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TABLE OF CONTENTS
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
​
FORM 10-Q
​
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
​
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2019
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
​
FOR THE TRANSITION PERIOD FROM      TO     
COMMISSION FILE NUMBER: 814-01047
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FS Investment Corporation III
(Exact name of registrant as specified in its charter)
​
​
Maryland
​ ​
90-0994912
​
​
(State or other jurisdiction of
incorporation or organization)
 ​ ​
(I.R.S. Employer
Identification No.)
 ​
​
201 Rouse Boulevard
Philadelphia, Pennsylvania
 ​ ​
19112
​
​
(Address of principal executive offices)
 ​ ​
(Zip Code)
 ​
(215) 495-1150
(Registrant’s telephone number, including area code)
​
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes ☐ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of  “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
​ Large accelerated filer ​ ​ ☐ ​ ​ Accelerated filer ​ ​ ☐ ​
​ Non-accelerated filer ​ ​ ☒ ​ ​ Smaller reporting company ​ ​ ☐ ​
​ ​ ​ ​ ​ ​ ​ Emerging growth company ​ ​ ☒ ​
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
There were 288,370,132 shares of the registrant’s common stock outstanding as of May 10, 2019.
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TABLE OF CONTENTS​​
TABLE OF CONTENTS
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Page
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PART I—FINANCIAL INFORMATION ​ ​ ​ ​ ​ ​ ​
ITEM 1.
FINANCIAL STATEMENTS
​
 ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ 1 ​ ​
​ ​ ​ ​ 2 ​ ​
​ ​ ​ ​ 3 ​ ​
​ ​ ​ ​ 4 ​ ​
​ ​ ​ ​ 5 ​ ​
​ ​ ​ ​ 28 ​ ​
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​ ​ ​ ​ 56 ​ ​
​
​ ​ ​ ​ 71 ​ ​
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​ ​ ​ ​ 72 ​ ​
PART II—OTHER INFORMATION ​ ​ ​ ​ ​ ​ ​
​
​ ​ ​ ​ 73 ​ ​
​
​ ​ ​ ​ 73 ​ ​
​
​ ​ ​ ​ 73 ​ ​
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​ ​ ​ ​ 73 ​ ​
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​ ​ ​ ​ 73 ​ ​
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​ ​ ​ ​ 73 ​ ​
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​ ​ ​ ​ 73 ​ ​
​ ​ ​ ​ 80 ​ ​
TABLE OF CONTENTS​
PART I—FINANCIAL INFORMATION
Item 1.
Financial Statements.
​
FS Investment Corporation III
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
​
​ ​ ​
March 31, 2019
(Unaudited)
​ ​
December 31, 2018
​
Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Investments, at fair value ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Non-controlled/unaffiliated investments (amortized cost—$3,773,653 and $3,710,247, respectively)
​ ​ ​ $ 3,651,293 ​ ​ ​ ​ $ 3,574,417 ​ ​
Non-controlled/affiliated investments (amortized cost—$36,309 and $86,851, respectively)
​ ​ ​ ​ 20,265 ​ ​ ​ ​ ​ 36,866 ​ ​
Total investments, at fair value (amortized cost—$3,809,962 and $3,797,098, respectively)
​ ​ ​ ​ 3,671,558 ​ ​ ​ ​ ​ 3,611,283 ​ ​
Cash
​ ​ ​ ​ 63,558 ​ ​ ​ ​ ​ 65,501 ​ ​
Foreign currency, at fair value (cost—$506 and $1,830, respectively)
​ ​ ​ ​ 508 ​ ​ ​ ​ ​ 1,847 ​ ​
Collateral held at broker for open interest rate swap contracts
​ ​ ​ ​ 10,050 ​ ​ ​ ​ ​ — ​ ​
Due from counterparty
​ ​ ​ ​ 46,915 ​ ​ ​ ​ ​ 128,764 ​ ​
Receivable for investments sold and repaid
​ ​ ​ ​ 20,532 ​ ​ ​ ​ ​ 1,028 ​ ​
Interest receivable
​ ​ ​ ​ 38,745 ​ ​ ​ ​ ​ 30,126 ​ ​
Deferred financing costs
​ ​ ​ ​ 7,894 ​ ​ ​ ​ ​ 4,524 ​ ​
Receivable due on total return swap(1)
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,071 ​ ​
Receivable on interest rate swaps
​ ​ ​ ​ 2,818 ​ ​ ​ ​ ​ 259 ​ ​
Prepaid expenses and other assets
​ ​ ​ ​ 1 ​ ​ ​ ​ ​ 39 ​ ​
Total assets
 ​ ​ ​ $ 3,862,579 ​ ​ ​ ​ $ 3,844,442 ​ ​
Liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Unrealized depreciation on total return swap(1)
 ​ ​ ​ $ 910 ​ ​ ​ ​ $ 22,062 ​ ​
Unrealized depreciation on interest rate swaps
​ ​ ​ ​ 8,608 ​ ​ ​ ​ ​ 2,614 ​ ​
Payable for investments purchased
​ ​ ​ ​ 22,613 ​ ​ ​ ​ ​ 367,728 ​ ​
Payable due on total return swap
​ ​ ​ ​ 15,250 ​ ​ ​ ​ ​ — ​ ​
Repurchase agreement payable (net of deferred financing costs of  $116 and $214, respectively)(1)
 ​ ​ ​ ​ 299,884 ​ ​ ​ ​ ​ 299,786 ​ ​
Credit facilities payable (net of deferred financing costs of  $1,946 and $2,092, respectively)(1)
 ​ ​ ​ ​ 1,244,784 ​ ​ ​ ​ ​ 897,502 ​ ​
Stockholder distributions payable
​ ​ ​ ​ 9,586 ​ ​ ​ ​ ​ 9,401 ​ ​
Management fees payable
​ ​ ​ ​ 14,870 ​ ​ ​ ​ ​ 13,300 ​ ​
Subordinated income incentive fees payable(2)
 ​ ​ ​ ​ 12,108 ​ ​ ​ ​ ​ 9,525 ​ ​
Administrative services expense payable
​ ​ ​ ​ 517 ​ ​ ​ ​ ​ 425 ​ ​
Interest payable(1)
 ​ ​ ​ ​ 15,674 ​ ​ ​ ​ ​ 13,008 ​ ​
Interest rate swap income payable
​ ​ ​ ​ 3,652 ​ ​ ​ ​ ​ 261 ​ ​
Directors’ fees payable
​ ​ ​ ​ 92 ​ ​ ​ ​ ​ 215 ​ ​
Other accrued expenses and liabilities
​ ​ ​ ​ 1,374 ​ ​ ​ ​ ​ 1,644 ​ ​
Total liabilities
 ​ ​ ​ ​ 1,649,922 ​ ​ ​ ​ ​ 1,637,471 ​ ​
Commitments and contingencies(3) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Stockholders’ equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Preferred stock, $0.001 par value, 50,000,000 shares authorized, none issued and outstanding
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Common stock, $0.001 par value, 550,000,000 shares authorized, 290,276,971 and 290,353,680 shares issued and outstanding, respectively
​ ​ ​ ​ 290 ​ ​ ​ ​ ​ 290 ​ ​
Capital in excess of par value
​ ​ ​ ​ 2,526,039 ​ ​ ​ ​ ​ 2,526,632 ​ ​
Retained earnings (accumulated deficit)
​ ​ ​ ​ (313,672) ​ ​ ​ ​ ​ (319,951) ​ ​
Total stockholders’ equity
 ​ ​ ​ ​ 2,212,657 ​ ​ ​ ​ ​ 2,206,971 ​ ​
Total liabilities and stockholders’ equity
 ​ ​ ​ $ 3,862,579 ​ ​ ​ ​ $ 3,844,442 ​ ​
Net asset value per share of common stock at period end
​ ​ ​ $ 7.62 ​ ​ ​ ​ $ 7.60 ​ ​
​
(1)
See Note 9 for a discussion of the Company’s financing arrangements.
​
(2)
See Note 2 for a discussion of the methodology employed by the Company in calculating the subordinated income incentive fees.
​
(3)
See Note 10 for a discussion of the Company’s commitments and contingencies.
​
​
See notes to unaudited consolidated financial statements.
1
TABLE OF CONTENTS​
FS Investment Corporation III
Unaudited Consolidated Statements of Operations
(in thousands, except share and per share amounts)
​
​ ​ ​
Three Months Ended
March 31,
​
​ ​ ​
2019
​ ​
2018
​
Investment income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
From non-controlled/unaffiliated investments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Interest income
​ ​ ​ $ 85,391 ​ ​ ​ ​ $ 74,221 ​ ​
Paid-in-kind interest income
​ ​ ​ ​ 4,532 ​ ​ ​ ​ ​ 6,175 ​ ​
Fee income
​ ​ ​ ​ 6,793 ​ ​ ​ ​ ​ 1,783 ​ ​
Dividend income
​ ​ ​ ​ 256 ​ ​ ​ ​ ​ — ​ ​
From non-controlled/affiliated investments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Interest income
​ ​ ​ ​ 499 ​ ​ ​ ​ ​ 946 ​ ​
Paid-in-kind interest income
​ ​ ​ ​ 311 ​ ​ ​ ​ ​ 213 ​ ​
Fee income
​ ​ ​ ​ 8 ​ ​ ​ ​ ​ 478 ​ ​
Total investment income
​ ​ ​ ​ 97,790 ​ ​ ​ ​ ​ 83,816 ​ ​
Operating expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Management fees(1)
 ​ ​ ​ ​ 14,870 ​ ​ ​ ​ ​ 19,078 ​ ​
Subordinated income incentive fees(2)
 ​ ​ ​ ​ 12,108 ​ ​ ​ ​ ​ 1,623 ​ ​
Administrative services expenses
​ ​ ​ ​ 738 ​ ​ ​ ​ ​ 854 ​ ​
Stock transfer agent fees
​ ​ ​ ​ 412 ​ ​ ​ ​ ​ 387 ​ ​
Accounting and administrative fees
​ ​ ​ ​ 258 ​ ​ ​ ​ ​ 277 ​ ​
Interest expense
​ ​ ​ ​ 21,565 ​ ​ ​ ​ ​ 14,692 ​ ​
Directors’ fees
​ ​ ​ ​ 95 ​ ​ ​ ​ ​ 450 ​ ​
Other general and administrative expenses
​ ​ ​ ​ 933 ​ ​ ​ ​ ​ 784 ​ ​
Operating expenses
​ ​ ​ ​ 50,979 ​ ​ ​ ​ ​ 38,145 ​ ​
Management fees waiver(1)
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ (2,385) ​ ​
Net expenses
​ ​ ​ ​ 50,979 ​ ​ ​ ​ ​ 35,760 ​ ​
Net investment income
​ ​ ​ ​ 46,811 ​ ​ ​ ​ ​ 48,056 ​ ​
Realized and unrealized gain/loss ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Net realized gain (loss) on investments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Non-controlled/unaffiliated investments
​ ​ ​ ​ (4,632) ​ ​ ​ ​ ​ (22,865) ​ ​
Non-controlled/affiliated investments
​ ​ ​ ​ (32,809) ​ ​ ​ ​ ​ — ​ ​
Net realized gain (loss) on total return swap(3)
 ​ ​ ​ ​ (15,004) ​ ​ ​ ​ ​ 5,285 ​ ​
Net realized gain (loss) on foreign currency
​ ​ ​ ​ 15 ​ ​ ​ ​ ​ 226 ​ ​
Net change in unrealized appreciation (depreciation) on investments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Non-controlled/unaffiliated investments
​ ​ ​ ​ 13,470 ​ ​ ​ ​ ​ (28,276) ​ ​
Non-controlled/affiliated investments
​ ​ ​ ​ 33,941 ​ ​ ​ ​ ​ 1,008 ​ ​
Net change in unrealized appreciation (depreciation) on total return swap(3)
 ​ ​ ​ ​ 21,152 ​ ​ ​ ​ ​ 2,196 ​ ​
Net change in unrealized appreciation (depreciation) on interest rate swaps
​ ​ ​ ​ (5,994) ​ ​ ​ ​ ​ — ​ ​
Net change in unrealized gain (loss) on foreign currency
​ ​ ​ ​ (204) ​ ​ ​ ​ ​ (41) ​ ​
Total net realized gain (loss) and unrealized appreciation (depreciation)
​ ​ ​ ​ 9,935 ​ ​ ​ ​ ​ (42,467) ​ ​
Net increase (decrease) in net assets resulting from operations
 ​ ​ ​ $ 56,746 ​ ​ ​ ​ $ 5,589 ​ ​
Per share information—basic and diluted ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Net increase (decrease) in net assets resulting from operations (Earnings per Share)
​ ​ ​ $ 0.20 ​ ​ ​ ​ $ 0.02 ​ ​
Weighted average shares outstanding
​ ​ ​ ​ 288,996,840 ​ ​ ​ ​ ​ 289,190,554 ​ ​
​
(1)
See Note 4 for a discussion of the waiver by FSIC III Advisor, LLC, the Company’s former investment adviser, of certain management fees to which it was otherwise entitled during the applicable period.
​
(2)
See Note 2 for a discussion of the methodology employed by the Company in calculating the subordinated income incentive fees.
​
(3)
See Note 9 for a discussion of the Company’s financing arrangements.
​
​
See notes to unaudited consolidated financial statements.
2
TABLE OF CONTENTS​
FS Investment Corporation III
Unaudited Consolidated Statements of Changes in Net Assets
(in thousands)
​
​ ​ ​
Three Months Ended
March 31,
​
​ ​ ​
2019
​ ​
2018
​
Operations ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Net investment income
​ ​ ​ $ 46,811 ​ ​ ​ ​ $ 48,056 ​ ​
Net realized gain (loss) on investments, total return swap and foreign currency(1)
 ​ ​ ​ ​ (52,430) ​ ​ ​ ​ ​ (17,354) ​ ​
Net change in unrealized appreciation (depreciation) on investments, total return swap
and interest rate swaps
​ ​ ​ ​ 62,569 ​ ​ ​ ​ ​ (25,072) ​ ​
Net change in unrealized gain (loss) on foreign currency
​ ​ ​ ​ (204) ​ ​ ​ ​ ​ (41) ​ ​
Net increase in net assets resulting from operations
​ ​ ​ ​ 56,746 ​ ​ ​ ​ ​ 5,589 ​ ​
Stockholder distributions(2) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Distributions to stockholders
​ ​ ​ ​ (50,467) ​ ​ ​ ​ ​ (50,490) ​ ​
Net decrease in net assets resulting from stockholder distributions
​ ​ ​ ​ (50,467) ​ ​ ​ ​ ​ (50,490) ​ ​
Capital share transactions(3) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Reinvestment of stockholder distributions
​ ​ ​ ​ 21,878 ​ ​ ​ ​ ​ 24,279 ​ ​
Repurchases of common stock
​ ​ ​ ​ (22,471) ​ ​ ​ ​ ​ (24,935) ​ ​
Net increase (decrease) in net assets resulting from capital share transactions
​ ​ ​ ​ (593) ​ ​ ​ ​ ​ (656) ​ ​
Total increase (decrease) in net assets
​ ​ ​ ​ 5,686 ​ ​ ​ ​ ​ (45,557) ​ ​
Net assets at beginning of period
​ ​ ​ ​ 2,206,971 ​ ​ ​ ​ ​ 2,388,724 ​ ​
Net assets at end of period
​ ​ ​ $ 2,212,657 ​ ​ ​ ​ $ 2,343,167 ​ ​
​
(1)
See Note 7 for a discussion of these financial instruments.
​
(2)
See Note 5 for a discussion of the sources of distributions paid by the Company.
​
(3)
See Note 3 for a discussion of the Company’s capital share transactions.
​
​
See notes to unaudited consolidated financial statements.
3
TABLE OF CONTENTS​
FS Investment Corporation III
Unaudited Consolidated Statements of Cash Flows
(in thousands)
​
​ ​ ​
Three Months Ended
March 31,
​
​ ​ ​
2019
​ ​
2018
​
Cash flows from operating activities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Net increase (decrease) in net assets resulting from operations
​ ​ ​ $ 56,746 ​ ​ ​ ​ $ 5,589 ​ ​
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Purchases of investments
​ ​ ​ ​ (401,423) ​ ​ ​ ​ ​ (177,850) ​ ​
Paid-in-kind interest
​ ​ ​ ​ (4,843) ​ ​ ​ ​ ​ (6,388) ​ ​
Proceeds from sales and repayments of investments
​ ​ ​ ​ 357,765 ​ ​ ​ ​ ​ 161,895 ​ ​
Net realized (gain) loss on investments
​ ​ ​ ​ 37,441 ​ ​ ​ ​ ​ 22,865 ​ ​
Net change in unrealized (appreciation) depreciation on investments
​ ​ ​ ​ (47,411) ​ ​ ​ ​ ​ 27,268 ​ ​
Net change in unrealized (appreciation) depreciation on total return swap
​ ​ ​ ​ (21,152) ​ ​ ​ ​ ​ (2,196) ​ ​
Net change in unrealized (appreciation) depreciation on interest rate swaps
​ ​ ​ ​ 5,994 ​ ​ ​ ​ ​ — ​ ​
Accretion of discount
​ ​ ​ ​ (1,804) ​ ​ ​ ​ ​ (1,133) ​ ​
Amortization of deferred financing costs
​ ​ ​ ​ 611 ​ ​ ​ ​ ​ 432 ​ ​
Net change in unrealized (gain) loss on borrowings in foreign currency
​ ​ ​ ​ 188 ​ ​ ​ ​ ​ — ​ ​
(Increase) decrease in due from counterparty
​ ​ ​ ​ 81,849 ​ ​ ​ ​ ​ (10,011) ​ ​
(Increase) decrease in receivable for investments sold and repaid
​ ​ ​ ​ (19,504) ​ ​ ​ ​ ​ (3,151) ​ ​
(Increase) decrease in interest receivable
​ ​ ​ ​ (8,619) ​ ​ ​ ​ ​ (3,004) ​ ​
(Increase) decrease in receivable due on total return swap
​ ​ ​ ​ 1,071 ​ ​ ​ ​ ​ (9) ​ ​
(Increase) decrease in receivable on interest rate swaps
​ ​ ​ ​ (2,559) ​ ​ ​ ​ ​ — ​ ​
(Increase) decrease in prepaid expenses and other assets
​ ​ ​ ​ 38 ​ ​ ​ ​ ​ 39 ​ ​
Increase (decrease) in payable for investments purchased
​ ​ ​ ​ (345,115) ​ ​ ​ ​ ​ (22,113) ​ ​
Increase (decrease) in management fees payable
​ ​ ​ ​ 1,570 ​ ​ ​ ​ ​ (322) ​ ​
Increase (decrease) in subordinated income incentive fees payable
​ ​ ​ ​ 2,583 ​ ​ ​ ​ ​ (12,864) ​ ​
(Increase) decrease in payable due on total return swap
​ ​ ​ ​ 15,250 ​ ​ ​ ​ ​ — ​ ​
Increase (decrease) in administrative services expense payable
​ ​ ​ ​ 92 ​ ​ ​ ​ ​ 389 ​ ​
Increase (decrease) in interest rate swap income payable
​ ​ ​ ​ 3,391 ​ ​ ​ ​ ​ — ​ ​
Increase (decrease) in interest payable(1)
 ​ ​ ​ ​ 2,666 ​ ​ ​ ​ ​ 228 ​ ​
Increase (decrease) in directors’ fees payable
​ ​ ​ ​ (123) ​ ​ ​ ​ ​ 197 ​ ​
Increase (decrease) in other accrued expenses and liabilities
​ ​ ​ ​ (270) ​ ​ ​ ​ ​ (607) ​ ​
Net cash provided by (used in) operating activities
​ ​ ​ ​ (285,568) ​ ​ ​ ​ ​ (20,746) ​ ​
Cash flows from financing activities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Repurchases of common stock
​ ​ ​ ​ (22,471) ​ ​ ​ ​ ​ (24,935) ​ ​
Distributions paid
​ ​ ​ ​ (28,404) ​ ​ ​ ​ ​ (17,392) ​ ​
Borrowings under credit facilities(1)
 ​ ​ ​ ​ 569,448 ​ ​ ​ ​ ​ — ​ ​
Repayments of credit facilities(1)
 ​ ​ ​ ​ (222,500) ​ ​ ​ ​ ​ — ​ ​
Deferred financing costs paid
​ ​ ​ ​ (3,737) ​ ​ ​ ​ ​ — ​ ​
Net cash provided by financing activities
​ ​ ​ ​ 292,336 ​ ​ ​ ​ ​ (42,327) ​ ​
Total increase (decrease) in cash
​ ​ ​ ​ 6,768 ​ ​ ​ ​ ​ (63,073) ​ ​
Cash, restricted cash and foreign currency at beginning of period
​ ​ ​ ​ 67,348 ​ ​ ​ ​ ​ 368,344 ​ ​
Cash, restricted cash and foreign currency at end of period(2)
​ ​ ​ $ 74,116 ​ ​ ​ ​ $ 305,271 ​ ​
Supplemental disclosure ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Distributions reinvested
​ ​ ​ $ 21,878 ​ ​ ​ ​ $ 24,279 ​ ​
Excise and state taxes paid
​ ​ ​ $ 125 ​ ​ ​ ​ $ 527 ​ ​
​
​
(1)
See Note 9 for a discussion of the Company’s financing arrangements. During the three months ended March 31, 2019 and 2018, the Company paid $14,503 and $11,073, respectively, in interest expense on the credit facilities and $3,785 and $2,959, respectively, in interest expense pursuant to the repurchase agreement.
​
(2)
As of March 31, 2019, balance includes cash of  $64,066 and restricted cash of  $10,050, respectively. As of March 31, 2018, balance includes cash of  $305,271 and restricted cash of  $0, respectively.
​
​
See notes to unaudited consolidated financial statements.
4
TABLE OF CONTENTS​
FS Investment Corporation III
 
Unaudited Consolidated Schedule of Investments
As of March 31, 2019
(in thousands, except share amounts)
​
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Principal
Amount(c)
 ​ ​
Amortized
Cost
​ ​
Fair
Value(d)
 ​
Senior Secured Loans—First Lien—122.1% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
5 Arch Income Fund 2, LLC
​ ​
(i)(n)
​ ​ Diversified Financials ​ ​
9.0%
​ ​ ​ ​ ​ ​ ​ ​
11/18/23
​ ​ ​ $ 144,445 ​ ​ ​ ​ $ 144,585 ​ ​ ​ ​ $ 144,445 ​ ​
5 Arch Income Fund 2, LLC
​ ​
(i)(j)(n)
​ ​ Diversified Financials ​ ​
9.0%
​ ​ ​ ​ ​ ​ ​ ​
11/18/23
​ ​ ​ ​ 3,955 ​ ​ ​ ​ ​ 3,958 ​ ​ ​ ​ ​ 3,955 ​ ​
Acosta Holdco Inc
​ ​
(q)
​ ​ Commercial & Professional Services ​ ​
L+325
​ ​ ​ ​ 1.0% ​ ​ ​
9/26/21
​ ​ ​ ​ 14,257 ​ ​ ​ ​ ​ 10,710 ​ ​ ​ ​ ​ 6,717 ​ ​
Addison Holdings
​ ​
(g)
​ ​ Commercial & Professional Services ​ ​
L+675
​ ​ ​ ​ 1.0% ​ ​ ​
12/29/23
​ ​ ​ ​ 60,984 ​ ​ ​ ​ ​ 60,984 ​ ​ ​ ​ ​ 61,594 ​ ​
Advantage Sales & Marketing Inc
​ ​
(q)
​ ​ Commercial & Professional Services ​ ​
L+325
​ ​ ​ ​ 1.0% ​ ​ ​
7/23/21
​ ​ ​ ​ 16,783 ​ ​ ​ ​ ​ 14,909 ​ ​ ​ ​ ​ 14,326 ​ ​
All Systems Holding LLC
​ ​
(f)
​ ​ Commercial & Professional Services ​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​
10/31/23
​ ​ ​ ​ 5,108 ​ ​ ​ ​ ​ 5,108 ​ ​ ​ ​ ​ 5,159 ​ ​
All Systems Holding LLC
​ ​
(f)(g)(h)
​ ​ Commercial & Professional Services ​ ​
L+767
​ ​ ​ ​ 1.0% ​ ​ ​
10/31/23
​ ​ ​ ​ 48,903 ​ ​ ​ ​ ​ 48,903 ​ ​ ​ ​ ​ 49,392 ​ ​
Alstom SA
​ ​
(i)(q)
​ ​ Transportation ​ ​
L+450
​ ​ ​ ​ 1.0% ​ ​ ​
8/29/21
​ ​ ​ ​ 6,227 ​ ​ ​ ​ ​ 5,938 ​ ​ ​ ​ ​ 6,001 ​ ​
Altus Power America Inc
​ ​ ​ ​ ​ Energy ​ ​
L+750
​ ​ ​ ​ 1.5% ​ ​ ​
9/30/21
​ ​ ​ ​ 683 ​ ​ ​ ​ ​ 683 ​ ​ ​ ​ ​ 656 ​ ​
Altus Power America Inc
​ ​
(j)
​ ​ Energy ​ ​
L+750
​ ​ ​ ​ 1.5% ​ ​ ​
9/30/21
​ ​ ​ ​ 140 ​ ​ ​ ​ ​ 140 ​ ​ ​ ​ ​ 135 ​ ​
Altus Power America Inc
​ ​ ​ ​ ​ Energy ​ ​
L+750
​ ​ ​ ​ 1.5% ​ ​ ​
10/8/21
​ ​ ​ ​ 2,500 ​ ​ ​ ​ ​ 2,500 ​ ​ ​ ​ ​ 2,400 ​ ​
American Tire Distributors Inc
​ ​
(q)
​ ​ Automobiles & Components ​ ​
L+600, 1.0% PIK (1.0% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
9/1/23
​ ​ ​ ​ 1,447 ​ ​ ​ ​ ​ 1,357 ​ ​ ​ ​ ​ 1,427 ​ ​
American Tire Distributors Inc
​ ​
(q)
​ ​ Automobiles & Components ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​
9/2/24
​ ​ ​ ​ 9,169 ​ ​ ​ ​ ​ 8,132 ​ ​ ​ ​ ​ 8,227 ​ ​
Ammeraal Beltech Holding BV
​ ​
(i)(q)
​ ​ Capital Goods ​ ​
E+375
​ ​ ​ ​ ​ ​ ​ ​
7/30/25
​ ​ ​ € 1,268 ​ ​ ​ ​ ​ 1,466 ​ ​ ​ ​ ​ 1,423 ​ ​
Apex Group Limited
​ ​
(i)(j)
​ ​ Diversified Financials ​ ​
L+650
​ ​ ​ ​ ​ ​ ​ ​
6/15/23
​ ​ ​ $ 1,957 ​ ​ ​ ​ ​ 1,905 ​ ​ ​ ​ ​ 1,667 ​ ​
Apex Group Limited
​ ​
(f)(i)(r)
​ ​ Diversified Financials ​ ​
L+650
​ ​ ​ ​ 1.0% ​ ​ ​
6/15/25
​ ​ ​ ​ 37,987 ​ ​ ​ ​ ​ 37,556 ​ ​ ​ ​ ​ 37,121 ​ ​
Apex Group Limited
​ ​
(i)(j)(r)
​ ​ Diversified Financials ​ ​
L+650
​ ​ ​ ​ 1.0% ​ ​ ​
6/15/25
​ ​ ​ ​ 4,958 ​ ​ ​ ​ ​ 4,938 ​ ​ ​ ​ ​ 4,845 ​ ​
Aspect Software Inc
​ ​
(j)(s)
 ​ ​ Software & Services ​ ​
L+500
​ ​ ​ ​ 1.0% ​ ​ ​
7/15/23
​ ​ ​ ​ 2,422 ​ ​ ​ ​ ​ 2,422 ​ ​ ​ ​ ​ 2,422 ​ ​
Aspect Software Inc
​ ​
(f)(s)
 ​ ​ Software & Services ​ ​
L+500
​ ​ ​ ​ ​ ​ ​ ​
1/15/24
​ ​ ​ ​ 15,673 ​ ​ ​ ​ ​ 13,883 ​ ​ ​ ​ ​ 13,832 ​ ​
ATX Networks Corp
​ ​
(g)(h)(i)(q)(r)
​ ​ Technology Hardware & Equipment ​ ​
L+600, 1.0% PIK (1.0% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
6/11/21
​ ​ ​ ​ 43,114 ​ ​ ​ ​ ​ 42,272 ​ ​ ​ ​ ​ 40,958 ​ ​
AVF Parent LLC
​ ​
(f)
​ ​ Retailing ​ ​
L+725
​ ​ ​ ​ 1.3% ​ ​ ​
3/1/24
​ ​ ​ ​ 29,248 ​ ​ ​ ​ ​ 29,248 ​ ​ ​ ​ ​ 25,373 ​ ​
Belk Inc
​ ​
(q)
​ ​ Retailing ​ ​
L+475
​ ​ ​ ​ 1.0% ​ ​ ​
12/12/22
​ ​ ​ ​ 21,857 ​ ​ ​ ​ ​ 17,807 ​ ​ ​ ​ ​ 17,695 ​ ​
Borden Dairy Co
​ ​
(f)(g)
​ ​ Food, Beverage & Tobacco ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​
7/6/23
​ ​ ​ ​ 48,125 ​ ​ ​ ​ ​ 48,125 ​ ​ ​ ​ ​ 43,683 ​ ​
Brand Energy & Infrastructure Services Inc
 ​ ​
(q)
​ ​ Capital Goods ​ ​
L+425
​ ​ ​ ​ 1.0% ​ ​ ​
6/21/24
​ ​ ​ ​ 5,454 ​ ​ ​ ​ ​ 5,188 ​ ​ ​ ​ ​ 5,239 ​ ​
Caprock Midstream LLC
​ ​
(q)
​ ​ Energy ​ ​
L+475
​ ​ ​ ​ ​ ​ ​ ​
11/3/25
​ ​ ​ ​ 1,157 ​ ​ ​ ​ ​ 1,078 ​ ​ ​ ​ ​ 1,098 ​ ​
Conservice LLC
​ ​ ​ ​ ​ Consumer Services ​ ​
L+525
​ ​ ​ ​ ​ ​ ​ ​
11/30/24
​ ​ ​ ​ 27,119 ​ ​ ​ ​ ​ 26,856 ​ ​ ​ ​ ​ 27,166 ​ ​
Conservice LLC
​ ​
(j)
​ ​ Consumer Services ​ ​
L+525
​ ​ ​ ​ ​ ​ ​ ​
11/30/24
​ ​ ​ ​ 5,062 ​ ​ ​ ​ ​ 5,031 ​ ​ ​ ​ ​ 4,947 ​ ​
Constellis Holdings LLC/Constellis Finance
Corp
​ ​
(g)
​ ​ Capital Goods ​ ​
L+575
​ ​ ​ ​ 1.0% ​ ​ ​
4/15/22
​ ​ ​ ​ 40,125 ​ ​ ​ ​ ​ 39,565 ​ ​ ​ ​ ​ 39,674 ​ ​
CSafe Global
​ ​ ​ ​ ​ Capital Goods ​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​
11/1/21
​ ​ ​ ​ 957 ​ ​ ​ ​ ​ 957 ​ ​ ​ ​ ​ 957 ​ ​
CSafe Global
​ ​
(j)
​ ​ Capital Goods ​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​
11/1/21
​ ​ ​ ​ 1,652 ​ ​ ​ ​ ​ 1,652 ​ ​ ​ ​ ​ 1,652 ​ ​
CSafe Global
​ ​
(f)
​ ​ Capital Goods ​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​
10/31/23
​ ​ ​ ​ 22,285 ​ ​ ​ ​ ​ 22,285 ​ ​ ​ ​ ​ 22,508 ​ ​
CSM Bakery Products
​ ​
(q)
​ ​ Food, Beverage & Tobacco ​ ​
L+400
​ ​ ​ ​ 1.0% ​ ​ ​
7/3/20
​ ​ ​ ​ 488 ​ ​ ​ ​ ​ 461 ​ ​ ​ ​ ​ 468 ​ ​
Dade Paper and Bag Co Inc
​ ​ ​ ​ ​ Capital Goods ​ ​
L+700
​ ​ ​ ​ 1.0% ​ ​ ​
6/10/24
​ ​ ​ ​ 5,616 ​ ​ ​ ​ ​ 5,616 ​ ​ ​ ​ ​ 5,398 ​ ​
Dade Paper and Bag Co Inc
​ ​
(g)(h)
​ ​ Capital Goods ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​
6/10/24
​ ​ ​ ​ 44,029 ​ ​ ​ ​ ​ 44,029 ​ ​ ​ ​ ​ 43,148 ​ ​
See notes to unaudited consolidated financial statements.
5
TABLE OF CONTENTS
FS Investment Corporation III
 
Unaudited Consolidated Schedule of Investments (continued)
As of March 31, 2019
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Principal
Amount(c)
 ​ ​
Amortized
Cost
​ ​
Fair
Value(d)
 ​
Dayton Superior Corp
​ ​
(q)
​ ​ Materials ​ ​
L+800, 6.0% PIK (6.0% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
11/15/21
​ ​ ​ $ 11,934 ​ ​ ​ ​ $ 9,654 ​ ​ ​ ​ $ 10,054 ​ ​
Diamond Resorts International Inc
​ ​
(f)(q)
​ ​ Consumer Services ​ ​
L+375
​ ​ ​ ​ 1.0% ​ ​ ​
9/2/23
​ ​ ​ ​ 26,799 ​ ​ ​ ​ ​ 24,896 ​ ​ ​ ​ ​ 25,861 ​ ​
Distribution International Inc
​ ​
(q)
​ ​ Retailing ​ ​
L+500
​ ​ ​ ​ 1.0% ​ ​ ​
12/15/21
​ ​ ​ ​ 369 ​ ​ ​ ​ ​ 328 ​ ​ ​ ​ ​ 337 ​ ​
Eagle Family Foods Inc
​ ​
(j)
​ ​ Food, Beverage & Tobacco ​ ​
L+650
​ ​ ​ ​ 1.0% ​ ​ ​
6/14/23
​ ​ ​ ​ 3,507 ​ ​ ​ ​ ​ 3,474 ​ ​ ​ ​ ​ 2,974 ​ ​
Eagle Family Foods Inc
​ ​
(f)
​ ​ Food, Beverage & Tobacco ​ ​
L+650
​ ​ ​ ​ 1.0% ​ ​ ​
6/14/24
​ ​ ​ ​ 23,205 ​ ​ ​ ​ ​ 22,971 ​ ​ ​ ​ ​ 22,473 ​ ​
Eagleclaw Midstream Ventures LLC
​ ​
(q)
​ ​ Energy ​ ​
L+425
​ ​ ​ ​ 1.0% ​ ​ ​
6/24/24
​ ​ ​ ​ 576 ​ ​ ​ ​ ​ 541 ​ ​ ​ ​ ​ 542 ​ ​
Empire Today LLC
​ ​
(f)(g)
​ ​ Retailing ​ ​
L+700
​ ​ ​ ​ 1.0% ​ ​ ​
11/17/22
​ ​ ​ ​ 43,988 ​ ​ ​ ​ ​ 43,987 ​ ​ ​ ​ ​ 43,601 ​ ​
Fairway Group Holdings Corp
​ ​
(s)
​ ​ Food & Staples Retailing ​ ​
4.0%, 11.0% PIK (11.0% Max PIK)
 ​ ​ ​ ​ ​ ​ ​ ​
8/28/23
​ ​ ​ ​ 493 ​ ​ ​ ​ ​ 491 ​ ​ ​ ​ ​ 493 ​ ​
Fairway Group Holdings Corp
​ ​
(j)(s)
​ ​ Food & Staples Retailing ​ ​
4.0%, 11.0% PIK (11.0% Max PIK)
 ​ ​ ​ ​ ​ ​ ​ ​
8/28/23
​ ​ ​ ​ 1,028 ​ ​ ​ ​ ​ 1,024 ​ ​ ​ ​ ​ 1,028 ​ ​
Fairway Group Holdings Corp
​ ​
(k)(l)(s)
​ ​ Food & Staples Retailing ​ ​
10.0% PIK (10.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
11/27/23
​ ​ ​ ​ 4,549 ​ ​ ​ ​ ​ 3,916 ​ ​ ​ ​ ​ 597 ​ ​
Fairway Group Holdings Corp
​ ​
(s)
 ​ ​ Food & Staples Retailing ​ ​
12.0% PIK (12.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
11/27/23
​ ​ ​ ​ 7,153 ​ ​ ​ ​ ​ 7,153 ​ ​ ​ ​ ​ 6,947 ​ ​
Fairway Group Holdings Corp
​ ​
(s)
​ ​ Food & Staples Retailing ​ ​
4.0%, 11.0% PIK (11.0% Max PIK)
 ​ ​ ​ ​ ​ ​ ​ ​
11/27/23
​ ​ ​ ​ 2,484 ​ ​ ​ ​ ​ 2,345 ​ ​ ​ ​ ​ 2,485 ​ ​
FHC Health Systems Inc
​ ​
(q)
​ ​ Health Care Equipment & Services ​ ​
L+400
​ ​ ​ ​ 1.0% ​ ​ ​
12/23/21
​ ​ ​ ​ 8,814 ​ ​ ​ ​ ​ 7,349 ​ ​ ​ ​ ​ 7,345 ​ ​
Foresight Energy LLC
​ ​
(i)(q)
​ ​ Materials ​ ​
L+575
​ ​ ​ ​ 1.0% ​ ​ ​
3/28/22
​ ​ ​ ​ 4,925 ​ ​ ​ ​ ​ 4,830 ​ ​ ​ ​ ​ 4,836 ​ ​
Fox Head Inc
​ ​
(f)
​ ​ Consumer Durables & Apparel ​ ​
L+850
​ ​ ​ ​ 1.0% ​ ​ ​
12/19/20
​ ​ ​ ​ 6,729 ​ ​ ​ ​ ​ 6,729 ​ ​ ​ ​ ​ 6,469 ​ ​
FullBeauty Brands Holdings Corp
​ ​ ​ ​ ​ Retailing ​ ​
10.0%
​ ​ ​ ​ ​ ​ ​ ​
6/30/19
​ ​ ​ ​ 312 ​ ​ ​ ​ ​ 312 ​ ​ ​ ​ ​ 304 ​ ​
FullBeauty Brands Holdings Corp
​ ​ ​ ​ ​ Retailing ​ ​
L+900
​ ​ ​ ​ 1.0% ​ ​ ​
2/7/24
​ ​ ​ ​ 1,817 ​ ​ ​ ​ ​ 1,773 ​ ​ ​ ​ ​ 1,772 ​ ​
Gulf Finance LLC
​ ​
(h)(q)
​ ​ Energy ​ ​
L+525
​ ​ ​ ​ 1.0% ​ ​ ​
8/25/23
​ ​ ​ ​ 14,026 ​ ​ ​ ​ ​ 11,689 ​ ​ ​ ​ ​ 11,235 ​ ​
HM Dunn Co Inc
​ ​
(k)(l)(s)
​ ​ Capital Goods ​ ​
L+875 PIK (L+875 Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
6/30/21
​ ​ ​ ​ 6,583 ​ ​ ​ ​ ​ 5,786 ​ ​ ​ ​ ​ 601 ​ ​
Hudson Technologies Co
​ ​
(g)(i)
​ ​ Commercial & Professional Services ​ ​
L+1025
​ ​ ​ ​ 1.0% ​ ​ ​
10/10/23
​ ​ ​ ​ 7,889 ​ ​ ​ ​ ​ 7,825 ​ ​ ​ ​ ​ 5,582 ​ ​
Icynene Group Ltd
​ ​
(f)(g)(h)
​ ​ Materials ​ ​
L+700
​ ​ ​ ​ 1.0% ​ ​ ​
11/30/24
​ ​ ​ ​ 76,038 ​ ​ ​ ​ ​ 76,037 ​ ​ ​ ​ ​ 73,756 ​ ​
Industrial Group Intermediate Holdings LLC 
 ​ ​
(g)
​ ​ Materials ​ ​
L+800
​ ​ ​ ​ 1.3% ​ ​ ​
5/31/20
​ ​ ​ ​ 9,787 ​ ​ ​ ​ ​ 9,787 ​ ​ ​ ​ ​ 9,860 ​ ​
Ivanti Software Inc
​ ​
(q)
​ ​ Software & Services ​ ​
L+425
​ ​ ​ ​ 1.0% ​ ​ ​
1/20/24
​ ​ ​ ​ 775 ​ ​ ​ ​ ​ 752 ​ ​ ​ ​ ​ 770 ​ ​
JAKKS Pacific Inc
​ ​ ​ ​ ​ Consumer Durables & Apparel ​ ​
L+900
​ ​ ​ ​ 1.5% ​ ​ ​
6/14/21
​ ​ ​ ​ 2,374 ​ ​ ​ ​ ​ 2,360 ​ ​ ​ ​ ​ 2,390 ​ ​
Jazz Acquisition Inc
​ ​ ​ ​ ​ Capital Goods ​ ​
L+550
​ ​ ​ ​ 1.0% ​ ​ ​
6/1/22
​ ​ ​ ​ 24,629 ​ ​ ​ ​ ​ 24,629 ​ ​ ​ ​ ​ 24,425 ​ ​
JC Penney Corp Inc
​ ​
(i)(q)
​ ​ Retailing ​ ​
L+425
​ ​ ​ ​ 1.0% ​ ​ ​
6/23/23
​ ​ ​ ​ 2,304 ​ ​ ​ ​ ​ 1,942 ​ ​ ​ ​ ​ 2,053 ​ ​
JHC Acquisition LLC
​ ​
(f)(g)(h)
​ ​ Capital Goods ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​
11/6/21
​ ​ ​ ​ 114,086 ​ ​ ​ ​ ​ 114,086 ​ ​ ​ ​ ​ 114,086 ​ ​
JHC Acquisition LLC
​ ​
(f)(g)(h)
​ ​ Capital Goods ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​
1/29/24
​ ​ ​ ​ 62,082 ​ ​ ​ ​ ​ 62,082 ​ ​ ​ ​ ​ 62,082 ​ ​
JHC Acquisition LLC
​ ​
(j)
​ ​ Capital Goods ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​
1/29/24
​ ​ ​ ​ 21,787 ​ ​ ​ ​ ​ 21,787 ​ ​ ​ ​ ​ 21,787 ​ ​
Jo-Ann Stores Inc
​ ​
(q)
​ ​ Retailing ​ ​
L+500
​ ​ ​ ​ 1.0% ​ ​ ​
10/20/23
​ ​ ​ ​ 318 ​ ​ ​ ​ ​ 303 ​ ​ ​ ​ ​ 317 ​ ​
Jostens Inc
​ ​
(q)
​ ​ Consumer Services ​ ​
L+550
​ ​ ​ ​ ​ ​ ​ ​
12/19/25
​ ​ ​ ​ 3,976 ​ ​ ​ ​ ​ 3,869 ​ ​ ​ ​ ​ 3,983 ​ ​
JSS Holdings Ltd
​ ​
(f)(g)(h)
​ ​ Capital Goods ​ ​
L+800, 0.0% PIK (2.5% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
3/31/23
​ ​ ​ ​ 65,810 ​ ​ ​ ​ ​ 65,330 ​ ​ ​ ​ ​ 67,785 ​ ​
Kodiak BP LLC
​ ​
(f)(g)(h)
​ ​ Capital Goods ​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​
12/1/24
​ ​ ​ ​ 90,668 ​ ​ ​ ​ ​ 90,668 ​ ​ ​ ​ ​ 88,742 ​ ​
Kodiak BP LLC
​ ​
(j)
​ ​ Capital Goods ​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​
12/1/24
​ ​ ​ ​ 10,871 ​ ​ ​ ​ ​ 10,871 ​ ​ ​ ​ ​ 10,640 ​ ​
Lazard Global Compounders Fund
​ ​
(i)
​ ​ Diversified Financials ​ ​
L+725
​ ​ ​ ​ 3.8% ​ ​ ​
4/1/26
​ ​ ​ ​ 100,132 ​ ​ ​ ​ ​ 100,132 ​ ​ ​ ​ ​ 98,630 ​ ​
See notes to unaudited consolidated financial statements.
6
TABLE OF CONTENTS
FS Investment Corporation III
 
