UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, DC 20549





FORM 10-K


(Mark One)


xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the fiscal year ended December 31, 2016


OR


oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





Commission file number: 814-00821


BUSINESS DEVELOPMENT CORPORATION OF AMERICA


(Exact Name of Registrant as Specified in its Charter)





Maryland27-2614444(State or Other Jurisdiction ofIncorporation or Organization)(I.R.S. EmployerIdentification No.)9 West 57th Street, 49th Floor, Suite 4920New York, New York10019(Address of Principal Executive Office)(Zip Code)





(212) 588-6770


(Registrant’s Telephone Number, Including Area Code)





Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class  Name of Each Exchange on Which Registered   None  N/A





Securities registered pursuant to Section 12(g) of the Act:


Common Stock, par value $0.001 per share


(Title of Class)





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act of 1933.


Yes o No x





Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934.


Yes o No x





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 x No o










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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 o No o





Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or  information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o





Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (check one):


Large accelerated fileroAccelerated fileroNon-accelerated filerxSmaller reporting companyo


(Do not check if a smaller reporting company)





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





There is no established market for the Registrant’s shares of common stock.


There were 178,747,651 shares of the Registrant’s common stock outstanding as of March 15, 2017.





Documents Incorporated by Reference


Portions of the registrant’s definitive Proxy Statement relating to the registrant’s 2017 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days following the end of the Company’s fiscal year, are incorporated by reference in Part III of this Annual Report on Form 10-K as indicated herein.

























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BUSINESS DEVELOPMENT CORPORATION OF AMERICA


FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2016





TABLE OF CONTENTS





PagePART IItem 1. Business1Item 1A. Risk Factors19Item 1B. Unresolved Staff Comments44Item 2. Properties44Item 3. Legal Proceedings45Item 4.Mine Safety Disclosures45PART IIItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities46Item 6. Selected Consolidated Financial Data48Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations50Item 7A. Quantitative and Qualitative Disclosures About Market Risk61Item 8. Consolidated Financial Statements and Supplementary Data62Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure62Item 9A. Controls and Procedures62Item 9B. Other Information63PART IIIItem 10. Directors, Executive Officers and Corporate Governance64Item 11. Executive Compensation64Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters64Item 13. Certain Relationships and Related Transactions, and Director Independence64Item 14. Principal Accountant Fees and Services64PART IVItem 15. Exhibits and Consolidated Financial Statement Schedules65Item 16. Form 10-K Summary68Signatures69







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PART I








ITEM 1. BUSINESS





GENERAL





Business Development Corporation of America (“BDCA,” or the “Company,” which may also be referred to as “we,” “us,” or “our”) is an externally managed, non-diversified closed-end investment company that has elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, we have elected to be treated for U.S. federal income tax purposes, and intend to qualify annually hereafter, as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).





We were incorporated in Maryland in May 2010 and commenced our initial public offering (the “IPO”) on January 25, 2011. As of December 31, 2016 , we had issued 189.6 million shares of common stock for gross proceeds of $ 2.0 billion including the shares issued under our distribution reinvestment plan (“DRIP”) and shares purchased by an affiliate of Benefit Street Partners L.L.C. (“BSP”). As of December 31, 2016 , we had repurchased a cumulative 12.5 million shares of common stock through our share repurchase program for payments of $ 113.4 million.





Effective November 1, 2016, we are externally managed by our investment adviser, BDCA Adviser, LLC (“BDCA Adviser” or the “Adviser”), a subsidiary of BSP, a leading credit-focused alternative asset management firm with approximately $20 billion of assets under management as of February 28, 2017. In addition, BSP provides us with administrative services under an administration agreement (“Administration Agreement”) with the Company. We believe we benefit from the significant investment platform, personnel, scale and resources of our Adviser and BSP. Our investment activities are managed by the Adviser, and supervised by our board of directors, a majority of whom are independent of the Adviser and its affiliates. As a BDC, we are required to comply with certain regulatory requirements. See “Regulation” for discussion of BDC regulation and other regulatory considerations.





Our investment objective is to generate both current income and to a lesser extent long-term capital appreciation through debt and equity investments. We invest primarily in senior secured loans, and to a lesser extent, mezzanine loans, unsecured loans and equity of predominantly private U.S. middle-market companies. We define middle market companies as those with annual earnings before interest, taxes, depreciation and amortization (“EBITDA”) of $10 million to $100 million, although we may invest in larger or smaller companies. We may also purchase interests in loans or corporate bonds through secondary market transactions. We expect that each investment generally will range between approximately 0.5% and 3.0% of our total assets. As of December 31, 2016 , 79.0% of our portfolio was invested in senior secured loans.





Senior secured loans generally are senior debt instruments that rank ahead of subordinated debt and equity in bankruptcy priority and are generally secured by liens on the operating assets of a borrower which may include inventory, receivables, plant, property and equipment. Mezzanine debt is subordinated to senior loans and is generally unsecured. We may also invest in the equity and junior debt tranches of collateralized loan obligation investment vehicles (“Collateralized Securities”). For a discussion of the risks inherent in our portfolio investments, please see the discussion under Part I, Item 1A. “Risk Factors”.


We intend to co-invest, subject to the conditions included in the exemptive order we received from the U.S. Securities and Exchange Commission (the “SEC”), with certain of our affiliates. See “Material Conflicts of Interests” below. We believe that such co-investments may afford us additional investment opportunities and an ability to achieve greater diversification.


As a BDC, we are generally required to invest at least 70% of our total assets primarily in securities of private and certain U.S. public companies (other than certain financial institutions), cash, cash equivalents and U.S. government securities and other high quality debt investments that mature in one year or less.


We are permitted to borrow money from time to time within the levels permitted by the 1940 Act (which generally allows us to incur leverage for up to one half of our assets). We have used, and expect to continue to use, our credit facilities and other borrowings, along with proceeds from the rotation of our portfolio and proceeds from private securities offerings to finance our investment objectives. See “Regulation” for discussion of BDC regulation and other regulatory considerations.








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ABOUT OUR ADVISER AND BSP





BDCA Adviser is the investment adviser of BDCA. BDCA Adviser, a Delaware limited liability company, is registered as an investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). BDCA Adviser is a subsidiary of BSP, which is also registered as an investment adviser under the Advisers Act.





BSP is a leading credit-focused alternative asset management firm with over $20 billion in assets under management.  Established in 2008, the BSP platform manages funds for institutions and high-net-worth investors across various credit funds and complementary strategies including high yield, levered loans, private/opportunistic debt, liquid credit, structured credit and commercial real estate debt. These strategies complement each other as they all leverage the sourcing, analytical, compliance, and operational capabilities that encompass BSP’s robust platform. BSP has approximately 150 employees with over 90 investment professionals. BSP is in partnership with Providence Equity Partners L.L.C., a leading global private equity firm with a combined $50 billion in assets under management.





Our investment committee consists of Thomas Gahan, Chief Executive Officer of BSP, Michael Paasche, Senior Managing Director of BSP, and Blair D. Faulstich, Head of Private Debt Originations of BSP, each with over 20 years of experience in the financial services industry and substantial experience in originating, underwriting and structuring credit investments.





MARKET OPPORTUNITY





We believe that there exists a unique opportunity for BDCs with experience in investing in middle market companies. In our view, middle market companies provide attractive current yields and significant downside protection.





Our current opportunity is highlighted by the following factors:





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|• | Large pool of uninvested private equity capital likely to seek additional capital to support private investments.We believe there remains a large pool of uninvested private equity capital available to middle market companies. We expect that private equity firms will be active investors in middle market companies and that these private equity firms will seek to supplement their equity investments with senior secured and mezzanine debt and equity co-investments from other sources, such as us.

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|• | Consolidation among commercial banks has reduced their focus on middle market businesses.The commercial banks in the United States, which have traditionally been the primary source of capital to middle market companies, have experienced consolidation, loan losses, and stricter regulatory scrutiny, which has led to a significant tightening of credit standards and substantially reduced loan volume to the middle market. Many financial institutions that have historically loaned to middle market companies have failed or been acquired, and we believe that larger financial institutions are now more focused on syndicated lending to larger corporations and are allocating capital to business lines that generate fee income and involve less balance sheet risk. We believe this market dynamic provides us with numerous opportunities to originate new debt and equity investments in middle market companies.

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|• | Refinancing activities will provide continued opportunities to extend capital to middle market companies.A significant volume of senior secured and mezzanine debt is expected to come due over the next several years. As companies seek to refinance their debt, we believe this will create new financing opportunities for us.

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|• | Lower default rates and higher recovery rates in the middle market.Default rates remain relatively low, with generally higher recovery rates in the middle market. Middle market companies are generally over-equitized as compared to large cap companies.

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|• | Favorable Pricing Environment in the Loan Market.Lower valuation levels in certain situations, combined with reduced liquidity in the secondary loan market, have created opportunities to acquire relatively high yielding senior and subordinated debt, both secured and unsecured, at potentially attractive prices.


































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BUSINESS STRATEGY





Our investment objective is to generate both current income and to a lesser extent long-term capital appreciation through debt and equity investments. We invest primarily in first and second lien senior secured debt investments and mezzanine debt issued by middle market companies. We have adopted the following business strategy to achieve our investment objectives:





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|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | Utilize the experience and expertise of the principals of our Adviser and BSP.Certain principals of our Adviser and BSP have a broad network of contacts with financial sponsors, commercial and investment banks and leaders within a number of industries that we believe will produce significant proprietary investment opportunities outside the normal banking auction process.

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|• | Focus on middle market companies with stable cash flow.We believe that the middle market is less competitive and this is one factor that allows us to negotiate favorable investment terms. Such favorable terms include higher debt yields, more significant covenant protection and greater equity participation than typical of transactions involving larger companies. We generally invest in established companies with positive cash flow. We believe these companies possess better risk-adjusted return profiles than newer companies that are building management expertise or in the early stages of building a revenue base. These middle market companies represent a significant portion of the U.S. economy and often require substantial capital investment to grow their businesses.

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|• | Employ disciplined underwriting policies and rigorous portfolio management.We employ an extensive underwriting process that includes a review of the investment memo, competitive position, financial performance and industry dynamics of each potential portfolio company. In addition, we perform substantial due diligence on potential investments, and seek to invest with management teams and/or private equity sponsors who have proven capabilities in building value. As part of the monitoring process for portfolio companies, our Adviser analyzes monthly (if available), quarterly, and annual financial statements versus the previous periods and year, reviews financial projections, and may perform other procedures including meeting with management, attending board meetings and reviewing compliance certificates and covenants.

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|• | Focus on long-term credit performance and principal protection.We structure our customized loan investments on a relatively conservative basis with high cash yields, security interests (preferably first lien) where possible, cash origination fees, and appropriate leverage levels. We seek strong deal protection for our customized debt investments, including default penalties, information rights, board observation rights, and affirmative, negative and financial covenants, such as lien protection and prohibitions against change of control. We believe these protections will reduce our risk of capital loss.

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|• | Diversification.We seek to diversify our portfolio broadly among companies in a multitude of different industries, thereby reducing the concentration of credit risk in any one company or sector of the economy. We cannot guarantee that we will be successful in this effort.




DEAL ORIGINATION





Our Adviser and BSP have extensive relationships with private equity firms, competing lenders, loan syndication and trading desks, management teams, investment bankers, and other persons who we believe will continue to provide us with significant investment opportunities. We believe these relationships provide us with competitive advantages over other BDCs.





From time to time, we may receive referrals for new prospective investments from our portfolio companies as well as other participants in the capital markets.





INVESTMENT SELECTION





We strive to structure our debt investments with the maximum seniority and collateral that we can reasonably obtain while seeking to achieve our expectations for total returns on investments. We seek to structure our debt investments so that they often are collateralized by a first or second lien on the assets of the portfolio company. We seek to tailor the terms of our debt investments to the facts and circumstances of the transaction and prospective portfolio company, negotiating a structure that seeks to protect our rights and manage our risk while creating incentives for the portfolio company to achieve its business plan. A substantial source of our return is monthly or quarterly cash interest that we collect on our debt investments.





Our investment philosophy and portfolio construction involves:





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|• | Company-specific research and analysis; and

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|• | An emphasis on capital preservation, low volatility, diversification and minimization of downside risk.







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The foundation of our investment philosophy is intensive credit investment analysis. We follow a rigorous selection process based on:





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|• | A comprehensive analysis of company creditworthiness, including a quantitative and qualitative assessment of the company’s business;

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|• | An evaluation of the management team and support from equity investors;

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|• | An assessment of the competitive landscape;

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|• | An analysis of business strategy and long-term industry trends; and

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|• | An in-depth examination of capital structure, financial results and financial projections.




We seek to identify those companies exhibiting superior fundamental risk-return profiles with a particular focus on investments with the following characteristics:





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|• | Established companies with a history of positive and stable operating cash flows.We seek to invest in established companies with sound historical financial performance. We typically focus on companies with a history of profitability.

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|• | Ability to exert meaningful influence.We target investment opportunities in which we will be the lead investor where we can add value through active participation. Our focus is often on first lien investments.

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|• | Experienced management team.We will require that our portfolio companies have an experienced management team. We also seek to invest in companies that have a strong equity incentive program in place that properly aligns the interests of management with such company's investors.

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|• | Strong franchises and sustainable competitive advantages.We seek to invest in companies with proven products and/ or services and strong regional or national operations.

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|• | Diverse customer bases and product offerings.We seek to invest in companies with diverse customer bases and product offerings.




INTENSIVE CREDIT ANALYSIS/DUE DILIGENCE





The disciplined process through which we make investment decisions with respect to a customized financing transaction involves extensive research into the target company, its industry, its growth prospects and its ability to withstand adverse conditions. If the investment team responsible for the transaction determines that an investment opportunity should be pursued, we engage in an intensive due diligence process. Though each transaction involves a somewhat different approach, the regular due diligence steps generally to be undertaken may include:





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|• | Meeting with senior management to understand the business more fully and evaluate the ability of the senior management team;

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|• | Checking management backgrounds and references;

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|• | Performing a detailed review of financial performance, earnings and potential for earnings growth;

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|• | Commissioning a quality of earnings report;

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|• | Visiting the headquarters and conducting other on site diligence;

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|• | Contacting customers and vendors to assess both business prospects and industry practices;

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|• | Conducting a competitive analysis, and comparing the company to its main competitors;

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|• | Researching industry and relevant publications to understand industry wide growth trends;

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|• | Assessing asset value and the ability of physical infrastructure and information systems to handle anticipated growth;

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|• | Investigating legal risks and financial and accounting systems;

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|• | Engaging third party experts and consultants to assist in the due diligence process; and

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|• | Building detailed projected financial models with an emphasis on downside scenarios.




PORTFOLIO MONITORING





With respect to customized financing transactions, our Adviser monitors our portfolio companies to determine if each company is meeting its business plan and to assess the appropriate course of action for each company.








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We employ several methods of evaluating and monitoring the performance and value of our investments, which may include, but are not limited to, the following:





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|• | Assessment of success in adhering to the portfolio company’s business plan and compliance with covenants;

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|• | Regular contact with portfolio company management and, if appropriate, the financial or strategic sponsor, to discuss financial position, requirements and accomplishments;

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|• | Attendance at and participation in board meetings of the portfolio company (if available); and

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|• | Review of monthly (if available), quarterly, and annual financial statements and financial projections for the portfolio company.




PORTFOLIO ASSET QUALITY





Our Adviser employs an investment rating system to categorize our investments. In addition to various risk management and monitoring tools, our Adviser grades the credit risk of all debt investments on a scale of 1 to 5 no less frequently than quarterly. This system is intended primarily to reflect the underlying risk of a portfolio debt investment relative to the inherent risk at the time the original debt investment was made (i.e., at the time of acquisition), although it may also take into account under certain circumstances the performance of the portfolio company's business, the collateral coverage of the investment and other relevant factors.


Loan RatingSummary Description1Debt investment exceeding fundamental performance expectations and/or capital gain expected. Trends and risk factors since the time of investment are favorable.2Performing consistent with expectations and a full return of principal and interest expected. Trends and risk factors are neutral to favorable. All investments are initially rated a “2”.3Performing debt investment requiring closer monitoring. Trends and risk factors show some deterioration.4Underperforming debt investment. Some loss of interest or dividend expected, but still expecting a positive return on investment. Trends and risk factors are negative.5Underperforming debt investment with expected loss of interest and some principal.





The weighted average risk ratings of our investments based on amortized cost were 2.18 and 2.19 as of December 31, 2016 and December 31, 2015 , respectively. As of December 31, 2016 , we had six portfolio companies, which represented eight portfolio investments, on non-accrual status with a total principal amount of $136.2 million, amortized cost of $127.6 million, and fair value of $51.2 million, which represented 5.0%, 5.1% and 2.1% of the investment portfolio total principal, amortized cost and fair value, respectively. We are currently evaluating potential value recovery alternatives for these investments. As of December 31, 2015, we had three portfolio companies, which represented three portfolio investments, on non-accrual status with a total principal amount of $51.9 million, amortized cost of $51.2 million, and fair value of $33.0 million which represented 2.0%, 2.1% and 1.4% of the investment portfolio total principal, amortized cost and fair value, respectively.





DETERMINATION OF NET ASSET VALUE





The Adviser, acting pursuant to delegated authority from, and under the oversight of our board of directors, assists the board of directors in its determination of the NAV of our investment portfolio each quarter. Securities that are publicly-traded are valued at the reported closing price on the valuation date. Securities that are not publicly-traded are valued at fair value as determined in good faith by our board of directors. In connection with that determination, our Adviser facilitates the preparation, through the use of independent valuation firms, portfolio company valuations using relevant inputs, including but not limited to indicative dealer quotes, values of like securities, the most recent portfolio company financial statements and forecasts.





In September 2006, the Financial Accounting Standards Board (“FASB”) issued guidance which 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. The guidance defines fair value as the price that





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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. The guidance 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:





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|• | Each portfolio company or investment will be valued by the Adviser, with assistance from one or more independent valuation firms engaged by our board of directors;

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|• | The independent valuation firm(s) will conduct independent appraisals and make an independent assessment of the value of each investment; and

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|• | Our board of directors determines the fair value of each investment, in good faith, based on the input of our Adviser, independent valuation firm and the board of directors.




Determination of fair values 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. Below is a description of factors that our board of directors may consider when valuing our debt and equity investments.





Securities for which market quotations are readily available on an exchange are valued at the reported closing price on the valuation date. We may also obtain quotes with respect to certain of our investments from pricing services or brokers or dealers in order to value assets. When doing so, we determine whether the quote obtained is readily available according to U.S. generally accepted accounting principles (“U.S. GAAP”) to determine the fair value of the security. If determined readily available, we use the quote obtained.





Investments without a readily determined market value are primarily valued using a market approach, an income approach, or both approaches, as appropriate. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors that we may take into account in fair value pricing our investments include, as relevant: available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company's ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, M&A comparables, and enterprise values, among other factors. When available, broker quotations and/or quotations provided by pricing services are considered as an input in the valuation process.





For an investment in an investment fund that does not have a readily determinable fair value, we measure the fair value of the investment predominately based on the net asset value per share of the investment fund if the net asset value of the investment fund is calculated in a manner consistent with the measurement principles of FASB, Accounting Standards Codification, or ASC, Topic 946, Financial Services - Investment Companies, as of our measurement date.





For investments in Collateralized Securities, we model both the assets and liabilities of each Collateralized Securities’ capital structure. The model uses a waterfall engine to store the collateral data, generate collateral cash flows from the assets, and distribute the cash flows to the liability structure based on priority of payments. The waterfall cash flows are discounted using rates that incorporate risk factors such as default risk, recovery risk, prepayment risk, reinvestment risk, and interest rate risk, among others. In addition, we consider broker quotations and/or quotations provided by pricing services as an input to determining fair value when available.





DETERMINATIONS IN CONNECTION WITH OFFERINGS





Although we are no longer offering shares of our common stock in a continuous offering, we may, from time to time, elect to issue shares of our common stock in private placements. We are prohibited under the 1940 Act from selling our shares of common stock at a public offering price, after deducting selling commissions and dealer manager fees, that is below our net





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asset value per share unless we obtain stockholder approval. In connection with any issuance of our common stock, our board of directors or a committee thereof will review the then current public offering price per share, if available, against the current estimated net asset value per share to ensure that we are not selling shares of our common stock at a price which, after deducting selling commissions and dealer manager fees, was below our net asset value per share. If shares are to be sold at a price below our net asset value per share, then a majority of our directors who have no financial interest in the sale and a majority of such directors who are not interested persons of the Company have determined that any such sale would be in our best interests and those of our stockholders.





In reviewing our offering price in connection with any closing, the board of directors or a committee thereof will consider the following factors, among others, in making such determination:





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|• | the net asset value of our common stock disclosed in the most recent periodic report we filed with the SEC;

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|• | our Adviser’s assessment of whether any material change in the net asset value of our common stock has occurred (including through the realization of net gains on the sale of our portfolio investments) from the period beginning on the date of the most recently disclosed net asset value to the period ending two days prior to the date of the closing on and sale of our common stock; and

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|• | the magnitude of the difference between the net asset value disclosed in the most recent periodic report we filed with the SEC and our Adviser’s assessment of any material change in the net asset value since the date of the most recently disclosed net asset value, and the offering price of the shares of our common stock at the date of closing.




Importantly, this determination requires that we calculate net asset value per share within 48 hours of each closing. In addition, it involves a determination by the board of directors or a committee thereof that we are not selling shares at a price which, after deducting selling commissions and dealer manager fees, is below the then current net asset value per share at the time at which the sale of shares is made. To the extent that there is even a remote possibility that we may issue shares of our common stock at a price which, after deducting selling commissions and dealer manager fees, is below the then current net asset value per share, the board of directors or a committee thereof will elect either to postpone the closing until such time that there is no longer the possibility of the occurrence of such event or to undertake to calculate our net asset value per share within 48 hours of the issuance of shares of our common stock in order to ensure that it will not be at a price which, after deducting selling commissions and dealer manager fees, is below our net asset value per share.





These processes and procedures are part of our compliance policies and procedures. Records will be made contemporaneously with all determinations described in this section and these records will be maintained with other records we are required to maintain under the 1940 Act.





LEVERAGE





We may use borrowed funds, known as “leverage,” to make investments and to attempt to increase returns to our stockholders by reducing our overall cost of capital. As a BDC, we are only allowed to employ leverage to the extent that our asset coverage, as defined in the 1940 Act, equals at least 200% after giving effect to such leverage.





Wells Fargo Credit Facility





On July 24, 2012, we, through a wholly-owned special purpose financing subsidiary, BDCA Funding I, LLC (“Funding I”), entered into the Credit Facility with Wells Fargo and U.S. Bank National Association, as collateral agent, account bank and collateral custodian (the “Wells Fargo Credit Facility”). The Wells Fargo Credit Facility, which was subsequently amended on April 26, 2013, September 9, 2013, June 30, 2014, May 29, 2015 and November 4, 2015, provides for borrowings in an aggregate principal amount of up to $400.0 million on a committed basis, with a maturity of May 29, 2020.





The Wells Fargo Credit Facility is priced at one month maturity LIBOR, with no LIBOR floor, plus a spread ranging between 1.75% and 2.50% per annum, depending on the composition of the portfolio of loans owned by Funding I for the relevant period. Interest is payable quarterly in arrears. Funding I is subject to a non-usage fee to the extent the aggregate principal amount available under the Wells Fargo Credit Facility has not been borrowed. The non-usage fee per annum for the first six months is 0.50%; thereafter, the non-usage fee per annum is 0.50% for the first 20% of the unused balance and 2.0% for the portion of the unused balance that exceeds 20%.





Borrowings under the Wells Fargo Credit Facility are subject to compliance with a borrowing base, pursuant to which the amount of funds advanced to Funding I varies depending upon the types of loans in Funding I's portfolio. As of





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December 31, 2016 , we were in compliance with regards to the Wells Fargo Credit Facility covenants. The Wells Fargo Credit Facility may be prepaid in whole or in part, subject to customary breakage costs.





The Wells Fargo Credit Facility contains customary default provisions for facilities of this type pursuant to which Wells Fargo may terminate our rights, obligations, power and authority, in its capacity as servicer of the portfolio assets under the Wells Fargo Credit Facility, including, but not limited to, non-performance of the Wells Fargo Credit Facility obligations, insolvency, defaults of certain financial covenants and other events with respect to us that may be adverse to Wells Fargo and the secured parties under the Wells Fargo Credit Facility.





In connection with the Wells Fargo Credit Facility, Funding I has made certain representations and warranties, is required to comply with various covenants, reporting requirements and other customary requirements for similar facilities and is subject to certain customary events of default. Upon the occurrence and during the continuation of an event of default, Wells Fargo may declare the outstanding advances and all other obligations under the Wells Fargo Credit Facility immediately due and payable. During the continuation of an event of default, Funding I must pay interest at a default rate.





Borrowings of Funding I will be considered our borrowings for purposes of complying with the asset coverage requirements under the 1940 Act applicable to BDCs.





The obligations of Funding I under the Wells Fargo Credit Facility are non-recourse to us.





As of December 31, 2016 , we had $298.2 million outstanding under the Wells Fargo Credit Facility.





Deutsche Bank Credit Facility





On February 21, 2014, we, through a wholly-owned, consolidated special purpose financing subsidiary, BDCA 2L Funding I, LLC (“2L Funding I”), entered into the a credit facility with Deutsche Bank (the “Deutsche Bank Credit Facility”) as lender and as administrative agent and U.S. Bank as collateral agent and collateral custodian. The Deutsche Bank Credit Facility was amended on February 19, 2016 and was terminated in accordance with its terms on June 3, 2016.





The Deutsche Bank Credit Facility provided for borrowings in an aggregate principal amount of up to $60.0 million with a term of 36 months. The Deutsche Bank Credit Facility was priced at LIBOR plus 4.25%, with no LIBOR floor. Prior to its termination, the Deutsche Bank Credit Facility was subject to a minimum utilization of 82.5% of the loan amount thereafter, measured quarterly. If the utilized portion of the loan amount was less than the foregoing thresholds, such shortfalls bore interest at LIBOR plus 4.25%. The Deutsche Bank Credit Facility provided for monthly interest payments for each drawn loan. 2L Funding I paid a structuring fee and incurred certain other customary costs and expenses in connection with obtaining the Deutsche Bank Credit Facility.





Citi Credit Facility





On June 27, 2014, we, through a wholly-owned, special purpose financing subsidiary, BDCA-CB Funding, LLC (“CB Funding”), entered into a credit facility with Citi (the “Citi Credit Facility”) as administrative agent and U.S. Bank as collateral agent, account bank and collateral custodian. The Citi Credit Facility, which was subsequently amended on October 14, 2015, provides for borrowings in an aggregate principal amount of up to $400.0 million on a committed basis, subject to the administrative agent’s right to approve the assets acquired by CB Funding and pledged as collateral under the Citi Credit Facility. The Citi Credit Facility has a maturity date of June 27, 2018.





The Citi Credit Facility is priced at LIBOR, with no LIBOR floor, plus a spread of 1.70% per annum for the first twenty four months and 2.00% per annum thereafter. Interest is payable quarterly in arrears. CB Funding is subject to a non- usage fee to the extent the aggregate principal amount available under the Citi Credit Facility has not been borrowed. Any amounts borrowed under the Citi Credit Facility along with any accrued and unpaid interest thereunder will mature, and will be due and payable, in three years.





Borrowings of CB Funding will be considered our borrowings for purposes of complying with the asset coverage requirements under the 1940 Act applicable to business development companies.





The obligations of CB Funding under the Citi Credit Facility are non-recourse to us.





As of December 31, 2016 , we had $ 286.0 million outstanding under the Citi Credit Facility.





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UBS Credit Facility


On April 7, 2015, we, through a wholly-owned, special-purpose, bankruptcy-remote subsidiary, BDCA Helvetica Funding, Ltd. (“Helvetica Funding”) entered into a debt financing facility with UBS AG, London Branch (the “UBS Credit Facility”). Pursuant to the UBS Credit Facility, which was amended on July 10, 2015 and June 6, 2016, we have access to up to $232.5 million in available debt available to fund investments in new securities and for other general corporate purposes. The UBS Credit Facility has a maturity date of April 7, 2018. Pricing under the transaction is based on three-month LIBOR plus a spread of 4.05% per annum for the relevant period.





As of December 31, 2016 , we had $ 232.5 million outstanding under the UBS Credit Facility.





