021, was as follows:
|
|
|
As of September 30, 2022 |
|
|
As of December 31, 2021 |
|
||||||||||
|
Industry |
|
Fair Value |
|
|
Percentage of Total |
|
|
Fair Value |
|
|
Percentage of Total |
|
||||
|
Beef Cattle, Except Feedlots |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
Boatbuilding and Repairing |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Chemicals and Allied Products |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Chocolate and Cocoa Products |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Coal and Other Minerals and Ores |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Computer Related Services, NEC |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Corn |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Corrugated and solid fiber boxes |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Cotton Ginning |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Dairy Farms |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Drugs, Proprietaries, and Sundries |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Electric Services |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Farm Products |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Freight Transportation Arrangement |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Hotels and Motels |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Land Subdividers and Developers |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Miscellaneous Business Credit |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Motor Vehicle Parts and Accessories |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Personal Credit Institutions |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Petroleum and Petroleum Products |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Refuse Systems |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Retail Bakeries |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Salted and Roasted Nuts and Seeds |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Sanitary Paper Products |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Secondary Nonferrous Metals |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Short-Term Business Credit |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Soybeans |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Sugarcane and Sugar Beets |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Telephone and Telegraph Apparatus |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Telephone Communications |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Towing and Tugboat Service |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Total |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
24
The table below shows the portfolio composition by geographic classification at fair value as of September 30, 2022 and December 31, 2021:
|
|
|
As of September 30, 2022 |
|
|
As of December 31, 2021 |
|
||||||||||
|
|
|
Fair |
|
|
Percentage |
|
|
Fair |
|
|
Percentage |
|
||||
|
Country |
|
Value |
|
|
of Total |
|
|
Value |
|
|
of Total |
|
||||
|
Argentina (1) |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
Botswana |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Brazil |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Cabo Verde |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Cameroon |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Chile |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Colombia |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Ecuador |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Ghana |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Hong Kong |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Indonesia |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Jersey |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Kenya |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Malaysia |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Mexico |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Morocco |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Namibia |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Netherlands |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Nigeria |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Peru |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Romania |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Singapore |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
South Africa |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
United Arab Emirates |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Uganda |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
N/A (2) |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Total |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
(1) |
All of the Company’s investments in Argentina are Participations in trade finance facilities originated by IIG TOF B.V. See Note 3 “Watch List Investments” for further information. |
|
(2) |
This investment was in a credit facility originated by IIG TOF B.V., which has been placed into bankruptcy; therefore, no geographic classification is applicable. |
25
Note 4. Fair Value Measurements
The following table summarizes the valuation of the Company’s investments by the fair value hierarchy levels required under ASC 820 as of September 30, 2022:
|
|
|
Fair |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
|
Senior secured term loan participations |
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
Senior secured term loans |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Senior secured trade finance participations |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Other investments |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Equity warrants |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
The following table summarizes the valuation of the Company’s investments by the fair value hierarchy levels required under ASC 820 as of December 31, 2021:
|
|
|
Fair |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
|
Senior secured term loan participations |
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
Senior secured term loans |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Senior secured trade finance participations |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Other investments |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Equity warrants |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
The following is a reconciliation of activity for the nine months ended September 30, 2022, of investments classified as Level 3:
|
|
|
Fair Value at December 31, 2021 |
|
|
Purchases |
|
|
Proceeds from disposition of investments |
|
|
Payment-in- kind interest |
|
|
Net change in depreciation |
|
|
Fair Value at September 30, 2022 |
|
||||||
|
Senior secured term loan participations |
|
$ |
|
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Senior secured term loans |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Senior secured trade finance participations |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Short term and other investments |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Equity warrants |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
There were
26
As of September 30, 2022, all of the Company’s portfolio investments utilized Level 3 inputs. The following table presents the quantitative information about Level 3 fair value measurements of the Company’s investments as of September 30, 2022:
|
|
|
Fair value |
|
|
Valuation technique |
|
Unobservable input |
|
Range (weighted average) (4) |
|
|
Senior secured trade finance participations (2) |
|
$ |
|
|
|
Collateral based approach Income approach (DCF) |
|
Value of collateral (collateral coverage ratio) Discount rate |
|
0.17x - 1.18x 11.5% - 15.75% (10.2%) |
|
Senior secured trade finance participations (1) |
|
$ |
|
|
|
Collateral based approach |
|
Value of collateral (collateral coverage ratio) |
|
1.0x - 1.67x |
|
Senior secured term loans (2) |
|
$ |
|
|
|
Collateral based approach Income approach (DCF) |
|
Value of collateral (collateral coverage ratio) Discount rate |
|
0.91x - 1.24x 12.0% - 16.5% (11.5%) |
|
Senior secured term loan participations (2) |
|
$ |
|
|
|
Collateral based approach Income approach (DCF) |
|
Value of collateral (collateral coverage ratio) Discount rate |
|
0.58x - 8.7x 12.0% - 20.75% (11.8%) |
|
Senior secured term loan participations (1) |
|
$ |
|
|
|
Collateral based approach |
|
Value of collateral (collateral coverage ratio) |
|
1.4x |
|
Other investments (3) |
|
$ |
|
|
|
Collateral based approach |
|
Value of collateral (collateral coverage ratio) |
|
1.0x |
|
Equity warrants |
|
$ |
|
|
|
Option Pricing Method |
|
Equity value, volatility, time to exit |
|
72%, 5 years |
|
(1) |
Collateral based approach used for the following watch list investments: Trustco, Sancor, FRIAR, Algonodera, Mac Z, GPI and Conplex. See Note 3 “Watch List Investments” for further information. |
|
(2) |
The Company used the income approach for the following Watch List investments: CAGSA, Triton, MICD and Itelecom and a hybrid of the collateral based approach and the income approach for TRG Cape Verde, Helios Martime, Producam, Applewood and Usivale, using additional unobservable inputs including recovery rates ranging from |
|
(3) |
|
|
(4) |
The inputs were weighted based on the fair value of the investments included in the range. |
27
As of December 31, 2021, all of the Company’s portfolio investments utilized Level 3 inputs. The following table presents the quantitative information about Level 3 fair value measurements of the Company’s investments as of December 31, 2021:
|
|
|
Fair value |
|
|
Valuation technique |
|
Unobservable input |
|
Range (weighted average) |
|
|
Senior secured trade finance participations (2) |
|
$ |
|
|
|
Income approach (DCF) |
|
Discount rate |
|
|
|
Senior secured trade finance participations (1) |
|
$ |
|
|
|
Collateral based approach |
|
Value of collateral (collateral coverage ratio) |
|
0.43x - 1.67x |
|
Senior secured term loans (2) |
|
$ |
|
|
|
Income approach (DCF) |
|
Discount rate |
|
|
|
Senior secured term loan participations (2) |
|
$ |
|
|
|
Income approach (DCF) |
|
Discount rate |
|
|
|
Senior secured term loan participations (1) |
|
$ |
|
|
|
Collateral based approach |
|
Value of collateral (collateral coverage ratio) |
|
0.99x |
|
Other investments (3) |
|
$ |
|
|
|
Collateral based approach |
|
Value of collateral (collateral coverage ratio) |
|
1.0x |
|
Equity warrants |
|
$ |
|
|
|
Option Pricing Method |
|
Equity value, volatility, time to exit |
|
71%, 5 years |
|
(1) |
Collateral based approach used for the following Watch List investments: Trustco, Sancor, FRIAR, Algonodera, MacZ, GPI and Conplex. See Note 3 “Watch List Investments” for further information. |
|
(2) |
The Company used the income approach for the following Watch List investments: CAGSA, Triton, MICD and Itelecom and a hybrid of the collateral based approach and the income approach for TRG Cape Verde, Helios Maritime, Producam, Applewood and Usivale, using additional unobservable inputs including recovery rates ranging from |
|
(3) |
This investment was originally classified as an investment in a credit facility originated by IIG TOF B.V. Due to the fact that IIG TOF B.V. has been placed into bankruptcy, this investment utilizes the collateral based approach. |
|
(4) |
The inputs were weighted based on the fair value of the investments included in the range. |
The significant unobservable Level 3 inputs used in the fair value measurement of the Company’s investments are market yields used to discount the estimated future cash flows expected to be received from the underlying investments, which include both future principal and interest payments. Significant increases in market yields would result in significantly lower fair value measurements. In addition, a significant decrease in future cash flows is expected to be received from the underlying investments due to a projected decrease in results of operations and cash flows from the underlying investments, would result in significantly lower fair value measurements.
For additional information concerning of the country-specific risk concentrations for the Company’s investments, refer to the Consolidated Schedule of Investments and Note 3.