Unaudited Consolidated Schedule of Investments (continued)
As of March 31, 2019
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Principal
Amount(c)
 ​ ​
Amortized
Cost
​ ​
Fair
Value(d)
 ​
Lazard Global Compounders Fund
​ ​
(i)(j)
​ ​ Diversified Financials ​ ​
L+725
​ ​ ​ ​ 3.8% ​ ​ ​
4/1/26
​ ​ ​ $ 19,118 ​ ​ ​ ​ $ 19,118 ​ ​ ​ ​ $ 18,831 ​ ​
LBM Borrower LLC
​ ​
(f)(q)
​ ​ Capital Goods ​ ​
L+375
​ ​ ​ ​ 1.0% ​ ​ ​
8/20/22
​ ​ ​ ​ 5,310 ​ ​ ​ ​ ​ 4,968 ​ ​ ​ ​ ​ 5,115 ​ ​
LD Intermediate Holdings Inc
​ ​
(q)
​ ​ Software & Services ​ ​
L+588
​ ​ ​ ​ 1.0% ​ ​ ​
12/9/22
​ ​ ​ ​ 9,375 ​ ​ ​ ​ ​ 8,428 ​ ​ ​ ​ ​ 8,168 ​ ​
Lipari Foods LLC
​ ​ ​ ​ ​ Food & Staples Retailing ​ ​
L+588
​ ​ ​ ​ 1.0% ​ ​ ​
1/4/25
​ ​ ​ ​ 103,645 ​ ​ ​ ​ ​ 102,825 ​ ​ ​ ​ ​ 102,730 ​ ​
Lipari Foods LLC
​ ​
(j)
​ ​ Food & Staples Retailing ​ ​
L+588
​ ​ ​ ​ 1.0% ​ ​ ​
1/4/25
​ ​ ​ ​ 21,437 ​ ​ ​ ​ ​ 21,437 ​ ​ ​ ​ ​ 21,248 ​ ​
Mitel US Holdings Inc
​ ​
(q)
​ ​ Technology Hardware & Equipment ​ ​
L+450
​ ​ ​ ​ ​ ​ ​ ​
11/30/25
​ ​ ​ ​ 229 ​ ​ ​ ​ ​ 222 ​ ​ ​ ​ ​ 226 ​ ​
Monitronics International Inc
​ ​
(i)(q)
​ ​ Commercial & Professional Services ​ ​
L+550
​ ​ ​ ​ 1.0% ​ ​ ​
9/30/22
​ ​ ​ ​ 4,339 ​ ​ ​ ​ ​ 3,921 ​ ​ ​ ​ ​ 3,649 ​ ​
Murray Energy Corp
​ ​ ​ ​ ​ Energy ​ ​
L+900
​ ​ ​ ​ 1.0% ​ ​ ​
2/12/21
​ ​ ​ ​ 9,258 ​ ​ ​ ​ ​ 9,205 ​ ​ ​ ​ ​ 9,202 ​ ​
NaviHealth Inc.
​ ​
(q)
​ ​ Health Care Equipment & Services ​ ​
L+500
​ ​ ​ ​ ​ ​ ​ ​
8/1/25
​ ​ ​ ​ 1,051 ​ ​ ​ ​ ​ 1,018 ​ ​ ​ ​ ​ 1,024 ​ ​
Navistar Inc
​ ​
(i)(q)
​ ​ Automobiles & Components ​ ​
L+350
​ ​ ​ ​ ​ ​ ​ ​
11/6/24
​ ​ ​ ​ 1,010 ​ ​ ​ ​ ​ 970 ​ ​ ​ ​ ​ 1,008 ​ ​
North Haven Cadence Buyer Inc
​ ​
(j)
​ ​ Consumer Services ​ ​
L+500
​ ​ ​ ​ 1.0% ​ ​ ​
9/2/21
​ ​ ​ ​ 750 ​ ​ ​ ​ ​ 750 ​ ​ ​ ​ ​ 750 ​ ​
North Haven Cadence Buyer Inc
​ ​
(f)(g)
​ ​ Consumer Services ​ ​
L+798
​ ​ ​ ​ 1.0% ​ ​ ​
9/2/24
​ ​ ​ ​ 17,686 ​ ​ ​ ​ ​ 17,687 ​ ​ ​ ​ ​ 17,466 ​ ​
North Haven Cadence Buyer Inc
​ ​ ​ ​ ​ Consumer Services ​ ​
L+650
​ ​ ​ ​ 1.0% ​ ​ ​
9/2/24
​ ​ ​ ​ 4,081 ​ ​ ​ ​ ​ 4,081 ​ ​ ​ ​ ​ 4,030 ​ ​
North Haven Cadence Buyer Inc
​ ​
(j)
​ ​ Consumer Services ​ ​
L+650
​ ​ ​ ​ 1.0% ​ ​ ​
9/2/24
​ ​ ​ ​ 83 ​ ​ ​ ​ ​ 83 ​ ​ ​ ​ ​ 82 ​ ​
P2 Energy Solutions, Inc.
​ ​
(q)
​ ​ Software & Services ​ ​
L+400
​ ​ ​ ​ 1.0% ​ ​ ​
10/30/20
​ ​ ​ ​ 252 ​ ​ ​ ​ ​ 244 ​ ​ ​ ​ ​ 250 ​ ​
Peak 10 Holding Corp
​ ​
(q)(r)
​ ​ Telecommunication Services ​ ​
L+350
​ ​ ​ ​ ​ ​ ​ ​
8/1/24
​ ​ ​ ​ 821 ​ ​ ​ ​ ​ 751 ​ ​ ​ ​ ​ 755 ​ ​
PF Chang’s China Bistro Inc
​ ​
(q)
​ ​ Consumer Services ​ ​
L+650
​ ​ ​ ​ ​ ​ ​ ​
3/1/26
​ ​ ​ ​ 8,654 ​ ​ ​ ​ ​ 8,569 ​ ​ ​ ​ ​ 8,555 ​ ​
PHRC License LLC
​ ​
(f)
​ ​ Consumer Services ​ ​
L+850, 0.3% PIK (0.3% Max PIK)
​ ​ ​ ​ 1.5% ​ ​ ​
4/28/22
​ ​ ​ ​ 16,662 ​ ​ ​ ​ ​ 16,662 ​ ​ ​ ​ ​ 16,891 ​ ​
Power Distribution Inc
​ ​ ​ ​ ​ Capital Goods ​ ​
L+725
​ ​ ​ ​ 1.3% ​ ​ ​
1/25/23
​ ​ ​ ​ 19,514 ​ ​ ​ ​ ​ 19,514 ​ ​ ​ ​ ​ 19,100 ​ ​
Production Resource Group LLC
​ ​
(f)(h)
​ ​ Media ​ ​
L+700
​ ​ ​ ​ 1.0% ​ ​ ​
8/21/24
​ ​ ​ ​ 173,008 ​ ​ ​ ​ ​ 173,008 ​ ​ ​ ​ ​ 170,412 ​ ​
Propulsion Acquisition LLC
​ ​
(f)(h)(q)
​ ​ Capital Goods ​ ​
L+600
​ ​ ​ ​ 1.0% ​ ​ ​
7/13/21
​ ​ ​ ​ 54,140 ​ ​ ​ ​ ​ 53,308 ​ ​ ​ ​ ​ 53,598 ​ ​
PSKW LLC
​ ​
(f)(g)(h)
​ ​ Health Care Equipment & Services ​ ​
L+825
​ ​ ​ ​ 1.0% ​ ​ ​
10/1/21
​ ​ ​ ​ 154,000 ​ ​ ​ ​ ​ 154,000 ​ ​ ​ ​ ​ 154,000 ​ ​
PSKW LLC
​ ​
(g)(h)
​ ​ Health Care Equipment & Services ​ ​
L+826
​ ​ ​ ​ 1.0% ​ ​ ​
11/25/21
​ ​ ​ ​ 18,364 ​ ​ ​ ​ ​ 18,243 ​ ​ ​ ​ ​ 18,364 ​ ​
Reliant Rehab Hospital Cincinnati LLC
​ ​
(g)
​ ​ Health Care Equipment & Services ​ ​
L+675
​ ​ ​ ​ 1.0% ​ ​ ​
8/30/24
​ ​ ​ ​ 51,001 ​ ​ ​ ​ ​ 50,569 ​ ​ ​ ​ ​ 50,291 ​ ​
Roadrunner Intermediate Acquisition Co LLC 
​ ​
(f)(g)(h)(r)
​ ​ Health Care Equipment & Services ​ ​
L+675
​ ​ ​ ​ 1.0% ​ ​ ​
9/22/21
​ ​ ​ ​ 93,386 ​ ​ ​ ​ ​ 93,385 ​ ​ ​ ​ ​ 86,169 ​ ​
Safariland LLC
​ ​
(f)
​ ​ Capital Goods ​ ​
L+765
​ ​ ​ ​ 1.1% ​ ​ ​
11/18/23
​ ​ ​ ​ 42,893 ​ ​ ​ ​ ​ 42,893 ​ ​ ​ ​ ​ 38,764 ​ ​
Savers Inc
​ ​ ​ ​ ​ Retailing ​ ​
L+650, 0.8% PIK (0.8% Max PIK)
​ ​ ​ ​ 1.5% ​ ​ ​
3/28/24
​ ​ ​ C$ 31,399 ​ ​ ​ ​ ​ 23,094 ​ ​ ​ ​ ​ 23,209 ​ ​
Savers Inc
​ ​ ​ ​ ​ Retailing ​ ​
L+650, 0.8% PIK (0.8% Max PIK)
​ ​ ​ ​ 1.5% ​ ​ ​
3/28/24
​ ​ ​ $ 22,610 ​ ​ ​ ​ ​ 22,328 ​ ​ ​ ​ ​ 22,327 ​ ​
Sequa Corp
​ ​
(q)
​ ​ Materials ​ ​
L+500
​ ​ ​ ​ 1.0% ​ ​ ​
11/28/21
​ ​ ​ ​ 3,663 ​ ​ ​ ​ ​ 3,495 ​ ​ ​ ​ ​ 3,594 ​ ​
Sequel Youth & Family Services LLC
​ ​
(g)
​ ​ Health Care Equipment & Services ​ ​
L+700
​ ​ ​ ​ 1.0% ​ ​ ​
9/1/23
​ ​ ​ ​ 2,265 ​ ​ ​ ​ ​ 2,265 ​ ​ ​ ​ ​ 2,286 ​ ​
Sequel Youth & Family Services LLC
​ ​
(f)
​ ​ Health Care Equipment & Services ​ ​
L+800
​ ​ ​ ​ ​ ​ ​ ​
9/1/23
​ ​ ​ ​ 13,000 ​ ​ ​ ​ ​ 13,000 ​ ​ ​ ​ ​ 13,118 ​ ​
Sequential Brands Group Inc.
​ ​
(f)(g)(h)
​ ​ Consumer Durables & Apparel ​ ​
L+875
​ ​ ​ ​ ​ ​ ​ ​
2/7/24
​ ​ ​ ​ 97,197 ​ ​ ​ ​ ​ 95,416 ​ ​ ​ ​ ​ 96,347 ​ ​
SI Group Inc
​ ​
(q)
​ ​ Materials ​ ​
L+475
​ ​ ​ ​ ​ ​ ​ ​
10/15/25
​ ​ ​ ​ 526 ​ ​ ​ ​ ​ 506 ​ ​ ​ ​ ​ 526 ​ ​
SIRVA Worldwide Inc
​ ​
(q)
​ ​ Commercial & Professional Services ​ ​
L+550
​ ​ ​ ​ ​ ​ ​ ​
8/2/25
​ ​ ​ ​ 327 ​ ​ ​ ​ ​ 320 ​ ​ ​ ​ ​ 320 ​ ​
Sorenson Communications LLC
​ ​
(f)(q)
​ ​ Telecommunication Services ​ ​
L+575
​ ​ ​ ​ 2.3% ​ ​ ​
4/30/20
​ ​ ​ ​ 45,098 ​ ​ ​ ​ ​ 44,919 ​ ​ ​ ​ ​ 44,647 ​ ​
See notes to unaudited consolidated financial statements.
7
TABLE OF CONTENTS
FS Investment Corporation III
 
Unaudited Consolidated Schedule of Investments (continued)
As of March 31, 2019
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Principal
Amount(c)
 ​ ​
Amortized
Cost
​ ​
Fair
Value(d)
 ​
Sorenson Communications LLC
​ ​
(q)(r)
​ ​ Telecommunication Services ​ ​
L+650
​ ​ ​ ​ ​ ​ ​ ​
3/14/24
​ ​ ​ $ 23,555 ​ ​ ​ ​ $ 22,613 ​ ​ ​ ​ $ 23,349 ​ ​
Spencer Gifts LLC
​ ​
(q)
​ ​ Retailing ​ ​
L+425
​ ​ ​ ​ 1.0% ​ ​ ​
7/16/21
​ ​ ​ ​ 14,530 ​ ​ ​ ​ ​ 13,795 ​ ​ ​ ​ ​ 14,421 ​ ​
SSC (Lux) Limited S.a r.l.
​ ​
(f)(g)(i)
​ ​ Health Care Equipment & Services ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​
9/10/24
​ ​ ​ ​ 60,820 ​ ​ ​ ​ ​ 60,820 ​ ​ ​ ​ ​ 61,294 ​ ​
Sungard Availability Services Capital Inc
​ ​
(h)(k)(l)(q)
​ ​ Software & Services ​ ​
L+700
​ ​ ​ ​ 1.0% ​ ​ ​
9/30/21
​ ​ ​ ​ 27,037 ​ ​ ​ ​ ​ 25,950 ​ ​ ​ ​ ​ 18,453 ​ ​
Sungard Availability Services Capital Inc
​ ​
(k)(l)(q)
​ ​ Software & Services ​ ​
L+1000
​ ​ ​ ​ 1.0% ​ ​ ​
10/1/22
​ ​ ​ ​ 2,234 ​ ​ ​ ​ ​ 2,113 ​ ​ ​ ​ ​ 1,927 ​ ​
Sutherland Global Services Inc
​ ​
(i)(q)
​ ​ Software & Services ​ ​
L+538
​ ​ ​ ​ 1.0% ​ ​ ​
4/23/21
​ ​ ​ ​ 11,961 ​ ​ ​ ​ ​ 11,223 ​ ​ ​ ​ ​ 11,692 ​ ​
Swift Worldwide Resources Holdco Ltd
​ ​ ​ ​ ​ Energy ​ ​
L+1000, 1.0% PIK (1.0% Max PIK)
 ​ ​ ​ ​ 1.0% ​ ​ ​
7/20/21
​ ​ ​ ​ 17,229 ​ ​ ​ ​ ​ 17,229 ​ ​ ​ ​ ​ 17,229 ​ ​
Tangoe LLC
​ ​ ​ ​ ​ Software & Services ​ ​
L+650
​ ​ ​ ​ 1.0% ​ ​ ​
11/28/25
​ ​ ​ ​ 44,110 ​ ​ ​ ​ ​ 43,686 ​ ​ ​ ​ ​ 43,557 ​ ​
Trace3 Inc
​ ​
(f)(g)
​ ​ Software & Services ​ ​
L+675
​ ​ ​ ​ 1.0% ​ ​ ​
8/5/24
​ ​ ​ ​ 37,484 ​ ​ ​ ​ ​ 37,484 ​ ​ ​ ​ ​ 37,484 ​ ​
Virgin Pulse Inc
​ ​
(f)(g)(h)
​ ​ Software & Services ​ ​
L+650
​ ​ ​ ​ 1.0% ​ ​ ​
5/22/25
​ ​ ​ ​ 67,737 ​ ​ ​ ​ ​ 67,242 ​ ​ ​ ​ ​ 66,864 ​ ​
Vivint Inc
​ ​
(f)(q)
​ ​ Commercial & Professional Services ​ ​
L+500
​ ​ ​ ​ ​ ​ ​ ​
4/1/24
​ ​ ​ ​ 13,182 ​ ​ ​ ​ ​ 12,822 ​ ​ ​ ​ ​ 12,894 ​ ​
Warren Resources Inc
​ ​
(g)(s)
​ ​ Energy ​ ​
L+1000, 1.0% PIK (1.0% Max PIK)
 ​ ​ ​ ​ 1.0% ​ ​ ​
5/22/20
​ ​ ​ ​ 6,191 ​ ​ ​ ​ ​ 6,191 ​ ​ ​ ​ ​ 6,191 ​ ​
West Corp
​ ​
(q)
​ ​ Software & Services ​ ​
L+350
​ ​ ​ ​ 1.0% ​ ​ ​
10/10/24
​ ​ ​ ​ 520 ​ ​ ​ ​ ​ 477 ​ ​ ​ ​ ​ 484 ​ ​
West Corp
​ ​
(q)
​ ​ Software & Services ​ ​
L+400
​ ​ ​ ​ 1.0% ​ ​ ​
10/10/24
​ ​ ​ ​ 15,771 ​ ​ ​ ​ ​ 14,486 ​ ​ ​ ​ ​ 14,850 ​ ​
York Risk Services Group Inc
​ ​
(f)(q)
​ ​ Insurance ​ ​
L+375
​ ​ ​ ​ 1.0% ​ ​ ​
10/1/21
​ ​ ​ ​ 7,599 ​ ​ ​ ​ ​ 7,145 ​ ​ ​ ​ ​ 7,152 ​ ​
Zeta Interactive Holdings Corp
​ ​
(g)(h)
​ ​ Software & Services ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​
7/29/22
​ ​ ​ ​ 62,929 ​ ​ ​ ​ ​ 62,929 ​ ​ ​ ​ ​ 63,559 ​ ​
Zeta Interactive Holdings Corp
​ ​
(j)
​ ​ Software & Services ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​
7/29/22
​ ​ ​ ​ 11,143 ​ ​ ​ ​ ​ 11,143 ​ ​ ​ ​ ​ 11,254 ​ ​
Total Senior Secured Loans—First Lien
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2,860,505 ​ ​ ​ ​ ​ 2,812,256 ​ ​
Unfunded Loan Commitments
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (109,733) ​ ​ ​ ​ ​ (109,733) ​ ​
Net Senior Secured Loans—First Lien
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2,750,772 ​ ​ ​ ​ ​ 2,702,523 ​ ​
Senior Secured Loans—Second Lien—14.6% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Advantage Sales & Marketing Inc
​ ​
(q)
​ ​ Commercial & Professional Services ​ ​
L+650
​ ​ ​ ​ 1.0% ​ ​ ​
7/25/22
​ ​ ​ ​ 4,413 ​ ​ ​ ​ ​ 3,488 ​ ​ ​ ​ ​ 3,260 ​ ​
American Bath Group LLC
​ ​
(q)
​ ​ Capital Goods ​ ​
L+975
​ ​ ​ ​ 1.0% ​ ​ ​
9/30/24
​ ​ ​ ​ 314 ​ ​ ​ ​ ​ 312 ​ ​ ​ ​ ​ 314 ​ ​
Ammeraal Beltech Holding BV
​ ​
(i)
​ ​ Capital Goods ​ ​
L+800
​ ​ ​ ​ ​ ​ ​ ​
7/27/26
​ ​ ​ ​ 44,463 ​ ​ ​ ​ ​ 43,610 ​ ​ ​ ​ ​ 43,527 ​ ​
Arena Energy LP
​ ​
(f)(g)
​ ​ Energy ​ ​
L+900, 4.0% PIK (4.0% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
1/24/21
​ ​ ​ ​ 26,125 ​ ​ ​ ​ ​ 26,125 ​ ​ ​ ​ ​ 26,125 ​ ​
athenahealth Inc
​ ​
(h)
​ ​ Health Care Equipment & Services ​ ​
L+850
​ ​ ​ ​ 1.0% ​ ​ ​
2/11/27
​ ​ ​ ​ 55,444 ​ ​ ​ ​ ​ 54,901 ​ ​ ​ ​ ​ 55,721 ​ ​
Bellatrix Exploration Ltd
​ ​
(i)
​ ​ Energy ​ ​
8.5%
​ ​ ​ ​ ​ ​ ​ ​
7/26/23
​ ​ ​ ​ 12,744 ​ ​ ​ ​ ​ 11,931 ​ ​ ​ ​ ​ 11,583 ​ ​
Bellatrix Exploration Ltd
​ ​
(i)(j)
​ ​ Energy ​ ​
8.5%
​ ​ ​ ​ ​ ​ ​ ​
7/26/23
​ ​ ​ ​ 1,248 ​ ​ ​ ​ ​ 1,248 ​ ​ ​ ​ ​ 1,237 ​ ​
Byrider Finance LLC
​ ​ ​ ​ ​ Automobiles & Components ​ ​
L+1000, 0.5% PIK (4.0% Max PIK)
 ​ ​ ​ ​ 1.3% ​ ​ ​
8/22/20
​ ​ ​ ​ 5,946 ​ ​ ​ ​ ​ 5,946 ​ ​ ​ ​ ​ 5,879 ​ ​
CDS US Intermediate Holdings Inc
​ ​
(f)(i)(q)
​ ​ Media ​ ​
L+825
​ ​ ​ ​ 1.0% ​ ​ ​
7/10/23
​ ​ ​ ​ 18,000 ​ ​ ​ ​ ​ 16,171 ​ ​ ​ ​ ​ 16,357 ​ ​
Centric Group LLC
​ ​
(q)
​ ​ Retailing ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​
2/1/24
​ ​ ​ ​ 2,215 ​ ​ ​ ​ ​ 2,177 ​ ​ ​ ​ ​ 2,167 ​ ​
Chisholm Oil & Gas Operating LLC
​ ​ ​ ​ ​ Energy ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​
3/21/24
​ ​ ​ ​ 16,000 ​ ​ ​ ​ ​ 16,000 ​ ​ ​ ​ ​ 15,705 ​ ​
Crossmark Holdings Inc
​ ​
(k)(l)(q)
​ ​ Media ​ ​
L+750
​ ​ ​ ​ 1.3% ​ ​ ​
12/21/20
​ ​ ​ ​ 1,500 ​ ​ ​ ​ ​ 1,340 ​ ​ ​ ​ ​ 11 ​ ​
Fairway Group Holdings Corp
​ ​
(k)(l)(s)
​ ​ Food & Staples Retailing ​ ​
11.0% PIK (11.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
2/24/24
​ ​ ​ ​ 4,051 ​ ​ ​ ​ ​ 3,436 ​ ​ ​ ​ ​ — ​ ​
Grocery Outlet Inc
​ ​
(q)
​ ​ Food & Staples Retailing ​ ​
L+725
​ ​ ​ ​ ​ ​ ​ ​
10/22/26
​ ​ ​ ​ 271 ​ ​ ​ ​ ​ 270 ​ ​ ​ ​ ​ 271 ​ ​
See notes to unaudited consolidated financial statements.
8
TABLE OF CONTENTS
FS Investment Corporation III
 
Unaudited Consolidated Schedule of Investments (continued)
As of March 31, 2019
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Principal
Amount(c)
 ​ ​
Amortized
Cost
​ ​
Fair
Value(d)
 ​
Gruden Acquisition Inc
​ ​
(h)(q)
​ ​ Transportation ​ ​
L+850
​ ​ ​ ​ 1.0% ​ ​ ​
8/18/23
​ ​ ​ $ 10,000 ​ ​ ​ ​ $ 9,719 ​ ​ ​ ​ $ 9,925 ​ ​
Jazz Acquisition Inc
​ ​
(q)
​ ​ Capital Goods ​ ​
L+675
​ ​ ​ ​ 1.0% ​ ​ ​
6/19/22
​ ​ ​ ​ 4,498 ​ ​ ​ ​ ​ 4,326 ​ ​ ​ ​ ​ 4,228 ​ ​
LBM Borrower LLC
​ ​
(f)(q)
​ ​ Capital Goods ​ ​
L+925
​ ​ ​ ​ 1.0% ​ ​ ​
8/20/23
​ ​ ​ ​ 19,910 ​ ​ ​ ​ ​ 19,454 ​ ​ ​ ​ ​ 19,512 ​ ​
One Call Care Management Inc
​ ​
(g)(h)
​ ​ Insurance ​ ​
L+375, 6.0% PIK (6.0% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
4/11/24
​ ​ ​ ​ 2,815 ​ ​ ​ ​ ​ 2,791 ​ ​ ​ ​ ​ 2,568 ​ ​
OPE Inmar Acquisition Inc
​ ​
(f)(q)
​ ​ Software & Services ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​
5/1/25
​ ​ ​ ​ 15,000 ​ ​ ​ ​ ​ 15,000 ​ ​ ​ ​ ​ 14,888 ​ ​
Paradigm Acquisition Corp
​ ​
(q)
​ ​ Health Care Equipment & Services ​ ​
L+750
​ ​ ​ ​ ​ ​ ​ ​
10/26/26
​ ​ ​ ​ 190 ​ ​ ​ ​ ​ 190 ​ ​ ​ ​ ​ 189 ​ ​
Peak 10 Holding Corp
​ ​
(q)
​ ​ Telecommunication Services ​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​
8/1/25
​ ​ ​ ​ 7,902 ​ ​ ​ ​ ​ 7,183 ​ ​ ​ ​ ​ 6,993 ​ ​
Pure Fishing Inc
​ ​ ​ ​ ​ Consumer Durables & Apparel ​ ​
L+838
​ ​ ​ ​ 1.0% ​ ​ ​
12/31/26
​ ​ ​ ​ 39,804 ​ ​ ​ ​ ​ 39,415 ​ ​ ​ ​ ​ 40,041 ​ ​
Rise Baking Company
​ ​
(f)
​ ​ Food, Beverage & Tobacco ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​
8/9/26
​ ​ ​ ​ 15,292 ​ ​ ​ ​ ​ 15,148 ​ ​ ​ ​ ​ 15,024 ​ ​
Sequa Corp
​ ​
(q)
​ ​ Materials ​ ​
L+900
​ ​ ​ ​ 1.0% ​ ​ ​
4/28/22
​ ​ ​ ​ 5,204 ​ ​ ​ ​ ​ 4,919 ​ ​ ​ ​ ​ 5,106 ​ ​
SIRVA Worldwide Inc
​ ​
(q)
​ ​ Commercial & Professional Services ​ ​
L+950
​ ​ ​ ​ ​ ​ ​ ​
8/2/26
​ ​ ​ ​ 2,826 ​ ​ ​ ​ ​ 2,409 ​ ​ ​ ​ ​ 2,487 ​ ​
SMG/PA
​ ​
(q)
​ ​ Consumer Services ​ ​
L+700
​ ​ ​ ​ ​ ​ ​ ​
1/23/26
​ ​ ​ ​ 942 ​ ​ ​ ​ ​ 928 ​ ​ ​ ​ ​ 955 ​ ​
Spencer Gifts LLC
​ ​
(g)(q)(r)
​ ​ Retailing ​ ​
L+825
​ ​ ​ ​ 1.0% ​ ​ ​
6/29/22
​ ​ ​ ​ 16,161 ​ ​ ​ ​ ​ 16,178 ​ ​ ​ ​ ​ 15,434 ​ ​
Titan Energy LLC
​ ​
(g)(k)(l)
​ ​ Energy ​ ​
L+1300 PIK (L+1300 Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
2/3/20
​ ​ ​ ​ 45,287 ​ ​ ​ ​ ​ 33,111 ​ ​ ​ ​ ​ 3,321 ​ ​
UTEX Industries Inc
​ ​
(q)
​ ​ Energy ​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​
5/20/22
​ ​ ​ ​ 1,273 ​ ​ ​ ​ ​ 1,270 ​ ​ ​ ​ ​ 1,186 ​ ​
WireCo WorldGroup Inc
​ ​
(q)
​ ​ Capital Goods ​ ​
L+900
​ ​ ​ ​ 1.0% ​ ​ ​
9/30/24
​ ​ ​ ​ 606 ​ ​ ​ ​ ​ 605 ​ ​ ​ ​ ​ 605 ​ ​
Total Senior Secured Loans—Second Lien
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​
359,601
 ​ ​ ​ ​
​
324,619
 ​ ​
Unfunded Loan Commitment
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1,248) ​ ​ ​ ​ ​ (1,248) ​ ​
Net Senior Secured Loans—Second Lien
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 358,353 ​ ​ ​ ​ ​ 323,371 ​ ​
Other Senior Secured Debt—3.6% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Akzo Nobel Specialty Chemicals
​ ​
(e)(i)(q)
​ ​ Materials ​ ​
8.0%
​ ​ ​ ​ ​ ​ ​ ​
10/1/26
​ ​ ​ ​ 2,288 ​ ​ ​ ​ ​ 2,288 ​ ​ ​ ​ ​ 2,308 ​ ​
APTIM Corp
​ ​
(q)(r)
​ ​ Diversified Financials ​ ​
7.8%
​ ​ ​ ​ ​ ​ ​ ​
6/15/25
​ ​ ​ ​ 11,974 ​ ​ ​ ​ ​ 11,974 ​ ​ ​ ​ ​ 9,265 ​ ​
Black Swan Energy Ltd
​ ​
(i)
​ ​ Energy ​ ​
9.0%
​ ​ ​ ​ ​ ​ ​ ​
1/20/24
​ ​ ​ ​ 1,333 ​ ​ ​ ​ ​ 1,333 ​ ​ ​ ​ ​ 1,320 ​ ​
Diamond Resorts International Inc
​ ​
(h)(q)
​ ​ Consumer Services ​ ​
7.8%
​ ​ ​ ​ ​ ​ ​ ​
9/1/23
​ ​ ​ ​ 11,965 ​ ​ ​ ​ ​ 11,965 ​ ​ ​ ​ ​ 11,980 ​ ​
Genesys Telecommunications Laboratories Inc 
​ ​
(e)(q)
​ ​ Technology Hardware & Equipment ​ ​
10.0%
​ ​ ​ ​ ​ ​ ​ ​
11/30/24
​ ​ ​ ​ 1,409 ​ ​ ​ ​ ​ 1,551 ​ ​ ​ ​ ​ 1,541 ​ ​
JC Penney Corp Inc
​ ​
(e)(i)(q)
​ ​ Retailing ​ ​
5.7%
​ ​ ​ ​ ​ ​ ​ ​
6/1/20
​ ​ ​ ​ 143 ​ ​ ​ ​ ​ 134 ​ ​ ​ ​ ​ 130 ​ ​
JW Aluminum Co
​ ​
(q)
​ ​ Materials ​ ​
10.3%
​ ​ ​ ​ ​ ​ ​ ​
6/1/26
​ ​ ​ ​ 759 ​ ​ ​ ​ ​ 759 ​ ​ ​ ​ ​ 786 ​ ​
Lycra
​ ​
(e)(i)(q)
​ ​ Consumer Durables & Apparel ​ ​
7.5%
​ ​ ​ ​ ​ ​ ​ ​
5/1/25
​ ​ ​ ​ 4,284 ​ ​ ​ ​ ​ 4,319 ​ ​ ​ ​ ​ 4,230 ​ ​
Numericable-SFR
​ ​
(e)(i)(q)
​ ​ Software & Services ​ ​
8.1%
​ ​ ​ ​ ​ ​ ​ ​
2/1/27
​ ​ ​ ​ 2,059 ​ ​ ​ ​ ​ 2,056 ​ ​ ​ ​ ​ 2,085 ​ ​
Pattonair Holdings Ltd
​ ​
(e)(i)(q)
​ ​ Capital Goods ​ ​
9.0%
​ ​ ​ ​ ​ ​ ​ ​
11/1/22
​ ​ ​ ​ 4,660 ​ ​ ​ ​ ​ 4,812 ​ ​ ​ ​ ​ 4,743 ​ ​
Ply Gem Holdings Inc
​ ​
(e)(q)
​ ​ Capital Goods ​ ​
8.0%
​ ​ ​ ​ ​ ​ ​ ​
4/15/26
​ ​ ​ ​ 3,697 ​ ​ ​ ​ ​ 3,614 ​ ​ ​ ​ ​ 3,322 ​ ​
Sorenson Communications LLC
​ ​
(e)(q)
​ ​ Telecommunication Services ​ ​
9.0%, 0.0% PIK (9.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
10/31/20
​ ​ ​ ​ 11,820 ​ ​ ​ ​ ​ 11,655 ​ ​ ​ ​ ​ 11,938 ​ ​
Sunnova Energy Corp
​ ​ ​ ​ ​ Energy ​ ​
6.0%, 6.0% PIK (6.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
7/31/19
​ ​ ​ ​ 1,710 ​ ​ ​ ​ ​ 1,710 ​ ​ ​ ​ ​ 1,704 ​ ​
Velvet Energy Ltd
​ ​
(i)
​ ​ Energy ​ ​
9.0%
​ ​ ​ ​ ​ ​ ​ ​
10/5/23
​ ​ ​ ​ 4,500 ​ ​ ​ ​ ​ 4,500 ​ ​ ​ ​ ​ 4,601 ​ ​
Vivint Inc
​ ​
(e)(h)(q)
​ ​ Commercial & Professional Services ​ ​
7.9%
​ ​ ​ ​ ​ ​ ​ ​
12/1/22
​ ​ ​ ​ 12,886 ​ ​ ​ ​ ​ 12,759 ​ ​ ​ ​ ​ 12,917 ​ ​
See notes to unaudited consolidated financial statements.
9
TABLE OF CONTENTS
FS Investment Corporation III
 
Unaudited Consolidated Schedule of Investments (continued)
As of March 31, 2019
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Principal
Amount(c)
 ​ ​
Amortized
Cost
​ ​
Fair
Value(d)
 ​
Vivint Inc
​ ​
(e)(q)
​ ​ Commercial & Professional Services ​ ​
7.6%
​ ​ ​ ​ ​
9/1/23
​ ​ ​ $ 8,911 ​ ​ ​ ​ $ 8,175 ​ ​ ​ ​ $ 7,604 ​ ​
Total Other Senior Secured Debt
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 83,604 ​ ​ ​ ​ ​ 80,474 ​ ​
Subordinated Debt—14.8% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
All Systems Holding LLC
​ ​ ​ ​ ​ Commercial & Professional Services ​ ​
10.0% PIK (10.0% Max PIK)
​ ​ ​ ​ ​
10/31/22
​ ​ ​ ​ 100 ​ ​ ​ ​ ​ 100 ​ ​ ​ ​ ​ 100 ​ ​
Ascent Resources Utica Holdings LLC/ARU
Finance Corp
​ ​
(e)(q)
​ ​ Energy ​ ​
10.0%
​ ​ ​ ​ ​
4/1/22
​ ​ ​ ​ 19,500 ​ ​ ​ ​ ​ 19,500 ​ ​ ​ ​ ​ 21,358 ​ ​
athenahealth Inc
​ ​ ​ ​ ​ Health Care Equipment & Services ​ ​
L+1125 PIK (L+1125 Max PIK)
​ ​ ​ ​ ​
11/30/25
​ ​ ​ ​ 27,722 ​ ​ ​ ​ ​ 27,722 ​ ​ ​ ​ ​ 28,040 ​ ​
Avantor Inc
​ ​
(g)(h)(q)
​ ​
Pharmaceuticals, Biotechnology & Life Sciences
​ ​
9.0%
 ​ ​ ​ ​ ​
10/1/25
​ ​ ​ ​ 52,500 ​ ​ ​ ​ ​ 52,502 ​ ​ ​ ​ ​ 56,897 ​ ​
Byrider Finance LLC
​ ​ ​ ​ ​ Automobiles & Components ​ ​
20.0% PIK (20.0% Max PIK)
​ ​ ​ ​ ​
3/31/22
​ ​ ​ ​ 321 ​ ​ ​ ​ ​ 321 ​ ​ ​ ​ ​ 321 ​ ​
Calumet Specialty Products
​ ​
(e)(i)(q)
​ ​ Energy ​ ​
7.8%
​ ​ ​ ​ ​
4/15/23
​ ​ ​ ​ 10,300 ​ ​ ​ ​ ​ 10,255 ​ ​ ​ ​ ​ 9,180 ​ ​
Canbriam Energy Inc
​ ​
(e)(i)(q)
​ ​ Energy ​ ​
9.8%
 ​ ​ ​ ​ ​
11/15/19
​ ​ ​ ​ 18,550 ​ ​ ​ ​ ​ 18,525 ​ ​ ​ ​ ​ 15,118 ​ ​
CEC Entertainment Inc
​ ​
(g)(q)
​ ​ Consumer Services ​ ​
8.0%
​ ​ ​ ​ ​
2/15/22
​ ​ ​ ​ 21,186 ​ ​ ​ ​ ​ 20,469 ​ ​ ​ ​ ​ 19,604 ​ ​
ClubCorp Club Operations Inc
​ ​
(e)(q)
​ ​ Consumer Services ​ ​
8.5%
​ ​ ​ ​ ​
9/15/25
​ ​ ​ ​ 12,478 ​ ​ ​ ​ ​ 12,050 ​ ​ ​ ​ ​ 11,397 ​ ​
Diamond Resorts International Inc
​ ​
(e)(q)
​ ​ Consumer Services ​ ​
10.8%
​ ​ ​ ​ ​
9/1/24
​ ​ ​ ​ 3,453 ​ ​ ​ ​ ​ 3,610 ​ ​ ​ ​ ​ 3,274 ​ ​
Eclipse Resources Corp
​ ​
(e)(i)(q)
​ ​ Energy ​ ​
8.9%
​ ​ ​ ​ ​
7/15/23
​ ​ ​ ​ 9,175 ​ ​ ​ ​ ​ 9,053 ​ ​ ​ ​ ​ 8,756 ​ ​
Hub International Ltd
​ ​
(e)(q)
​ ​ Insurance ​ ​
7.0%
​ ​ ​ ​ ​
5/1/26
​ ​ ​ ​ 1,069 ​ ​ ​ ​ ​ 1,041 ​ ​ ​ ​ ​ 1,059 ​ ​
Intelsat Jackson Holdings SA
​ ​
(e)(i)(q)
​ ​ Media ​ ​
5.5%
​ ​ ​ ​ ​
8/1/23
​ ​ ​ ​ 3,577 ​ ​ ​ ​ ​ 3,255 ​ ​ ​ ​ ​ 3,179 ​ ​
Ken Garff Automotive LLC
​ ​
(e)(q)
​ ​ Retailing ​ ​
7.5%
​ ​ ​ ​ ​
8/15/23
​ ​ ​ ​ 4,039 ​ ​ ​ ​ ​ 4,048 ​ ​ ​ ​ ​ 4,105 ​ ​
LifePoint Hospitals Inc
​ ​
(e)(q)
​ ​ Health Care Equipment & Services ​ ​
9.8%
​ ​ ​ ​ ​
12/1/26
​ ​ ​ ​ 6,248 ​ ​ ​ ​ ​ 6,248 ​ ​ ​ ​ ​ 6,490 ​ ​
Logan’s Roadhouse Inc
​ ​
(k)
​ ​ Consumer Services ​ ​ ​ ​ ​ ​ ​ ​
11/1/24
​ ​ ​ ​ 1,317 ​ ​ ​ ​ ​ 1,304 ​ ​ ​ ​ ​ 1,317 ​ ​
PriSo Acquisition Corp
​ ​
(e)(g)(q)
​ ​ Capital Goods ​ ​
9.0%
​ ​ ​ ​ ​
5/15/23
​ ​ ​ ​ 47,859 ​ ​ ​ ​ ​ 47,573 ​ ​ ​ ​ ​ 47,754 ​ ​
Quorum Health Corp
​ ​
(e)(q)
​ ​ Health Care Equipment & Services ​ ​
11.6%
​ ​ ​ ​ ​
4/15/23
​ ​ ​ ​ 2,630 ​ ​ ​ ​ ​ 2,621 ​ ​ ​ ​ ​ 2,368 ​ ​
Sorenson Communications LLC
​ ​
(e)(g)(q)
​ ​ Telecommunication Services ​ ​
13.9%, 0.0% PIK (13.9% Max PIK)
 ​ ​ ​ ​ ​
10/31/21
​ ​ ​ ​ 8,983 ​ ​ ​ ​ ​ 9,223 ​ ​ ​ ​ ​ 9,253 ​ ​
SRS Distribution Inc
​ ​
(e)(q)
​ ​ Capital Goods ​ ​
8.3%
​ ​ ​ ​ ​
7/1/26
​ ​ ​ ​ 13,222 ​ ​ ​ ​ ​ 13,090 ​ ​ ​ ​ ​ 12,726 ​ ​
Stars Group Holdings BV
​ ​
(e)(i)(q)
​ ​ Consumer Services ​ ​
7.0%
​ ​ ​ ​ ​
7/15/26
​ ​ ​ ​ 2,770 ​ ​ ​ ​ ​ 2,770 ​ ​ ​ ​ ​ 2,891 ​ ​
Sungard Availability Services Capital Inc
​ ​
(g)(k)(l)(q)
​ ​ Software & Services ​ ​
8.8%
​ ​ ​ ​ ​
4/1/22
​ ​ ​ ​ 16,400 ​ ​ ​ ​ ​ 12,880 ​ ​ ​ ​ ​ 875 ​ ​
Surgery Partners Holdings LLC
​ ​
(e)(q)
​ ​ Health Care Equipment & Services ​ ​
6.8%
​ ​ ​ ​ ​
7/1/25
​ ​ ​ ​ 997 ​ ​ ​ ​ ​ 954 ​ ​ ​ ​ ​ 904 ​ ​
Team Health Inc
​ ​
(e)(q)
​ ​ Health Care Equipment & Services ​ ​
6.4%
​ ​ ​ ​ ​
2/1/25
​ ​ ​ ​ 9,254 ​ ​ ​ ​ ​ 8,220 ​ ​ ​ ​ ​ 7,536 ​ ​
Vertiv Group Corp
​ ​
(e)(q)
​ ​ Technology Hardware & Equipment ​ ​
9.3%
​ ​ ​ ​ ​
10/15/24
​ ​ ​ ​ 18,690 ​ ​ ​ ​ ​ 18,331 ​ ​ ​ ​ ​ 18,456 ​ ​
Vivint Inc
​ ​
(e)(h)(q)
​ ​ Commercial & Professional Services ​ ​
8.8%
​ ​ ​ ​ ​
12/1/20
​ ​ ​ ​ 4,406 ​ ​ ​ ​ ​ 4,166 ​ ​ ​ ​ ​ 4,345 ​ ​
York Risk Services Group Inc
​ ​
(g)(h)(q)
​ ​ Insurance ​ ​
8.5%
​ ​ ​ ​ ​
10/1/22
​ ​ ​ ​ 36,050 ​ ​ ​ ​ ​ 34,274 ​ ​ ​ ​ ​ 29,291 ​ ​
Total Subordinated Debt
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 344,105 ​ ​ ​ ​ ​ 326,594 ​ ​
​
See notes to unaudited consolidated financial statements.
10
TABLE OF CONTENTS
FS Investment Corporation III
 
Unaudited Consolidated Schedule of Investments (continued)
As of March 31, 2019
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Principal
Amount(c)/​
Shares
​ ​
Amortized
Cost
​ ​
Fair
Value(d)
 ​
Asset Based Finance—7.4% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Altus Power America Inc, Preferred Stock
​ ​
(o)
​ ​ Energy ​ ​
9.0%, 5.0% PIK
​ ​ ​ ​ ​
10/3/23
​ ​ ​ ​ 1,107,723 ​ ​ ​ ​ $ 1,108 ​ ​ ​ ​ $ 1,106 ​ ​
Global Jet Capital LLC, Structured Mezzanine
​ ​
(r)
​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​
1/30/25
​ ​ ​ $ 1,023 ​ ​ ​ ​ ​ 994 ​ ​ ​ ​ ​ 1,006 ​ ​
Global Jet Capital LLC, Structured Mezzanine
​ ​
(r)
​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​
4/30/25
​ ​ ​ $ 6,502 ​ ​ ​ ​ ​ 6,315 ​ ​ ​ ​ ​ 6,396 ​ ​
Global Jet Capital LLC, Structured Mezzanine
​ ​
(r)
​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​
9/3/25
​ ​ ​ $ 1,344 ​ ​ ​ ​ ​ 1,305 ​ ​ ​ ​ ​ 1,322 ​ ​
Global Jet Capital LLC, Structured Mezzanine
​ ​
(r)
​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​
9/29/25
​ ​ ​ $ 1,265 ​ ​ ​ ​ ​ 1,228 ​ ​ ​ ​ ​ 1,244 ​ ​
Global Jet Capital LLC, Structured Mezzanine
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​
12/4/25
​ ​ ​ $ 68,725 ​ ​ ​ ​ ​ 66,753 ​ ​ ​ ​ ​ 67,608 ​ ​
Global Jet Capital LLC, Structured Mezzanine
​ ​
(i)
​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​
12/4/25
​ ​ ​ $ 15,302 ​ ​ ​ ​ ​ 14,863 ​ ​ ​ ​ ​ 15,053 ​ ​
Global Jet Capital LLC, Structured Mezzanine
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​
12/9/25
​ ​ ​ $ 1,581 ​ ​ ​ ​ ​ 1,535 ​ ​ ​ ​ ​ 1,555 ​ ​
Global Jet Capital LLC, Structured Mezzanine
​ ​
(i)
​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​
12/9/25
​ ​ ​ $ 12,162 ​ ​ ​ ​ ​ 11,813 ​ ​ ​ ​ ​ 11,964 ​ ​
Global Jet Capital LLC, Structured Mezzanine
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​
1/29/26
​ ​ ​ $ 5,883 ​ ​ ​ ​ ​ 5,715 ​ ​ ​ ​ ​ 5,788 ​ ​
Global Jet Capital LLC, Structured Mezzanine
​ ​
(i)
​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​
1/29/26
​ ​ ​ $ 1,313 ​ ​ ​ ​ ​ 1,275 ​ ​ ​ ​ ​ 1,292 ​ ​
Global Jet Capital LLC, Structured Mezzanine
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​
2/17/26
​ ​ ​ $ 17,596 ​ ​ ​ ​ ​ 17,091 ​ ​ ​ ​ ​ 17,310 ​ ​
Global Jet Capital LLC, Structured Mezzanine
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​
4/14/26
​ ​ ​ $ 10,897 ​ ​ ​ ​ ​ 10,584 ​ ​ ​ ​ ​ 10,720 ​ ​
Global Jet Capital LLC, Structured Mezzanine
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​
12/2/26
​ ​ ​ $ 16,105 ​ ​ ​ ​ ​ 15,643 ​ ​ ​ ​ ​ 15,843 ​ ​
NewStar Clarendon 2014-1A Class D
​ ​
(i)
​ ​ Diversified Financials ​ ​
20.3%
​ ​ ​ ​ ​
1/25/27
​ ​ ​ $ 8,310 ​ ​ ​ ​ ​ 5,188 ​ ​ ​ ​ ​ 5,537 ​ ​
Total Asset Based Finance
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 161,410 ​ ​ ​ ​ ​ 163,744 ​ ​
​
See notes to unaudited consolidated financial statements.
11
TABLE OF CONTENTS
FS Investment Corporation III
 
Unaudited Consolidated Schedule of Investments (continued)
As of March 31, 2019
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Number of
Shares
​ ​
Cost
​ ​
Fair
Value(d)
 ​
Equity/Other—3.4% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
All Systems Holding LLC, Common Stock
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 600,099 ​ ​ ​ ​ $ 581 ​ ​ ​ ​ $ 819 ​ ​
Altavair NewCo, Private Equity
​ ​
(i)(k)
​ ​ Capital Goods ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2,915,040 ​ ​ ​ ​ ​ 2,915 ​ ​ ​ ​ ​ 2,991 ​ ​
ASG Technologies, Warrants
​ ​
(k)
​ ​ Software & Services ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 6/27/22 ​ ​ ​ ​ ​ 48,325 ​ ​ ​ ​ ​ 1,377 ​ ​ ​ ​ ​ 1,783 ​ ​
Aspect Software Inc, Common Stock
​ ​
(f)(k)
​ ​ Software & Services ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 844,096 ​ ​ ​ ​ ​ 1,369 ​ ​ ​ ​ ​ 1,369 ​ ​
Aspect Software Inc, Warrant
​ ​
(f)(k)
​ ​ Software & Services ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1/15/24 ​ ​ ​ ​ ​ 842,769 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
ATX Networks Corp, Common Stock
​ ​
(i)(k)
​ ​
Technology Hardware & Equipment
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 83,488 ​ ​ ​ ​ ​ 134 ​ ​ ​ ​ ​ 108 ​ ​
Australis Maritime, Private Equity
​ ​
(i)(k)
​ ​ Transportation ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 965,635 ​ ​ ​ ​ ​ 966 ​ ​ ​ ​ ​ 966 ​ ​
Byrider Finance LLC, Common Stock
​ ​
(k)
​ ​ Automobiles & Components ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 278 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Chisholm Oil & Gas Operating LLC, Series A Units
​ ​
(k)(m)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 75,000 ​ ​ ​ ​ ​ 75 ​ ​ ​ ​ ​ 34 ​ ​
CSafe Global, Common Stock
​ ​
(k)
​ ​ Capital Goods ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 173,900 ​ ​ ​ ​ ​ 174 ​ ​ ​ ​ ​ 309 ​ ​
Empire Today LLC, Common Stock
​ ​
(k)
​ ​ Retailing ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 206 ​ ​ ​ ​ ​ 614 ​ ​ ​ ​ ​ 675 ​ ​
Fairway Group Holdings Corp, Common Stock
​ ​
(k)(s)
​ ​ Food & Staples Retailing ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 71,465 ​ ​ ​ ​ ​ 2,296 ​ ​ ​ ​ ​ — ​ ​
Fox Head Inc, Common Stock
​ ​
(k)
​ ​ Consumer Durables & Apparel ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1,142,857 ​ ​ ​ ​ ​ 1,143 ​ ​ ​ ​ ​ 460 ​ ​
FullBeauty Brands Holdings Corp, Common Stock
​ ​
(k)
​ ​ Retailing ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 9,228 ​ ​ ​ ​ ​ 43 ​ ​ ​ ​ ​ 43 ​ ​
Global Jet Capital LLC, Preferred Stock
​ ​
(i)(k)
​ ​
Commercial & Professional Services
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 42,484,416 ​ ​ ​ ​ ​ 42,484 ​ ​ ​ ​ ​ 3,186 ​ ​
Harvest Oil & Gas Corp, Common Stock
​ ​
(k)(q)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 59,445 ​ ​ ​ ​ ​ 1,308 ​ ​ ​ ​ ​ 997 ​ ​
Harvey Industries Inc, Common Stock
​ ​
(k)
​ ​ Capital Goods ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2,000,000 ​ ​ ​ ​ ​ 2,000 ​ ​ ​ ​ ​ 4,050 ​ ​
HM Dunn Co Inc, Preferred Stock, Series A
​ ​
(k)(s)
​ ​ Capital Goods ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1,929 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
HM Dunn Co Inc, Preferred Stock, Series B
​ ​
(k)(s)
​ ​ Capital Goods ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1,929 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Industrial Group Intermediate Holdings LLC, Common Stock
​ ​
(k)(m)
​ ​ Materials ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 220,619 ​ ​ ​ ​ ​ 221 ​ ​ ​ ​ ​ 281 ​ ​
JHC Acquisition LLC, Common Stock
​ ​
(k)
​ ​ Capital Goods ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 8,068 ​ ​ ​ ​ ​ 8,068 ​ ​ ​ ​ ​ 10,468 ​ ​
JSS Holdings Ltd, Net Profits Interest
​ ​
(k)
​ ​ Capital Goods ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 24 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 424 ​ ​
JW Aluminum Co, Common Stock
​ ​
(k)
​ ​ Materials ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 41 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
JW Aluminum Co, Preferred Stock
​ ​ ​ ​ ​ Materials ​ ​
12.5% PIK
​ ​ ​ ​ ​ ​ ​ 11/17/25 ​ ​ ​ ​ ​ 1,003 ​ ​ ​ ​ ​ 5,194 ​ ​ ​ ​ ​ 10,265 ​ ​
North Haven Cadence Buyer Inc, Common Stock
​ ​
(k)
​ ​ Consumer Services ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 833,333 ​ ​ ​ ​ ​ 833 ​ ​ ​ ​ ​ 1,417 ​ ​
Power Distribution Inc, Common Stock
​ ​
(k)
​ ​ Capital Goods ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 923,077 ​ ​ ​ ​ ​ 923 ​ ​ ​ ​ ​ 208 ​ ​
Ridgeback Resources Inc, Common Stock
​ ​
(i)(k)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 827,156 ​ ​ ​ ​ ​ 5,082 ​ ​ ​ ​ ​ 3,932 ​ ​
Sequential Brands Group Inc., Common Stock
​ ​
(k)(q)
​ ​ Consumer Durables & Apparel ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 125,391 ​ ​ ​ ​ ​ 1,693 ​ ​ ​ ​ ​ 160 ​ ​
SSC (Lux) Limited S.a r.l., Common Stock
​ ​
(i)(k)
​ ​ Health Care Equipment & Services ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 113,636 ​ ​ ​ ​ ​ 2,273 ​ ​ ​ ​ ​ 2,784 ​ ​
Sunnova Energy Corp, Common Stock
​ ​
(k)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 577,086 ​ ​ ​ ​ ​ 2,166 ​ ​ ​ ​ ​ 716 ​ ​
Sunnova Energy Corp, Preferred Stock
​ ​
(k)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 105,341 ​ ​ ​ ​ ​ 561 ​ ​ ​ ​ ​ 619 ​ ​
Templar Energy LLC, Common Stock
​ ​
(k)(m)(q)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 129,829 ​ ​ ​ ​ ​ 1,104 ​ ​ ​ ​ ​ 73 ​ ​
See notes to unaudited consolidated financial statements.
12
TABLE OF CONTENTS
FS Investment Corporation III
 