Unsecured Notes


On August 26, 2015, we entered into a purchase agreement with the initial purchasers, relating to our sale of $100.0 million aggregate principal amount of its 6.00% fixed rate senior notes due 2020 to the initial purchasers in a private placement in reliance on Section 4(a)(2) of the Securities Act and for initial resale by the initial purchasers to qualified institutional buyers pursuant to the exemption from registration provided by Rule 144A promulgated under the Securities Act (the “Unsecured Notes”). We relied upon these exemptions from registration based in part on representations made by the initial purchasers. The purchase agreement includes customary representations, warranties and covenants by us. Under the terms of the purchase agreement, we have agreed to indemnify the initial purchasers against certain liabilities under the Securities Act. The Unsecured Notes have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. The net proceeds from the sale of the Unsecured Notes were approximately $97.9 million, after deducting initial purchasers’ discounts and commissions of approximately $1.6 million payable by us and estimated offering expenses of approximately $0.5 million payable by us.





The Unsecured Notes were issued pursuant to the Indenture, dated as of August 31, 2015, between us and the trustee. The Unsecured Notes will mature on September 1, 2020, and may be redeemed in whole or in part at our option at any time, or from time to time, at the redemption prices set forth in the Indenture. The Unsecured Notes bear interest at a rate of 6.00% per year payable semi-annually on March 1 and September 1 of each year, commencing on March 1, 2016. The Unsecured Notes will be our general unsecured obligations that rank senior in right of payment to all of our existing and future indebtedness that is expressly subordinated in right of payment to the Unsecured Notes. The Unsecured Notes will rank equally in right of payment with all of our existing and future senior liabilities that are not so subordinated, effectively junior to any of our secured indebtedness (including unsecured indebtedness that we later secure) to the extent of the value of the assets securing such indebtedness, and structurally junior to all existing and future indebtedness incurred by our subsidiaries, financing vehicles or similar facilities, including credit facilities held by our wholly owned, special purpose financing subsidiaries.





The Indenture contains certain covenants, including covenants requiring us to: (i) comply with the asset coverage requirements of Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act as in effect immediately prior to the issuance of the Unsecured Notes, whether or not we are subject to such provisions; (ii) provide financial information to the holders of the Unsecured Notes and the trustee if we are no longer subject to the reporting requirements under the Securities Exchange Act of 1934, as amended; and (iii) maintain total unencumbered assets, as defined in the Indenture, of at least 175% of the aggregate principal amount of all of our and the our consolidated subsidiaries’ outstanding unsecured debt determined on a consolidated basis in accordance with generally accepted accounting principles. These covenants are subject to important limitations and exceptions that are described in the Indenture.





As of December 31, 2016 , we had $ 98.8 million outstanding under the Unsecured Notes.





We expect that in the future, we may use other sources of financing for our investments such as proceeds from secured or unsecured financings from banks or other lenders or proceeds from private offerings. However, our ability to incur additional debt will be dependent on a number of factors, including our degree of leverage, the value of our unencumbered assets and borrowing restrictions that may be imposed by lenders.

















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INVESTMENT ADVISORY AND MANAGEMENT SERVICES AGREEMENT





Pursuant to the Investment Advisory and Management Services Agreement, as amended (the “Investment Advisory Agreement”), our Adviser oversees the management of our activities and is responsible for making investment decisions with respect to our portfolio.





On July 19, 2016, American Realty Capital II Advisors, LLC, the former parent of the Adviser, entered into a membership interest purchase agreement with a subsidiary of BSP, pursuant to which such subsidiary acquired all of the outstanding limited liability company interests of the Adviser (the “Transaction”). In connection with the Transaction, we amended the Investment Advisory Agreement, effective as of November 1, 2016, to allow the Adviser to serve as investment adviser to us following the closing of the Transaction.





Responsibilities of the Adviser





Subject to the overall supervision of our board of directors, our Adviser manages the day-to-day operations of, and provides investment advisory and management services to us. Under the terms of our Investment Advisory Agreement, our Adviser, among other things:


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|• | Determines the composition and allocation of our portfolio, the nature and timing of the changes therein and the manner of implementing such changes;

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|• | Identifies, evaluates and negotiates the structure of the investments we make;

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|• | Executes, monitors and services our investments;

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|• | Determines the securities and other assets that we will purchase, retain, or sell;

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|• | Performs due diligence on prospective portfolio companies; and

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|• | Provides us with such other investment advisory, research and related services as we may, from time to time, reasonably require for the investment of our funds.




Our Adviser's services under the Investment Advisory Agreement are not exclusive, and they are free to furnish similar services to other entities so long as their services to us are not impaired.





Compensation of the Adviser





Pursuant to the Investment Advisory Agreement and for the investment advisory and management services provided thereunder, we pay our Adviser a base management fee and an incentive fee.





Base Management Fee





The base management fee is calculated at an annual rate of 1.5% of our average gross assets. The base management fee is payable quarterly in arrears, and is calculated based on the average value of our gross assets at the end of the two most recently completed calendar quarters. All or any part of the base management fee not taken as to any quarter shall be deferred without interest and may be taken in such other quarter as the Adviser will determine. The base management fee for any partial month or quarter is appropriately pro-rated.








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Incentive Fees





The incentive fee consists of two parts. The first part is referred to as the incentive fee on income and it is calculated and payable quarterly in arrears based on our “Pre-Incentive Fee Net Investment Income” for the immediately preceding quarter. “Pre-Incentive Fee Net Investment Income” means interest income, dividend income and any other income (including any other fees, other than fees for providing managerial assistance, such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies) accrued during the calendar quarter, minus our operating expenses for the quarter (including the base management fee, expenses payable under the administration agreement and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-Incentive Fee Net Investment Income includes, in the case of investments with a deferred interest feature (such as original issue discount debt instruments with payment-in-kind interest and zero coupon securities), accrued income that we have not yet received in cash. Pre-Incentive Fee Net Investment Income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation. The payment of the incentive fee on income shall be subject to payment of a preferred return to investors each quarter, expressed as a quarterly rate of return on the value of our net assets at the end of the most recently completed calendar quarter, of 1.75% (7.00% annualized), subject to a “catch up” feature (as described below). The calculation of the incentive fee on income for each quarter is as follows:





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|• | No incentive fee on income shall be payable to the Adviser in any calendar quarter in which our Pre-Incentive Fee Net Investment Income does not exceed the preferred return rate of 1.75% or 7.00% annualized (the “Preferred Return”) on net assets;

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|• | 100% of our Pre-Incentive Fee Net Investment Income, if any, that exceeds the preferred return but is less than or equal to 2.1875% in any calendar quarter (8.75% annualized) shall be payable to the Adviser. This portion of our incentive fee on income is referred to as the “catch up” and is intended to provide the Adviser with an incentive fee of 20% on all of our Pre-Incentive Fee Net Investment Income when our Pre-Incentive Fee Net Investment Income reaches 2.1875% (8.75% annualized) in any calendar quarter; and

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|• | For any quarter in which our Pre-Incentive Fee Net Investment Income exceeds 2.1875% (8.75% annualized), the incentive fee on income shall equal 20% of the amount of our Pre-Incentive Fee Net Investment Income, as the Preferred Return and catch-up will have been achieved.

The second part of the incentive fee, referred to as the “incentive fee on capital gains during operations,” shall be an incentive fee on capital gains earned on liquidated investments from the portfolio during operations prior to our liquidation and shall be determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, if earlier). This fee shall equal 20.0% of our incentive fee capital gains, which shall equal our 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 previously paid capital gain incentive fees.





Payment of our expenses





All investment professionals and staff of the Adviser and BSP, when and to the extent engaged in providing investment advisory and management services to us and the compensation and routine overhead expenses of such personnel allocable to such services (including health insurance, 401(k) plan benefits, payroll taxes and other compensation related matters), are provided and paid for by the Adviser. We bear all other costs and expenses of our operations and transactions, including (without limitation) fees and expenses relating to:





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|• | expenses deemed to be “organization and offering expenses” of the Company for purposes of Conduct Rule 2310(a)(12) of the Financial Industry Regulatory Authority, or FINRA;

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|• | amounts paid to third parties for administrative services;

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|• | amounts paid to third party experts relating to the investigation and monitoring of our investments;

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|• | the cost of calculating our net asset value;

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|• | the cost of effecting sales and repurchases of shares of our common stock and other securities;

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|• | management and incentive fees payable pursuant to the Investment Advisory Agreement;

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|• | fees payable to third parties relating to, or associated with, making investments and valuing investments (including third-party valuation firms);

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|• | transfer agent and custodial fees;

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|• | fees and expenses associated with marketing efforts (including attendance at investment conferences and similar events);

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|• | federal and state registration fees;

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|• | any exchange listing fees;




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|• | federal, state, and local taxes;

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|• | independent directors' fees and expenses;

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|• | brokerage commissions;

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|• | costs of proxy statements;

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|• | stockholders' reports and notices;

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|• | costs of preparing government filings, including periodic and current reports with the SEC;

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|• | fidelity bond, liability insurance and other insurance premiums;

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|• | printing and mailing; and

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|• | independent accountants and outside legal costs.




We reimburse the Adviser for all of our expenses incurred by the Adviser as well as the actual cost of goods and services used for or by us and obtained from entities not affiliated with the Adviser. The Adviser may be reimbursed for the administrative services performed by it on our behalf; provided, however, the reimbursement shall be an amount equal to the lower of the Adviser’s actual cost or the amount we would be required to pay third parties for the provision of comparable administrative services in the same geographic location; and provided, further, that such costs are reasonably allocated to the Company on the basis of assets, revenues, time records or other method conforming with generally accepted accounting principles. No reimbursement shall be permitted for services for which the Adviser is entitled to compensation by way of a separate fee.





Duration and termination





In connection with the Transaction, we amended the Investment Advisory Agreement, effective as of November 1, 2016, to allow the Adviser to continue to serve as our investment adviser following the closing of the Transaction. Unless terminated earlier, it will remain in effect until November 2018 and then from year to year if approved annually by our board of directors or by the affirmative vote of the holders of a majority of our outstanding voting securities, including, in either case, approval by a majority of our directors who are not interested persons. The Investment Advisory Agreement will automatically terminate in the event of its assignment. The Investment Advisory Agreement may be terminated by either party without penalty upon not less than 60 days' written notice to the other. Any termination by us must be authorized either by our board of directors or by vote of our stockholders.





ADMINISTRATION AGREEMENTS





On March 18, 2011, we entered into a fund administration servicing agreement and a fund accounting servicing agreement with U.S. Bancorp Fund Services, LLC (the “Administrator”). Our Administrator provides the administrative services, such as accounting, financial reporting, legal and compliance support and investor relations support, necessary for us to operate.





In connection with the closing of the Transaction, we terminated the prior Administration Agreement and entered into a new administration agreement with BSP on November 1, 2016 (the “New Administration Agreement”). In connection with the New Administration Agreement, BSP will provide us with office facilities and administrative services.





COMPLIANCE





We, along with our Adviser, have adopted and implemented written policies and procedures reasonably designed to prevent violations of the federal securities laws, and our board of directors is required to review these compliance policies and procedures annually to assess their adequacy and the effectiveness of their implementation. Guy Talarico, our Chief Compliance Officer, is the Chief Executive Officer of Alaric Compliance Services, LLC, and performs his functions as our Chief Compliance Officer under the terms of an agreement between BDCA and Alaric Compliance Services, LLC.



































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COMPETITION





Our primary competition in providing financing for acquisitions, buyouts and recapitalizations of middle market companies will include other publicly-traded BDCs and public non-traded BDCs, public and private buyout and other private equity funds, commercial and investment banks, commercial financing companies, and, to the extent they provide an alternative form of financing, hedge funds. Many of our competitors may be substantially larger and have considerably greater financial resources than we do. For example, some competitors may have a lower cost of funds as well as access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than us. Furthermore, many of our competitors are not subject to the regulatory restrictions that the 1940 Act imposes on us as a BDC. We expect to use the industry expertise of the investment professionals to which we have access to assess investment risks and determine appropriate pricing for our investments in portfolio companies. In addition, we expect that our relationships will enable us to discover, and compete effectively for, financing opportunities with attractive middle market companies in the industries in which we seek to invest.





STAFFING





We do not currently have any employees and do not expect to have any employees in the foreseeable future. The services necessary for the operation of our business are provided to us by our officers and the employees of our Adviser and BSP and our Administrator pursuant to the terms of the Investment Advisory Agreement and the servicing agreements that we have entered into with our Administrator.





REGULATION





We have elected to be regulated as a BDC under the 1940 Act. The 1940 Act contains prohibitions and restrictions relating to transactions between BDCs and their affiliates, principal underwriters and the affiliates of those affiliates or underwriters. The 1940 Act also requires that a majority of the directors be persons other than “interested persons,” as that term is defined in the 1940 Act. In addition, the 1940 Act provides that we may not change the nature of our business so as to cease to be, or to withdraw our election as, a BDC unless approved by a majority of our outstanding voting securities. The 1940 Act defines “a majority of the outstanding voting securities” as the lesser of (i) 67% or more of the voting securities present at a meeting if the holders of more than 50% of our outstanding voting securities are present or represented by proxy or (ii) 50% of our voting securities.





We are generally not able to issue and sell our common stock at a price below net asset value per share. See “Item 1A. Risk Factors - Risks Related to Business Development Companies - Regulations governing our operation as a BDC and RIC will affect our ability to raise, and the way in which we raise, additional capital or borrow for investment purposes, which may have a negative effect on our growth .” We may, however, sell our common stock, or warrants, options or rights to acquire our common stock, at a price below the then current net asset value of our common stock if our board of directors determines that such sale is in our best interests and the best interests of our stockholders, and our stockholders approve such sale. In addition, we may generally issue new shares of our common stock at a price below net asset value in rights offerings to existing stockholders, in payment of dividends and in certain other limited circumstances.





The 1940 Act generally prohibits BDCs from making certain negotiated co-investments with affiliates absent an order from the SEC permitting the BDC to do so. Unless otherwise provided in the allocation policy, if an investment opportunity is appropriate for both us and other investment funds and the investment opportunity requires more than the price to be negotiated, the investment opportunity will be made available to the other investment fund or us on an alternating basis based on the date of closing of each such investment opportunity and each fund’s available capital. As a result, the Adviser and/or its affiliates may face conflicts in allocating investment opportunities between us and such other entities. Although the Adviser and its affiliates will endeavor to allocate investment opportunities in a fair and equitable manner and consistent with applicable allocation procedures, it is possible that, in the future, we may not be given the opportunity to participate in investments made by investment funds managed by the Adviser or its affiliates.





The SEC staff has granted us relief sought in an exemptive application that expands our ability to co-invest in portfolio companies with other funds managed by the Adviser or its affiliates (“Affiliated Funds”) in a manner consistent with our investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors, subject to compliance with certain conditions (the “Order”). Pursuant to the Order, we are permitted to co-invest with our affiliates if a “required majority” (as defined in Section 57(o) of the 1940 Act) or our independent directors make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transactions, including the





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consideration to be paid, are reasonable and fair to us and our stockholders and do not involve overreaching by us or our stockholders on the part of any person concerned, and (2) the transaction is consistent with the interests of our stockholders and is consistent with our investment objective and strategies.





As a BDC, we may be examined periodically by the SEC for compliance with the 1940 Act. Our Adviser is a registered investment adviser and is also subject to examination by the SEC.





We are required to provide and maintain a bond issued by a reputable fidelity insurance company to protect us against larceny and embezzlement. Furthermore, as a BDC, we are prohibited from protecting any director or officer against any liability to us or our stockholders arising from willful misconduct, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person’s office.





Asset Coverage





In addition, we are only allowed to borrow money such that our asset coverage, which, as defined in the 1940 Act, measures the ratio of total assets less total liabilities not represented by senior securities to total borrowings, equals at least 200% after such borrowing, with certain limited exceptions. We may use borrowed funds, known as “leverage,” to make investments and to attempt to increase returns to our stockholders by reducing our overall cost of capital. We currently have credit facilities with Wells Fargo, Citi, and UBS and have sold $100.0 million in aggregate principal of senior notes. For a detailed discussion of our current credit facilities, please refer to “Item 1. Business - Leverage”.





Qualifying assets





As a BDC, we are required to comply with certain regulatory requirements. For instance, we have to invest at least 70% of our total assets in “qualifying assets,” including securities of U.S. operating companies whose securities are not listed on a national securities exchange, U.S. operating companies with listed securities that have equity market capitalizations of less than $250 million, cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less.































































































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Under the 1940 Act, a BDC may not acquire any asset other than assets of the type listed in Section 55(a) of the 1940 Act, which are referred to as qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least


70% of the company’s total assets. The principal categories of qualifying assets relevant to our business are any of the following:





1. Securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer (subject to certain limited exceptions) is an eligible portfolio company, or from any person who is, or has been during the preceding 13 months, an affiliated person of an eligible portfolio company, or from any other person, subject to such rules as may be prescribed by the SEC. An eligible portfolio company is defined in the 1940 Act as any issuer which:


a. is organized under the laws of, and has its principal place of business in, the United States;


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|b. | is not an investment company (other than a small business investment company wholly owned by the BDC) or a company that would be an investment company but for certain exclusions under the 1940 Act; and

c. satisfies any of the following:


i. does not have any class of securities that is traded on a national securities exchange;


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|ii. | has a class of securities listed on a national securities exchange, but has an aggregate          market value of outstanding voting and non-voting common equity of less than $250 million;

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|iii. | is controlled by a BDC or a group of companies including a BDC and the BDC has an affiliated person who is a director of the eligible portfolio company; or

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|iv. | is a small and solvent company having total assets of not more than $4.0 million and capital and surplus of not less than $2.0 million.

2. Securities of any eligible portfolio company that we control.


3. Securities purchased in a private transaction from a U.S. issuer that is not an investment company or from an affiliated person of the issuer, or in transactions incident thereto, if the issuer is in bankruptcy and subject to reorganization or if the issuer, immediately prior to the purchase of its securities was unable to meet its obligations as they came due without material assistance other than conventional lending or financing arrangements.


4. Securities of an eligible portfolio company purchased from any person in a private transaction if there is no ready market for such securities and we already own 60% of the outstanding equity of the eligible portfolio company.


5. Securities received in exchange for or distributed on or with respect to securities described in (1) through (4) above, or pursuant to the exercise of warrants or rights relating to such securities.


6. Cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment.





In addition, a BDC must have been organized and have its principal place of business in the United States and must be operated for the purpose of making investments in the types of securities described in (1), (2) or (3) above.





Temporary investments





Pending investment in other types of “qualifying assets,” as described above, our investments may consist of cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment, which we refer to, collectively, as temporary investments, so that 70% of our assets are qualifying assets. Typically, we will invest in U.S. Treasury bills or in repurchase agreements, provided that such agreements are fully collateralized by cash or securities issued by the U.S. government or its agencies. A repurchase agreement involves the purchase by an investor, such as us, of a specified security and the simultaneous agreement by the seller to repurchase it at an agreed-upon future date and at a price that is greater than the purchase price by an amount that reflects an agreed-upon interest rate. There is no percentage restriction on the proportion of our assets that may be invested in such repurchase agreements. However, if more than 25% of our total assets constitute repurchase agreements from a single counterparty, we would not meet the Diversification Tests in order to qualify as a RIC for federal income tax purposes. Thus, we do not intend to enter into repurchase agreements with a single counterparty in excess of this limit. Our Adviser will monitor the creditworthiness of the counterparties with which we enter into repurchase agreement transactions.














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Significant managerial assistance to portfolio companies





A BDC must have been organized and have its principal place of business in the United States and must be operated for the purpose of making investments in the types of securities described in “Regulation-Qualifying assets” above. BDCs generally must offer to make available to the issuer of the securities significant managerial assistance, except in circumstances where either (i) the BDC controls such issuer of securities or (ii) the BDC purchases such securities in conjunction with one or more other persons acting together and one of the other persons in the group makes available such managerial assistance. Making available managerial assistance means, among other things, any arrangement whereby the BDC, through its directors, officers or employees, offers to provide, and, if accepted, does so provide, significant guidance and counsel concerning the management, operations or business objectives and policies of a portfolio company.





Indebtedness and Senior Securities





We are permitted, under specified conditions, to issue multiple classes of debt and one class of stock senior to our common stock if our asset coverage, as defined in the 1940 Act, is at least equal to 200% immediately after each such issuance. In addition, while any senior securities remain outstanding, we must make provision to prohibit any distribution to our stockholders or the repurchase of such securities or shares unless we meet the applicable asset coverage ratios at the time of the distribution or repurchase. We may also borrow amounts up to 5% of the value of our total assets for temporary or emergency purposes without regard to asset coverage. For a discussion of the risks associated with leverage, See “Item 1A. Risk Factors - Risks Related to Business Development Companies - Regulations governing our operation as a BDC and RIC will affect our ability to raise, and the way in which we raise additional capital or borrow for investment purposes, which may have a negative effect on our growth.”


The SEC has proposed a new rule under the 1940 Act that would govern financial commitment transactions (defined to include reverse repurchase agreements, short sale borrowings and any firm or standby commitment agreement or similar agreement) by BDCs. Under the proposed rule, a BDC would be required to comply with one of two alternative portfolio limitations, one of which would have the effect of treating such financial commitment transactions as senior securities. There are no assurances as to when the SEC will adopt a final version of the proposed rules or as to the form that the final rules will take.





Code of Ethics





We have adopted a code of ethics pursuant to Rule 17j-1 under the 1940 Act that establishes procedures for personal investments and restricts certain personal securities transactions. Personnel subject to the code may invest in securities for their personal investment accounts, including securities that may be purchased or held by us, so long as such investments are made in accordance with the code’s requirements.


Our code of ethics is posted on our website at http://www.bdcofamerica.com  and was filed with the SEC as an exhibit to the registration statement. You may read and copy the code of ethics at the SEC's Public Reference Room in Washington, D.C. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the code of ethics is available on the EDGAR Database on the SEC's Internet site at http://www.sec.gov . You may obtain copies of the code of ethics, after paying a duplicating fee, by electronic request at the following email address: publicinfo@sec.gov , or by writing the SEC's Public Reference Section, Washington, D.C. 20549.





Election to be Taxed as a RIC





We have elected to be treated as a RIC under Subchapter M of the Code commencing with our taxable year ended December 31, 2011, and intend to qualify annually thereafter as a RIC. As a RIC, we generally will not have to pay corporate- level U.S. federal income taxes on any income that we distribute to our stockholders from our taxable earnings and profits. To qualify as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements (as described below). In addition, in order to obtain RIC tax treatment, we must distribute to our stockholders, for each taxable year, at least 90% of our “investment company taxable income,” which is generally our net ordinary income plus the excess, if any, of realized net short-term capital gain over realized net long-term capital loss, (the “Annual Distribution Requirement”). Even if we qualify as a RIC, we generally will be subject to corporate-level U.S. federal income tax on our undistributed taxable income and could be subject to U.S. federal excise, state, local and foreign taxes.








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In order to qualify as a RIC for U.S. federal income tax purposes, we must, among other things:





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|• | qualify to be treated as a BDC or be registered as a management investment company under the 1940 Act at all times during each taxable year;

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|• | meet the Annual Distribution Requirement;

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|• | derive in each taxable year at least 90% of our gross income from dividends, interest, payments with respect to certain securities loans, gains from the sale or other disposition of stock or other securities or currencies. or other income derived with respect to our business of investing in such stock, securities or currencies and net income derived from an interest in a “qualified publicly traded partnership” as defined in the Code (the “90% Income Test”); and

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|• | diversify our holdings so that at the end of each quarter of the taxable year: (i) at least 50% of the value of our assets consists of cash, cash equivalents, U.S. Government securities, securities of other RICs, and other securities if such other securities of any one issuer do not represent more than 5% of the value of our assets or more than 10% of the outstanding voting securities of the issuer (which for these purposes includes the equity securities of a “qualified publicly traded partnership”); and (ii) no more than 25% of the value of our assets is invested in the securities, other than U.S. Government securities or securities of other RICs, (i) of one issuer (ii) of two or more issuers that are controlled, as determined under applicable tax rules, by us and that are engaged in the same or similar or related trades or businesses or (iii) of one or more “qualified publicly traded partnerships,” or the Diversification Tests.




Provided that we continue to qualify as a RIC and satisfy the Annual Distribution Requirement, we will not be subject to U.S. federal income tax on the portion of our investment company taxable income and net capital gain (which generally is defined as net long-term capital gain in excess of net short-term capital loss) that we timely distribute to stockholders. We will be subject to U.S. federal income tax at the regular corporate rates on any income or capital gain not distributed (or deemed distributed) to our stockholders.





We will be subject to a 4% nondeductible U.S. federal excise tax on certain undistributed income of RICs unless we distribute in a timely manner an amount at least equal to the sum of: (1) 98% of our ordinary income for each calendar year; (2) 98.2% of our capital gain net income for the one-year period ending October 31 in that calendar year; and (3) any income recognized, but not distributed, in preceding years and on which we paid no U.S. federal income tax.





We have also formed and expect to continue to form consolidated subsidiaries (the “Consolidated Holding Companies”). These Consolidated Holding Companies enable us to hold equity securities of portfolio companies organized as pass-through entities while continuing to satisfy the requirements of a RIC under the Code. See “Regulation” for discussion of BDC regulation and other regulatory considerations.





Proxy Voting Policies and Procedures





We delegate our proxy voting responsibility to our Adviser. The proxy voting policies and procedures that our Adviser follows are set forth below and are intended to comply with Section 206 of, and Rule 206(4)-6 under, the Advisers Act. The guidelines will be reviewed periodically by our Adviser and our non-interested directors, and, accordingly, are subject to change.





As an investment adviser registered under the Advisers Act, our Adviser has a fiduciary duty to act solely in the best interests of its clients. As part of this duty, it recognizes that it must vote client securities in a timely manner free of conflicts of interest and in the best interests of its clients.





Our Adviser will vote proxies relating to our securities in the best interest of its clients’ stockholders. It will review on a case-by-case basis each proposal submitted for a stockholder vote to determine its impact on the portfolio securities held by its clients. Although our Adviser will generally vote against proposals that may have a negative impact on its clients’ portfolio securities, it may vote for such a proposal if there exists compelling long-term reasons to do so.





The proxy voting decisions of our Adviser are made by the senior officers who are responsible for monitoring each of its clients’ investments. To ensure that its vote is not the product of a conflict of interest, it will require that: (a) anyone involved in the decision-making process disclose to its chief compliance officer any potential conflict that he or she is aware of and any contact that he or she has had with any interested party regarding a proxy vote; and (b) employees involved in the decision making process or vote administration are prohibited from revealing how our Adviser intends to vote on a proposal in order to reduce any attempted influence from interested parties.











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You may obtain information, without charge, regarding how we voted proxies with respect to our portfolio securities by making a written request for proxy voting information to: Chief Financial Officer, 9 West 57th Street, 49th Floor, Suite 4920, New York, NY 10019.





MATERIAL CONFLICTS OF INTEREST





Investment Advisory Agreement





We entered into an Investment Advisory Agreement on November 1, 2016 under which the Adviser, subject to the overall supervision of our board of directors manages the day-to-day operations of, and provides investment advisory services to us. The Adviser and its affiliates also provide investment advisory services to other funds that have investment mandates that are similar, in whole and in part, with ours. The Adviser and its affiliates serve as investment adviser or subadvisor to private funds and registered open-end funds, and serves as an investment adviser to a public REIT. The Adviser’s policies are designed to manage and mitigate the conflicts of interest associated with the allocation of investment opportunities pursuant to the SEC exemptive order. See “Co-Investment Relief”. In addition, any affiliated fund currently formed or formed in the future and managed by the Adviser or its affiliates may have overlapping investment objectives with our own and, accordingly, may invest in asset classes similar to those targeted by us. However, in certain instances due to regulatory, tax, investment, or other restrictions, certain investment opportunities may not be appropriate for either us or other funds managed by the Adviser or its affiliates.





Administration Agreement





In connection with the closing of the Transaction, we terminated our previous administration agreement and entered into a new administration agreement with BSP on November 1, 2016. In connection with the New Administration Agreement, BSP will provide us with office facilities and administrative services.