Note 5. Contingencies and Related Parties
Agreements
Advisory Agreement
The current term of the Advisory Agreement between the Company and the Advisor, (the “Advisory Agreement”) ends on
28
If certain financial goals are reached by the Company, the Company is required to pay the Advisor an incentive fee that is comprised of two parts: (i) a subordinated fee on net investment income and (ii) an incentive fee on capital gains.
An incentive fee on capital gains will be earned on investments sold and shall be determined and payable to the Advisor in arrears as of the end of each calendar year.
Operating Expense Responsibility Agreement
On May 12, 2021, the Company entered into the Second Amended and Restated Operating Expense Responsibility Agreement with the Advisor and the Sponsor (the “Responsibility Agreement”). The Responsibility Agreement amends and replaces the prior agreement and amended the manner in which reimbursements to the Sponsor under the agreement will be allocated. Since the inception of the Company through December 31, 2017, pursuant to the terms of the Responsibility Agreement, the Sponsor paid approximately $
Pursuant to the Responsibility Agreement, the Sponsor will only be entitled to reimbursement of the cumulative expenses it has incurred on the Company’s behalf to the extent the Company’s investment income in any quarter, as reflected on the statement of operations, exceeds the sum of (a) total distributions to unitholders incurred during the quarter and (b) the Company’s expenses as reflected on the statement of operations for the same quarter (the “Reimbursement Hurdle”). If the Sponsor is entitled to receive reimbursement for any given quarter because the Company’s investment income exceeds the Reimbursement Hurdle for such quarter, the Company will apply
The Company did not meet the Reimbursement Hurdle for the three months ended September 30, 2022 and 2021. Therefore,
Transactions
For the three months ended September 30, 2022 and 2021, the Advisor earned $
As of September 30, 2022 and December 31, 2021, due from affiliates on the Consolidated Statement of Assets and Liabilities in the amount of $
On September 1, 2022, the Company sold $
29
Note 6. Organization and Offering Costs
The Sponsor previously paid approximately $
Since the commencement of the Company’s operations, the Company has reimbursed the Sponsor a total of approximately $
For the nine months ended September 30, 2022 and 2021, the Company paid SC Distributors, formally known as StratCap Securities, the dealer manager for certain of the Company’s prior offerings, approximately $
Note 7. Note Payable
The Company’s note payable consists of the following:
|
|
|
September 30, 2022 |
|
|
December 31, 2021 |
|
||
|
|
|
Outstanding Balance |
|
|
Outstanding Balance |
|
||
|
Christian Super promissory note |
|
$ |
— |
|
|
$ |
|
|
|
Total note payable |
|
$ |
— |
|
|
$ |
|
|
Christian Super Promissory Note
On December 18, 2018, Trilinc Global Impact Fund Cayman, Ltd. (“TGIFC”) issued $
For the nine months ended September 30, 2022 and 2021, the Company recognized $
30
Note 8. Unit Capital
As of September 30, 2022, the Company had six classes of units: Class A, Class C, Class I, Class W, Class Y and Class Z units. The unit classes have been sold with different upfront sales commissions and dealer manager fees as well as different ongoing distribution fees, dealer manager fees and/or service fees with respect to certain classes of units, including a distribution fee with respect to Class C units, an ongoing dealer manager fee with respect to Class I and Class W units, and an ongoing service fee with respect to Class W units. As of September 30, 2022, the Company recorded a liability in the aggregate amount of $
|
|
|
Units |
|
|
|
|
|
|
|
|
|
|
Units |
|
||
|
|
|
Outstanding |
|
|
|
|
|
|
Units |
|
|
Outstanding |
|
|||
|
|
|
as of |
|
|
Units Issued |
|
|
Repurchased |
|
|
as of |
|
||||
|
|
|
December 31, |
|
|
During |
|
|
During |
|
|
September 30, |
|
||||
|
|
|
2021 |
|
|
the Period |
|
|
the Period |
|
|
2022 |
|
||||
|
Class A units |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Class C units |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Class I units |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Class W units |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Class Y units |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Class Z units |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
The total of
Beginning June 11, 2014, the Company commenced a unit repurchase program pursuant to which the Company may conduct quarterly unit repurchases of up to
The unit repurchase program includes numerous restrictions, including a one-year holding period, that limit the ability of the Company’s unitholders to sell their units. Unless the Company’s board of managers determines otherwise, the Company will limit the number of units to be repurchased during any calendar year to the number of units that can be repurchased with the proceeds the Company receives from the sale of units under the Company’s DRP. At the sole discretion of the Company’s board of managers, the Company may also use cash on hand, cash available from borrowings and cash from the repayment or liquidation of investments as of the end of the applicable quarter to repurchase units.
During the nine months ended September 30, 2022, the Company fulfilled repurchase requests for a total of
31
Note 9. Distributions
Since July 2013, the Company has paid monthly distributions for all classes of units. The following table summarizes the distributions paid for the nine months ended September 30, 2022:
|
|
|
|
|
Daily Rate |
|
|
Cash |
|
|
Distributions |
|
|
Total |
|
||||
|
Month ended |
|
Date Declared |
|
Per Unit |
|
|
Distributions |
|
|
Reinvested |
|
|
Declared |
|
||||
|
January 31, 2022 |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
February 28, 2022 |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2022 |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2022 |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 31, 2022 |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2022 |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2022 |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 31, 2022 |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022 |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total for 2022 |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
In August 2022, the Company’s board of managers authorized the declaration of distributions for September, October and November of 2022. These distributions have been or will be calculated based on unitholders of record for each day in an amount equal to $
Note 10. Financial Highlights
The following is a schedule of financial highlights of the Company for the nine months ended September 30, 2022 and 2021:
|
|
Nine months ended |
|
|||||
|
|
September 30, |
|
|
September 30, |
|
||
|
|
2022 |
|
|
2021 |
|
||
|
Per unit data (1): |
|
|
|
|
|
|
|
|
Net asset value at beginning of period |
$ |
|
|
|
$ |
|
|
|
Net investment income |
|
|
|
|
|
|
|
|
Net change in unrealized depreciation on investments |
|
( |
) |
|
|
( |
) |
|
Realized loss on investments |
|
— |
|
|
|
( |
) |
|
Net increase in net assets resulting from operations |
|
|
|
|
|
|
|
|
Distributions |
|
( |
) |
|
|
( |
) |
|
Net change in accrued distribution and other fees |
|
— |
|
|
|
— |
|
|
Net decrease in net assets |
|
( |
) |
|
|
( |
) |
|
Net asset value at end of period (2) |
$ |
|
|
|
$ |
|
|
|
Total return based on net asset value (3) |
|
|
% |
|
|
|
% |
|
Net assets at end of period |
$ |
|
|
|
$ |
|
|
|
Units Outstanding at end of period |
|
|
|
|
|
|
|
|
Ratio/Supplemental data (annualized) (3): |
|
|
|
|
|
|
|
|
Ratio of net investment income to average net assets |
|
|
% |
|
|
|
% |
|
Ratio of total expenses to average net assets |
|
|
% |
|
|
|
% |
|
1 |
The per unit data was derived by using the weighted average units outstanding during the nine months ended September 30, 2022 and 2021, which were |
|
2 |
For financial statement reporting purposes under GAAP, as of September 30, 2022 and 2021, the Company recorded a liability in the amount of $ |
32
|
asset value determination is consistent with the industry standard and is more appropriate since the Company intends for the net asset value to reflect the estimated value on the date that the Company determines its net asset value. |
|
3 |
The Company’s net investment income has been annualized assuming consistent results over a full fiscal year, however, this may not be indicative of actual results over a full fiscal year. |
Note 11. Subsequent Events
The Company’s management has evaluated subsequent events through the date of issuance of the consolidated financial statements included herein. Except as discussed below, there have been no subsequent events that occurred during such period that would require disclosure in the Form 10-Q or would be required to be recognized in the consolidated financial statements as of and for the three and nine months ended September 30, 2022.
Distributions
The cash distributions for October totaled $
The Company’s board of managers authorized the declaration of distributions for September, October and November of 2022. These distributions will be calculated based on unitholders of record for each day in an amount equal to $
Sub-advisor
On October 3, 2022, one of the Company’s sub-advisors, TransAsia, notified the Company of its intention to terminate the sub-advisory agreement between the two parties. The Company is working with TransAsia to transition all of TransAsia's responsibilities under the agreement to the Advisor in an orderly and timely fashion and expects to complete the process by early 2023.
Investments
On November 3, 2022, the Company entered into a transaction with an unrelated financial institution, whereby, it sold a $
Subsequent to September 30, 2022 through November 14, 2022, the Company did
33
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the Company’s financial statements and related notes and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q.