Unaudited Consolidated Schedule of Investments (continued)
As of March 31, 2019
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Number of
Shares
​ ​
Cost
​ ​
Fair
Value(d)
 ​
Templar Energy LLC, Preferred Stock
​ ​
(k)(q)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 86,061 ​ ​ ​ ​ $ 859 ​ ​ ​ ​ $ 215 ​ ​
Titan Energy LLC, Common Stock
​ ​
(k)(q)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 72,739 ​ ​ ​ ​ ​ 2,299 ​ ​ ​ ​ ​ 7 ​ ​
Trace3 Inc, Common Stock
​ ​
(k)
​ ​ Software & Services ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 7,725 ​ ​ ​ ​ ​ 77 ​ ​ ​ ​ ​ 352 ​ ​
Warren Resources Inc, Common Stock
​ ​
(k)(s)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 998,936 ​ ​ ​ ​ ​ 4,695 ​ ​ ​ ​ ​ 2,947 ​ ​
White Star Petroleum LLC, Common Stock
​ ​
(k)(m)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1,738,244 ​ ​ ​ ​ ​ 1,477 ​ ​ ​ ​ ​ 391 ​ ​
Zeta Interactive Holdings Corp, Preferred Stock, Series E-1
​ ​
(k)
​ ​ Software & Services ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1,051,348 ​ ​ ​ ​ ​ 8,357 ​ ​ ​ ​ ​ 11,275 ​ ​
Zeta Interactive Holdings Corp, Preferred Stock, Series F 
​ ​
(k)
​ ​ Software & Services ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 956,233 ​ ​ ​ ​ ​ 8,357 ​ ​ ​ ​ ​ 10,108 ​ ​
Zeta Interactive Holdings Corp, Warrant
​ ​
(k)
​ ​ Software & Services ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 4/20/27 ​ ​ ​ ​ ​ 143,435 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 420 ​ ​
Total Equity/Other
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 111,718 ​ ​ ​ ​ ​ 74,852 ​ ​
TOTAL INVESTMENTS—165.9%
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 3,809,962 ​ ​ ​ ​ ​ 3,671,558 ​ ​
LIABILITIES IN EXCESS OF ASSETS—(65.9%)
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1,458,901) ​ ​
NET ASSETS—100.0%
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 2,212,657 ​ ​
​
Total Return Swap
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Notional
Amount
​ ​ ​ ​ ​
Unrealized
Depreciation
​
Citibank TRS Facility (Note 9)
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 123,158 ​ ​ ​ ​ ​ ​ ​ $ (910) ​ ​
​
A summary of outstanding financial instruments as of March 31, 2019 is as follows:
Interest rate swaps
Counterparty
​ ​
Notional
Amount
​ ​
Company Receives
Floating Rate
​ ​
Company Pays
Fixed Rate
​ ​
Termination
Date
​ ​
Premiums
Paid/​
(Received)
​ ​
Value
​ ​
Unrealized
Appreciation
(Depreciation)
​
JP Morgan Chase Bank
​ ​ ​ $ 120,000 ​ ​ ​
3-Month LIBOR
​ ​ ​ ​ 2.78% ​ ​ ​
12/18/2023
​ ​ ​ $    — ​ ​ ​ ​ $ (3,044) ​ ​ ​ ​ $ (3,044) ​ ​
JP Morgan Chase Bank
​ ​ ​ $ 120,000 ​ ​ ​
3-Month LIBOR
​ ​ ​ ​ 2.81% ​ ​ ​
12/18/2021
​ ​ ​ ​ — ​ ​ ​ ​ ​ (1,731) ​ ​ ​ ​ ​ (1,731) ​ ​
ING Capital Markets
​ ​ ​ $ 150,000 ​ ​ ​
3-Month LIBOR
​ ​ ​ ​ 2.59% ​ ​ ​
1/14/2024
​ ​ ​ ​ — ​ ​ ​ ​ ​ (1,353) ​ ​ ​ ​ ​ (1,353) ​ ​
ING Capital Markets
​ ​ ​ $ 150,000 ​ ​ ​
3-Month LIBOR
​ ​ ​ ​ 2.62% ​ ​ ​
1/14/2022
​ ​ ​ ​ — ​ ​ ​ ​ ​ (2,480) ​ ​ ​ ​ ​ (2,480) ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ — ​ ​ ​ ​ $ (8,608) ​ ​ ​ ​ $ (8,608) ​ ​
​
​
(a)
Security may be an obligation of one or more entities affiliated with the named company.
​
(b)
Certain variable rate securities in the Company’s portfolio bear interest at a rate determined by a publicly disclosed base rate plus a basis point spread. As of March 31, 2019, the three-month London Interbank Offered Rate, or LIBOR or “L”, was 2.60%, the Euro Interbank Offered Rate, or EURIBOR, was (0.31)%, Candian Dollar Offer Rate, or CDOR was 2.02%, and the U.S. Prime Lending Rate, or Prime, was 5.50%. PIK means paid-in-kind. PIK income accruals may be adjusted based on the fair value of the underlying investment.
​
(c)
Denominated in U.S. dollars unless otherwise noted.
​
(d)
Fair value determined by the Company’s board of directors (see Note 8).
​
​
See notes to unaudited consolidated financial statements.
13
TABLE OF CONTENTS
FS Investment Corporation III
 
Unaudited Consolidated Schedule of Investments (continued)
As of March 31, 2019
(in thousands, except share amounts)
​
 
(e)
Security or portion thereof held within Burholme Funding LLC and is pledged as collateral supporting the amounts outstanding under the prime brokerage facility with BNP Paribas Prime Brokerage International, Ltd. (as assignee of BNP Paribas Prime Brokerage, Inc.), or BNPP. Securities held within Burholme Funding LLC may be rehypothecated from time to time as permitted under Rule 15c-1(a)(1) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, subject to the terms and conditions governing the prime brokerage facility with BNPP (see Note 9).
​
(f)
Security or portion thereof held within Dunlap Funding LLC and is pledged as collateral supporting the amounts outstanding under a revolving credit facility with Deutsche Bank AG, New York Branch (see Note 9).
​
(g)
Security or portion thereof held within Jefferson Square Funding LLC and is pledged as collateral supporting the amounts outstanding under a term loan credit facility with JPMorgan Chase Bank, National Association (see Note 9).
​
(h)
Security or portion thereof held within Germantown Funding LLC and is pledged as collateral supporting the amounts outstanding under the notes issued to Society Hill Funding LLC pursuant to an indenture with Citibank, N.A., as trustee (see Note 9).
​
(i)
The investment is not a qualifying asset under the Investment Company Act of 1940, as amended, or the 1940 Act. A business development company may not acquire any asset other than qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets. As of March 31, 2019, 85.3% of the Company’s total assets represented qualifying assets. In addition, the Company also calculates its compliance with the qualifying asset test on a “look through” basis by disregarding the value of the Company’s total return swap and treating each loan underlying the total return swap as either a qualifying asset or non-qualifying asset based on whether the obligor is an eligible portfolio company. On this basis, 85.1% of the Company’s total assets represented qualifying assets as of March 31, 2019.
​
(j)
Security is an unfunded commitment. The stated rate reflects the spread disclosed at the time of commitment and may not indicate the actual rate received upon funding.
​
(k)
Security is non-income producing.
​
(l)
Security was on non-accrual status as of March 31, 2019.
​
(m)
Security held within FSIC III Investments, Inc., a wholly-owned subsidiary of the Company.
​
(n)
Security held within IC III Arches Investments, LLC, a wholly-owned subsidiary of the Company.
​
(o)
Security held within IC III Altus Investments, LLC, a wholly-owned subsidiary of the Company.
​
(p)
Security or portion thereof held within Burholme Funding LLC has been rehypothecated under Rule 15c-1(a)(1) of the Exchange Act, subject to the terms and conditions governing the prime brokerage facility with BNPP (see Note 9). As of March 31, 2019, the fair value of securities rehypothecated by BNPP was $119,829.
​
(q)
Security is classified as Level 1 or Level 2 in the Company’s fair value hierarchy (see Note 8).
​
(r)
Position or portion thereof unsettled as of March 31, 2019.
​
​
See notes to unaudited consolidated financial statements.
14
TABLE OF CONTENTS
FS Investment Corporation III
 
Unaudited Consolidated Schedule of Investments (continued)
As of March 31, 2019
(in thousands, except share amounts)
​
 
(s)
Under the 1940 Act, the Company generally is deemed to be an “affiliated person” of a portfolio company if it owns 5% or more of the portfolio company’s voting securities and generally is deemed to “control” a portfolio company if it owns more than 25% of the portfolio company’s voting securities or it has the power to exercise control over the management or policies of such portfolio company. As of March 31, 2019, the Company held investments in portfolio companies of which it is deemed to be an “affiliated person” but is not deemed to “control.” The following table presents certain financial information with respect to investments in portfolio companies of which the Company was deemed to be an “affiliated person” for the three months ended March 31, 2019:
​
Portfolio Company
​ ​
Fair Value at
December 31, 2018
​ ​
Gross
Additions(1)
 ​ ​
Gross
Reductions(2)
 ​ ​
Net Realized
Gain (Loss)
​ ​
Net Change in
Unrealized
Appreciation
(Depreciation)
​ ​
Fair Value at
March 31, 2019
​ ​
Interest
Income(4)
 ​ ​
PIK
Income(4)
 ​ ​
Fee
Income(4)
 ​
Senior Secured Loans—First Lien ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Aspect Software, Inc.
​ ​ ​ $ 7,328 ​ ​ ​ ​ $ — ​ ​ ​ ​ $ (7,663) ​ ​ ​ ​ $ (2,060) ​ ​ ​ ​ $ 2,395 ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​
Aspect Software, Inc.
​ ​ ​ ​ 9,741 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (10,386) ​ ​ ​ ​ ​ (2,652) ​ ​ ​ ​ ​ 3,297 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Fairway Group Acquisition Co.
​ ​ ​ ​ 6,742 ​ ​ ​ ​ ​ 211 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (6) ​ ​ ​ ​ ​ 6,947 ​ ​ ​ ​ ​ 208 ​ ​ ​ ​ ​ 211 ​ ​ ​ ​ ​ — ​ ​
Fairway Group Acquisition Co.
​ ​ ​ ​ 582 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 15 ​ ​ ​ ​ ​ 597 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Fairway Group Acquisition Co.(3)
 ​ ​ ​ ​ 480 ​ ​ ​ ​ ​ 18 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (1) ​ ​ ​ ​ ​ 497 ​ ​ ​ ​ ​ 18 ​ ​ ​ ​ ​ 18 ​ ​ ​ ​ ​ 8 ​ ​
Fairway Group Acquisition Co.
​ ​ ​ ​ 2,417 ​ ​ ​ ​ ​ 72 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (4) ​ ​ ​ ​ ​ 2,485 ​ ​ ​ ​ ​ 91 ​ ​ ​ ​ ​ 67 ​ ​ ​ ​ ​ — ​ ​
H.M. Dunn Co., Inc.
​ ​ ​ ​ 1,053 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (452) ​ ​ ​ ​ ​ 601 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Warren Resources, Inc.
​ ​ ​ ​ 6,176 ​ ​ ​ ​ ​ 15 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 6,191 ​ ​ ​ ​ ​ 182 ​ ​ ​ ​ ​ 15 ​ ​ ​ ​ ​ — ​ ​
Senior Secured Loans—Second Lien ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Fairway Group Acquisition Co.
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Equity/Other ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Aspect Software Parent, Inc., Common Equity
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (28,097) ​ ​ ​ ​ ​ 28,097 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Fairway Group Holdings Corp., Common Equity
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
HM Dunn Aerosystems, Inc. Preferred Equity, Series A
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
HM Dunn Aerosystems, Inc. Preferred Equity, Series B
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Warren Resources, Inc., Common Equity
​ ​ ​ ​ 2,347 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 600 ​ ​ ​ ​ ​ 2,947 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Total
 ​ ​ ​ $ 36,866 ​ ​ ​ ​ $ 316 ​ ​ ​ ​ $ (18,049) ​ ​ ​ ​ $ (32,809) ​ ​ ​ ​ $ 33,941 ​ ​ ​ ​ $ 20,265 ​ ​ ​ ​ $ 499 ​ ​ ​ ​ $ 311 ​ ​ ​ ​ $ 8 ​ ​
​
​
(1)
Gross additions include increases in the cost basis of investments resulting from new portfolio investments, PIK interest, the amortization of unearned income, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company into this category from a different category.
​
(2)
Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company out of this category into a different category.
​
(3)
Security includes a partially unfunded commitment with an amortized cost of  $1,024 and a fair value of  $1,028.
​
(4)
Interest income, PIK income and fee income presented for the full three months ended March 31, 2019.
​
​
See notes to unaudited consolidated financial statements.
15
TABLE OF CONTENTS
FS Investment Corporation III
 
Consolidated Schedule of Investments
As of December 31, 2018
(in thousands, except share amounts)
​
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Principal
Amount(c)
 ​ ​
Amortized
Cost
​ ​
Fair
Value(d)
 ​
Senior Secured Loans—First Lien—119.6% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
5 Arch Income Fund 2, LLC
​ ​
(i)(n)
​ ​ Diversified Financials ​ ​
9.0%
​ ​ ​ ​ ​ ​ ​ ​
11/18/23
​ ​ ​ $ 144,445 ​ ​ ​ ​ $ 144,593 ​ ​ ​ ​ $ 144,445 ​ ​
5 Arch Income Fund 2, LLC
​ ​
(i)(j)
​ ​ Diversified Financials ​ ​
9.0%
​ ​ ​ ​ ​ ​ ​ ​
11/18/23
​ ​ ​ ​ 3,955 ​ ​ ​ ​ ​ 3,955 ​ ​ ​ ​ ​ 3,955 ​ ​
Acosta Holdco Inc
​ ​
(r)
​ ​
Commercial & Professional Services
​ ​
L+325
​ ​ ​ ​ 1.0% ​ ​ ​
9/26/21
​ ​ ​ ​ 14,294 ​ ​ ​ ​ ​ 10,738 ​ ​ ​ ​ ​ 8,781 ​ ​
Addison Holdings
​ ​
(g)
​ ​
Commercial & Professional Services
​ ​
L+675
​ ​ ​ ​ 1.0% ​ ​ ​
12/29/23
​ ​ ​ ​ 23,952 ​ ​ ​ ​ ​ 23,952 ​ ​ ​ ​ ​ 23,993 ​ ​
Advantage Sales & Marketing Inc
​ ​
(r)(s)
​ ​
Commercial & Professional Services
​ ​
L+325
​ ​ ​ ​ 1.0% ​ ​ ​
7/23/21
​ ​ ​ ​ 16,827 ​ ​ ​ ​ ​ 14,850 ​ ​ ​ ​ ​ 14,948 ​ ​
Aleris International Inc
​ ​
(r)(s)
​ ​ Materials ​ ​
L+475
​ ​ ​ ​ ​ ​ ​ ​
2/27/23
​ ​ ​ ​ 275 ​ ​ ​ ​ ​ 272 ​ ​ ​ ​ ​ 274 ​ ​
All Systems Holding LLC
​ ​
(f)(g)(h)
​ ​
Commercial & Professional Services
​ ​
L+767
​ ​ ​ ​ 1.0% ​ ​ ​
10/31/23
​ ​ ​ ​ 54,011 ​ ​ ​ ​ ​ 54,011 ​ ​ ​ ​ ​ 54,551 ​ ​
Alstom SA
​ ​
(r)(i)
​ ​ Transportation ​ ​
L+450
​ ​ ​ ​ 1.0% ​ ​ ​
8/29/21
​ ​ ​ ​ 7,181 ​ ​ ​ ​ ​ 6,840 ​ ​ ​ ​ ​ 6,872 ​ ​
Altus Power America Inc
​ ​ ​ ​ ​ Energy ​ ​
L+750
​ ​ ​ ​ 1.5% ​ ​ ​
9/30/21
​ ​ ​ ​ 3,183 ​ ​ ​ ​ ​ 3,183 ​ ​ ​ ​ ​ 3,087 ​ ​
Altus Power America Inc
​ ​
(j)
​ ​ Energy ​ ​
L+750
​ ​ ​ ​ 1.5% ​ ​ ​
9/30/21
​ ​ ​ ​ 140 ​ ​ ​ ​ ​ 140 ​ ​ ​ ​ ​ 136 ​ ​
American Tire Distributors Inc
​ ​
(r)
​ ​ Automobiles & Components ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​
8/30/24
​ ​ ​ ​ 9,192 ​ ​ ​ ​ ​ 8,156 ​ ​ ​ ​ ​ 7,568 ​ ​
American Tire Distributors Inc
​ ​
(r)
​ ​ Automobiles & Components ​ ​
L+650, 1.0% PIK (1.0% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
9/1/23
​ ​ ​ ​ 1,447 ​ ​ ​ ​ ​ 1,353 ​ ​ ​ ​ ​ 1,353 ​ ​
Ammeraal Beltech Holding BV
​ ​
(i)(r)
​ ​ Capital Goods ​ ​
E+375
​ ​ ​ ​ ​ ​ ​ ​
7/30/25
​ ​ ​ € 1,268 ​ ​ ​ ​ ​ 1,466 ​ ​ ​ ​ ​ 1,446 ​ ​
Apex Group Limited
​ ​
(i)(j)
​ ​ Diversified Financials ​ ​
L+650
​ ​ ​ ​ ​ ​ ​ ​
6/15/23
​ ​ ​ $ 1,957 ​ ​ ​ ​ ​ 1,902 ​ ​ ​ ​ ​ 1,675 ​ ​
Apex Group Limited
​ ​
(f)(i)
​ ​ Diversified Financials ​ ​
L+650
​ ​ ​ ​ 1.0% ​ ​ ​
6/15/25
​ ​ ​ ​ 13,230 ​ ​ ​ ​ ​ 12,981 ​ ​ ​ ​ ​ 12,706 ​ ​
Apex Group Limited
​ ​
(i)(j)
​ ​ Diversified Financials ​ ​
L+650
​ ​ ​ ​ 1.0% ​ ​ ​
6/15/25
​ ​ ​ ​ 6,382 ​ ​ ​ ​ ​ 6,264 ​ ​ ​ ​ ​ 6,130 ​ ​
Apex Group Limited
​ ​
(i)
​ ​ Diversified Financials ​ ​
L+650
​ ​ ​ ​ 1.0% ​ ​ ​
6/15/25
​ ​ ​ ​ 2,127 ​ ​ ​ ​ ​ 2,049 ​ ​ ​ ​ ​ 2,043 ​ ​
Apex Group Limited
​ ​
(i)(j)
​ ​ Diversified Financials ​ ​
L+650
​ ​ ​ ​ 1.0% ​ ​ ​
6/15/25
​ ​ ​ ​ 3,191 ​ ​ ​ ​ ​ 3,191 ​ ​ ​ ​ ​ 3,065 ​ ​
Aspect Software Inc
​ ​
(l)(t)
​ ​ Software & Services ​ ​
L+400, 6.5% PIK (6.5% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
5/25/20
​ ​ ​ ​ 13,075 ​ ​ ​ ​ ​ 13,038 ​ ​ ​ ​ ​ 9,741 ​ ​
Aspect Software Inc
​ ​
(f)(l)(t)
​ ​ Software & Services ​ ​
L+1100
​ ​ ​ ​ 1.0% ​ ​ ​
5/25/20
​ ​ ​ ​ 9,837 ​ ​ ​ ​ ​ 9,723 ​ ​ ​ ​ ​ 7,328 ​ ​
ATX Networks Corp
​ ​
(h)(i)(r)(s)
​ ​
Technology Hardware & Equipment
​ ​
L+600, 1.0% PIK (1.0% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
6/11/21
​ ​ ​ ​ 14,019 ​ ​ ​ ​ ​ 13,674 ​ ​ ​ ​ ​ 13,318 ​ ​
ATX Networks Corp
​ ​
(g)(h)(i)(r)
​ ​
Technology Hardware & Equipment
​ ​
L+600, 1.0% PIK (1.0% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
6/11/21
​ ​ ​ ​ 28,510 ​ ​ ​ ​ ​ 28,006 ​ ​ ​ ​ ​ 27,085 ​ ​
ATX Networks Corp
​ ​
(i)(r)(s)
​ ​
Technology Hardware & Equipment
​ ​
L+600, 1.0% PIK (1.0% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
6/11/21
​ ​ ​ ​ 797 ​ ​ ​ ​ ​ 749 ​ ​ ​ ​ ​ 757 ​ ​
AVF Parent LLC
​ ​
(f)
​ ​ Retailing ​ ​
L+725
​ ​ ​ ​ 1.3% ​ ​ ​
3/1/24
​ ​ ​ ​ 29,438 ​ ​ ​ ​ ​ 29,438 ​ ​ ​ ​ ​ 27,518 ​ ​
Belk Inc
​ ​
(r)(s)
​ ​ Retailing ​ ​
L+475
​ ​ ​ ​ 1.0% ​ ​ ​
12/12/22
​ ​ ​ ​ 21,929 ​ ​ ​ ​ ​ 17,684 ​ ​ ​ ​ ​ 17,793 ​ ​
Borden Dairy Co
​ ​
(f)(g)
​ ​ Food, Beverage & Tobacco ​ ​
L+808
​ ​ ​ ​ 1.0% ​ ​ ​
7/6/23
​ ​ ​ ​ 48,125 ​ ​ ​ ​ ​ 48,125 ​ ​ ​ ​ ​ 43,760 ​ ​
Brand Energy & Infrastructure Services Inc
​ ​
(r)(s)
​ ​ Capital Goods ​ ​
L+425
​ ​ ​ ​ 1.0% ​ ​ ​
6/21/24
​ ​ ​ ​ 5,468 ​ ​ ​ ​ ​ 5,192 ​ ​ ​ ​ ​ 5,206 ​ ​
Caprock Midstream LLC
​ ​
(s)
​ ​ Energy ​ ​
L+475
​ ​ ​ ​ ​ ​ ​ ​
11/3/25
​ ​ ​ ​ 1,157 ​ ​ ​ ​ ​ 1,076 ​ ​ ​ ​ ​ 1,079 ​ ​
Constellis Holdings LLC/Constellis Finance
Corp
​ ​ ​ ​ ​ Capital Goods ​ ​
L+575
​ ​ ​ ​ 1.0% ​ ​ ​
4/1/22
​ ​ ​ ​ 40,226 ​ ​ ​ ​ ​ 39,628 ​ ​ ​ ​ ​ 39,623 ​ ​
CSafe Global
​ ​ ​ ​ ​ Capital Goods ​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​
11/1/21
​ ​ ​ ​ 261 ​ ​ ​ ​ ​ 261 ​ ​ ​ ​ ​ 263 ​ ​
CSafe Global
​ ​
(j)
​ ​ Capital Goods ​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​
11/1/21
​ ​ ​ ​ 2,348 ​ ​ ​ ​ ​ 2,348 ​ ​ ​ ​ ​ 2,371 ​ ​
CSafe Global
​ ​
(f)
​ ​ Capital Goods ​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​
10/31/23
​ ​ ​ ​ 22,335 ​ ​ ​ ​ ​ 22,335 ​ ​ ​ ​ ​ 22,559 ​ ​
See notes to unaudited consolidated financial statements.
16
TABLE OF CONTENTS
FS Investment Corporation III
 
Consolidated Schedule of Investments (continued)
As of December 31, 2018
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Principal
Amount(c)
 ​ ​
Amortized
Cost
​ ​
Fair
Value(d)
 ​
CSM Bakery Products
​ ​
(r)(s)
​ ​ Food, Beverage & Tobacco ​ ​
L+400
​ ​ ​ ​ 1.0% ​ ​ ​
7/3/20
​ ​ ​ $ 488 ​ ​ ​ ​ $ 458 ​ ​ ​ ​ $ 453 ​ ​
Dade Paper and Bag Co Inc
​ ​ ​ ​ ​ Capital Goods ​ ​
L+700
​ ​ ​ ​ 1.0% ​ ​ ​
6/10/24
​ ​ ​ ​ 5,630 ​ ​ ​ ​ ​ 5,630 ​ ​ ​ ​ ​ 5,405 ​ ​
Dade Paper and Bag Co Inc
​ ​
(g)(h)
​ ​ Capital Goods ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​
6/10/24
​ ​ ​ ​ 44,141 ​ ​ ​ ​ ​ 44,141 ​ ​ ​ ​ ​ 43,258 ​ ​
Dayton Superior Corp
​ ​
(r)(s)
​ ​ Materials ​ ​
L+800, 6.0% PIK (6.0% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
11/15/21
​ ​ ​ ​ 11,790 ​ ​ ​ ​ ​ 9,697 ​ ​ ​ ​ ​ 9,874 ​ ​
Diamond Resorts International Inc
​ ​
(r)(s)
​ ​ Consumer Services ​ ​
L+375
​ ​ ​ ​ 1.0% ​ ​ ​
9/2/23
​ ​ ​ ​ 26,866 ​ ​ ​ ​ ​ 24,919 ​ ​ ​ ​ ​ 25,120 ​ ​
Distribution International Inc
​ ​
(r)(s)
​ ​ Retailing ​ ​
L+500
​ ​ ​ ​ 1.0% ​ ​ ​
12/15/21
​ ​ ​ ​ 370 ​ ​ ​ ​ ​ 326 ​ ​ ​ ​ ​ 329 ​ ​
Eagle Family Foods Inc
​ ​
(j)
​ ​ Food, Beverage & Tobacco ​ ​
L+650
​ ​ ​ ​ 1.0% ​ ​ ​
6/14/23
​ ​ ​ ​ 3,507 ​ ​ ​ ​ ​ 3,472 ​ ​ ​ ​ ​ 2,989 ​ ​
Eagle Family Foods Inc
​ ​
(f)
​ ​ Food, Beverage & Tobacco ​ ​
L+650
​ ​ ​ ​ 1.0% ​ ​ ​
6/14/24
​ ​ ​ ​ 23,263 ​ ​ ​ ​ ​ 23,020 ​ ​ ​ ​ ​ 22,907 ​ ​
Eagleclaw Midstream Ventures LLC
​ ​
(r)(s)
​ ​ Energy ​ ​
L+425
​ ​ ​ ​ 1.0% ​ ​ ​
6/24/24
​ ​ ​ ​ 578 ​ ​ ​ ​ ​ 541 ​ ​ ​ ​ ​ 542 ​ ​
Empire Today LLC
​ ​
(f)(g)
​ ​ Retailing ​ ​
L+700
​ ​ ​ ​ 1.0% ​ ​ ​
11/17/22
​ ​ ​ ​ 44,100 ​ ​ ​ ​ ​ 44,100 ​ ​ ​ ​ ​ 44,180 ​ ​
Fairway Group Holdings Corp
​ ​
(k)(l)(r)(t)
​ ​ Food & Staples Retailing ​ ​
10.0% PIK (10.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
11/27/23
​ ​ ​ ​ 4,437 ​ ​ ​ ​ ​ 3,916 ​ ​ ​ ​ ​ 582 ​ ​
Fairway Group Holdings Corp
​ ​
(t)
​ ​ Food & Staples Retailing ​ ​
12.0% PIK (12.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
11/27/23
​ ​ ​ ​ 6,942 ​ ​ ​ ​ ​ 6,942 ​ ​ ​ ​ ​ 6,742 ​ ​
Fairway Group Holdings Corp
​ ​
(t)
​ ​ Food & Staples Retailing ​ ​
4.0%, 11.0% PIK (11.0% Max PIK)
 ​ ​ ​ ​ ​ ​ ​ ​
8/28/23
​ ​ ​ ​ 480 ​ ​ ​ ​ ​ 473 ​ ​ ​ ​ ​ 480 ​ ​
Fairway Group Holdings Corp
​ ​
(j)(t)
​ ​ Food & Staples Retailing ​ ​
4.0%, 11.0% PIK (11.0% Max PIK)
 ​ ​ ​ ​ ​ ​ ​ ​
8/28/23
​ ​ ​ ​ 1,028 ​ ​ ​ ​ ​ 1,028 ​ ​ ​ ​ ​ 1,028 ​ ​
Fairway Group Holdings Corp
​ ​
(t)
​ ​ Food & Staples Retailing ​ ​
4.0%, 11.0% PIK (11.0% Max PIK)
 ​ ​ ​ ​ ​ ​ ​ ​
8/28/23
​ ​ ​ ​ 2,417 ​ ​ ​ ​ ​ 2,273 ​ ​ ​ ​ ​ 2,417 ​ ​
FHC Health Systems Inc
​ ​
(r)(s)
​ ​
Health Care Equipment & Services
​ ​
L+400
​ ​ ​ ​ 1.0% ​ ​ ​
12/23/21
​ ​ ​ ​ 8,837 ​ ​ ​ ​ ​ 7,306 ​ ​ ​ ​ ​ 7,379 ​ ​
Foresight Energy LLC
​ ​
(i)(r)(s)
​ ​ Materials ​ ​
L+575
​ ​ ​ ​ 1.0% ​ ​ ​
3/28/22
​ ​ ​ ​ 4,925 ​ ​ ​ ​ ​ 4,824 ​ ​ ​ ​ ​ 4,847 ​ ​
Fox Head Inc
​ ​
(f)
​ ​ Consumer Durables & Apparel ​ ​
L+850
​ ​ ​ ​ 1.0% ​ ​ ​
12/19/20
​ ​ ​ ​ 652 ​ ​ ​ ​ ​ 652 ​ ​ ​ ​ ​ 644 ​ ​
Fox Head Inc
​ ​
(f)
​ ​ Consumer Durables & Apparel ​ ​
L+850
​ ​ ​ ​ 1.0% ​ ​ ​
12/19/20
​ ​ ​ ​ 6,097 ​ ​ ​ ​ ​ 6,097 ​ ​ ​ ​ ​ 6,022 ​ ​
FullBeauty Brands Holdings Corp
​ ​
(l)(r)
​ ​ Retailing ​ ​
L+475
​ ​ ​ ​ 1.0% ​ ​ ​
10/14/22
​ ​ ​ ​ 8,116 ​ ​ ​ ​ ​ 2,421 ​ ​ ​ ​ ​ 2,471 ​ ​
Gulf Finance LLC
​ ​
(h)(r)(s)
​ ​ Energy ​ ​
L+525
​ ​ ​ ​ 1.0% ​ ​ ​
8/25/23
​ ​ ​ ​ 14,061 ​ ​ ​ ​ ​ 11,639 ​ ​ ​ ​ ​ 10,845 ​ ​
HM Dunn Co Inc
​ ​
(k)(l)(t)
​ ​ Capital Goods ​ ​
L+875 PIK (L+875 Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
6/30/21
​ ​ ​ ​ 6,583 ​ ​ ​ ​ ​ 5,786 ​ ​ ​ ​ ​ 1,053 ​ ​
Hudson Technologies Co
​ ​
(g)(i)
​ ​
Commercial & Professional Services
​ ​
L+1025
​ ​ ​ ​ 1.0% ​ ​ ​
10/10/23
​ ​ ​ ​ 7,889 ​ ​ ​ ​ ​ 7,822 ​ ​ ​ ​ ​ 5,641 ​ ​
Icynene Group Ltd
​ ​
(f)(g)(h)
​ ​ Materials ​ ​
L+700
​ ​ ​ ​ 1.0% ​ ​ ​
11/30/24
​ ​ ​ ​ 76,230 ​ ​ ​ ​ ​ 76,230 ​ ​ ​ ​ ​ 74,126 ​ ​
Industrial Group Intermediate Holdings
LLC 
 ​ ​
(g)
​ ​ Materials ​ ​
L+800
​ ​ ​ ​ 1.3% ​ ​ ​
5/31/20
​ ​ ​ ​ 9,787 ​ ​ ​ ​ ​ 9,787 ​ ​ ​ ​ ​ 9,726 ​ ​
Intelsat Jackson Holdings SA
​ ​
(i)(r)(s)
​ ​ Media ​ ​
L+375
​ ​ ​ ​ 1.0% ​ ​ ​
11/27/23
​ ​ ​ ​ 13,508 ​ ​ ​ ​ ​ 13,093 ​ ​ ​ ​ ​ 13,137 ​ ​
Ivanti Software Inc
​ ​
(r)(s)
​ ​ Software & Services ​ ​
L+425
​ ​ ​ ​ 1.0% ​ ​ ​
1/20/24
​ ​ ​ ​ 777 ​ ​ ​ ​ ​ 753 ​ ​ ​ ​ ​ 757 ​ ​
JAKKS Pacific Inc
​ ​ ​ ​ ​ Consumer Durables & Apparel ​ ​
L+900
​ ​ ​ ​ 1.5% ​ ​ ​
6/14/21
​ ​ ​ ​ 2,374 ​ ​ ​ ​ ​ 2,359 ​ ​ ​ ​ ​ 2,383 ​ ​
JC Penney Corp Inc
​ ​
(i)(r)(s)
​ ​ Retailing ​ ​
L+425
​ ​ ​ ​ 1.0% ​ ​ ​
6/23/23
​ ​ ​ ​ 2,320 ​ ​ ​ ​ ​ 1,945 ​ ​ ​ ​ ​ 1,992 ​ ​
JHC Acquisition LLC
​ ​
(f)(g)(h)
​ ​ Capital Goods ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​
1/29/24
​ ​ ​ ​ 176,168 ​ ​ ​ ​ ​ 176,168 ​ ​ ​ ​ ​ 176,168 ​ ​
JHC Acquisition LLC
​ ​
(j)
​ ​ Capital Goods ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​
1/29/24
​ ​ ​ ​ 21,787 ​ ​ ​ ​ ​ 21,786 ​ ​ ​ ​ ​ 21,787 ​ ​
Jo-Ann Stores Inc
​ ​
(r)(s)
​ ​ Retailing ​ ​
L+500
​ ​ ​ ​ 1.0% ​ ​ ​
10/20/23
​ ​ ​ ​ 325 ​ ​ ​ ​ ​ 310 ​ ​ ​ ​ ​ 310 ​ ​
Jostens Inc
​ ​
(r)(s)
​ ​ Consumer Services ​ ​
L+550
​ ​ ​ ​ ​ ​ ​ ​
12/19/25
​ ​ ​ ​ 4,152 ​ ​ ​ ​ ​ 4,038 ​ ​ ​ ​ ​ 4,051 ​ ​
See notes to unaudited consolidated financial statements.
17
TABLE OF CONTENTS
FS Investment Corporation III
 
Consolidated Schedule of Investments (continued)
As of December 31, 2018
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Principal
Amount(c)
 ​ ​
Amortized
Cost
​ ​
Fair
Value(d)
 ​
JSS Holdings Ltd
​ ​
(f)(g)
​ ​ Capital Goods ​ ​
L+800, 0.0% PIK (2.5% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
3/31/23
​ ​ ​ $ 65,725 ​ ​ ​ ​ $ 65,222 ​ ​ ​ ​ $ 67,697 ​ ​
Kodiak BP LLC
​ ​
(f)(g)(h)
​ ​ Capital Goods ​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​
12/1/24
​ ​ ​ ​ 90,878 ​ ​ ​ ​ ​ 90,878 ​ ​ ​ ​ ​ 88,947 ​ ​
Kodiak BP LLC
​ ​
(j)
​ ​ Capital Goods ​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​
12/1/24
​ ​ ​ ​ 10,871 ​ ​ ​ ​ ​ 10,871 ​ ​ ​ ​ ​ 10,640 ​ ​
Koosharem LLC
​ ​
(r)(s)
​ ​
Commercial & Professional Services
​ ​
L+450
​ ​ ​ ​ 1.0% ​ ​ ​
4/18/25
​ ​ ​ ​ 1,781 ​ ​ ​ ​ ​ 1,802 ​ ​ ​ ​ ​ 1,752 ​ ​
Lazard Global Compounders Fund
​ ​
(i)
​ ​ Diversified Financials ​ ​
L+725
​ ​ ​ ​ 3.8% ​ ​ ​
4/1/26
​ ​ ​ ​ 101,644 ​ ​ ​ ​ ​ 101,644 ​ ​ ​ ​ ​ 102,406 ​ ​
Lazard Global Compounders Fund
​ ​
(i)(j)
​ ​ Diversified Financials ​ ​
L+725
​ ​ ​ ​ 3.8% ​ ​ ​
4/1/26
​ ​ ​ ​ 17,606 ​ ​ ​ ​ ​ 17,606 ​ ​ ​ ​ ​ 17,738 ​ ​
LBM Borrower LLC
​ ​
(r)(s)
​ ​ Capital Goods ​ ​
L+375
​ ​ ​ ​ 1.0% ​ ​ ​
8/20/22
​ ​ ​ ​ 5,322 ​ ​ ​ ​ ​ 4,966 ​ ​ ​ ​ ​ 4,983 ​ ​
LD Intermediate Holdings Inc
​ ​
(r)(s)
​ ​ Software & Services ​ ​
L+588
​ ​ ​ ​ 1.0% ​ ​ ​
12/9/22
​ ​ ​ ​ 9,500 ​ ​ ​ ​ ​ 8,503 ​ ​ ​ ​ ​ 8,621 ​ ​
Mitel US Holdings Inc
​ ​
(r)(s)
​ ​
Technology Hardware & Equipment
​ ​
L+450
​ ​ ​ ​ ​ ​ ​ ​
11/30/25
​ ​ ​ ​ 8,781 ​ ​ ​ ​ ​ 8,495 ​ ​ ​ ​ ​ 8,534 ​ ​
Monitronics International Inc
​ ​
(i)(r)(s)
​ ​
Commercial & Professional Services
​ ​
L+550
​ ​ ​ ​ 1.0% ​ ​ ​
9/30/22
​ ​ ​ ​ 4,350 ​ ​ ​ ​ ​ 3,915 ​ ​ ​ ​ ​ 3,901 ​ ​
Murray Energy Corp
​ ​ ​ ​ ​ Energy ​ ​
L+900
​ ​ ​ ​ 1.0% ​ ​ ​
2/12/21
​ ​ ​ ​ 9,258 ​ ​ ​ ​ ​ 9,199 ​ ​ ​ ​ ​ 9,216 ​ ​
NaviHealth Inc.
​ ​
(r)(s)
​ ​
Health Care Equipment & Services
​ ​
L+500
​ ​ ​ ​ ​ ​ ​ ​
8/1/25
​ ​ ​ ​ 1,054 ​ ​ ​ ​ ​ 1,020 ​ ​ ​ ​ ​ 997 ​ ​
Navistar Inc
​ ​
(i)(r)(s)
​ ​ Automobiles & Components ​ ​
L+350
​ ​ ​ ​ ​ ​ ​ ​
11/6/24
​ ​ ​ ​ 1,012 ​ ​ ​ ​ ​ 972 ​ ​ ​ ​ ​ 979 ​ ​
North Haven Cadence Buyer Inc
​ ​
(j)
​ ​ Consumer Services ​ ​
L+500
​ ​ ​ ​ 1.0% ​ ​ ​
9/2/21
​ ​ ​ ​ 750 ​ ​ ​ ​ ​ 750 ​ ​ ​ ​ ​ 750 ​ ​
North Haven Cadence Buyer Inc
​ ​
(f)(g)
​ ​ Consumer Services ​ ​
L+777
​ ​ ​ ​ 1.0% ​ ​ ​
9/2/24
​ ​ ​ ​ 18,853 ​ ​ ​ ​ ​ 18,853 ​ ​ ​ ​ ​ 18,665 ​ ​
North Haven Cadence Buyer Inc
​ ​
(j)
​ ​ Consumer Services ​ ​
L+650
​ ​ ​ ​ 1.0% ​ ​ ​
9/2/24
​ ​ ​ ​ 3,000 ​ ​ ​ ​ ​ 3,000 ​ ​ ​ ​ ​ 2,970 ​ ​
P2 Energy Solutions, Inc.
​ ​
(r)(s)
​ ​ Energy ​ ​
L+400
​ ​ ​ ​ 1.3% ​ ​ ​
10/30/20
​ ​ ​ ​ 253 ​ ​ ​ ​ ​ 244 ​ ​ ​ ​ ​ 245 ​ ​
Peak 10 Holding Corp
​ ​
(r)(s)
​ ​ Telecommunication Services ​ ​
L+325
​ ​ ​ ​ 1.0% ​ ​ ​
8/1/24
​ ​ ​ ​ 823 ​ ​ ​ ​ ​ 751 ​ ​ ​ ​ ​ 751 ​ ​
PF Chang’s China Bistro Inc
​ ​
(r)(s)
​ ​ Consumer Services ​ ​
L+500
​ ​ ​ ​ 1.0% ​ ​ ​
9/1/22
​ ​ ​ ​ 359 ​ ​ ​ ​ ​ 347 ​ ​ ​ ​ ​ 350 ​ ​
PHRC License LLC
​ ​
(f)
​ ​ Consumer Services ​ ​
L+850, 0.3% PIK (0.3% Max PIK)
​ ​ ​ ​ 1.5% ​ ​ ​
4/28/22
​ ​ ​ ​ 16,710 ​ ​ ​ ​ ​ 16,710 ​ ​ ​ ​ ​ 17,066 ​ ​
Power Distribution Inc
​ ​ ​ ​ ​ Capital Goods ​ ​
L+725
​ ​ ​ ​ 1.3% ​ ​ ​
1/25/23
​ ​ ​ ​ 19,565 ​ ​ ​ ​ ​ 19,565 ​ ​ ​ ​ ​ 19,565 ​ ​
Production Resource Group LLC
​ ​
(f)(h)
​ ​ Media ​ ​
L+700
​ ​ ​ ​ 1.0% ​ ​ ​
8/21/24
​ ​ ​ ​ 173,008 ​ ​ ​ ​ ​ 173,008 ​ ​ ​ ​ ​ 169,980 ​ ​
Propulsion Acquisition LLC
​ ​
(f)(h)(r)
​ ​ Capital Goods ​ ​
L+600
​ ​ ​ ​ 1.0% ​ ​ ​
7/13/21
​ ​ ​ ​ 60,292 ​ ​ ​ ​ ​ 59,251 ​ ​ ​ ​ ​ 59,689 ​ ​
PSKW LLC
​ ​
(f)(g)(h)
​ ​
Health Care Equipment & Services
​ ​
L+850
​ ​ ​ ​ 1.0% ​ ​ ​
11/25/21
​ ​ ​ ​ 172,364 ​ ​ ​ ​ ​ 172,234 ​ ​ ​ ​ ​ 172,800 ​ ​
Reliant Rehab Hospital Cincinnati LLC
 ​ ​
(g)
​ ​
Health Care Equipment & Services
​ ​
L+675
​ ​ ​ ​ 1.0% ​ ​ ​
8/30/24
​ ​ ​ ​ 46,763 ​ ​ ​ ​ ​ 46,316 ​ ​ ​ ​ ​ 46,623 ​ ​
Roadrunner Intermediate Acquisition Co
LLC
​ ​
(f)(g)(h)
​ ​
Health Care Equipment & Services
​ ​
L+675
​ ​ ​ ​ 1.0% ​ ​ ​
3/15/23
​ ​ ​ ​ 94,042 ​ ​ ​ ​ ​ 94,042 ​ ​ ​ ​ ​ 87,587 ​ ​
Rogue Wave Software Inc
​ ​
(f)(g)(h)
​ ​ Software & Services ​ ​
L+843
​ ​ ​ ​ 1.0% ​ ​ ​
9/25/21
​ ​ ​ ​ 151,900 ​ ​ ​ ​ ​ 151,900 ​ ​ ​ ​ ​ 151,710 ​ ​
Safariland LLC
​ ​
(f)
​ ​ Capital Goods ​ ​
L+765
​ ​ ​ ​ 1.1% ​ ​ ​
11/18/23
​ ​ ​ ​ 42,893 ​ ​ ​ ​ ​ 42,893 ​ ​ ​ ​ ​ 38,443 ​ ​
Savers Inc
​ ​
(r)(s)
​ ​ Retailing ​ ​
L+375
​ ​ ​ ​ 1.3% ​ ​ ​
7/9/19
​ ​ ​ ​ 2,964 ​ ​ ​ ​ ​ 2,823 ​ ​ ​ ​ ​ 2,838 ​ ​
Sequa Corp
​ ​
(r)(s)
​ ​ Materials ​ ​
L+500
​ ​ ​ ​ 1.0% ​ ​ ​
11/28/21
​ ​ ​ ​ 3,672 ​ ​ ​ ​ ​ 3,493 ​ ​ ​ ​ ​ 3,520 ​ ​
Sequel Youth & Family Services LLC
​ ​
(g)
​ ​
Health Care Equipment & Services
​ ​
L+700
​ ​ ​ ​ 1.0% ​ ​ ​
9/1/23
​ ​ ​ ​ 2,271 ​ ​ ​ ​ ​ 2,271 ​ ​ ​ ​ ​ 2,311 ​ ​
Sequel Youth & Family Services LLC
​ ​
(f)
​ ​
Health Care Equipment & Services
​ ​
L+800
​ ​ ​ ​ ​ ​ ​ ​
9/1/23
​ ​ ​ ​ 13,000 ​ ​ ​ ​ ​ 13,000 ​ ​ ​ ​ ​ 13,231 ​ ​
Sequential Brands Group Inc.
​ ​
(f)(g)(h)
​ ​ Consumer Durables & Apparel ​ ​
L+875
​ ​ ​ ​ ​ ​ ​ ​
2/7/24
​ ​ ​ ​ 97,853 ​ ​ ​ ​ ​ 96,047 ​ ​ ​ ​ ​ 97,853 ​ ​
See notes to unaudited consolidated financial statements.
18
TABLE OF CONTENTS
FS Investment Corporation III
 
Consolidated Schedule of Investments (continued)
As of December 31, 2018
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Principal
Amount(c)
 ​ ​
Amortized
Cost
​ ​
Fair
Value(d)
 ​
SI Group Inc
​ ​
(r)(s)
​ ​ Materials ​ ​
L+475
​ ​ ​ ​ ​ ​ ​ ​
10/15/25
​ ​ ​ $ 527 ​ ​ ​ ​ $ 507 ​ ​ ​ ​ $ 508 ​ ​
SIRVA Worldwide Inc
​ ​
(r)(s)
​ ​
Commercial & Professional Services
​ ​
L+550
​ ​ ​ ​ ​ ​ ​ ​
8/2/25
​ ​ ​ ​ 329 ​ ​ ​ ​ ​ 322 ​ ​ ​ ​ ​ 323 ​ ​
Sorenson Communications LLC
​ ​
(f)(r)(s)
​ ​ Telecommunication Services ​ ​
L+575
​ ​ ​ ​ 2.3% ​ ​ ​
4/30/20
​ ​ ​ ​ 45,216 ​ ​ ​ ​ ​ 45,008 ​ ​ ​ ​ ​ 45,047 ​ ​
Spencer Gifts LLC
​ ​
(r)(s)
​ ​ Retailing ​ ​
L+425
​ ​ ​ ​ 1.0% ​ ​ ​
7/16/21
​ ​ ​ ​ 14,530 ​ ​ ​ ​ ​ 13,786 ​ ​ ​ ​ ​ 13,895 ​ ​
SSC (Lux) Limited S.a r.l.
​ ​
(f)(g)(i)
​ ​
Health Care Equipment & Services
​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​
9/10/24
​ ​ ​ ​ 60,820 ​ ​ ​ ​ ​ 60,820 ​ ​ ​ ​ ​ 61,428 ​ ​
Strike LLC
​ ​
(r)(s)
​ ​ Energy ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​
11/30/22
​ ​ ​ ​ 3,155 ​ ​ ​ ​ ​ 3,092 ​ ​ ​ ​ ​ 3,159 ​ ​
Sungard Availability Services Capital
Inc
 ​ ​
(f)(h)(r)(s)
​ ​ Software & Services ​ ​
L+700
​ ​ ​ ​ 1.0% ​ ​ ​
9/30/21
​ ​ ​ ​ 29,092 ​ ​ ​ ​ ​ 28,129 ​ ​ ​ ​ ​ 24,845 ​ ​
Sungard Availability Services Capital
Inc
​ ​
(r)
​ ​ Software & Services ​ ​
L+1000
​ ​ ​ ​ 1.0% ​ ​ ​
10/1/22
​ ​ ​ ​ 2,404 ​ ​ ​ ​ ​ 2,295 ​ ​ ​ ​ ​ 2,333 ​ ​
Sutherland Global Services Inc
​ ​
(i)(r)(s)
​ ​ Software & Services ​ ​
L+538
​ ​ ​ ​ 1.0% ​ ​ ​
4/23/21
​ ​ ​ ​ 9,728 ​ ​ ​ ​ ​ 9,120 ​ ​ ​ ​ ​ 9,185 ​ ​
Sutherland Global Services Inc
​ ​
(i)(r)(s)
​ ​ Software & Services ​ ​
L+538
​ ​ ​ ​ 1.0% ​ ​ ​
4/23/21
​ ​ ​ ​ 2,265 ​ ​ ​ ​ ​ 2,123 ​ ​ ​ ​ ​ 2,138 ​ ​
Swift Worldwide Resources Holdco Ltd
​ ​ ​ ​ ​ Energy ​ ​
L+1000, 1.0% PIK (1.0% Max PIK)
 ​ ​ ​ ​ 1.0% ​ ​ ​
7/20/21
​ ​ ​ ​ 17,228 ​ ​ ​ ​ ​ 17,228 ​ ​ ​ ​ ​ 17,228 ​ ​
Tangoe LLC
​ ​ ​ ​ ​ Software & Services ​ ​
L+650
​ ​ ​ ​ 1.0% ​ ​ ​
11/28/25
​ ​ ​ ​ 44,220 ​ ​ ​ ​ ​ 43,784 ​ ​ ​ ​ ​ 43,778 ​ ​
Trace3 Inc
​ ​
(f)(g)
​ ​ Diversified Financials ​ ​
L+675
​ ​ ​ ​ 1.0% ​ ​ ​
8/5/24
​ ​ ​ ​ 37,578 ​ ​ ​ ​ ​ 37,578 ​ ​ ​ ​ ​ 37,202 ​ ​
Virgin Pulse Inc
​ ​
(f)(g)(h)
​ ​ Software & Services ​ ​
L+650
​ ​ ​ ​ 1.0% ​ ​ ​
5/22/25
​ ​ ​ ​ 67,908 ​ ​ ​ ​ ​ 67,397 ​ ​ ​ ​ ​ 65,796 ​ ​
Vivint Inc
​ ​
(r)(s)
​ ​
Commercial & Professional Services
​ ​
L+500
​ ​ ​ ​ ​ ​ ​ ​
4/1/24
​ ​ ​ ​ 13,215 ​ ​ ​ ​ ​ 12,842 ​ ​ ​ ​ ​ 12,880 ​ ​
Warren Resources Inc
​ ​
(g)(t)
​ ​ Energy ​ ​
L+1000, 1.0% PIK (1.0% Max PIK)
 ​ ​ ​ ​ 1.0% ​ ​ ​
5/22/20
​ ​ ​ ​ 6,176 ​ ​ ​ ​ ​ 6,176 ​ ​ ​ ​ ​ 6,176 ​ ​
West Corp
​ ​
(r)(s)
​ ​ Software & Services ​ ​
L+350
​ ​ ​ ​ 1.0% ​ ​ ​
10/10/24
​ ​ ​ ​ 522 ​ ​ ​ ​ ​ 478 ​ ​ ​ ​ ​ 478 ​ ​
West Corp
​ ​
(r)(s)
​ ​ Software & Services ​ ​
L+400
​ ​ ​ ​ 1.0% ​ ​ ​
10/10/24
​ ​ ​ ​ 15,811 ​ ​ ​ ​ ​ 14,507 ​ ​ ​ ​ ​ 14,566 ​ ​
Westbridge Technologies Inc
​ ​
(r)(s)
​ ​
Technology Hardware & Equipment
​ ​
L+850
​ ​ ​ ​ 1.0% ​ ​ ​
4/28/23
​ ​ ​ ​ 25,441 ​ ​ ​ ​ ​ 25,470 ​ ​ ​ ​ ​ 25,505 ​ ​
York Risk Services Group Inc
​ ​
(r)(s)
​ ​ Insurance ​ ​
L+375
​ ​ ​ ​ 1.0% ​ ​ ​
10/1/21
​ ​ ​ ​ 7,619 ​ ​ ​ ​ ​ 7,146 ​ ​ ​ ​ ​ 7,145 ​ ​
Zeta Interactive Holdings Corp
​ ​
(g)(h)
​ ​ Software & Services ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​
7/29/22
​ ​ ​ ​ 62,929 ​ ​ ​ ​ ​ 62,929 ​ ​ ​ ​ ​ 63,559 ​ ​
Zeta Interactive Holdings Corp
​ ​
(j)
​ ​ Software & Services ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​
7/29/22
​ ​ ​ ​ 11,143 ​ ​ ​ ​ ​ 11,143 ​ ​ ​ ​ ​ 11,254 ​ ​
Total Senior Secured Loans—First Lien
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2,769,596 ​ ​ ​ ​ ​ 2,726,860 ​ ​
Unfunded Loan Commitments
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (87,456) ​ ​ ​ ​ ​ (87,456) ​ ​
Net Senior Secured Loans—First Lien
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2,682,140 ​ ​ ​ ​ ​ 2,639,404 ​ ​
Senior Secured Loans—Second Lien—13.3% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Advantage Sales & Marketing Inc
​ ​
(r)(s)
​ ​
Commercial & Professional Services
​ ​
L+650
​ ​ ​ ​ 1.0% ​ ​ ​
7/25/22
​ ​ ​ ​ 4,413 ​ ​ ​ ​ ​ 3,447 ​ ​ ​ ​ ​ 3,496 ​ ​
American Bath Group LLC
​ ​
(r)(s)
​ ​ Capital Goods ​ ​
L+975
​ ​ ​ ​ 1.0% ​ ​ ​
9/30/24
​ ​ ​ ​ 314 ​ ​ ​ ​ ​ 312 ​ ​ ​ ​ ​ 312 ​ ​
Ammeraal Beltech Holding BV
​ ​
(i)
​ ​ Capital Goods ​ ​
L+800
​ ​ ​ ​ ​ ​ ​ ​
7/27/26
​ ​ ​ ​ 44,463 ​ ​ ​ ​ ​ 43,592 ​ ​ ​ ​ ​ 43,505 ​ ​
Arena Energy LP
​ ​
(f)(g)
​ ​ Energy ​ ​
L+900, 4.0% PIK (4.0% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
1/24/21
​ ​ ​ ​ 25,872 ​ ​ ​ ​ ​ 25,872 ​ ​ ​ ​ ​ 25,872 ​ ​
Bellatrix Exploration Ltd
​ ​
(i)
​ ​ Energy ​ ​
8.5%
​ ​ ​ ​ ​ ​ ​ ​
7/26/23
​ ​ ​ ​ 3,744 ​ ​ ​ ​ ​ 3,744 ​ ​ ​ ​ ​ 3,733 ​ ​
Bellatrix Exploration Ltd
​ ​
(i)(j)
​ ​ Energy ​ ​
8.5%
​ ​ ​ ​ ​ ​ ​ ​
7/26/23
​ ​ ​ ​ 1,248 ​ ​ ​ ​ ​ 1,248 ​ ​ ​ ​ ​ 1,244 ​ ​
See notes to unaudited consolidated financial statements.
19
TABLE OF CONTENTS
FS Investment Corporation III
 