Co-Investment Relief





The 1940 Act generally prohibits BDCs from making certain negotiated co-investments with affiliates absent an order from the SEC permitting the BDC to do so. Unless otherwise provided in the allocation policy, if an investment opportunity is appropriate for both us and other investment funds and the investment opportunity requires more than the price to be negotiated, the investment opportunity will be made available to the other investment fund or us on an alternating basis based on the date of closing of each such investment opportunity and each fund’s available capital. As a result, the Adviser and/or its affiliates may face conflicts in allocating investment opportunities between us and such other entities. Although the Adviser and its affiliates will endeavor to allocate investment opportunities in a fair and equitable manner and consistent with applicable allocation procedures, it is possible that, in the future, we may not be given the opportunity to participate in investments made by investment funds managed by the Adviser or its affiliates.





The SEC staff has granted us relief sought in an exemptive application that expands our ability to co-invest in portfolio companies with other funds managed by the Adviser or its Affiliated Funds in a manner consistent with our investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors, subject to compliance with certain conditions. Pursuant to the Order, we are permitted to co-invest with our affiliates if a “required majority” (as defined in Section 57(o) of the 1940 Act) or our independent directors make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transactions, including the consideration to be paid, are reasonable and fair to us and our stockholders and do not involve overreaching by us or our stockholders on the part of any person concerned, and (2) the transaction is consistent with the interests of our stockholders and is consistent with our investment objective and strategies.





Transactions with Affiliates





In connection with the closing of the Transaction, an affiliate of BSP purchased $10.0 million of our common stock based on our net asset value per share as of September 30, 2016 in a private placement in reliance on Section 4(a)(2) of the Securities Act of 1933. On November 7, 2016, we issued approximately 1.2 million shares of our common stock to the BSP affiliate.

















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AVAILABLE INFORMATION





We file with or submit to the SEC annual, quarterly and current periodic reports, proxy statements and other information meeting the informational requirements of the Securities Exchange of 1934, as amended (the “Exchange Act”). You may inspect and copy these reports, proxy statements and other information at the Public Reference Room of the SEC at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Copies of these reports, proxy and information statements and other information may be obtained, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov, or by writing the SEC’s Public Reference Section, Washington, D.C. 20549-0102. In addition, the SEC maintains an Internet website that contains reports, proxy and information statements and other information filed electronically by us with the SEC at http://www.sec.gov . Our Internet address is http://www.bdcofamerica.com . We make available free of charge on our Internet website our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.








ITEM 1A. RISK FACTORS





Investing in our common stock involves a high degree of risk. The risks set forth below are not the only risks we face. If any of the following risks occur, our business and financial condition could be materially adversely affected. In such case, the net asset value of our common stock could decline, and you may lose all or part of your investment.





Risks Relating to Our Business and Structure





Global economic, political and market conditions may adversely affect our business, results of operations and financial condition, including our revenue growth and profitability.





The current worldwide financial market situation, as well as various social and political tensions in the United States (“U.S.”) and around the world, may contribute to increased market volatility, may have long-term effects on the U.S. and worldwide financial markets, and may cause economic uncertainties or deterioration in the U.S. and worldwide. The U.S. and global capital markets experienced extreme volatility and disruption during the economic downturn that began in mid-2007, and the U.S. economy was in a recession for several consecutive calendar quarters during the same period. In 2010, a financial crisis emerged in Europe, triggered by high budget deficits and rising direct and contingent sovereign debt, which created concerns about the ability of certain nations to continue to service their sovereign debt obligations. Risks resulting from such debt crisis, including any austerity measures taken in exchange for bailout of certain nations, and any future debt crisis in Europe or any similar crisis elsewhere could have a detrimental impact on the global economic recovery, sovereign and non-sovereign debt in certain countries and the financial condition of financial institutions generally. In June 2016, the United Kingdom held a referendum in which voters approved an exit from the European Union (“Brexit”), and, accordingly, on February 1, 2017, the U.K. Parliament voted in favor of allowing the U.K. government to begin the formal process of Brexit. Brexit created political and economic uncertainty and instability in the global markets (including currency and credit markets), and especially in the United Kingdom and the European Union, and this uncertainty and instability may last indefinitely. There is continued concern about national-level support for the Euro and the accompanying coordination of fiscal and wage policy among European Economic and Monetary Union member countries. In addition, the fiscal and monetary policies of foreign nations, such as Russia and China, may have a severe impact on the worldwide and U.S. financial markets.





As a result of the 2016 U.S. election, the Republican Party currently controls both the executive and legislative branches of government, which increases the likelihood that legislation may be adopted that could significantly affect the regulation of U.S. financial markets. Areas subject to potential change, amendment or repeal include the Dodd-Frank Wall Street Reform and Consumer Protection Act and the authority of the Federal Reserve and the Financial Stability Oversight Council. The U.S. may also potentially withdraw from or renegotiate various trade agreements and take other actions that would change current trade policies of the U.S. We cannot predict which, if any, of these actions will be taken or, if taken, their effect on the financial stability of the U.S. Such actions could have a significant adverse effect on our business, financial condition and results of operations. We cannot predict the effects of these or similar events in the future on the U.S. economy and securities markets or on our investments. We monitor developments and seek to manage our investments in a manner consistent with achieving our investment objective, but there can be no assurance that we will be successful in doing so.





Future disruptions or instability in capital markets could negatively impact our ability to raise capital and have a material adverse effect on our business, financial condition and results of operations.


From time to time, the global capital markets may experience periods of disruption and instability, which could materially and adversely impact the broader financial and credit markets and reduce the availability to us of debt and equity





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capital. For example, between 2008 and 2009, instability in the global capital markets resulted in disruptions in liquidity in the debt capital markets, significant write-offs in the financial services sector, the repricing of credit risk in the broadly syndicated credit market and the failure of major domestic and international financial institutions. In particular, the financial services sector was negatively impacted by significant write-offs as the value of the assets held by financial firms declined, impairing their capital positions and abilities to lend and invest. We believe that such value declines were exacerbated by widespread forced liquidations as leveraged holders of financial assets, faced with declining prices, were compelled to sell to meet margin requirements and maintain compliance with applicable capital standards. Such forced liquidations also impaired or eliminated many investors and investment vehicles, leading to a decline in the supply of capital for investment and depressed pricing levels for many assets. These events significantly diminished overall confidence in the debt and equity markets, engendered unprecedented declines in the values of certain assets, caused extreme economic uncertainty and significantly reduced the availability of debt and equity capital for the market as a whole and financial services firms in particular. While market conditions have experienced relative stability in recent years, there have been continuing periods of volatility and there can be no assurance that adverse market conditions will not repeat themselves in the future.


Future volatility and dislocation in the capital markets could create a challenging environment in which to raise or access capital. For example, the re-appearance of market conditions similar to those experienced from 2008 through 2009 for any substantial length of time could make it difficult to extend the maturity of or refinance our existing indebtedness or obtain new indebtedness with similar terms. Significant changes or volatility in the capital markets may also have a negative effect on the valuations of our investments. While most of our investments are not publicly traded, applicable accounting standards require us to assume as part of our valuation process that our investments are sold in a principal market to market participants (even if we plan on holding an investment through its maturity) and impairments of the market values or fair market values of our investments, even if unrealized, must be reflected in our consolidated financial statements for the applicable period, which could result in significant reductions to our net asset value for the period. With certain limited exceptions, we are only allowed to borrow amounts or issue debt securities if our asset coverage, as calculated pursuant to the 1940 Act, equals at least 200% immediately after such borrowing. Equity capital may also be difficult to raise during periods of adverse or volatile market conditions because, subject to some limited exceptions, as a BDC, we are generally not able to issue additional shares of our common stock at a price less than net asset value without first obtaining approval for such issuance from our stockholders and our independent directors. If we are unable to raise capital or refinance existing debt on acceptable terms, then we may be limited in our ability to make new commitments or to fund existing commitments to our portfolio companies. Significant changes in the capital markets may also affect the pace of our investment activity and the potential for liquidity events involving our investments. Thus, the illiquidity of our investments may make it difficult for us to sell such investments to access capital if required, and as a result, we could realize significantly less than the value at which we have recorded our investments if we were required to sell them for liquidity purposes.


Uncertainty with respect to the financial stability of the United States and several countries in the European Union (EU) could have a significant adverse effect on our business, financial condition and results of operations.


In August 2011, S&P’s Ratings Services lowered its long-term sovereign credit rating on the U.S. from “AAA” to “AA+,” which was affirmed by S&P in June 2013. Moody’s and Fitch have also warned that they may downgrade the U.S. federal government’s credit rating. In addition, the economic downturn and the significant government interventions into the financial markets and fiscal stimulus spending over the last several years have contributed to significantly increased U.S. budget deficits. Recent U.S. debt ceiling and budget deficit concerns have increased the possibility of additional credit-rating downgrades and economic slowdowns, or a recession in the U.S. In the future, the U.S. government may not be able to meet its debt payments unless the federal debt ceiling is raised. The federal debt limit has been suspended since November 2, 2015, but the limit is set to be reinstated on March 15, 2017. If legislation increasing the debt ceiling is not enacted, as needed, and the debt ceiling is reached, the U.S. federal government may stop or delay making payments on its obligations, which could negatively impact the U.S. economy and our portfolio companies. In addition, disagreement over the federal budget has caused the U.S. federal government to shut down for periods of time. Continued adverse political and economic conditions, further downgrades or warnings by S&P or other rating agencies, and the U.S. government’s credit and deficit concerns in general, including issues around the federal debt ceiling, could cause interest rates and borrowing costs to rise, which may negatively impact both the perception of credit risk associated with our debt portfolio and our ability to access the debt markets on favorable terms.


Furthermore, in February 2014, the Federal Reserve began scaling back its bond- buying program, or quantitative easing, which it ended in October 2014. Quantitative easing was designed to stimulate the economy and expand the Federal Reserve’s holdings of long-term securities until key economic indicators, such as the unemployment rate, showed signs of improvement. The Federal Reserve raised interest rates for the first time in nearly a decade in December 2015.


In 2010, a financial crisis emerged in Europe, triggered by high budget deficits and rising direct and contingent sovereign debt in Greece, Ireland, Italy, Portugal and Spain, which created concerns about the ability of these nations to continue to service their sovereign debt obligations. In January 2012, S&P’s Ratings Services lowered its long-term sovereign





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credit rating for France, Italy, Spain and six other European countries, which has negatively impacted global markets and economic conditions. In addition, in April 2012, S&P’s Ratings Services further lowered its long-term sovereign credit rating for Spain. While the financial stability of such countries has improved, risks resulting from any future debt crisis in Europe or any similar crisis could have a detrimental impact on the global economic recovery, sovereign and non-sovereign debt in these countries and the financial condition of U.S. and European financial institutions. Market disruptions in Europe, including the increased cost of funding for certain governments and financial institutions, could negatively impact the global economy, and there can be no assurance that assistance packages will be available, or if available, will be sufficient to stabilize countries and markets in Europe. To the extent uncertainty regarding any economic recovery in Europe negatively impacts consumer confidence levels and spending, personal bankruptcy rates, levels of incurrence and default on consumer debt and home prices, or other credit factors, our business, financial condition and results of operations could be significantly and adversely affected.





It is unclear how increased regulatory oversight and changes in the method for determining LIBOR may affect the value of the financial obligations to be held or issued by us that are linked to LIBOR, or how such changes could affect our results of operations or financial condition.





As a result of concerns about the accuracy of the calculation of LIBOR, a number of British Bankers’ Association, or BBA, member banks entered into settlements with certain regulators and law enforcement agencies with respect to the alleged manipulation of LIBOR, and there are ongoing investigations by regulators and governmental authorities in various jurisdictions. Following a review of LIBOR conducted at the request of the U.K. government, on September 28, 2012, recommendations for reforming the setting and governing of LIBOR were released, which are referred to as the Wheatley Review. The Wheatley Review made a number of recommendations for changes with respect to LIBOR, including the introduction of S-5 statutory regulation of LIBOR, the transfer of responsibility for LIBOR from the BBA to an independent administrator, changes to the method of the compilation of lending rates and new regulatory oversight and enforcement mechanisms for rate-setting and a reduction in the number of currencies and tenors for which LIBOR is published. Based on the Wheatley Review and on a subsequent public and governmental consultation process, on March 25, 2013, the U.K. Financial Services Authority published final rules for the U.K. Financial Conduct Authority’s regulation and supervision of LIBOR, which are referred to as the FCA Rules. In particular, the FCA Rules include requirements that (1) an independent LIBOR administrator monitor and survey LIBOR submissions to identify breaches of practice standards and/or potentially manipulative behavior, and (2) firms submitting data to LIBOR establish and maintain a clear conflicts of interest policy and appropriate systems and controls. The FCA Rules took effect on April 2, 2013. It is uncertain what additional regulatory changes or what changes, if any, in the method of determining LIBOR may be required or made by the U.K. government or other governmental or regulatory authorities. Accordingly, uncertainty as to the nature of such changes may adversely affect the market for or value of any LIBOR-linked securities, loans, derivatives and other financial obligations or extensions of credit held by or due to us or on our overall financial condition or results of operations. In addition, any further changes or reforms to the determination or supervision of LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR, which could have an adverse impact on the market for or value of any LIBOR-linked securities, loans, derivatives and other financial obligations or extensions of credit held by or due to us or on our overall financial condition or results of operations.








The amount of any distributions we pay is uncertain. Our distributions to our stockholders may exceed our earnings. Therefore, portions of the distributions that we pay may represent a return of capital to you which will lower your tax basis in your shares and reduce the amount of funds we have for investment in targeted assets. We may not be able to pay you distributions, and our distributions may not grow over time.





We intend to declare distributions quarterly and pay distributions on a monthly basis. We will pay these distributions  to our stockholders out of assets legally available for distribution. We cannot assure you that we will achieve investment results that will allow us to make a targeted level of distributions or year-to-year increases in distributions. Our ability to pay distributions might be adversely affected by, among other things, the impact of one or more of the risk factors described in this Annual Report. In addition, the inability to satisfy the asset coverage test applicable to us as a BDC can limit our ability to pay distributions. All distributions will be paid at the discretion of our board of directors and will depend on our earnings, our financial condition, maintenance of our RIC status, compliance with applicable BDC regulations and such other factors as our board of directors may deem relevant from time-to-time. We cannot assure you that we will pay distributions to our stockholders in the future. In the event that we encounter delays in locating suitable investment opportunities, we may pay all or a substantial portion of our distributions from the proceeds of our offerings of our common stock or from borrowings in anticipation of future cash flow, which may constitute a return of your capital and will lower your tax basis in your shares. Distributions from the proceeds of our offerings of common stock or from borrowings also could reduce the amount of capital we ultimately invest in interests of portfolio companies. We have not established any limit on the extent to which we may use borrowings, if any, or proceeds from our public offering to fund distributions (which may reduce the amount of capital we





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ultimately invest in assets). There can be no assurance that we will be able to sustain distributions at any particular level or at all.





Price declines in the large corporate leveraged loan market may adversely affect the fair value of debt securities we hold, reducing our net asset value through increased net unrealized depreciation.





Prior to the onset of the financial crisis, CLOs, a type of leveraged investment vehicle holding corporate loans, hedge funds and other highly leveraged investment vehicles, comprised a substantial portion of the market for purchasing and holding senior secured and second lien secured loans. As the secondary market pricing of the loans underlying these portfolios deteriorated during the fourth quarter of 2008, it is our understanding that many investors, as a result of their generally high degrees of leverage, were forced to raise cash by selling their interests in performing loans in order to satisfy margin requirements or the equivalent of margin requirements imposed by their lenders. This resulted in a forced deleveraging cycle of price declines, compulsory sales, and further price declines, with widespread redemption requests and other constraints resulting from the credit crisis generating further selling pressure. While prices have appreciated measurably in recent years, conditions in the large corporate leveraged loan market may experience similar disruptions or distortions, which may cause pricing levels to decline similarly or be volatile. As a result, we may suffer unrealized depreciation and could incur realized losses in connection with the sale of debt securities we hold, which could have a material adverse impact on our business, financial condition and results of operations.





Our ability to achieve our investment objective depends on our Adviser’s and its affiliates' ability to manage and support our investment process. If our Adviser were to lose any members of its senior management team, our ability to achieve our investment objective could be significantly harmed.





We are externally managed and depend upon the investment expertise, diligence, skill and network of business contacts of our Adviser. We also depend, to a significant extent, on our Adviser's access to the investment professionals and the information and deal flow generated by such investment professionals in the course of its investment and portfolio management activities. Our Adviser evaluates, negotiates, structures, closes, monitors and services our investments. Our success depends to a significant extent on the continued service and coordination of our Adviser, including its key professionals. The departure of a significant number of our Adviser’s or its affiliates' key professionals could have a materially adverse effect on our ability to achieve our investment objective. Additionally, changes in ownership or management practices, the occurrence of adverse events affecting our Adviser or its affiliates or other companies advised by our Adviser and its affiliates could create adverse publicity and adversely affect us and our relationship with investment banks, business brokers, loan syndication and trading desks and other investment counterparties. In addition, we can offer no assurance that our Adviser will remain our investment adviser or that we will continue to have access to our Adviser's or its affiliates' investment professionals or their information and deal flow.





Because our business model depends to a significant extent upon relationships with investment banks, business brokers, loan syndication and trading desks, and commercial banks, the inability of our Adviser to maintain or develop these relationships, or the failure of these relationships to generate investment opportunities, could adversely affect our business.





Our Adviser depends on its relationship with private equity firms, investment banks, business brokers, loan syndication and trading desks, and commercial banks, and we will rely to a significant extent upon these relationships to provide us with potential investment opportunities. If our Adviser fails to maintain its existing relationships or develop new relationships with other sponsors or sources of investment opportunities, we will not be able to grow our investment portfolio. In addition, individuals with whom our Adviser’s professionals have relationships are not obligated to provide us with investment opportunities, and, therefore, there is no assurance that such relationships will generate investment opportunities for us.





We may face increasing competition for investment opportunities, which could delay deployment of our capital, reduce returns and result in losses.





We will compete for investments with other BDCs and investment funds (including private equity funds and mezzanine funds), as well as traditional financial services companies such as commercial banks and other sources of funding. Moreover, alternative investment vehicles, such as hedge funds, also make investments in middle market private U.S. companies. As a result of these new entrants, competition for investment opportunities in private U.S. companies may intensify. Many of our competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. For example, some competitors may have a lower cost of capital and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments than we have. These characteristics could allow our competitors to consider a wider variety of investments, establish more relationships and





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offer better pricing and more flexible structuring than we are able to do. We may lose investment opportunities if we do not match our competitors’ pricing, terms and structure. If we are forced to match our competitors’ pricing, terms and structure, we may not be able to achieve acceptable returns on our investments or may bear substantial risk of capital loss. A significant part of our competitive advantage stems from the fact that the market for investments in private U.S. companies is underserved by traditional commercial banks and other financial sources. A significant increase in the number and/or the size of our competitors in this target market could force us to accept less attractive investment terms. Furthermore, many of our competitors have greater experience operating under, or are not subject to, the regulatory restrictions that the 1940 Act imposes on us as a BDC.





Our business and operations could be negatively affected if we become subject to any securities litigation or stockholder activism, which could cause us to incur significant expense, hinder execution of investment strategy and impact our stock price.





In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. Stockholder activism, which could take many forms or arise in a variety of situations, has been increasing in the BDC space recently. While we are currently not subject to any securities litigation or stockholder activism, due to the potential volatility of our stock price and for a variety of other reasons, we may in the future become the target of securities litigation or stockholder activism. Securities litigation and stockholder activism, including potential proxy contests, could result in substantial costs and divert the attention of management and our board of directors’ attention and resources from our business. Additionally, such securities litigation and stockholder activism could give rise to perceived uncertainties as to our future, adversely affect our relationships with service providers and make it more difficult to attract and retain qualified personnel. Also, we may be required to incur significant legal fees and other expenses related to any securities litigation and stockholder activism matters. Further, our stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any securities litigation and stockholder activism.





A significant portion of our investment portfolio is recorded at fair value as determined in good faith by our board of directors and, as a result, there is and will be uncertainty as to the value of our portfolio investments.





Under the 1940 Act, we are required to carry our portfolio investments at market value or, if there is no readily available market value, at fair value, as determined by our board of directors. However, the majority of our investments are not publicly traded or actively traded on a secondary market. As a result, we value these securities quarterly at fair value as determined in good faith by our board of directors.





The determination of fair value, and thus the amount of unrealized losses we may incur in any year, is to a degree subjective, and our Adviser has a conflict of interest in providing input to the board of directors in making this determination. We expect to value our securities quarterly at fair value as determined in good faith by our board of directors based on input from our Adviser. Our board of directors may utilize the services of an independent third-party valuation firm to aid it in determining the fair value of any securities. The types of factors that may be considered in determining the fair value of our investments include the nature and realizable value of any collateral, the portfolio company's ability to make payments on indebtedness and its earnings, the markets in which the portfolio company does business, comparison to publicly traded companies, discounted cash flow, current market interest rates and other relevant factors. Because such valuations, and particularly valuations of private securities and private companies, are inherently uncertain, the valuations may fluctuate significantly over short periods of time due to changes in current market conditions. The determinations of fair value by our board of directors may differ materially from the values that would have been used if an active market and market quotations existed for these investments. Our net asset value could be adversely affected if the determinations regarding the fair value of our investments were materially higher than the values that we ultimately realize upon the disposal of such investments. See “Item 1. Business - Determination of Net Asset Value.”








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Our board of directors may change our operating policies and strategies without prior notice or stockholder approval, the effects of which may be adverse.





Our board of directors has the authority to modify or waive our current operating policies, investment criteria and strategies without prior notice and without stockholder approval if it determines that doing so will be in the best interests of stockholders. We cannot predict the effect any changes to our current operating policies, investment criteria and strategies would have on our business, net asset value, operating results and value of our stock. However, the effects might be adverse, which could negatively impact our ability to pay you distributions and cause you to lose all or part of your investment. Moreover, we have significant flexibility in investing the net proceeds of our public offering and may use the net proceeds from our public offering in ways with which our stockholders may not agree or for purposes other than those contemplated at the time of our public offering.





If we internalize our management functions, your interest in us could be diluted, and we could incur other significant costs and face other significant risks associated with being self-managed.





Our board of directors may decide in the future to internalize our management functions. If we do so, we may elect to negotiate to acquire our Adviser’s assets and personnel. At this time, we cannot anticipate the form or amount of consideration or other terms relating to any such internalization transaction. Such consideration could take many forms, including cash payments, promissory notes and shares of our common stock. The payment of such consideration could result in dilution of your interests as a stockholder and could reduce the earnings per share attributable to your investment.





In addition, while we would no longer bear the costs of the various fees and expenses we expect to pay to our Adviser under the Investment Advisory Agreement, we would incur the compensation and benefits costs of our officers and other employees and consultants that we now expect will be paid by our Adviser or its affiliates. We cannot reasonably estimate the amount of fees we would save or the costs we would incur if we became self-managed. If the expenses we assume as a result of an internalization are higher than the expenses we avoid paying to our Adviser, our earnings per share would be lower as a result of the internalization than they otherwise would have been, potentially decreasing the amount of funds available to distribute to our stockholders and the value of our shares. As currently organized, we will not have any employees. If we elect to internalize our operations, we would employ personnel and would be subject to potential liabilities commonly faced by employers, such as workers disability and compensation claims, potential labor disputes and other employee-related liabilities and grievances.





If we internalize our management functions, we could have difficulty integrating these functions as a stand-alone entity. In addition, we could have difficulty retaining such personnel employed by us. Currently, individuals employed by our Adviser and its affiliates perform management and general and administrative functions, including accounting and financial reporting, for multiple entities. These personnel have a great deal of know-how and experience. We may fail to properly identify the appropriate mix of personnel and capital needs to operate as a stand-alone entity. An inability to manage an internalization transaction effectively could result in our incurring excess costs and/or suffering deficiencies in our disclosure controls and procedures or our internal control over financial reporting. Such deficiencies could cause us to incur additional costs, and our management’s attention could be diverted from most effectively managing our investments.





Changes in laws or regulations governing our operations may adversely affect our business or cause us to alter our business strategy.





We and our portfolio companies are subject to regulation at the local, state and federal level. New legislation may be enacted or new interpretations, rulings or regulations could be adopted, including those governing the types of investments we are permitted to make, any of which could harm us and our stockholders, potentially with retroactive effect.





Additionally, any changes to the laws and regulations governing our operations relating to permitted investments may cause us to alter our investment strategy to avail ourselves of new or different opportunities. Such changes could result in material differences to the strategies and plans set forth in this Annual Report on Form 10-K and may result in our investment focus shifting from the areas of expertise of our Adviser to other types of investments in which our Adviser may have less expertise or little or no experience. Thus, any such changes, if they occur, could have a material adverse effect on our results of operations and the value of your investment.








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Efforts to comply with the Sarbanes-Oxley Act will involve significant expenditures, and non-compliance with the Sarbanes-Oxley Act may adversely affect us.





We are subject to the Sarbanes-Oxley Act of 2002 (“the Sarbanes-Oxley Act”) and the related rules and regulations promulgated by the SEC. Under current SEC rules, our management is required to report on our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act and rules and regulations of the SEC thereunder. We are required to review on an annual basis our internal control over financial reporting, and on a quarterly and annual basis to evaluate and disclose changes in our internal control over financial reporting. As a result, we expect to incur significant additional expenses in the near term, which may negatively impact our financial performance and our ability to pay distributions. This process also will result in a diversion of management’s time and attention. We cannot be certain as to the timing of completion of our evaluation, testing and remediation actions or the impact of the same on our operations and we may not be able to ensure that the process is effective or that our internal control over financial reporting is or will be effective in a timely manner. In the event that we are unable to maintain or achieve compliance with the Sarbanes-Oxley Act and related rules, we may be adversely affected.





We may experience fluctuations in our quarterly results.





We may experience fluctuations in our quarterly operating results due to a number of factors, including our ability or inability to make investments in companies that meet our investment criteria, variations in the interest rates on the debt securities we acquire, the level of our expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our 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.





Terrorist attacks, acts of war or natural disasters may impact our portfolio companies and harm our business, operating results and financial condition.





Terrorist acts, acts of war or natural disasters may disrupt our operations, as well as the operations of our portfolio companies. Such acts have created, and continue to create, economic and political uncertainties and have contributed to recent global economic instability. Future terrorist activities, military or security operations, or natural disasters could further weaken the domestic/global economies and create additional uncertainties, which may negatively impact our portfolio companies and, in turn, could have a material adverse impact on our business, operating results and financial condition. Losses from terrorist attacks and natural disasters are generally uninsurable.





We are dependent on information systems and systems failures could significantly disrupt our business, which may, in turn, negatively affect the market price of our common stock and our ability to pay dividends.





Our business is dependent on our and third parties’ communications and information systems. Any failure or interruption of those systems, including as a result of the termination of an agreement with any third-party service providers, could cause delays or other problems in our activities. Our financial, accounting, data processing, backup or other operating systems and facilities may fail to operate properly or become disabled or damaged as a result of a number of factors including events that are wholly or partially beyond our control and adversely affect our business. There could be:





• sudden electrical or telecommunication outages;


• natural disasters such as earthquakes, tornadoes and hurricanes;


• disease pandemics;


• events arising from local or larger scale political or social matters, including terrorist acts; and


• cyber-attacks.


These events, in turn, could have a material adverse effect on our operating results and negatively affect the market price of our common stock and our ability to pay dividends to our stockholders.





Our business could suffer in the event our Adviser or any other party that provides us with services essential to our operations experiences system failures or cyber-incidents or a deficiency in cybersecurity.





Despite system redundancy, the implementation of security measures and the existence of a disaster recovery plan for the internal information technology systems of our Adviser and other parties that provide us with services essential to our operations, these systems are vulnerable to damage from any number of sources, including computer viruses, unauthorized access, energy blackouts, natural disasters, terrorism, war and telecommunication failures. Any system failure or accident that causes interruptions in our operations could result in a material disruption to our business.





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A cyber-incident is considered to be any adverse event that threatens the confidentiality, integrity or availability of information resources. More specifically, a cyber-incident is an intentional attack or an unintentional event that can result in third parties gaining unauthorized access to systems to disrupt operations, corrupt data, or steal confidential information. As reliance on technology in our industry has increased, so have the risks posed to the systems of our Adviser and other parties that provide us with services essential to our operations, both internal and those that have been outsourced. In addition, the risk of a cyber-incident, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Even the most well protected information, networks, systems and facilities remain potentially vulnerable because the techniques used in such attempted attacks and intrusions evolve and generally are not recognized until launched against a target, and in some cases are designed not to be detected and, in fact, may not be detected.