Except as otherwise specified, references to “we,” “us,” “our,” or the “Company,” refer to TriLinc Global Impact Fund, LLC.
Forward Looking Statements
Some of the statements in this Form 10-Q constitute forward-looking statements, which relate to future events or our future performance or financial condition. The forward-looking statements contained in this Quarterly Report involve risks and uncertainties, including statements as to:
|
|
• |
our future operating results; |
|
|
• |
our ability to purchase or make investments in a timely manner; |
|
|
• |
our business prospects and the prospects of our borrowers; |
|
|
• |
the impact of the COVID-19 pandemic and actions taken to prevent its spread on our business, results of operations, financial condition, liquidity and net asset value per unit; |
|
|
• |
the economic, social and/or environmental impact of the investments that we expect to make; |
|
|
• |
our contractual arrangements and relationships with third parties; |
|
|
• |
our ability to make distributions to our unitholders; |
|
|
• |
the dependence of our future success on the general economy and its impact on the companies in which we invest; |
|
|
• |
the availability of cash flow from operating activities for distributions and payment of operating expenses; |
|
|
• |
the performance of our Advisor, our sub-advisors and our Sponsor; |
|
|
• |
our dependence on our Advisor and our dependence on and the availability of the financial resources of our Sponsor; |
|
|
• |
the ability of our borrowers to make required payments; |
|
|
• |
our Advisor’s ability to attract and retain sufficient personnel to support our growth and operations; |
|
|
• |
the lack of a public trading market for our units; |
|
|
• |
our ongoing litigation; |
|
|
• |
our ability to borrow funds; |
|
|
• |
our expected financings and investments; |
|
|
• |
the adequacy of our cash resources and working capital; |
|
|
• |
general global economic, political and business conditions, including inflation, and the conflict in Ukraine; |
|
|
• |
performance of our investments relative to our expectations and the impact on our actual return on invested equity, as well as the cash provided by these investments; |
|
|
• |
any failure in our Advisor’s or sub-advisors’ due diligence to identify all relevant facts in our underwriting process or otherwise; |
|
|
• |
the ability of our sub-advisors and borrowers to achieve their objectives; |
|
|
• |
the effectiveness of our portfolio management techniques and strategies; |
|
|
• |
failure to maintain effective internal controls; and |
|
|
• |
the loss of our exemption from the definition of an “investment company” under the Investment Company Act of 1940, as amended. |
We 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.
The foregoing list of factors is not exhaustive. 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 in the future with the SEC.
Overview
We make impact investments in SMEs that provide the opportunity to achieve both competitive financial returns and positive measurable impact. We were organized as a Delaware limited liability company on April 30, 2012. We have operated and intend to continue to operate our business in a manner that will permit us to maintain our exemption from registration under the Investment Company Act of 1940, as amended. We use the proceeds raised from the issuance of units to invest in SMEs through local market sub-advisors in a diversified portfolio of financial assets, including direct loans, loan participations, convertible debt instruments, trade finance, structured credit and preferred and common equity investments. A substantial portion of our assets consists of collateralized private debt instruments, which we believe offer opportunities for competitive risk-adjusted returns and income generation. We are externally managed and advised by TriLinc Advisors, LLC, or the Advisor. The Advisor is an investment advisor registered with the SEC.
34
Our business strategy is to generate competitive financial returns and positive economic, social and environmental impact by providing financing to SMEs, which we define as those business having less than 500 employees, primarily in developing economies. To a lesser extent, we may also make impact investments in companies that may not meet our technical definition of SMEs due to a larger number of employees but that also provide the opportunity to achieve both competitive financial returns and positive measurable impact. We generally expect that such investments will have similar investment characteristics as SMEs as defined by us. Our style of investment is referred to as impact investing, which J.P. Morgan Global Research and Rockefeller Foundation in a 2010 report called “an emerging alternative asset class” and defined as investing with the intent to create positive impact beyond financial return. We believe it is possible to generate competitive financial returns while creating positive, measurable impact. We measure the economic, social and environmental impact of our investments using industry-standard metrics, including the Impact Reporting and Investment Standards. Through our investments in SMEs, we intend to enable job creation and stimulate economic growth.
We commenced the Offering on February 25, 2013. Pursuant to the Offering, we were offering on a continuous basis up to $1.5 billion in units of our limited liability company interest, consisting of up to $1.25 billion of units in the primary offering consisting of Class A and Class C units at initial offering prices of $10.00 and $9.576 per unit, respectively, and Class I units at $9.025 per unit, and up to $250 million of units pursuant to our Distribution Reinvestment Plan. SC Distributors, LLC was the dealer manager for the Offering. In May 2012, the Advisor purchased 22,161 Class A units for aggregate gross proceeds of $200,000. On June 11, 2013, we satisfied the minimum offering requirement of $2,000,000 when the Sponsor purchased 321,330 Class A units for aggregate gross proceeds of $2,900,000 and we commenced operations. The Offering terminated on March 31, 2017. Through the termination of the Offering, we raised approximately $361,776,000 in gross proceeds, including approximately $13,338,000 raised through our Distribution Reinvestment Plan.
Upon termination of the primary portion of the Offering, we registered $75 million in Class A, Class C and Class I units to continue to be offered pursuant to our Distribution Reinvestment Plan to the investors who have purchased units in the Offering. Units issued pursuant to our Distribution Reinvestment Plan are being offered at the price equal to the net asset value per unit of each class of units, as most recently disclosed by the Company in a public filing with the SEC at the time of reinvestment. Our Distribution Reinvestment Plan was amended, effective May 25, 2020, to allow holders of all classes of units other than Class Z units to participate, including holders who purchased units in our private placements. The offering must be registered or exempt from registration in every state in which we offer or sell units. If the offering is not exempt from registration, the required registration generally is for a period of one year. Therefore, we may have to stop selling units in any state in which the registration is not renewed annually and the offering is not otherwise exempt from registration.
For the nine months ended September 30, 2022, we issued 741,000 of our units pursuant to our Distribution Reinvestment Plan for gross proceeds of approximately $5,243,000. In addition, for the nine months ended September 30, 2022, we issued 41,163 of our units for gross proceeds of approximately $295,000 pursuant to our ongoing private placement described above. As of September 30, 2022, $24,186,000 in units remained available for sale pursuant to the Distribution Reinvestment Plan.
From our inception to September 30, 2022, we have issued an aggregate of 56,000,530 of our units, including 7,778,116 units issued under our Distribution Reinvestment Plan, for gross proceeds of approximately $512,698,000 including approximately $64,152,000 reinvested under our Distribution Reinvestment Plan (before dealer manager fees of approximately $4,801,000 and selling commissions of $16,862,000), for net proceeds of $491,035,000.
Outlook
The COVID-19 pandemic and its lingering effects has adversely impacted many of the Company’s borrowers both directly and indirectly. First, the adverse impact on the global supply chain has been one of the largest challenges for our borrowers, as most of them are exporters directly tied to global trade. Some of these challenges include: demand from suppliers to be paid in cash rather than supplier credit, significant increases in shipping costs (when and if shipping is reliably available), and delays in the payment of receivables, all of which put pressure on borrowers’ working capital needs. Although not as severe as they once were, supply chain problems continue to be aggravated by China’s rolling lockdowns to control COVID-19 and the conflict between Russia and Ukraine. Second, our borrowers experienced challenges related to the decrease in global demand during 2020 and 2021, which decreased revenue for many of them. Additionally, input costs remain high and the conflict between Russia and Ukraine has increased the disruption, instability and volatility in global markets and industries. The Company expects some of the regions in which it invests to achieve economic normalization once the lingering supply chain disruptions and input cost increases dissipate. However, the Company believes certain regions, industries and borrowers may experience further material economic distress due to the compound impact of more than two years of economic hardship and some borrowers may find it difficult or impossible to recover. If the continuing impacts of COVID-19 combined with rising input costs further adversely affect borrowers’ businesses, financial condition and results of operations, borrowers may be unable to make required payments in the near term, which could impact the fair value of the Company’s investments.
While inflation and rising interest rates are major issues in most advanced economies, the Company believes they are not core issues in the Company’s markets. The Company continues to believe that the central issue driving results is that borrowers are struggling to recover from the compound impact of more than two years of economic hardship. Indeed, although the Company’s NAV per unit modestly decreased by $0.06 as of September 30, 2022, compared to the NAV per unit as of June 30, 2022, the Company’s
35
NAV is a reflection of the cumulative effect of 11 consecutive quarters of the adverse economic impact of COVID-19 and its ramifications, including persistent supply chain and cash flow issues, on our borrowers.