Consolidated Schedule of Investments (continued)
As of December 31, 2018
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Principal
Amount(c)
 ​ ​
Amortized
Cost
​ ​
Fair
Value(d)
 ​
Bellatrix Exploration Ltd
​ ​
(i)
​ ​ Energy ​ ​
8.5%
​ ​ ​ ​ ​ ​ ​ ​
7/26/23
​ ​ ​ $ 9,000 ​ ​ ​ ​ $ 8,151 ​ ​ ​ ​ $ 7,958 ​ ​
Byrider Finance LLC
​ ​ ​ ​ ​ Automobiles & Components ​ ​
L+1000, 0.5% PIK (4.0% Max PIK)
 ​ ​ ​ ​ 1.3% ​ ​ ​
8/22/20
​ ​ ​ ​ 5,939 ​ ​ ​ ​ ​ 5,939 ​ ​ ​ ​ ​ 5,828 ​ ​
CDS US Intermediate Holdings Inc
​ ​
(f)(i)(r)(s)
​ ​ Media ​ ​
L+825
​ ​ ​ ​ 1.0% ​ ​ ​
7/10/23
​ ​ ​ ​ 18,000 ​ ​ ​ ​ ​ 16,110 ​ ​ ​ ​ ​ 15,030 ​ ​
Centric Group LLC
​ ​
(r)(s)
​ ​ Retailing ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​
2/1/24
​ ​ ​ ​ 2,215 ​ ​ ​ ​ ​ 2,176 ​ ​ ​ ​ ​ 2,184 ​ ​
Chisholm Oil & Gas Operating LLC
​ ​ ​ ​ ​ Energy ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​
3/21/24
​ ​ ​ ​ 16,000 ​ ​ ​ ​ ​ 16,000 ​ ​ ​ ​ ​ 15,811 ​ ​
Crossmark Holdings Inc
​ ​
(k)(l)(r)
​ ​ Media ​ ​
L+750
​ ​ ​ ​ 1.3% ​ ​ ​
12/21/20
​ ​ ​ ​ 1,500 ​ ​ ​ ​ ​ 1,340 ​ ​ ​ ​ ​ 60 ​ ​
Fairway Group Holdings Corp
​ ​
(k)(l)(r)(t)
​ ​ Food & Staples Retailing ​ ​
11.0% PIK (11.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
2/24/24
​ ​ ​ ​ 3,941 ​ ​ ​ ​ ​ 3,436 ​ ​ ​ ​ ​ — ​ ​
Grocery Outlet Inc
​ ​
(r)(s)
​ ​ Food & Staples Retailing ​ ​
L+725
​ ​ ​ ​ ​ ​ ​ ​
10/22/26
​ ​ ​ ​ 271 ​ ​ ​ ​ ​ 270 ​ ​ ​ ​ ​ 269 ​ ​
Gruden Acquisition Inc
​ ​
(h)(r)
​ ​ Transportation ​ ​
L+850
​ ​ ​ ​ 1.0% ​ ​ ​
8/18/23
​ ​ ​ ​ 10,000 ​ ​ ​ ​ ​ 9,703 ​ ​ ​ ​ ​ 10,025 ​ ​
Jazz Acquisition Inc
​ ​
(r)(s)
​ ​ Capital Goods ​ ​
L+675
​ ​ ​ ​ 1.0% ​ ​ ​
6/19/22
​ ​ ​ ​ 4,498 ​ ​ ​ ​ ​ 4,317 ​ ​ ​ ​ ​ 4,206 ​ ​
LBM Borrower LLC
​ ​
(r)(s)
​ ​ Capital Goods ​ ​
L+925
​ ​ ​ ​ 1.0% ​ ​ ​
8/20/23
​ ​ ​ ​ 19,910 ​ ​ ​ ​ ​ 19,437 ​ ​ ​ ​ ​ 19,512 ​ ​
One Call Care Management Inc
​ ​
(g)(h)
​ ​ Insurance ​ ​
L+375, 6.0% PIK (6.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
4/11/24
​ ​ ​ ​ 2,772 ​ ​ ​ ​ ​ 2,747 ​ ​ ​ ​ ​ 2,655 ​ ​
OPE Inmar Acquisition Inc
​ ​
(r)(s)
​ ​ Software & Services ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​
5/1/25
​ ​ ​ ​ 15,000 ​ ​ ​ ​ ​ 15,000 ​ ​ ​ ​ ​ 14,850 ​ ​
Paradigm Acquisition Corp
​ ​
(r)(s)
​ ​
Health Care Equipment & Services
​ ​
L+750
​ ​ ​ ​ ​ ​ ​ ​
10/26/26
​ ​ ​ ​ 190 ​ ​ ​ ​ ​ 190 ​ ​ ​ ​ ​ 190 ​ ​
Peak 10 Holding Corp
​ ​
(r)(s)
​ ​ Telecommunication Services ​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​
8/1/25
​ ​ ​ ​ 7,902 ​ ​ ​ ​ ​ 7,177 ​ ​ ​ ​ ​ 7,132 ​ ​
Pure Fishing Inc
​ ​ ​ ​ ​ Consumer Durables & Apparel ​ ​
L+838
​ ​ ​ ​ 1.0% ​ ​ ​
12/31/26
​ ​ ​ ​ 39,804 ​ ​ ​ ​ ​ 39,408 ​ ​ ​ ​ ​ 39,406 ​ ​
Rise Baking Company
​ ​
(f)
​ ​ Food, Beverage & Tobacco ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​
8/9/26
​ ​ ​ ​ 15,292 ​ ​ ​ ​ ​ 15,145 ​ ​ ​ ​ ​ 15,149 ​ ​
Sequa Corp
​ ​
(r)(s)
​ ​ Materials ​ ​
L+900
​ ​ ​ ​ 1.0% ​ ​ ​
4/28/22
​ ​ ​ ​ 5,204 ​ ​ ​ ​ ​ 4,905 ​ ​ ​ ​ ​ 4,944 ​ ​
SIRVA Worldwide Inc
​ ​
(r)(s)
​ ​
Commercial & Professional Services
​ ​
L+950
​ ​ ​ ​ ​ ​ ​ ​
8/2/26
​ ​ ​ ​ 2,826 ​ ​ ​ ​ ​ 2,402 ​ ​ ​ ​ ​ 2,501 ​ ​
SMG/PA
​ ​
(r)(s)
​ ​ Consumer Services ​ ​
L+700
​ ​ ​ ​ ​ ​ ​ ​
1/23/26
​ ​ ​ ​ 942 ​ ​ ​ ​ ​ 928 ​ ​ ​ ​ ​ 931 ​ ​
Spencer Gifts LLC
​ ​
(g)(h)(r)
​ ​ Retailing ​ ​
L+825
​ ​ ​ ​ 1.0% ​ ​ ​
6/29/22
​ ​ ​ ​ 37,000 ​ ​ ​ ​ ​ 36,963 ​ ​ ​ ​ ​ 31,635 ​ ​
TierPoint LLC
​ ​
(r)(s)
​ ​ Software & Services ​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​
5/5/25
​ ​ ​ ​ 7,000 ​ ​ ​ ​ ​ 6,589 ​ ​ ​ ​ ​ 6,646 ​ ​
Titan Energy LLC
​ ​
(g)(k)(l)
​ ​ Energy ​ ​
L+1300 PIK (L+1300 Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
2/23/20
​ ​ ​ ​ 44,037 ​ ​ ​ ​ ​ 33,111 ​ ​ ​ ​ ​ 4,096 ​ ​
UTEX Industries Inc
​ ​
(r)
​ ​ Energy ​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​
5/20/22
​ ​ ​ ​ 1,273 ​ ​ ​ ​ ​ 1,269 ​ ​ ​ ​ ​ 1,101 ​ ​
Winebow Group LLC/The
​ ​
(r)(s)
​ ​ Food & Staples Retailing ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​
1/2/22
​ ​ ​ ​ 4,912 ​ ​ ​ ​ ​ 2,456 ​ ​ ​ ​ ​ 2,701 ​ ​
WireCo WorldGroup Inc
​ ​
(r)(s)
​ ​ Capital Goods ​ ​
L+900
​ ​ ​ ​ 1.0% ​ ​ ​
9/30/24
​ ​ ​ ​ 606 ​ ​ ​ ​ ​ 605 ​ ​ ​ ​ ​ 608 ​ ​
Total Senior Secured Loans—Second Lien
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 333,989 ​ ​ ​ ​ ​ 293,590 ​ ​
Unfunded Loan Commitments
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1,248) ​ ​ ​ ​ ​ (1,248) ​ ​
Net Senior Secured Loans—Second Lien
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 332,741 ​ ​ ​ ​ ​ 292,342 ​ ​
​
See notes to unaudited consolidated financial statements.
20
TABLE OF CONTENTS
FS Investment Corporation III
 
Consolidated Schedule of Investments (continued)
As of December 31, 2018
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Principal
Amount(c)
 ​ ​
Amortized
Cost
​ ​
Fair
Value(d)
 ​
Other Senior Secured Debt—4.3% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Akzo Nobel Specialty Chemicals
​ ​
(e)(i)(r)
​ ​ Materials ​ ​
8.0%
​ ​ ​ ​ ​
10/1/26
​ ​ ​ $ 2,288 ​ ​ ​ ​ $ 2,288 ​ ​ ​ ​ $ 2,142 ​ ​
APTIM Corp
​ ​
(r)
​ ​ Diversified Financials ​ ​
7.8%
​ ​ ​ ​ ​
6/15/25
​ ​ ​ ​ 13,174 ​ ​ ​ ​ ​ 13,174 ​ ​ ​ ​ ​ 9,963 ​ ​
Avantor Inc
​ ​
(r)
​ ​ Pharmaceuticals, Biotechnology & Life Sciences ​ ​
6.0%
​ ​ ​ ​ ​
10/1/24
​ ​ ​ ​ 1,361 ​ ​ ​ ​ ​ 1,361 ​ ​ ​ ​ ​ 1,339 ​ ​
Black Swan Energy Ltd
​ ​
(i)
​ ​ Energy ​ ​
9.0%
​ ​ ​ ​ ​
1/20/24
​ ​ ​ ​ 1,333 ​ ​ ​ ​ ​ 1,333 ​ ​ ​ ​ ​ 1,286 ​ ​
Boyne USA Inc
​ ​
(e)(r)
​ ​ Consumer Services ​ ​
7.3%
​ ​ ​ ​ ​
5/1/25
​ ​ ​ ​ 54 ​ ​ ​ ​ ​ 56 ​ ​ ​ ​ ​ 56 ​ ​
Diamond Resorts International Inc
​ ​
(h)(r)
​ ​ Consumer Services ​ ​
7.8%
​ ​ ​ ​ ​
9/1/23
​ ​ ​ ​ 11,965 ​ ​ ​ ​ ​ 11,965 ​ ​ ​ ​ ​ 11,544 ​ ​
DJO Finance LLC/DJO Finance Corp
​ ​
(e)(r)
​ ​
Health Care Equipment & Services
​ ​
8.1%
​ ​ ​ ​ ​
6/15/21
​ ​ ​ ​ 4,580 ​ ​ ​ ​ ​ 4,611 ​ ​ ​ ​ ​ 4,729 ​ ​
Genesys Telecommunications Laboratories
Inc 
 ​ ​
(r)
​ ​
Technology Hardware & Equipment
​ ​
10.0%
​ ​ ​ ​ ​
11/30/24
​ ​ ​ ​ 1,409 ​ ​ ​ ​ ​ 1,556 ​ ​ ​ ​ ​ 1,482 ​ ​
Global A&T Electronics Ltd
​ ​
(i)(r)
​ ​ Semiconductors & Semiconductor Equipment ​ ​
8.5%
​ ​ ​ ​ ​
1/12/23
​ ​ ​ ​ 7,120 ​ ​ ​ ​ ​ 7,181 ​ ​ ​ ​ ​ 6,319 ​ ​
JC Penney Corp Inc
​ ​
(e)(i)(r)
​ ​ Retailing ​ ​
5.7%
​ ​ ​ ​ ​
6/1/20
​ ​ ​ ​ 143 ​ ​ ​ ​ ​ 133 ​ ​ ​ ​ ​ 115 ​ ​
JW Aluminum Co
​ ​
(r)
​ ​ Materials ​ ​
10.3%
​ ​ ​ ​ ​
6/1/26
​ ​ ​ ​ 759 ​ ​ ​ ​ ​ 759 ​ ​ ​ ​ ​ 757 ​ ​
Lycra
​ ​
(e)(i)(r)
​ ​ Consumer Durables & Apparel ​ ​
7.5%
​ ​ ​ ​ ​
5/1/25
​ ​ ​ ​ 4,284 ​ ​ ​ ​ ​ 4,320 ​ ​ ​ ​ ​ 4,032 ​ ​
Numericable-SFR
​ ​
(e)(i)(r)
​ ​ Software & Services ​ ​
8.1%
​ ​ ​ ​ ​
2/1/27
​ ​ ​ ​ 1,767 ​ ​ ​ ​ ​ 1,767 ​ ​ ​ ​ ​ 1,674 ​ ​
Pattonair Holdings Ltd
​ ​
(e)(i)
​ ​ Capital Goods ​ ​
9.0%
​ ​ ​ ​ ​
11/1/22
​ ​ ​ ​ 4,660 ​ ​ ​ ​ ​ 4,821 ​ ​ ​ ​ ​ 4,708 ​ ​
Ply Gem Holdings Inc
​ ​
(e)(r)
​ ​ Capital Goods ​ ​
8.0%
​ ​ ​ ​ ​
4/15/26
​ ​ ​ ​ 3,697 ​ ​ ​ ​ ​ 3,611 ​ ​ ​ ​ ​ 3,401 ​ ​
Sorenson Communications LLC
​ ​
(r)
​ ​ Telecommunication Services ​ ​
9.0%, 0.0% PIK (9.0% Max PIK)
​ ​ ​ ​ ​
10/31/20
​ ​ ​ ​ 11,820 ​ ​ ​ ​ ​ 11,634 ​ ​ ​ ​ ​ 11,702 ​ ​
Sunnova Energy Corp
​ ​ ​ ​ ​ Energy ​ ​
6.0%, 6.0% PIK (6.0% Max PIK)
​ ​ ​ ​ ​
7/31/19
​ ​ ​ ​ 1,685 ​ ​ ​ ​ ​ 1,685 ​ ​ ​ ​ ​ 1,674 ​ ​
Talos Production LLC
​ ​
(r)
​ ​ Energy ​ ​
11.0%
​ ​ ​ ​ ​
4/3/22
​ ​ ​ ​ 4,500 ​ ​ ​ ​ ​ 4,698 ​ ​ ​ ​ ​ 4,376 ​ ​
Velvet Energy Ltd
​ ​
(i)
​ ​ Energy ​ ​
9.0%
​ ​ ​ ​ ​
10/5/23
​ ​ ​ ​ 4,500 ​ ​ ​ ​ ​ 4,500 ​ ​ ​ ​ ​ 4,536 ​ ​
Vivint Inc
​ ​
(e)(r)
​ ​
Commercial & Professional Services
​ ​
7.6%
​ ​ ​ ​ ​
9/1/23
​ ​ ​ ​ 8,911 ​ ​ ​ ​ ​ 8,142 ​ ​ ​ ​ ​ 7,292 ​ ​
Vivint Inc
​ ​
(e)(h)(r)
​ ​
Commercial & Professional Services
​ ​
7.9%
​ ​ ​ ​ ​
12/1/22
​ ​ ​ ​ 12,886 ​ ​ ​ ​ ​ 12,753 ​ ​ ​ ​ ​ 12,210 ​ ​
Total Other Senior Secured Debt
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 102,348 ​ ​ ​ ​ ​ 95,337 ​ ​
Subordinated Debt—15.8% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
All Systems Holding LLC
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​
10.0% PIK (10.0% Max PIK)
​ ​ ​ ​ ​
10/31/22
​ ​ ​ ​ 100 ​ ​ ​ ​ ​ 100 ​ ​ ​ ​ ​ 100 ​ ​
Ascent Resources Utica Holdings LLC/ARU
Finance Corp
​ ​
(e)(r)
​ ​ Energy ​ ​
10.0%
​ ​ ​ ​ ​
4/1/22
​ ​ ​ ​ 19,500 ​ ​ ​ ​ ​ 19,500 ​ ​ ​ ​ ​ 19,957 ​ ​
Avantor Inc
​ ​
(g)(h)(r)
​ ​ Pharmaceuticals, Biotechnology & Life Sciences ​ ​
9.0%
​ ​ ​ ​ ​
10/1/25
​ ​ ​ ​ 52,500 ​ ​ ​ ​ ​ 52,502 ​ ​ ​ ​ ​ 52,533 ​ ​
Byrider Finance LLC
​ ​ ​ ​ ​ Automobiles & Components ​ ​
20.0% PIK (20.0% Max PIK)
​ ​ ​ ​ ​
3/31/22
​ ​ ​ ​ 292 ​ ​ ​ ​ ​ 292 ​ ​ ​ ​ ​ 292 ​ ​
Calumet Specialty Products
​ ​
(e)(i)(r)
​ ​ Energy ​ ​
7.8%
​ ​ ​ ​ ​
4/15/23
​ ​ ​ ​ 10,300 ​ ​ ​ ​ ​ 10,252 ​ ​ ​ ​ ​ 8,000 ​ ​
See notes to unaudited consolidated financial statements.
21
TABLE OF CONTENTS
FS Investment Corporation III
 
Consolidated Schedule of Investments (continued)
As of December 31, 2018
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Principal
Amount(c)
 ​ ​
Amortized
Cost
​ ​
Fair
Value(d)
 ​
Canbriam Energy Inc
​ ​
(e)(i)(r)
​ ​ Energy ​ ​
7.8%
​ ​ ​ ​ ​ ​ ​ ​
4/15/23
​ ​ ​ $ 18,550 ​ ​ ​ ​ $ 18,517 ​ ​ ​ ​ $ 16,278 ​ ​
CEC Entertainment Inc
​ ​
(g)(r)
​ ​ Consumer Services ​ ​
8.0%
​ ​ ​ ​ ​ ​ ​ ​
2/15/22
​ ​ ​ ​ 37,261 ​ ​ ​ ​ ​ 36,294 ​ ​ ​ ​ ​ 33,535 ​ ​
ClubCorp Club Operations Inc
​ ​
(e)(r)
​ ​ Consumer Services ​ ​
8.5%
​ ​ ​ ​ ​ ​ ​ ​
9/15/25
​ ​ ​ ​ 12,478 ​ ​ ​ ​ ​ 12,036 ​ ​ ​ ​ ​ 11,230 ​ ​
Diamond Resorts International Inc
​ ​
(e)(r)
​ ​ Consumer Services ​ ​
10.8%
​ ​ ​ ​ ​ ​ ​ ​
9/1/24
​ ​ ​ ​ 3,453 ​ ​ ​ ​ ​ 3,615 ​ ​ ​ ​ ​ 3,117 ​ ​
Eclipse Resources Corp
​ ​
(e)(i)(r)
​ ​ Energy ​ ​
8.9%
​ ​ ​ ​ ​ ​ ​ ​
7/15/23
​ ​ ​ ​ 9,175 ​ ​ ​ ​ ​ 9,049 ​ ​ ​ ​ ​ 7,879 ​ ​
Exterran Energy Solutions LP/EES Finance
Corp
​ ​
(i)(r)
​ ​ Energy ​ ​
8.1%
​ ​ ​ ​ ​ ​ ​ ​
5/1/25
​ ​ ​ ​ 4,114 ​ ​ ​ ​ ​ 4,114 ​ ​ ​ ​ ​ 3,966 ​ ​
Great Lakes Dredge & Dock Corp
​ ​
(e)(i)(r)
​ ​ Capital Goods ​ ​
8.0%
​ ​ ​ ​ ​ ​ ​ ​
5/15/22
​ ​ ​ ​ 4,896 ​ ​ ​ ​ ​ 4,899 ​ ​ ​ ​ ​ 4,978 ​ ​
Intelsat Jackson Holdings SA
​ ​
(e)(i)
​ ​ Media ​ ​
5.5%
​ ​ ​ ​ ​ ​ ​ ​
8/1/23
​ ​ ​ ​ 3,577 ​ ​ ​ ​ ​ 3,240 ​ ​ ​ ​ ​ 3,145 ​ ​
Ken Garff Automotive LLC
​ ​
(e)(r)
​ ​ Retailing ​ ​
7.5%
​ ​ ​ ​ ​ ​ ​ ​
8/15/23
​ ​ ​ ​ 4,039 ​ ​ ​ ​ ​ 4,048 ​ ​ ​ ​ ​ 4,009 ​ ​
Lazard Global Compounders Fund
​ ​
(i)(j)
​ ​ Diversified Financials ​ ​
L+650
​ ​ ​ ​ 4.5% ​ ​ ​
9/15/25
​ ​ ​ ​ 39,750 ​ ​ ​ ​ ​ 39,750 ​ ​ ​ ​ ​ 38,907 ​ ​
LifePoint Hospitals Inc
​ ​
(e)(r)
​ ​
Health Care Equipment & Services
​ ​
9.8%
​ ​ ​ ​ ​ ​ ​ ​
12/1/26
​ ​ ​ ​ 6,248 ​ ​ ​ ​ ​ 6,248 ​ ​ ​ ​ ​ 5,953 ​ ​
Logan’s Roadhouse Inc
​ ​
(k)
​ ​ Consumer Services ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
11/1/24
​ ​ ​ ​ 1,317 ​ ​ ​ ​ ​ 1,304 ​ ​ ​ ​ ​ 1,303 ​ ​
PF Chang’s China Bistro Inc
​ ​
(g)(h)(r)
​ ​ Consumer Services ​ ​
10.3%
​ ​ ​ ​ ​ ​ ​ ​
6/30/20
​ ​ ​ ​ 43,108 ​ ​ ​ ​ ​ 42,908 ​ ​ ​ ​ ​ 39,363 ​ ​
PriSo Acquisition Corp
​ ​
(e)(g)(r)
​ ​ Capital Goods ​ ​
9.0%
​ ​ ​ ​ ​ ​ ​ ​
5/15/23
​ ​ ​ ​ 47,859 ​ ​ ​ ​ ​ 47,559 ​ ​ ​ ​ ​ 48,906 ​ ​
Quorum Health Corp
​ ​
(e)(r)
​ ​
Health Care Equipment & Services
​ ​
11.6%
​ ​ ​ ​ ​ ​ ​ ​
4/15/23
​ ​ ​ ​ 2,816 ​ ​ ​ ​ ​ 2,806 ​ ​ ​ ​ ​ 2,684 ​ ​
Sorenson Communications LLC
​ ​
(g)(r)
​ ​ Telecommunication Services ​ ​
13.9%, 0.0% PIK (13.9% Max PIK)
 ​ ​ ​ ​ ​ ​ ​ ​
10/31/21
​ ​ ​ ​ 8,983 ​ ​ ​ ​ ​ 9,244 ​ ​ ​ ​ ​ 9,208 ​ ​
SRS Distribution Inc
​ ​
(e)(r)
​ ​ Capital Goods ​ ​
8.3%
​ ​ ​ ​ ​ ​ ​ ​
7/1/26
​ ​ ​ ​ 13,222 ​ ​ ​ ​ ​ 13,087 ​ ​ ​ ​ ​ 12,164 ​ ​
Stars Group Holdings BV
​ ​
(e)(i)(r)
​ ​ Consumer Services ​ ​
7.0%
​ ​ ​ ​ ​ ​ ​ ​
7/15/26
​ ​ ​ ​ 2,770 ​ ​ ​ ​ ​ 2,770 ​ ​ ​ ​ ​ 2,692 ​ ​
Sungard Availability Services Capital Inc
​ ​
(g)(r)
​ ​ Software & Services ​ ​
8.8%
​ ​ ​ ​ ​ ​ ​ ​
4/1/22
​ ​ ​ ​ 16,400 ​ ​ ​ ​ ​ 12,880 ​ ​ ​ ​ ​ 3,676 ​ ​
Surgery Partners Holdings LLC
​ ​
(e)(r)
​ ​
Health Care Equipment & Services
​ ​
6.8%
​ ​ ​ ​ ​ ​ ​ ​
7/1/25
​ ​ ​ ​ 2,215 ​ ​ ​ ​ ​ 2,113 ​ ​ ​ ​ ​ 1,918 ​ ​
Team Health Inc
​ ​
(e)(r)
​ ​
Health Care Equipment & Services
​ ​
6.4%
​ ​ ​ ​ ​ ​ ​ ​
2/1/25
​ ​ ​ ​ 9,254 ​ ​ ​ ​ ​ 8,187 ​ ​ ​ ​ ​ 7,553 ​ ​
Vertiv Group Corp
​ ​
(e)(r)
​ ​
Technology Hardware & Equipment
​ ​
9.3%
​ ​ ​ ​ ​ ​ ​ ​
10/15/24
​ ​ ​ ​ 18,690 ​ ​ ​ ​ ​ 18,316 ​ ​ ​ ​ ​ 16,634 ​ ​
Vivint Inc
​ ​
(e)(h)(r)
​ ​
Commercial & Professional Services
​ ​
8.8%
​ ​ ​ ​ ​ ​ ​ ​
12/1/20
​ ​ ​ ​ 4,406 ​ ​ ​ ​ ​ 4,135 ​ ​ ​ ​ ​ 4,202 ​ ​
York Risk Services Group Inc
​ ​
(g)(h)(r)
​ ​ Insurance ​ ​
8.5%
​ ​ ​ ​ ​ ​ ​ ​
10/1/22
​ ​ ​ ​ 36,050 ​ ​ ​ ​ ​ 34,162 ​ ​ ​ ​ ​ 25,235 ​ ​
Total Subordinated Debt
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 423,927 ​ ​ ​ ​ ​ 389,417 ​ ​
Unfunded Loan Commitments
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (39,750) ​ ​ ​ ​ ​ (39,750) ​ ​
Net Subordinated Debt
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 384,177 ​ ​ ​ ​ ​ 349,667 ​ ​
​
See notes to unaudited consolidated financial statements.
22
TABLE OF CONTENTS
FS Investment Corporation III
 
Consolidated Schedule of Investments (continued)
As of December 31, 2018
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Principal
Amount(c)/​
Shares
​ ​
Amortized
Cost
​ ​
Fair
Value(d)
 ​
Asset Based Finance—7.3% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Altus Power America Inc, Preferred Stock
​ ​
(o)
​ ​ Energy ​ ​
9.0%, 5.0% PIK
​ ​ ​ ​ ​
10/3/23
​ ​ ​ ​ 1,060,975 ​ ​ ​ ​ $ 1,061 ​ ​ ​ ​ $ 1,045 ​ ​
Global Jet Capital LLC, Structured Mezzanine
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​
1/30/25
​ ​ ​ $ 986 ​ ​ ​ ​ ​ 971 ​ ​ ​ ​ ​ 986 ​ ​
Global Jet Capital LLC, Structured Mezzanine
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​
4/30/25
​ ​ ​ $ 6,267 ​ ​ ​ ​ ​ 6,175 ​ ​ ​ ​ ​ 6,267 ​ ​
Global Jet Capital LLC, Structured Mezzanine
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​
9/3/25
​ ​ ​ $ 1,295 ​ ​ ​ ​ ​ 1,276 ​ ​ ​ ​ ​ 1,295 ​ ​
Global Jet Capital LLC, Structured Mezzanine
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​
9/29/25
​ ​ ​ $ 1,219 ​ ​ ​ ​ ​ 1,201 ​ ​ ​ ​ ​ 1,219 ​ ​
Global Jet Capital LLC, Structured Mezzanine
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​
12/4/25
​ ​ ​ $ 65,587 ​ ​ ​ ​ ​ 64,612 ​ ​ ​ ​ ​ 65,587 ​ ​
Global Jet Capital LLC, Structured Mezzanine
​ ​
(i)
​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​
12/4/25
​ ​ ​ $ 15,402 ​ ​ ​ ​ ​ 15,181 ​ ​ ​ ​ ​ 15,402 ​ ​
Global Jet Capital LLC, Structured Mezzanine
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​
12/9/25
​ ​ ​ $ 1,976 ​ ​ ​ ​ ​ 1,942 ​ ​ ​ ​ ​ 1,976 ​ ​
Global Jet Capital LLC, Structured Mezzanine
​ ​
(i)
​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​
12/9/25
​ ​ ​ $ 11,270 ​ ​ ​ ​ ​ 11,108 ​ ​ ​ ​ ​ 11,270 ​ ​
Global Jet Capital LLC, Structured Mezzanine
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​
1/29/26
​ ​ ​ $ 5,622 ​ ​ ​ ​ ​ 5,539 ​ ​ ​ ​ ​ 5,622 ​ ​
Global Jet Capital LLC, Structured Mezzanine
​ ​
(i)
​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​
1/29/26
​ ​ ​ $ 1,314 ​ ​ ​ ​ ​ 1,295 ​ ​ ​ ​ ​ 1,314 ​ ​
Global Jet Capital LLC, Structured Mezzanine
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​
2/17/26
​ ​ ​ $ 16,960 ​ ​ ​ ​ ​ 16,709 ​ ​ ​ ​ ​ 16,960 ​ ​
Global Jet Capital LLC, Structured Mezzanine
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​
4/14/26
​ ​ ​ $ 10,503 ​ ​ ​ ​ ​ 10,348 ​ ​ ​ ​ ​ 10,503 ​ ​
Global Jet Capital LLC, Structured Mezzanine
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​
12/2/26
​ ​ ​ $ 15,523 ​ ​ ​ ​ ​ 15,294 ​ ​ ​ ​ ​ 15,523 ​ ​
NewStar Clarendon 2014-1A Class Subord. B 
 ​ ​
(i)
​ ​ Diversified Financials ​ ​
L+435
​ ​ ​ ​ ​
1/25/27
​ ​ ​ $ 730 ​ ​ ​ ​ ​ 698 ​ ​ ​ ​ ​ 727 ​ ​
NewStar Clarendon 2014-1A Class D
​ ​
(i)
​ ​ Diversified Financials ​ ​
13.2%
​ ​ ​ ​ ​
1/25/27
​ ​ ​ $ 8,310 ​ ​ ​ ​ ​ 5,310 ​ ​ ​ ​ ​ 5,928 ​ ​
Total Asset Based Finance
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 158,720 ​ ​ ​ ​ ​ 161,624 ​ ​
​
See notes to unaudited consolidated financial statements.
23
TABLE OF CONTENTS
FS Investment Corporation III
 
Consolidated Schedule of Investments (continued)
As of December 31, 2018
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Number of
Shares
​ ​
Cost
​ ​
Fair
Value(d)
 ​
Equity/Other—4.3% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
5 Arch Income Fund 2, LLC, Common Stock
​ ​
(i)(m)
​ ​ Diversified Financials ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 56,000 ​ ​ ​ ​ $ 1,381 ​ ​ ​ ​ $ 2,800 ​ ​
All Systems Holding LLC, Common Stock
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 60 ​ ​ ​ ​ ​ 581 ​ ​ ​ ​ ​ 670 ​ ​
Altus Power America Inc, Common Stock
​ ​
(k)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 462,008 ​ ​ ​ ​ ​ 462 ​ ​ ​ ​ ​ 81 ​ ​
ASG Technologies, Warrants
​ ​
(k)
​ ​ Software & Services ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 6/27/22 ​ ​ ​ ​ ​ 48,325 ​ ​ ​ ​ ​ 1,377 ​ ​ ​ ​ ​ 1,403 ​ ​
Aspect Software Inc, Common Stock
​ ​
(k)(t)
​ ​ Software & Services ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 108,806 ​ ​ ​ ​ ​ 28,097 ​ ​ ​ ​ ​ — ​ ​
ATX Networks Corp, Common Stock
​ ​
(i)(k)
​ ​ Technology Hardware & Equipment ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 83,488 ​ ​ ​ ​ ​ 134 ​ ​ ​ ​ ​ 65 ​ ​
Australis Maritime, Private Equity
​ ​
(i)(k)
​ ​ Transportation ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 966 ​ ​ ​ ​ ​ 966 ​ ​ ​ ​ ​ 966 ​ ​
Byrider Finance LLC, Common Stock
​ ​
(k)
​ ​ Automobiles & Components ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 278 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Chisholm Oil & Gas Operating LLC, Series A Units
​ ​
(k)(m)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 75,000 ​ ​ ​ ​ ​ 75 ​ ​ ​ ​ ​ 32 ​ ​
CSafe Global, Common Stock
​ ​
(k)
​ ​ Capital Goods ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 173,900 ​ ​ ​ ​ ​ 174 ​ ​ ​ ​ ​ 243 ​ ​
Empire Today LLC, Common Stock
​ ​
(k)
​ ​ Retailing ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 206 ​ ​ ​ ​ ​ 614 ​ ​ ​ ​ ​ 595 ​ ​
Fairway Group Holdings Corp, Common Stock
​ ​
(k)(t)
​ ​ Food & Staples Retailing ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 71,465 ​ ​ ​ ​ ​ 2,296 ​ ​ ​ ​ ​ — ​ ​
Fox Head Inc, Common Stock
​ ​
(k)
​ ​ Consumer Durables & Apparel ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 11,429 ​ ​ ​ ​ ​ 11 ​ ​ ​ ​ ​ 5 ​ ​
Fox Head Inc, Common Stock
​ ​
(k)
​ ​ Consumer Durables & Apparel ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1,131,428 ​ ​ ​ ​ ​ 1,131 ​ ​ ​ ​ ​ 504 ​ ​
Global Jet Capital LLC, Preferred Stock
​ ​
(k)
​ ​
Commercial & Professional Services
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 34,893,581 ​ ​ ​ ​ ​ 34,894 ​ ​ ​ ​ ​ 4,885 ​ ​
Global Jet Capital LLC, Preferred Stock
​ ​
(i)(k)
​ ​
Commercial & Professional Services
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 7,590,835 ​ ​ ​ ​ ​ 7,591 ​ ​ ​ ​ ​ 1,063 ​ ​
Harvest Oil & Gas Corp, Common Stock
​ ​
(k)(r)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 59,445 ​ ​ ​ ​ ​ 1,308 ​ ​ ​ ​ ​ 1,069 ​ ​
Harvey Industries Inc, Common Stock
​ ​
(k)
​ ​ Capital Goods ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2,000,000 ​ ​ ​ ​ ​ 2,000 ​ ​ ​ ​ ​ 4,050 ​ ​
HM Dunn Co Inc, Preferred Stock, Series A
​ ​
(k)(t)
​ ​ Capital Goods ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1,929 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
HM Dunn Co Inc, Preferred Stock, Series B
​ ​
(k)(t)
​ ​ Capital Goods ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1,929 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Industrial Group Intermediate Holdings LLC, Common
Stock
​ ​
(k)(m)
​ ​ Materials ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 220,619 ​ ​ ​ ​ ​ 221 ​ ​ ​ ​ ​ 132 ​ ​
JHC Acquisition LLC, Common Stock
​ ​
(k)
​ ​ Capital Goods ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 8,068 ​ ​ ​ ​ ​ 8,068 ​ ​ ​ ​ ​ 10,831 ​ ​
JSS Holdings Ltd, Net Profits Interest
​ ​
(k)
​ ​ Capital Goods ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 426 ​ ​
JW Aluminum Co, Common Stock
​ ​
(k)
​ ​ Materials ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 41 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
JW Aluminum Co, Preferred Stock
​ ​ ​ ​ ​ Materials ​ ​
12.5% PIK
​ ​ ​ ​ ​ ​ ​ 11/17/2025 ​ ​ ​ ​ ​ 1,087 ​ ​ ​ ​ ​ 4,836 ​ ​ ​ ​ ​ 9,041 ​ ​
North Haven Cadence Buyer Inc, Common Equity
​ ​
(k)
​ ​ Consumer Services ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 833,333 ​ ​ ​ ​ ​ 833 ​ ​ ​ ​ ​ 1,271 ​ ​
Power Distribution Inc, Common Stock
​ ​
(k)
​ ​ Capital Goods ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 923,077 ​ ​ ​ ​ ​ 923 ​ ​ ​ ​ ​ 485 ​ ​
Ridgeback Resources Inc, Common Stock
​ ​
(i)(k)(q)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 827,156 ​ ​ ​ ​ ​ 5,082 ​ ​ ​ ​ ​ 4,092 ​ ​
Sequential Brands Group Inc., Common Stock
​ ​
(k)(r)
​ ​ Consumer Durables & Apparel ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 125,391 ​ ​ ​ ​ ​ 1,693 ​ ​ ​ ​ ​ 100 ​ ​
See notes to unaudited consolidated financial statements.
24
TABLE OF CONTENTS
FS Investment Corporation III
 
Consolidated Schedule of Investments (continued)
As of December 31, 2018
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Number of
Shares
​ ​
Cost
​ ​
Fair
Value(d)
 ​
SSC (Lux) Limited S.a r.l., Common Stock
​ ​
(i)(k)
​ ​
Health Care Equipment & Services
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 113,636 ​ ​ ​ ​ $ 2,273 ​ ​ ​ ​ $ 2,784 ​ ​
Sunnova Energy Corp, Common Stock
​ ​
(k)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 577,086 ​ ​ ​ ​ ​ 2,166 ​ ​ ​ ​ ​ — ​ ​
Sunnova Energy Corp, Preferred Stock
​ ​
(k)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 105,341 ​ ​ ​ ​ ​ 561 ​ ​ ​ ​ ​ 578 ​ ​
Templar Energy LLC, Common Stock
​ ​
(k)(m)(r)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 129,829 ​ ​ ​ ​ ​ 1,103 ​ ​ ​ ​ ​ 81 ​ ​
Templar Energy LLC, Preferred Stock
​ ​
(k)(r)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 86,061 ​ ​ ​ ​ ​ 859 ​ ​ ​ ​ ​ 258 ​ ​
Titan Energy LLC, Common Stock
​ ​
(k)(r)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 72,739 ​ ​ ​ ​ ​ 2,299 ​ ​ ​ ​ ​ 22 ​ ​
Trace3 Inc, Common Stock
​ ​ ​ ​ ​ Diversified Financials ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 7,725 ​ ​ ​ ​ ​ 77 ​ ​ ​ ​ ​ 143 ​ ​
Warren Resources Inc, Common Stock
​ ​
(k)(t)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 998,936 ​ ​ ​ ​ ​ 4,695 ​ ​ ​ ​ ​ 2,347 ​ ​
White Star Petroleum LLC
​ ​
(k)(m)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1,738,244 ​ ​ ​ ​ ​ 1,477 ​ ​ ​ ​ ​ 565 ​ ​
Zeta Interactive Holdings Corp, Preferred Stock, Series E - 1
​ ​
(k)
​ ​ Software & Services ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1,051,348 ​ ​ ​ ​ ​ 8,357 ​ ​ ​ ​ ​ 11,053 ​ ​
Zeta Interactive Holdings Corp, Preferred Stock, Series F 
 ​ ​
(k)
​ ​ Software & Services ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 956,233 ​ ​ ​ ​ ​ 8,357 ​ ​ ​ ​ ​ 9,862 ​ ​
Zeta Interactive Holdings Corp, Warrant
​ ​
(k)
​ ​ Software & Services ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 4/20/2027 ​ ​ ​ ​ ​ 143,435 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 407 ​ ​
Total Equity/Other
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 136,972 ​ ​ ​ ​ ​ 72,909 ​ ​
TOTAL INVESTMENTS—163.6%
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 3,797,098 ​ ​ ​ ​ ​ 3,611,283 ​ ​
LIABILITIES IN EXCESS OF OTHER ASSETS—(63.6%)
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​
(1,404,312)
 ​ ​
NET ASSETS—100.0%
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 2,206,971 ​ ​
​
Total Return Swap
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Notional
Amount
​ ​ ​ ​ ​
Unrealized
Depreciation
​
Citibank TRS Facility (Note 8)
​ ​
(i)
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 145,371 ​ ​ ​ ​ ​ ​ ​ $ (22,062) ​ ​
A summary of outstanding financial instruments as of December 31, 2018 is as follows:
Interest rate swaps
Counterparty
​ ​
Notional
Amount
​ ​
Company Receives
Floating Rate
​ ​
Company Pays
Fixed Rate
​ ​
Termination
Date
​ ​
Premiums
Paid/​
(Received)
​ ​
Value
​ ​
Unrealized
Depreciation
​
JP Morgan Chase Bank
​ ​ ​ $ 120,000 ​ ​ ​
3-Month LIBOR
​ ​ ​ ​ 2.78% ​ ​ ​
12/18/2023
​ ​ ​ $ — ​ ​ ​ ​ $ (1,636) ​ ​ ​ ​ $ (1,636) ​ ​
JP Morgan Chase Bank
​ ​ ​ $ 120,000 ​ ​ ​
3-Month LIBOR
​ ​ ​ ​ 2.81% ​ ​ ​
12/18/2021
​ ​ ​ ​ — ​ ​ ​ ​ ​ (978) ​ ​ ​ ​ ​ (978) ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ — ​ ​ ​ ​ $ (2,614) ​ ​ ​ ​ $ (2,614) ​ ​
​
​
(a)
Security may be an obligation of one or more entities affiliated with the named company.
​
(b)
Certain variable rate securities in the Company’s portfolio bear interest at a rate determined by a publicly disclosed base rate plus a basis point spread. As of December 31, 2018, the three-month London Interbank Offered Rate, or LIBOR or L, was 2.81% and the U.S. Prime Lending Rate, or Prime, was 5.50%. PIK means paid-in-kind. 
​
​
See notes to unaudited consolidated financial statements.
25
TABLE OF CONTENTS
FS Investment Corporation III
 
Consolidated Schedule of Investments (continued)
As of December 31, 2018
(in thousands, except share amounts)
​
 
(c)
Denominated in U.S. dollars unless otherwise noted.
​
(d)
Fair value determined by the Company’s board of directors (see Note 8).
​
(e)
Security or portion thereof held within Burholme Funding LLC and is pledged as collateral supporting the amounts outstanding under the prime brokerage facility with BNP Paribas Prime Brokerage International, Ltd. (as assignee of BNP Paribas Prime Brokerage, Inc.), or BNPP. Securities held within Burholme Funding LLC may be rehypothecated from time to time as permitted under Rule 15c-1(a)(1) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, subject to the terms and conditions governing the prime brokerage facility with BNPP (see Note 9).
​
(f)
Security or portion thereof held within Dunlap Funding LLC and is pledged as collateral supporting the amounts outstanding under a revolving credit facility with Deutsche Bank AG, New York Branch (see Note 9).
​
(g)
Security or portion thereof held within Jefferson Square Funding LLC and is pledged as collateral supporting the amounts outstanding under a term loan credit facility with JPMorgan Chase Bank, National Association (see Note 9).
​
(h)
Security or portion thereof held within Germantown Funding LLC and is pledged as collateral supporting the amounts outstanding under the notes issued to Society Hill Funding LLC pursuant to an indenture with Citibank, N.A., as trustee (see Note 9).
​
(i)
The investment is not a qualifying asset under the Investment Company Act of 1940, as amended, or the 1940 Act. A business development company may not acquire any asset other than qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets. As of December 31, 2018, 84.3% of the Company’s total assets represented qualifying assets. In addition, as described in Note 9, the Company also calculates its compliance with the qualifying asset test on a “look through” basis by disregarding the value of the Company’s total return swap and treating each loan underlying the total return swap as either a qualifying asset or non-qualifying asset based on whether the obligor is an eligible portfolio company. On this basis, 83.7% of the Company’s total assets represented qualifying assets as of December 31, 2018.
​
(j)
Security is an unfunded commitment. The stated rate reflects the spread disclosed at the time of commitment and may not indicate the actual rate received upon funding.
​
(k)
Security is non-income producing.
​
(l)
Security was on non-accrual status as of December 31, 2018.
​
(m)
Security held within FSIC III Investments, Inc., a wholly-owned subsidiary of the Company.
​
(n)
Security held within IC III Arches Investments, LLC, a wholly-owned subsidiary of the Company.
​
(o)
Security held within IC III Altus Investments, LLC, a wholly-owned subsidiary of the Company.
​
(p)
Security or portion thereof held within Burholme Funding LLC has been rehypothecated under Rule 15c-1(a)(1) of the Exchange Act, subject to the terms and conditions governing the prime brokerage facility with BNPP (see Note 9). As of December 31, 2018, the fair value of securities rehypothecated by BNPP was $114,799.
​
(q)
Investment denominated in Canadian dollars. Cost and fair value are converted into U.S. dollars at an exchange rate of CAD $1.00 to USD $0.73 as of December 31, 2018.
​
(r)
Security is classified as Level 1 or 2 in the Company’s fair value hierarchy (see Note 8).
​
(s)
Position or portion thereof unsettled as of December 31, 2018.
​
​
See notes to unaudited consolidated financial statements.
26
TABLE OF CONTENTS
FS Investment Corporation III
 
Consolidated Schedule of Investments (continued)
As of December 31, 2018
(in thousands, except share amounts)
​
 