The remediation costs and lost revenues experienced by a victim of a cyber-incident may be significant and significant resources may be required to repair system damage, protect against the threat of future security breaches or to alleviate problems caused by any breaches, including reputational harm, loss of revenues and litigation. In addition, a security breach or


other significant disruption involving the information technology networks and related systems of our Adviser or any other party that provides us with services essential to our operations could:





• result in misstated financial reports, violations of loan covenants, missed reporting deadlines;


• affect our ability to properly monitor our compliance with the rules and regulations regarding our qualification


as a RIC;


• result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of, proprietary,


confidential, sensitive or otherwise valuable information, which others could use to compete against us or for


disruptive, destructive or otherwise harmful purposes and outcomes;


• require significant management attention and resources to remedy any damages that result; or


• adversely impact our reputation among investors.


Although our Adviser and other parties that provide us with services essential to our operations intend to continue to implement industry-standard security measures, there can be no assurance that those measures will be sufficient, and any material adverse effect experienced by our Adviser and other parties that provide us with services essential to our operations could, in turn, have an adverse impact on us.





To the extent that our Adviser serves as a “joint bookrunner” in connection with the underwriting of a loan or other security to be acquired, it may be subject to underwriter liability under the federal securities laws. This liability can be managed principally through the exercise of due diligence regarding any such offering. In addition, if it acts as joint bookrunner for a loan or other securities offering and is not successful in syndicating the loan or offering, our Adviser may acquire a larger amount of the subject securities than it had planned, and it may be required to hold such loan or security for a longer period than it had anticipated.





It could be determined that our Adviser is serving as a joint bookrunner in connection with offerings of loans or other securities in connection with providing investment advisory services to us in connection with our ongoing operations and the management of our portfolio. A joint bookrunner is one of multiple lead managers of a securities issuance which syndicates the issuance of securities with other bookrunners and syndicate firms to lower the risk of selling the security for each syndicate member. In acting as a joint bookrunner, our Adviser may be required to perform due diligence on certain offerings before they are syndicated and sold, subjecting our Adviser to underwriter liabilities under federal securities laws in connection with the offer and sale of such securities. Furthermore, in leading an underwriting syndicate, our Adviser, in acting as a joint bookrunner, could be obligated to sell a large portion of an offering of securities should it be unable to put together a substantial enough underwriting syndicate, perhaps obligating it to hold such security for a longer period of time than it had originally anticipated. By being deemed a joint bookrunner, our Adviser would be obligated to perform duties for other issuers while still managing our portfolio, thus reducing the amount of time it allocates to us and subjecting it to liabilities and financial obligations.








We could potentially be involved in litigation arising out of our operations in the normal course of business.





We may, from time to time, be involved in litigation arising out of our operations in the normal course of business or otherwise. Furthermore, third parties may try to seek to impose liability on us in connection with the activities of our portfolio companies. While the outcome of any current legal proceedings cannot at this time be predicted with certainty, we do not expect any current matters will materially affect our financial condition or results of operations; however, there can be no





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assurance whether any pending legal proceedings will have a material adverse effect on our financial condition or results of operations in any future reporting period.





Risks Related to our Adviser and its Affiliates





We may be obligated to pay our Adviser incentive compensation even if we incur a net loss due to a decline in the value of our portfolio.





The Investment Advisory Agreement entitles our Adviser to receive incentive compensation on income regardless of any capital losses. In such case, we may be required to pay our Adviser incentive compensation for a fiscal quarter even if there is a decline in the value of our portfolio or if we incur a net loss for that quarter.





We expect that any incentive fee payable by us that relates to our net investment income may be computed and paid on income that may include interest that has been accrued but not yet received. If a portfolio company defaults on a loan that is structured to provide accrued interest, it is possible that accrued interest previously included in the calculation of the incentive fee will become uncollectible. Pursuant to the Investment Advisory Agreement, our Adviser will not be under any obligation to reimburse us for any part of the incentive fee it received that was based on accrued income that we never received as a result of a default by an entity on the obligation that resulted in the accrual of such income, and such circumstances would result in our paying an incentive fee on income we never received.





Moreover, to the extent that we are required to recognize in our taxable income such interest income that has been accrued but not yet paid, our payment of incentive fees to the Adviser on such income may make it difficult to meet (or may further amplify existing difficulties in meeting) the Annual Distribution Requirement necessary to maintain RIC tax treatment under the Code. As a result, we may have to sell some of our investments at times and/or at prices we would not consider advantageous, raise additional debt or equity capital or forgo new investment opportunities for this purpose. If we are not able to obtain cash from other sources, we may fail to qualify for RIC tax treatment and thus become subject to corporate-level U.S. Federal income tax. For additional discussion regarding the tax implications of a RIC, see “Risk Factors - We will be subject to corporate-level U.S. Federal income tax if we are unable to maintain our qualification as a RIC under Subchapter M of the Code or to satisfy RIC distribution requirements.”





The time and resources that individuals and the executive officers of our Adviser devote to us may be diverted and we may face additional competition due to the fact that neither our Adviser nor its affiliates are prohibited from raising money for or managing another entity that makes the same types of investments that we target.





Affiliates and executive officers of the Adviser currently manage other investment entities and are not prohibited from raising money for and managing future investment entities that make the same types of investments as those we target. As a result, the time and resources that the executive officers and individuals employed by the Adviser and its affiliates devote to us may be diverted, and during times of intense activity in other areas of business, they may devote less time and resources to our business than is necessary or appropriate.





Our fee structure may induce our Adviser to make speculative investments or incur debt.





The incentive fee payable by us to our Adviser may create an incentive for it to make investments on our behalf that are risky or more speculative than would be the case in the absence of such compensation arrangement. The way in which the incentive fee payable to our Adviser is determined may encourage it to use leverage to increase the return on our investments. In addition, the fact that our management fee is payable based upon our gross assets, which would include any borrowings for investment purposes, may encourage our Adviser to use leverage to make additional investments. Under certain circumstances, the use of leverage may increase the likelihood of default, which would disfavor holders of our common stock. Such a practice could result in our investing in more speculative securities than would otherwise be the case, which could result in higher investment losses, particularly during cyclical economic downturns.





There are significant potential conflicts of interest that could impact our investment returns.





We pay management and incentive fees to our Adviser and reimburse our Adviser for certain expenses it incurs. In addition, investors in our common stock will invest on a gross basis and receive distributions on a net basis after expenses, resulting in, among other things, a lower rate of return than one might achieve through direct investments.








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The part of the incentive fee payable by us that relates to our pre-incentive fee net investment income is computed and paid on income that may include interest that is accrued but not yet received in cash. If a portfolio company defaults on a loan that is structured to provide accrued interest, it is possible that accrued interest previously used in the calculation of the incentive fee will become uncollectible.





Our Adviser may seek to change the terms of the Investment Advisory Agreement, which could affect the terms of our Adviser’s compensation.





After an initial two year term, the Investment Advisory Agreement will automatically renew for successive annual periods if approved by our board of directors or by the affirmative vote of the holders of a majority of our outstanding voting securities, including, in either case, approval by a majority of our directors who are not interested persons. Moreover, conflicts of interest may arise if our Adviser seeks to change the terms of our Investment Advisory Agreement, including, for example, the terms related to compensation. While any material change to the Investment Advisory Agreement (other than a decrease in advisory fees) must be submitted to stockholders for approval under the 1940 Act, we may from time to time decide it is appropriate to seek stockholder approval to change the terms of the agreement.





In selecting and structuring investments appropriate for us, our Adviser will consider the investment and tax objectives of the Company and our stockholders as a whole, not the investment, tax or other objectives of any stockholder individually.





Our stockholders may have conflicting investment, tax and other objectives with respect to their investments in us.


The conflicting interests of individual stockholders may relate to or arise from, among other things, the nature of our investments, the structure or the acquisition of our investments, and the timing of the disposition of our investments. As a consequence, conflicts of interest may arise in connection with decisions made by our Adviser, including with respect to the nature or structuring of our investments, that may be more beneficial for one stockholder than for another stockholder, especially with respect to stockholders’ individual tax situations.





Risks Related to Business Development Companies





Our failure to invest a sufficient portion of our assets in qualifying assets could result in our failure to maintain our status as a BDC.





As a BDC, we may not acquire any assets other than “qualifying assets” unless, at the time of and after giving effect to such acquisition, at least 70% of our total assets are qualifying assets. See “Item 1. Business - Regulation.” Therefore, we may be precluded from investing in what we believe are attractive investments if such investments are not qualifying assets. We may also be required to re-classify investments previously identified as qualifying assets as non-qualifying assets due to a change in the underlying business, a change in law or regulation, or for other reasons. Similarly, these rules could prevent us from making additional investments in existing portfolio companies, which could result in the dilution of our position, or could require us either to dispose of investments at an inopportune time or to refrain from making additional investments to comply with the 1940 Act. If we were forced to sell non-qualifying investments in our portfolio for compliance purposes, the proceeds from such sales could be significantly less than the current value of such investments.





Failure to maintain our status as a BDC would reduce our operating flexibility.





If we do not remain a BDC, we might be regulated as a registered closed-end investment company under the 1940 Act, which would subject us to substantially more regulatory restrictions under the 1940 Act and correspondingly decrease our operating flexibility.





Regulations governing our operation as a BDC and RIC will affect our ability to raise, and the way in which we raise, additional capital or borrow for investment purposes, which may have a negative effect on our growth.





As a result of the Annual Distribution Requirement to maintain our tax treatment as a RIC, we may need to periodically access the capital markets to raise cash to fund new investments. We may issue “senior securities,” including borrowing money from banks or other financial institutions only in amounts such that our asset coverage, as defined in the 1940 Act, equals at least 200% after such incurrence or issuance. Our ability to issue different types of securities is also limited. Compliance with these requirements may unfavorably limit our investment opportunities and reduce our ability compared to other companies to profit from favorable spreads between the rates at which we can borrow and the rates at which we can lend. As a BDC, therefore, we intend to continuously issue equity at a rate more frequent than our privately owned competitors, which may lead to greater stockholder dilution.





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We have incurred leverage to generate capital to make additional investments. If the value of our assets declines, we may be unable to satisfy the asset coverage test under the 1940 Act, which could prohibit us from paying distributions and could prevent us from qualifying as a RIC. If we cannot satisfy the asset coverage test, we may be required to sell a portion of our investments and, depending on the nature of our debt financing, repay a portion of our indebtedness at a time when such sales and repayments may be disadvantageous.





Under the 1940 Act, we generally are prohibited from issuing or selling our common stock at a price per share, after deducting selling commissions and dealer manager fees, that is below net asset value per share, which may be a disadvantage as compared to other public companies. We may, however, sell our common stock, or warrants, options or rights to acquire our common stock, at a price below the then-current net asset value of the common stock if our board of directors and independent directors determine that such sale is in our best interests and the best interests of our stockholders, and our stockholders in general, as well as those stockholders that are not affiliated with us approve such sale. In any such case, the price at which our securities are to be issued and sold may not be less than a price that, in the determination of our board of directors, closely approximates the fair value of such securities.





Our ability to enter into transactions with our affiliates is restricted.





The 1940 Act generally prohibits BDCs from making certain negotiated co-investments with affiliates absent an order from the SEC permitting the BDC to do so. Unless otherwise provided in the allocation policy, if an investment opportunity is appropriate for both us and other investment funds and the investment opportunity requires more than the price to be negotiated, the investment opportunity will be made available to the other investment fund or us on an alternating basis based on the date of closing of each such investment opportunity and each fund’s available capital. As a result, the Adviser and/or its affiliates may face conflicts in allocating investment opportunities between us and such other entities. Although the Adviser and its affiliates will endeavor to allocate investment opportunities in a fair and equitable manner and consistent with applicable allocation procedures, it is possible that, in the future, we may not be given the opportunity to participate in investments made by investment funds managed by the Adviser or its affiliates.


The SEC staff has granted us relief sought in an exemptive application that expands our ability to co-invest in portfolio companies with other funds managed by the Adviser or its Affiliated Funds in a manner consistent with our investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors, subject to compliance with certain conditions. Pursuant to the Order, we are permitted to co-invest with our affiliates if a “required majority” (as defined in Section 57(o) of the 1940 Act) or our independent directors make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transactions, including the consideration to be paid, are reasonable and fair to us and our stockholders and do not involve overreaching by us or our stockholders on the part of any person concerned, and (2) the transaction is consistent with the interests of our stockholders and is consistent with our investment objective and strategies.





We are uncertain of our sources for funding our future capital needs; if we cannot obtain debt or equity financing on acceptable terms, our ability to acquire investments and to expand our operations will be adversely affected.





The net proceeds from the sale of shares of our common stock will be used for our investment opportunities, operating expenses and for payment of various fees and expenses such as management fees, incentive fees and other fees. Any working capital reserves we maintain may not be sufficient for investment purposes, and we may require debt or equity financing to operate. In order to maintain our RIC tax treatment we must distribute to our stockholders on a timely basis generally an amount equal to at least 90% of our investment company taxable income, and the amounts of such distributions will therefore not be available to fund investment originations or to repay maturing debt. In addition, with certain limited exceptions, we are only allowed to borrow amounts or issue debt securities or preferred stock, which we refer to collectively as “senior securities,” such that our asset coverage, as calculated pursuant to the 1940 Act, equals at least 200% immediately after such borrowing, which, in certain circumstances, may restrict our ability to borrow or issue debt securities or preferred stock. Accordingly, in the event that we develop a need for additional capital in the future for investments or for any other reason, these sources of funding may not be available to us. Consequently, if we cannot obtain debt or equity financing on acceptable terms, our ability to acquire investments and to expand our operations will be adversely affected. As a result, we would be less able to achieve portfolio diversification and our investment objective, which may negatively impact our results of operations and reduce our ability to pay distributions to our stockholders.








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Risks Related to Our Investments





Our investments in portfolio companies may be risky, and we could lose all or part of our investment.





We invest primarily in first and second lien senior secured loans and mezzanine debt and selected equity investments issued by middle market companies.





First and Second Lien Senior Secured Loans. When we make senior secured loans, we will generally take a security interest in the available assets of these portfolio companies, including the equity interests of their subsidiaries. We expect this security interest to help mitigate the risk that we will not be repaid. However, there is a risk that the collateral securing our loans may decrease in value over time or lose its entire value, may be difficult to sell in a timely manner, may be difficult to appraise and may fluctuate in value based upon the success of the business and market conditions, including as a result of the inability of the portfolio company to raise additional capital. Also, in some circumstances, our lien could be subordinated to claims of other creditors. In addition, deterioration in a portfolio company’s financial condition and prospects, including its inability to raise additional capital, may be accompanied by deterioration in the value of the collateral for the loan. Finally, applicable bankruptcy laws may adversely impact the timing and methods used by us to liquidate collateral securing our loans, which could adversely affect the collectability of such loans. Consequently, the fact that a loan is secured does not guarantee that we will receive principal and interest payments according to the loan’s terms, or at all, or that we will be able to collect on the loan should we be forced to enforce our remedies.





Mezzanine Debt. Our mezzanine debt investments will generally be subordinated to senior loans and will generally be unsecured. This may result in a heightened level of risk and volatility or a loss of principal which could lead to the loss of the entire investment.





These investments may involve additional risks that could adversely affect our investment returns. To the extent interest payments associated with such debt are deferred, such debt may be subject to greater fluctuations in valuations, and such debt could subject us and our stockholders to non-cash income. Since we will not receive any principal repayments prior to the maturity of some of our mezzanine debt investments, such investments will be of greater risk than amortizing loans.





Equity Investments. We expect to make selected equity investments. In addition, when we invest in first and second lien senior loans or mezzanine debt, we may acquire warrants to purchase equity securities. Our goal is ultimately to dispose of these equity interests and realize gains upon our disposition of such interests. However, the equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience.





More generally, investing in private companies involves a number of significant risks, including that they:





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|• | may have limited financial resources and may be unable to meet their obligations under their debt securities that we hold, which may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of us realizing any guarantees we may have obtained in connection with our investment;

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|• | have shorter operating histories, narrower product lines and smaller market shares than larger businesses, which tend to render them more vulnerable to competitors’ actions and changing market conditions, as well as general economic downturns;

|  |                                                                                                                                                                                                                                                                             
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | are more likely to depend on the management talents and efforts of a small group of persons; therefore, the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on our portfolio company and, in turn, on us;

|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | generally have less predictable operating results, may from time to time be parties to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence, and may require substantial additional capital to support their operations, finance expansion or maintain their competitive position. In addition, our executive officers and directors and employees of our Adviser may, in the ordinary course of business, be named as defendants in litigation arising from our investments in the portfolio companies; and

|  |                                                                                                                                                                                
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | may have difficulty accessing the capital markets to meet future capital needs, which may limit their ability to grow or to repay their outstanding indebtedness upon maturity.







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Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies.





We invest primarily in first and second lien senior secured loans, mezzanine debt, preferred equity and common equity issued by middle market companies. Our portfolio companies may have, or may be permitted to incur, other debt that ranks equally with, or senior to, the debt in which we invest. By their terms, such debt instruments may entitle the holders to receive payment of interest or principal on or before the dates on which we are entitled to receive payments with respect to the debt instruments in which we invest. Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of debt instruments ranking senior to our investment in that portfolio company would typically be entitled to receive payment in full before we receive any distribution. After repaying such senior creditors, such portfolio company may not have any remaining assets to use for repaying its obligation to us. In the case of debt ranking equally with debt instruments in which we invest, we would have to share on an equal basis any distributions with other creditors holding such debt in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company.





There may be circumstances where our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability claims.





Even though we intend to generally structure our directly-originated investments as senior loans, if one of our portfolio companies were to go bankrupt, depending on the facts and circumstances, including the extent to which we actually provided managerial assistance to that portfolio company, a bankruptcy court might recharacterize our debt investment and subordinate all or a portion of our claim to that of other creditors. In situations where a bankruptcy carries a high degree of political significance, our legal rights may be subordinated to other creditors. We may also be subject to lender liability claims for actions taken by us with respect to a borrower’s business or instances where we exercise control over the borrower.





Second priority liens on collateral securing our loans may be subject to control by senior creditors with first priority liens. If there is a default, the value of the collateral may not be sufficient to repay in full both the first priority creditors and us.





A portion of our loans are secured on a second priority basis by the same collateral securing senior secured debt of such companies. The first priority liens on the collateral secure the portfolio company’s obligations under any outstanding senior debt and may secure certain other future debt that may be permitted to be incurred by the company under the agreements governing the loans. The holders of obligations secured by the first priority liens on the collateral will generally control the liquidation of and be entitled to receive proceeds from any realization of the collateral to repay their obligations in full before we receive anything. In addition, the value of the collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors.





There can be no assurance that the proceeds, if any, from the sale or sales of all of the collateral would be sufficient to satisfy the loan obligations secured by the second priority liens after payment in full of all obligations secured by the first priority liens on the collateral. If such proceeds are not sufficient to repay amounts outstanding under the loan obligations secured by the second priority liens, then we, to the extent not repaid from the proceeds of the sale of the collateral, will only have an unsecured claim against the company’s remaining assets, if any.





The rights we may have with respect to the collateral securing the loans we make to our portfolio companies with senior debt outstanding may also be limited pursuant to the terms of one or more intercreditor agreements that we enter into with the holders of senior debt. Under such an intercreditor agreement, at any time that obligations that have the benefit of the first priority liens are outstanding, any of the following actions that may be taken in respect of the collateral will be at the direction of the holders of the obligations secured by the first priority liens: the ability to cause the commencement of enforcement proceedings against the collateral; the ability to control the conduct of such proceedings; the approval of amendments to collateral documents; releases of liens on the collateral; and waivers of past defaults under collateral documents. We may not have the ability to control or direct such actions, even if our rights are adversely affected.





We generally will not control our portfolio companies.





We generally will not control our portfolio companies, even though we may have board representation or board observation rights, and our debt agreements may contain certain restrictive covenants. As a result, we are subject to the risk that a portfolio company in which we invest may make business decisions with which we disagree and the management of such company, as representatives of the holders of their common equity, may take risks or otherwise act in ways that do not serve our interests as debt investors. Due to the lack of liquidity for our investments in non-traded companies, we may not be able to dispose of our interests in our portfolio companies as readily as we would like or at an appropriate valuation. As a result, a portfolio company may make decisions that could decrease the value of our portfolio holdings.








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Our investments in a portfolio company, whether debt, equity, or a combination thereof, may lead to our receiving material non-public information (“MNPI”) or obtaining ‘control’ of the target company. Our ability to exit an investment where we have MNPI or control could be limited and could result in a realized loss on the investment.





If we receive MNPI, or a controlling interest in a portfolio company, our ability to divest ourselves from a debt or equity investment could be restricted. Causes of such restriction could include market factors, such as liquidity in a private stock, or limited trading volume in a public company’s securities, or regulatory factors, such as the receipt of MNPI or insider blackout periods, where we are under legal obligation not to sell. Additionally, we may choose not to take certain actions to protect a debt investment in a control investment portfolio company. As a result, we could experience a decrease in the value of our portfolio company holdings and potentially incur a realized loss on the investment.





Economic recessions or downturns could impair our portfolio companies and harm our operating results.





Many of the portfolio companies in which we may invest may be susceptible to economic slowdowns or recessions and may be unable to repay our debt investments during these periods. Therefore, our non-performing assets are likely to increase, and the value of our portfolio is likely to decrease during these periods. Adverse economic conditions may also decrease the value of any collateral securing our senior secured or second lien secured loans. A prolonged recession may further decrease the value of such collateral and result in losses of value in our portfolio and a decrease in our revenues, net income, assets and net worth. Unfavorable economic conditions also could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us on terms we deem acceptable. These events could prevent us from increasing investments and harm our operating results.





In addition, while we believe that these conditions also afford attractive opportunities to make investments, future financial market uncertainty could lead to further financial market disruptions and could further adversely impact our ability to obtain financing and the value of our investments.





The effect of global climate change may impact the operations of our portfolio companies.





There may be evidence of global climate change. Climate change creates physical and financial risk and some of our portfolio companies may be adversely affected by climate change. For example, the needs of customers of energy companies vary with weather conditions, primarily temperature and humidity. To the extent weather conditions are affected by climate change, energy use could increase or decrease depending on the duration and magnitude of any changes. Increases in the cost of energy could adversely affect the cost of operations of our portfolio companies if the use of energy products or services is material to their business. A decrease in energy use due to weather changes may affect some of our portfolio companies’ financial condition, through decreased revenues. Extreme weather conditions in general require more system backup, adding to costs, and can contribute to increased system stresses, including service interruptions. Energy companies could also be affected by the potential for lawsuits against or taxes or other regulatory costs imposed on greenhouse gas emitters, based on links drawn between greenhouse gas emissions and climate change.





In December 2015 the United Nations, of which the U.S. is a member, adopted a climate accord (the “Paris Agreement”) with the long-term goal of limiting global warming and the short-term goal of significantly reducing greenhouse gas emissions. The U.S. subsequently ratified the Paris Agreement, and it entered into force on November 4, 2016. As a result, some of our portfolio companies may become subject to new or strengthened regulations or legislation which could increase their operating costs and/or decrease their revenues.





Defaults by our portfolio companies will harm our operating results.





A portfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults and, potentially, termination of its loans and foreclosure on its secured assets, which could trigger cross-defaults under other agreements and jeopardize a portfolio company’s ability to meet its obligations under the debt or equity securities that we hold. We may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms, which may include the waiver of certain financial covenants, with a defaulting portfolio company.








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We may not realize gains from our equity investments.





Certain investments that we may make could include warrants or other equity securities. In addition, we may make direct equity investments, including controlling investments, in companies. Our goal is ultimately to realize gains upon our disposition of such equity interests. However, the equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience. We also may be unable to realize any value if a portfolio company does not have a liquidity event, such as a sale of the business, recapitalization or public offering, which would allow us to sell the underlying equity interests. We intend to seek puts or similar rights to give us the right to sell our equity securities back to the portfolio company issuer. We may be unable to exercise these puts rights for the consideration provided in our investment documents if the issuer is in financial distress.





An investment strategy focused primarily on privately held companies presents certain challenges, including the lack of available information about these companies.





We intend to invest in corporate debt of middle market companies, including privately held companies. Investments in private companies pose certain incremental risks as compared to investments in public companies. First, private companies have reduced access to the capital markets, resulting in diminished capital resources and ability to withstand financial distress. Second, the investments themselves tend to be less liquid. As such, we may have difficulty exiting an investment promptly or at a desired price prior to maturity or outside of a normal amortization schedule. Finally, little public information generally exists about private companies. Further, these companies may not have third-party debt ratings or audited financial statements. We must therefore rely on the ability of our Adviser to obtain adequate information through due diligence to evaluate the creditworthiness and potential returns from investing in these companies. These companies and their financial information will generally not be subject to the Sarbanes-Oxley Act and other rules that govern public companies. If we are unable to uncover all material information about these companies, we may not make a fully informed investment decision, and we may lose money on our investments. As a result, the relative lack of liquidity and the potential diminished capital resources of our target portfolio companies may affect our investment returns.





The lack of liquidity in our investments may adversely affect our business.





We invest in companies whose securities are typically not publicly traded, and whose securities will be subject to legal and other restrictions on resale or will otherwise be less liquid than publicly traded securities. The illiquidity of these investments may make it difficult for us to sell these investments when desired. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we had previously recorded these investments. As a result, we do not expect to achieve liquidity in our investments in the near-term. We expect that our investments will generally be subject to contractual or legal restrictions on resale or are otherwise illiquid because there is usually no established trading market for such investments. The illiquidity of most of our investments may make it difficult for us to dispose of them at a favorable price, and, as a result, we may suffer losses.





We may not have the funds or ability to make additional investments in our portfolio companies.





We may not have the funds or ability to make additional investments in our portfolio companies. After our initial investment in a portfolio company, we may be called upon from time to time to provide additional funds to such company or have the opportunity to increase our investment through the exercise of a warrant to purchase common stock. There is no assurance that we will make, or will have sufficient funds to make, follow-on investments. Any decisions not to make a follow-on investment or any inability on our part to make such an investment may have a negative impact on a portfolio company in need of such an investment, may result in a missed opportunity for us to increase our participation in a successful operation or may reduce the expected return on the investment.





We may concentrate our investments in companies in a particular industry or industries.





In the event we concentrate our investments in companies in a particular industry or industries, any adverse conditions that disproportionately impact that industry or industries may have a magnified adverse effect on our operating results.





The Company’s financial results may be affected adversely if one or more of the Company’s significant equity or junior debt investments in a CLO vehicle defaults on its payment obligations or fails to perform as the Company expects.





The Company expects that a portion of its portfolio will consist of equity and junior debt investments in CLOs, which involve a number of significant risks. CLOs are typically highly leveraged up to approximately 10 times, and therefore the





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junior debt and equity tranches in which we will invest in are subject to a higher risk of total loss. In particular, investors in CLOs indirectly bear risks of the underlying debt investments held by such CLOs. The Company may have the right to receive payments only from the CLOs, and does not have direct rights against the issuer or the entity that sold the assets to be securitized. Although it is difficult to predict whether the prices of indices and securities underlying CLOs will rise or fall, these prices, and therefore, the prices of the CLOs, will be influenced by the same types of political and economic events that affect issuers of securities and capital markets generally.





The investments we make in CLOs are thinly traded or have only a limited trading market. CLO securities are typically privately offered and sold, in the primary and secondary markets. As a result, investments in CLOs may be characterized as illiquid securities. In addition to the general risks associated with investing in debt securities, CLOs carry additional risks, including, but not limited to: (i) the possibility that distributions from the underlying loans will not be adequate to make interest or other payments; (ii) the quality of the underlying loans may decline in value or default; and (iii) the complex structure of the security may not be fully understood at the time of investment and may produce disputes with the CLO or unexpected investment results. Further, the Company’s investments in equity and junior debt tranches of CLOs are subordinate to the senior debt tranches thereof.





Investments in structured vehicles, including equity and junior debt instruments issued by CLOs, involve risks, including credit risk and market risk. Changes in interest rates and credit quality may cause significant price fluctuations. Additionally, changes in the underlying loans held by a CLO may cause payments on the instruments we hold to be reduced, either temporarily or permanently. Structured investments, particularly the subordinated interests in which we invest, are less liquid than many other types of securities and may be more volatile than the loans underlying the CLOs in which we invest.





CLO investments are subject to interest rate risk.