Investments
Our investment objectives are to provide our unitholders current income, capital preservation, and modest capital appreciation. These objectives are achieved primarily through SME trade finance and term loan financing, while employing rigorous risk-mitigation and due diligence practices, and transparently measuring and reporting the economic, social and environmental impacts of our investments. The majority of our investments are senior and other collateralized loans to SMEs with established, profitable businesses in developing economies. To a lesser extent, we may also make investments in financing to companies that may not meet our technical definition of SMEs due, for example, to the companies having a larger number of employees, but that also provide the opportunity to achieve both competitive financial returns and positive measurable impact. Furthermore, we may also make investments in developed economies, including the United States. With the sub-advisors that our Advisor has contracted with to assist the Advisor in implementing the Company’s investment program, we expect to provide growth capital financing generally ranging in size from $5-20 million per transaction for direct SME loans and $500,000 to $15 million for trade finance transactions. We seek to protect and grow investor capital by: (1) targeting countries with favorable economic growth and investor protections; (2) partnering with sub-advisors with significant experience in local markets; (3) focusing on creditworthy lending targets who have at least 3-year operating histories and demonstrated cash flows enabling loan repayment; (4) making primarily debt investments, backed by collateral and borrower guarantees; (5) employing best practices in our due diligence and risk mitigation processes; and (6) monitoring our portfolio on an ongoing basis. By providing additional liquidity to growing small businesses, we believe we support both economic growth and the expansion of the global middle class.
Investments will continue to be primarily credit facilities and participations in credit facilities to developing economy SMEs, including trade finance and term loans, through the Advisor’s team of professional sub-advisors with a local presence in the markets where they invest. As of September 30, 2022, more than a majority of our investments were in the form of participations and we expect that future investments will continue to be primarily participations. We typically provide financing that is collateralized, has a short to medium-term maturity and is self-liquidating through the repayment of principal. Our counterparty for participations generally will be the respective sub-advisor or its affiliate that originates the loan in which we are participating. We will not have a contract with the underlying borrower and therefore, in the event of default, we will not have the ability to directly seek recovery against the collateral and instead will have to seek recovery through our sub-advisor counterparty, which increases the risk of full recovery.
Certain investments, including loans and participations, may carry equity warrants on borrowers, which allow us to buy shares of the portfolio company at a given price, which we will exercise at our discretion during the life of the portfolio company. Our goal is to ultimately dispose of such equity interests and realize gains upon the disposition of such interests. However, these warrants and equity interests are illiquid and it may be difficult for the Company to dispose of them. In addition, we expect that any warrants or other return enhancements received when we make or invest in loans may require several years to appreciate in value and may not appreciate at all.
LIBOR
In July 2017, the United Kingdom’s Financial Conduct Authority (“FCA”) announced it intends to stop compelling banks to submit rates for the calculation of LIBOR. As a result, the U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative rate for USD LIBOR in derivatives and other financial contracts. The transition away from LIBOR could cause interest rates on our debt to decrease, which could adversely affect our operating results. In addition, uncertainty about the extent and manner of future changes may result in interest rates that are higher or lower than if LIBOR were to remain available in the current form.
LIBOR is expected to be phased out completely by June 2023, and new contracts ceased to be written using USD LIBOR at the beginning of 2022. As of September 30, 2022, 14.3% of the fair value of the Company’s total investments bore interest at floating rates based on LIBOR, with an alternative rate to be designated by the Company in the event that LIBOR is unavailable. The Company expects to fix SOFR as the alternative benchmark rate for our remaining investments with floating rates based on LIBOR. There can be no assurances as to whether such replacement or alternative rate will be more or less favorable than LIBOR. We intend to monitor the developments with respect to the phasing out of LIBOR and work with our sub-advisors to seek to ensure any transition away from LIBOR will have minimal impact on our investments, but we can provide no assurances regarding the impact of the discontinuation of LIBOR.
36
Revenues
Since we anticipate that the majority of our assets will continue to consist of trade finance instruments and term loans, we expect that the majority of our revenue will continue to be generated in the form of interest. Our senior and subordinated debt investments may bear interest at a fixed or floating rate. Interest on debt securities is generally payable monthly, quarterly or semi-annually. In some cases, some of our investments provide for deferred interest payments or PIK interest. The principal amount of the debt securities and any accrued but unpaid interest generally is due at the maturity date. In addition, we generate revenue in the form of acquisition and other fees in connection with some transactions. Original issue discounts and market discounts or premiums are capitalized, and we accrete or amortize such amounts as interest income. We record prepayment premiums on loans and debt securities as interest income. Dividend income, if any, will be recognized on an accrual basis to the extent that we expect to collect such amounts.
Expenses
Our primary operating expenses include the payment of asset management fees and expenses reimbursable to our Advisor under the Advisory Agreement. We bear all other costs and expenses of our operations and transactions.
From our inception through December 31, 2017, under the terms of the Responsibility Agreement, our Sponsor assumed substantially all our operating expenses. Our Sponsor has not assumed any of our operating expenses subsequent to December 31, 2017. From our inception through September 30, 2017, pursuant to the terms of the Responsibility Agreement, the Sponsor has paid approximately $12,421,000 of operating expenses, asset management fees, and incentive fees on our behalf and will reimburse us an additional $4,240,231 of expenses, which we had paid as of September 30, 2017. Such expenses, in the aggregate of approximately $16,274,000 since the Company’s inception, may be expensed and payable by the Company to the Sponsor only if the Company satisfies the Reimbursement Hurdle. The Company did not meet the Reimbursement Hurdle for the quarter ended September 30, 2022. Therefore, none of the expenses of the Company covered by the Responsibility Agreement have been recorded as expenses of the Company for the quarter ended September 30, 2022.
Portfolio and Investment Activity
During the nine months ended September 30, 2022, the Company did not fund any new investments. Our investments consisted of senior secured trade finance participations, senior secured term loan participations, senior secured term loans, other investments, and equity warrants. Additionally, we received proceeds from repayments of investment principal of approximately $9.6 million.
At September 30, 2022 and December 31, 2021, the Company’s investment portfolio included 35 and 36 companies, respectively, and the fair value of our portfolio was comprised of the following:
|
|
|
|
|
|
|
As of September 30, 2022 |
|
|
As of December 31, 2021 |
|
||||||||||
|
|
|
|
|
|
|
Investments |
|
|
Percentage of |
|
|
Investments |
|
|
Percentage of |
|
||||
|
|
|
|
|
|
|
at Fair Value |
|
|
Total Investments |
|
|
at Fair Value |
|
|
Total Investments |
|
||||
|
Senior secured term loans |
|
|
|
|
|
$ |
118,328,770 |
|
|
|
39.9 |
% |
|
$ |
119,374,062 |
|
|
|
39.5 |
% |
|
Senior secured term loan participations |
|
|
|
|
|
|
128,851,567 |
|
|
|
43.4 |
% |
|
|
132,290,743 |
|
|
|
43.9 |
% |
|
Senior secured trade finance participations |
|
|
|
|
|
|
44,591,325 |
|
|
|
15.0 |
% |
|
|
45,092,689 |
|
|
|
15.0 |
% |
|
Other investments * |
|
|
|
|
|
|
3,758,063 |
|
|
|
1.3 |
% |
|
|
3,758,063 |
|
|
|
1.2 |
% |
|
Equity warrants |
|
|
|
|
|
|
1,205,503 |
|
|
|
0.4 |
% |
|
|
1,088,168 |
|
|
|
0.4 |
% |
|
Total investments |
|
|
|
|
|
$ |
296,735,228 |
|
|
|
100.0 |
% |
|
$ |
301,603,725 |
|
|
|
100.0 |
% |
|
* |
This investment was originally classified as an investment in a credit facility originated by IIG TOF B.V. |
As of September 30, 2022, the weighted average yields, based upon the cost of our portfolio, on trade finance participations, term loan participations, senior secured term loans, and other investments were 10.4%, 11.3%, 11.9%, and 8.8%, respectively, for a weighted average yield on investments of approximately 11.3% on our total portfolio.
As of September 30, 2021, the weighted average yields, based upon the cost of our portfolio, on trade finance participations, term loan participations, senior secured term loans, and other investments were 10.6%, 12.3%, 11.6%, and 8.8%, respectively, for a weighted average yield on investments of approximately 11.7% on our total portfolio.