(t)
Under the 1940 Act, the Company generally is deemed to be an “affiliated person” of a portfolio company if it owns 5% or more of the portfolio company’s voting securities and generally is deemed to “control” a portfolio company if it owns more than 25% of the portfolio company’s voting securities or it has the power to exercise control over the management or policies of such portfolio company. As of December 31, 2018, the Company held investments in portfolio companies of which it is deemed to be an “affiliated person” but is not deemed to “control.” The following table presents certain financial information with respect to investments in portfolio companies of which the Company was deemed to be an “affiliated person” for the year ended December 31, 2018:
​
Portfolio Company
​ ​
Fair Value at
December 31,
2017
​ ​
Transfers In
or Out
​ ​
Purchases and
Paid-in-Kind
Interest
​ ​
Sales and
Repayments
​ ​
Accretion of
Discount
​ ​
Net Realized
Gain (Loss)
​ ​
Net Change in
Unrealized
Appreciation
(Depreciation)
​ ​
Fair Value at
December 31,
2018
​ ​
Interest
Income
​ ​
PIK
Income
​ ​
Fee
Income
​
Senior Secured Loans—First Lien ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Aspect Software, Inc.
​ ​ ​ $ 5,004 ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​ ​ ​ $ (5,004) ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​ ​ ​ $ 286 ​ ​ ​ ​ $ — ​ ​ ​ ​ $ 6 ​ ​
Aspect Software, Inc.
​ ​ ​ ​ 9,156 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 195 ​ ​ ​ ​ ​ (371) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (1,652) ​ ​ ​ ​ ​ 7,328 ​ ​ ​ ​ ​ 1,144 ​ ​ ​ ​ ​ 195 ​ ​ ​ ​ ​ 293 ​ ​
Aspect Software, Inc.(1)
 ​ ​ ​ ​ (1,822) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,822 ​ ​ ​ ​ ​ (1,822) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,822 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 22 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 4 ​ ​
Aspect Software, Inc.
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 13,195 ​ ​ ​ ​ ​ (157) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (3,297) ​ ​ ​ ​ ​ 9,741 ​ ​ ​ ​ ​ 718 ​ ​ ​ ​ ​ 295 ​ ​ ​ ​ ​ 2 ​ ​
Aspect Software, Inc.
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 280 ​ ​ ​ ​ ​ (283) ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ 2 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 4 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Fairway Group Acquisition Co.
​ ​ ​ ​ 6,159 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 783 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (200) ​ ​ ​ ​ ​ 6,742 ​ ​ ​ ​ ​ 786 ​ ​ ​ ​ ​ 783 ​ ​ ​ ​ ​ — ​ ​
Fairway Group Acquisition Co.
​ ​ ​ ​ 903 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (321) ​ ​ ​ ​ ​ 582 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Fairway Group Acquisition Co.(2)
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 473 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 7 ​ ​ ​ ​ ​ 480 ​ ​ ​ ​ ​ 24 ​ ​ ​ ​ ​ 17 ​ ​ ​ ​ ​ 101 ​ ​
Fairway Group Acquisition Co.
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 2,382 ​ ​ ​ ​ ​ (116) ​ ​ ​ ​ ​ 7 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 144 ​ ​ ​ ​ ​ 2,417 ​ ​ ​ ​ ​ 124 ​ ​ ​ ​ ​ 87 ​ ​ ​ ​ ​ — ​ ​
H.M. Dunn Co., Inc.
​ ​ ​ ​ — ​ ​ ​ ​ ​ 9,643 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (3,857) ​ ​ ​ ​ ​ (4,733) ​ ​ ​ ​ ​ 1,053 ​ ​ ​ ​ ​ 279 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Warren Resources, Inc.
​ ​ ​ ​ 18,372 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 76 ​ ​ ​ ​ ​ (11,824) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (448) ​ ​ ​ ​ ​ 6,176 ​ ​ ​ ​ ​ 891 ​ ​ ​ ​ ​ 76 ​ ​ ​ ​ ​ 473 ​ ​
Senior Secured Loans—Second Lien ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Fairway Group Acquisition Co.
​ ​ ​ ​ 795 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (795) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Equity/Other ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Aspect Software Parent, Inc., Common Equity
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (25,711) ​ ​ ​ ​ ​ 25,711 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Fairway Group Holdings Corp., Common Equity 
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
HM Dunn Aerosystems, Inc. Preferred Equity, Series A
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
HM Dunn Aerosystems, Inc. Preferred Equity, Series B
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Warren Resources, Inc., Common Equity
​ ​ ​ ​ 1,698 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 649 ​ ​ ​ ​ ​ 2,347 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Total
 ​ ​ ​ $ 40,265 ​ ​ ​ ​ $ 9,643 ​ ​ ​ ​ $ 19,206 ​ ​ ​ ​ $ (19,577) ​ ​ ​ ​ $ 8 ​ ​ ​ ​ $ (29,566) ​ ​ ​ ​ $ 16,887 ​ ​ ​ ​ $ 36,866 ​ ​ ​ ​ $ 4,278 ​ ​ ​ ​ $ 1,453 ​ ​ ​ ​ $ 879 ​ ​
​
​
(1)
Security was an unfunded commitment with an amortized cost of  $1,822 and a fair value of  $0 as of December 31, 2017.
​
(2)
Security includes a partially unfunded commitment with an amortized cost of  $1,028 and a fair value of  $1,028.
​
​
See notes to unaudited consolidated financial statements.
27
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FS Investment Corporation III
 
Notes to Unaudited Consolidated Financial Statements
(in thousands, except share and per share amounts)
​
Note 1. Principal Business and Organization
FS Investment Corporation III, or the Company, was incorporated under the general corporation laws of the State of Maryland on June 7, 2013 and formally commenced investment operations on April 2, 2014. The Company is an externally managed, non-diversified, closed-end management investment company that has elected to be regulated as a business development company, or BDC, under the Investment Company Act of 1940, as amended, or the 1940 Act. In addition, the Company has elected to be treated for U.S. federal income tax purposes, and intends to qualify annually, as a regulated investment company, or RIC, as defined under Subchapter M of the Internal Revenue Code of 1986, as amended, or the Code. As of March 31, 2019, the Company had various wholly-owned subsidiaries, including special-purpose financing subsidiaries and subsidiaries through which it holds interests in portfolio companies. The consolidated financial statements include both the Company’s accounts and the accounts of its wholly-owned subsidiaries as of March 31, 2019. All significant intercompany transactions have been eliminated in consolidation. One of the Company’s consolidated subsidiaries is subject to U.S. federal and state income taxes.
The Company’s investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation. The Company’s portfolio is comprised primarily of investments in senior secured loans and second lien secured loans of private middle market U.S. companies and, to a lesser extent, subordinated loans of private U.S. companies. In addition, a portion of the Company’s portfolio may be comprised of equity and equity-related securities, corporate bonds, structured products, other debt securities and derivatives, including total return swaps and credit default swaps.
The Company is externally managed by FS/KKR Advisor, LLC, or the Advisor, pursuant to an investment advisory and administrative services agreement, dated as of April 9, 2018, or the investment advisory and administrative services agreement. On April 9, 2018, GSO/Blackstone Debt Funds Management LLC, or GDFM, resigned as the investment sub-adviser to the Company and terminated the investment sub-advisory agreement, or the investment sub-advisory agreement, between FSIC III Advisor, LLC, or FSIC III Advisor, and GDFM, effective April 9, 2018. In connection with GDFM’s resignation as the investment sub-adviser to the Company, on April 9, 2018, the Company entered into the investment advisory and administrative services agreement, which replaced an amended and restated investment advisory and administrative services agreement, dated August 6, 2014, or the FSIC III Advisor investment advisory and administrative services agreement, by and between the Company and FSIC III Advisor.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation: The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For a more complete discussion of significant accounting policies and certain other information, the Company’s interim unaudited consolidated financial statements should be read in conjunction with its audited consolidated financial statements as of and for the year ended December 31, 2018 included in the Company’s annual report on Form 10-K for the year ended December 31, 2018. Operating results for the three months ended March 31, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. The December 31, 2018 consolidated balance sheet and consolidated schedule of investments are derived from the Company’s audited consolidated financial statements as of and for the year ended December 31, 2018. The Company is considered an investment company under GAAP and follows the accounting and reporting guidance applicable to investment companies under Accounting Standards Codification, or ASC, Topic 946, Financial Services—Investment Companies.
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FS Investment Corporation III
 
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 2. Summary of Significant Accounting Policies (continued)
 
Use of Estimates: The preparation of the unaudited consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Capital Gains Incentive Fee: Pursuant to the terms of the investment advisory and administrative services agreement, the incentive fee on capital gains is determined and payable in arrears as of the end of each calendar year (or upon termination of the investment advisory and administrative services agreement). This fee equals 20.0% of the Company’s incentive fee capital gains, which equals the Company’s realized capital gains on a cumulative basis from inception, calculated as of the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any capital gain incentive fees previously paid by the Company. On a quarterly basis, the Company accrues for the capital gains incentive fee by calculating such fees as if it were due and payable as of the end of such period. The Company includes unrealized gains in the calculation of the capital gains incentive fee expense and related accrued capital gains incentive fee. This accrual reflects the incentive fees that would be payable to the Advisor if the Company’s entire portfolio was liquidated at its fair value as of the balance sheet date even though the Advisor is not entitled to an incentive fee with respect to unrealized gains unless and until such gains are actually realized.
The Company “looks through” its total return swap, or TRS, between its wholly-owned financing subsidiary Center City Funding LLC, or Center City Funding, and Citibank, N.A., or Citibank, in calculating the capital gains incentive fee. Under this methodology, the portion of the net settlement payments received by the Company pursuant to the TRS which would have represented net investment income to the Company had the Company held the loans underlying the TRS directly is treated as net investment income subject to the subordinated incentive fee on income payable to the Advisor pursuant to the investment advisory and administrative services agreement, rather than as realized capital gains in accordance with GAAP, and any unrealized depreciation on individual loans underlying the TRS further reduces the capital gains incentive fee payable to the Advisor with respect to realized gains. See Note 9 for additional information regarding the Company’s TRS.
Subordinated Income Incentive Fee: Pursuant to the terms of the investment advisory and administrative services agreement, the Advisor may also be entitled to receive a subordinated incentive fee on income. The subordinated incentive fee on income under the investment advisory and administrative services agreement, which is calculated and payable quarterly in arrears, equals 20.0% of the Company’s “pre-incentive fee net investment income” for the immediately preceding quarter and is subject to a hurdle rate, expressed as a rate of return on adjusted capital equal to 1.75% per quarter (1.875% under the FSIC III Advisor investment advisory and administrative services agreement), or an annualized hurdle rate of 7.0% (7.5% under the FSIC III Advisor investment advisory and administrative services agreement). For purposes of this fee, “adjusted capital” means cumulative gross proceeds generated from sales of the Company’s common stock (including proceeds from its distribution reinvestment plan) reduced for distributions paid to stockholders from proceeds of non-liquidating dispositions of the Company’s investments and amounts paid for share repurchases pursuant to the Company’s share repurchase program. As a result, the Advisor will not earn this incentive fee for any quarter until the Company’s pre-incentive fee net investment income for such quarter exceeds the hurdle rate of 1.75% (1.875% under the FSIC III Advisor investment advisory and administrative services agreement). Once the Company’s pre-incentive fee net investment income in any quarter exceeds the hurdle rate, the Advisor will be entitled to a “catch-up” fee equal to the amount of the pre-incentive fee net investment income in excess of the hurdle rate, until the Company’s pre-incentive fee net investment income
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FS Investment Corporation III
 
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 2. Summary of Significant Accounting Policies (continued)
 
for such quarter equals 2.1875%, or 8.75% annually (2.34375%, or 9.375% annually under the FSIC III Advisor investment advisory and administrative services agreement), of the Company’s adjusted capital. Thereafter, the Advisor will be entitled to receive 20.0% of pre-incentive fee net investment income.
Reclassifications: Certain amounts in the unaudited consolidated financial statements as of and for the three months ended March 31, 2018 and the audited consolidated financial statements as of and for the year ended December 31, 2018 may have been reclassified to conform to the classifications used to prepare the unaudited consolidated financial statements as of and for the three months ended March 31, 2019.
Revenue Recognition: Security transactions are accounted for on the trade date. The Company records interest income on an accrual basis to the extent that it expects to collect such amounts. The Company records dividend income on the ex-dividend date. Distributions received from limited liability company (“LLC”) and limited partnership (“LP”) investments are evaluated to determine if the distribution should be recorded as dividend income or a return of capital. The Company does not accrue as a receivable interest or dividends on loans and securities if it has reason to doubt its ability to collect such income. The Company’s policy is to place investments on non-accrual status when there is reasonable doubt that interest income will be collected. The Company considers many factors relevant to an investment when placing it on or removing it from non-accrual status including, but not limited to, the delinquency status of the investment, economic and business conditions, the overall financial condition of the underlying investment, the value of the underlying collateral, bankruptcy status, if any, and any other facts or circumstances relevant to the investment. If there is reasonable doubt that the Company will receive any previously accrued interest, then the interest income will be written-off. Payments received on non-accrual investments may be recognized as income or applied to principal depending upon the collectability of the remaining principal and interest. Non-accrual investments may be restored to accrual status when principal and interest become current and are likely to remain current based on the Company’s judgment.
Loan origination fees, original issue discount and market discount are capitalized and the Company amortizes such amounts as interest income over the respective term of the loan or security. Upon the prepayment of a loan or security, any unamortized loan origination fees and original issue discount are recorded as interest income. Structuring and other non-recurring upfront fees are recorded as fee income when earned. For the three months ended March 31, 2019, the Company recognized $6,095 in structuring fee revenue. The Company records prepayment premiums on loans and securities as fee income when it receives such amounts.
Derivative Instruments: The Company recognizes all derivative instruments as assets or liabilities at fair value in its consolidated financial statements. Derivative contracts entered into by the Company are not designated as hedging instruments, and as a result, the Company presents changes in fair value through net change in unrealized appreciation (depreciation) on derivative instruments in the consolidated statements of operations. Realized gains and losses that occur upon the cash settlement of the derivative instruments are included in net realized gains (losses) on derivative instruments in the condensed consolidated statements of operations. As of March 31, 2019, the Company’s derivative instruments included interest rate swaps.
Recent Accounting Pronouncements: In August 2018, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update 2018-13, Fair Value Measurement (Topic 820)-Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, or ASU 2018-13. ASU 2018-13 introduces new fair value disclosure requirements and eliminates and modifies certain existing fair value disclosure requirements. ASU 2018-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently evaluating the impact of ASU 2018-13 on its financial statements.
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FS Investment Corporation III
 
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 3. Share Transactions
Below is a summary of transactions with respect to shares of the Company’s common stock during the three months ended March 31, 2019 and 2018:
​ ​ ​
Three Months Ended March 31,
​
​ ​ ​
2019
​ ​
2018
​
​ ​ ​
Shares
​ ​
Amount
​ ​
Shares
​ ​
Amount
​
Reinvestment of Distributions
​ ​ ​ ​ 2,822,761 ​ ​ ​ ​ $ 21,878 ​ ​ ​ ​ ​ 2,919,541 ​ ​ ​ ​ $ 24,279 ​ ​
Share Repurchase Program
​ ​ ​ ​ (2,899,470) ​ ​ ​ ​ ​ (22,471) ​ ​ ​ ​ ​ (2,986,249) ​ ​ ​ ​ ​ (24,935) ​ ​
Net Proceeds from Share Transactions
​ ​ ​ ​ (76,709) ​ ​ ​ ​ $ (593) ​ ​ ​ ​ ​ (66,708) ​ ​ ​ ​ $ (656) ​ ​
During the period from April 1, 2019 to May 10, 2019, the Company issued 915,914 shares of common stock pursuant to its distribution reinvestment plan, or DRP, for gross proceeds of $7,098 and at an average price per share of $7.75. For additional information regarding the terms of the DRP, see Note 5.
Share Repurchase Program
The Company intends to continue to conduct quarterly tender offers pursuant to its share repurchase program. The Company’s board of directors will consider the following factors, among others, in making its determination regarding whether to cause the Company to offer to repurchase shares of common stock and under what terms:
•
the effect of such repurchases on the Company’s qualification as a RIC (including the consequences of any necessary asset sales);
​
•
the liquidity of the Company’s assets (including fees and costs associated with disposing of assets);
​
•
the Company’s investment plans and working capital requirements;
​
•
the relative economies of scale with respect to the Company’s size;
​
•
the Company’s history in repurchasing shares of common stock or portions thereof; and
​
•
the condition of the securities markets.
​
Historically, the Company limited the number of shares of common stock to be repurchased during any calendar year to the lesser of  (i) the number of shares of common stock that the Company could repurchase with the proceeds it received from the issuance of shares of common stock under the DRP and (ii) 10% of the weighted average number of shares of common stock outstanding in the prior calendar year, or 2.5% in each calendar quarter. On May 10, 2017, the board of directors of the Company amended the share repurchase program. As amended, the Company limits the maximum number of shares of common stock to be repurchased for any repurchase offer to the greater of  (A) the number of shares of common stock that the Company can repurchase with the proceeds it has received from the sale of shares of common stock under the DRP during the twelve-month period ending on the date the applicable repurchase offer expires (less the amount of proceeds used to repurchase shares of common stock on each previous repurchase date for repurchase offers conducted during such twelve-month period) (the Company refers to this limitation as the twelve-month repurchase limitation) and (B) the number of shares of common stock that the Company can repurchase with the proceeds it received from the sale of shares of common stock under the DRP during the three-month period ending on the date the applicable repurchase offer expires (the Company refers to this limitation as the three-month repurchase limitation). In addition to this limitation, the maximum number of shares of common stock to be repurchased for any repurchase offer will also be limited to 10% of the weighted average number of shares of common stock outstanding in the prior calendar year, or 2.5% in each calendar quarter. As a result, the maximum number of shares of
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FS Investment Corporation III
 
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 3. Share Transactions (continued)
 
common stock to be repurchased for any repurchase offer will not exceed the lesser of  (i) 10% of the weighted average number of shares of common stock outstanding in the prior calendar year, or 2.5% in each calendar quarter, and (ii) whichever is greater of the twelve-month repurchase limitation described in clause (A) above and the three-month repurchase limitation described in clause (B) above. At the discretion of the Company’s board of directors, the Company may also use cash on hand, cash available from borrowings and cash from the liquidation of securities investments as of the end of the applicable period to repurchase shares of common stock. The actual number of shares of common stock that the Company offers to repurchase may be less in light of the limitations noted above. The Company’s board of directors may amend, suspend or terminate the share repurchase program at any time upon 30 days’ notice.
On October 13, 2017, the Company further amended the terms of its share repurchase program, or the amended share repurchase program, which was first effective for the Company’s quarterly repurchase offer for the fourth quarter of 2017. Prior to amending the share repurchase program, the Company offered to repurchase shares of its common stock on a quarterly basis at a repurchase price equal to the institutional offering price in effect on each date of repurchase. Under the amended share repurchase program, the Company offers to repurchase shares of common stock at a price equal to the price at which shares of its common stock are issued pursuant to the DRP on the distribution date coinciding with the applicable share repurchase date. The price at which shares of common stock are issued under the DRP is determined by the Company’s board of directors or a committee thereof, in its sole discretion, and will be (i) not less than the net asset value per share of the Company’s common stock as determined in good faith by the Company’s board of directors or a committee thereof, in its sole discretion, immediately prior to the payment date of the distribution and (ii) not more than 2.5% greater than the net asset value per share as of such date.
The following table provides information concerning the Company’s repurchases of shares of its common stock pursuant to its share repurchase program during the three months ended March 31, 2019 and 2018:
For the Three Months Ended
​ ​
Repurchase
Date
​ ​
Shares
Repurchased
​ ​
Percentage
of Shares
Tendered
That Were
Repurchased
​ ​
Percentage of
Outstanding
Shares
Repurchased
as of the
Repurchase
Date
​ ​
Repurchase
Price Per
Share
​ ​
Aggregate
Consideration
for
Repurchased
Shares
​
Fiscal 2018 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
December 31, 2017
​ ​
January 10, 2018
​ ​ ​ ​ 2,986,249 ​ ​ ​ ​ ​ 40% ​ ​ ​ ​ ​ 1.03% ​ ​ ​ ​ $ 8.35 ​ ​ ​ ​ $ 24,935 ​ ​
Fiscal 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
December 31, 2018
​ ​
January 2, 2019
​ ​ ​ ​ 2,899,470 ​ ​ ​ ​ ​ 16% ​ ​ ​ ​ ​ 1.00% ​ ​ ​ ​ $ 7.75 ​ ​ ​ ​ $ 22,471 ​ ​
On April 1, 2019, the Company repurchased 2,822,753 shares of common stock (representing 13% of the shares of common stock tendered for repurchase and 0.97% of the shares outstanding as of such date) at $7.75 per share for aggregate consideration totaling $21,876.
Note 4. Related Party Transactions
Compensation of the Investment Adviser and Dealer Manager
Pursuant to the investment advisory and administrative services agreement, the Advisor is entitled to a base management fee calculated at an annual rate of 1.50% of the average weekly value of the Company’s gross assets (gross assets equal the total assets of the Company as set forth on the Company’s consolidated balance sheets) and an incentive fee based on the Company’s performance. The base management fee is
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FS Investment Corporation III
 
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 4. Related Party Transactions (continued)
 
payable quarterly in arrears. All or any part of the base management fee not taken as to any quarter will be deferred without interest, and may be taken in such other quarter as the Advisor determines. See Note 2 for a discussion of the capital gains and subordinated income incentive fees that the Advisor may be entitled to under the investment advisory and administrative services agreement.
Pursuant to the FSIC III Advisor investment advisory and administrative services agreement, which was in effect until April 9, 2018, FSIC III Advisor was entitled to an annual base management fee equal to 2.0% of the average weekly value of the Company’s gross assets (gross assets equal the total assets of the Company as set forth on the Company’s consolidated balance sheets) and an incentive fee based on the Company’s performance. Effective February 3, 2017, FSIC III Advisor contractually had agreed to permanently waive 0.25% of the base management fee to which it was entitled under the FSIC III Advisor investment advisory and administrative services agreement, so that the fee received equaled 1.75% of the average weekly value of the Company’s gross assets. Pursuant to the investment sub-advisory agreement, GDFM was entitled to receive 50% of all management and incentive fees payable to FSIC III Advisor under the FSIC III Advisor investment advisory and administrative services agreement with respect to each year.
Pursuant to the investment advisory and administrative services agreement, the Advisor oversees the Company’s day-to-day operations, including the provision of general ledger accounting, fund accounting, legal services, investor relations, certain government and regulatory affairs activities and other administrative services. The Advisor also performs, or oversees the performance of, the Company’s corporate operations and required administrative services, which includes being responsible for the financial records that the Company is required to maintain and preparing reports for the Company’s stockholders and reports filed with the U.S. Securities and Exchange Commission, or the SEC. In addition, the Advisor assists the Company in calculating its net asset value, overseeing the preparation and filing of tax returns and the printing and dissemination of reports to the Company’s stockholders, and generally overseeing the payment of the Company’s expenses and the performance of administrative and professional services rendered to the Company by others.
Pursuant to the investment advisory and administrative services agreement, the Company reimburses the Advisor for expenses necessary to perform services related to its administration and operations, including the Advisor’s allocable portion of the compensation and related expenses of certain personnel of Franklin Square Holdings, L.P., which does business as FS Investments, or FS Investments, and KKR Credit Advisors (US), LLC, or KKR Credit, providing administrative services to the Company on behalf of the Advisor. The Company reimburses the Advisor no less than monthly for expenses necessary to perform services related to the Company’s administration and operations. The amount of this reimbursement is set at the lesser of  (1) the Advisor’s actual costs incurred in providing such services and (2) the amount that the Company estimates it would be required to pay alternative service providers for comparable services in the same geographic location. The Advisor allocates the cost of such services to the Company based on factors such as total assets, revenues, time allocations and/or other reasonable metrics. The Company’s board of directors reviews the methodology employed in determining how the expenses are allocated to the Company and the proposed allocation of administrative expenses among the Company and certain affiliates of the Advisor. The Company’s board of directors then assesses the reasonableness of such reimbursements for expenses allocated to it based on the breadth, depth and quality of such services as compared to the estimated cost to the Company of obtaining similar services from third-party service providers known to be available. In addition, the Company’s board of directors considers whether any single third-party service provider would be capable of providing all such services at comparable cost and quality. Finally, the Company’s board of directors compares the total amount paid to the Advisor for such services as a percentage of the Company’s net assets to the same ratio as reported by other comparable BDCs. The administrative services provisions of the FSIC III Advisor investment advisory and administrative services
33
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FS Investment Corporation III
 
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 4. Related Party Transactions (continued)
 
agreement were substantially similar to the administrative services provisions of the investment advisory and administrative services agreement.
The following table describes the fees and expenses the Company accrued under the FSIC III Advisor investment advisory and administrative services agreement and the investment advisory and administrative services agreement, as applicable, during the three months ended March 31, 2019 and 2018:
Related Party
​ ​
Source Agreement
​ ​
Description
​ ​
Three Months Ended
March 31,
​
​
2019
​ ​
2018
​
The Advisor and FSIC III Advisor
​ ​ FS/KKR Advisor Investment
Advisory and Administrative Services
Agreement and FSIC III Advisor
Investment Advisory and
Administrative Services Agreement 		​ ​
Base Management Fee(1)
 ​ ​ ​ $ 14,870 ​ ​ ​ ​ $ 16,693 ​ ​
The Advisor and FSIC III Advisor
​ ​ FS/KKR Advisor Investment
Advisory and Administrative Services
Agreement and FSIC III Advisor
Investment Advisory and
Administrative Services Agreement 		​ ​ Subordinated Incentive Fee on Income(2) ​ ​ ​ $ 12,108 ​ ​ ​ ​ $ 1,623 ​ ​
The Advisor and FSIC III Advisor
​ ​ FS/KKR Advisor Investment
Advisory and Administrative Services
Agreement and FSIC III Advisor
Investment Advisory and
Administrative Services Agreement 		​ ​ Administrative Services
Expenses(3)		 ​ ​ ​ $ 738 ​ ​ ​ ​ $ 854 ​ ​
​
(1)
FSIC III Advisor contractually agreed, effective February 3, 2017, to permanently waive 0.25% of its base management fee to which it was entitled under the FSIC III Advisor investment advisory and administrative services agreement, so that the fee received equaled 1.75% of the average value of the Company’s weekly gross assets. As a result, the amount shown for the three months ended March 31, 2018 is net of waivers of  $2,385. During the three months ended March 31, 2019 and 2018, $13,300 and $17,015, respectively, in base management fees were paid to the Advisor and/or FSIC III Advisor. As of March 31, 2019, $14,870 in base management fees were payable to the Advisor.
​
(2)
During the three months ended March 31, 2019 and 2018, $9,525 and $14,487, respectively, of subordinated incentive fees on income were paid to the Advisor and/or FSIC III Advisor. As of March 31, 2019, a subordinated incentive fee on income of $12,108 was payable to the Advisor.
​
(3)
During the three months ended March 31, 2019 and 2018, $444 and $668, respectively, of the accrued administrative services expenses related to the allocation of costs of administrative personnel for services rendered to the Company by FSIC III Advisor and the Advisor and the remainder related to other reimbursable expenses, including reimbursement of fees related to transactional expenses for prospective investments, such as fees and expenses associated with performing due diligence reviews of investments that do not close, often referred to as “broken deal” costs. Broken deal costs were $66 for the three months ended March 31, 2019. The Company paid $646 and $465 in administrative services expenses to FSIC III Advisor and the Advisor during the three months ended March 31, 2019 and 2018, respectively.
​
Potential Conflicts of Interest
The members of the senior management and investment teams of the Advisor serve or may serve as officers, directors or principals of entities that operate in the same or a related line of business as the Company does, or of investment vehicles managed by the same personnel. For example, the Advisor is the investment adviser to FS KKR Capital Corp., FS Investment Corporation II, FS Investment Corporation IV and Corporate Capital Trust II, and the officers, managers and other personnel of the Advisor may serve in similar or other capacities for the investment advisers to future investment vehicles affiliated with FS Investments or KKR Credit. In serving in these multiple and other capacities, they may have obligations to other clients or investors in those entities, the fulfillment of which may not be in the Company’s best
34
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FS Investment Corporation III
 
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 4. Related Party Transactions (continued)
 
interests or in the best interest of the Company’s stockholders. The Company’s investment objectives may overlap with the investment objectives of such investment funds, accounts or other investment vehicles. For additional information regarding potential conflicts of interest, see the Company’s annual report on Form 10-K for the year ended December 31, 2018.
Exemptive Relief
As a BDC, the Company is subject to certain regulatory restrictions in making its investments. For example, BDCs generally are not permitted to co-invest with certain affiliated entities in transactions originated by the BDC or its affiliates in the absence of an exemptive order from the SEC. However, BDCs are permitted to, and may, simultaneously co-invest in transactions where price is the only negotiated term.
In an order dated June 4, 2013, or the FS Order, the SEC granted exemptive relief permitting the Company, subject to the satisfaction of certain conditions, to co-invest in certain privately negotiated investment transactions with certain affiliates of FSIC III Advisor, including FS Energy and Power Fund, FS KKR Capital Corp., FS Investment Corporation II, FS Investment Corporation IV and any future BDCs that are advised by FSIC III Advisor or its affiliated investment advisers. However, in connection with the investment advisory relationship with the Advisor, and in an effort to mitigate potential future conflicts of interest, the Company’s board of directors authorized and directed that the Company (i) withdraw from the FS Order, except with respect to any transaction in which the Company participated in reliance on the FS Order prior to April 9, 2018, and (ii) rely on an exemptive relief order, dated April 3, 2018, that permits the Company, subject to the satisfaction of certain conditions, to co-invest in certain privately negotiated investment transactions, including investments originated and directly negotiated by the Advisor or KKR Credit, with certain affiliates of the Advisor.
Note 5. Distributions
The following table reflects the cash distributions per share that the Company declared and paid on its common stock during the three months ended March 31, 2019 and 2018:
​ ​ ​
Distribution
​
For the Three Months Ended
​ ​
Per Share
​ ​
Amount
​
Fiscal 2018 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
March 31, 2018
​ ​ ​ $ 0.17499 ​ ​ ​ ​ $ 50,490 ​ ​
Fiscal 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
March 31, 2019
​ ​ ​ $ 0.17499 ​ ​ ​ ​ $ 50,467 ​ ​
The Company intends to declare regular cash distributions on a quarterly basis and pay such distributions on a monthly basis. On February 19, 2019 and April 30, 2019, the Company’s board of directors declared regular monthly cash distributions for April 2019 through June 2019 and July 2019 through September 2019, respectively, each in the amount of  $0.058331 per share. These distributions have been or will be paid monthly to stockholders of record as of monthly record dates previously determined by the Company’s board of directors. The timing and amount of any future distributions to stockholders are subject to applicable legal restrictions and the sole discretion of the Company’s board of directors.
The Company has adopted an “opt in” distribution reinvestment plan for its stockholders. As a result, if the Company makes a cash distribution, its stockholders will receive the distribution in cash unless they specifically “opt in” to the DRP so as to have their cash distributions reinvested in additional shares of the Company’s common stock. However, certain state authorities or regulators may impose restrictions from time to time that may prevent or limit a stockholder’s ability to participate in the DRP.
35
TABLE OF CONTENTS
FS Investment Corporation III
 
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 5. Distributions (continued)
 
On October 13, 2017, the Company amended and restated its DRP, or the amended DRP, which first applied to the reinvestment of cash distributions paid on or after November 29, 2017. Under the original DRP, cash distributions to participating stockholders were reinvested in additional shares of the Company’s common stock at a purchase price equal to the institutional offering price in effect on the date of issuance. Under the amended DRP, cash distributions to participating stockholders will be reinvested in additional shares of the Company’s common stock at a purchase price determined by the Company’s board of directors or a committee thereof, in its sole discretion, that is (i) not less than the net asset value per share of the Company’s common stock as determined in good faith by the Company’s board of directors or a committee thereof, in its sole discretion, immediately prior to the payment of the distribution and (ii) not more than 2.5% greater than the net asset value per share of the Company’s common stock as of such date. Although distributions paid in the form of additional shares of common stock will generally be subject to U.S. federal, state and local taxes in the same manner as cash distributions, stockholders who elect to participate in the DRP will not receive any corresponding cash distributions with which to pay any such applicable taxes. Stockholders receiving distributions in the form of additional shares of common stock will be treated as receiving a distribution in the amount of the fair market value of the Company’s shares of common stock.
The Company may fund its cash distributions to stockholders from any sources of funds legally available to it, including proceeds from the sale of the Company’s common stock, borrowings, net investment income from operations, capital gains proceeds from the sale of assets, non-capital gains proceeds from the sale of assets and dividends or other distributions paid to the Company on account of preferred and common equity investments in portfolio companies. The Company has not established limits on the amount of funds it may use from available sources to make distributions. During certain periods, the Company’s distributions may exceed its earnings. As a result, it is possible that a portion of the distributions the Company makes may represent a return of capital. A return of capital generally is a return of a stockholder’s investment rather than a return of earnings or gains derived from the Company’s investment activities. Each year a statement on Form 1099-DIV identifying the sources of the distributions (i.e., paid from ordinary income, paid from net capital gains on the sale of securities, and/or a return of capital, which is a nontaxable distribution) will be mailed to the Company’s stockholders. There can be no assurance that the Company will be able to pay distributions at a specific rate or at all. No portion of the distributions paid during the three months ended March 31, 2019 and 2018 was funded through the reimbursement of operating expenses by FS Investments.
The following table reflects the sources of the cash distributions on a tax basis that the Company paid on its common stock during the three months ended March 31, 2019 and 2018:
​ ​ ​
Three Months Ended March 31,
​
​ ​ ​
2019
​ ​
2018
​
Source of Distribution
​ ​
Distribution
Amount
​ ​
Percentage
​ ​
Distribution
Amount
​ ​
Percentage
​
Offering proceeds
​ ​ ​ $ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ — ​ ​ ​ ​ ​ — ​ ​
Borrowings
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Net investment income(1)
 ​ ​ ​ ​ 50,467 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ ​ 50,490 ​ ​ ​ ​ ​ 100% ​ ​
Short-term capital gains proceeds from the sale of assets
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Long-term capital gains proceeds from the sale of assets
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Non-capital gains proceeds from the sale of assets
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Distributions on account of preferred and common equity
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Total
​ ​ ​ $ 50,467 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ $ 50,490 ​ ​ ​ ​ ​ 100% ​ ​
​
​
(1)
During the three months ended March 31, 2019 and 2018, 93.2% and 91.4%, respectively, of the Company’s gross investment income was attributable to cash income earned, 1.8% and 1.0%, respectively, was attributable to non-cash accretion of discount and 5.0% and 7.6%, respectively, was attributable to PIK interest.
​
​
36
TABLE OF CONTENTS
FS Investment Corporation III
 
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 5. Distributions (continued)
 
The Company’s net investment income on a tax basis for the three months ended March 31, 2019 and 2018 was $51,311 and $52,104, respectively. As of March 31, 2019 and December 31, 2018, the Company had $6,920 and $6,076, respectively, of undistributed net investment income and $138,493 and $96,629, respectively, of accumulated capital losses on a tax basis.
The difference between the Company’s GAAP-basis net investment income and its tax-basis net investment income is primarily due to the reclassification of unamortized original issue discount and prepayment fees recognized upon prepayment of loans from income for GAAP purposes to realized gains for tax purposes, the inclusion of a portion of the periodic net settlement payments due on the TRS in tax-basis net investment income and the accretion of discount on the TRS.
The following table sets forth a reconciliation between GAAP-basis net investment income and tax-basis net investment income during the three months ended March 31, 2019 and 2018:
​ ​ ​
Three Months Ended March 31,
​
​ ​ ​
2019
​ ​
2018
​
GAAP-basis net investment income
​ ​ ​ $ 46,811 ​ ​ ​ ​ $ 48,056 ​ ​
Reclassification of unamortized original issue discount and prepayment fees
​ ​ ​ ​ (440) ​ ​ ​ ​ ​ (1,089) ​ ​
Tax-basis net investment income portion of total return swap payments
​ ​ ​ ​ 3,411 ​ ​ ​ ​ ​ 3,674 ​ ​
Accretion of discount on total return swap
​ ​ ​ ​ 87 ​ ​ ​ ​ ​ 362 ​ ​
Other miscellaneous differences
​ ​ ​ ​ 1,442 ​ ​ ​ ​ ​ 1,101 ​ ​
Tax-basis net investment income
​ ​ ​ $ 51,311 ​ ​ ​ ​ $ 52,104 ​ ​
​
The determination of the tax attributes of the Company’s distributions is made annually as of the end of the Company’s fiscal year based upon the Company’s taxable income for the full year and distributions paid for the full year. Therefore, a determination made on a quarterly basis may not be representative of the actual tax attributes of the Company’s distributions for a full year. The actual tax characteristics of distributions to stockholders are reported to stockholders annually on Form 1099-DIV.
As of March 31, 2019 and December 31, 2018, the components of accumulated earnings on a tax basis were as follows:
​ ​ ​
March 31, 2019
(Unaudited)
​ ​
December 31, 2017
​
Distributable ordinary income
​ ​ ​ $ 6,920 ​ ​ ​ ​ $ 6,076 ​ ​
Accumulated capital losses(1)
 ​ ​ ​ ​ (138,493) ​ ​ ​ ​ ​ (96,629) ​ ​
Other temporary differences
​ ​ ​ ​ (169) ​ ​ ​ ​ ​ (172) ​ ​
Net unrealized appreciation (depreciation) on investments, total return swap and interest rate swaps and gain/loss on foreign currency(2)
 ​ ​ ​ ​ (181,428) ​ ​ ​ ​ ​ (229,111) ​ ​
Total
​ ​ ​ $ (313,170) ​ ​ ​ ​ $ (319,836) ​ ​
​
(1)
Net capital losses may be carried forward indefinitely, and their character is retained as short-term or long-term losses. As of March 31, 2019, the Company had short-term and long-term capital loss carryforwards available to offset future realized capital gains of $6,733 and $131,760, respectively.
​
(2)
As of March 31, 2019 and December 31, 2018, the gross unrealized appreciation on the Company’s investments, secured borrowing and TRS and gain on foreign currency was $160,460 and $129,945, respectively, and the gross unrealized depreciation on the Company’s investments, secured borrowing and TRS and loss on foreign currency was $341,888 and $359,056, respectively.
​
​
37
TABLE OF CONTENTS
FS Investment Corporation III
 
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 5. Distributions (continued)
 
The aggregate cost of the Company’s investments for U.S. federal income tax purposes totaled $3,843,438 and $3,815,892 as of March 31, 2019 and December 31, 2018, respectively. The aggregate net unrealized appreciation (depreciation) on investments on a tax basis was $(171,880) and $(204,609) as of March 31, 2019 and December 31, 2018, respectively.
As of March 31, 2019, the Company had a deferred tax asset of $1,444 comprised of the Company’s wholly-owned taxable subsidiary’s unrealized depreciation on investments, net operating loss carryforward and capital loss carryforward. As of March 31, 2019, the wholly-owned taxable subsidiary anticipated that it would be unable to fully utilize the components of the deferred tax assets, therefore, the deferred tax assets were offset by valuation allowance of $1,444, respectively. For the three months ended March 31, 2019, the Company did not record a provision for taxes related to its wholly-owned taxable subsidiary.
Note 6. Investment Portfolio
The following table summarizes the composition of the Company’s investment portfolio at cost and fair value as of March 31, 2019 and December 31, 2018:
​ ​ ​
March 31, 2019 (Unaudited)
​ ​
December 31, 2018
​
​ ​ ​
Amortized
Cost(1)
 ​ ​
Fair Value
​ ​
Percentage
of Portfolio
​ ​
Amortized
Cost(1)
 ​ ​
Fair Value
​ ​
Percentage
of Portfolio
​
Senior Secured Loans—First Lien
​ ​ ​ $ 2,750,772 ​ ​ ​ ​ $ 2,702,523 ​ ​ ​ ​ ​ 74% ​ ​ ​ ​ $ 2,682,140 ​ ​ ​ ​ $ 2,639,404 ​ ​ ​ ​ ​ 73% ​ ​
Senior Secured Loans—Second Lien
 ​ ​ ​ ​ 358,353 ​ ​ ​ ​ ​ 323,371 ​ ​ ​ ​ ​ 9% ​ ​ ​ ​ ​ 332,741 ​ ​ ​ ​ ​ 292,342 ​ ​ ​ ​ ​ 8% ​ ​
Other Senior Secured Debt
​ ​ ​ ​ 83,604 ​ ​ ​ ​ ​ 80,474 ​ ​ ​ ​ ​ 2% ​ ​ ​ ​ ​ 102,348 ​ ​ ​ ​ ​ 95,337 ​ ​ ​ ​ ​ 3% ​ ​
Subordinated Debt
​ ​ ​ ​ 344,105 ​ ​ ​ ​ ​ 326,594 ​ ​ ​ ​ ​ 9% ​ ​ ​ ​ ​ 384,177 ​ ​ ​ ​ ​ 349,667 ​ ​ ​ ​ ​ 10% ​ ​
Asset Based Finance
​ ​ ​ ​ 161,410 ​ ​ ​ ​ ​ 163,744 ​ ​ ​ ​ ​ 4% ​ ​ ​ ​ ​ 158,720 ​ ​ ​ ​ ​ 161,624 ​ ​ ​ ​ ​ 4% ​ ​
Equity/Other
​ ​ ​ ​ 111,718 ​ ​ ​ ​ ​ 74,852 ​ ​ ​ ​ ​ 2% ​ ​ ​ ​ ​ 136,972 ​ ​ ​ ​ ​ 72,909 ​ ​ ​ ​ ​ 2% ​ ​
Total
​ ​ ​ $ 3,809,962 ​ ​ ​ ​ $ 3,671,558 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ $ 3,797,098 ​ ​ ​ ​ $ 3,611,283 ​ ​ ​ ​ ​ 100% ​ ​
​
​
(1)
Amortized cost represents the original cost adjusted for the amortization of premiums and/or accretion of discounts, as applicable, on investments.
​
​
38
TABLE OF CONTENTS
FS Investment Corporation III
 
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 6. Investment Portfolio (continued)
 
The following table summarizes the composition of the Company’s investment portfolio at cost and fair value as of March 31, 2019 and December 31, 2018 to include, on a look-through basis, the investments underlying the TRS, as disclosed in Note 9. The investments underlying the TRS had a notional amount and market value of  $123,158 and $120,812, respectively, as of March 31, 2019 and $145,371 and $141,279, respectively, as of December 31, 2018.
​ ​ ​
March 31, 2019
(Unaudited)
​ ​
December 31, 2018
​
​ ​ ​
Amortized
Cost(1)
 ​ ​
Fair Value
​ ​
Percentage
of Portfolio
​ ​
Amortized
Cost(1)
 ​ ​
Fair Value
​ ​
Percentage
of Portfolio
​
Senior Secured Loans—First Lien
​ ​ ​ $ 2,850,487 ​ ​ ​ ​ $ 2,800,102 ​ ​ ​ ​ ​ 74% ​ ​ ​ ​ $ 2,804,068 ​ ​ ​ ​ $ 2,757,436 ​ ​ ​ ​ ​ 74% ​ ​
Senior Secured Loans—Second Lien
 ​ ​ ​ ​ 381,796 ​ ​ ​ ​ ​ 346,604 ​ ​ ​ ​ ​ 9% ​ ​ ​ ​ ​ 356,184 ​ ​ ​ ​ ​ 315,589 ​ ​ ​ ​ ​ 8% ​ ​
Other Senior Secured Debt
​ ​ ​ ​ 83,604 ​ ​ ​ ​ ​ 80,474 ​ ​ ​ ​ ​ 2% ​ ​ ​ ​ ​ 102,348 ​ ​ ​ ​ ​ 95,337 ​ ​ ​ ​ ​ 3% ​ ​
Subordinated Debt
​ ​ ​ ​ 344,105 ​ ​ ​ ​ ​ 326,594 ​ ​ ​ ​ ​ 9% ​ ​ ​ ​ ​ 384,177 ​ ​ ​ ​ ​ 349,667 ​ ​ ​ ​ ​ 9% ​ ​
Asset Based Finance
​ ​ ​ ​ 161,410 ​ ​ ​ ​ ​ 163,744 ​ ​ ​ ​ ​ 4% ​ ​ ​ ​ ​ 158,720 ​ ​ ​ ​ ​ 161,624 ​ ​ ​ ​ ​ 4% ​ ​
Equity/Other
​ ​ ​ ​ 111,718 ​ ​ ​ ​ ​ 74,852 ​ ​ ​ ​ ​ 2% ​ ​ ​ ​ ​ 136,972 ​ ​ ​ ​ ​ 72,909 ​ ​ ​ ​ ​ 2% ​ ​
Total
​ ​ ​ $ 3,933,120 ​ ​ ​ ​ $ 3,792,370 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ $ 3,942,469 ​ ​ ​ ​ $ 3,752,562 ​ ​ ​ ​ ​ 100% ​ ​
​
​
(1)
Amortized cost represents the original cost adjusted for the amortization of premiums and/or accretion of discounts, as applicable, on investments.
​
In general, under the 1940 Act, the Company would be presumed to “control” a portfolio company if it owned more than 25% of its voting securities or it had the power to exercise control over the management or policies of such portfolio company, and would be an “affiliated person” of a portfolio company if it owned 5% or more of its voting securities.
As of March 31, 2019, the Company held investments in three portfolio companies of which it is deemed to be an “affiliated person” but is not deemed to “control.” As of March 31, 2019, the Company did not “control” any of its portfolio companies. For additional information with respect to such portfolio companies, see footnote (s) to the unaudited consolidated schedule of investments as of March 31, 2019 in this quarterly report on Form 10-Q.
As of December 31, 2018, the Company held investments in four portfolio companies of which it is deemed to be an “affiliated person” but is not deemed to “control.” As of December 31, 2018, the Company did not “control” any of its portfolio companies. For additional information with respect to such portfolio companies, see footnote (t) to the consolidated schedule of investments as of December 31, 2018 in this quarterly report on Form 10-Q.
The Company’s investment portfolio may contain loans and other unfunded arrangements that are in the form of lines of credit, revolving credit facilities, delayed draw credit facilities or other investments, pursuant to which the Company may be required to provide funding when requested by portfolio companies in accordance with the terms of the underlying agreements. As of March 31, 2019, the Company had unfunded debt investments with aggregate unfunded commitments of  $110,981 and unfunded equity commitments of  $47. As of December 31, 2018, the Company had unfunded debt investments with aggregate unfunded commitments of  $128,454 and unfunded equity commitments of  $47. The Company maintains sufficient cash on hand, available borrowings and liquid securities to fund such unfunded commitments should the need arise. For additional details regarding the Company’s unfunded debt investments, see the Company’s unaudited consolidated schedule of investments as of March 31, 2019 and audited consolidated schedule of investments as of December 31, 2018.
39
TABLE OF CONTENTS
FS Investment Corporation III
 
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 6. Investment Portfolio (continued)
 
The table below describes investments by industry classification and enumerates the percentage, by fair value, of the total portfolio assets in such industries as of March 31, 2019 and December 31, 2018:
​ ​ ​
March 31, 2019
(Unaudited)
​ ​
December 31, 2018
​
Industry Classification
​ ​
Fair Value
​ ​
Percentage
of Portfolio
​ ​
Fair Value
​ ​
Percentage
of Portfolio
​
Automobiles & Components
​ ​ ​ $ 16,862 ​ ​ ​ ​ ​ 0% ​ ​ ​ ​ $ 16,020 ​ ​ ​ ​ ​ 0% ​ ​
Capital Goods
​ ​ ​ ​ 747,595 ​ ​ ​ ​ ​ 20% ​ ​ ​ ​ ​ 732,433 ​ ​ ​ ​ ​ 20% ​ ​
Commercial & Professional Services
​ ​ ​ ​ 351,452 ​ ​ ​ ​ ​ 10% ​ ​ ​ ​ ​ 317,113 ​ ​ ​ ​ ​ 9% ​ ​
Consumer Durables & Apparel
​ ​ ​ ​ 150,097 ​ ​ ​ ​ ​ 4% ​ ​ ​ ​ ​ 150,949 ​ ​ ​ ​ ​ 4% ​ ​
Consumer Services
​ ​ ​ ​ 156,702 ​ ​ ​ ​ ​ 4% ​ ​ ​ ​ ​ 170,264 ​ ​ ​ ​ ​ 5% ​ ​
Diversified Financials
​ ​ ​ ​ 294,377 ​ ​ ​ ​ ​ 8% ​ ​ ​ ​ ​ 317,165 ​ ​ ​ ​ ​ 9% ​ ​
Energy
​ ​ ​ ​ 179,531 ​ ​ ​ ​ ​ 5% ​ ​ ​ ​ ​ 188,262 ​ ​ ​ ​ ​ 5% ​ ​
Food & Staples Retailing
​ ​ ​ ​ 113,338 ​ ​ ​ ​ ​ 3% ​ ​ ​ ​ ​ 13,191 ​ ​ ​ ​ ​ 0% ​ ​
Food, Beverage & Tobacco
​ ​ ​ ​ 81,148 ​ ​ ​ ​ ​ 2% ​ ​ ​ ​ ​ 81,786 ​ ​ ​ ​ ​ 2% ​ ​
Health Care Equipment & Services
​ ​ ​ ​ 497,923 ​ ​ ​ ​ ​ 14% ​ ​ ​ ​ ​ 418,167 ​ ​ ​ ​ ​ 12% ​ ​
Insurance
​ ​ ​ ​ 40,070 ​ ​ ​ ​ ​ 1% ​ ​ ​ ​ ​ 35,035 ​ ​ ​ ​ ​ 1% ​ ​
Materials
​ ​ ​ ​ 121,372 ​ ​ ​ ​ ​ 3% ​ ​ ​ ​ ​ 119,891 ​ ​ ​ ​ ​ 3% ​ ​
Media
​ ​ ​ ​ 189,959 ​ ​ ​ ​ ​ 5% ​ ​ ​ ​ ​ 201,352 ​ ​ ​ ​ ​ 6% ​ ​
Pharmaceuticals, Biotechnology & Life Sciences
​ ​ ​ ​ 56,897 ​ ​ ​ ​ ​ 2% ​ ​ ​ ​ ​ 53,872 ​ ​ ​ ​ ​ 1% ​ ​
Retailing
​ ​ ​ ​ 173,963 ​ ​ ​ ​ ​ 5% ​ ​ ​ ​ ​ 149,864 ​ ​ ​ ​ ​ 4% ​ ​
Semiconductors & Semiconductor Equipment
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 6,319 ​ ​ ​ ​ ​ 0% ​ ​
Software & Services
​ ​ ​ ​ 325,156 ​ ​ ​ ​ ​ 9% ​ ​ ​ ​ ​ 454,517 ​ ​ ​ ​ ​ 13% ​ ​
Technology Hardware & Equipment
​ ​ ​ ​ 61,289 ​ ​ ​ ​ ​ 2% ​ ​ ​ ​ ​ 93,380 ​ ​ ​ ​ ​ 3% ​ ​
Telecommunication Services
​ ​ ​ ​ 96,935 ​ ​ ​ ​ ​ 3% ​ ​ ​ ​ ​ 73,840 ​ ​ ​ ​ ​ 2% ​ ​
Transportation
​ ​ ​ ​ 16,892 ​ ​ ​ ​ ​ 0% ​ ​ ​ ​ ​ 17,863 ​ ​ ​ ​ ​ 1% ​ ​
Total
​ ​ ​ $ 3,671,558 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ $ 3,611,283 ​ ​ ​ ​ ​ 100% ​ ​
​
Note 7. Financial Instruments
The following is a summary of the fair value and location of the Company’s derivative instruments in the consolidated balance sheets held as of March 31, 2019 and December 31, 2018:
​ ​ ​ ​ ​ ​
Fair Value
​
Derivative Instrument
​ ​
Statement Location
​ ​
March 31, 2019
​ ​
December 31, 2018
​
Interest rate swaps
​ ​
Unrealized appreciation on interest rate swaps
​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​
Interest rate swaps
​ ​
Unrealized depreciation on interest rate swaps
​ ​ ​ $ (8,608) ​ ​ ​ ​ $ (2,614) ​ ​
Total
 ​ ​ ​ ​ ​ ​ $ (8,608) ​ ​ ​ ​ $ (2,614) ​ ​
​
40
TABLE OF CONTENTS
FS Investment Corporation III
 