A majority of the assets in a CLO’s portfolio are floating rate loans which are sensitive to interest rate levels and volatility. Although CLOs are generally structured to mitigate the risk of interest rate mismatch, there may be some difference between the timing of interest rate resets on these floating rate loans and liabilities of a CLO. Such a mismatch in timing could have a negative effect on the amount of funds distributed to CLO equity. In addition, CLOs may not be able to enter into hedge agreements, even if it may otherwise be in the best interests of the CLO to hedge such interest rate risk. Furthermore, in the event of a significant rising interest rate environment and/or economic downturn, loan defaults may increase and result in credit losses that may adversely affect the CLO investments held by the Company.





Risks Relating to Debt Financing





We have sold unsecured notes and have entered into revolving credit facilities with Citi, UBS and Wells Fargo that contain various covenants which, if not complied with, could accelerate repayment under the Credit Facilities, thereby materially and adversely affecting our liquidity, financial condition, results of operations and our ability to pay distributions to our stockholders.





The agreements governing certain of our and our special purpose financing subsidiaries’ financing arrangements require us and our subsidiaries to comply with certain financial and operational covenants. These covenants require us and our subsidiaries to, among other things, maintain certain financial ratios, including asset coverage and minimum stockholders’ equity. Compliance with these covenants depends on many factors, some of which are beyond our and their control. In the event of deterioration in the capital markets and pricing levels subsequent to this period, net unrealized depreciation in our and our subsidiaries’ portfolios may increase in the future and could result in non-compliance with certain covenants, or our taking actions which could disrupt our business and impact our ability to meet our investment objective. For example, the agreements governing one or more of our credit facilities require applicable special purpose vehicles (“SPVs”) to comply with certain operational covenants, including maintaining eligible assets with an aggregate value equal to or exceeding a specified multiple of the borrowings under the credit facility, and a decline in the value of assets owned by the SPV could result in our being required to contribute additional assets to the SPV.





There can be no assurance that we and our subsidiaries will continue to comply with the covenants under our financing arrangements. Failure to comply with these covenants could result in a default which, if we and our subsidiaries were unable to obtain a waiver from the debt holders, could accelerate repayment under any or all of our and their debt instruments and thereby force us to liquidate investments at a disadvantageous time and/or at a price which could result in losses, or allow our lenders to sell assets pledged as collateral under our financing arrangements in order to satisfy amounts due thereunder. These occurrences could have a material adverse impact on our liquidity, financial condition, results of operations and ability to pay distributions. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Financial Condition, Liquidity and Capital Resources” for a more detailed discussion of the terms of debt financings.





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Because we borrow money, the potential for gain or loss on amounts invested in us will be magnified and may increase the risk of investing in us.





At December 31, 2016 , we had $ 915.5 million of debt financing. The use of borrowings, also known as leverage, increases the volatility of investments by magnifying the potential for gain or loss on invested equity capital. Because we use leverage to partially finance our investments, through borrowing from banks and other lenders, you will experience increased risks of investing in our common stock. If the value of our assets increases, leveraging would cause the net asset value attributable to our common stock to increase more sharply than it would have had we not leveraged. Conversely, if the value of our assets decreases, leveraging would cause our net asset value to decline more sharply than it otherwise would have had we not leveraged. Similarly, any increase in our income in excess of interest payable on the borrowed funds would cause our net income to increase more than it would without the leverage, while any decrease in our income would cause net income to decline more sharply than it would have had we not borrowed. Such a decline could negatively affect our ability to make common stock distribution payments. Leverage is generally considered a speculative investment technique.





Illustration .  The following table illustrates the effect of leverage on returns from an investment in our common stock assuming various annual returns, net of expenses. The calculations in the table below are hypothetical and actual returns may be higher or lower than those appearing below. The calculation assumes (i) $2.8 billion in total assets, (ii) a weighted average cost of funds of 3.54%, (iii) $1,132.5 million in debt outstanding (i.e., assumes that the $100.0 million principal amount of Unsecured Notes sold and the full $1,032.5 million available to us under the revolving credit facilities we have with Wells Fargo, Citi, and UBS is outstanding) and (iv) $1.5 billion in stockholders’ equity. In order to compute the “Corresponding return to stockholders,” the “Assumed Return on Our Portfolio (net of expenses)” is multiplied by the assumed total assets to obtain an assumed return to us. From this amount, the interest expense is calculated by multiplying the assumed weighted average cost of funds by the assumed debt outstanding, and the product is subtracted from the assumed return to us in order to determine the return available to stockholders. The return available to stockholders is then divided by our stockholders’ equity to determine the “Corresponding return to stockholders.” Actual interest payments may be different.


Assumed Return on Our Portfolio (net of expenses)(10)%(5)%- %5%10%Corresponding return to stockholders(1)(20.93)%(11.77)%(2.62)%6.53%15.69%


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(1) In order for us to cover our annual interest payments on indebtedness, we must achieve annual returns on our December 31, 2016 total assets of at least 1.43%.





As of December 31, 2016 , the Wells Fargo Facility provided for borrowings in an aggregate principal amount of up to


$400.0 million on a committed basis, due May 29, 2020, the Citi Credit Facility provided for borrowings in an aggregate principal amount of up to $400.0 million on a committed basis, due June 27, 2018, the UBS Credit Facility provided for borrowings in an aggregate principal amount of up to $232.5 million on a committed basis, due April 7, 2018, and the Unsecured Notes provided borrowings in an aggregate principal amount of $100.0 million, due September 1, 2020. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” for more information about these financing arrangements.


To the extent we use debt or preferred stock to finance our investments, changes in interest rates will affect our cost of capital and net investment income.





As a result, we can offer no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. In periods of rising interest rates when we have debt outstanding, our cost of funds will increase, which could reduce our net investment income. We expect that our long-term fixed-rate investments will be financed primarily with equity and long-term debt. We may use interest rate risk management techniques in an effort to limit our exposure to interest rate fluctuations. These techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act. These activities may limit our ability to participate in the benefits of lower interest rates with respect to the hedged portfolio. 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. Also, we have limited experience in entering into hedging transactions, and we will initially have to purchase or develop such expertise.





You should also be aware that a rise in the general level of interest rates can be expected to lead to higher interest rates applicable to our debt investments. Accordingly, an increase in interest rates would make it easier for us to meet or exceed the incentive fee preferred return and may result in a substantial increase of the amount of incentive fees payable to our Adviser





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with respect to pre-incentive fee net investment income.





Our ability to enter into transactions involving derivatives and financial commitment transactions may be limited.





The SEC has proposed a new rule under the 1940 Act that would govern the use of derivatives (defined to include any swap, security-based swap, futures contract, forward contract, option or any similar instrument) as well as financial commitment transactions (defined to include reverse repurchase agreements, short sale borrowings and any firm or standby commitment agreement or similar agreement) by BDCs. Under the proposed rule, a BDC would be required to comply with one of two alternative portfolio limitations and manage the risks associated with derivatives transactions and financial commitment transactions by segregating certain assets. Furthermore, a BDC that engages in more than a limited amount of derivatives transactions or that uses complex derivatives would be required to establish a formalized derivatives risk management program. If the SEC adopts this rule in the form proposed, our ability to enter into transactions involving such instruments may be hindered, which could have an adverse effect on our business, financial condition and results of operations.





We are subject to risks associated with our debt securitization/repurchase agreement financing facility.


On April 7, 2015 (the “Closing Date”), the Company and our wholly-owned, special-purpose financing subsidiary, BDCA Helvetica Funding, Ltd., or Helvetica Funding, entered into a debt securitization and repurchase agreement financing facility with UBS AG, London Branch pursuant to which up to $150.0 million was initially made available to us to fund investments and for other general corporate purposes.The financing transaction with UBS is structured initially as a debt securitization (the “Debt Securitization”) by Helvetica Funding, and is followed by a repurchase transaction (the “Repurchase Transaction”) between the Company and UBS, and collectively with the Debt Securitization, the UBS Facility. The UBS Facility was subsequently amended on July 10, 2015 (the “First Upsize Date”), to increase the amount of debt available to the Company under the UBS Facility from $150.0 million to $210.0 million (the “First Upsize”). On June 6, 2016 (the “Second Upsize Date”), the UBS Facility was again amended to increase the amount of debt available from $210.0 million to $232.5 million (the “Second Upsize”). In addition, the Second Upsize increased the cost of the financing by increasing the applicable spread from 3.90% to 4.05% per annum. Pricing under the Repurchase Transaction is based on three-month LIBOR plus the spread of 4.05% per annum for the relevant period. The Second Upsize also relaxed the limitations on second lien and unsecured loan assets by increasing the permissible percentage of second lien and unsecured loan assets from 60% to 70% and eliminating the requirement that 40% of the loan asset pool had to consist of senior secured loan assets.  Generally, under the Debt Securitization, the Company transfers existing loan investments to Helvetica Funding, which is established solely for the purpose of holding income producing assets and related investments, and issuing debt secured by loan assets. The Company completes the borrowing by receiving all of the notes issued by Helvetica Funding, transferring all such notes to UBS under a repurchase agreement between the Company and UBS and receiving cash from UBS under such Repurchase Transaction. Pursuant to the terms of the collateral management agreement (the “Collateral Management Agreement”), the Company also serves as the collateral manager of the loan assets securing the notes.


Pursuant to the Debt Securitization, loan assets in our portfolio may be sold and/or contributed by us from time to time to Helvetica Funding pursuant to a master loan purchase agreement, dated as of April 7, 2015, between us and Helvetica Funding (the “Loan Purchase Agreement”), and the terms of other transaction documents for the UBS Facility (the “Transaction Documents”). Helvetica Funding is also able to use available principal collections received from the loan assets to acquire loan assets directly. The loan assets held by Helvetica Funding will secure the obligations of Helvetica Funding under the notes issued by Helvetica Funding. On the Closing Date, Helvetica Funding issued $300.0 million in notes, on the First Upsize Date, Helvetica Funding issued $120.0 million in notes, and on the Second Upsize Date, Helvetica Funding issued $69.5 million in notes (collectively the “Notes”), pursuant to an indenture with US Bank, as amended and restated on the First Upsize Date and was again amended and restated on the Second Upsize Date, or collectively the Indenture. Pursuant to the Indenture, the aggregate principal amount of Notes that may be issued by Helvetica Funding is $489.5 million. The Company purchased all of the Notes issued by Helvetica Funding at a purchase price equal to their par value. All principal and any unpaid interest on all of the Notes will be due and payable on the same stated maturity date of April 7, 2025. The Notes do not have a stated interest rate. Instead, after payment of administrative fees and expenses under the Indenture, interest on the Notes is paid from and to the extent of any remaining interest payments received from the loan assets themselves. Principal payments received on the loan assets are either invested in eligible investments under the Indenture, available to be used for redemption of the Notes or available to Helvetica Funding to be utilized to acquire additional loan assets to secure the Notes. Pursuant to the Transaction Documents, on the Closing Date the Company made an equity investment in Helvetica Funding in an amount equal to $0.1 million.The Company is required under the Transaction Documents to invest additional amounts from time to time to pay administrative costs and expenses under the Transaction Documents whenever the balance of funds available is or, after giving effect to a payment, will be less than $0.1 million.


The Company, in turn, has entered into a Repurchase Transaction with UBS pursuant to the terms of a global master repurchase agreement and related annex, dated as of March 31, 2015, and a confirmation related thereto, dated as of the Closing Date, which confirmation was as amended and restated for the First Upsize and was again amended and restated for the Second





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Upsize, collectively referred to herein as the Repurchase Agreement. Pursuant to the Repurchase Agreement, UBS purchased the Notes held by the Company on the Closing Date and on the date of the First Upsize for an aggregate purchase price equal to 50% of the principal amount of Notes. The Notes purchased by UBS on the Second Upsize Date were purchased at a lower purchase price of 47.5%. Under the Repurchase Agreement, on the Closing Date the Company sold $300.0 million of Notes to UBS for $150.0 million, on the First Upsize Date the Company sold $120.0 million of Notes to UBS for $60.0 million and on the Second Upsize Date the Company sold $69.5 million of Notes to UBS for $22.5 million. Under the Repurchase Agreement, the scheduled repurchase date for all Notes is April 7, 2018 (the “Scheduled Repurchase Date”), the date on which the Company must pay to UBS all the repurchase price outstanding for all of the Notes and all other outstanding amounts owed to UBS under the Repurchase Agreement. Under the terms of the Repurchase Agreement, the Company is required to maintain at all times overcollateralization for the repurchase obligations at a rate over two times the aggregate outstanding purchase price. The overcollateralization rate was increased from 50% to 52.5% in connection with the Second Upsize. In order for all Notes to meet the new overcollateralization rate, the repurchase price for all Notes were adjusted as follows: (a) with regard to the Notes sold on the Closing Date, the repurchase price was reduced from $150.0 million to $142.5 million, (b) with regard to the Notes sold on the First Upsize Date, the repurchase price was reduced from $60.0 million to $57.0 million, and (c) with regard to the Notes sold on the Second Upside Date, the repurchase price was increased from $22.5 million to $33.0 million (the $10.5 million increase in price for these Notes represents the total decrease in repurchase price necessary to bring the Notes sold on the Closing Date and the First Upsize Date in line with the 52.5% overcollateralization requirement). Overcollateralization is maintained through margin call provisions in the Repurchase Agreement. Margin calls may not be made on the Company until the margin deficit initially exceeds 10% of the aggregate outstanding principal amount of the Notes and, thereafter, margin calls may be made on the Company anytime the margin deficit exceeds 5% of the aggregate outstanding principal amount of the Notes. The formula for calculating the overcollateralization and margin maintenance was changed in the Second Upsize. Those changes may result in an increased frequency of margin deficits that the Company would need to satisfy. Under the Repurchase Agreement, the Company is entitled to receive all interest payments and all redemption payments on the Notes. However, the Company is obligated to pay UBS monthly transaction fees. Until the Company’s obligations under the Repurchase Agreement are satisfied, UBS is entitled to exercise all voting rights with respect to the Notes. There are mandatory and voluntary prepayment provisions in the Repurchase Agreement.  A mandatory prepayment event occurs if there is an event of default and acceleration under the Transaction Documents related to Helvetica Funding or UBS is subject to a regulatory event and exercises its option to require an early repurchase date. The Company may also voluntarily prepay the outstanding purchase price under the Repurchase Agreement in whole or in part but only to the extent there has been a redemption of the Notes and such voluntary prepayment is limited to 50% of the redemption amount. Any mandatory prepayment (other than a UBS regulatory event) and any voluntary prepayment requires the payment by the Company of a breakage fee, equal to the present value of the transaction fee payable to UBS from the prepayment date to the Scheduled Repurchase Date.


As a result of this UBS Facility, we are subject to certain risks, including those set forth below.


Our equity investment in Helvetica Funding is subordinated to the debt obligations of Helvetica Funding.


Any dividends or other payments in respect of our equity interest in Helvetica Funding are subordinated in priority of payment to the Notes. In addition, Helvetica Funding is subject to certain payment restrictions set forth in the Indenture in respect of our equity interest.


We will receive cash distributions based on our investment in Helvetica Funding only if and when the Notes are paid in full. We cannot assure you that distributions on the loan assets held by Helvetica Funding will be sufficient to make any distributions to us or that the yield on our investment in Helvetica Funding will meet our expectations.


Our equity investment in Helvetica Funding is unsecured and ranks behind all of the creditors, known or unknown, of Helvetica Funding, including the holders of the Notes. Consequently, if the value of Helvetica Funding's loan assets decrease as a result of conditions in the credit markets, defaulted loans, capital gains and losses on the loan assets, prepayments, changes in interest rates generally and/or other market or industry factors, the value of our equity investment in Helvetica Funding could be reduced. Accordingly, our investment in Helvetica Funding may not produce a profit and may be subject to a loss in an amount up to the entire amount of such equity investment.


In addition, if the value of Helvetica Funding's loan assets decrease and Helvetica Funding is unable to make any required payments under the Indenture, the Repurchase Agreement and/or other Transaction Documents, the Company may, in turn, be required to contribute additional capital contributions to Helvetica Funding, satisfy margin calls under the Repurchase Agreement, sell or dispose of loan assets and/or contribute additional loan assets to the Debt Securitization.











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Our equity investment in Helvetica Funding has a high degree of leverage.


The maximum aggregate principal amount of Notes permitted to be issued by Helvetica Funding under the Indenture is $489.5 million. Our current equity investment in Helvetica Funding is $0.1 million. The market value of our equity investment in Helvetica Funding may be significantly affected by a variety of factors, including changes in the market value of the loan assets held by Helvetica Funding, changes in distributions on the assets held by Helvetica Funding, defaults and recoveries on those loan assets, capital gains and losses on those loan assets, prepayments on those loan assets and other risks associated with those loan assets. Our investment in Helvetica Funding may not produce a profit and may be subject to a loss in an amount up to the entire amount of such equity investment. The leveraged nature of our equity investment may magnify the adverse impact of any loss on our equity investment.


The interests of UBS, as the holder of the Notes, may not be aligned with our interests, and we will not have control over remedies in respect of the Notes.


The Notes rank senior in right of payment to any equity securities issued by Helvetica Funding. As a result, there are circumstances in which the interests of UBS, as the holder of the Notes, may not be aligned with our interests. For example, under the terms of the Notes, UBS has the right to receive payments of principal and interest prior to Helvetica Funding making any distributions or dividends to holders of its equity securities.


For as long as the Notes remain outstanding, UBS has the right to act in certain circumstances with respect to the portfolio of loan assets that secure the obligations of Helvetica Funding under the Notes in ways that may benefit their interests but not ours, including by exercising remedies or directing the Indenture trustee to declare events of default under or accelerate the Notes in accordance with the terms of the Indenture. UBS has no obligation to consider any possible adverse effect that actions taken may have on our equity interests. For example, upon the occurrence of an event of default with respect to the Notes, the trustee, which is currently U.S. Bank, may declare the outstanding principal amount of all of the Notes, together with any accrued interest thereon, to be immediately due and payable. This would have the effect of accelerating the outstanding principal amount of the Notes and triggering a repayment obligation on the part of Helvetica Funding. Helvetica Funding may not have proceeds sufficient to make required payments on the Notes and make any distributions to us. Any failure of Helvetica Funding to make distributions on the equity interests we hold could have a material adverse effect on our business, financial condition, results of operations and cash flows, and may result in our inability to make distributions to our stockholders in amounts sufficient to maintain our qualification as a RIC, or at all.


Helvetica Funding’s loan assets may fail to meet certain eligibility criteria and/or become defaulted assets, which would have an adverse effect on us.


The loan assets must at all times satisfy certain loan eligibility criteria set forth in the Indenture and certain other eligibility criteria and portfolio concentration limits set forth in the Repurchase Agreement. If any such eligibility criteria is not satisfied under the Indenture or a loan asset becomes a defaulted obligation, the loan asset must be removed from the collateral and sold.  In addition, if any such event occurs under the Indenture, or the eligibility criteria or portfolio concentration limits set forth in the Repurchase Agreement are not satisfied, the market value of any such loan asset is treated as zero under the Repurchase Agreement.  If the market value of a loan asset is zero, it will likely result in a margin call under the Repurchase Agreement if the threshold amount is satisfied. In order to avoid or satisfy a margin deficit, we may be required to contribute additional loan assets to Helvetica Funding, sell or dispose of assets or make additional borrowings to satisfy the obligations under the Indenture and Repurchase Agreement. This could have a material adverse effect on our business, financial condition, results of operations and cash flows, and may result in our inability to make distributions to our stockholders in amounts sufficient to maintain our qualification as a RIC, or at all.


The market value of the loan assets may decline causing us to commit additional capital in order to meet certain margin posting, which would have an adverse effect on the timing of payments to us.


If at any time during the term of the UBS Facility the market value of the Notes (measured by reference to the market value of Helvetica Funding's portfolio of loan assets and other collateral) declines and is less than the required margin amount under the Repurchase Agreement and such deficiency exceeds the applicable threshold, we will be required to post cash collateral with UBS to correct such deficiency. The likelihood of the Company needing to satisfy a margin deficit is now greater with the increase in the overcollateralization percentage to 52.5%. In such event, in order to satisfy this requirement, we may be required to contribute additional loan assets to Helvetica Funding, sell or dispose of assets or make additional borrowings. This could have a material adverse effect on our business, financial condition, results of operations and cash flows, and may result in our inability to make distributions to our stockholders in amounts sufficient to maintain our qualification as a RIC, or at all.





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Restructurings of investments held by Helvetica Funding, if any, may decrease their value and reduce the value of our equity interest in Helvetica Funding.


As collateral manager, subject to certain material actions that require the consent of UBS, we have authority to direct and supervise the investment and reinvestment of the loan assets held by Helvetica Funding, which may require from time to time the execution of amendments, waivers, modifications and other changes to the investment documentation in accordance with the related investment management agreement we have entered into with Helvetica Funding. During periods of economic uncertainty and recession, the necessity for amendments, waivers, modifications and restructurings of investments may increase. Such amendments, waivers, modifications and other restructurings may change the terms of the investments and, in some cases, may result in Helvetica Funding holding loan assets that do not meet certain specified criteria for the investments made by it, and also could adversely impact the market value of such investments and thereby the market value of the Notes, which in turn could adversely impact the ability of the Company to meet margin calls. Any amendment, waiver, modification or other restructuring that affects the market value of the loan assets underlying the Notes, and therefore reduces our ability to meet margin calls under the Repurchase Agreement, will make it more likely that Helvetica Funding will need to retain assets, including cash, to increase the market value of the loan assets underlying the Notes and for us to post cash collateral with UBS in an amount equal to the related margin deficit after giving effect to the applicable threshold. Any such use of cash by Helvetica Funding would reduce distributions available to us or delay the timing of distributions to us.


We may not receive cash from Helvetica Funding.


We receive cash from Helvetica Funding only to the extent that Helvetica Funding makes distributions to us. Helvetica Funding may make distributions to us, in turn, only to the extent permitted by the Indenture. The Indenture generally provides that distributions by Helvetica Funding may not be made unless all amounts then due and owing with respect to the Notes have been paid in full. If we do not receive cash from Helvetica Funding, we may be unable to make distributions to our stockholders in amounts sufficient to maintain our qualification as a RIC, or at all. We also could be forced to sell investments in our portfolio at less than their fair value in order to continue making such distributions.


We are subject to the credit risk of UBS.


If UBS fails to sell the Notes back to us at the end of the applicable period, our recourse will be limited to an unsecured claim against UBS for the difference between the value of such Notes at such time and the net amount that would be owing by us to UBS had UBS performed under the UBS Facility. The ability of UBS to satisfy such a claim will be subject to UBS's creditworthiness at that time.


No market for the resale of the Notes exists.


If the Company is the holder of the Notes, no market for resale of the Notes exists. The Notes are highly illiquid, not suitable for short-term trading, no secondary market may develop and the Notes are a highly-leveraged investment in a portfolio consisting primarily of loan assets, which may expose the Notes to disproportionately large losses.


Payments on the Notes depend on the performance of the loan asset portfolio.


Payments on the Notes are not guaranteed, but are dependent on the performance of the loan assets and other assets or investments held by Helvetica Funding. Due to the structure of the transaction and the performance of the loan assets and other assets or investments held by Helvetica Funding, it is possible that payments on the Notes may be deferred, reduced or eliminated entirely. The holders of the Notes are not entitled to a stated return on their investment and Helvetica Funding will have no significant assets other than the loan assets, and payments on the Notes will be payable solely from and to the extent of the available proceeds from the loan assets and other assets of Helvetica Funding, in accordance with the priority of payments established under the Indenture. If the payments on the Notes are insufficient or non-existent, it will impact the Company’s ability to pay the amounts owed by the Company under the Indenture, the Repurchase Agreement and other Transaction Documents. In such event, in order to satisfy the payment obligations, we may be required to contribute additional loan assets to Helvetica Funding, sell or dispose of assets or make additional borrowings. This could have a material adverse effect on our business, financial condition, results of operations and cash flows, and may result in our inability to make distributions to our stockholders in amounts sufficient to maintain our qualification as a RIC, or at all.











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Events of default by the Company or Helvetica Funding may result in the sale of the loan asset portfolio at prices less than fair market value.


An event of default by the Company under the Repurchase Agreement is an event of default under the Indenture and other Transaction Documents. Likewise, an event of default by the Helvetica Funding under the Indenture results in an event of default under the Transaction Documents and a mandatory repayment of the aggregate outstanding purchase price under the Repurchase Agreement, which repurchase requires payment by the Company of the breakage fee. A default by the Company under the Indenture can also result in an event of default under the Transaction Documents. Also, if there is cause for removal of the Company as collateral manager under the Collateral Management Agreement, besides being removed as the day to day asset manager of the loan assets, such cause for removal also triggers events of default under the Indenture, the other Transaction Documents and the Repurchase Agreement. Upon the occurrence of any of these or other events of default and the acceleration of the indebtedness under the Indenture, the portfolio of loan assets is required to be sold or disposed of in accordance with the Indenture. If the loan assets are sold under these circumstances due to any such defaults, the value of the loan assets may be sold for less than fair market value. As a result, we may be required to contribute additional capital to Helvetica Funding, sell or dispose of assets or make additional borrowings to satisfy the obligations under the Indenture, the Repurchase Agreement and the other Transaction Documents. This could have a material adverse effect on our business, financial condition, results of operations and cash flows, and may result in our inability to make distributions to our stockholders in amounts sufficient to maintain our qualification as a RIC, or at all.


Risks Relating to Our Corporate Structure and Common Stock





As a result of certain limitations in our share repurchase program, you will have limited opportunities to sell your shares and, to the extent you are able to sell your shares under the program, you may not be able to recover the amount of your investment in our shares.





We intend to conduct tender offers pursuant to our share repurchase program on a semi-annual basis. The share repurchase program includes numerous restrictions that limit your ability to sell your shares and should not be relied upon as a method to sell your shares promptly or at a desired price. We intend to limit the number of shares repurchased pursuant to our proposed share repurchase program as follows: (1) we currently intend to limit the number of shares to be repurchased during any calendar year to the number of shares we can repurchase with the proceeds we receive from the sale of shares of our common stock under our distribution reinvestment plan; at the discretion of our board of directors, we may also use cash on hand, cash available from borrowings and cash from liquidation of securities investments as of the end of the applicable period to repurchase shares; (2) we will not repurchase shares in any calendar year in excess of 10% of the weighted average number of shares outstanding in the prior calendar year; (3) unless you tender all of your shares, you must tender at least 25% of the amount of shares you have purchased in the offering and must maintain a minimum balance of $1,000 subsequent to submitting a portion of your shares for repurchase by us; and (4) to the extent that the number of shares put to us for repurchase exceeds the number of shares that we are able to purchase, we will repurchase shares on a pro rata basis, not on a first-come, first-served basis. Further, we will have no obligation to repurchase shares if the repurchase would violate the restrictions on distributions under federal law or Maryland law, which prohibits distributions that would cause a corporation to fail to meet statutory tests of solvency. These limits may prevent us from accommodating all repurchase requests made in any year.





Our board of directors may amend, suspend or terminate the repurchase program upon 30 days’ notice. We will notify you of such developments (1) in the quarterly reports mentioned above or (2) by means of a separate mailing to you, accompanied by disclosure in a current or periodic report under the Exchange Act.





The timing of our repurchase offers pursuant to our share repurchase program may be at a time that is disadvantageous to our stockholders.





When we make quarterly repurchase offers pursuant to the share repurchase program, we may offer to repurchase shares at a price that is lower than the price you paid for shares in our offering. As a result, to the extent you have the ability to sell your shares to us as part of our share repurchase program, the price at which you may sell your shares, may be lower than what you paid in connection with your purchase of shares in our offering. On March 8, 2016, our board of directors amended our stock repurchase program.





In addition, in the event you choose to participate in our share repurchase program, you will be required to provide us with notice of your intent to participate prior to knowing what the repurchase price per share will be on the repurchase date. Although you will have the ability to withdraw your repurchase request prior to the repurchase date, to the extent you seek to sell your shares to us as part of our periodic share repurchase program, you will be required to do so without knowledge of





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what the repurchase price of our shares will be on the repurchase date.





Under the terms of our charter, our board of directors is authorized to issue shares of preferred stock with rights and privileges superior to common stockholders without common stockholder approval.





Under the terms of our charter, our board of directors is authorized to issue shares of preferred stock in one or more series without stockholder approval. The board of directors has discretion to set the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each class or series of preferred stock.