37
As of September 30, 2022, we had the following investments, listed by description of the underlying borrower (if applicable):
|
Description |
|
Sector |
|
Industry Classification |
|
Country |
|
Interest |
|
|
Maturity (1) |
|
Principal Amount |
|
|
Fair Value |
|
|||
|
Sugar Producer |
|
Sugarcane and Sugar Beets |
|
Sustainable Agriculture & Agroprocessing |
|
Brazil |
|
12.43% |
|
|
12/15/2020 |
(2) |
$ |
2,851,296 |
|
|
$ |
555,673 |
|
|
|
LED Lighting Service Provider |
|
Electric Services |
|
Technological Innovation |
|
Chile |
|
11.00% |
|
|
6/6/2021 |
(2) |
|
1,456,162 |
|
|
|
1,245,868 |
|
|
|
Sustainable Packaging Manufacturer |
|
Corrugated and solid fiber boxes |
|
Recycling |
|
Ecuador |
|
9.44% Cash/2.20% PIK |
|
|
6/18/2025 |
|
|
11,102,781 |
|
|
|
11,102,781 |
|
|
|
Resource Trader |
|
Coal and Other Minerals and Ores |
|
Responsible Natural Resources Distribution |
|
Hong Kong |
|
11.50% PIK |
|
|
6/30/2023 |
|
|
22,219,565 |
|
|
|
17,791,170 |
|
|
|
Wholesale Distributor |
|
Chemicals and Allied Products |
|
Responsible Industrial Goods Distribution |
|
Malaysia |
|
12.00% |
|
|
6/30/2023 |
|
|
18,484,703 |
|
|
|
16,744,391 |
|
|
|
Waste to Fuels Processor |
|
Refuse Systems |
|
Recycling |
|
Mexico |
|
15.50% PIK |
|
|
1/27/2023 |
(3) |
|
37,361,095 |
|
|
|
38,459,771 |
|
|
|
Cocoa Processor |
|
Chocolate and Cocoa Products |
|
Sustainable Agriculture & Agroprocessing |
|
Indonesia |
|
13.00% |
|
|
3/4/2024 |
|
|
10,000,000 |
|
|
|
10,000,000 |
|
|
|
Cocoa Processor |
|
Chocolate and Cocoa Products |
|
Sustainable Agriculture & Agroprocessing |
|
Indonesia |
|
11.00% |
|
|
5/26/2023 |
|
|
5,000,000 |
|
|
|
5,000,000 |
|
|
|
Diaper Manufacturer II |
|
Sanitary Paper Products |
|
Responsible Consumer Goods Production |
|
Peru |
|
8.0% Cash/3.0% PIK |
|
|
12/31/2024 |
|
|
4,990,692 |
|
|
|
4,990,692 |
|
|
|
SME Financier |
|
Short-Term Business Credit |
|
Inclusive Finance |
|
Botswana |
|
10.38% |
|
|
8/18/2023 |
|
|
4,740,000 |
|
|
|
4,740,000 |
|
|
|
IT Service Provider |
|
Computer Related Services, NEC |
|
Access to Technology |
|
Brazil |
|
10.75% Cash/3.25% PIK |
|
|
11/23/2023 |
|
|
18,944,790 |
|
|
|
19,246,894 |
|
|
|
Ship Maintenance & Repair Service Provider |
|
Boatbuilding and Repairing |
|
Infrastructure Development |
|
Brazil |
|
8.00% Cash/10.0% PIK |
|
|
12/7/2023 |
|
|
7,006,741 |
|
|
|
6,985,352 |
|
|
|
Hospitality Service Provider |
|
Hotels and Motels |
|
Infrastructure Development |
|
Cabo Verde |
|
10.0% Cash/3.5% PIK |
|
|
12/31/2024 |
(2) |
|
17,987,949 |
|
|
|
17,101,321 |
|
|
|
Consumer Lender II |
|
Personal Credit Institutions |
|
Inclusive Finance |
|
Colombia |
|
11.90% |
|
|
9/1/2025 |
|
|
2,121,530 |
|
|
|
2,121,530 |
|
|
|
Tank Farm Operator |
|
Petroleum and Petroleum Products |
|
Responsible Fuel Storage |
|
Ghana |
|
12.00% |
|
|
2/10/2023 |
|
|
4,588,390 |
|
|
|
4,588,390 |
|
|
|
Mobile Network Operator |
|
Telephone Communications |
|
Access to Technology |
|
Jersey |
|
13.00% |
|
|
9/30/2026 |
|
|
13,750,000 |
|
|
|
13,750,000 |
|
|
|
Freight and Cargo Transporter |
|
Freight Transportation Arrangement |
|
Responsible Logistics Management |
|
Kenya |
|
10.29% Cash/4.00% PIK |
|
|
3/31/2023 |
(2) |
|
15,062,231 |
|
|
|
13,072,206 |
|
|
|
Property Developer |
|
Land Subdividers and Developers |
|
Infrastructure Development |
|
Namibia |
|
8.50% Cash/4.0% PIK |
|
|
8/15/2021 |
(2) |
|
18,717,631 |
|
|
|
14,222,622 |
|
|
|
Wheel Manufacturer |
|
Motor Vehicle Parts and Accessories |
|
Responsible Consumer Goods Production |
|
Netherlands |
|
8.00% |
|
|
2/7/2023 |
|
|
8,275,000 |
|
|
|
9,779,546 |
|
|
|
Marine Logistics Provider |
|
Towing and Tugboat Service |
|
Responsible Logistics Management |
|
Nigeria |
|
3.00% |
|
|
11/30/2021 |
(2) |
|
16,443,585 |
|
|
|
7,476,711 |
|
|
|
Frozen Bakery Products Manufacturer |
|
Retail Bakeries |
|
Responsible Consumer Goods Production |
|
Romania |
|
7.0% Cash/7.0% PIK |
|
|
5/20/2024 |
|
|
4,112,447 |
|
|
|
4,127,441 |
|
|
|
Grain Processor G |
|
Corn |
|
Sustainable Agriculture & Agroprocessing |
|
Uganda |
|
12.80% PIK |
|
|
7/8/2024 |
|
|
568,179 |
|
|
|
568,179 |
|
|
|
Grain Processor F |
|
Corn |
|
Sustainable Agriculture & Agroprocessing |
|
Uganda |
|
3.50% Cash/8.00% PIK |
|
|
6/30/2025 |
|
|
12,100,913 |
|
|
|
11,071,375 |
|
|
|
Agriculture Distributor |
|
Soybeans |
|
Sustainable Agriculture & Agroprocessing |
|
Argentina |
|
10.45% |
|
|
6/30/2018 |
(2) |
|
12,500,000 |
|
|
|
5,592,112 |
|
|
|
Dairy Co-Operative |
|
Dairy Farms |
|
Sustainable Dairy Production |
|
Argentina |
|
10.67% |
|
|
7/29/2019 |
(2) |
|
5,802,296 |
|
|
|
4,393,274 |
|
|
|
Beef Exporter |
|
Beef Cattle, Except Feedlots |
|
Sustainable Agriculture & Agroprocessing |
|
Argentina |
|
11.50% |
|
|
8/31/2017 |
(2) |
|
9,000,000 |
|
|
|
6,361,679 |
|
|
|
Cotton Producer |
|
Cotton Ginning |
|
Sustainable Agriculture & Agroprocessing |
|
Argentina |
|
9.00% |
|
|
8/31/2017 |
(2) |
|
6,000,000 |
|
|
|
3,398,558 |
|
|
|
Cocoa & Coffee Exporter |
|
Chocolate and Cocoa Products |
|
Sustainable Agriculture & Agroprocessing |
|
Cameroon |
|
9.50%, 6.0% |
|
|
6/30/2023 |
(2) |
|
16,035,023 |
|
|
|
15,314,592 |
|
|
|
Non-Ferrous Metal Trader |
|
Coal and Other Minerals and Ores |
|
Responsible Metals Distribution |
|
Singapore |
|
13.50% PIK |
|
|
8/17/2025 |
(2) |
|
20,907,297 |
|
|
|
18,643,927 |
|
|
|
Mobile Phone Distributor |
|
Telephone and Telegraph Apparatus |
|
Access to Technology |
|
Hong Kong |
|
14.0%, 12.0% |
|
|
5/31/2020 |
(2) |
|
9,072,469 |
|
|
|
1,685,937 |
|
|
|
Scrap Metal Recycler |
|
Secondary Nonferrous Metals |
|
Recycling |
|
Morocco |
|
N/A |
|
|
7/31/2018 |
(2) |
|
1,433,058 |
|
|
|
628,862 |
|
|
|
Cocoa Trader III |
|
Farm Products |
|
Sustainable Agriculture & Agroprocessing |
|
Nigeria |
|
8.50% |
|
|
12/31/2022 |
|
|
664,101 |
|
|
|
664,101 |
|
|
|
Cocoa Trader II |
|
Farm Products |
|
Sustainable Agriculture & Agroprocessing |
|
Nigeria |
|
8.50% |
|
|
12/31/2022 |
|
|
820,482 |
|
|
|
820,482 |
|
|
|
Fruit & Nut Distributor |
|
Salted and Roasted Nuts and Seeds |
|
Sustainable Agriculture & Agroprocessing |
|
South Africa |
|
17.50% |
|
|
5/22/2015 |
(2) |
|
785,806 |
|
|
|
83,298 |
|
|
|
Pharmaceuticals Distributor |
|
Drugs, Proprietaries, and Sundries |
|
Access to Healthcare and Pharmaceuticals |
|
United Arab Emirates |
|
14.60% |
|
|
6/30/2018 |
(2) |
|
648,430 |
|
|
|
648,430 |
|
|
|
Receivable from IIG TOF B.V. |
|
Miscellaneous Business Credit |
|
Other |
|
N/A |
|
8.75% |
|
|
N/A |
(2) |
|
6,000,000 |
|
|
|
3,758,063 |
|
|
|
Total Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
296,735,228 |
|
|
1 |
Trade finance borrowers may be granted flexibility with respect to repayment relative to the stated maturity date to accommodate specific contracts and/or business cycle characteristics. This flexibility in each case is agreed upon between the Company and the sub-advisor and between the sub-advisor and the borrower. |
|
2 |
See Watch List Investments section below for further information. |