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 7. Financial Instruments (continued)
 
Net realized and unrealized gains and losses on derivative instruments recorded by the Company for the three months ended March 31, 2019 and 2018 are in the following locations in the consolidated statements of operations:
​ ​ ​ ​ ​ ​
Net Realized Gains (Losses)
​
​ ​ ​ ​ ​ ​
Three Months Ended March 31,
​
Derivative Instrument
​ ​
Statement Location
​ ​
2019
​ ​
2018
​
Interest rate swaps
​ ​
Net realized gains (losses) on interest rate swaps
​ ​ ​ $    — ​ ​ ​ ​ $    — ​ ​
Total
 ​ ​ ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​
​
​ ​ ​ ​ ​ ​
Net Unrealized Gains (Losses)
​
​ ​ ​ ​ ​ ​
Three Months Ended March 31,
​
Derivative Instrument
​ ​
Statement Location
​ ​
2019
​ ​
2018
​
Interest rate swaps
​ ​ Net change in unrealized appreciation
(depreciation) on interest rate swaps 		​ ​ ​ $ (5,994) ​ ​ ​ ​ $    — ​ ​
Total
 ​ ​ ​ ​ ​ ​ $ (5,994) ​ ​ ​ ​ $ — ​ ​
​
Offsetting of Derivative Instruments
The Company has derivative instruments that are subject to master netting agreements. These agreements include provisions to offset positions with the same counterparty in the event of default by one of the parties. The Company’s unrealized appreciation and depreciation on derivative instruments are reported as gross assets and liabilities, respectively, in the condensed consolidated statements of assets and liabilities. The following tables present the Company’s assets and liabilities related to derivatives by counterparty, net of amounts available for offset under a master netting arrangement and net of any collateral received or pledged by the Company for such assets and liabilities as of March 31, 2019 and December 31, 2018:
As of March 31, 2019
 ​
Counterparty
​ ​
Derivative Assets
Subject to Master
Netting
Agreement
​ ​
Derivatives
Available for
Offset
​ ​
Non-cash
Collateral
Received(1)
 ​ ​
Cash
Collateral
Received(1)
 ​ ​
Net Amount
of Derivative
Assets(2)
 ​
JP Morgan Chase Bank
​ ​ ​ $    — ​ ​ ​ ​ $    — ​ ​ ​ ​ $    — ​ ​ ​ ​ $    — ​ ​ ​ ​ $    — ​ ​
ING Capital Markets
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Total
​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​
​
Counterparty
​ ​
Derivative
Liabilities Subject
to Master Netting
Agreement
​ ​
Derivatives
Available for
Offset
​ ​
Non-cash
Collateral
Pledged(1)
 ​ ​
Cash
Collateral
Pledged(1)
 ​ ​
Net Amount
of Derivative
Liabilities(3)
 ​
JP Morgan Chase Bank
​ ​ ​ $ 4,775 ​ ​ ​ ​ $    — ​ ​ ​ ​ $    — ​ ​ ​ ​ $ 4,775 ​ ​ ​ ​ $    — ​ ​
ING Capital Markets
​ ​ ​ ​ 3,833 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 3,833 ​ ​ ​ ​ ​ — ​ ​
Total
​ ​ ​ $ 8,608 ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​ ​ ​ $ 8,608 ​ ​ ​ ​ $ — ​ ​
​
41
TABLE OF CONTENTS
FS Investment Corporation III
 
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 7. Financial Instruments (continued)
 
As of December 31, 2018
​
Counterparty
​ ​
Derivative Assets
Subject to Master
Netting
Agreement
​ ​
Derivatives
Available for
Offset
​ ​
Non-cash
Collateral
Received(1)
 ​ ​
Cash
Collateral
Received(1)
 ​ ​
Net Amount
of Derivative
Assets(2)
 ​
JP Morgan Chase Bank
​ ​ ​ $    — ​ ​ ​ ​ $    — ​ ​ ​ ​ $    — ​ ​ ​ ​ $    — ​ ​ ​ ​ $    — ​ ​
​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​
​
Counterparty
​ ​
Derivative
Liabilities Subject
to Master Netting
Agreement
​ ​
Derivatives
Available for
Offset
​ ​
Non-cash
Collateral
Pledged(1)
 ​ ​
Cash
Collateral
Pledged(1)
 ​ ​
Net Amount
of Derivative
Liabilities(3)
 ​
JP Morgan Chase Bank
​ ​ ​ $ 2,614 ​ ​ ​ ​ $    — ​ ​ ​ ​ $    — ​ ​ ​ ​ $    — ​ ​ ​ ​ $ 2,614 ​ ​
​ ​ ​ ​ $ 2,614 ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​ ​ ​ $ 2,614 ​ ​
​
​
(1)
In some instances, the actual amount of the collateral received and/or pledged may be more than the amount shown due to overcollateralization.
​
(2)
Net amount of derivative assets represents the net amount due from the counterparty to the Company.
​
(3)
Net amount of derivative liabilities represents the net amount due from the Company to the counterparty.
​
Interest Rate Swaps
Interest rate swap contracts are privately negotiated agreements between the Company and a counterparty. Pursuant to interest rate swap agreements, the Company makes fixed-rate payments to a counterparty in exchange for payments on a floating benchmark interest rate. Payments received or made are recorded as realized gains or losses. During the term of the outstanding swap agreement, changes in the underlying value of the swap are recorded as unrealized gains or losses. The value of the swap is determined by changes in the relationship between two rates of interest. The Company is exposed to credit loss in the event of non-performance by the swap counterparty. Risk may also arise from movements in interest rates. The Company attempts to limit counterparty risk by dealing only with well-known counterparties.
The interest rate swaps open at the end of the period are generally indicative of the volume of activity during the period.
As of March 31, 2019 and December 31, 2018, the Company’s open interest rate swaps were as follows:
As of March 31, 2019
​
Counterparty
​ ​
Notional
Amount
​ ​
Company Receives
Floating Rate
​ ​
Company
Pays Fixed
Rate
​ ​
Termination
Date
​ ​
Premiums
Paid/​
(Received)
​ ​
Value
​ ​
Unrealized
Appreciation
(Depreciation)
​
JP Morgan Chase Bank
​ ​ ​ $ 120,000 ​ ​ ​
3-Month LIBOR
​ ​ ​ ​ 2.78% ​ ​ ​
12/18/2023
​ ​ ​ $    — ​ ​ ​ ​ $ (3,044) ​ ​ ​ ​ $ (3,044) ​ ​
JP Morgan Chase Bank
​ ​ ​ $ 120,000 ​ ​ ​
3-Month LIBOR
​ ​ ​ ​ 2.81% ​ ​ ​
12/18/2021
​ ​ ​ ​ — ​ ​ ​ ​ ​ (1,731) ​ ​ ​ ​ ​ (1,731) ​ ​
ING Capital Markets
​ ​ ​ $ 150,000 ​ ​ ​
3-Month LIBOR
​ ​ ​ ​ 2.59% ​ ​ ​
1/14/2024
​ ​ ​ ​ — ​ ​ ​ ​ ​ (1,353) ​ ​ ​ ​ ​ (1,353) ​ ​
ING Capital Markets
​ ​ ​ $ 150,000 ​ ​ ​
3-Month LIBOR
​ ​ ​ ​ 2.62% ​ ​ ​
1/14/2022
​ ​ ​ ​ — ​ ​ ​ ​ ​ (2,480) ​ ​ ​ ​ ​ (2,480) ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ — ​ ​ ​ ​ $ (8,608) ​ ​ ​ ​ $ (8,608) ​ ​
​
42
TABLE OF CONTENTS
FS Investment Corporation III
 
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 7. Financial Instruments (continued)
 
As of December 31, 2018
​
Counterparty
​ ​
Notional
Amount
​ ​
Company Receives
Floating Rate
​ ​
Company
Pays Fixed
Rate
​ ​
Termination
Date
​ ​
Premiums
Paid/​
(Received)
​ ​
Value
​ ​
Unrealized
Appreciation
(Depreciation)
​
JP Morgan Chase Bank
​ ​ ​ $ 120,000 ​ ​ ​
3-Month LIBOR
​ ​ ​ ​ 2.78% ​ ​ ​
12/18/2023
​ ​ ​ $    — ​ ​ ​ ​ $ (1,636) ​ ​ ​ ​ $ (1,636) ​ ​
JP Morgan Chase Bank
​ ​ ​ $ 120,000 ​ ​ ​
3-Month LIBOR
​ ​ ​ ​ 2.81% ​ ​ ​
12/18/2021
​ ​ ​ ​ — ​ ​ ​ ​ ​ (978) ​ ​ ​ ​ ​ (978) ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ — ​ ​ ​ ​ $ (2,614) ​ ​ ​ ​ $ (2,614) ​ ​
​
Note 8. Fair Value of Financial Instruments
Under existing accounting guidance, fair value is defined as the price that the Company would receive upon selling an investment or pay to transfer a liability in an orderly transaction to a market participant in the principal or most advantageous market for the investment. This accounting guidance emphasizes valuation techniques that maximize the use of observable market inputs and minimize the use of unobservable inputs. Inputs refer broadly to the assumptions that market participants would use in pricing an asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances.
The Company classifies the inputs used to measure these fair values into the following hierarchy as defined by current accounting guidance:
Level 1: Inputs that are quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs that are quoted prices for similar assets or liabilities in active markets.
Level 3: Inputs that are unobservable for an asset or liability.
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
As of March 31, 2019 and December 31, 2018, the Company’s investments and total return swap were categorized as follows in the fair value hierarchy:
Valuation Inputs
​ ​
March 31, 2019
(Unaudited)
​ ​
December 31, 2018
​
​
Investments
​ ​
Total Return
Swap
​ ​
Investments
​ ​
Total Return
Swap
​
Level 1—Price quotations in active markets
​ ​ ​ $ 1,164 ​ ​ ​ ​ $ — ​ ​ ​ ​ $ 1,191 ​ ​ ​ ​ $ — ​ ​
Level 2—Significant other observable inputs
​ ​ ​ ​ 881,410 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,013,082 ​ ​ ​ ​ ​ — ​ ​
Level 3—Significant unobservable inputs
​ ​ ​ ​ 2,788,984 ​ ​ ​ ​ ​ (910) ​ ​ ​ ​ ​ 2,597,010 ​ ​ ​ ​ ​ (22,062) ​ ​
Total
​ ​ ​ $ 3,671,558 ​ ​ ​ ​ $ (910) ​ ​ ​ ​ $ 3,611,283 ​ ​ ​ ​ $ (22,062) ​ ​
​
43
TABLE OF CONTENTS
FS Investment Corporation III
 
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 8. Fair Value of Financial Instruments (continued)
 
As of March 31, 2019 and December 31, 2018, the Company’s interest rate swaps were categorized as follows in the fair value hierarchy:
Valuation Inputs
​ ​
March 31, 2019
(Unaudited)
​ ​
December 31, 2018
​
​
Asset
​ ​
Liability
​ ​
Asset
​ ​
Liability
​
Level 1—Price quotations in active markets
​ ​ ​ $    — ​ ​ ​ ​ $ — ​ ​ ​ ​ $    — ​ ​ ​ ​ $ — ​ ​
Level 2—Significant other observable inputs
​ ​ ​ ​ — ​ ​ ​ ​ ​ (8,608) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (2,614) ​ ​
Level 3—Significant unobservable inputs
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Total
​ ​ ​ $ — ​ ​ ​ ​ $ (8,608) ​ ​ ​ ​ $ — ​ ​ ​ ​ $ (2,614) ​ ​
​
The Company’s investments consist primarily of debt investments that were acquired directly from the issuer. Debt investments, for which broker quotes are not available, are valued by independent valuation firms, which determine the fair value of such investments by considering, among other factors, the borrower’s ability to adequately service its debt, prevailing interest rates for like investments, expected cash flows, call features, anticipated repayments and other relevant terms of the investments. Except as described below, all of the Company’s equity/other investments are also valued by independent valuation firms, which determine the fair value of such investments by considering, among other factors, contractual rights ascribed to such investments, as well as various income scenarios and multiples of earnings before interest, taxes, depreciation and amortization, or EBITDA, cash flows, net income, revenues or, in limited instances, book value or liquidation value. An investment that is newly issued and purchased near the date of the financial statements is valued at cost if the Company’s board of directors determines that the cost of such investment is the best indication of its fair value. Such investments described above are typically classified as Level 3 within the fair value hierarchy. Investments that are traded on an active public market are valued at their closing price as of the date of the financial statements and are classified as Level 1 within the fair value hierarchy. Except as described above, the Company typically values its other investments and interest rate swaps by using the midpoint of the prevailing bid and ask prices from dealers on the date of the relevant period end, which are provided by independent third-party pricing services and screened for validity by such services and are typically classified as Level 2 within the fair value hierarchy.
The Company values the TRS in accordance with the agreements between Center City Funding and Citibank, that collectively established the TRS, which agreements are collectively referred to herein as the TRS Agreement. Pursuant to the TRS Agreement, the value of the TRS is based on the increase or decrease in the value of the loans underlying the TRS, together with accrued interest income, interest expense and certain other expenses incurred under the TRS. The loans underlying the TRS are valued by Citibank. Citibank bases its valuation on the indicative bid prices provided by an independent third-party pricing service. Bid prices reflect the highest price that market participants may be willing to pay. These valuations are sent to the Company for review and testing. The valuation committee and the board of directors review and approve the value of the TRS, as well as the value of the loans underlying the TRS, on a quarterly basis. To the extent the Company’s valuation committee or board of directors has any questions or concerns regarding the valuation of the loans underlying the TRS, such valuation is discussed or challenged pursuant to the terms of the TRS Agreement. See Note 9 for additional information regarding the TRS.
The Company periodically benchmarks the bid and ask prices it receives from the third-party pricing services and/or dealers and independent valuation firms as applicable, against the actual prices at which the Company purchases and sells its investments. Based on the results of the benchmark analysis and the experience of the Company’s management in purchasing and selling these investments, the Company
44
TABLE OF CONTENTS
FS Investment Corporation III
 
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 8. Fair Value of Financial Instruments (continued)
 
believes that these prices are reliable indicators of fair value. The valuation committee and the board of directors reviewed and approved the valuation determinations made with respect to these investments in a manner consistent with the Company’s valuation policy.
The following is a reconciliation for the three months ended March 31, 2019 and 2018 of investments for which significant unobservable inputs (Level 3) were used in determining fair value:
​ ​ ​
For the Three Months Ended March 31, 2019
​
​ ​ ​
Senior Secured
Loans—
First Lien
​ ​
Senior Secured
Loans—
Second Lien
​ ​
Other Senior
Secured Debt
​ ​
Subordinated
Debt
​ ​
Asset Based
Finance
​ ​
Equity/​
Other
​ ​
Total
​
Fair value at beginning of period
​ ​ ​ $ 2,191,650 ​ ​ ​ ​ $ 164,009 ​ ​ ​ ​ $ 7,496 ​ ​ ​ ​ $ 852 ​ ​ ​ ​ $ 161,624 ​ ​ ​ ​ $ 71,379 ​ ​ ​ ​ $ 2,597,010 ​ ​
Accretion of discount (amortization of premium)
​ ​ ​ ​ 239 ​ ​ ​ ​ ​ 76 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 8 ​ ​ ​ ​ ​ 323 ​ ​
Net realized gain (loss)
​ ​ ​ ​ (4,694) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 24 ​ ​ ​ ​ ​ (28,922) ​ ​ ​ ​ ​ (33,592) ​ ​
Net change in unrealized appreciation (depreciation)
​ ​ ​ ​ (1,327) ​ ​ ​ ​ ​ 205 ​ ​ ​ ​ ​ 104 ​ ​ ​ ​ ​ 1,175 ​ ​ ​ ​ ​ (570) ​ ​ ​ ​ ​ 27,276 ​ ​ ​ ​ ​ 26,863 ​ ​
Purchases
​ ​ ​ ​ 283,282 ​ ​ ​ ​ ​ 54,890 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 27,722 ​ ​ ​ ​ ​ 47 ​ ​ ​ ​ ​ 4,327 ​ ​ ​ ​ ​ 370,268 ​ ​
Paid-in-kind interest
​ ​ ​ ​ 601 ​ ​ ​ ​ ​ 303 ​ ​ ​ ​ ​ 25 ​ ​ ​ ​ ​ 29 ​ ​ ​ ​ ​ 3,464 ​ ​ ​ ​ ​ 350 ​ ​ ​ ​ ​ 4,772 ​ ​
Sales and repayments
​ ​ ​ ​ (174,797) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (845) ​ ​ ​ ​ ​ (1,018) ​ ​ ​ ​ ​ (176,660) ​ ​
Net transfers in or out of Level 3 
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Fair value at end of period
​ ​ ​ $ 2,294,954 ​ ​ ​ ​ $ 219,483 ​ ​ ​ ​ $ 7,625 ​ ​ ​ ​ $ 29,778 ​ ​ ​ ​ $ 163,744 ​ ​ ​ ​ $ 73,400 ​ ​ ​ ​ $ 2,788,984 ​ ​
The amount of total gains or losses for the period included
in changes in net assets attributable to the change in
unrealized gains or losses relating to investments still
held at the reporting date
​ ​ ​ $ (7,210) ​ ​ ​ ​ $ 205 ​ ​ ​ ​ $ 104 ​ ​ ​ ​ $ 331 ​ ​ ​ ​ $ (272) ​ ​ ​ ​ $ 568 ​ ​ ​ ​ $ (6,274) ​ ​
​
​ ​ ​
For the Three Months Ended March 31, 2018
​
​ ​ ​
Senior Secured
Loans—
First Lien
​ ​
Senior Secured
Loans—
Second Lien
​ ​
Other Senior
Secured Debt
​ ​
Subordinated
Debt
​ ​
Asset
Based
Finance
​ ​
Equity/​
Other
​ ​
Total
​
Fair value at beginning of period
​ ​ ​ $ 2,222,444 ​ ​ ​ ​ $ 261,239 ​ ​ ​ ​ $ 60,478 ​ ​ ​ ​ $ 552,320 ​ ​ ​ ​ $ 143,418 ​ ​ ​ ​ $ 95,962 ​ ​ ​ ​ $ 3,335,861 ​ ​
Accretion of discount (amortization of premium)
​ ​ ​ ​ 355 ​ ​ ​ ​ ​ 217 ​ ​ ​ ​ ​ 13 ​ ​ ​ ​ ​ 548 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,133 ​ ​
Net realized gain (loss)
​ ​ ​ ​ (3,317) ​ ​ ​ ​ ​ (3,199) ​ ​ ​ ​ ​ (1,064) ​ ​ ​ ​ ​ (14,396) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (21,976) ​ ​
Net change in unrealized appreciation (depreciation)
​ ​ ​ ​ (8,067) ​ ​ ​ ​ ​ (9,232) ​ ​ ​ ​ ​ (809) ​ ​ ​ ​ ​ (7,761) ​ ​ ​ ​ ​ (1,117) ​ ​ ​ ​ ​ (605) ​ ​ ​ ​ ​ (27,591) ​ ​
Purchases
​ ​ ​ ​ 137,699 ​ ​ ​ ​ ​ 9,849 ​ ​ ​ ​ ​ 11,525 ​ ​ ​ ​ ​ 6,623 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 12,154 ​ ​ ​ ​ ​ 177,850 ​ ​
Paid-in-kind interest
​ ​ ​ ​ 635 ​ ​ ​ ​ ​ 420 ​ ​ ​ ​ ​ 96 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 4,972 ​ ​ ​ ​ ​ 265 ​ ​ ​ ​ ​ 6,388 ​ ​
Sales and repayments
​ ​ ​ ​ (119,274) ​ ​ ​ ​ ​ (7,005) ​ ​ ​ ​ ​ (11,933) ​ ​ ​ ​ ​ (18,744) ​ ​ ​ ​ ​ (162) ​ ​ ​ ​ ​ (19) ​ ​ ​ ​ ​ (157,137) ​ ​
Net transfers in or out of Level 3
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Fair value at end of period
​ ​ ​ $ 2,230,475 ​ ​ ​ ​ $ 252,289 ​ ​ ​ ​ $ 58,306 ​ ​ ​ ​ $ 518,590 ​ ​ ​ ​ $ 147,111 ​ ​ ​ ​ $ 107,757 ​ ​ ​ ​ $ 3,314,528 ​ ​
The amount of total gains or losses for the period included
in changes in net assets attributable to the change in
unrealized gains or losses relating to investments still
held at the reporting date
​ ​ ​ $ (9,076) ​ ​ ​ ​ $ (11,278) ​ ​ ​ ​ $ (1,353) ​ ​ ​ ​ $ (17,925) ​ ​ ​ ​ $ (1,119) ​ ​ ​ ​ $ 164 ​ ​ ​ ​ $ (40,587) ​ ​
​
45
TABLE OF CONTENTS
FS Investment Corporation III
 
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 8. Fair Value of Financial Instruments (continued)
 
The following is a reconciliation for the three months ended March 31, 2019 and 2018 of the total return swap for which significant unobservable inputs (Level 3) were used in determining fair value:
​ ​ ​
For the Three Months Ended
March 31,
​
​ ​ ​
2019
​ ​
2018
​
Fair value at beginning of period
​ ​ ​ $ (22,062) ​ ​ ​ ​ $ (3,756) ​ ​
Amortization of premium (accretion of discount)
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Net realized gain (loss)
​ ​ ​ ​ (15,004) ​ ​ ​ ​ ​ 5,285 ​ ​
Net change in unrealized appreciation (depreciation)
​ ​ ​ ​ 21,152 ​ ​ ​ ​ ​ 2,196 ​ ​
Proceeds
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Sales and repayments
​ ​ ​ ​ 15,004 ​ ​ ​ ​ ​ (5,285) ​ ​
Net transfers in or out of Level 3
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Fair value at end of period
​ ​ ​ $ (910) ​ ​ ​ ​ $ (1,560) ​ ​
The amount of total gains or losses for the period included in changes in net assets attributable to the change in unrealized gains or losses relating to a secured borrowing and the total return swap still held at the reporting date
​ ​ ​ $ 21,152 ​ ​ ​ ​ $ 2,196 ​ ​
​
The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements as of March 31, 2019 and December 31, 2018 were as follows:
Type of Investment
​ ​
Fair Value at
March 31, 2019
(Unaudited)(1)
 ​ ​
Valuation
Techniques(2)
 ​ ​
Primary
Unobservable Inputs
​ ​
Range
(Weighted Average)(3)
 ​ ​
Impact to
Valuation from
an Increase in
Input(4)
 ​
Senior Debt
​ ​ ​
$
2,249,914
 ​ ​ ​ Discounted Cash Flow ​ ​ Discount Rate ​ ​
8.06% – 16.73% (9.87%)
​ ​
Decrease
​
​ ​ ​ ​
​
183,250
 ​ ​ ​ Waterfall ​ ​ EBITDA Multiple ​ ​
0.13x – 8.25x (1.62x)
​ ​
Increase
​
​ ​ ​ ​
​
85,577
 ​ ​ ​ Cost ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
​
3,321
 ​ ​ ​ Other(5) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Subordinated Debt
​ ​ ​
​
29,678
 ​ ​ ​ Discounted Cash Flow ​ ​ Discount Rate ​ ​
11.58% – 19.75% (11.74%)
​ ​
Decrease
​
​ ​ ​ ​
​
100
 ​ ​ ​ Waterfall ​ ​ EBITDA Multiple ​ ​
10.64x – 10.64x (10.64x)
​ ​
Increase
​
Asset Based Finance
​ ​ ​
​
158,207
 ​ ​ ​ Waterfall ​ ​ EBITDA Multiple ​ ​
1.03x – 12.00x (1.10x)
​ ​
Increase
​
​ ​ ​ ​
​
5,537
 ​ ​ ​
Indicative Dealer Quotes
​ ​ ​ ​ ​
99.71% – 99.71% (99.71%)
​ ​
Increase
​
Equity/Other
​ ​ ​
​
41,756
 ​ ​ ​ Waterfall ​ ​ EBITDA Multiple ​ ​
1.00x – 14.50x (6.23x)
​ ​
Increase
​
​ ​ ​ ​
​
424
 ​ ​ ​ Option Pricing Model ​ ​
Equity Illiquidity Discount
​ ​
15.00% – 15.00% (15.00%)
​ ​
Decrease
​
​ ​ ​ ​
​
3,957
 ​ ​ ​ Cost ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
​
27,263
 ​ ​ ​ Other(5) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Total
​ ​ ​
$
2,788,984
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Total Return Swap
​ ​ ​
$
(910)
 ​ ​ ​
Indicative Dealer Quotes
​ ​ ​ ​ ​
88.42% – 99.50% (96.87%)
​ ​
Increase
​
​
(1)
Certain investments may be valued at cost for a period of time after an acquisition as the best indicator of fair value.
​
(2)
For the assets and investments that have more than one valuation technique, the Company may rely on the stated techniques individually or in the aggregate based on a weight ascribed to each valuation technique, ranging from 0 – 100%. Indicative broker quotes obtained for valuation purposes are reviewed by the Company relative to other valuation techniques.
​
(3)
Weighted average amounts are based on the estimated fair values.
​
(4)
This column represents the directional change in the fair value of the Level 3 investments that would result from an increase to the corresponding unobservable input. A decrease to the input would have the opposite effect. Significant changes in these inputs in isolation could result in significantly higher or lower fair value measurements.
​
(5)
Fair value based on expected outcome of proposed corporate transactions and/or other factors.
​
​
46
TABLE OF CONTENTS
FS Investment Corporation III
 
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 8. Fair Value of Financial Instruments (continued)
 
Type of Investment
​ ​
Fair Value at
December 31,
2018
​ ​
Valuation
Technique(1)
 ​ ​
Unobservable Input
​ ​
Range
​ ​
Weighted
Average
​
Senior Secured Loans—First Lien
​ ​ ​
$
1,957,628
 ​ ​ ​ Market Comparables ​ ​ Market Yield (%) ​ ​
6.9% – 16.8%
​ ​
10.8%
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ EBITDA Multiples (x) ​ ​
5.3x – 9.5x
​ ​
6.9x
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Revenue Multiples (x) ​ ​
0.1x – 0.1x
​ ​
0.1x
​
​ ​ ​ ​
​
150,621
 ​ ​ ​ Other(2) ​ ​ Other(2) ​ ​
N/A
​ ​
N/A
​
​ ​ ​ ​
​
83,401
 ​ ​ ​ Cost ​ ​ Cost ​ ​
99.0% – 100.0%
​ ​
99.5%
​
Senior Secured Loans—Second Lien 
​ ​ ​
​
120,507
 ​ ​ ​ Market Comparables ​ ​ Market Yield (%) ​ ​
8.9% – 15.0%
​ ​
12.0%
​
​ ​ ​ ​
​
4,096
 ​ ​ ​ Other(2) ​ ​ Other(2) ​ ​
N/A
​ ​
N/A
​
​ ​ ​ ​
​
39,406
 ​ ​ ​ Cost ​ ​ Cost ​ ​
98.5% – 98.5%
​ ​
98.5%
​
Other Senior Secured Debt
​ ​ ​
​
7,496
 ​ ​ ​ Market Comparables ​ ​ Market Yield (%) ​ ​
8.2% – 13.6%
​ ​
10.3%
​
Subordinated Debt
​ ​ ​
​
852
 ​ ​ ​ Market Comparables ​ ​ Market Yield (%) ​ ​
12.0% – 20.0%
​ ​
15.1%
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ EBITDA Multiples (x) ​ ​
9.6x – 10.1x
​ ​
9.9x
​
Asset Based Finance
​ ​ ​
​
154,969
 ​ ​ ​ Market Comparables ​ ​ Market Yield (%) ​ ​
17.7% – 19.0%
​ ​
18.4%
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Net Aircraft Book Value Multiple (x)
​ ​
1.0x – 1.0x
​ ​
1.0x
​
​ ​ ​ ​
​
6,655
 ​ ​ ​ Market Quotes ​ ​ Indicative Dealer Quotes ​ ​
71.3% – 99.6%
​ ​
61.9%
​
Equity/Other
​ ​ ​
​
42,939
 ​ ​ ​ Market Comparables ​ ​ Capacity Multiple ($/kW) ​ ​
$1,875.0 – $2,125.0
​ ​
$2,000.0
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ EBITDA Multiples (x) ​ ​
4.0x – 14.3x
​ ​
7.4x
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Net Aircraft Book Value Multiple (x)
​ ​
1.0x – 1.0x
​ ​
1.0x
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Production Multiples (Mboe/d) ​ ​
$31,250.0 – $38,750.0
​ ​
$35,795.1
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Proved Reserves Multiples (Mmboe)
​ ​
$7.0 – $13.8
​ ​
$12.3
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ PV-10 Multiples (x) ​ ​
0.8x – 1.3x
​ ​
0.9x
​
​ ​ ​ ​
​
426
 ​ ​ ​
Option Valuation Model
​ ​ Volatility (%) ​ ​
30.0% – 30.0%
​ ​
30.0%
​
​ ​ ​ ​
​
27,048
 ​ ​ ​ Other(2) ​ ​ Other(2) ​ ​
N/A
​ ​
N/A
​
​ ​ ​ ​
​
966
 ​ ​ ​ Cost ​ ​ Cost ​ ​
100.0% – 100.0%
​ ​
100.0%
​
Total
​ ​ ​
$
2,597,010
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Total Return Swap
​ ​ ​
$
(22,062)
 ​ ​ ​ Market Quotes ​ ​ Indicative Dealer Quotes ​ ​
89.1% – 100.0%
​ ​
95.9%
​
​
(1)
Investments using a market quotes valuation technique were valued by using the midpoint of the prevailing bid and ask prices from dealers on the date of the relevant period end, which were provided by independent third-party pricing services and screened for validity by such services, with the exception of investments in the TRS, which was valued by using the bid price from dealers on the date of the relevant period end. Investments valued using an EBITDA multiple or a revenue multiple pursuant to the market comparables valuation technique may be conducted using an enterprise valuation waterfall analysis. For investments utilizing a market comparables valuation technique, a significant increase (decrease) in the market yield, in isolation, would result in a significantly lower (higher) fair value measurement, and a significant increase (decrease) in any of the valuation multiples, in isolation, would result in a significantly higher (lower) fair value measurement. For investments utilizing a discounted cash flow valuation technique, a significant increase (decrease) in the discount rate, in isolation, would result in a significantly lower (higher) fair value measurement. For investments utilizing an option valuation model valuation technique, a significant increase (decrease) in the volatility, in isolation, would result in a significantly higher (lower) fair value measurement.
​
(2)
Fair value based on expected outcome of proposed corporate transactions and/or other factors.
​
47
TABLE OF CONTENTS
FS Investment Corporation III
 
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 9. Financing Arrangements
The following tables present summary information with respect to the Company’s outstanding financing arrangements as of March 31, 2019 and December 31, 2018. For additional information regarding these financing arrangements, see the notes to the Company’s audited consolidated financial statements contained in its annual report on Form 10-K for the year ended December 31, 2018. Any significant changes to the Company’s financing arrangements during the three months ended March 31, 2019 are discussed below.
​ ​ ​
As of March 31, 2019
(Unaudited)
​
Arrangement
​ ​
Type of Arrangement
​ ​
Rate
​ ​
Amount
Outstanding
​ ​
Amount
Available
​ ​
Maturity Date
​
BNP Facility(1)
 ​ ​
Prime Brokerage Facility
​ ​
L+1.25%
​ ​ ​ $ 52,500 ​ ​ ​ ​ $ 197,500 ​ ​ ​
June 15, 2019(2)
 ​
Deutsche Bank Credit Facility(1)
 ​ ​
Revolving Credit Facility
​ ​
L+2.00%
​ ​ ​ ​ 300,000 ​ ​ ​ ​ ​ 200,000 ​ ​ ​
February 26, 2024
​
JPM Credit Facility(1)
 ​ ​
Revolving Credit Facility
​ ​
L+2.50%
​ ​ ​ ​ 400,000 ​ ​ ​ ​ ​ — ​ ​ ​
July 15, 2022
​
Goldman Facility(1)
 ​ ​
Repurchase Agreement
​ ​
L+2.50%
​ ​ ​ ​ 300,000 ​ ​ ​ ​ ​ — ​ ​ ​
July 15, 2019
​
Senior Secured Revolving Credit Facility(1)
 ​ ​
Revolving Credit Facility
​ ​
L+ 2.00% – 2.25%(3)
 ​ ​ ​ ​ 494,230(4) ​ ​ ​ ​ ​ 155,770 ​ ​ ​
August 9, 2023
​
Total
​ ​ ​ ​ ​ ​ ​ ​ ​ $ 1,546,730 ​ ​ ​ ​ $ 553,270 ​ ​ ​ ​ ​
Citibank Total Return Swap
​ ​
Total Return Swap
​ ​
L+1.55%
​ ​ ​ $ 123,158 ​ ​ ​ ​ $ 26,842 ​ ​ ​
N/A(5)
 ​
​ ​ ​
As of December 31, 2018
​ ​
Arrangement
​ ​
Type of Arrangement
​ ​
Rate
​ ​
Amount
Outstanding
​ ​
Amount
Available
​ ​
Maturity Date
​ ​
BNP Facility(1)
 ​ ​
Prime Brokerage Facility
​ ​
L+1.25%
​ ​ ​ $ — ​ ​ ​ ​ $ 250,000 ​ ​ ​
June 15, 2019(2)
 ​ ​ ​ ​
Deutsche Bank Credit Facility(1)
 ​ ​
Revolving Credit Facility
​ ​
L+2.25%
​ ​ ​ ​ 269,000 ​ ​ ​ ​ ​ 81,000 ​ ​ ​
September 22, 2019
​ ​ ​ ​
JPM Credit Facility(1)
 ​ ​
Revolving Credit Facility
​ ​
L+2.50%
​ ​ ​ ​ 340,000 ​ ​ ​ ​ ​ 60,000 ​ ​ ​
July 15, 2022
​ ​ ​ ​
Goldman Facility(1)
 ​ ​
Repurchase Agreement
​ ​
L+2.50%
​ ​ ​ ​ 300,000 ​ ​ ​ ​ ​ — ​ ​ ​
July 15, 2019
​ ​ ​ ​
Senior Secured Revolving Credit Facility(1)
 ​ ​
Revolving Credit Facility
​ ​
L+2.00% – 2.25%(3)
 ​ ​ ​ ​ 290,594(6) ​ ​ ​ ​ ​ 359,406 ​ ​ ​
August 9, 2023
​ ​ ​ ​
Total
​ ​ ​ ​ ​ ​ ​ ​ ​ $ 1,199,594 ​ ​ ​ ​ $ 750,406 ​ ​ ​ ​ ​ ​ ​ ​
Citibank Total Return Swap
 ​ ​
Total Return Swap
​ ​
L+1.55%
​ ​ ​ $ 145,371 ​ ​ ​ ​ $ 4,629 ​ ​ ​
N/A(5)
 ​ ​ ​ ​
​
(1)
The carrying amount outstanding under the facility approximates its fair value.
​
(2)
This facility generally is terminable upon 270 days’ notice by either party. On September 18, 2018, Burholme Funding LLC gave notice of its intent to terminate the facility on June 15, 2019.
​
(3)
The spread over LIBOR is determined by reference to the ratio of the value of the borrowing base to the aggregate amount of certain outstanding indebtedness of the Company.
​
(4)
Amount includes borrowings in U.S. dollars, Canadian dollars and Euros. Canadian dollar balance outstanding of CAD $37,100 has been converted to U.S. dollars at an exchange rate of CAD $1.00 to $0.75 as of March 31, 2019 and Euro balance outstanding of  €1,300 has been converted to U.S. dollars at an exchange rate of EUR €1.00 to $1.12 as of March 31, 2019 to reflect total amount outstanding in U.S. dollars.
​
(5)
The TRS may be terminated by Center City Funding at any time, subject to payment of an early termination fee if prior to June 30, 2019, or by Citibank on or after June 30, 2019, in each case, in whole or in part, upon prior written notice to the other party.
​
​
48
TABLE OF CONTENTS
FS Investment Corporation III
 
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 9. Financing Arrangements (continued)
 
(6)
Amount includes borrowings in U.S. dollars, Canadian dollars and Euros. Canadian dollar balance outstanding of CAD $5,600 has been converted to U.S. dollars at an exchange rate of CAD $1.00 to $0.73 as of December 31, 2018 and Euro balance outstanding of  €1,300 has been converted to U.S. dollars at an exchange rate of EUR €1.00 to $1.15 as of December 31, 2018 to reflect total amount outstanding in U.S. dollars.
​
For the three months ended March 31, 2019 and 2018, the components of total interest expense for the Company’s financing arrangements were as follows:
​ ​ ​
Three Months Ended March 31,
​
​ ​ ​
2019
​ ​
2018
​
Arrangement(1)
 ​ ​
Interest
Expense(2)
 ​ ​
Amortization of
Deferred
Financing Costs
​ ​
Total
Interest
Expense
​ ​
Interest
Expense(2)
 ​ ​
Amortization of
Deferred
Financing Costs
​ ​
Total
Interest
Expense
​
BNP Facility
​ ​ ​ $ 869 ​ ​ ​ ​ $ — ​ ​ ​ ​ $ 869 ​ ​ ​ ​ $ 1,593 ​ ​ ​ ​ $ — ​ ​ ​ ​ $ 1,593 ​ ​
Deutsche Bank Credit Facility
​ ​ ​ ​ 4,104 ​ ​ ​ ​ ​ 134 ​ ​ ​ ​ ​ 4,238 ​ ​ ​ ​ ​ 3,682 ​ ​ ​ ​ ​ 230 ​ ​ ​ ​ ​ 3,912 ​ ​
JPM Credit Facility
​ ​ ​ ​ 5,170 ​ ​ ​ ​ ​ 146 ​ ​ ​ ​ ​ 5,316 ​ ​ ​ ​ ​ 4,354 ​ ​ ​ ​ ​ 36 ​ ​ ​ ​ ​ 4,390 ​ ​
Goldman Facility
​ ​ ​ ​ 3,924 ​ ​ ​ ​ ​ 98 ​ ​ ​ ​ ​ 4,022 ​ ​ ​ ​ ​ 3,121 ​ ​ ​ ​ ​ 98 ​ ​ ​ ​ ​ 3,219 ​ ​
Capital One Credit Facility
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,510 ​ ​ ​ ​ ​ 68 ​ ​ ​ ​ ​ 1,578 ​ ​
Senior Secured Revolving Credit Facility
​ ​ ​ ​ 6,887 ​ ​ ​ ​ ​ 233 ​ ​ ​ ​ ​ 7,120 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Total
​ ​ ​ $ 20,954 ​ ​ ​ ​ $ 611 ​ ​ ​ ​ $ 21,565 ​ ​ ​ ​ $ 14,260 ​ ​ ​ ​ $ 432 ​ ​ ​ ​ $ 14,692 ​ ​
​
​
(1)
Borrowings of each of the Company’s wholly-owned financing subsidiaries are considered borrowings of the Company for purposes of complying with the asset coverage requirements applicable to BDCs under the 1940 Act.
​
(2)
Interest expense may include the effect of non-usage fees, administration fees and/or make-whole fees.
​
The Company’s average borrowings and weighted average interest rate, including the effect of non-usage fees, for the three months ended March 31, 2019 were $1,620,003 and 5.17%, respectively. As of March 31, 2019, the Company’s weighted average effective interest rate on borrowings was 5.14%.
Under its financing arrangements, the Company has made certain representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar financing arrangements. The Company was in compliance with all covenants required by its financing arrangements as of March 31, 2019 and December 31, 2018.
Deutsche Bank Credit Facility
On February 19, 2019, Dunlap Funding LLC, the Company’s wholly-owned special purpose financing subsidiary, entered into an Omnibus Amendment to the revolving credit facility, or the Deutsche Bank Credit Facility, originally entered into on December 2, 2014 with deutsche bank AG, New York Branch, to, among other things, increase the committed facility amount to $500,000, extend the end of the revolving period to February 26, 2022, extend the maturity date to February 26, 2024, decrease the interest rate to, during the revolving period, 2.00% per annum, and after the revolving period, 2.10% per annum, in each case, plus three-month LIBOR (or the relevant reference rate for any foreign currency borrowings), and decrease the non-usage fee to 0.25%.
49
TABLE OF CONTENTS
FS Investment Corporation III
 
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 9. Financing Arrangements (continued)
 
Citibank Total Return Swap
Counterparty
​ ​
Description
​ ​
Termination Date
​ ​
Value as of
March 31, 2019
​
Citibank ​ ​ A TRS is a contract in which one party agrees to make periodic payments to another party based on the change in the market value of the assets underlying the TRS, which may include a specified security, basket of securities or securities indices during a specified period, in return for periodic payments based on a fixed or variable interest rate. ​ ​ Citibank may terminate the TRS on or after June 30, 2019, unless certain specified events permit Citibank to terminate the TRS on an earlier date. Center City Funding may terminate the TRS at any time upon providing no more than 30 days, and no less than 10 days, prior notice to Citibank. ​ ​
$(910)
 ​
As of March 31, 2019 and December 31, 2018, the fair value of the TRS was $(910) and $(22,062), respectively, which is reflected in the Company’s consolidated balance sheets as unrealized appreciation (depreciation) on total return swap. As of March 31, 2019 and December 31, 2018, the receivable due on the TRS was $0 and $1,071, respectively, which is reflected in the Company’s consolidated balance sheets as receivable due on total return swap. As of March 31, 2019 and December 31, 2018, the payable due on the TRS was $15,250 and $0, respectively, which is reflected in the Company’s consolidated balance sheets as payable due on total return swap. As of March 31, 2019 and December 31, 2018, the Company posted $46,915 and $128,764, respectively, in cash collateral held by Citibank (of which only $45,181 and $119,616, respectively, was required to be posted). The cash collateral held by Citibank is reflected in the Company’s consolidated balance sheets as due from counterparty. The Company does not offset collateral posted in relation to the TRS with any unrealized appreciation (depreciation) outstanding on the consolidated balance sheets as of March 31, 2019 and December 31, 2018.
For the three months ended March 31, 2019 and 2018, transactions in the TRS resulted in net realized gain (loss) on total return swap of  $(15,004) and $5,285, respectively, and unrealized appreciation (depreciation) on total return swap of  $21,152 and $2,196, respectively, which are reflected in the Company’s consolidated statements of operations.
50
TABLE OF CONTENTS
FS Investment Corporation III
 
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 9. Financing Arrangements (continued)
 
The following is a summary of the underlying loans subject to the TRS as of March 31, 2019:
Underlying Loan(1)
 ​ ​
Industry
​ ​
Rate(2)
 ​ ​
Floor
​ ​
Maturity
​ ​
Notional
Amount
​ ​
Market
Value
​ ​
Unrealized
Appreciation/​
(Depreciation)
​
American Bath Group LLC(4) 
 ​ ​ Capital Goods ​ ​
L+975
​ ​ 1.0% ​ ​
9/30/24
​ ​ ​
$
2,471
 ​ ​ ​ ​
$
2,673
 ​ ​ ​ ​
$
202
 ​ ​
ATX Networks Corp(3)(4)
 ​ ​
Technology Hardware & Equipment
​ ​
L+600, 1.00% PIK
(1.00% Max PIK)
​ ​ 1.0% ​ ​
6/11/21
​ ​ ​
​
6,487
 ​ ​ ​ ​
​
6,374
 ​ ​ ​ ​
​
(113)
 ​ ​
Brand Energy & Infrastructure Services Inc(4)
 ​ ​ Capital Goods ​ ​
L+425
​ ​ 1.0% ​ ​
6/21/24
​ ​ ​
​
4,459
 ​ ​ ​ ​
​
4,223
 ​ ​ ​ ​
​
(236)
 ​ ​
Caprock Midstream LLC(4)
 ​ ​ Energy ​ ​
L+475
​ ​ ​ ​ ​
11/3/25
​ ​ ​
​
3,705
 ​ ​ ​ ​
​
3,544
 ​ ​ ​ ​
​
(161)
 ​ ​
Centric Group LLC(4)
 ​ ​ Retailing ​ ​
L+800
​ ​ 1.0% ​ ​
2/1/24
​ ​ ​
​
1,800
 ​ ​ ​ ​
​
1,742
 ​ ​ ​ ​
​
(58)
 ​ ​
CSM Bakery Products(4)
 ​ ​ Food, Beverage & Tobacco ​ ​
L+400
​ ​ 1.0% ​ ​
7/3/20
​ ​ ​
​
4,037
 ​ ​ ​ ​
​
3,978
 ​ ​ ​ ​
​
(59)
 ​ ​
Diamond Resorts International Inc(4)
 ​ ​ Consumer Services ​ ​
L+375
​ ​ 1.0% ​ ​
9/2/23
​ ​ ​
​
11,164
 ​ ​ ​ ​
​
10,559
 ​ ​ ​ ​
​
(605)
 ​ ​
Eagleclaw Midstream Ventures LLC(4)
 ​ ​ Energy ​ ​
L+425
​ ​ 1.0% ​ ​
6/24/24
​ ​ ​
​
4,772
 ​ ​ ​ ​
​
4,628
 ​ ​ ​ ​
​
(144)
 ​ ​
Foresight Energy LLC(3)(4)
 ​ ​ Materials ​ ​
L+575
​ ​ 1.0% ​ ​
3/28/22
​ ​ ​
​
7,500
 ​ ​ ​ ​
​
7,353
 ​ ​ ​ ​
​
(147)
 ​ ​
Grocery Outlet Inc(4)
 ​ ​ Food & Staples Retailing ​ ​
L+725
​ ​ ​ ​ ​
10/22/26
​ ​ ​
​
2,298
 ​ ​ ​ ​
​
2,298
 ​ ​ ​ ​
​
—
 ​ ​
Ivanti Software Inc(4)
 ​ ​ Software & Services ​ ​
L+425
​ ​ 1.0% ​ ​
1/20/24
​ ​ ​
​
6,598
 ​ ​ ​ ​
​
6,556
 ​ ​ ​ ​
​
(42)
 ​ ​
Jo-Ann Stores Inc(4)
 ​ ​ Retailing ​ ​
L+500
​ ​ 1.0% ​ ​
10/20/23
​ ​ ​
​
2,733
 ​ ​ ​ ​
​
2,697
 ​ ​ ​ ​
​
(36)
 ​ ​
LBM Borrower LLC(4)
 ​ ​ Capital Goods ​ ​
L+925
​ ​ 1.0% ​ ​
8/20/23
​ ​ ​
​
10,000
 ​ ​ ​ ​
​
9,749
 ​ ​ ​ ​
​
(251)
 ​ ​
NaviHealth Inc.(4)
 ​ ​
Health Care Equipment & Services
​ ​
L+500
​ ​ ​ ​ ​
8/1/25
​ ​ ​
​
8,466
 ​ ​ ​ ​
​
8,717
 ​ ​ ​ ​
​
251
 ​ ​
Navistar Inc(3)(4)
 ​ ​ Automobiles & Components ​ ​
L+350
​ ​ ​ ​ ​
11/6/24
​ ​ ​
​
8,599
 ​ ​ ​ ​
​
8,589
 ​ ​ ​ ​
​
(10)
 ​ ​
P2 Energy Solutions, Inc.(4)
 ​ ​ Software & Services ​ ​
L+400
​ ​ 1.0% ​ ​
10/30/20
​ ​ ​
​
2,008
 ​ ​ ​ ​
​
2,133
 ​ ​ ​ ​
​
125
 ​ ​
PAE Holding Corp
​ ​ Capital Goods ​ ​
L+550
​ ​ 1.0% ​ ​
10/20/22
​ ​ ​
​
83
 ​ ​ ​ ​
​
82
 ​ ​ ​ ​
​
(1)
 ​ ​
Paradigm Acquisition Corp(4) 
 ​ ​
Health Care Equipment & Services
​ ​
L+750
​ ​ ​ ​ ​
10/26/26
​ ​ ​
​
1,618
 ​ ​ ​ ​
​
1,606
 ​ ​ ​ ​
​
(12)
 ​ ​
Sequa Corp(4)
 ​ ​ Materials ​ ​
L+500
​ ​ 1.0% ​ ​
11/28/21
​ ​ ​
​
9,132
 ​ ​ ​ ​
​
9,029
 ​ ​ ​ ​
​
(103)
 ​ ​
SI Group Inc(4)
 ​ ​ Materials ​ ​
L+475
​ ​ ​ ​ ​
10/15/25
​ ​ ​
​
1,319
 ​ ​ ​ ​
​
1,361
 ​ ​ ​ ​
​
42
 ​ ​
SIRVA Worldwide Inc(4)
 ​ ​
Commercial & Professional Services
​ ​
L+550
​ ​ ​ ​ ​
8/2/25
​ ​ ​
​
2,758
 ​ ​ ​ ​
​
2,723
 ​ ​ ​ ​
​
(35)
 ​ ​
Team Health Inc
​ ​
Health Care Equipment & Services
​ ​
L+275
​ ​ 1.0% ​ ​
2/6/24
​ ​ ​
​
75
 ​ ​ ​ ​
​
73
 ​ ​ ​ ​
​
(2)
 ​ ​
Vivint Inc(4)
 ​ ​
Commercial & Professional Services
​ ​
L+500
​ ​ ​ ​ ​
4/1/24
​ ​ ​
​
7,358
 ​ ​ ​ ​
​
7,149
 ​ ​ ​ ​
​
(209)
 ​ ​
West Corp(4)
 ​ ​ Software & Services ​ ​
L+350
​ ​ 1.0% ​ ​
10/10/24
​ ​ ​
​
4,437
 ​ ​ ​ ​
​
4,104
 ​ ​ ​ ​
​
(333)
 ​ ​
West Corp(4)
 ​ ​ Software & Services ​ ​
L+400
​ ​ 1.0% ​ ​
10/10/24
​ ​ ​
​
4,025
 ​ ​ ​ ​
​
3,707
 ​ ​ ​ ​
​
(318)
 ​ ​
WireCo WorldGroup Inc(4)
 ​ ​ Capital Goods ​ ​
L+900
​ ​ 1.0% ​ ​
9/30/24
​ ​ ​
​
5,256
 ​ ​ ​ ​
​
5,165
 ​ ​ ​ ​
​
(91)
 ​ ​
Total
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
$
123,158
 ​ ​ ​ ​
$
120,812
 ​ ​ ​ ​
​
(2,346)
 ​ ​
Total TRS Accrued Income and Liabilities:​
 ​ ​ ​
​
1,436
 ​ ​
Total TRS Fair Value:​
 ​ ​ ​
$
(910)
 ​ ​
​
​
(1)
Loan may be an obligation of one or more entities affiliated with the named company.
​
(2)
The variable rate securities underlying the TRS bear interest at a rate determined by a publicly disclosed base rate plus a basis point spread. As of March 31, 2019, three-month LIBOR was 2.60%.
​
(3)
The investment is not a qualifying asset under the 1940 Act. A BDC may not acquire any asset other than qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets.
​
(4)
Security is also held directly by the Company or one of its wholly-owned subsidiaries.
​
​
51
TABLE OF CONTENTS
FS Investment Corporation III
 