Every issuance of preferred stock will be required to comply with the requirements of the 1940 Act, including among other things, that (1) immediately after issuance and before any distribution is made with respect to our common stock and before any purchase of common stock is made, such preferred stock together with all other senior securities must not exceed an amount equal to 50% of our total assets after deducting the amount of such distribution or purchase price, as the case may be, and (2) the holders of shares of preferred stock, if any are issued, must be entitled as a class to elect two directors at all times and to elect a majority of the directors if distributions on such preferred stock are in arrears by two years or more. Certain matters under the 1940 Act require the separate vote of the holders of any issued and outstanding preferred stock.





Your interest in us will be diluted if we issue additional shares, which could reduce the overall value of your investment.





Potential investors in this offering do not have preemptive rights to any shares we issue in the future. Our charter authorizes us to issue shares of common stock. Pursuant to our charter, a majority of our entire board of directors may amend our charter from time to time to increase or decrease the aggregate number of authorized shares of stock or the number of authorized shares of stock of any class or series without stockholder approval. After your purchase in this offering, our board of directors may elect to sell additional shares in this or any follow-on public offerings, issue equity interests in private offerings or issue share-based awards to our independent directors or employees of our Adviser. To the extent we issue additional equity interests after your purchase in this offering, your percentage ownership interest in us will be diluted. In addition, depending upon the terms and pricing of any additional offerings and the value of our investments, you may also experience dilution in the book value and fair value of your shares.








Certain provisions of our charter and bylaws as well as provisions of the Maryland General Corporation Law could deter takeover attempts and have an adverse impact on the value of our common stock.





Our charter and bylaws, as well as certain statutory and regulatory requirements, contain certain provisions that may have the effect of discouraging a third party from attempting to acquire us. Under the Maryland General Corporation Law, “control shares” acquired in a “control share acquisition” have no voting rights except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter, excluding shares owned by the acquiror, by officers or by employees who are directors of the corporation. Our bylaws contain a provision exempting us from the Maryland Control Share Acquisition Act under the Maryland General Corporation Law any and all acquisitions by any person of our shares of stock. Our board of directors may amend the bylaws to remove that exemption in whole or in part without stockholder approval. The Maryland Control Share Acquisition Act (if we amend our bylaws to be subject to that Act) may discourage others from trying to acquire control of us and increase the difficulty of consummating any offer. Under the Maryland General Corporation Law, specified “business combinations,” including mergers, consolidations, share exchanges, or, in circumstances specified in the statute, asset transfers or issuances or reclassifications of equity securities, between a Maryland corporation and any person who owns 10% or more of the voting power of the corporation’s outstanding voting stock, and certain other parties (each an “interested stockholder”), or an affiliate of the interested stockholder, are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. Thereafter any of the specified business combinations must be approved by two super majority votes of the stockholders unless, among other conditions, the corporation’s common stockholders receive a minimum price for their shares.





Under the Maryland General Corporation Law, certain statutory provisions permit a corporation that is subject to the Exchange Act and that has at least three independent directors to be subject to certain corporate governance provisions notwithstanding any contrary provision in the corporation’s charter and bylaws. Among other provisions, a board of directors may classify itself without the vote of stockholders. Further, the board of directors, by electing into certain statutory provisions and notwithstanding any contrary provision in the charter or bylaws, may (i) provide that a special meeting of stockholders will be called only at the request of stockholders entitled to cast at least a majority of the votes entitled to be cast at the meeting, (ii) reserve for itself the right to fix the number of directors, and (iii) retain for itself the exclusive power to fill vacancies created by the death, removal or resignation of a director. A corporation may be prohibited by its charter or by resolution of its board of





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directors from electing to be subject to any of the provisions of the statute. We are not prohibited from implementing any or all of the provisions.





Additionally, our board of directors may, without stockholder action, authorize the issuance of shares of stock in one or more classes or series, including preferred stock; and our board of directors may, without stockholder action, amend our charter from time to time to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that we have authority to issue. These provisions may inhibit a change of control in circumstances that could give the holders of our common stock the opportunity to realize a premium over the value of our common stock.





We are not obligated to complete a liquidity event by a specified date; therefore, it will be difficult for you to sell your shares.





We intend to explore a potential liquidity event for our stockholders between five to seven years following the completion of our offering stage. We expect that our board of directors, in the exercise of the requisite standard of care applicable to directors under Maryland law, will determine to pursue a liquidity event when it believes that then-current market conditions are favorable for a liquidity event, and that such a transaction is in our best interests. A liquidity event could include (1) the sale of all or substantially all of our assets either on a complete portfolio basis or individually followed by a liquidation, (2) a listing of our shares on a national securities exchange, or (3) a merger or another transaction approved by our board of directors in which our stockholders will receive cash or shares of a publicly traded company. However, there can be no assurance that we will complete a liquidity event within such time or at all. If we do not successfully complete a liquidity event, liquidity for your shares will be limited to our share repurchase program which we have no obligation to maintain.





Our shares will not be listed on an exchange or quoted through a quotation system for the foreseeable future, if ever. Therefore, you will have limited liquidity and may not receive a full return of your invested capital if you sell your shares.





Our shares are illiquid assets for which there is not expected to be any secondary market nor is it expected that any will develop in the future. We intend to explore a potential liquidity event for our stockholders between five and seven years following the completion of our offering stage, which may include further follow-on offerings. However, there can be no assurance that we will complete a liquidity event within such time or at all. We expect that our board of directors, in the exercise of its duties to us, will determine to pursue a liquidity event when it believes that then-current market conditions are favorable for a liquidity event, and that such an event is in our best interests. A liquidity event could include (1) the sale of all or substantially all of our assets either on a complete portfolio basis or individually followed by a liquidation, (2) a listing of our shares on a national securities exchange or (3) a merger or another transaction approved by our board in which our stockholders will receive cash or shares of a publicly traded company.





In making the decision to apply for listing of our shares, our directors will try to determine whether listing our shares or liquidating our assets will result in greater value for our stockholders. In making a determination of what type of liquidity event is in our best interests, our board of directors, including our independent directors, may consider a variety of criteria, including, but not limited to, market conditions, portfolio diversification, portfolio performance, our financial condition, potential access to capital as a listed company, market conditions for the sale of our assets or listing of our common stock, internal management requirements to become a perpetual life company and the potential for stockholder liquidity. If our shares are listed, we cannot assure you a public trading market will develop.





You should also be aware that shares of publicly traded closed-end investment companies frequently trade at a discount to their NAV. If our shares are eventually listed on a national exchange, we would not be able to predict whether our common stock would trade above, at or below NAV. This risk is separate and distinct from the risk that our NAV may decline.








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Federal Income Tax Risks





We may be subject to corporate-level U.S. federal taxes if we fail to maintain our qualification as a RIC.





To maintain RIC tax treatment under the Code, we must meet the following annual distribution, income source and asset diversification requirements.





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|• | The Annual Distribution Requirement for a RIC will be satisfied if we distribute to our stockholders on an annual basis at least 90% of our net ordinary income and net short-term capital gain in excess of net long-term capital loss, if any. We may be subject to corporate-level U.S. federal income tax on any of our undistributed income or gain. Additionally, we will be subject to a 4% nondeductible federal excise tax to the extent that we do not satisfy certain additional minimum distribution requirements on a calendar-year basis. Because we use debt financing, we are subject to an asset coverage ratio requirement under the 1940 Act and may in the future become subject to certain financial covenants under loan and credit agreements that could, under certain circumstances, restrict us from making distributions necessary to satisfy the distribution requirements. If we are unable to obtain cash from other sources, we could fail to qualify for RIC tax treatment and thus become subject to corporate-level income tax.

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|• | The income source requirement will be satisfied if we obtain at least 90% of our gross income for each year from distributions, interest, gains from the sale of stock or securities or similar sources.

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|• | The asset diversification requirement will be satisfied if we meet certain asset diversification requirements at the end of each quarter of our taxable year. To satisfy this requirement, at least 50% of the value of our assets must consist of cash, cash equivalents, U.S. Government securities, securities of other RICs, and other acceptable securities; and no more than 25% of the value of our assets can be invested in the securities, other than U.S. government securities or securities of other RICs, of one issuer, of two or more issuers that are controlled, as determined under applicable Code rules, by us and that are engaged in the same or similar or related trades or businesses or of certain “qualified publicly traded partnerships.” Failure to meet these requirements may result in our having to dispose of certain investments quickly in order to prevent the loss of RIC status. Because most of our investments will be in private companies, and therefore will be relatively illiquid, any such dispositions could be made at disadvantageous prices and could result in substantial losses.




If we fail to maintain RIC tax treatment for any reason and are subject to corporate-level U.S. federal income tax on all of our income, the resulting corporate taxes could substantially reduce our net assets, the amount of income available for distribution and the amount of our distributions. Even if we qualify as a RIC, we will be required to pay corporate-level U.S. federal income taxes on any income or capital gains that we do not distribute (or deemed to be distributed) to stockholders. We may also be subject to certain U.S. federal excise taxes, as well as state, local and foreign taxes.





We may have difficulty paying our required distributions if we recognize income before or without receiving cash representing such income.





For U.S. federal income tax purposes, we may be required to recognize taxable income in circumstances in which we do not receive a corresponding payment in cash. For example, if we hold debt obligations that are treated under applicable tax rules as having original issue discount (such as debt instruments with PIK interest or, in certain cases, increasing interest rates or debt instruments that were issued with warrants), we must include in income each year a portion of the original issue discount that accrues over the life of the obligation, regardless of whether cash representing such income is received by us in the same taxable year. We may also have to include in income other amounts that we have not yet received in cash, such as deferred loan origination fees that are paid after origination of the loan or are paid in non-cash compensation such as warrants or stock. We anticipate that a portion of our income may constitute original issue discount or other income required to be included in taxable income prior to receipt of cash. Further, we may elect to amortize market discounts and include such amounts in our taxable income in the current year, instead of upon disposition, as an election not to do so would limit our ability to deduct interest expenses for tax purposes.





Because any original issue discount or other amounts accrued will be included in our investment company taxable income for the year of the accrual, we may be required to make a distribution to our stockholders in order to satisfy the Annual Distribution Requirement, even though we will not have received any corresponding cash amount. As a result, we may have difficulty meeting the Annual Distribution Requirement necessary to maintain RIC tax treatment under the Code. We may have to sell some of our investments at times and/or at prices we would not consider advantageous, raise additional debt or equity capital or forgo new investment opportunities for this purpose. If we are not able to obtain cash from other sources, we may fail to qualify for RIC tax treatment and thus become subject to corporate-level income tax.








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You may receive shares of our common stock as distributions which could result in adverse tax consequences to you.





In order to satisfy the Annual Distribution Requirement applicable to RICs, we may have the ability to declare a large portion of a distribution in shares of our common stock instead of in cash, provided that stockholders have the right to elect to receive their distribution in cash. As long as a portion of such distribution is payable in cash (which portion can be as low as 20% based on certain rulings by the IRS) and certain requirements are met, the entire distribution to the extent of our current and accumulated earnings and profits would be a dividend for U.S. federal income tax purposes. If too many stockholders elect to receive their distributions in cash, each stockholder electing to receive his/her distribution in cash would receive a pro rata portion of his/her distribution in cash and the remaining portion of the distribution would be paid in shares of our common stock. As a result, a stockholder would be taxed on the entire distribution in the same manner as a cash distribution, even though a portion of the distribution was paid in shares of our common stock, and a stockholder may be required to pay tax with respect to such dividends in excess of any cash received. If a stockholder sells the stock it receives as a dividend in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of our stock at the time of the sale. Furthermore, with respect to non-U.S. stockholders, we may be required to withhold U.S. tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in stock. In addition, if a significant number of our stockholders determine to sell shares of our stock in order to pay taxes owed on dividends, then such sales may put downward pressure on the trading price of our stock.





You may have current tax liability on distributions you elect to reinvest in our common stock but would not receive cash from such distributions to pay such tax liability.





If you participate in our distribution reinvestment plan, you will be deemed to have received, and for U.S. federal income tax purposes will be taxed on, the fair market value of our common stock that you received to the extent such amount was not a tax-free return of capital. As a result, unless you are a tax-exempt entity, you may have to use funds from other sources to pay your tax liability on the value of our common stock received from the distribution.





If we do not qualify as a “publicly offered regulated investment company,” as defined in the Code, you will be taxed as though you received a distribution of some of our expenses and may be limited in your ability to deduct such expenses.





A “publicly offered regulated investment company” is a regulated investment company whose shares are either (i) continuously offered pursuant to a public offering, (ii) regularly traded on an established securities market or (iii) held by at least 500 persons at all times during the taxable year. If we are not a publicly offered regulated investment company for any period, a non-corporate stockholder’s pro rata portion of our affected expenses, including our management fees, will be treated as an additional distribution to the stockholder and will be deductible by such stockholder only to the extent permitted under the limitations described below. For non-corporate stockholders, including individuals, trusts, and estates, significant limitations generally apply to the deductibility of certain expenses of a non-publicly offered regulated investment company, including advisory fees. In particular, these expenses, referred to as miscellaneous itemized deductions, are deductible to an individual only to the extent they exceed 2% of such a stockholder’s adjusted gross income, and are not deductible for alternative minimum tax purposes. While we anticipate that we will constitute a publicly offered regulated investment company for our current tax year, there can be no assurance that we will in fact so qualify for any of our taxable years.





An investment in the shares by a Non-U.S. stockholder may have adverse tax consequences.





Whether an investment in the shares is appropriate for a Non-U.S. stockholder will depend upon that person's particular circumstances. A “Non-U.S. stockholder” is a beneficial owner of shares of our common stock that is neither a U.S. stockholder nor a partnership (including an entity treated as a partnership for U.S. federal income tax purposes). Among other things, a Non-U.S. stockholder, under certain circumstances, may be subject to withholding of U.S. federal income tax at a rate of 30.0% (or lower rate provided by an applicable treat); required to file U.S. income taxes to receive a tax credit or tax refund of overpayments of taxes; subject to U.S. income tax at graduated rates or to a branch profits on our distributions; subject to certain reporting requirements, disclosure requirements, and withholding taxes under the Foreign Account Tax Compliance Act and other laws; and subject to certain rules regarding foreign tax credits. Non-U.S. persons should consult their tax advisors with respect to U.S. federal income tax and withholding tax, and state, local and foreign tax consequences of an investment in our shares.








ITEM 1B. UNRESOLVED STAFF COMMENTS





None.








ITEM 2. PROPERTIES





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We do not own any real estate or other physical properties materially important to our operation. Our executive offices are located at 9 West 57th Street, 49th Floor, Suite 4920, New York, NY 10019. We believe that our current office facilities are adequate for our business as we intend to conduct it.








ITEM 3. LEGAL PROCEEDINGS





As of December 31, 2016 , we are not defendants in any material pending legal proceeding, and no such material proceedings are known to be contemplated. However, from time to time, we may be party to certain legal proceedings incidental to the normal course of our business including the enforcement of our rights under the contracts with our portfolio companies. Third parties may also seek to impose liability on us in connection with the activities of our portfolio companies.








ITEM 4. MINE SAFETY DISCLOSURES





Not applicable.





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PART II








ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES





There is currently no market for our common stock, and we do not expect that a market for our shares will develop in the future. We closed the Offering to new investments on April 30, 2015. And no stock has been authorized for issuance under any equity compensation plans.  We are prohibited under the 1940 Act from selling our shares of common stock at a public offering price, after deducting selling commissions and dealer manager fees, that is below our net asset value per share unless we obtain stockholder approval. In connection with any issuance of shares of our common stock, our board of directors or a committee thereof will review the then current offering price per share against the current estimated net asset value per share to ensure that we were not selling shares of our common stock at a price which, after deducting selling commissions and dealer manager fees, was below our net asset value per share.





Set forth below is a chart describing the classes of our securities outstanding as of December 31, 2016 :





Title of ClassAmount AuthorizedAmount IssuedCommon Stock, par value $0.001 per share450,000,000177,120,791





As of December 31, 2016 , we had issued 189.6 million shares of common stock for gross proceeds of $ 2.0 billion, including shares issued pursuant to the DRIP and shares purchased by an affiliate of BSP. As of December 31, 2016 , we had repurchased 12.5 million shares of common stock for payments of $ 113.4 million through our share purchase program. As of December 31, 2016 , we had 36,740 record holders of our common stock.





Distributions





We declared our first distribution on June 23, 2011 and have declared and paid cash distributions to our stockholders on a monthly basis since such time. We calculate each stockholder’s specific distribution amount for the month using record and declaration dates, and the stockholder's distributions begin to accrue on the date we accepted their subscription for shares of our common stock. From time-to-time, we may also pay interim distributions at the discretion of our board of directors. Each year a statement on Internal Revenue Service Form 1099-DIV (or such successor form) identifying the source of the distribution (i.e., paid from ordinary income, paid from net capital gain on the sale of securities, and/or a return of paid-in capital surplus which is a nontaxable distribution) will be mailed to our stockholders. Our distributions may exceed our earnings, and, as a result, a portion of the distributions we make may represent a return of capital for tax purposes.





We have not established any limit on the extent to which we may use borrowings, if any, or proceeds from any future offering to fund distributions. There can be no assurance that we will be able to sustain distributions at any particular level.





From time-to-time and not less than quarterly, our Adviser will be required to review our accounts to determine whether distributions are appropriate. We shall distribute pro rata to our stockholders funds received by us which our Adviser deems unnecessary for us to retain.





To maintain our RIC qualification, we must, among other things, distribute at least 90% of our net ordinary income and net short-term capital gain in excess of net long-term capital loss, if any, to our stockholders. In order to avoid certain excise taxes imposed on RICs, we currently intend to distribute, or be deemed to distribute, during each calendar year an amount at least equal to the sum of: (1) 98% of our net ordinary income for the calendar year; (2) 98.2% of our capital gain in excess of capital loss for the calendar year; and (3) any net ordinary income and net capital gain for preceding years that were not distributed during such years and on which we paid no U.S. federal income tax. We can offer no assurance that we will achieve results that will permit the payment of any distributions and, if we issue senior securities, we will be prohibited from paying 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.








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The table below reflects the cash distributions per share that we have paid on our common stock for the years ended December 31, 2016 and December 31, 2015 (dollars in thousands except per share amounts). Additionally, distributions made through the filing of this Form 10-K are included for reference.


Record DatePayment DatePer shareDistributions Paid in CashDistributions Paid Through the DRIPTotal Distributions Paid2015:January 31, 2015February 4, 2015$0.07$5,948$5,797$11,745February 28, 2015March 2, 20150.075,5205,23610,756March 31, 2015April 1, 20150.076,2655,89812,163April 30, 2015May 1, 20150.076,2425,84912,091May 29, 2015June 1, 20150.076,6805,90512,585June 30, 2015July 1, 20150.076,4855,73512,220July 31, 2015August 3, 20150.076,9766,12613,102August 31, 2015September 1, 20150.077,0536,04913,102September 30, 2015October 1, 20150.076,8705,83512,705October 31, 2015November 2, 20150.077,1406,03013,170November 30, 2015December 1, 20150.076,9325,83512,767December 31, 2015January 4, 20160.077,2245,98913,213$79,335$70,284$149,6192016:January 31, 2016February 3, 2016$0.07$8,922$4,298$13,220February 28, 2016March 1, 20160.077,0145,33312,347March 31, 2016April 1, 20160.077,3635,71813,081April 30, 2016May 2, 20160.0712,708(2)12,706May 31, 2016June 2, 20160.077,5825,53913,121June 30, 2016July 1, 20160.077,4385,30412,742July 31, 2016August 1, 20160.077,7895,42113,210August 31, 2016September 1, 20160.077,9085,35113,259September 30, 2016October 3, 20160.077,7455,12712,872October 31, 2016November 1, 20160.078,0675,27313,340November 30, 2016December 1, 20160.077,9475,07313,020December 31, 2016January 3, 20170.078,3115,20513,516$98,794$57,640$156,4342017:January 31, 2017February 3, 20170.07$7,983$5,081$13,064February 28, 2017March 1, 20170.077,2504,59011,840$15,233$9,671$24,904$193,362$137,595$330,957





We have a distribution reinvestment plan (the “DRIP”) pursuant to which we reinvest all cash dividends or distributions (“Distributions”) declared by our board of directors on behalf of investors who do not elect to receive their Distributions in cash as described below (the “Participants”). As a result, if our board of directors declares a Distribution, then stockholders who have not elected to “opt out” of the DRIP will have their Distributions automatically reinvested in additional shares of our common stock at a price equal to NAV per share as estimated in good faith by us on the payment date. 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.





We have not established limits on the amount of funds we may use from available sources to fund distributions. We may have distributions which could be characterized as a return of capital for tax purposes.  During the years ended





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December 31, 2016 and December 31, 2015, zero and $16.3 million of our distributions were characterized as return of capital for tax purposes, respectively. No portion of our distributions were characterized as a return of capital for tax purposes for the year ended December 31, 2014.





Sales of Unregistered Securities





In connection with the closing of the Transaction, an affiliate of BSP purchased $10.0 million of our common stock based on our net asset value per share as of September 30, 2016 in a private placement in reliance on Section 4(a)(2) of the Securities Act of 1933. On November 7, 2016, we issued approximately 1.2 million shares of our common stock to the BSP affiliate.





Issuer Purchases of Equity Securities





The table below provides information concerning our repurchases of shares of our common stock during the year ended December 31, 2016 , pursuant to our share repurchase program.





PeriodTotal Number of Shares PurchasedAverage Price Paid per ShareTotal Number of Shares Purchased asPart of Publicly Announced Plans orProgramsJanuary 1, 2016 to March 31, 20163,053,869$9.223,053,869April 1, 2016 to June 30, 2016—$——July 1, 2016 to September 30, 2016—$——October 1, 2016 to December 31, 20166,715,864$8.586,715,864Total9,769,7339,769,733





See Note 10 to our consolidated financial statements contained in this Annual Report on Form 10-K for a more detailed discussion of the terms of our share repurchase program.








ITEM 6. SELECTED FINANCIAL DATA





The consolidated statements of operations data, consolidated per share data and consolidated statements of assets and liabilities data for each of the five years in the period ended December 31, 2016 are derived from our audited consolidated financial statements which are filed with the SEC. This selected financial data should be read in conjunction with our consolidated financial statements and related notes thereto and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Annual Report.








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As of and For the Year Ended December 31, 2016As of and For the Year Ended December 31, 2015As of and For the Year Ended December 31, 2014As of and For the Year Ended December 31, 2013As of and For the Year Ended December 31, 2012(Dollars in thousands, except per share data)Consolidated Statement of Operations Data:Total investment income$229,658$195,846$138,281$31,393$6,914Total expenses net of expense waivers(1)108,52181,69051,99418,3012,500Income tax expense, including excise tax1,140————Net investment loss attributable to non-controlling interests19—(68)——Net investment income119,978114,15686,35513,0924,414Net realized and unrealized gain (loss) on investments and total return swap, net of deferred taxes(26,892)(103,576)(6,155)29,6525,086Net change in unrealized appreciation (depreciation) attributable to non-controlling interests1,316(2,527)(660)——Net increase in net assets resulting from operations$94,402$8,053$79,540$42,744$9,500Consolidated Per Share Data:Net investment income$0.67$0.66$0.71$0.36$0.63Net realized and unrealized gain (loss) on investments and total return swap, net of deferred taxes$(0.14)$(0.60)$(0.05)$0.81$0.73Net increase in net assets resulting from operations$0.52$0.05$0.65$1.17$1.36Distributions declared$0.87$0.87$0.87$0.85$1.06Consolidated Statements of Assets and Liabilities Data:Total assets$2,616,306$2,490,755$2,187,942$841,641$186,877Borrowings outstanding$915,497$842,238$618,712$132,687$33,907Total net assets$1,529,734$1,610,485$1,535,423$627,903$140,685Other data:Total return(2)6.02%0.67%7.63%14.12%15.19%Number of portfolio company investments at year end1351251108339Value of investments at year end2,394,0832,311,2811,916,991695,776136,171Weighted average yield on investments at year end(3)9.3%9.6%10.4%9.3%9.7%


______________


(1) Expenses are net of expense waivers for the years ended December 31, 2015, 2014, 2013 and 2012, the amounts waived were $3,534, $1,335, $1,827 and $1,877, respectively. No expenses were waived for the year ended December 31, 2016 .


(2) Total return is calculated assuming a purchase of shares of common stock at the current net asset value on the first day and a sale at the current net asset value on the last day of the periods reported. Distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the DRIP. The total return based on net asset value for the years ended December 31, 2016 , December 31, 2015, December 31, 2014, December 31, 2013, and December 31, 2012 includes the effect of expense waivers and reimbursements which equaled 0.00% , 0.22% , 0.11% , 0.51%, and 2.35%, respectively. Total returns covering less than a full period are not annualized.


(3) Inclusive of TRS Loans, for the years ending December 31, 2014, 2013 and 2012. The TRS was liquidated during the year ending December 31, 2014.





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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS





The following discussion and analysis should be read in conjunction with the selected financial data and our consolidated financial statements and the notes thereto, included elsewhere in this Annual Report on Form 10-K.





Forward Looking Statements





This report, and other statements that we may make, may contain forward-looking statements with respect to future financial or business performance, strategies or expectations. Forward-looking statements are typically identified by words or phrases such as “ trend, ”  “ opportunity, ”  “ pipeline, ”  “ believe, ”  “ comfortable, ”  “ expect," “ anticipate, ”  “ current," “ intention, ”  “ estimate, ”  “ position, ”  “ assume, ”  “ potential, ”  “ outlook, ”  “ continue, ”  “ remain, ”  “ maintain, ”  “ sustain, ”  “ seek, ”  “ achieve, ” and similar expressions, or future conditional verbs such as “ will," “ would," “ should," “ could," “ may" or similar expressions.





Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made, and we assume no duty to and do not undertake to update forward-looking statements. Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance.





In addition to factors previously disclosed in our U.S. Securities and Exchange Commission ( “ SEC ” ) reports and those identified elsewhere in this report, including the “ Risk Factors ” section, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance:





|  |                              
|- | -----------------------------
|• | our future operating results;

|  |                                                                     
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|• | our business prospects and the prospects of our portfolio companies;

|  |                                                      
|- | -----------------------------------------------------
|• | the impact of the investments that we expect to make;

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|• | the ability of our portfolio companies to achieve their objectives;

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|- | ------------------------------------------------------------------
|• | our contractual arrangements and relationships with third parties;

|  |                                         
|- | ----------------------------------------
|• | our expected financings and investments;

|  |                                                        
|- | -------------------------------------------------------
|• | the adequacy of our cash resources and working capital;

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|• | the timing of cash flows, if any, from the operations of our portfolio companies;

|  |                          
|- | -------------------------
|• | our repurchase of shares;

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|- | -------------------------------------------------------------------------------
|• | actual and potential conflicts of interest with our Adviser and its affiliates;

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|- | ----------------------------------------------------------------------------------------------------------------
|• | the dependence of our future success on the general economy and its effect on the industries in which we invest;

|  |                                                                                                                                            
|- | -------------------------------------------------------------------------------------------------------------------------------------------
|• | the ability to qualify and maintain our qualification as a regulated investment company (“RIC”) and a business development company (“BDC”);

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|- | ----------------------------------------------------------
|• | the timing, form and amount of any dividend distributions;

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|- | -------------------------------------------------------------
|• | the impact of fluctuations in interest rates on our business;

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|- | ------------------------------------------------------------------------------------------------------------
|• | the valuation of any investments in portfolio companies, particularly those having no liquid trading market;

|  |                                                                                               
|- | ----------------------------------------------------------------------------------------------
|• | the impact of changes to generally accepted accounting principles, and the impact to BDCA; and

|  |                                                                           
|- | --------------------------------------------------------------------------
|• | the impact of changes to tax legislation and, generally, our tax position.




Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Risk Factors” and elsewhere in this Annual Report.





Overview





We are an externally managed, non-diversified closed-end management investment company incorporated in Maryland in May 2010 that has elected to be regulated as a BDC under the Investment Company Act of 1940, as amended (“the 1940 Act”). In addition, we have elected to be treated for tax purposes as a RIC under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). Our investment activities are managed by BDCA Adviser, LLC (the “Adviser”), a subsidiary of Benefit Street Partners L.L.C. (“BSP”) and supervised by our board of directors, a majority of whom are





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independent of the Adviser and its affiliates. As a BDC, we are required to comply with certain regulatory requirements. See “Item 1. Business - Regulation” for discussion of BDC regulation and other regulatory considerations.