|
3 |
This investment consists of a senior secured term loan and equity warrants in the borrower. |
38
As of September 30, 2022, the composition our investments based on the Company created industry classification was as follows:
|
Industry Classification |
|
Value |
|
|
of Total |
|
||
|
Access to Healthcare and Pharmaceuticals |
|
$ |
648,430 |
|
|
|
0.20 |
% |
|
Access to Technology |
|
|
34,682,831 |
|
|
|
11.70 |
% |
|
Inclusive Finance |
|
|
6,861,530 |
|
|
|
2.30 |
% |
|
Infrastructure Development |
|
|
38,309,295 |
|
|
|
12.90 |
% |
|
Recycling |
|
|
50,191,414 |
|
|
|
16.90 |
% |
|
Responsible Consumer Goods Production |
|
|
18,897,679 |
|
|
|
6.40 |
% |
|
Responsible Fuel Storage |
|
|
4,588,390 |
|
|
|
1.50 |
% |
|
Responsible Industrial Goods Distribution |
|
|
16,744,391 |
|
|
|
5.60 |
% |
|
Responsible Logistics Management |
|
|
20,548,917 |
|
|
|
6.90 |
% |
|
Responsible Metals Distribution |
|
|
18,643,927 |
|
|
|
6.30 |
% |
|
Responsible Natural Resources Distribution |
|
|
17,791,170 |
|
|
|
6.00 |
% |
|
Sustainable Agriculture & Agroprocessing |
|
|
59,430,049 |
|
|
|
20.00 |
% |
|
Sustainable Dairy Production |
|
|
4,393,274 |
|
|
|
1.50 |
% |
|
Technological Innovation |
|
|
1,245,868 |
|
|
|
0.40 |
% |
|
Other |
|
|
3,758,063 |
|
|
|
1.40 |
% |
|
Total |
|
$ |
296,735,228 |
|
|
|
100.00 |
% |
Concentration Limits
The Company is subject to the following concentration limits:
|
|
• |
Maximum 45% regional exposure |
|
|
• |
Maximum 20% country exposure |
|
|
• |
Maximum 5% individual investment exposure |
We may only make investments that do not cause us to exceed these limits on the date of investment. These limits are calculated as a percentage of the aggregate of all outstanding principal balances on our investments and our cash balances on the date of investment. As of September 30, 2022, the Company was in compliance with all of the above concentration limits.
Watch List Investments
Please see “Notes to Consolidated Financial Statements - Note 3. Investments - Watch List Investments.”
Results of Operations
Consolidated operating results for the three and nine months ended September 30, 2022 and 2021 are as follows:
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
||||||||||
|
|
|
September 30, 2022 |
|
|
September 30, 2021 |
|
|
September 30, 2022 |
|
|
September 30, 2021 |
|
|
||||
|
Investment income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
$ |
8,786,055 |
|
|
$ |
9,069,603 |
|
|
$ |
26,631,208 |
|
|
$ |
27,684,145 |
|
|
|
Interest from cash |
|
|
— |
|
|
|
3,703 |
|
|
|
3,481 |
|
|
|
41,002 |
|
|
|
Total investment income |
|
|
8,786,055 |
|
|
|
9,073,306 |
|
|
|
26,634,689 |
|
|
|
27,725,147 |
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset management fees |
|
|
1,641,882 |
|
|
|
1,758,565 |
|
|
|
4,987,817 |
|
|
|
5,337,777 |
|
|
|
Incentive fees |
|
|
995,962 |
|
|
|
1,049,785 |
|
|
|
3,151,543 |
|
|
|
3,178,782 |
|
|
|
Professional fees |
|
|
819,457 |
|
|
|
601,923 |
|
|
|
2,345,583 |
|
|
|
1,923,730 |
|
|
|
General and administrative expenses |
|
|
340,189 |
|
|
|
362,157 |
|
|
|
901,573 |
|
|
|
1,040,902 |
|
|
|
Interest expense |
|
|
— |
|
|
|
48,319 |
|
|
|
11,169 |
|
|
|
143,381 |
|
|
|
Board of managers fees |
|
|
64,375 |
|
|
|
64,375 |
|
|
|
193,125 |
|
|
|
193,125 |
|
|
|
Total expenses |
|
|
3,861,865 |
|
|
|
3,885,124 |
|
|
|
11,590,810 |
|
|
|
11,817,697 |
|
|
|
Net investment income |
|
$ |
4,924,190 |
|
|
$ |
5,188,182 |
|
|
$ |
15,043,879 |
|
|
$ |
15,907,450 |
|
|
39
Revenues
Three months ended September 30, 2022 and 2021
For the three months ended September 30, 2022 and 2021, total investment income amounted to $8,786,055 and $9,073,306, respectively. Interest income decreased approximately by $287,000 during the three months ended September 30, 2022 compared to the same period in 2021 as a result of the change in the average size of the investment portfolio from the second quarter of 2022 to the third quarter of 2022, which decreased by approximately $1.9 million. The average size of the investment portfolio increased by approximately $78,000 from the second quarter of 2021 to the third quarter of 2021. The decrease in the average size of our portfolio during the third quarter of 2022 was due to investment repayments that were not redeployed.
During the three months ended September 30, 2022, $4,444,079 or 50.6% of the interest income was earned from loan and trade finance participations and $4,341,975 or 49.4% from direct loans.
During the three months ended September 30, 2021, $5,437,026 or 59.9% of the interest income was earned from loan and trade finance participations and $3,632,577 or 40.1% from direct loans. In addition, the Company earned $3,703 in interest income on our cash balances.
Nine months ended September 30, 2022 and 2021
For the nine months ended September 30, 2022 and 2021, total investment income amounted to $26,634,689 and $27,725,147, respectively. Interest income decreased approximately by $1,090,000 during the nine months ended September 30, 2022 compared to the same period in 2021 as a result of the change in the average size of the investment portfolio for the nine months ended September 30, 2022, which decreased by approximately $909,000. The average size of the investment portfolio increased by approximately $2,165,000 for the nine months ended September 30, 2021. The decrease in the average size of our portfolio during the first three quarters of 2022 was due to investment repayments that were not redeployed.
During the nine months ended September 30, 2022, $14,393,302 or 54.0% of the interest income was earned from loan and trade finance participations and $12,237,905 or 46.0% from direct loans.
During the nine months ended September 30, 2021, $17,044,552 or 61.6% of the interest income was earned from loan and trade finance participations and $10,639,594 or 38.4% from direct loans. In addition, we earned $41,002 in interest income on our cash balances.
Expenses
Three months ended September 30, 2022 and 2021
Total operating expenses, excluding the asset management and incentive fees, incurred for the three months ended September 30, 2022 increased by $147,247 to $1,224,021 from $1,076,774 for the three months ended September 30, 2021 as a result of an increase in the professional fees of approximately $215,000 which was primarily due to more fees incurred for audit, legal and valuation services in connection with the valuation of our portfolio and our ongoing efforts to recover amounts outstanding with respect to investments for which IIG was the sub-advisor during the three months ended September 30, 2022.
For the three months ended September 30, 2022 and 2021, the asset management fees amounted to $1,641,882 and $1,758,565, respectively. The incentive fees for the three months ended September 30, 2022 and 2021 amounted to $995,962 and $1,049,785, respectively. The decrease in incentive fees primarily is due to the decrease in revenue during the third quarter of 2022.