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 9. Financing Arrangements (continued)
 
The following is a summary of the underlying loans subject to the TRS as of December 31, 2018:
Underlying Loan(1)
 ​ ​
Industry
​ ​
Rate(2)
 ​ ​
Floor
​ ​
Maturity
​ ​
Notional
Amount
​ ​
Market
Value
​ ​
Unrealized
Appreciation/​
(Depreciation)
​
Aleris International Inc(4)
 ​ ​ Materials ​ ​
L+475
​ ​ ​ ​ ​
2/27/23
​ ​ ​
$
2,333
 ​ ​ ​ ​
$
2,332
 ​ ​ ​ ​
$
(1)
 ​ ​
American Bath Group
LLC(4)
 ​ ​ Capital Goods ​ ​
L+975
​ ​ 1.0% ​ ​
9/30/24
​ ​ ​
​
2,471
 ​ ​ ​ ​
​
2,659
 ​ ​ ​ ​
​
188
 ​ ​
ATX Networks Corp(3)(4)
 ​ ​
Technology Hardware & Equipment
​ ​
L+600, 1.0% PIK
(1.0% Max PIK)
​ ​ 1.0% ​ ​
6/11/21
​ ​ ​
​
6,478
 ​ ​ ​ ​
​
6,358
 ​ ​ ​ ​
​
(120)
 ​ ​
Brand Energy & Infrastructure
Services Inc(4)
 ​ ​ Capital Goods ​ ​
L+425
​ ​ 1.0% ​ ​
6/21/24
​ ​ ​
​
4,471
 ​ ​ ​ ​
​
4,199
 ​ ​ ​ ​
​
(272)
 ​ ​
Caprock Midstream LLC(4)
 ​ ​ Energy ​ ​
L+475
​ ​ ​ ​ ​
11/3/25
​ ​ ​
​
3,706
 ​ ​ ​ ​
​
3,470
 ​ ​ ​ ​
​
(236)
 ​ ​
Centric Group LLC(4)
 ​ ​ Retailing ​ ​
L+800
​ ​ 1.0% ​ ​
2/1/24
​ ​ ​
​
1,800
 ​ ​ ​ ​
​
1,758
 ​ ​ ​ ​
​
(42)
 ​ ​
CSM Bakery Products(4)
 ​ ​ Food, Beverage & Tobacco ​ ​
L+400
​ ​ 1.0% ​ ​
7/3/20
​ ​ ​
​
4,037
 ​ ​ ​ ​
​
3,840
 ​ ​ ​ ​
​
(197)
 ​ ​
Diamond Resorts International
Inc(4)
 ​ ​ Consumer Services ​ ​
L+375
​ ​ 1.0% ​ ​
9/2/23
​ ​ ​
​
10,751
 ​ ​ ​ ​
​
10,235
 ​ ​ ​ ​
​
(516)
 ​ ​
Eagleclaw Midstream Ventures
LLC(4)
 ​ ​ Energy ​ ​
L+425
​ ​ 1.0% ​ ​
6/24/24
​ ​ ​
​
4,784
 ​ ​ ​ ​
​
4,605
 ​ ​ ​ ​
​
(179)
 ​ ​
Foresight Energy LLC(3)(4)
 ​ ​ Materials ​ ​
L+575
​ ​ 1.0% ​ ​
3/28/22
​ ​ ​
​
7,484
 ​ ​ ​ ​
​
7,351
 ​ ​ ​ ​
​
(133)
 ​ ​
Grocery Outlet Inc(4)
 ​ ​ Food & Staples Retailing ​ ​
L+725
​ ​ ​ ​ ​
10/22/26
​ ​ ​
​
2,298
 ​ ​ ​ ​
​
2,281
 ​ ​ ​ ​
​
(17)
 ​ ​
Intelsat Jackson Holdings SA(3)(4)
 ​ ​ Media ​ ​
L+375
​ ​ 1.0% ​ ​
11/27/23
​ ​ ​
​
6,501
 ​ ​ ​ ​
​
6,272
 ​ ​ ​ ​
​
(229)
 ​ ​
Ivanti Software Inc(4)
 ​ ​ Software & Services ​ ​
L+425
​ ​ 1.0% ​ ​
1/20/24
​ ​ ​
​
6,614
 ​ ​ ​ ​
​
6,439
 ​ ​ ​ ​
​
(175)
 ​ ​
Jo-Ann Stores Inc(4)
 ​ ​ Retailing ​ ​
L+500
​ ​ 1.0% ​ ​
10/20/23
​ ​ ​
​
2,794
 ​ ​ ​ ​
​
2,636
 ​ ​ ​ ​
​
(158)
 ​ ​
Koosharem LLC(4)
 ​ ​
Commercial & Professional Services
​ ​
L+450
​ ​ 1.0% ​ ​
4/18/25
​ ​ ​
​
1,049
 ​ ​ ​ ​
​
1,012
 ​ ​ ​ ​
​
(37)
 ​ ​
LBM Borrower LLC(4)
 ​ ​ Capital Goods ​ ​
L+925
​ ​ 1.0% ​ ​
8/20/23
​ ​ ​
​
10,000
 ​ ​ ​ ​
​
9,749
 ​ ​ ​ ​
​
(251)
 ​ ​
NaviHealth Inc.(4)
 ​ ​
Health Care Equipment & Services
​ ​
L+500
​ ​ ​ ​ ​
8/1/25
​ ​ ​
​
8,487
 ​ ​ ​ ​
​
8,479
 ​ ​ ​ ​
​
(8)
 ​ ​
Navistar Inc(3)(4)
 ​ ​ Automobiles & Components ​ ​
L+350
​ ​ ​ ​ ​
11/6/24
​ ​ ​
​
8,621
 ​ ​ ​ ​
​
8,340
 ​ ​ ​ ​
​
(281)
 ​ ​
P2 Energy Solutions, Inc.(4)
 ​ ​ Energy ​ ​
L+400
​ ​ 1.3% ​ ​
10/30/20
​ ​ ​
​
2,014
 ​ ​ ​ ​
​
2,084
 ​ ​ ​ ​
​
70
 ​ ​
PAE Holding Corp
​ ​ Capital Goods ​ ​
L+550
​ ​ 1.0% ​ ​
10/20/22
​ ​ ​
​
11
 ​ ​ ​ ​
​
10
 ​ ​ ​ ​
​
(1)
 ​ ​
Paradigm Acquisition
Corp(4)
 ​ ​
Health Care Equipment & Services
​ ​
L+750
​ ​ ​ ​ ​
10/26/26
​ ​ ​
​
1,618
 ​ ​ ​ ​
​
1,622
 ​ ​ ​ ​
​
4
 ​ ​
PF Chang’s China Bistro Inc(4) 
 ​ ​ Consumer Services ​ ​
L+500
​ ​ 1.0% ​ ​
9/1/22
​ ​ ​
​
2,985
 ​ ​ ​ ​
​
2,978
 ​ ​ ​ ​
​
(7)
 ​ ​
Sequa Corp(4)
 ​ ​ Materials ​ ​
L+500
​ ​ 1.0% ​ ​
11/28/21
​ ​ ​
​
9,155
 ​ ​ ​ ​
​
8,820
 ​ ​ ​ ​
​
(335)
 ​ ​
SI Group Inc(4)
 ​ ​ Materials ​ ​
L+475
​ ​ ​ ​ ​
10/15/25
​ ​ ​
​
1,322
 ​ ​ ​ ​
​
1,320
 ​ ​ ​ ​
​
(2)
 ​ ​
SIRVA Worldwide Inc(4)
 ​ ​
Commercial & Professional Services
​ ​
L+550
​ ​ ​ ​ ​
8/2/25
​ ​ ​
​
2,775
 ​ ​ ​ ​
​
2,754
 ​ ​ ​ ​
​
(21)
 ​ ​
Strike LLC(4)
 ​ ​ Energy ​ ​
L+800
​ ​ 1.0% ​ ​
11/30/22
​ ​ ​
​
2,481
 ​ ​ ​ ​
​
2,551
 ​ ​ ​ ​
​
70
 ​ ​
Team Health Inc
​ ​
Health Care Equipment & Services
​ ​
L+275
​ ​ 1.0% ​ ​
2/6/24
​ ​ ​
​
75
 ​ ​ ​ ​
​
74
 ​ ​ ​ ​
​
(1)
 ​ ​
Vivint Inc(4)
 ​ ​
Commercial & Professional Services
​ ​
L+500
​ ​ ​ ​ ​
4/1/24
​ ​ ​
​
7,377
 ​ ​ ​ ​
​
7,159
 ​ ​ ​ ​
​
(218)
 ​ ​
West Corp(4)
 ​ ​ Software & Services ​ ​
L+400
​ ​ 1.0% ​ ​
10/10/24
​ ​ ​
​
4,035
 ​ ​ ​ ​
​
3,652
 ​ ​ ​ ​
​
(383)
 ​ ​
West Corp(4)
 ​ ​ Software & Services ​ ​
L+350
​ ​ 1.0% ​ ​
10/10/24
​ ​ ​
​
4,448
 ​ ​ ​ ​
​
4,062
 ​ ​ ​ ​
​
(386)
 ​ ​
Westbridge Technologies Inc(4) 
 ​ ​
Technology Hardware & Equipment
​ ​
L+850
​ ​ 1.0% ​ ​
4/28/23
​ ​ ​
​
7,140
 ​ ​ ​ ​
​
7,000
 ​ ​ ​ ​
​
(140)
 ​ ​
WireCo WorldGroup Inc(4)
 ​ ​ Capital Goods ​ ​
L+900
​ ​ 1.0% ​ ​
9/30/24
​ ​ ​
​
5,256
 ​ ​ ​ ​
​
5,178
 ​ ​ ​ ​
​
(78)
 ​ ​
Total
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
$
145,371
 ​ ​ ​ ​
$
141,279
 ​ ​ ​ ​
​
(4,092)
 ​ ​
Total TRS Accrued Income and Liabilities:​
 ​ ​ ​
​
(17,970)
 ​ ​
Total TRS Fair Value:​
 ​ ​ ​
$
(22,062)
 ​ ​
​
​
(1)
Loan may be an obligation of one or more entities affiliated with the named company.
​
(2)
The variable rate securities underlying the TRS bear interest at a rate determined by a publicly disclosed base rate plus a basis point spread. As of December 31, 2018, three-month LIBOR was 2.81%.
​
(3)
The investment is not a qualifying asset under the 1940 Act. A BDC may not acquire any asset other than qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets.
​
(4)
Security is also held directly by the Company or one of its wholly-owned subsidiaries.
​
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FS Investment Corporation III
 
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 10. Commitments and Contingencies
The Company enters into contracts that contain a variety of indemnification provisions. The Company’s maximum exposure under these arrangements is unknown; however, the Company has not had prior claims or losses pursuant to these contracts. The Advisor has reviewed the Company’s existing contracts and expects the risk of loss to the Company to be remote.
The Company is not currently subject to any material legal proceedings and, to the Company’s knowledge, no material legal proceedings are threatened against the Company. From time to time, the Company may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of the Company’s rights under contracts with its portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, the Company does not expect that any such proceedings will have a material effect upon its financial condition or results of operations.
Unfunded commitments to provide funds to portfolio companies are not recorded in the Company’s condensed consolidated statements of assets and liabilities. Since these commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. The Company has sufficient liquidity to fund these commitments. As of March 31, 2019, the Company’s unfunded commitments consisted of the following:
Category/Company(1)
 ​ ​
Commitment
Amount
​
Senior Secured Loans—First Lien ​ ​ ​ ​ ​ ​ ​
5 Arch Income Fund 2, LLC
​ ​ ​ $ 3,958 ​ ​
Altus Power America Inc
​ ​ ​ ​ 140 ​ ​
Apex Group Limited
​ ​ ​ ​ 1,905 ​ ​
Apex Group Limited
​ ​ ​ ​ 4,938 ​ ​
Aspect Software Inc
​ ​ ​ ​ 2,422 ​ ​
Conservice LLC
​ ​ ​ ​ 5,031 ​ ​
CSafe Global
​ ​ ​ ​ 1,652 ​ ​
Eagle Family Foods Inc
​ ​ ​ ​ 3,474 ​ ​
Fairway Group Holdings Corp
​ ​ ​ ​ 1,024 ​ ​
JHC Acquisition LLC
​ ​ ​ ​ 21,787 ​ ​
Kodiak BP LLC
​ ​ ​ ​ 10,871 ​ ​
Lazard Global Compounders Fund
​ ​ ​ ​ 19,118 ​ ​
Lipari Foods LLC
​ ​ ​ ​ 21,437 ​ ​
North Haven Cadence Buyer Inc
​ ​ ​ ​ 750 ​ ​
North Haven Cadence Buyer Inc
​ ​ ​ ​ 83 ​ ​
Zeta Interactive Holdings Corp
​ ​ ​ ​ 11,143 ​ ​
Senior Secured Loans—Second Lien ​ ​ ​ ​ ​ ​ ​
Bellatrix Exploration Ltd
​ ​ ​ ​ 1,248 ​ ​
Total unfunded loans
​ ​ ​ $ 110,981 ​ ​
Unfunded equity commitments
​ ​ ​ $ 47 ​ ​
​
(1)
May be commitments to one or more entities affiliated with the named company.
​
As of March 31, 2019, the Company’s unfunded debt commitments have a fair value representing unrealized appreciation (depreciation) of  $(1,527). The Company funds its equity investments as it receives funding notices from the portfolio companies. As of March 31, 2019, the Company’s unfunded equity commitments have a fair value of zero.
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FS Investment Corporation III
 
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 11. Financial Highlights
The following is a schedule of financial highlights of the Company for the three months ended March 31, 2019 and the year ended December 31, 2018:
​ ​ ​
Three Months Ended
March 31, 2019
(Unaudited)
​ ​
Year Ended
December 31, 2018
​
Per Share Data:(1) ​ ​ ​
Net asset value, beginning of period
​ ​ ​ $ 7.60 ​ ​ ​ ​ $ 8.22 ​ ​
Results of operations(2) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Net investment income
​ ​ ​ ​ 0.16 ​ ​ ​ ​ ​ 0.63 ​ ​
Net realized gain (loss) and unrealized appreciation (depreciation)
​ ​ ​ ​ 0.03 ​ ​ ​ ​ ​ (0.55) ​ ​
Net increase (decrease) in net assets resulting from operations
​ ​ ​ ​ 0.19 ​ ​ ​ ​ ​ 0.08 ​ ​
Stockholder distributions(3)
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Distributions from net investment income
​ ​ ​ ​ (0.17) ​ ​ ​ ​ ​ (0.70) ​ ​
Net decrease in net assets resulting from stockholder distributions
​ ​ ​ ​ (0.17) ​ ​ ​ ​ ​ (0.70) ​ ​
Capital share transactions ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Issuance of common stock(4)
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Repurchases of common stock(5)
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Net increase in net assets resulting from capital share transactions
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Net asset value, end of period
​ ​ ​ $ 7.62 ​ ​ ​ ​ $ 7.60 ​ ​
Shares outstanding, end of period
​ ​ ​ ​ 290,276,971 ​ ​ ​ ​ ​ 290,353,680 ​ ​
Total return(6)
 ​ ​ ​ ​ 2.54% ​ ​ ​ ​ ​ 0.71% ​ ​
Total return (without assuming reinvestment of distributions)(6)
 ​ ​ ​ ​ 2.50% ​ ​ ​ ​ ​ 0.97% ​ ​
Ratio/Supplemental Data: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Net assets, end of period
​ ​ ​ $ 2,212,657 ​ ​ ​ ​ $ 2,206,971 ​ ​
Ratio of net investment income to average net assets(7)
 ​ ​ ​ ​ 8.48% ​ ​ ​ ​ ​ 7.84% ​ ​
Ratio of operating expenses to average net assets(7)
 ​ ​ ​ ​ 9.23% ​ ​ ​ ​ ​ 7.38% ​ ​
Ratio of net operating expenses to average net assets(7)
 ​ ​ ​ ​ 9.23% ​ ​ ​ ​ ​ 7.27% ​ ​
Portfolio turnover(8)
 ​ ​ ​ ​ 9.69% ​ ​ ​ ​ ​ 38.40% ​ ​
Total amount of senior securities outstanding, exclusive of treasury securities
​ ​ ​ $ 1,624,707 ​ ​ ​ ​ $ 1,225,349 ​ ​
Asset coverage per unit(9)
 ​ ​ ​ ​ 2.36 ​ ​ ​ ​ ​ 2.80 ​ ​
​
(1)
Per share data may be rounded in order to recompute the ending net asset value per share.
​
(2)
The per share data was derived by using the weighted average shares outstanding during the applicable period.
​
(3)
The per share data for distributions reflects the actual amount of distributions paid per share during the applicable period.
​
(4)
The issuance of common stock on a per share basis reflects the incremental net asset value changes as a result of the issuance of shares of common stock in the Company’s continuous public offering and pursuant to the DRP. The issuance of common stock at a price, net of selling commissions and dealer manager fees, that is greater than the net asset value per share results in an increase in net asset value per share.
​
(5)
The per share impact of the Company’s repurchases of common stock is a reduction to net asset value of less than $0.01 per share during each period.
​
(6)
The total return based on net asset value for each period presented was calculated by taking the net asset value per share as of the end of the applicable period, adding the cash distributions per share that were declared during the applicable period and dividing the total by the net asset value per share at the beginning of the applicable period. Total return based on net asset value does not
​
​
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FS Investment Corporation III
 
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 11. Financial Highlights (continued)
 