Our investment objective is to generate both current income and to a lesser extent long-term capital appreciation through debt and equity investments. We invest primarily in senior secured loans, and to a lesser extent, mezzanine loans, unsecured loans and equity of predominantly private U.S. middle-market companies. We define middle market companies as those with annual earnings before interest, taxes, depreciation and amortization (“EBITDA”) of $10 million to $100 million, although we may invest in larger or smaller companies. We may also purchase interests in loans or corporate bonds through secondary market transactions. We expect that each investment generally will range between approximately 0.5% and 3.0% of our total assets. As of December 31, 2016 , 79.0% of our portfolio was invested in senior secured loans.





Senior secured loans generally are senior debt instruments that rank ahead of subordinated debt and equity in bankruptcy priority and are generally secured by liens on the operating assets of a borrower which may include inventory, receivables, plant, property and equipment. Mezzanine debt is subordinated to senior loans and is generally unsecured. We may also invest in the equity and junior debt tranches of collateralized loan obligation investment vehicles (“Collateralized Securities”).





Financial and Operating Highlights


(Dollars in millions, except per share amounts)At December 31, 2016:Investment Portfolio:$2,394.1Net Assets attributable to Business Development Corporation of America:1,526.9Indebtedness (borrowings under Credit Facilities and Unsecured Notes):915.5Net Asset Value per share:8.62Portfolio Activity for the Year Ended December 31, 2016:Cost of investments purchased during period, including PIK:690.9Sales, repayments and other exits during the period:587.9Number of portfolio companies at end of period:135Operating results for the Year Ended December 31, 2016:Net investment income per share:0.67Distributions declared per share:0.87Net increase in net assets resulting from operations per share:0.52Net investment income:120.0Net realized and unrealized gain (loss) on investments, net of deferred taxes(25.6)Net increase in net assets resulting from operations:94.4





Portfolio and Investment Activity





During the year ended December 31, 2016 , we made $ 0.7 billion of investments in new and existing portfolio companies and had $ 0.6 billion in aggregate amount of exits and repayments, resulting in net investments of $0.1 billion for the period. The portfolio composition by loan market consisted of 75.2% Middle Market (1) , 7.2% Large Corporate (2) , and 17.6% Other (3) investments. In addition, the total portfolio of debt investments at fair value consisted of 92.2% bearing variable interest rates and 7.8% bearing fixed interest rates.


______________





(1) Middle market represents companies whose annual revenues are between $10 million and $1 billion.


(2) Large corporate represents companies whose annual revenues are in excess of $1 billion.


(3) Other represents collateralized securities and equity investments.








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Our portfolio composition, based on fair value at December 31, 2016 was as follows: December 31, 2016Percentage ofTotal PortfolioWeighted Average Current Yield for Total Portfolio(1)Senior Secured First Lien Debt68.1%8.6%Senior Secured Second Lien Debt10.910.4Subordinated Debt3.413.5Collateralized Securities(2)10.411.5Equity/Other7.2N/ATotal100.0%9.3%


______________





(1) Excludes the effect of the amortization or accretion of loan premiums or discounts.


(2) Weighted average current yield for Collateralized Securities is based on the estimation of effective yield to expected maturity for each security as calculated in accordance with ASC Topic 325-40-35, Beneficial Interests in Securitized Financial Assets (see Note 2 - Summary of Significant Accounting Policies).





During the year ended December 31, 2015 , we made $ 1.2 billion of investments in new and existing portfolio companies and had $ 0.7 billion in aggregate amount of exits and repayments, resulting in net investments of $0.5 billion for the period. The portfolio composition by loan market consisted of 80.4% Middle Market (1) , 3.7% Large Corporate (2) , and 15.9% Other (3) investments. In addition, the total portfolio of debt investments at fair value consisted of 91.2% bearing variable interest rates and 8.8% bearing fixed interest rates.


______________





(1) Middle market represents companies whose annual revenues are between $10 million and $1 billion.


(2) Large corporate represents companies whose annual revenues are in excess of $1 billion.


(3) Other represents collateralized securities and equity investments.





Our portfolio composition, based on fair value at December 31, 2015 was as follows:


December 31, 2015Percentage ofTotal PortfolioWeighted Average Current Yield for Total Portfolio(1)Senior Secured First Lien Debt60.8%8.8%Senior Secured Second Lien Debt15.110.4Subordinated Debt4.013.6Collateralized Securities(2)11.311.3Equity/Other8.8N/ATotal100.0%9.6%


______________





(1) Excludes the effect of the amortization or accretion of loan premiums or discounts.


(2) Weighted average current yield for Collateralized Securities is based on the estimation of effective yield to expected maturity for each security as calculated in accordance with ASC Topic 325-40-35, Beneficial Interests in Securitized Financial Assets (see Note 2 - Summary of Significant Accounting Policies).
































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RESULTS OF OPERATIONS





Operating results for the years ended December 31, 2016 , 2015 and 2014 was as follows:


For the Year Ended December 31,For the Year Ended December 31,For the Year Ended December 31,201620152014Total investment income$229,658$195,846$138,281Total expenses net of expense waivers108,52181,69051,994Income tax expense, including excise tax1,140——Net investment (income) loss attributable to non-controlling interests19—(68)Net investment income119,978114,15686,355





Investment Income





For the year ended December 31, 2016 , total investment income was $ 229.7 million and was primarily attributable to interest income from investments in portfolio companies with an average portfolio fair value of $2.4 billion and a weighted average current yield of 9.3%. Included within total investment income was $5.5 million of prepayment and amendment fees for the year ended December 31, 2016 . For the year ended December 31, 2015 , total investment income was $ 195.8 million and was primarily attributable to interest income from investments in portfolio companies with an average portfolio fair value of $2.1 billion and a weighted average current yield of 9.6%. Included within total investment income was $2.5 million of prepayment and amendment fees for the year ended December 31, 2015 . For the year ended December 31, 2014, total investment income was $ 138.3 million and was primarily attributable to interest income from investments in portfolio companies with an average portfolio fair value of $1.4 billion and a weighted average current yield of 10.4%. Included within total investment income was $4.6 million of prepayment and amendment fees for the year ended December 31, 2014. The increases in total investment income during the year ended December 31, 2016 as compared to the year ended December 31, 2015 , and during the year ended December 31, 2015 as compared to year ended December 31, 2014, were driven by the year over year increases in average portfolio size.





Operating Expenses





The composition of our operating expenses for the years ended December 31, 2016 , 2015 and 2014 was as follows:





For the Year Ended December 31,For the Year Ended December 31,For the Year Ended December 31,201620152014Management fees$38,121$35,994$24,926Subordinated income incentive fees17,90610,1459,929Capital gains incentive fees——(2,664)Interest and credit facility financing expenses37,32726,46711,057Professional fees6,3576,7775,956Other general and administrative7,0594,5903,060Administrative Services811966770Insurance184210221Directors fees7567574Operating expenses before expense waivers108,52185,22453,329Waiver of management and incentive fees—(3,534)(1,335)Total operating expenses net of expense waivers$108,521$81,690$51,994





For the year ended December 31, 2016 , we incurred $ 38.1 million of management fees, of which the Adviser waived none. For the year ended December 31, 2016 , we incurred $17.9 million of incentive fees, of which the Adviser waived none. For the year ended December 31, 2015, we incurred $ 36.0 million of management fees, of which the Adviser waived none. For the year ended December 31, 2015, we incurred $10.1 million of incentive fees, of which the Adviser waived $3.5 million. For





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the year ended December 31, 2014, we incurred $ 24.9 million of management fees, of which the Adviser waived none. For the year ended December 31, 2014, we incurred $7.3 million of incentive fees, of which the Adviser waived $1.3 million.





For the years ended December 31, 2016 , 2015 and 2014, we incurred interest and credit facility financing expenses of $ 37.3 million, $26.5 million, and $11.1 million, respectively. Interest and credit facility financing expenses are comprised of interest expense, non-usage fees, amortization of deferred financing costs and amortization of discount if applicable related to the Wells Fargo Credit Facility, Deutsche Bank Credit Facility, Citi Credit Facility, UBS Credit Facility and Unsecured Notes. The increase in interest and credit facility financing expenses for the year ended December 31, 2016 as compared to the same periods in 2015 and 2014 is a result of an increase in the weighted average interest rate as well as an increase in the average debt outstanding.





Net Realized Gain and Net Change in Unrealized Appreciation (Depreciation) on Investments for the years ended December 31, 2016, 2015 and 2014 was as follows:





For the Year Ended December 31,For the Year Ended December 31,For the Year Ended December 31,201620152014Net realized gain (loss) from investmentsControl investments$—$(51)$(79)Affiliate investments(11,988)2767,785Non-control/non-affiliate investments(11,321)(579)1,688Total net realized gain (loss) from investments(23,309)(354)9,394Net realized gain from total return swap——14,552Net change in unrealized appreciation (depreciation) on investments, net of deferred taxesControl investments(40,638)19,2078,466Affiliate investments48,182(68,777)(10,858)Non-control/non-affiliate investments(11,127)(53,652)(24,529)Total net change in unrealized depreciation on investments, net of deferred taxes(3,583)(103,222)(26,921)Net change in unrealized depreciation on total return swap——(3,180)Net change in unrealized appreciation (depreciation) attributable to non-controlling interests1,316(2,527)(660)Net realized and unrealized loss on investments and total return swap$(25,576)$(106,103)$(6,815)





Net realized and unrealized gain (loss) on investments, net of deferred taxes, resulted in a net loss of $(25.6) million for the year ended December 31, 2016 compared to a net loss of $(106.1) million and $(6.8) million, respectively, for the same periods in 2015 and 2014. We look at net realized gains (losses) and change in unrealized appreciation (depreciation) together, as movement in unrealized appreciation or depreciation can be the result of realizations.





The net realized and unrealized loss for the year ended December 31, 2016 was primarily driven by realized losses on one subordinated, one first lien, and one equity investment. The net realized and unrealized loss for the year ended December 31, 2015 was primarily driven by unrealized depreciation across the portfolio of Collateralized Securities investments. The net realized and unrealized loss for the year ended December 31, 2014 was driven by unrealized depreciation on first lien loans primarily due to the overall market decline in broadly syndicated loan prices.





Changes in Net Assets from Operations





For the year ended December 31, 2016 , we recorded a net increase in net assets resulting from operations of $ 94.4 million versus a net increase in net assets resulting from operations of $8.1 million for the year ended December 31, 2015. The increase is primarily attributable to a net increase in unrealized appreciation in our investments, driven mostly by our Collateralized Securities. Based on the weighted average shares of common stock outstanding for the periods ended December 31, 2016 and 2015, respectively, our per share net increase in net assets resulting from operations was $ 0.52 for the year ended December 31, 2016 , versus a net increase in net assets resulting from operations of $0.05 for the year ended December 31, 2015.





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For the year ended December 31, 2015, we recorded a net increase in net assets resulting from operations of $ 8.1 million versus a net increase in net assets resulting from operations of $79.5 million for the year ended December 31, 2014. The decrease is primarily attributable to net unrealized depreciation on investments of $(103.6) million during the year ended December 31, 2015 which was driven by the overall market decline in broadly syndicated loan prices and unrealized depreciation across the portfolio of Collateralized Securities due to decreased liquidity in the market for this asset class and a decline in the market values of the collateral loans underlying these securities. The decrease was partially offset by an increase of $27.8 million in net investment income during the year ended December 31, 2015 as compared to the prior year due to an increased average investment level during the year. Based on the weighted average shares of common stock outstanding for the periods ended December 31, 2015 and 2014, respectively, our per share net increase in net assets resulting from operations was $ 0.05 for the year ended December 31, 2015, versus a net increase in net assets resulting from operations of $0.65 for the year ended December 31, 2014.





Cash Flows





For the year ended December 31, 2016 , net cash provided by operating activities was $ 84.5 million. The level of cash flows used in or provided by operating activities is affected by the timing of purchases, redemptions and sales of portfolio


investments, among other factors. The increase in cash flows provided by operating activities for the year ended December 31, 2016 was primarily due to $ 0.6 billion for sales and repayments of investments, a net increase in realized gains from investments of $ 23.3 million, a net increase in net assets of $94.4 million and an increase in unsettled purchases of $67.3 million, offset by cash used in operating activities for purchases of $0.7 billion, a decrease in unsettled sale proceeds of $2.9 million and payment-in-kind interest of $12.4 million.





Net cash used in financing activities of $ 45.7 million during the year ended December 31, 2016 primarily related to net proceeds from the Wells Fargo Credit Facility, Citi Credit Facility, Deutsche Bank Credit Facility and the UBS Credit Facility of $72.9 million. These inflows were partially offset by payments of stockholder distributions of $97.7 million and net repurchases of common stock of $29.1 million.





For the year ended December 31, 2015, net cash used in operating activities was $ 344.9 million. The level of cash flows used in or provided by operating activities is affected by the timing of purchases, redemptions and sales of portfolio


investments, among other factors. The increase in cash flows used in operating activities for the year ended December 31, 2015 was primarily due to $ 1.2 billion for purchases of investments partially offset by cash provided by operating activities of $ 0.7 billion for sales and repayments of investments, $ 6.0 million from a increase in unsettled trades payable, and $ 8.1 million from a net increase in net assets from operations. The purchase and sales activity was driven by the increase in investment activity resulting from the equity capital raising and borrowings on our credit facilities.





Net cash provided by financing activities of $ 288.5 million during the year ended December 31, 2015 primarily related to net proceeds from the issuance of common stock of $ 165.5 million and net proceeds from the Wells Fargo Credit Facility, the Deutsche Bank Credit Facility, Citi Credit Facility, and the UBS Credit Facility of $223.4 million. These inflows were partially offset by payments of stockholder distributions of $ 78.0 million. Consistent with the increase in investment activity, the proceeds from the issuance of common stock are the result of our increasing equity raise capabilities.





For the year ended December 31, 2014, net cash used in operating activities was $ 1.1 billion. The level of cash flows used in or provided by operating activities is affected by the timing of purchases, redemptions and sales of portfolio


investments, among other factors. The increase in cash flows used in operating activities for the year ended December 31, 2014 was primarily due to $ 2.5 billion for purchases of investments partially offset by cash provided by operating activities of $ 1.3 billion for sales and repayments of investments, $ 66.3 million from a decrease in unsettled trades payable, and $ 79.5 million from a net increase in net assets from operations. The purchase and sales activity is driven by the increase in investment activity resulting from the continuous equity capital raising and growing capital base.





Net cash provided by financing activities of $ 1.3 billion during the year ended December 31, 2014 primarily related to net proceeds from the issuance of common stock of $ 888.6 million and net proceeds from the Wells Fargo Credit Facility, the Deutsche Bank Credit Facility, and the Citi Credit Facility of $486.0 million. These inflows were partially offset by payments of stockholder distributions of $ 50.7 million. Consistent with the increase in investment activity, the proceeds from the issuance of common stock are the result of our increasing equity raise capabilities.

















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Recent Developments





DRIP Sales





From January 1, 2017 through the filing of this Form 10-K, the Company has issued 1.7 million shares of common stock including shares issued pursuant to the DRIP. Total gross proceeds from these issuances including proceeds from shares issued pursuant to the DRIP were $14.9 million.





Borrowings





On January 20, 2017, we entered into a prime brokerage account agreement with JP Morgan Securities LLC (the “JPMC PB Account”). The JPMC PB Account provides a full suite of services around the custody of bonds and equities and also access to leverage, which is dependent on the price, credit quality and diversity of the pool of assets held within the account. The borrowing availability is recalculated daily based on changes to the assets, with margin calls issued in the morning as appropriate. The cost to borrow is 1 week LIBOR + 90 bps and there is no mandatory usage or period wherein the debt needs to be repaid.


Liquidity and Capital Resources





We generate cash flows from fees, interest and dividends earned from our investments, as well as proceeds from sales of our investments and, previously, from the net proceeds of our Offering. As of December 31, 2016 , we had issued 189.6 million shares of our common stock for gross proceeds of $ 2.0 billion, including shares issued to the BSP affiliate and shares issued under our distribution reinvestment plan (“DRIP”).





Our principal demands for funds in both the short-term and long-term are for portfolio investments, for the payment of operating expenses, distributions to our investors, repurchases under our share repurchase program, and for the payment of principal and interest on our outstanding indebtedness. We may also from time to time enter into other agreements with third parties whereby third parties will contribute to specific investment opportunities. Other potential future sources of capital include proceeds from secured or unsecured financings from banks or other lenders, proceeds from private offerings, proceeds from the sale of investments and undistributed funds from operations. However, our ability to incur additional debt will be dependent on a number of factors, including our degree of leverage, the value of our unencumbered assets and borrowing restrictions that may be imposed by lenders. Our ability to raise proceeds in our public offering will be dependent on a number of factors as well, including general market conditions for BDCs.





We intend to conduct semi-annual tender offers pursuant to our share repurchase program. Our board of directors will consider the following factors, among others, in making its determination regarding whether to cause us to offer to repurchase shares and under what terms:





|  |                                                                                                                        
|- | -----------------------------------------------------------------------------------------------------------------------
|• | the effect of such repurchases on our qualification as a RIC (including the consequences of any necessary asset sales);

|  |                                                                                            
|- | -------------------------------------------------------------------------------------------
|• | the liquidity of our assets (including fees and costs associated with disposing of assets);

|  |                                                       
|- | ------------------------------------------------------
|• | our investment plans and working capital requirements;

|  |                                                          
|- | ---------------------------------------------------------
|• | the relative economies of scale with respect to our size;

|  |                                                            
|- | -----------------------------------------------------------
|• | our history in repurchasing shares or portions thereof; and

|  |                                         
|- | ----------------------------------------
|• | the condition of the securities markets.




On March 8, 2016, our board of directors amended our share repurchase program. We will begin to make tender offers on a semi-annual basis, instead of on a quarterly basis as was done previously. We will continue to limit the number of shares to be repurchased in any calendar year to 10% of the weighted average number of shares outstanding in the prior calendar year, or 5.0% at each semi-annual tender offer. In addition, in the event of a stockholder’s death or disability, any repurchases of shares made in connection with a stockholder’s death or disability may be included within the overall limitation imposed on tender offers during the relevant redemption period, which provides that we may limit the number of shares to be repurchased during any redemption period to the number of shares of common stock we are able to repurchase with the proceeds received from the sale of shares of common stock under the DRIP during such redemption period.








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Distributions





Our board of directors has authorized, and we have declared, cash distributions payable on a monthly basis to stockholders of record on each day since we commenced operations. Since November 2013, the distribution rate has been $0.002378082 per day, which is equivalent to $0.868 per annum, per share of common stock. In March 2016, our board of directors ratified the existing distribution amount equivalent to $0.868 per annum, and, for calendar year 2016, affirmed a change to the daily distribution amount to $0.002371585 per day per share of common stock, effective January 1, 2016, to accurately reflect that 2016 was a leap year.





The amount of each such distribution will be subject to the discretion of our board of directors and applicable legal restrictions related to the payment of distributions. We will calculate each stockholder’s specific distribution amount for the month using record and declaration dates and accrue distributions on the date we accept a subscription for shares of our common stock. The distributions are payable by the fifth day following each month end to stockholders of record at the close of business each day during the prior month.





From time to time, we may also pay interim distributions at the discretion of our board of directors. Our distributions may exceed our earnings, especially during the period before we have substantially invested the proceeds from our IPO. As a result, a portion of the distributions we make may represent a return of capital for tax purposes.





The table below shows the components of the distributions we have declared and/or paid during the years ended December 31, 2016 and 2015. As of December 31, 2016 , we had $ 13.5 million of distributions accrued and unpaid.





For the Year Ended December 31,For the Year Ended December 31,For the Year Ended December 31,201620152014Distributions declared$156,434$149,619$106,299Distributions paid$156,132$147,992$99,290Portion of distributions paid in cash$97,708$77,959$50,721Portion of distributions paid in DRIP shares$58,424$70,033$48,569





We may fund our cash distributions to stockholders from any sources of funds available to us, including offering proceeds, borrowings, net investment income from operations, capital gains proceeds from the sale of assets and non-capital gains proceeds from the sale of assets. We have not established limits on the amount of funds we may use from available sources to make distributions. We may have distributions which could be characterized as a return of capital for tax purposes . During the year ended December 31, 2016 , no portion of our distributions was characterized as return of capital for tax purposes. During the year ended December 31, 2015, $16.3 million of our distributions was characterized as return of capital for tax purposes. No portion of our distributions was characterized as a return of capital for tax purposes for the year ended December 31, 2014. You should understand that any such distributions were not based on our investment performance and can only be sustained if we achieve positive investment performance in future periods and/or our Adviser continues to make such reimbursements. There can be no assurance that we will achieve the performance necessary to sustain our distributions or that we will be able to pay distributions at all. The Adviser has no obligation to make Expense Support Payments in future periods.





The following table sets forth the distributions made during the years ended December 31, 2016 , 2015, and 2014(dollars in thousands):


For the Year Ended December 31,For the Year Ended December 31,For the Year Ended December 31,201620152014Monthly distributions$156,434$149,619$106,299Total distributions$156,434$149,619$106,299





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Election as a RIC





We have elected to be treated as a RIC under Subchapter M of the Code commencing with our taxable year ended December, 31 2011, and intend to maintain our qualification as a RIC thereafter. As a RIC, we generally will not have to pay corporate-level U.S. federal income taxes on any income that we distribute to our stockholders from our tax earnings and profits. To maintain our qualification as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements. In addition, in order to maintain RIC tax treatment, we must distribute to our stockholders, for each taxable year, at least 90% of our “investment company taxable income,” which is generally our net ordinary income plus the excess, if any, of realized net short-term capital gain over realized net long-term capital loss, or the annual distribution requirement. Even if we qualify as a RIC, we generally will be subject to corporate-level U.S. federal income tax on our undistributed taxable income and could be subject to U.S federal excise, state, local and foreign taxes. We may be subject to a 4% U.S federal excise tax.





Related Party Transactions and Agreements





The Transaction





On July 19, 2016, American Realty Capital II Advisors, LLC, the former parent of the Adviser, entered into a membership interest purchase agreement with a subsidiary of BSP, pursuant to which BSP acquired all of the outstanding limited liability company interests of the Adviser (the “Transaction”). In connection with the Transaction, we amended the Investment Advisory Agreement, effective as of November 1, 2016, to allow the Adviser to serve as investment adviser to us following the closing of the Transaction.





Investment Advisory Agreement





We entered into an Investment Advisory Agreement on November 1, 2016 under which the Adviser, subject to the overall supervision of our board of directors manages the day-to-day operations of, and provides investment advisory services to us. The Adviser and its affiliates also provide investment advisory services to other funds that have investment mandates that are similar, in whole and in part, with ours. The Adviser and its affiliates serve as investment adviser or subadvisor to private funds and registered open-end funds, and serves as an investment adviser to a public REIT. The Adviser’s policies are designed to manage and mitigate the conflicts of interest associated with the allocation of investment opportunities pursuant to the SEC exemptive order. In addition, any affiliated fund currently formed or formed in the future and managed by the Adviser or its affiliates may have overlapping investment objectives with our own and, accordingly, may invest in asset classes similar to those targeted by us. However, in certain instances due to regulatory, tax, investment, or other restrictions, certain investment opportunities may not be appropriate for either us or other funds managed by the Adviser or its affiliates.





Administration Agreement





In connection with the closing of the Transaction, we terminated our previous administration agreement and entered into a new administration agreement with BSP on November 1, 2016. In connection with the New Administration Agreement, BSP will provide us with office facilities and administrative services.





Co-Investment Relief





The 1940 Act generally prohibits BDCs from making certain negotiated co-investments with affiliates absent an order from the SEC permitting the BDC to do so. Unless otherwise provided in the allocation policy, if an investment opportunity is appropriate for both us and other investment funds and the investment opportunity requires more than the price to be negotiated, the investment opportunity will be made available to the other investment fund or us on an alternating basis based on the date of closing of each such investment opportunity and each fund’s available capital. As a result, the Adviser and/or its affiliates may face conflicts in allocating investment opportunities between us and such other entities. Although the Adviser and its affiliates will endeavor to allocate investment opportunities in a fair and equitable manner and consistent with applicable allocation procedures, it is possible that, in the future, we may not be given the opportunity to participate in investments made by investment funds managed by the Adviser or its affiliates.





The SEC staff has granted us relief sought in an exemptive application that expands our ability to co-invest in portfolio companies with other funds managed by the Adviser or its affiliates (“Affiliated Funds”) in a manner consistent with our investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors, subject to compliance with certain conditions (the “Order”). Pursuant to the Order, we are permitted to co-invest with our affiliates if a “required majority” (as defined in Section 57(o) of the 1940 Act) or our independent directors make certain





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conclusions in connection with a co-investment transaction, including that (1) the terms of the transactions, including the consideration to be paid, are reasonable and fair to us and our stockholders and do not involve overreaching by us or our stockholders on the part of any person concerned, and (2) the transaction is consistent with the interests of our stockholders and is consistent with our investment objective and strategies.





Transactions with Affiliates





In connection with the closing of the Transaction, an affiliate of BSP purchased $10.0 million of our common stock based on our net asset value per share as of September 30, 2016 in a private placement in reliance on Section 4(a)(2) of the Securities Act of 1933. On November 7, 2016, we issued approximately 1.2 million shares of our common stock to the BSP affiliate.





Contractual Obligations





The following table shows our payment obligations for repayment of debt and other contractual obligations at December 31, 2016 (dollars in thousands):





Payment Due by PeriodTotalLess than 1 year1 - 3 years3- 5 yearsMore than 5 yearsWells Fargo Credit Facility(1)$298,152$—$—$298,152$—Citi Credit Facility(2)286,003—286,003——UBS Credit Facility(3)232,500—232,500——Unsecured Notes(4)98,842——98,842—Total contractual obligations$915,497$—$518,503$396,994$—


______________





|    |                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | As ofDecember 31, 2016, we had $101.8 million of unused borrowing capacity under the Wells Fargo Credit Facility, subject to borrowing base limits.

|    |                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------
|(2) | As ofDecember 31, 2016, we had $114.0 million of unused borrowing capacity under the Citi Credit Facility, subject to borrowing base limits.

|    |                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------
|(3) | As ofDecember 31, 2016, we had no unused borrowing capacity under the UBS Credit Facility, subject to borrowing base limits.

|    |                                                                                       
|--- | --------------------------------------------------------------------------------------
|(4) | As ofDecember 31, 2016, we had no unused borrowing capacity under the Unsecured Notes.




Off-Balance Sheet Arrangements





We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.





Commitments





In the ordinary course of business, the Company may enter into future funding commitments. As of December 31, 2016 , we had unfunded commitments on delayed draw term loans of $35.7 million, unfunded commitments on revolver term loans of $24.7 million and unfunded equity capital commitments of $9.4 million. As of December 31, 2015 , we had unfunded commitments on delayed draw term loans of $48.7 million, unfunded commitments on revolver term loans of $18.9 million and unfunded equity capital commitments of $11.8 million. The unfunded commitments are disclosed in our consolidated schedule of investments. We maintain sufficient cash on hand and available borrowings to fund such unfunded commitments.





Significant Accounting Estimates and Critical Accounting Policies





Our discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and





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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.





While our significant accounting policies are more fully described in Note 2 of Notes to Consolidated Financial Statements appearing elsewhere in this report, we believe the following accounting policies require the most significant judgment in the preparation of our consolidated financial statements.





Valuation of Portfolio Investments





Portfolio investments are reported on the consolidated statement of assets and liabilities at fair value. On a quarterly basis we perform an analysis of each investment to determine fair value as follows:





Securities for which market quotations are readily available on an exchange are valued at the reported closing price on the valuation date. We may also obtain quotes with respect to certain of our investments from pricing services or brokers or dealers in order to value assets. When doing so, we determine whether the quote obtained is readily available according to U.S. GAAP to determine the fair value of the security. If determined readily available, we use the quote obtained.





Investments without a readily determined market value are primarily valued using a market approach, an income approach, or both approaches, as appropriate. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors that we may take into account in fair value pricing our investments include, as relevant: available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company's ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, M&A comparables, and enterprise values, among other factors. When available, broker quotations and/or quotations provided by pricing services are considered as an input in the valuation process.





For an investment in an investment fund that does not have a readily determinable fair value, we measure the fair value of the investment predominately based on the net asset value per share of the investment fund if the net asset value of the investment fund is calculated in a manner consistent with the measurement principles of ASC 946, as of our measurement date.