Nine months ended September 30, 2022 and 2021
Total operating expenses, excluding the asset management and incentive fees, incurred for the nine months ended September 30, 2022 increased by $150,312 to $3,451,450 from $3,301,138 for the nine months ended June 30, 2021. The increase is mainly due to more audit fees incurred in relation to the new audit service contract in the second and third quarter of 2022.
For the nine months ended September 30, 2022 and 2021, the asset management fees amounted to $4,987,817 and $5,337,777, respectively. The incentive fees for the nine months ended September 30, 2022 and 2021 amounted to $3,151,543 and $3,178,782, respectively. The decrease in incentive fees is due to the increase in professional fees during the first three quarters of 2022 and the decrease in investment income during the third quarter of 2022.
40
Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation on Investments.
We measure net realized gains or losses by the difference between the net proceeds from the repayment or sale of an investment and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized, but considering unamortized upfront fees and prepayment penalties. Net change in unrealized appreciation or depreciation reflects the change in portfolio investment fair market values during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized. We had no recorded realized losses of for the three and nine months ended September 30, 2022 but we recorded realized losses of $0 and $ 909,584 for the three and nine months ended September 30, 2021, respectively. We recorded unrealized losses of $1,967,920 and $3,047,884 for the three months ended September 30, 2022 and 2021, respectively. We recorded unrealized losses of $10,866,588 and $11,579,186 for the nine months ended September 30, 2022 and 2021, respectively. These unrealized losses were primarily driven by macro events, including the uncertainty created by the recent COVID-19 pandemic and the rising input costs caused in part by the conflict between Russian and Ukraine and their impact on the future cash flows generated by our investments as well as the ultimate realization of the underlying collateral.
Financial Condition, Liquidity and Capital Resources
As of September 30, 2022, we had approximately $1.2 million in cash. Historically, we have generated cash primarily from cash flows from interest, dividends and fees earned from our investments and principal repayments, proceeds from sales of our investments and from sales of promissory notes and proceeds from private placements of our units. We may also generate cash in the future from debt financing.
We have experienced decreased liquidity; however, we expect this will be short-lived because the decline in liquidity is primarily the result of the inconsistent cash flows generated from the existing portfolio that has been caused by the current economic uncertainty. The decrease in liquidity has the potential to impact our ability to cover future distributions to our unitholders or meet other Company obligations. In order to address our temporary liquidity needs, on September 1, 2022, we sold $1.25 million of our investment in Africell Holding Limited to an entity whose advisor is under common ownership with our Advisor and, subsequent to September 30, 2022, we sold one of our participation interests to a third party for $5.0 million, with an agreement to repurchase the participation from the buyer in approximately four months (as further discussed in Note 11 to the financial statements). In addition, we anticipate closing a significant leverage facility prior to year-end, and, in the short-term, may pursue additional repurchase or other financial transactions, as needed, in order to supplement cash flows to allow us to maintain normal future operations.
Our primary use of cash will be to make loans, either directly or through participations, payments of our expenses, payments on our notes and any other borrowings, and cash distributions to our unitholders. We expect to maintain cash reserves from time to time for investment opportunities, working capital and distributions. As noted above, the combination of a slower pace of deployment of capital with higher cash balances may further reduce cash flows generated to cover our distributions to our unitholders and/or cause us to further reduce our NAV in future periods. From the beginning of the Company’s operations to date, our Sponsor has assumed a significant portion of our operating expenses under the Responsibility Agreement in the amount of approximately $16.7 million. The Company may only reimburse the Sponsor for expenses assumed by the Sponsor pursuant to the Responsibility Agreement to the extent the Company’s investment income in any quarter, as reflected on the statement of operations, exceeds the sum of (a) total distributions to unitholders incurred during the quarter and (b) the Company’s expenses as reflected on the statement of operations for the same quarter (the “Reimbursement Hurdle”). To the extent the Company is not successful in satisfying the Reimbursement Hurdle, no amount will be payable in that quarter by the Company for reimbursement to the Sponsor of the Company’s cumulative operating expenses. The Company did not meet the Reimbursement Hurdle for the quarter ended September 30, 2022. Therefore, none of the expenses of the Company covered by the Responsibility Agreement have been recorded as expenses of the Company for the quarter ended September 30, 2022. As of September 30, 2022, there is a remaining aggregate balance of approximately $16.3 million in operating expenses assumed by the Sponsor pursuant to the Responsibility Agreement which have not been recorded by the Company. Thus, such amounts are not yet reimbursable by the Company to the Sponsor. Such reimbursements to the Sponsor would affect the amount of cash available to the Company to pay distributions and/or make investments.
We may borrow additional funds to make investments. We have not decided to what extent going forward we will finance portfolio investments using debt or the specific form that any such financing would take, but we believe that obtaining financing is necessary for us to fully achieve our long-term goals. We have been, and still are, actively seeking further financing through both development banks and several commercial banks. Accordingly, we cannot predict with certainty what terms any such financing would have or the costs we would incur in connection with any such arrangement. On August 7, 2017, TGIFC issued $5.0 million in the first of a Series 1 Senior Secured Promissory Notes private offering to State Street Australia Ltd ACF Christian Super (“Christian Super”). On December 18, 2018, TGIFC issued $5.0 million of Series 2 Senior Secured Promissory Notes to Christian Super. The Company extended and repaid the CS Note in full in January 2022.
Company Strategy
Although the Company has a perpetual duration, it disclosed previously that if the Company did not consummate a liquidity event by August 25, 2021, it would commence an orderly liquidation of its assets unless a majority of the board of managers, including a majority of the independent managers, determined that liquidation is not in the best interests of the Company’s unitholders. Following the completion of a review process, in May 2021, the board of managers, including all of the independent managers, determined that a
41
liquidation was not in the best interests of the Company’s unitholders and approved the continuation of the Company’s operations through at least August 26, 2022. In August 2022, the board of managers again determined that a liquidation is not in the best interests of the Company. The board of managers and management believe that it is in the best interests of the Company to continue its operations and to pursue leverage and other alternatives to stabilize its portfolio and NAV through December 31, 2023.
Distributions
We have paid distributions commencing with the month beginning July 1, 2013, and we intend to continue to pay distributions on a monthly basis. From time to time, we may also pay interim distributions at the discretion of our board. Distributions are subject to the board of managers’ discretion and applicable legal restrictions and accordingly, there can be no assurance that we will make distributions at a specific rate or at all. Distributions are made on all classes of our units at the same time. The cash distributions received by our unitholders with respect to the Class C units, Class W units and certain Class I units, are and will continue to be lower than the cash distributions with respect to Class A and certain other Class I units because of the distribution fee relating to Class C units, the ongoing dealer manager fee relating to Class W units and Class I units issued pursuant to a private placement and the ongoing service fee relating to the Class W units, which are expenses specific to those classes of units. Amounts distributed to each class are allocated among the unitholders in such class in proportion to their units. Distributions are paid in cash or reinvested in units, for those unitholders participating in the DRP. For the nine months ended September 30, 2022, we paid a total of $17,731,627 in distributions, comprised of $12,488,127 paid in cash and $5,243,500 reinvested under our DRP.
Related Party Transactions
For the nine months ended September 30, 2022 and 2021, the Advisor earned $4,987,817, and $5,337,777, respectively, in asset management fees and $3,151,543 and $3,178,782, respectively, in incentive fees.
From our inception through September 30, 2017, pursuant to the terms of the Responsibility Agreement, the Sponsor has paid approximately $12,421,000 of operating expenses, asset management fees, and incentive fees on our behalf and will reimburse us an additional $4,240,231 of expenses, which we had paid as of September 30, 2017. Such expenses, in the aggregate of approximately $16,274,000 since the Company’s inception, may be expensed and payable by the Company to the Sponsor only if the Company satisfies the Reimbursement Hurdle. The Company did not meet the Reimbursement Hurdle for the quarter ended September 30, 2022. Therefore, none of the expenses of the Company covered by the Responsibility Agreement have been recorded as expenses of the Company for the quarter ended September 30, 2022.
As of September 30, 2022 and December 31, 2021, due from affiliates on the Consolidated Statements of Assets and Liabilities in the amount of $4,240,231 and $4,240,231, respectively was due from the Sponsor pursuant to the Responsibility Agreement for operating expenses which were paid by the Company, but, under the terms of the Responsibility Agreement, are the responsibility of the Sponsor. The Sponsor anticipates paying this receivable in the due course of business.
For the nine months ended September 30, 2022 and 2021, we paid SC Distributors, formally known as StratCap Securities, the dealer manager for certain of our offerings, approximately $299,000 and $327,000, respectively in ongoing distributions fees, dealer manager fees and service fees.