consider the effect of any sales commissions or charges that may be incurred in connection with the sale of shares of the Company’s common stock. The historical calculation of total return based on net asset value in the table should not be considered a representation of the Company’s future total return based on net asset value, which may be greater or less than the return shown in the table due to a number of factors, including the Company’s ability or inability to make investments in companies that meet its investment criteria, the interest rates payable on the debt securities the Company acquires, the level of the Company’s expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which the Company encounter competition in its markets and general economic conditions. As a result of these factors, results for any previous period should not be relied upon as being indicative of performance in future periods. The total return calculations set forth above represent the total return on the Company’s investment portfolio during the applicable period and do not represent an actual return to stockholders.
(7)
Weighted average net assets during the applicable period are used for this calculation. Ratios for the three months ended March 31, 2019 are annualized. Annualized ratios for the three months ended March 31, 2019 are not necessarily indicative of the ratios that may be expected for the year ending December 31, 2019. The following is a schedule of supplemental ratios for the three months ended March 31, 2019 and the year ended December 31, 2018:
​
​ ​ ​
Three Months Ended
March 31, 2019
(Unaudited)
​ ​
Year Ended
December 31, 2018
​
Ratio of subordinated income incentive fees to average net assets
​ ​ ​ ​ 2.19% ​ ​ ​ ​ ​ 1.52% ​ ​
Ratio of interest expense to average net assets
​ ​ ​ ​ 3.91% ​ ​ ​ ​ ​ 2.84% ​ ​
(8)
Portfolio turnover for the three months ended March 31, 2019 is not annualized.
​
(9)
Asset coverage per unit is the ratio of the carrying value of the Company’s total consolidated assets, less liabilities and indebtedness not represented by senior securities, to the aggregate amount of senior securities representing indebtedness.
​
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Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (in thousands, except share and per share amounts).
​
The information contained in this section should be read in conjunction with our unaudited consolidated financial statements and related notes thereto appearing elsewhere in this quarterly report on Form 10-Q. In this report, “we,” “us,” “our” and the “Company” refer to FS Investment Corporation III.
Forward-Looking Statements
Some of the statements in this quarterly report on Form 10-Q constitute forward-looking statements because they relate to future events or our future performance or financial condition. The forward-looking statements contained in this quarterly report on Form 10-Q may include statements as to:
•
our future operating results;
​
•
our business prospects and the prospects of the companies in which we may invest;
​
•
the impact of the investments that we expect to make;
​
•
the ability of our portfolio companies to achieve their objectives;
​
•
our current and expected financings and investments;
​
•
changes in the general interest rate environment;
​
•
the adequacy of our cash resources, financing sources and working capital;
​
•
the timing and amount of cash flows, distributions and dividends, if any, from our portfolio companies;
​
•
our contractual arrangements and relationships with third parties;
​
•
actual and potential conflicts of interest with the other funds advised by the Advisor, their respective current or future investment advisers or any of their affiliates;
​
•
the dependence of our future success on the general economy and its effect on the industries in which we may invest;
​
•
our use of financial leverage;
​
•
the ability of the Advisor to locate suitable investments for us and to monitor and administer our investments;
​
•
the ability of the Advisor or its affiliates to attract and retain highly talented professionals;
​
•
our ability to maintain our qualification as a RIC and as a BDC;
​
•
the impact on our business of the Dodd-Frank Act, and the rules and regulations issued thereunder;
​
•
the effect of changes to tax legislation on us and the portfolio companies in which we may invest and our and their tax position; and
​
•
the tax status of the enterprises in which we may invest.
​
In addition, words such as “anticipate,” “believe,” “expect” and “intend” indicate a forward-looking statement, although not all forward-looking statements include these words. The forward-looking statements contained in this quarterly report on Form 10-Q involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason. Factors that could cause actual results to differ materially include:
•
changes in the economy;
​
•
risks associated with possible disruption in our operations or the economy generally due to terrorism or natural disasters; and
​
•
future changes in laws or regulations and conditions in our operating areas.
​
​
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We have based the forward-looking statements included in this quarterly report on Form 10-Q on information available to us on the date of this quarterly report on Form 10-Q. Except as required by the federal securities laws, we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise. Stockholders are advised to consult any additional disclosures that we may make directly to stockholders or through reports that we may file in the future with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. The forward-looking statements and projections contained in this quarterly report on Form 10-Q are excluded from the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act.
Overview
We were incorporated under the general corporation laws of the State of Maryland on June 7, 2013 and formally commenced investment operations on April 2, 2014. We are an externally managed, non-diversified, closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act and has elected to be treated for U.S. federal income tax purposes, and intends to qualify annually, as a RIC under Subchapter M of the Code.
We are externally managed by the Advisor pursuant to the investment advisory and administrative services agreement and supervised by our board of directors, a majority of whom are independent.
On April 9, 2018, GDFM resigned as our investment sub-adviser and terminated its investment sub-advisory agreement effective April 9, 2018. In connection with GDFM’s resignation as our investment sub-adviser, on April 9, 2018, we entered into the investment advisory and administrative services agreement with the Advisor, which replaced an investment advisory and administrative services agreement, or the FSIC III Advisor investment advisory and administrative services agreement, with our former investment adviser, FSIC III Advisor.
Our investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation. We pursue our investment objective by investing primarily in the debt of middle market U.S. companies with a focus on originated transactions sourced through the network of the Advisor and its affiliates. We define direct originations as any investment where the Advisor or its affiliates negotiates the terms of the transaction beyond just the price, which, for example, may include negotiating financial covenants, maturity dates or interest rate terms. These directly originated transactions include participation in other originated transactions where there may be third parties involved, or a bank acting as an intermediary, for a closely held club, or similar transactions.
Our portfolio is comprised primarily of investments in senior secured loans and second lien secured loans of private middle market U.S. companies and, to a lesser extent, subordinated loans of private U.S. companies. Although we do not expect a significant portion of our portfolio to be comprised of subordinated loans, there is no limit on the amount of such loans in which we may invest. We may purchase interests in loans or make other debt investments, including investments in senior secured bonds, through secondary market transactions in the “over-the-counter” market or directly from our target companies as primary market or directly originated investments. In connection with our debt investments, we may on occasion receive equity interests such as warrants or options as additional consideration. We may also purchase or otherwise acquire interests in the form of common or preferred equity or equity-related securities, such as rights and warrants that may be converted into or exchanged for common stock or other equity or the cash value of common stock or other equity, in our target companies, generally in conjunction with one of our debt investments, including through the restructuring of such investments, or through a co-investment with a financial sponsor, such as an institutional investor or private equity firm. In addition, a portion of our portfolio may be comprised of corporate bonds, structured products, other debt securities and derivatives, including total return swaps and credit default swaps. The Advisor will seek to tailor our investment focus as market conditions evolve. Depending on market conditions, we may increase or decrease our exposure to less senior portions of the capital structure or otherwise make opportunistic investments, such as where the market price of loans, bonds or other securities reflects a lower value than
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deemed warranted by the Advisor’s fundamental analysis, which may occur due to general dislocations in the markets, a misunderstanding by the market of a particular company or an industry being out of favor with the broader investment community and may include event driven investments, anchor orders and structured products.
The senior secured loans, second lien secured loans and senior secured bonds in which we invest generally have stated terms of three to seven years and subordinated debt investments that we make generally have stated terms of up to ten years, but the expected average life of such securities is generally between three and seven years. However, there is no limit on the maturity or duration of any security in our portfolio. Our debt investments may be rated by a NRSRO and, in such case, generally will carry a rating below investment grade (rated lower than “Baa3” by Moody’s or lower than “BBB-” by S&P). We also invest in non-rated debt securities.
Revenues
The principal measure of our financial performance is net increase in net assets resulting from operations, which includes net investment income, net realized gain or loss on investments, net realized gain or loss on foreign currency, net realized gain or loss on total return swap, net unrealized appreciation or depreciation on investments, net unrealized gain or loss on foreign currency, net unrealized appreciation or depreciation on swap contracts and net unrealized appreciation or depreciation on total return swap.
Net investment income is the difference between our income from interest, dividends, fees and other investment income and our operating and other expenses. Net realized gain or loss on investments is the difference between the proceeds received from dispositions of portfolio investments and their amortized cost, including the respective realized gain or loss on foreign currency for those foreign denominated investment transactions. Net realized gain or loss on foreign currency is the portion of realized gain or loss attributable to foreign currency fluctuations. Net realized gain or loss on total return swap is the net monthly settlement payments received on the TRS. Net unrealized appreciation or depreciation on investments is the net change in the fair value of our investment portfolio, including the respective unrealized gain or loss on foreign currency for those foreign denominated investments. Net unrealized gain or loss on foreign currency is the net change in the value of receivables or accruals due to the impact of foreign currency fluctuations. Net unrealized appreciation or depreciation on total return swap is the net change in the fair value of the TRS.
We principally generate revenues in the form of interest income on the debt investments we hold. In addition, we may generate revenues in the form of non-recurring commitment, closing, origination, structuring or diligence fees, monitoring fees, fees for providing managerial assistance, consulting fees, prepayment fees and performance-based fees. We may also generate revenues in the form of dividends and other distributions on the equity or other securities we hold.
Expenses
Our primary operating expenses include the payment of management and incentive fees and other expenses under the investment advisory and administrative services agreement, interest expense from financing arrangements and other indebtedness, and other expenses necessary for our operations. The management and incentive fees compensate the Advisor for its work in identifying, evaluating, negotiating, executing, monitoring and servicing our investments.
The Advisor oversees our day-to-day operations, including the provision of general ledger accounting, fund accounting, legal services, investor relations, certain government and regulatory affairs activities, and other administrative services. The Advisor also performs, or oversees the performance of, our corporate operations and required administrative services, which includes being responsible for the financial records that we are required to maintain and preparing reports for our stockholders and reports filed with the SEC. In addition, the Advisor assists us in calculating our net asset value, overseeing the preparation and filing of tax returns and the printing and dissemination of reports to our stockholders, and generally overseeing the payment of our expenses and the performance of administrative and professional services rendered to us by others.
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Pursuant to the investment advisory and administrative services agreement, we reimburse the Advisor for expenses necessary to perform services related to our administration and operations, including the Advisor’s allocable portion of the compensation and related expenses of certain personnel of FS Investments and KKR Credit providing administrative services to us on behalf of the Advisor. We reimburse the Advisor no less than monthly for expenses necessary to perform services related to our administration and operations. The amount of this reimbursement is set at the lesser of  (1) the Advisor’s actual costs incurred in providing such services and (2) the amount that we estimate we would be required to pay alternative service providers for comparable services in the same geographic location. The Advisor allocates the cost of such services to us based on factors such as total assets, revenues, time allocations and/or other reasonable metrics. Our board of directors reviews the methodology employed in determining how the expenses are allocated to us and the proposed allocation of administrative expenses among us and certain affiliates of the Advisor. Our board of directors then assesses the reasonableness of such reimbursements for expenses allocated to us based on the breadth, depth and quality of such services as compared to the estimated cost to us of obtaining similar services from third-party service providers known to be available. In addition, our board of directors considers whether any single third-party service provider would be capable of providing all such services at comparable cost and quality. Finally, our board of directors compares the total amount paid to the Advisor for such services as a percentage of our net assets to the same ratio as reported by other comparable BDCs.
We bear all other expenses of our operations and transactions, including all other expenses incurred by the Advisor in performing services for us and administrative personnel paid by FS Investments and KKR Credit.
In addition, we have contracted with State Street Bank and Trust Company to provide various accounting and administrative services, including, but not limited to, preparing preliminary financial information for review by the Advisor, preparing and monitoring expense budgets, maintaining accounting and corporate books and records, processing trade information provided by us and performing testing with respect to RIC compliance.
Portfolio Investment Activity for the Three Months Ended March 31, 2019 and for the Year Ended December 31, 2018
Total Portfolio Activity
The following tables present certain selected information regarding our portfolio investment activity for the three months ended March 31, 2019 and the year ended December 31, 2018:
Net Investment Activity
​ ​
For the Three Months Ended
March 31, 2019
​ ​
For the Year Ended
December 31, 2018
​
Purchases
​ ​ ​ $ 401,423 ​ ​ ​ ​ $ 1,684,215 ​ ​
Sales and Repayments
​ ​ ​ ​ (357,765) ​ ​ ​ ​ ​ (1,298,121) ​ ​
Net Portfolio Activity
​ ​ ​ $ 43,658 ​ ​ ​ ​ $ 386,094 ​ ​
​
​ ​ ​
For the Three Months Ended
March 31, 2019
​ ​
For the Year Ended
December 31, 2018
​
New Investment Activity by Asset Class
​ ​
Purchases
​ ​
Percentage
​ ​
Purchases
​ ​
Percentage
​
Senior Secured Loans—First Lien
​ ​ ​ $ 313,106 ​ ​ ​ ​ ​ 78% ​ ​ ​ ​ $ 1,279,118 ​ ​ ​ ​ ​ 76% ​ ​
Senior Secured Loans—Second Lien
​ ​ ​ ​ 54,890 ​ ​ ​ ​ ​ 14% ​ ​ ​ ​ ​ 197,719 ​ ​ ​ ​ ​ 12% ​ ​
Other Senior Secured Debt
​ ​ ​ ​ 288 ​ ​ ​ ​ ​ 0% ​ ​ ​ ​ ​ 61,043 ​ ​ ​ ​ ​ 3% ​ ​
Subordinated Debt
​ ​ ​ ​ 28,764 ​ ​ ​ ​ ​ 7% ​ ​ ​ ​ ​ 131,064 ​ ​ ​ ​ ​ 8% ​ ​
Asset Based Finance
​ ​ ​ ​ 47 ​ ​ ​ ​ ​ 0% ​ ​ ​ ​ ​ 245 ​ ​ ​ ​ ​ 0% ​ ​
Equity/Other
​ ​ ​ ​ 4,328 ​ ​ ​ ​ ​ 1% ​ ​ ​ ​ ​ 15,026 ​ ​ ​ ​ ​ 1% ​ ​
Total
​ ​ ​ $ 401,423 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ $ 1,684,215 ​ ​ ​ ​ ​ 100% ​ ​
​
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The following table summarizes the composition of our investment portfolio at cost and fair value as of March 31, 2019 and December 31, 2018:
​ ​ ​
March 31, 2019
(Unaudited)
​ ​
December 31, 2018
​
​ ​ ​
Amortized
Cost(1)
 ​ ​
Fair Value
​ ​
Percentage
of Portfolio
​ ​
Amortized
Cost(1)
 ​ ​
Fair Value
​ ​
Percentage
of Portfolio
​
Senior Secured Loans—First Lien
​ ​ ​ $ 2,750,772 ​ ​ ​ ​ $ 2,702,523 ​ ​ ​ ​ ​ 74% ​ ​ ​ ​ $ 2,682,140 ​ ​ ​ ​ $ 2,639,404 ​ ​ ​ ​ ​ 73% ​ ​
Senior Secured Loans—Second Lien
​ ​ ​ ​ 358,353 ​ ​ ​ ​ ​ 323,371 ​ ​ ​ ​ ​ 9% ​ ​ ​ ​ ​ 332,741 ​ ​ ​ ​ ​ 292,342 ​ ​ ​ ​ ​ 8% ​ ​
Other Senior Secured Debt
​ ​ ​ ​ 83,604 ​ ​ ​ ​ ​ 80,474 ​ ​ ​ ​ ​ 2% ​ ​ ​ ​ ​ 102,348 ​ ​ ​ ​ ​ 95,337 ​ ​ ​ ​ ​ 3% ​ ​
Subordinated Debt
​ ​ ​ ​ 344,105 ​ ​ ​ ​ ​ 326,594 ​ ​ ​ ​ ​ 9% ​ ​ ​ ​ ​ 384,177 ​ ​ ​ ​ ​ 349,667 ​ ​ ​ ​ ​ 10% ​ ​
Asset Based Finance
​ ​ ​ ​ 161,410 ​ ​ ​ ​ ​ 163,744 ​ ​ ​ ​ ​ 4% ​ ​ ​ ​ ​ 158,720 ​ ​ ​ ​ ​ 161,624 ​ ​ ​ ​ ​ 4% ​ ​
Equity/Other
​ ​ ​ ​ 111,718 ​ ​ ​ ​ ​ 74,852 ​ ​ ​ ​ ​ 2% ​ ​ ​ ​ ​ 136,972 ​ ​ ​ ​ ​ 72,909 ​ ​ ​ ​ ​ 2% ​ ​
Total
​ ​ ​ $ 3,809,962 ​ ​ ​ ​ $ 3,671,558 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ $ 3,797,098 ​ ​ ​ ​ $ 3,611,283 ​ ​ ​ ​ ​ 100% ​ ​
​
(1)
Amortized cost represents the original cost adjusted for the amortization of premiums and/or accretion of discounts, as applicable, on investments.
​
The following table summarizes the composition of our investment portfolio at cost and fair value as of March 31, 2019 and December 31, 2018 to include, on a look-through basis, the investments underlying the TRS, as disclosed in Note 9 to our unaudited consolidated financial statements included herein. The investments underlying the TRS had a notional amount and market value of  $123,158 and $120,812, respectively, as of March 31, 2019 and $145,371, and $141,279, respectively, as of December 31, 2018.
​ ​ ​
March 31, 2019
(Unaudited)
​ ​
December 31, 2018
​
​ ​ ​
Amortized
Cost(1)
 ​ ​
Fair Value
​ ​
Percentage
of Portfolio
​ ​
Amortized
Cost(1)
 ​ ​
Fair Value
​ ​
Percentage
of Portfolio
​
Senior Secured Loans—First Lien
​ ​ ​ $ 2,850,487 ​ ​ ​ ​ $ 2,800,102 ​ ​ ​ ​ ​ 74% ​ ​ ​ ​ $ 2,804,068 ​ ​ ​ ​ $ 2,757,436 ​ ​ ​ ​ ​ 74% ​ ​
Senior Secured Loans—Second Lien
​ ​ ​ ​ 381,796 ​ ​ ​ ​ ​ 346,604 ​ ​ ​ ​ ​ 9% ​ ​ ​ ​ ​ 356,184 ​ ​ ​ ​ ​ 315,589 ​ ​ ​ ​ ​ 8% ​ ​
Other Senior Secured Debt
​ ​ ​ ​ 83,604 ​ ​ ​ ​ ​ 80,474 ​ ​ ​ ​ ​ 2% ​ ​ ​ ​ ​ 102,348 ​ ​ ​ ​ ​ 95,337 ​ ​ ​ ​ ​ 3% ​ ​
Subordinated Debt
​ ​ ​ ​ 344,105 ​ ​ ​ ​ ​ 326,594 ​ ​ ​ ​ ​ 9% ​ ​ ​ ​ ​ 384,177 ​ ​ ​ ​ ​ 349,667 ​ ​ ​ ​ ​ 9% ​ ​
Asset Based Finance
​ ​ ​ ​ 161,410 ​ ​ ​ ​ ​ 163,744 ​ ​ ​ ​ ​ 4% ​ ​ ​ ​ ​ 158,720 ​ ​ ​ ​ ​ 161,624 ​ ​ ​ ​ ​ 4% ​ ​
Equity/Other
​ ​ ​ ​ 111,718 ​ ​ ​ ​ ​ 74,852 ​ ​ ​ ​ ​ 2% ​ ​ ​ ​ ​ 136,972 ​ ​ ​ ​ ​ 72,909 ​ ​ ​ ​ ​ 2% ​ ​
Total
​ ​ ​ $ 3,933,120 ​ ​ ​ ​ $ 3,792,370 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ $ 3,942,469 ​ ​ ​ ​ $ 3,752,562 ​ ​ ​ ​ ​ 100% ​ ​
​
(1)
Amortized cost represents the original cost adjusted for the amortization of premiums and/or accretion of discounts, as applicable, on investments.
​
The following table presents certain selected information regarding the composition of our investment portfolio as of March 31, 2019 and December 31, 2018:
​ ​ ​
March 31, 2019
​ ​
December 31, 2018
​
Number of Portfolio Companies
​ ​
148
​ ​
157
​
% Variable Rate Debt Investments (based on fair value)(1)(2)
 ​ ​
78.0%
​ ​
75.9%
​
% Fixed Rate Debt Investments (based on fair value)(1)(2)
 ​ ​
19.5%
​ ​
21.3%
​
% Other Income Producing Investments (based on fair value)(3)
 ​ ​
0.0%
​ ​
0.4%
​
% Non-Income Producing Investments (based on fair value)(2)
 ​ ​
1.8%
​ ​
1.7%
​
% of Investments on Non-Accrual (based on fair value)
​ ​
0.7%
​ ​
0.7%
​
Weighted Average Annual Yield on Accruing Debt Investments(2)(4)
 ​ ​
10.1%
​ ​
10.5%
 ​
​
(1)
“Debt Investments” means investments that pay or are expected to pay a stated interest rate, stated dividend rate or other similar stated return.
​
​
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(2)
Does not include investments on non-accrual status.
​
(3)
“Other Income Producing Investments” means investments that pay or are expected to pay interest, dividends or other income to the Company on an ongoing basis but do not have a stated interest rate, stated dividend rate or other similar stated return.
​
(4)
The Weighted Average Annual Yield on Accruing Debt Investments is computed as (i) the sum of  (a) the stated annual interest rate, dividend rate or other similar stated return of each Debt Investment, multiplied by its par amount, adjusted to U.S. dollars and for any partial income accrual when necessary, as of the end of the applicable reporting period, plus (b) the annual amortization of the purchase or original issue discount or premium of each accruing Debt Investment; divided by (ii) the total amortized cost of Debt Investments included in the calculated group as of the end of the applicable reporting period.
​
Based on our regular monthly cash distribution amount of  $0.058331 per share as of March 31, 2019 and our distribution reinvestment price of  $7.75 per share, the annualized distribution rate to stockholders as of March 31, 2019 was 9.03%. The annualized distribution rate to stockholders is expressed as a percentage equal to the projected annualized distribution amount per share divided by our distribution reinvestment price per share. Our annualized distribution rate to stockholders may include income, realized capital gains and a return of investors’ capital. During the three months ended March 31, 2019, our total return was 2.54% and our total return without assuming reinvestment of distributions was 2.50%.
Based on our regular monthly cash distribution amount of  $0.058331 per share as of December 31, 2018 and our distribution reinvestment price of  $7.75 per share as of December 31, 2018, the annualized distribution rate to stockholders was 9.03%. During the year ended December 31, 2018, our total return was 0.71% and our total return without assuming reinvestment of distributions was 0.97%.
Our weighted average annual yield on accruing debt investments may be higher than a stockholder’s yield on an investment in shares of our common stock. Our weighted average annual yield on accruing debt investments does not reflect operating expenses that may be incurred by us nor does it include all of our investments. In addition, our weighted average annual yield on accruing debt investments and total return figures disclosed above do not consider the effect of any sales commissions or charges that may have been incurred in connection with the sale of shares of our common stock. Our weighted average annual yield on accruing debt investments, total return and annualized distribution rate to stockholders do not represent actual investment returns to stockholders, are subject to change and, in the future, may be greater or less than the rates set forth above. See the section entitled “Item 1A. Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2018 and our other periodic reports filed with the SEC for a discussion of the uncertainties, risks and assumptions associated with these statements. See footnote 6 to the financial highlights table included in Note 11 to our unaudited consolidated financial statements included herein for information regarding the calculations of our total return.
Direct Originations
The following table presents certain selected information regarding our direct originations as of March 31, 2019 and December 31, 2018:
Characteristics of All Direct Originations Held in Portfolio
​ ​
March 31, 2019
​ ​
December 31, 2018
​
Number of Portfolio Companies
​ ​
66
​ ​
64
​
% of Investments on Non-Accrual (based on fair value)
​ ​
0.1%
​ ​
0.2%
​
Total Cost of Direct Originations
​ ​
$2,895,432
​ ​
$2,666,284
​
Total Fair Value of Direct Originations
​ ​
$2,797,486
​ ​
$2,580,206
​
% of Total Investments, at Fair Value
​ ​
76.2%
​ ​
71.4%
​
Weighted Average Annual Yield on Accruing Debt Investments(1)
 ​ ​
10.1%
​ ​
10.4%
 ​
​
(1)
The Weighted Average Annual Yield on Accruing Debt Investments is computed as (i) the sum of  (a) the stated annual interest rate, dividend rate or other similar stated return of each Debt Investment, multiplied by its par amount, adjusted to U.S. dollars and for any partial income accrual when necessary, as of the end of the applicable reporting period, plus (b) the annual amortization of the purchase or original issue discount or premium of each accruing Debt Investment; divided by (ii) the total amortized cost of Debt Investments included in the calculated group as of the end of the applicable reporting period. Does not include Debt Investments on non-accrual status.
​
​
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Portfolio Composition by Industry Classification
See Note 6 to our unaudited consolidated financial statements included herein for additional information regarding the composition of our investment portfolio by industry classification.
Portfolio Asset Quality
In addition to various risk management and monitoring tools, the Advisor uses an investment rating system to characterize and monitor the expected level of returns on each investment in our portfolio. The Advisor uses an investment rating scale of 1 to 4. The following is a description of the conditions associated with each investment rating:
Investment
Rating 		​ ​
Summary Description
​
1
​ ​ Performing Investment—generally executing in accordance with plan and there are no concerns about the portfolio company’s performance or ability to meet covenant requirements. ​
2
​ ​ Performing investment—no concern about repayment of both interest and our cost basis but company’s recent performance or trends in the industry require closer monitoring. ​
3
​ ​ Underperforming investment—some loss of interest or dividend possible, but still expecting a positive return on investment. ​
4
​ ​ Underperforming investment—concerns about the recoverability of principal or interest. ​
The following table shows the distribution of our investments on the 1 to 4 investment rating scale at fair value as of March 31, 2019 and December 31, 2018:
​ ​ ​
March 31, 2019
​ ​
December 31, 2018
​
Investment Rating
​ ​
Fair Value
​ ​
Percentage
of Portfolio
​ ​
Fair Value
​ ​
Percentage
of Portfolio
​
1
​ ​ ​ $ 2,257,444 ​ ​ ​ ​ ​ 61% ​ ​ ​ ​ $ 2,119,219 ​ ​ ​ ​ ​ 59% ​ ​
2
​ ​ ​ ​ 1,283,767 ​ ​ ​ ​ ​ 35% ​ ​ ​ ​ ​ 1,372,565 ​ ​ ​ ​ ​ 38% ​ ​
3
​ ​ ​ ​ 67,786 ​ ​ ​ ​ ​ 2% ​ ​ ​ ​ ​ 75,146 ​ ​ ​ ​ ​ 2% ​ ​
4
​ ​ ​ ​ 62,561 ​ ​ ​ ​ ​ 2% ​ ​ ​ ​ ​ 44,353 ​ ​ ​ ​ ​ 1% ​ ​
Total
​ ​ ​ $ 3,671,558 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ $ 3,611,283 ​ ​ ​ ​ ​ 100% ​ ​
​
The amount of the portfolio in each grading category may vary substantially from period to period resulting primarily from changes in the composition of the portfolio as a result of new investment, repayment and exit activities. In addition, changes in the grade of investments may be made to reflect our expectation of performance and changes in investment values.
Results of Operations
Comparison of the Three Months Ended March 31, 2019 and 2018
Revenues
Our investment income for the three months ended March 31, 2019 and 2018 was as follows:
​ ​ ​
Three Months Ended March 31,
​
​ ​ ​
2019
​ ​
2018
​
​ ​ ​
Amount
​ ​
Percentage of
Total Income
​ ​
Amount
​ ​
Percentage of
Total Income
​
Interest income
​ ​ ​ $ 85,890 ​ ​ ​ ​ ​ 88% ​ ​ ​ ​ $ 75,167 ​ ​ ​ ​ ​ 90% ​ ​
Paid-in-kind interest income
​ ​ ​ ​ 4,843 ​ ​ ​ ​ ​ 5% ​ ​ ​ ​ ​ 6,388 ​ ​ ​ ​ ​ 7% ​ ​
Fee income
​ ​ ​ ​ 6,801 ​ ​ ​ ​ ​ 7% ​ ​ ​ ​ ​ 2,261 ​ ​ ​ ​ ​ 3% ​ ​
Dividend income
​ ​ ​ ​ 256 ​ ​ ​ ​ ​ 0% ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Total investment income(1)
 ​ ​ ​ $ 97,790 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ $ 83,816 ​ ​ ​ ​ ​ 100% ​ ​
​
​
(1)
For the three months ended March 31, 2019 and 2018, such revenues represent $91,143 and $76,581, respectively, of cash income earned as well as $6,647 and $7,235, respectively, in non-cash portions relating to accretion of discount and PIK interest. Cash flows related to such non-cash revenues may not occur for a number of reporting periods or years after such revenues are recognized.
​
​
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The level of interest income we receive is generally related to the balance of income-producing investments multiplied by the weighted average yield of our investments. Fee income is transaction based, and typically consists of prepayment fees and structuring fees. As such, fee income is generally dependent on new direct origination investments and the occurrence of events at existing portfolio companies resulting in such fees.
The increase in interest income during the three months ended March 31, 2019 compared to the three months ended March 31, 2018 can be primarily attributed to the higher average invested balance during the quarter ended March 31, 2019, compared to the quarter ended March 31, 2018. The increase in fee income during the three months ended March 31, 2019 compared to the three months ended March 31, 2018 was primarily due to the increase of origination activity during the three months ended March 31, 2019 compared to the three months ended March 31, 2018.
Expenses
Our operating expenses for the three months ended March 31, 2019 and 2018 were as follows:
​ ​ ​
Three Months Ended March 31,
​
​ ​ ​
2019
​ ​
2018
​
Management fees
​ ​ ​ $ 14,870 ​ ​ ​ ​ $ 19,078 ​ ​
Subordinated income incentive fees
​ ​ ​ ​ 12,108 ​ ​ ​ ​ ​ 1,623 ​ ​
Administrative services expenses
​ ​ ​ ​ 738 ​ ​ ​ ​ ​ 854 ​ ​
Stock transfer agent fees
​ ​ ​ ​ 412 ​ ​ ​ ​ ​ 387 ​ ​
Accounting and administrative fees
​ ​ ​ ​ 258 ​ ​ ​ ​ ​ 277 ​ ​
Interest expense
​ ​ ​ ​ 21,565 ​ ​ ​ ​ ​ 14,692 ​ ​
Directors’ fees
​ ​ ​ ​ 95 ​ ​ ​ ​ ​ 450 ​ ​
Expenses associated with our independent audit and related fees
​ ​ ​ ​ 99 ​ ​ ​ ​ ​ 99 ​ ​
Legal fees
​ ​ ​ ​ 74 ​ ​ ​ ​ ​ 34 ​ ​
Printing fees
​ ​ ​ ​ 291 ​ ​ ​ ​ ​ 250 ​ ​
Other
​ ​ ​ ​ 469 ​ ​ ​ ​ ​ 401 ​ ​
Operating expenses
​ ​ ​ ​ 50,979 ​ ​ ​ ​ ​ 38,145 ​ ​
Management fee waiver
​ ​ ​ ​ — ​ ​ ​ ​ ​ (2,385) ​ ​
Net expenses
​ ​ ​ $ 50,979 ​ ​ ​ ​ $ 35,760 ​ ​
​
The following table reflects selected expense ratios as a percent of average net assets for the three months ended March 31, 2019 and 2018:
​ ​ ​
Three Months Ended March 31,
​
​ ​ ​
2019
​ ​
2018
​
Ratio of operating expenses to average net assets
​ ​ ​ ​ 2.31% ​ ​ ​ ​ ​ 1.61% ​ ​
Ratio of management fee waiver to average net assets(1)
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ (0.10)% ​ ​
Ratio of net operating expenses to average net assets
​ ​ ​ ​ 2.31% ​ ​ ​ ​ ​ 1.51% ​ ​
Ratio of incentive fees and interest expense to average net assets(1)
 ​ ​ ​ ​ (1.53)% ​ ​ ​ ​ ​ (0.69)% ​ ​
Ratio of net operating expenses to average net assets, excluding certain expenses 
 ​ ​ ​ ​ 0.78% ​ ​ ​ ​ ​ 0.82% ​ ​
​
​
(1)
Data may be rounded in order to recompute the ending ratio of net operating expenses to average net assets, excluding certain expenses.
​
Incentive fees and interest expense, among other things, may increase or decrease our expense ratios relative to comparative periods depending on portfolio performance and changes in amounts outstanding under our financing facilities and benchmark interest rates such as LIBOR, among other factors.
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Net Investment Income
Our net investment income totaled $46,811 ($0.16 per share) and $48,056 ($0.17 per share) for the three months ended March 31, 2019 and 2018, respectively. The increase in net investment income for the three months ended March 31, 2019 can be attributed to the increase in interest income as discussed above, offset by higher incentive fees and interest expense.
Net Realized Gains or Losses
Our net realized gains (losses) on investments, TRS and foreign currency for the three months ended March 31, 2019 and 2018 were as follows:
​ ​ ​
Three Months Ended March 31,
​
​ ​ ​
2019
​ ​
2018
​
Net realized gain (loss) on investments(1)
 ​ ​ ​ $ (37,441) ​ ​ ​ ​ $ (22,865) ​ ​
Net realized gain (loss) on total return swap
​ ​ ​ ​ (15,004) ​ ​ ​ ​ ​ 5,285 ​ ​
Net realized gain (loss) on foreign currency
​ ​ ​ ​ 15 ​ ​ ​ ​ ​ 226 ​ ​
Total net realized gain (loss)
​ ​ ​ $ (52,430) ​ ​ ​ ​ $ (17,354) ​ ​
​
​
(1)
We sold investments and received principal repayments of  $164,714 and $193,051, respectively, during the three months ended March 31, 2019 and $95,274 and $66,621, respectively, during the three months ended March 31, 2018.
​
Net Change in Unrealized Appreciation (Depreciation)
Our net change in unrealized appreciation (depreciation) on investments, total return swap and interest rate swaps and unrealized gain (loss) on foreign currency for the three months ended March 31, 2019 and 2018 were as follows:
​ ​ ​
Three Months Ended March 31,
​
​ ​ ​
2019
​ ​
2018
​
Net change in unrealized appreciation (depreciation) on investments
​ ​ ​ $ 47,411 ​ ​ ​ ​ $ (27,268) ​ ​
Net change in unrealized appreciation (depreciation) on total return swap
​ ​ ​ ​ 21,152 ​ ​ ​ ​ ​ 2,196 ​ ​
Net change in unrealized appreciation (depreciation) on interest rate swaps
​ ​ ​ ​ (5,994) ​ ​ ​ ​ ​ — ​ ​
Net change in unrealized gain (loss) on foreign currency
​ ​ ​ ​ (204) ​ ​ ​ ​ ​ (41) ​ ​
Total net change in unrealized appreciation (depreciation)
​ ​ ​ $ 62,365 ​ ​ ​ ​ $ (25,113) ​ ​
​
During the three months ended March 31, 2019, the net change in unrealized appreciation (depreciation) was driven primarily by increased valuations in a few of our equity investments.
Net Increase (Decrease) in Net Assets Resulting from Operations
For the three months ended March 31, 2019 and 2018, the net increase in net assets resulting from operations was $56,746 ($0.20 per share) and $5,589 ($0.02 per share), respectively.
Financial Condition, Liquidity and Capital Resources
Overview
As of March 31, 2019, we had $64,066 in cash and foreign currency, which we or our wholly-owned financing subsidiaries held in custodial accounts, and $46,915 in cash held as collateral by Citibank under the terms of the TRS. In addition, as of March 31, 2019, we had $26,842 in capacity available under the TRS and $553,270 in borrowings available under our other financing arrangements, subject to borrowing base and other limitations. As of March 31, 2019, we also had broadly syndicated investments and opportunistic investments that could be sold to create additional liquidity. As of March 31, 2019, we had
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unfunded debt investments with aggregate unfunded commitments of  $110,981 and unfunded equity commitments of  $47. We maintain sufficient cash on hand, available borrowings and liquid securities to fund such unfunded commitments should the need arise.
We currently generate cash primarily from cash flows from fees, interest and dividends earned from our investments as well as from the issuance of shares under the distribution reinvestment plan, and principal repayments and proceeds from sales of our investments. To seek to enhance our returns, we also employ leverage as market conditions permit and at the discretion of the Advisor, but in no event will leverage employed exceed 50% of the value of our assets, as required by the 1940 Act. See “—Financing Arrangements.”
Prior to investing in securities of portfolio companies, we invest the cash received from fees, interest and dividends earned from our investments and from the issuance of shares under the distribution reinvestment plan, as well as principal repayments and proceeds from sales of our investments primarily in cash, cash equivalents, including money market funds, U.S. government securities, repurchase agreements and high-quality debt instruments maturing in one year or less from the time of investment, consistent with our BDC election and our election to be taxed as a RIC.
Financing Arrangements
The following table presents summary information with respect to our outstanding financing arrangements as of March 31, 2019:
Arrangement
​ ​
Type of Arrangement
​ ​
Rate
​ ​
Amount
Outstanding
​ ​
Amount
Available
​ ​
Maturity
Date
​
BNP Facility(1)
 ​ ​
Prime Brokerage Facility
​ ​
L+1.25%
​ ​ ​ $ 52,500 ​ ​ ​ ​ $ 197,500 ​ ​ ​
June 15, 2019(2)
 ​
Deutsche Bank Credit Facility(1)
 ​ ​
Revolving Credit Facility
​ ​
L+2.00%
​ ​ ​ ​ 300,000 ​ ​ ​ ​ ​ 200,000 ​ ​ ​
February 26, 2024
​
JPM Credit Facility(1)
 ​ ​
Revolving Credit Facility
​ ​
L+2.50%
​ ​ ​ ​ 400,000 ​ ​ ​ ​ ​ — ​ ​ ​
July 15, 2022
​
Goldman Facility(1)
 ​ ​
Repurchase Agreement
​ ​
L+2.50%
​ ​ ​ ​ 300,000 ​ ​ ​ ​ ​ — ​ ​ ​
July 15, 2019
​
Senior Secured Revolving
Credit Facility(1)
 ​ ​
Revolving Credit Facility
​ ​
L+ 2.00% – 2.25%(3)
 ​ ​ ​ ​ 494,230(4) ​ ​ ​ ​ ​ 155,770 ​ ​ ​
August 9, 2023
​
Total
​ ​ ​ ​ ​ ​ ​ ​ ​ $ 1,546,730 ​ ​ ​ ​ $ 553,270 ​ ​ ​ ​ ​
Citibank Total Return Swap
​ ​
Total Return Swap
​ ​
L+1.55%
​ ​ ​ $ 123,158 ​ ​ ​ ​ $ 26,842 ​ ​ ​
N/A(5)
 ​
​
(1)
The carrying amount outstanding under the facility approximates its fair value.
​
(2)
As described in Note 9 to our unaudited consolidated financial statements included herein, this facility generally is terminable upon 270 days’ notice by either party. On September 18, 2018, Burholme Funding LLC gave notice of its intent to terminate the facility on June 15, 2019.
​
(3)
The spread over LIBOR is determined by reference to the ratio of the value of the borrowing base to the aggregate amount of certain outstanding indebtedness of the Company.
​
(4)
Amount includes borrowings in U.S. dollars, Canadian dollars and Euros. Canadian dollar balance outstanding of CAD $37,100 has been converted to U.S. dollars at an exchange rate of CAD $1.00 to $0.75 as of March 31, 2019 and Euro balance outstanding of  €1,300 has been converted to U.S. dollars at an exchange rate of EUR €1.00 to $1.12 as of March 31, 2019 to reflect total amount outstanding in U.S. dollars.
​
(5)
The TRS may be terminated by Center City Funding at any time, subject to payment of an early termination fee if prior to June 30, 2019, or by Citibank on or after June 30, 2019, in each case, in whole or in part, upon prior written notice to the other party.
​
For additional information regarding our financing arrangements, see Note 9 to our unaudited consolidated financial statements included herein.
RIC Status and Distributions
We have elected to be subject to tax as a RIC under Subchapter M of the Code. In order to qualify for RIC tax treatment, we must, among other things, make distributions of an amount at least equal to 90% of our investment company taxable income, determined without regard to any deduction for distributions
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paid, each tax year. As long as the distributions are declared by the later of the fifteenth day of the ninth month following the close of a tax year or the due date of the tax return for such tax year, including extensions, distributions paid up to twelve months after the current tax year can be carried back to the prior tax year for determining the distributions paid in such tax year. We intend to make sufficient distributions to our stockholders to qualify for and maintain our RIC tax status each tax year. We are also subject to a 4% nondeductible federal excise tax on certain undistributed income unless we make distributions in a timely manner to our stockholders generally of an amount at least equal to the sum of  (1) 98% of our net ordinary income (taking into account certain deferrals and elections) for the calendar year, (2) 98.2% of our capital gain net income, which is the excess of capital gains in excess of capital losses, or “capital gain net income” (adjusted for certain ordinary losses), for the one-year period ending October 31 of that calendar year and (3) any net ordinary income and capital gain net income for the preceding years that were not distributed during such years and on which we paid no U.S. federal income tax. Any distribution declared by us during October, November or December of any calendar year, payable to stockholders of record on a specified date in such a month and actually paid during January of the following calendar year, will be treated as if it had been paid by us, as well as received by our stockholders, on December 31 of the calendar year in which the distribution was declared. We can offer no assurance that we will achieve results that will permit us to pay any cash distributions. If we issue senior securities, we will be prohibited from making distributions if doing so causes us to fail to maintain the asset coverage ratios stipulated by the 1940 Act or if distributions are limited by the terms of any of our borrowings.
Subject to applicable legal restrictions and the sole discretion of our board of directors we intend to declare regular cash distributions on a quarterly basis and pay such distributions on a monthly basis. We will calculate each stockholder’s specific distribution amount for the period using record and declaration dates and each stockholder’s distributions will begin to accrue on the date that shares of our common stock are issued to such stockholder. From time to time, we may also pay special interim distributions in the form of cash or shares of our common stock at the discretion of our board of directors. The timing and amount of any future distributions to stockholders are subject to applicable legal restrictions and the sole discretion of our board of directors.
During certain periods, our distributions may exceed our earnings. As a result, it is possible that a portion of the distributions we make may represent a return of capital. A return of capital generally is a return of a stockholder’s investment rather than a return of earnings or gains derived from our investment activities. Each year a statement on Form 1099-DIV identifying the sources of the distributions will be mailed to our stockholders. No portion of the distributions paid during the three months ended March 31, 2019 and 2018 represented a return of capital.
We intend to continue to make our regular distributions in the form of cash, out of assets legally available for distribution, except for those stockholders who elect to receive their distributions in the form of shares of our common stock under the distribution reinvestment plan. Any distributions reinvested under the plan will nevertheless remain taxable to a U.S. stockholder.
The following table reflects the cash distributions per share that we have declared and paid on our common stock during the three months ended March 31, 2019 and 2018:
​ ​ ​
Distribution
​
For the Three Months Ended
​ ​
Per Share
​ ​
Amount
​
Fiscal 2018 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
March 31, 2018
​ ​ ​ $ 0.17499 ​ ​ ​ ​ $ 50,490 ​ ​
Fiscal 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
March 31, 2019
​ ​ ​ $ 0.17499 ​ ​ ​ ​ $ 50,467 ​ ​
See Note 5 to our unaudited consolidated financial statements included herein for additional information regarding our distributions, including a reconciliation of our GAAP-basis net investment income to our tax-basis net investment income for the three months ended March 31, 2019 and 2018.
Critical Accounting Policies
Our financial statements are prepared in conformity with GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial
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statements and the reported amounts of revenues and expenses during the reporting periods. Critical accounting policies are those that require the application of management’s most difficult, subjective or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that may change in subsequent periods. In preparing the financial statements, management has made estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. In preparing the financial statements, management has utilized available information, including our past history, industry standards and the current economic environment, among other factors, in forming its estimates and judgments, giving due consideration to materiality. Actual results may differ from these estimates. In addition, other companies may utilize different estimates, which may impact the comparability of our results of operations to those of companies in similar businesses. As we execute our operating plans, we will describe additional critical accounting policies in the notes to our future financial statements in addition to those discussed below.
Valuation of Portfolio Investments
We determine the fair value of our investment portfolio each quarter. Securities are valued at fair value as determined in good faith by our board of directors. In connection with that determination, the Advisor provides our board of directors with portfolio company valuations which are based on relevant inputs, including, but not limited to, indicative dealer quotes, values of like securities, recent portfolio company financial statements and forecasts, and valuations prepared by independent third-party valuation services.
Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosure, or ASC Topic 820, issued by the Financial Accounting Standards Board, clarifies the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. ASC Topic 820 defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 also establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, which includes inputs such as quoted prices for similar securities in active markets and quoted prices for identical securities where there is little or no activity in the market; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.
With respect to investments for which market quotations are not readily available, we undertake a multi-step valuation process each quarter, as described below:
•
our quarterly fair valuation process begins with the Advisor reviewing and documenting valuations of each portfolio company or investment, which valuations are obtained from an independent third-party valuation service and provide a valuation range;
​
•
the Advisor then provides the valuation committee of our board of directors, or the valuation committee, with its valuation recommendation for each portfolio company or investment along with supporting materials;
​
•
preliminary valuations are then discussed with the valuation committee;
​
•
our valuation committee reviews the preliminary valuations and the Advisor, together with our independent third-party valuation services, if applicable, supplement the preliminary valuations to reflect any comments provided by the valuation committee;
​
•
following its review, the valuation committee will recommend that our board of directors approve our fair valuations; and
​
•
our board of directors discusses the valuations and determines the fair value of each such investment in our portfolio in good faith based on various statistical and other factors, including the input and recommendation of the Advisor, the valuation committee and any independent third-party valuation services, if applicable.
​
​
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Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our consolidated financial statements refer to the uncertainty with respect to the possible effect of such valuations and any change in such valuations on our consolidated financial statements. In making its determination of fair value, our board of directors may use any approved independent third-party pricing or valuation services. However, our board of directors is not required to determine fair value in accordance with the valuation provided by any single source, and may use any relevant data, including information obtained from the Advisor or any approved independent third-party valuation or pricing service that our board of directors deems to be reliable in determining fair value under the circumstances. Below is a description of factors that the Advisor, any approved independent third-party valuation services and our board of directors may consider when determining the fair value of our investments.
Valuation of fixed income investments, such as loans and debt securities, depends upon a number of factors, including prevailing interest rates for like securities, expected volatility in future interest rates, call features, put features and other relevant terms of the debt. For investments without readily available market prices, we may incorporate these factors into discounted cash flow models to arrive at fair value. Other factors that may be considered include the borrower’s ability to adequately service its debt, the fair market value of the borrower in relation to the face amount of its outstanding debt and the quality of collateral securing our debt investments.
For convertible debt securities, fair value generally approximates the fair value of the debt plus the fair value of an option to purchase the underlying security (i.e., the security into which the debt may convert) at the conversion price. To value such an option, a standard option pricing model may be used.
Our equity interests in portfolio companies for which there is no liquid public market are valued at fair value. Our board of directors, in its determination of fair value, may consider various factors, such as multiples of EBITDA, cash flows, net income, revenues or, in limited instances, book value or liquidation value. All of these factors may be subject to adjustments based upon the particular circumstances of a portfolio company or our actual investment position. For example, adjustments to EBITDA may take into account compensation to previous owners or acquisition, recapitalization, restructuring or other related items.
The Advisor, any approved independent third-party valuation services and our board of directors may also consider private merger and acquisition statistics, public trading multiples discounted for illiquidity and other factors, valuations implied by third-party investments in the portfolio companies or industry practices in determining fair value. The Advisor, any approved independent third-party valuation services and our board of directors may also consider the size and scope of a portfolio company and its specific strengths and weaknesses, and may apply discounts or premiums, where and as appropriate, due to the higher (or lower) financial risk and/or the smaller size of portfolio companies relative to comparable firms, as well as such other factors as our board of directors, in consultation with the Advisor and any approved independent third-party valuation services, if applicable, may consider relevant in assessing fair value. Generally, the value of our equity interests in public companies for which market quotations are readily available is based upon the most recent closing public market price. Portfolio securities that carry certain restrictions on sale are typically valued at a discount from the public market value of the security.
When we receive warrants or other equity securities at nominal or no additional cost in connection with an investment in a debt security, the cost basis in the investment will be allocated between the debt securities and any such warrants or other equity securities received at the time of origination. Our board of directors subsequently values these warrants or other equity securities received at their fair value.
The fair values of our investments are determined in good faith by our board of directors. Our board of directors is responsible for the valuation of our portfolio investments at fair value as determined in good faith pursuant to our valuation policy and consistently applied valuation process. Our board of directors has delegated day-to-day responsibility for implementing our valuation policy to the Advisor, and has authorized the Advisor to utilize independent third-party valuation and pricing services that have been approved by our board of directors. The valuation committee is responsible for overseeing the Advisor’s implementation of the valuation process.
See Note 8 to our unaudited consolidated financial statements included herein for additional information regarding the fair value of our financial instruments.
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Derivative Instruments
We recognize all derivative instruments as assets or liabilities at fair value in our consolidated financial statements. Derivative contracts entered into by us are not designated as hedging instruments, and as a result, we present changes in fair value through net change in unrealized appreciation (depreciation) on derivative instruments in the consolidated statements of operations. Realized gains and losses that occur upon the cash settlement of the derivative instruments are included in net realized gains (losses) on derivative instruments in the condensed consolidated statements of operations. As of December 31, 2018, the Company’s instruments included interest rate swaps.
Revenue Recognition
Security transactions are accounted for on the trade date. We record interest income on an accrual basis to the extent that we expect to collect such amounts. We record dividend income on the ex-dividend date. Distributions received from limited liability company (“LLC”) and limited partnership (“LP”) investments are evaluated to determine if the distribution should be recorded as dividend income or a return of capital. We do not accrue as a receivable interest or dividends on loans and securities if we have reason to doubt our ability to collect such income. Our policy is to place investments on non-accrual status when there is reasonable doubt that interest income will be collected. We consider many factors relevant to an investment when placing it on or removing it from non-accrual status including, but not limited to, the delinquency status of the investment, economic and business conditions, the overall financial condition of the underlying investment, the value of the underlying collateral, bankruptcy status, if any, and any other facts or circumstances relevant to the investment. If there is reasonable doubt that we will receive any previously accrued interest, then the interest income will be written-off. Payments received on non-accrual investments may be recognized as income or applied to principal depending upon the collectability of the remaining principal and interest. Non-accrual investments may be restored to accrual status when principal and interest become current and are likely to remain current based on our judgment.
Loan origination fees, original issue discount and market discount are capitalized and we amortize such amounts as interest income over the respective term of the loan or security. Upon the prepayment of a loan or security, any unamortized loan origination fees and original issue discount are recorded as interest income. Structuring and other non-recurring upfront fees are recorded as fee income when earned. We record prepayment premiums on loans and securities as fee income when we earn such amounts.
Effective January 1, 2018, we adopted Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, using the cumulative effect method applied to in-scope contracts with customers that have not been completed as of the date of adoption. We did not identify any in-scope contracts that had not been completed as of the date of adoption and, as a result, we did not recognize a cumulative effect on stockholders’ equity in connection with the adoption of the new revenue recognition guidance.
The new revenue recognition guidance applies to all entities and all contracts with customers to provide goods or services in the ordinary course of business, excluding, among other things, financial instruments as well as certain other contractual rights and obligations. Under the new revenue recognition guidance, which we have applied to all new in-scope contracts as of the date of adoption, structuring and other upfront fees are recognized as revenue based on the transaction price as the performance obligation is fulfilled. The related performance obligation consists of structuring activities and is satisfied over time as such activities are performed. Consideration is variable and is constrained from being included in the transaction price until the uncertainty associated with the variable consideration is resolved, typically as of the trade date of the related transaction. Payment is typically due on the settlement date of the related transaction.
For the three months ended March 31, 2019, we recognized $6,095 in structuring fee revenue under the new revenue recognition guidance and included such revenue in the fee income line item on our consolidated statement of operations. Comparative periods are presented in accordance with revenue recognition guidance effective prior to January 1, 2018, under which we recorded structuring and other non-recurring upfront fees as income when earned. We have determined that the adoption of the new revenue recognition guidance did not have a material impact on the amount of revenue recognized for the three months ended March 31, 2019.
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Net Realized Gains or Losses, Net Change in Unrealized Appreciation or Depreciation and Net Change in Unrealized Gains or Losses on Foreign Currency
Gains or losses on the sale of investments are calculated by using the specific identification method. We measure realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized, but considering unamortized fees. 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 gains or losses when gains or losses are realized. Net change in unrealized gains or losses on foreign currency reflects the change in the value of receivables or accruals during the reporting period due to the impact of foreign currency fluctuations.
Uncertainty in Income Taxes
We evaluate our tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax benefits or liabilities in our consolidated financial statements. Recognition of a tax benefit or liability with respect to an uncertain tax position is required only when the position is “more likely than not” to be sustained assuming examination by taxing authorities. We recognize interest and penalties, if any, related to unrecognized tax liabilities as income tax expense in our consolidated statements of operations. During the three months ended March 31, 2019 and 2018, we did not incur any interest or penalties.
See Note 2 to our unaudited consolidated financial statements included herein for additional information regarding our significant accounting policies.
Contractual Obligations
We have entered into an agreement with the Advisor to provide us with investment advisory and administrative services. Payments for investment advisory services under the investment advisory and administrative services agreement are equal to (a) an annual base management fee based on the average weekly value of our gross assets and (b) an incentive fee based on our performance. The Advisor is reimbursed for administrative expenses incurred on our behalf. See Note 4 to our unaudited consolidated financial statements included herein for a discussion of this agreement and for the amount of fees and expenses accrued under similar agreements with FSIC III Advisor during the three months ended March 31, 2018.
A summary of our significant contractual payment obligations related to the repayment of our outstanding indebtedness at March 31, 2019 is as follows:
​ ​ ​ ​ ​ ​
Payments Due By Period
​
​ ​ ​
Maturity Date(1)
 ​ ​
Total
​ ​
Less than
1 year
​ ​
1 – 3 years
​ ​
3 – 5 years
​ ​
More than
5 years
​
BNP Facility(2)
 ​ ​
June 15, 2019
​ ​ ​ $ 52,500 ​ ​ ​ ​ $ 52,500 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Deutsche Bank Credit Facility(3)
 ​ ​
February 26, 2024
​ ​ ​ $ 300,000 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 300,000 ​ ​ ​ ​ ​ — ​ ​
JPM Credit Facility(4)
 ​ ​
July 15, 2022
​ ​ ​ $ 400,000 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 400,000 ​ ​ ​ ​ ​ — ​ ​
Goldman Facility(4)
 ​ ​
July 15, 2019
​ ​ ​ $ 300,000 ​ ​ ​ ​ $ 300,000 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Senior Secured Revolving Credit Facility(5)
 ​ ​
August 9, 2023
​ ​ ​ $ 494,230 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 494,230 ​ ​ ​ ​ ​ — ​ ​
​
(1)
Amounts outstanding under the financing arrangements will mature, and all accrued and unpaid interest thereunder will be due and payable, on the maturity date.
​
(2)
At March 31, 2019, $197,500 remained unused under the BNP Facility. The BNP Facility generally is terminable upon 270 days’ notice by either party. On September 18, 2018, Burholme Funding LLC gave notice of its intent to terminate the facility on June 15, 2019.
​
(3)
At March 31, 2019, $200,000 remained unused under the Deutsche Bank Credit facility.
​
​
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(4)
At March 31, 2019, no amounts remained unused under the financing arrangement.
​
(5)
At March 31, 2019, $155,770 remained unused under the Senior Secured Revolving Credit Facility. Amount includes borrowings in U.S. dollars, Canadian dollars and Euros. Canadian dollar balance outstanding of CAD $37,100 has been converted to U.S. dollars at an exchange rate of CAD $1.00 to $0.75 as of March 31, 2019 and Euro balance outstanding of  €1,300 has been converted to U.S. dollars at an exchange rate of EUR €1.00 to $1.12 as of March 31, 2019 to reflect total amount outstanding in U.S. dollars.
​
Off-Balance Sheet Arrangements
We currently have no off-balance sheet arrangements, including any risk management of commodity pricing or other hedging practices.
Recently Issued Accounting Standards
Recent Accounting Pronouncements: In August 2018, the FASB issued Accounting Standards Update 2018-13, Fair Value Measurement-Disclosures Framework-Changes to Disclosure Requirements of Fair Value Measurement (Topic 820), or ASU 2018-13. ASU 2018-13 introduces new fair value disclosure requirements and eliminates and modifies certain existing fair value disclosure requirements. ASU 2018-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. We are currently evaluating the impact of ASU 2018-13 on our financial statements.
Item 3.
Quantitative and Qualitative Disclosures About Market Risk (dollar amounts in thousands).
​
Interest Rate Risk
We are subject to financial market risks, including changes in interest rates. As of March 31, 2019, 78.0% of our portfolio investments (based on fair value) were debt investments paying variable interest rates and 19.5% were debt investments paying fixed interest rates, while 0.0% were other income producing investments, 1.8% were non-income producing investments and the remaining 0.7% consisted of investments on non-accrual status. A rise in the general level of interest rates can be expected to lead to higher interest rates applicable to any variable rate investments we hold and to declines in the value of any fixed rate investments we hold. However, many of our variable rate investments provide for an interest rate floor, which may prevent our interest income from increasing until benchmark interest rates increase beyond a threshold amount. To the extent that a substantial portion of our investments may be in variable rate investments, an increase in interest rates beyond this threshold would make it easier for us to meet or exceed the hurdle rate applicable to the subordinated incentive fee on income and may result in a substantial increase in our net investment income and to the amount of incentive fees payable to the Advisor with respect to our increased pre-incentive fee net investment income.
Subject to the requirements of the 1940 Act, we may hedge against interest rate fluctuations by using standard hedging instruments such as futures, options and forward contracts. Although hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in the benefits of lower interest rates. As of March 31, 2019, we have four pay-fixed, receive-floating interest rate swaps which we pay an annual fixed rate of 2.59% to 2.81% and receive three-month LIBOR on an aggregate notional amount of  $540 million. The interest rate swaps have quarterly settlement payments.
Pursuant to the terms of the TRS between Center City Funding and Citibank, Center City Funding pays fees to Citibank at a floating rate equal to one-month LIBOR plus 1.55% per annum on the utilized notional amount of the loans subject to the TRS in exchange for the right to receive the economic benefit of a pool of loans having a maximum notional amount of  $150,000. Pursuant to the terms of the BNP facility, Deutsche Bank credit facility, JPM credit facility and Goldman facility borrowings are at a floating rate based on LIBOR. To the extent that any present or future credit facilities, total return swap agreements or other financing arrangements that we or any of our subsidiaries enter into are based on a floating interest rate, we will be subject to risks relating to changes in market interest rates. In periods of rising interest rates when we or our subsidiaries have such debt outstanding, or financing arrangements in effect, our interest expense would increase, which could reduce our net investment income, especially to the extent we hold fixed rate investments.
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The following table shows the effect over a twelve-month period of changes in interest rates on our interest income, interest expense and net interest income, assuming no changes in the composition of our investment portfolio, including the accrual status of our investments, and our financing arrangements in effect as of March 31, 2019:
Basis Point Change in Interest Rates
​ ​
Increase
(Decrease) in
Interest Income(1)
 ​ ​
Increase
(Decrease) in
Interest Expense
​ ​
Increase
(Decrease) in
Net Interest Income
​ ​
Percentage
Change in
Net Interest Income
​
Down 100 basis points
​ ​ ​ $ (29,089) ​ ​ ​ ​ $ (20,737) ​ ​ ​ ​ $ (8,351) ​ ​ ​ ​ ​ (3.1)% ​ ​
No change
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Up 100 basis points
​ ​ ​ $ 29,383 ​ ​ ​ ​ $ 20,737 ​ ​ ​ ​ $ 8,646 ​ ​ ​ ​ ​ 3.2% ​ ​
Up 300 basis points
​ ​ ​ $ 90,001 ​ ​ ​ ​ $ 62,211 ​ ​ ​ ​ $ 27,790 ​ ​ ​ ​ ​ 10.4% ​ ​
Up 500 basis points
​ ​ ​ $ 150,770 ​ ​ ​ ​ $ 103,686 ​ ​ ​ ​ $ 47,084 ​ ​ ​ ​ ​ 17.6% ​ ​
​
(1)
Assumes no defaults or prepayments by portfolio companies over the next twelve months. Includes the net effect of the change in interest rates on the unrealized appreciation (depreciation) on the TRS. Pursuant to the TRS, Center City Funding receives from Citibank all interest payable in respect of the loans included in the TRS and pays to Citibank interest at a rate equal to one-month LIBOR plus 1.55% per annum on the utilized notional amount of the loans subject to the TRS. As of March 31, 2019, all of the loans underlying the TRS (based on fair value) paid variable interest rates.
​
We expect that our long-term investments will be financed primarily with equity and debt. If deemed prudent, we may use interest rate risk management techniques in an effort to minimize our exposure to interest rate fluctuations. These techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act. Adverse developments resulting from changes in interest rates or hedging transactions could have a material adverse effect on our business, financial condition and results of operations.
In addition, we may have risk regarding portfolio valuation. See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Valuation of Portfolio Investments.”
Item 4.
Controls and Procedures.
​
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2019.
Based on the foregoing, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that we would meet our disclosure obligations.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) or 15d-15(f)) that occurred during the three-month period ended March 31, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1.
Legal Proceedings.
​
We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us. From time to time, we may be party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of any legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material adverse effect upon our financial condition or results of operations.
Item 1A.
Risk Factors.
​
There have been no material changes from the risk factors set forth in our annual report on Form 10-K for the year ended December 31, 2018, as supplemented by our quarterly report on Form 10-Q for the quarter ended March 31, 2019.
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.
​
The following table provides information concerning our repurchases of shares of our common stock during the three months ended March 31, 2019, pursuant to our share repurchase program.
Period
​ ​
Total Number
of Shares
Purchased
​ ​
Average
Price Paid
per Share
​ ​
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
​ ​
Maximum Number of
Shares that May Yet
Be Purchased
Under the
Plans or Programs
​
January 1, 2019 to January 31, 2019
​ ​ ​ ​ 2,899,470 ​ ​ ​ ​ $ 7.75 ​ ​ ​ ​ ​ 2,899,470 ​ ​ ​ ​ ​ (1) ​ ​
February 1, 2019 to February 28, 2019
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
March 1, 2019 to March 31, 2019
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Total
​ ​ ​ ​ 2,899,470 ​ ​ ​ ​ $ 7.75 ​ ​ ​ ​ ​ 2,899,470 ​ ​ ​ ​ ​ (1) ​ ​
​
​
(1)
The maximum number of shares available for repurchase on January 2, 2019 was 2,899,470. A description of the calculation of the maximum number of shares of our common stock that may be repurchased under our share repurchase program is set forth in Note 3 to our unaudited consolidated financial statements included herein.
​
See Note 3 to our unaudited consolidated financial statements included herein for a more detailed discussion of the terms of our share repurchase program.
Item 3.
Defaults upon Senior Securities.
​
Not applicable.
Item 4.
Mine Safety Disclosures.
​
Not applicable.
Item 5.
Other Information.
​
Not applicable.
Item 6.
Exhibits.
​
Please note that the agreements included as exhibits to this quarterly report on Form 10-Q are included to provide information regarding their terms and are not intended to provide any other factual or disclosure information about FS Investment Corporation III or the other parties to the agreements. The agreements contain representations and warranties by each of the parties to the applicable agreement that have been made solely for the benefit of the other parties to the applicable agreement and may not describe the actual state of affairs as of the date they were made or at any other time.
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The following exhibits are filed as part of this quarterly report or hereby incorporated by reference to exhibits previously filed with the SEC:
​  3.1 ​ ​ ​
​ ​ ​ Amended and Restated Bylaws of the Registrant (Incorporated by reference to Exhibit (b)(2) filed with Pre-Effective Amendment No. 2 to the Registrant’s registration statement on Form N-2 (File No. 333-191925) filed on December 23, 2013). ​
​  4.1 ​ ​ ​
​ ​ ​ Second Amended and Restated Distribution Reinvestment Plan of the Registrant (Incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on October 13, 2017.) ​
​ 10.1 ​ ​ Investment Advisory and Administrative Services Agreement, dated as of April 9, 2018, by and between the Registrant and FS/KKR Advisor, LLC (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on April 9, 2018). ​
​ 10.2 ​ ​ ​
​ 10.3 ​ ​ ​
​ 10.4 ​ ​ ​
​ 10.5 ​ ​ ​
​ 10.6 ​ ​ ​
​ 10.7 ​ ​ ​
​ 10.8 ​ ​ ISDA 2002 Master Agreement, together with the Schedule thereto and Credit Support Annex to such Schedule, each dated as of June 26, 2014, by and between Center City Funding LLC and Citibank, N.A. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on July 2, 2014). ​
​ 10.9 ​ ​ ISDA 2002 Master Agreement, together with the Schedule thereto and Credit Support Annex to such Schedule, each dated as of June 26, 2014, including the Amended and Restated Paragraph 13 to such Credit Support Annex, dated September 5, 2017, by and between Center City Funding LLC and Citibank, N.A. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on September 11, 2017). ​
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​ 10.10 ​ ​ Confirmation Letter Agreement, dated as of June 26, 2014, by and between Center City Funding LLC and Citibank, N.A. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on July 2, 2014). ​
​ 10.11 ​ ​ Amended and Restated Confirmation Letter Agreement, dated as of August 25, 2014, by and between Center City Funding LLC and Citibank, N.A. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on August 27, 2014). ​
​ 10.12 ​ ​ Second Amended and Restated Confirmation Letter Agreement, dated as of September 29, 2014, by and between Center City Funding LLC and Citibank, N.A. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on October 2, 2014). ​
​ 10.13 ​ ​ Third Amended and Restated Confirmation Letter Agreement, dated as of January 28, 2015, by and between Center City Funding LLC and Citibank, N.A. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on February 3, 2015). ​
​ 10.14 ​ ​ Fourth Amended and Restated Confirmation Letter Agreement, dated as of June 26, 2015, by and between Center City Funding LLC and Citibank, N.A. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on July 2, 2015). ​
​ 10.15 ​ ​ Fifth Amended and Restated Confirmation Letter Agreement, dated as of October 14, 2015, by and between Center City Funding LLC and Citibank, N.A. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on October 16, 2015). ​
​ 10.16 ​ ​ Sixth Amended and Restated Confirmation Letter Agreement, dated as of June 27, 2016, by and between Center City Funding LLC and Citibank, N.A. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on July 1, 2016). ​
​ 10.17 ​ ​ Seventh Amended and Restated Confirmation Letter Agreement, dated as of June 27, 2017, by and between Center City Funding LLC and Citibank, N.A. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on June 28, 2017). ​
​ 10.18 ​ ​ Eighth Amended and Restated Confirmation Letter Agreement, dated as of September 5, 2017, by and between Center City Funding LLC and Citibank, N.A. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on September 11, 2017). ​
​ 10.19 ​ ​ Ninth Amended and Restated Confirmation Letter Agreement, dated as of March 31, 2018, by and between Center City Funding LLC and Citibank, N.A. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on April 4, 2018). ​
​ 10.20 ​ ​ Tenth Amended and Restated Confirmation Letter Agreement, dated as of June 29, 2018, by and between Center City Funding LLC and Citibank, N.A. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on July 5, 2018). ​
​ 10.21 ​ ​ Eleventh Amended and Restated Confirmation Letter Agreement, dated as of September 28, 2018, by and between Center City Funding LLC and Citibank, N.A. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on October 1, 2018). ​
​ 10.22 ​ ​ Twelfth Amended and Restated Confirmation Letter Agreement, dated as of December 26, 2018, by and between Center City Funding LLC and Citibank, N.A. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on January 2, 2019). ​
​ 10.23 ​ ​ Committed Facility Agreement, dated as of October 17, 2014, by and between Burholme Funding LLC and BNP Paribas Prime Brokerage, Inc., on behalf of itself and as agent for the BNPP Entities (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on October 23, 2014). ​
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​ ​ ​ U.S. PB Agreement, dated as of October 17, 2014, by and between Burholme Funding LLC and BNP Paribas Prime Brokerage, Inc., on behalf of itself and as agent for the BNPP Entities (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on October 23, 2014). ​
​ 10.25 ​ ​ Special Custody and Pledge Agreement, dated as of October 17, 2014, by and among Burholme Funding LLC, BNP Paribas Prime Brokerage, Inc. and State Street Bank and Trust Company, as custodian (Incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on October 23, 2014). ​
​ 10.26 ​ ​ First Amendment Agreement, dated as of March 11, 2015, to the Committed Facility Agreement, dated as of October 17, 2014, between BNP Paribas Prime Brokerage, Inc., on behalf of itself and as agent for the BNPP Entities, and Burholme Funding LLC (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on March 13, 2015). ​
​ 10.27 ​ ​ Second Amendment Agreement, dated as of October 21, 2015, to the Committed Facility Agreement, dated as of October 17, 2014, between BNP Paribas Prime Brokerage, Inc., on behalf of itself and as agent for the BNPP Entities and Burholme Funding LLC. (Incorporated by reference to Exhibit 10.21 to the Registrant’s Annual Report on Form 10-K filed on March 11, 2016). ​
​ 10.28 ​ ​ Third Amendment Agreement, dated as of March 16, 2016, to the Committed Facility Agreement, dated as of October 17, 2014, between BNP Paribas Prime Brokerage, Inc., on behalf of itself and as agent for the BNPP Entities and Burholme Funding LLC. (Incorporated by reference to Exhibit 10.23 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2016 filed on November 14, 2016). ​
​ 10.29 ​ ​ Fourth Amendment Agreement, dated as of August 29, 2016, to the Committed Facility Agreement, dated as of October 17, 2014, between BNP Paribas Prime Brokerage, Inc., on behalf of itself and as agent for the BNPP Entities and Burholme Funding LLC. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on September 2, 2016). ​
​ 10.30 ​ ​ Fifth Amendment Agreement, dated as of November 15, 2016, to the Committed Facility Agreement, dated as of October 17, 2014, between BNP Paribas Prime Brokerage, Inc., on behalf of itself and as agent for the BNPP Entities and Burholme Funding LLC. (Incorporated by reference to Exhibit 10.34 to the Registrant’s Current Report on Form 8-K filed on November 21, 2016). ​
​ 10.31 ​ ​ Sixth Amendment Agreement, dated as of May 29, 2018, to the Committed Facility Agreement, dated as of October 17, 2014, between BNP Paribas Prime Brokerage International, Ltd. and Burholme Funding LLC. (Incorporated by reference to Exhibit 10.34 to the Registrant’s Quarterly Report on Form 10-Q filed on August 14, 2018). ​
​ 10.32 ​ ​ Loan Financing and Servicing Agreement, dated as of December 2, 2014, by and among Dunlap Funding LLC, as borrower, Deutsche Bank AG, New York Branch, as administrative agent, Wells Fargo Bank, National Association, as collateral agent and collateral custodian, and the other lenders and lender agents from time to time party thereto (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on December 8, 2014). ​
​ 10.33 ​ ​ Amendment No. 1 to Loan Financing and Servicing Agreement, dated as of February 24, 2015, between Dunlap Funding LLC, as borrower, and Deutsche Bank AG, New York Branch, as administrative agent (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on March 2, 2015). ​
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​ 10.34 ​ ​ Amendment No. 2 to Loan Financing and Servicing Agreement, dated as of March 24, 2015, between Dunlap Funding LLC, as borrower, and Deutsche Bank AG, New York Branch, as administrative agent (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on March 26, 2015). ​
​ 10.35 ​ ​ Amendment No. 3 to Loan Financing and Servicing Agreement, dated as of August 25, 2015, between Dunlap Funding LLC, as borrower, and Deutsche Bank AG, New York Branch, as administrative agent (Incorporated by reference to Exhibit 10.29 to the Registrant’s Annual Report on Form 10-K filed on March 11, 2016). ​
​ 10.36 ​ ​ Amendment No. 4 to Loan Financing and Servicing Agreement, dated as of September 22, 2015, between Dunlap Funding LLC, as borrower, and Deutsche Bank AG, New York Branch, as administrative agent (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on September 24, 2015). ​
​ 10.37 ​ ​ Amendment No. 5 to Loan Financing and Servicing Agreement, dated as of October 8, 2015, between Dunlap Funding LLC, as borrower, and Deutsche Bank AG, New York Branch, as administrative agent (Incorporated by reference to Exhibit 10.31 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015 filed on March 11, 2016). ​
​ 10.38 ​ ​ Amendment No. 7 to Loan Financing and Servicing Agreement, dated as of January 12, 2017, between Dunlap Funding LLC, as borrower, Deutsche Bank AG, New York Branch, as administrative agent, each lender party thereto, and Wells Fargo Bank, National Association, as collateral agent and collateral custodian (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on January 19, 2017). ​
​ 10.39 ​ ​ Amendment No. 8 to Loan Financing and Servicing Agreement, dated as of April 5, 2017, between Dunlap Funding LLC, as borrower, Deutsche Bank AG, New York Branch, as administrative agent, each lender party thereto, and Wells Fargo Bank, National Association, as collateral agent and collateral custodian (Incorporated by reference to Exhibit 10.37 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2017 filed on May 10, 2017). ​
​ 10.40 ​ ​ Amendment No. 9 to Loan Financing and Servicing Agreement, dated as of March 12, 2018, between Dunlap Funding LLC, as borrower, Deutsche Bank AG, New York Branch, as facility agent (formerly administrative agent), each lender party thereto, and Wells Fargo, National Association, as collateral agent and collateral custodian (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on March 15, 2018). ​
​ 10.41 ​ ​ Amendment No. 10 to Loan Financing and Servicing Agreement, dated as of June 20, 2018, among Dunlap Funding LLC, as borrower, Deutsche Bank AG, New York Branch, as facility agent (formerly administrative agent), each lender party thereto, each agent party thereto, and Wells Fargo Bank, National Association, as collateral agent and collateral custodian. (Incorporated by reference to Exhibit 10.48 to the Registrant’s Quarterly Report on Form 10-Q filed on August 14, 2018). ​
​ 10.42 ​ ​ Waiver, Assignment and Amendment No. 11 to Loan Financing and Servicing Agreement, dated as of September 17, 2018, among Dunlap Funding LLC, as borrower, Deutsche Bank AG, New York Branch, as facility agent (formerly administrative agent), each lender party thereto, each agent party thereto, and Wells Fargo Bank, National Association, as collateral agent and collateral custodian. (Incorporated by reference to Exhibit 10.46 to the Registrant’s Quarterly Report on Form 10-Q filed on November 14, 2018). ​
​ 10.43 ​ ​ Amendment No. 12 to Loan Financing and Servicing Agreement, dated as of December 21, 2018, among Dunlap Funding LLC, as borrower, Deutsche Bank AG, New York Branch, as facility agent, each lender party thereto, each agent party thereto, and Wells Fargo Bank, National Association, as collateral agent and collateral custodian. (Incorporated by reference to Exhibit 10.43 to the Registrant’s Annual Report on Form 10-K filed on March 19, 2019). ​
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​ 10.44 ​ ​ Omnibus Amendment, dated as of February 19, 2019, between Dunlap Funding LLC, as borrower, Deutsche Bank AG, New York Branch, as facility agent, each lender party thereto, each agent party thereto, and Wells Fargo Bank, National Association, as collateral agent and collateral custodian. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on February 25, 2019). ​
​ 10.45 ​ ​ Loan Agreement, dated as of May 8, 2015, by and among Jefferson Square Funding LLC, as borrower, JPMorgan Chase Bank, National Association, as administrative agent, each of the lenders from time to time party thereto, Citibank, N.A., as collateral agent and securities intermediary and Virtus Group, LP, as collateral administrator (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on May 14, 2015). ​
​ 10.46 ​ ​ Amendment No. 1 to Loan Agreement, dated as of September 8, 2015, between Jefferson Square Funding LLC, as borrower, and JPMorgan Chase Bank, National Association, as administrative agent, each of the lenders from time to time party thereto, Citibank, N.A., as collateral agent and securities intermediary and Virtus Group, LP, as collateral administrator (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on September 14, 2015). ​
​ 10.47 ​ ​ Amendment No. 2 to Loan Agreement, dated as of March 1, 2016, between Jefferson Square Funding LLC, as borrower, and JPMorgan Chase Bank, National Association, as administrative agent, each of the lenders from time to time party thereto, Citibank, N.A., as collateral agent and securities intermediary and Virtus Group, LP, as collateral administrator (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on March 7, 2016). ​
​ 10.48 ​ ​ Amended and Restated Loan and Security Agreement, dated as of July 16, 2018, by and between Jefferson Square Funding LLC, as borrower, JPMorgan Chase Bank, National Association, as administrative agent, the lenders party thereto, and State Street Bank and Trust Company, as collateral administrator, collateral agent and securities intermediary (Incorporated by reference to the Registrant’s Current Report on Form 8-K filed on July 20, 2018). ​
​ 10.49 ​ ​ Second Amended and Restated Loan and Security Agreement, dated as of March 4, 2019, by and between Jefferson Square Funding LLC, as borrower, JPMorgan Chase Bank, National Association, as administrative agent, the lenders party thereto, and Wells Fargo Bank, National Association, as collateral administrator, collateral agent and securities intermediary party thereto. (Incorporated by reference to Exhibit 10.49 to the Registrant’s Annual Report on Form 10-K filed on March 19, 2019). ​
​ 10.50 ​ ​ Indenture, dated as of June 18, 2015, by and between Germantown Funding LLC and Citibank, N.A., as trustee (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on June 24, 2015). ​
​ 10.57 ​ ​ ​
​ 10.52 ​ ​ September 1996 Version Master Repurchase Agreement between Goldman Sachs Bank USA and Society Hill Funding LLC, together with the related Annex and Master Confirmation thereto, each dated as of June 18, 2015 (Incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on June 24, 2015). ​
​ 10.53 ​ ​ Revolving Credit Agreement, dated as of June 18, 2015, by and between the Registrant and Society Hill Funding LLC (Incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed on June 24, 2015). ​
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​ 10.54 ​ ​ Senior Secured Revolving Credit Agreement, dated as of August 9, 2018, among Corporate Capital Trust, Inc., FS Investment Corporation, FS Investment Corporation II, FS Investment Corporation III, each other person designated as a “borrower” thereunder pursuant to section 9.19 thereof, the lenders party thereto, JPMorgan Chase, N.A. as administrative agent, and ING Capital LLC, as collateral agent. (Incorporated by reference to Exhibit 10.64 to the Registrant’s Quarterly Report on Form 10-Q filed on August 14, 2018). ​
​ 10.55 ​ ​ Commitment Increase Agreement, dated as of November 8, 2018, among BNP Paribas, Corporate Capital Trust, Inc., FS Investment Corporation, FS Investment Corporation II, FS  Investment Corporation III, JPMorgan Chase Bank, N.A., Bank of Montreal, Suntrust Bank, and ING Capital LLC (Incorporated by reference to Exhibit 10.55 to the Registrant’s Annual Report on Form 10-K filed on March 19, 2019). ​
​ 10.56 ​ ​ Commitment Increase Agreement, dated as of November 8, 2018, among U.S. Bank National Association, Corporate Capital Trust, Inc., FS Investment Corporation, FS Investment Corporation II, FS Investment Corporation III, JPMorgan Chase Bank, N.A., Bank of Montreal, Suntrust Bank, and ING Capital LLC (Incorporated by reference to Exhibit 10.56 to the Registrant’s Annual Report on Form 10-K filed on March 19, 2019). ​
​ 31.1* ​ ​ Certification of Chief Executive Officer pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as amended. ​
​ 31.2* ​ ​ Certification of Chief Financial Officer pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as amended. ​
​ 32.1* ​ ​ Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ​
​
*
Filed herewith.
​
​
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this quarterly report to be signed on its behalf by the undersigned, thereunto duly authorized on May 15, 2019.
​ ​ ​ ​ FS INVESTMENT CORPORATION III ​
​ ​ ​ ​
By:
​ ​
/s/ Michael C. Forman
​
Michael C. Forman
Chief Executive Officer
(Principal Executive Officer)
 ​
​ ​ ​ ​
By:
 ​ ​
/s/ William Goebel
​
William Goebel
Chief Financial Officer
(Principal Financial and Accounting Officer)
 ​
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