On September 1, 2022, the Company sold $1.25 million of its investment in Africell Holding Limited to an entity whose advisor is under common ownership with the Company’s Advisor. The transaction was recorded at par with no realized gain or loss. The Company engaged an independent valuation firm to validate the transaction price.
Legal Proceedings
As of September 30, 2022, the Company was not a party to any material legal proceedings other than as set forth in “Notes to Consolidated Financial Statements—Note 3. Investments—Watch List Investments.”
Critical Accounting Policies and Use of Estimates
In preparing our Consolidated Financial Statements in accordance with GAAP and pursuant to the rules and regulations promulgated by the SEC, we make assumptions, judgments and estimates that can have a significant impact on our net income/loss and affect the reported amounts of certain assets, liabilities, revenue and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and discuss our critical accounting policies and estimates with the audit committee of our board of managers. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions.
42
There have been no significant changes to our critical accounting policies, estimates and judgments during nine months ended September 30, 2022, compared to the critical accounting policies, estimates and judgments disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2021.
The preparation of financial statements in conformity with GAAP requires the Company's management to make estimates and assumptions that affect the amounts reported in the financial statements. Although these estimates are based on management's knowledge of current events and actions it may undertake in the future, actual results may differ from these estimates. In particular, the COVID-19 pandemic has adversely impacted and is likely to further adversely impact the Company's business, the businesses of the Company's borrowers and the global markets generally. The full extent to which the pandemic will directly or indirectly impact the Company's business, results of operations and financial condition, including fair value measurements, will depend on future developments that are highly uncertain and difficult to predict. These developments include, but are not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or address its impact, governmental actions to contain the spread of the pandemic and respond to the reduction in global economic activity, and how quickly and to what extent normal economic and operating conditions can resume.
Recent Accounting Pronouncements
See Note 2 to the Company’s accompanying Consolidated Financial Statements for a description of recent accounting pronouncements and its expectation of their impact on the Company’s results of operations and financial condition.
Subsequent Events
Please see “Notes to Consolidated Financial Statements—Note 11. Subsequent Events.”
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 4. Controls and Procedures
In accordance with Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q and determined that the disclosure controls and procedures were effective as of September 30, 2022.
There were no changes in our internal control over financial reporting during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
43
Part II. Other Information
Item 1. Legal Proceedings
As of September 30, 2022, the Company was not a party to any material legal proceedings other than the legal proceedings described in “Notes to Consolidated Financial Statements—Note 3. Investments—Watch List Investments."
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 30, 2022 (“2021 Form 10-K”) which could materially affect our business, financial condition, and/or future results. The risks described in our 2021 Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results.
There have been no material changes to the risk factors disclosed in our 2021 Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the nine months ended September 30, 2022, we sold an aggregate of 41,163 Class Y units to accredited investors for an aggregate amount of $295,000. The units were issued pursuant to an exemption from registration provided under Rule 506 of Regulation D promulgated under the Securities Act, for transactions not involving a public offering.
Unit Repurchase Program
Beginning June 11, 2014, we commenced a unit repurchase program pursuant to which we conduct quarterly unit repurchases of up to 5% of our weighted average number of outstanding units in any 12-month period to allow our unitholders, who have held our units for a minimum of one year, to sell their units back to us. Our unit repurchase program includes numerous restrictions, including a one-year holding period, that limit our unitholders’ ability to sell their units. Additionally, we have no obligation to repurchase units if the repurchase would violate the restrictions on distributions under federal law or Delaware law, and all units to be repurchased under the program must be fully transferable and not be subject to any liens or other encumbrances and free from any restrictions on transfer. Unless our board of managers determines otherwise, we will limit the number of units to be repurchased during any calendar year to the number of units we can repurchase with the proceeds we receive from the sale of units under our distribution reinvestment plan. At the sole discretion of our board of managers, we may also use cash on hand, cash available from borrowings and cash from liquidation of investments as of the end of the applicable quarter to repurchase units.
On August 9, 2019, our board of managers amended and restated our unit repurchase program in order to amend the basis on which we will honor repurchase requests in the event repurchase requests exceed the existing limitations of the program. The amended and restated unit repurchase program took effect on September 30, 2019. Under the amended and restated unit repurchase program, if we cannot repurchase all units presented for repurchase in any quarter because of the limitations on repurchases set forth in the program, then we will honor repurchase requests in the following order of priority (unless our board of managers determines that we will not repurchase units in that quarter):
|
|
• |
first, we will repurchase units pursuant to repurchase requests made in connection with the death or disability of a unitholder (or on a pro rata basis among such requests if less than all of such death or disability requests can be satisfied); |
|
|
• |
second, we will repurchase units pursuant to any repurchase request that has been carried over from one or more previous quarterly periods where the value of the units that have not yet been repurchased pursuant to such request (with the value calculated as the number of units multiplied by the estimated net asset value per unit for units of that class, as most recently disclosed by us in a filing with the SEC) is less than $2,500 (or on a pro rata basis among such requests if less than all of such requests carried over from prior periods can be satisfied); and |
|
|
• |
third, we will repurchase units pursuant to all other repurchase requests on a pro rata basis. |
Unit repurchases are made on the last calendar day of the quarter at a price equal to the estimated net asset value per unit for each class of units, as most recently disclosed by us in a public filing with the SEC. Redemptions for the third quarter of 2022 were redeemed at a price equal to $6.899 per unit, which was the net asset value per unit of each class as of June 30, 2022.
Our board of managers has the right to amend, suspend or terminate the unit repurchase program to the extent that it determines that it is in our best interest to do so. We will promptly notify our unitholders of any changes to the unit repurchase program, including any amendment, suspension or termination of it in our periodic or current reports or by means of other notice. Moreover, the unit repurchase program will terminate on the date that our units are listed on a national securities exchange, are included for quotation in a national securities market or, in the sole determination of our board of managers, a secondary trading market for the units otherwise develops.
44
During the three months ended September 30, 2022, we fulfilled the following requests pursuant to our unit repurchase program:
|
Period |
|
Total Number of Units Purchased |
|
|
Average Price Paid Per Unit |
|
|
Total Number of Units Purchased as Part of Publicly Announced Plans or Programs |
|
|
Maximum Number of Units that May Yet be Purchased Under the Program |
|
||||
|
07/01/2022 - 07/31/2022 |
|
|
795 |
|
|
$ |
7.153 |
|
|
|
795 |
|
|
|
892,446 |
|
|
08/01/2022 - 08/31/2022 |
|
|
12,760 |
|
|
|
7.049 |
|
|
|
12,760 |
|
|
|
892,446 |
|
|
09/01/2022 - 09/30/2022 |
|
|
235,141 |
|
|
|
6.899 |
|
|
|
235,141 |
|
|
|
892,446 |
|
|
Total |
|
|
248,696 |
|
|
$ |
6.908 |
|
|
|
248,696 |
|
|
|
|
|
During the three months ended September 30, 2022, we repurchased 248,696 units for a total of $1,717,956. In addition, as of September 30, 2022, there were repurchase requests for a total of 235,141 units that were pending which were processed by the Company during October 2022 at a price of $6.899 per unit. For the quarter ended September 30, 2022, eligible repurchase requests exceeded the limitations of our unit repurchase program described above and the requests were fulfilled on a pro rata basis, such that the Company repurchased approximately 249,000 units or 6.37% of eligible repurchase requests (based on the number of units submitted for repurchase), and approximately 3,449,000 units or 93.63% of eligible repurchase requests (based on the number of units submitted for repurchase) were not redeemed. Pursuant to the terms of our unit repurchase program, the unsatisfied portion of repurchase requests that were not fulfilled at quarter-end will be carried over to the next quarter and treated as a request for repurchase at the next quarter-end repurchase date, unless the repurchase request is withdrawn.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
45
Item 6. Exhibits.
|
Number |
|
Description |
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3.1 |
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3.2 |
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4.1 |
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4.2 |
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31.1* |
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31.2* |
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32.1* |
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101.INS |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
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|
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document |
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101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
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|
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
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|
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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|
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|
|
104 |
|
Cover Page Interactive Data File (formatted in Inline XBRL and included in Exhibit 101) |
|
* |
Filed herewith |
46
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.
|
|
|
TRILINC GLOBAL IMPACT FUND, LLC. |
||
|
|
|
|
|
|
|
November 14, 2022 |
|
By: |
|
/s/ Gloria S. Nelund |
|
|
|
|
|
Gloria S. Nelund |
|
|
|
|
|
Chief Executive Officer |
|
|
|
|
|
|
|
November 14, 2022 |
|
By: |
|
/s/ Mark A. Tipton |
|
|
|
|
|
Mark A. Tipton |
|
|
|
|
|
Chief Financial Officer |
47