For investments in Collateralized Securities, both the assets and liabilities of each Collateralized Securities' capital structure are modeled. The model uses a waterfall engine to store the collateral data, generate collateral cash flows from the assets, and distribute the cash flows to the liability structure based on the priority of payments. The waterfall cash flows are discounted using rates that incorporate risk factors such as default risk, interest rate risk, downgrade risk, and credit spread risk, among others. In addition, broker quotations and/or comparable trade activity is considered as an input to determining fair value when available.





As part of our quarterly valuation process the Adviser may be assisted by one or more independent valuation firms engaged by us. The board of directors determines the fair value of each investment, in good faith, based on the input of the Adviser and the independent valuation firm(s) (to the extent applicable).





With respect to investments for which market quotations are not readily available, the Adviser undertakes a multi-step valuation process each quarter, as described below:





|  |                                                                                                                                                                                
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | Each portfolio company or investment will be valued by the Adviser, potentially with assistance from one or more independent valuation firms engaged by our board of directors;

|  |                                                                                                                                                            
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|• | The independent valuation firm(s), if involved, will conduct independent appraisals and make an independent assessment of the value of each investment; and

|  |                                                                                                                                                                                                                                
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | The board of directors determines the fair value of each investment, in good faith, based on the input of the Adviser, independent valuation firm (to the extent applicable) and the audit committee of the board of directors.







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Because there is not a readily available market value for most of the investments in its portfolio, we value substantially all of our portfolio investments at fair value as determined in good faith by our board of directors, as described herein. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period. Additionally, the fair value of our investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that we may ultimately realize. Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we could realize significantly less than the value at which we have recorded it.





Revenue Recognition





Interest Income





Investment transactions are accounted for on the trade date. Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis. Discounts and premiums on investments purchased are accreted/amortized over the expected life of the respective investment using the effective yield method. The amortized cost of investments represents the original cost adjusted for the accretion of discounts and amortizations of premiums on investments.





We have a number of investments in Collateralized Securities. Interest income from investments in the “equity” class of these Collateralized Securities (in our case, preferred shares or subordinated notes) is recorded based upon an estimation of an effective yield to expected maturity utilizing assumed cash flows in accordance with ASC Topic 325-40-35, Beneficial Interests in Securitized Financial Assets. We monitor the expected cash inflows from its equity investments in Collateralized Securities, including the expected principal repayments. The effective yield is determined and updated quarterly.


Fee Income


Fee income, such as structuring fees, origination, closing, amendment fees, commitment and other upfront fees are generally non-recurring and are recognized as revenue when earned, either upfront or amortized into income. Upon the payment of a loan or debt security, any prepayment penalties and unamortized loan origination, structuring, closing, commitment and other upfront fees are recorded as income.


Payment-in-Kind Interest/Dividends





We hold debt and equity investments in its portfolio that contain payment-in-kind (“PIK”) interest and dividend provisions. The PIK interest and PIK dividend, which represent contractually deferred interest or dividends that add to the investment balance that is generally due at maturity, are generally recorded on the accrual basis.





Non-accrual income





Investments are placed on non-accrual status when principal or interest/dividend payments are past due 30 days or more and/or when there is reasonable doubt that principal or interest will be collected. Accrued cash and un-capitalized PIK interest is generally reversed when an investment is placed on non-accrual status. Previously capitalized PIK interest is not reversed when an investment is placed on non-accrual status. Interest payments received on non-accrual investments may be recognized as income or applied to principal depending upon management's judgment of the ultimate outcome. Non-accrual investments are restored to accrual status when past due principal and interest is paid and, in management's judgment, are likely to remain current.





Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation





Gains or losses on the sale of investments are calculated 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. Net change in unrealized appreciation or depreciation will reflect the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized.





See Note 2 to the consolidated financial statements for a description of other accounting policies and recently issued accounting pronouncements.














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ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





The market risk associated with financial instruments and derivative financial instruments is the risk of loss from adverse changes in market prices or interest rates. Our market risk arises primarily from interest rate risk relating to interest rate fluctuations. Many factors including governmental monetary and tax policies, domestic and international economic and political considerations and other factors that are beyond our control contribute to interest rate risk. To meet our short and long-term liquidity requirements, we borrow funds at a combination of fixed and variable rates. Our interest rate risk management objectives are to limit the impact of interest rate changes in earnings and cash flows and to lower our overall borrowing costs. To achieve these objectives, from time to time, we may enter into interest rate hedge contracts such as swaps, collars and treasury lock agreements, subject to the requirements of the 1940 Act, in order to mitigate our interest rate risk with respect to various debt instruments. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in benefits of lower interest rates with respect to our portfolio of investments with fixed interest rates. During the periods covered by this report, we did not engage in interest rate hedging activities. We would not hold or issue these derivative contracts for trading or speculative purposes. We do not have any foreign operations and thus we are not exposed to foreign currency fluctuations.





As of December 31, 2016 , our debt included variable-rate debt, bearing a weighted average interest rate of LIBOR plus 3.71% and fixed rate debt, bearing an interest rate of 6.00% with a total carrying value of $ 915.5 million. The following table quantifies the potential changes in interest income net of interest expense should interest rates increase by 100 or 200 basis points or decrease by 25 basis points assuming that our current statement of assets and liabilities was to remain constant and no actions were taken to alter our existing interest rate sensitivity.





Change in Interest RatesEstimated Percentage Change in Interest Income net of Interest Expense(-) 25 Basis Points5.44%Base Interest Rate—%(+) 100 Basis Points8.21%(+) 200 Basis Points12.45%





Because we may borrow money to make investments, our net investment income may be dependent on the difference between the rate at which we borrow funds and the rate at which we invest these funds. In periods of increasing interest rates, our cost of funds would increase, which may reduce our net investment income. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income.








ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA





Our consolidated financial statements are annexed to this Annual Report beginning on page F-1.








ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE





None.








ITEM 9A.  CONTROLS AND PROCEDURES





Disclosure Controls and Procedures





In accordance with Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this Annual Report on Form 10-K. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were (a) designed to ensure that the information we are required to disclose in our reports under the Exchange Act is recorded, processed and reported in an accurate manner and on a timely basis and the information that we are





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required to disclose in our Exchange Act reports is accumulated and communicated to management to permit timely decisions with respect to required disclosure and (b) operating in an effective manner.





Management's Annual Report on Internal Control Over Financial Reporting





Our management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, internal control over financial reporting is a process designed by, or under the supervision of, our principal executive and principal financial officers, or persons performing similar functions, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with U.S. GAAP.





Our internal control over financial reporting includes those policies and procedures that:


1. Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and our dispositions of assets;


2. Provide reasonable assurance that our transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and board of directors; and


3. Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financial statements.





Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation and presentation and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.





In connection with the preparation of our Form 10-K, our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2016 . In making that assessment, management used the criteria based on the framework set forth in Internal Control-Integrated Framework 2014 issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).





Based on its assessment, our management concluded that, as of December 31, 2016 , our internal control over financial reporting was effective.





The rules of the SEC do not require, and this annual report does not include, an attestation report of our independent registered public accounting firm regarding internal control over financial reporting.





Change in Internal Control Over Financial Reporting





No change occurred in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter ended December 31, 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.








ITEM 9B. OTHER INFORMATION





None.





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PART III








ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE





The information required by Item 10 is hereby incorporated by reference from our definitive Proxy Statement relating to our 2017 Annual Meeting of Stockholders to be filed with the SEC within 120 days following the end of our fiscal year.We have adopted a Code of Business Conduct and Ethics which contains a Statement on the Prohibition of Insider Trading that applies to directors, officers and employees. The Code of Business Conduct and Ethics is available on our website at


http://www.bdcofamerica.com. We will report any amendments to or waivers of a required provision of the Code of Business Conduct and Ethics on our website or in a Form 8-K.








ITEM 11. EXECUTIVE COMPENSATION





The information required by Item 11 is hereby incorporated by reference from our definitive Proxy Statement relating to our 2017 Annual Meeting of Stockholders to be filed with the SEC within 120 days following the end of our fiscal year.








ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS





The information required by Item 12 is hereby incorporated by reference from our definitive Proxy Statement relating to our 2017 Annual Meeting of Stockholders to be filed with the SEC within 120 days following the end of our fiscal year.











ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE





The information required by Item 13 is hereby incorporated by reference from our definitive Proxy Statement relating to our 2017 Annual Meeting of Stockholders to be filed with the SEC within 120 days following the end of our fiscal year.








ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES





The information required by Item 14 is hereby incorporated by reference from our definitive Proxy Statement relating to our 2017 Annual Meeting of Stockholders to be filed with the SEC within 120 days following the end of our fiscal year.











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PART IV








ITEM 15. EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES





The following exhibits are included, or incorporated by reference, in this Annual Report on Form 10-K for the year ended December 31, 2016 (and are numbered in accordance with Item 601 of Regulation S-K).





a. Consolidated Financial Statements


See the Index to the Consolidated Financial Statements at page F-1 of this report.


b. Exhibits


Exhibit No.Description3.1Second Articles of Amendment and Restatement of the Registrant (previously filed as Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 filed on August 13, 2013 and herein incorporated by reference).3.2Bylaws (previously filed as Exhibit (b) to the Company’s Pre-Effective Amendment No. 1 to its Registration Statement on Form N-2/A (File No. 333-166636) (the “Prior Registration Statement”) filed on November 24, 2010 and herein incorporated by reference).10.1Investment Advisory and Management Services Agreement dated November 1, 2016 by and between the Company and the Adviser (previously filed as Exhibit 99.1 to the Company's Current Report on Form 8-K filed on November 2, 2016 and herein incorporated by reference).10.2Administration Agreement, dated as of February 9, 2016, between the Company and ARC Advisory Services, LLC (previously filed as Exhibit 10.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 2015 filed on March 9, 2016 and herein incorporated by reference).10.3Administration Agreement dated November 1, 2016 by and between the Company and Benefit Street Partners L.L.C. (previously filed as Exhibit 99.2 to the Company's Current Report on Form 8-K filed on November 2, 2016 and herein incorporated by reference.10.4Amended and Restated Fund Administration Servicing Agreement by and between the Company and U.S. Bancorp Fund Services, LLC (previously filed as Exhibit 10.1 to the Company’s Current Report filed on April 17, 2015 and herein incorporated by reference).10.5Amended and Restated Fund Accounting Servicing Agreement by and between the Company and U.S. Bancorp Fund Services, LLC (previously filed as Exhibit 10.2 to the Company's Current Report on Form 8-K filed on April 17, 2015 and herein incorporated by reference).10.6Distribution Reinvestment Plan (previously filed as Exhibit E to the Company's Pre-Effective Amendment No. 1 to its Prior Registration Statement filed on November 24, 2010 and herein incorporated by reference).10.7Custody Agreement dated August 13, 2012 by and between the Company and U.S. Bank National Association (previously filed as Exhibit 10.11 to the Company's Current Report on Form 8-K filed on August 17, 2012 and herein incorporated by reference).10.8Expense Support Agreement dated November 9, 2011 by and between the Company and Adviser (previously filed as Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011 filed on November 14, 2011 and herein incorporated by reference).10.9Loan and Servicing Agreement, together with Exhibits thereto, among BDCA Funding I, LLC, the Company, Wells Fargo Securities, LLC, Wells Fargo Bank, National Association, Lenders and Lenders Agents from time to time party hereto and U.S. Bank National Association, each dated as of July 24, 2012 (previously filed as Exhibit 10.15 to the Company's Current Report on Form 8-K filed on August 7, 2012 and herein incorporated by reference).10.10Purchase and Sale Agreement by and between the Company and BDCA Funding I, LLC, dated as of July 24, 2012 (previously filed as Exhibit 10.16 to the Company's Current Report on Form 8-K filed on August 7, 2012 and herein incorporated by reference).10.11Collection Account Agreement by and among U.S. Bank National Association, Wells Fargo Securities, LLC, BDCA Funding I, LLC and the Company, dated as of July 24, 2012 (previously filed as Exhibit 10.17 to the Company's Current Report on Form 8-K filed on August 7, 2012 and herein incorporated by reference).





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Exhibit No.Description10.12Amendment No. 1 to Loan and Servicing Agreement, among BDCA Funding I, LLC, the Company, Wells Fargo Securities, LLC and Wells Fargo Bank, National Association, dated as of January 14, 2013 (previously filed as Exhibit 10.16 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2013 filed on May 15, 2013 and herein incorporated by reference).10.13Amendment No. 2 to Loan and Servicing Agreement, among BDCA Funding I, LLC, the Company, Wells Fargo Securities, LLC and Wells Fargo Bank, National Association, dated as of April 26, 2013 (previously filed as Exhibit 10.17 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2013 filed on May 15, 2013 and herein incorporated by reference).10.14Amendment No. 1 to Purchase and Sale Agreement, entered into by and between BDCA Funding I, LLC, the Company, Wells Fargo Securities, LLC and Wells Fargo Bank, National Association and U.S. Bank National Association, dated as of April 26, 2013 (previously filed as Exhibit 10.18 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2013 filed on May 15, 2013 and herein incorporated by reference).10.15Amendment No. 3 to Loan and Servicing Agreement, among BDCA Funding I, LLC, the Company, Wells Fargo Securities, LLC and Wells Fargo Bank, National Association, dated as of September 9, 2013 (previously filed as Exhibit 10.20 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2013 filed on November 13, 2013 and herein incorporated by reference).10.16Confirmation Letter Agreement by and between 405 TRS I, LLC and Citibank, N.A., amended and restated as of October 15, 2013 (previously filed as Exhibit 10.21 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2013 filed on November 13, 2013 and herein incorporated by reference).10.17Confirmation Letter Agreement by and between 405 TRS I, LLC and Citibank, N.A., amended and restated as of May 6, 2014 (previously filed as Exhibit 10.25 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 filed on May 15, 2014 and herein incorporated by reference).10.18Credit and Security Agreement, dated as of June 27, 2014, by and between BDCA-CB Funding LLC, the financial institutions and other lenders from time to time party thereto, Citibank, N.A., as administrative agent, U.S. Bank National Association, as collateral agent and custodian, and Business Development Corporation of America, as collateral manager (previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 2, 2014 and herein incorporated by reference).10.19Account Control Agreement, dated as of June 27, 2014, by and between BDCA-CB Funding, LLC, as pledger, U.S. Bank National Association as collateral agent and securities intermediary(previously filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on July 2, 2014 and herein incorporated by reference).10.20Collateral Administration Agreement, dated as of June 27, 2014, between BDCA-CB Funding, LLC, as borrower, Business Development Corporation of America, as collateral manager, Citibank, N.A., as administrative agent, and U.S. Bank National Association, as collateral administrator (previously filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on July 2, 2014 and herein incorporated by reference).10.21Sale and Contribution Agreement, dated as of June 27, 2014, between Business Development Corporation of America, as seller, and BDCA-CB Funding, LLC, as purchaser (previously filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on July 2, 2014 and herein incorporated by reference).10.22Agreement and Plan of Merger, dated as of June 27, 2014, by and among BDCA-CB Funding LLC, 405 Loan Funding LLC and Citibank, N.A. (previously filed as Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on July 2, 2014 and herein incorporated by reference).10.23Termination Acknowledgment (TRS), dated as of June 27, 2014, by and between BDCA-CB Funding LLC and Citibank, N.A., as counterparty, secured party and bank (previously filed as Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on July 2, 2014 and herein incorporated by reference).10.24Amendment No. 4 to Loan and Servicing Agreement, dated as of June 30, 2014 (as amended), by and among BDCA Funding I, LLC, the Company, Wells Fargo Securities, LLC and Wells Fargo Bank, National Association, and U.S. Bank National Association (previously filed as Exhibit 10.29 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, filed on August 14, 2014 and herein incorporated by reference).10.25Master Loan Purchase Agreement, dated as of April 7, 2015 between BDCA Helvetica Funding, Ltd. and Business Development Corporation of America (previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 7, 2015 and herein incorporated by reference).





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Exhibit No.Description10.26Indenture, dated as of April 7, 2015, by and between BDCA Helvetica Funding, Ltd. and U.S. Bank National Association as trustee (previously filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on April 7, 2015 and herein incorporated by reference).10.27Subscription Agreement, dated as of April 7, 2015, between BDCA Helvetica Funding, Ltd., Business Development Corporation of America (previously filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on April 7, 2015 and herein incorporated by reference).10.28Rule 144A Global Class A Notes and Regulation S Global Class A Notes (included in Exhibit A to Exhibit 10.2 to the Company’s Current Report on Form 8-K previously filed on April 7, 2015 and herein incorporated by reference).10.29TBMA/ISMA 2000 Global Master Repurchase Agreement (2000 version), by and between UBS AG, London Branch and Business Development Corporation of America, together with the related Annex and Confirmation thereto, each dated as of March 31, 2015 (previously filed as Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on April 7, 2015 and herein incorporated by reference).10.30Collateral Management Agreement, dated as of April 7, 2015, between BDCA Helvetica Funding, Ltd. and Business Development Corporation of America (previously filed as Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on April 7, 2015 and herein incorporated by reference).10.31Collateral Administration Agreement, dated as of April 7, 2015, between BDCA Helvetica Funding, Ltd., Business Development Corporation of America and U.S. Bank National Association as administrator (previously filed as Exhibit 10.7 to the Company’s Current Report on Form 8-K filed on April 7, 2015 and herein incorporated by reference).10.32Account Control Agreement dated as of April 7, 2015 between BDCA Helvetica Funding, Ltd. and U.S. Bank National Association as trustee and custodian (previously filed as Exhibit 10.8 to the Company’s Current Report on Form 8-K filed on April 7, 2015 and herein incorporated by reference).10.33Equity Contribution Agreement, dated as of April 7, 2015, between BDCA Helvetica Funding, Ltd., Business Development Corporation of America and U.S. Bank National Association as trustee (previously filed as Exhibit 10.9 to the Company’s Current Report on Form 8-K filed on April 7, 2015 and herein incorporated by reference).10.34Liquidation Agent Appointment Letter, dated as of April 7, 2015, between BDCA Helvetica Funding, Ltd., Business Development Corporation of America and UBS AG, London Branch (previously filed as Exhibit 10.10 to the Company’s Current Report on Form 8-K filed on April 7, 2015 and herein incorporated by reference).10.35Form of Indemnification Agreement (previously filed as exhibit 10.40 to the Company's Annual Report on Form 10-K for the year ended December 31, 2015 filed on May 4, 2015 and herein incorporated by reference).11Computation of Per Share Earnings (included in the notes to the audited consolidated financial statements contained in this report).14Code of Ethics (previously filed as Exhibit 14 to the Company's Annual Report on Form 10-K for the year ended December 31, 2014, filed on May 4, 2015 and herein incorporated by reference).21Subsidiaries of the Registrant (filed herewith).31.1Certification of the Principal Executive Officer of the Company pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).31.2Certification of the Principal Financial Officer of the Company pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).32Written statement of the Principal Executive Officer and Principal Financial Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).99.1Kahala Ireland Opco Limited Consolidated Financial Statements for the years ended December 31, 2016 and December 31, 2015. Although no separate financial statements are required under Regulation S-X Rule 3-09 for the year ended December 31, 2016, they are included for comparison purposes.








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ITEM 16. FORM 10-K SUMMARY





None.








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SIGNATURES





Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized this 16 th day of March 2017 .


BUSINESS DEVELOPMENT CORPORATION OF AMERICABy:/s/ Richard J. ByrneName:Richard J. ByrneTitle: Chief Executive Officer, President and Chairman of the Board of Directors


* * * * *


Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:


SignatureTitleDate/s/ Richard J. ByrneRichard J. ByrneChief Executive Officer, President, and Chairman of the Board of Directors(Principal Executive Officer)March 16, 2017/s/ Corinne D. PankovcinCorinne D. PankovcinChief Financial Officer and Treasurer(Principal Financial and Accounting Officer)March 16, 2017/s/ Lee S. HillmanLee S. HillmanIndependent DirectorMarch 16, 2017/s/ Ronald J. KramerRonald J. KramerIndependent DirectorMarch 16, 2017/s/ Leslie D. MichelsonLeslie D. MichelsonIndependent DirectorMarch 16, 2017/s/ Randolph C. ReadRandolph C. ReadIndependent DirectorMarch 16, 2017/s/ Edward G. RendellEdward G. RendellIndependent DirectorMarch 16, 2017/s/ Dennis M. SchaneyDennis M. SchaneyIndependent DirectorMarch 16, 2017











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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS





PageManagement's Report on Internal Control over Financial ReportingF- 2Report of Independent Registered Public Accounting FirmF- 3Audited Consolidated Financial Statements:Consolidated Statements of Assets and Liabilities as of December 31, 2016 and December 31, 2015F- 4Consolidated Statements of Operations for the Years Ended December 31, 2016, 2015 and 2014F- 5Consolidated Statements of Changes in Net Assets for the Years Ended December 31, 2016, 2015 and 2014F- 7Consolidated Statements of Cash Flows for the Years Ended December 31, 2016, 2015 and 2014F- 8Consolidated Schedules of Investments as of December 31, 2016 and 2015F- 10Notes to Consolidated Financial StatementsF- 30











F- 1


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MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING


Our management is responsible for establishing and maintaining adequate internal control over financial reporting. In connection with the preparation of our annual consolidated financial statements, management has conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework set forth in Internal Control-Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Management's assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of those controls. Based on this evaluation, we have concluded that, as of December 31, 2016 , our internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.








F- 2


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Report of Independent Registered Public Accounting Firm








The Board of Directors and Stockholders


Business Development Corporation of America:


We have audited the accompanying consolidated statements of assets and liabilities, including the consolidated schedules of investments, of Business Development Corporation of America (and subsidiaries) (the Company) as of December 31, 2016 and 2015, and the related consolidated statements of operations, changes in net assets, and cash flows for each of the years in the three-year period ended December 31, 2016. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.


We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. Our procedures included confirmation of securities owned as of December 31, 2016 and 2015, by correspondence with the custodian, portfolio companies and agents or by other appropriate auditing procedures where replies from portfolio companies or agents were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.


In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Business Development Corporation of America (and subsidiaries) as of December 31, 2016 and 2015, and the results of their operations, changes in net assets and their cash flows for each of the years in the three-year period ended December 31, 2016, in conformity with U.S. generally accepted accounting principles.


/s/ KPMG LLP


New York, New York


March 16, 2017














F- 3


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BUSINESS DEVELOPMENT CORPORATION OF AMERICA





CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES


(in thousands except share and per share data)


December 31,20162015ASSETSInvestments, at fair value:Control Investments, at fair value (amortized cost of $271,711 and $282,567, respectively)$254,638$306,382Affiliate Investments, at fair value (amortized cost of $383,894 and $439,141, respectively)354,238362,984Non-affiliate Investments, at fair value (amortized cost of $1,859,933 and $1,707,195, respectively)1,785,2071,641,915Investments, at fair value (amortized cost of $2,515,538 and $2,428,903, respectively)2,394,0832,311,281Cash and cash equivalents189,270150,412Interest and dividends receivable28,60822,772Receivable for unsettled trades4,2931,404Prepaid expenses and other assets524,886Total assets$2,616,306$2,490,755LIABILITIESDebt (net of deferred financing costs of $5,013 and $7,530, respectively)$910,484$834,708Stockholder distributions payable13,51613,213Management fees payable9,5719,532Subordinated income incentive fees payable3,137—Accounts payable and accrued expenses8,4548,486Payable for unsettled trades74,0206,683Interest and credit facility fees payable9,6066,507Payable for common stock repurchases57,651924Due to affiliate, net—197Directors fees payable13320Total liabilities$1,086,572$880,270Commitments and contingencies (Note 7)NET ASSETSPreferred stock, $.001 par value, 50,000,000 shares authorized, none issued and outstanding$—$—Common stock, $.001 par value, 450,000,000 shares authorized, 177,120,791 and 179,142,028 shares issued and outstanding, respectively177179Additional paid in capital1,729,8651,737,893Accumulated under (over) distributed net investment income48,944(7,656)Accumulated under (over) distributed net realized gains(129,161)(3,405)Net unrealized depreciation, net of deferred taxes(122,912)(120,645)Total net assets attributable to Business Development Corporation of America1,526,9131,606,366Net assets attributable to non-controlling interest2,8214,119Total net assets1,529,7341,610,485Total liabilities and net assets$2,616,306$2,490,755Net asset value per share attributable to Business Development Corporation of America$8.62$8.97











The accompanying notes are an integral part of these consolidated financial statements.
 
 F- 4


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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (dollars in thousands except share and per share data)





For the Year Ended December 31,For the Year Ended December 31,For the Year Ended December 31,201620152014Investment income:Interest from investmentsControl investments$27,140$18,451$5,076Affiliate investments41,48538,78139,510Non-control/non-affiliate investments149,736128,33983,172Total interest from investments218,361185,571127,758Interest from cash and cash equivalents2575825Total interest income218,618185,629127,783Other income11,04010,21710,498Total investment income229,658195,846138,281Operating expenses:Management fees38,12135,99424,926Subordinated income incentive fees17,90610,1459,929Capital gains incentive fees——(2,664)Interest and credit facility financing expenses37,32726,46711,057Professional fees6,3576,7775,956Other general and administrative7,0594,5903,060Administrative services811966770Insurance184210221Directors fees7567574Expenses before expense waivers108,52185,22453,329Waiver of management and incentive fees—(3,534)(1,335)Total expenses net of expense waivers108,52181,69051,994Income tax expense, including excise tax1,140——Net investment income (loss) attributable to non-controlling interests19—(68)Net investment income119,978114,15686,355Realized and unrealized gain (loss) on investments and total return swap:Net realized gain (loss) from investmentsControl investments—(51)(79)Affiliate investments(11,988)2767,785Non-control/non-affiliate investments(11,321)(579)1,688Total net realized gain (loss) from investments(23,309)(354)9,394Net realized gain from total return swap——14,552Net change in unrealized appreciation (depreciation) on investments, net of deferred taxesControl investments(40,638)19,2078,466Affiliate investments48,182(68,777)(10,858)Non-control/non-affiliate investments(11,127)(53,652)(24,529)Total net change in unrealized depreciation on investments, net of deferred taxes(3,583)(103,222)(26,921)





The accompanying notes are an integral part of these consolidated financial statements.
 
 F- 5


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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (dollars in thousands except share and per share data)





For the Year Ended December 31,For the Year Ended December 31,For the Year Ended December 31,201620152014Net change in unrealized depreciation on total return swap——(3,180)Net realized and unrealized loss on investments and total return swap before non-controlling interests, net of deferred taxes(26,892)(103,576)(6,155)Net change in unrealized appreciation (depreciation) attributable to non-controlling interests1,316(2,527)(660)Net realized and unrealized loss on investments and total return swap(25,576)(106,103)(6,815)Net increase in net assets resulting from operations$94,402$8,053$79,540Per share information - basic and dilutedNet investment income$0.67$0.66$0.71Net increase in net assets resulting from operations$0.52$0.05$0.65Weighted average shares outstanding180,215,713172,208,186122,154,778











The accompanying notes are an integral part of these consolidated financial statements.
 
 F- 6


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BUSINESS DEVELOPMENT CORPORATION OF AMERICA





CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS


(dollars in thousands except share and per share data)





For the Year Ended December 31,For the Year Ended December 31,For the Year Ended December 31,201620152014Operations:Net investment income$119,978$114,156$86,355Net realized gain (loss) from investments(23,309)(354)9,394Net realized gain from total return swap——14,552Net change in unrealized depreciation on investments, net of deferred taxes(3,583)(103,222)(26,921)Net change in unrealized depreciation on total return swap——(3,180)Net change in unrealized appreciation (depreciation) attributable to non-controlling interests1,316(2,527)(660)Net increase in net assets from operations94,4028,05379,540Stockholder distributions:Distributions from net investment income(119,978)(130,846)(86,355)Distributions from net realized gain from investments and total return swap—(2,509)(19,944)Return of capital(36,456)(16,264)—Net decrease in net assets from stockholder distributions(156,434)(149,619)(106,299)Capital share transactions:Issuance of common stock, net of issuance costs10,000165,527888,579Reinvestment of stockholder distributions58,42470,03348,569Repurchases of common stock(85,844)(21,459)(4,462)Net increase (decrease) in net assets from capital share transactions(17,420)214,101932,686Total increase (decrease) in net assets, before non-controlling interest(79,452)72,535905,927Increase (decrease) in non-controlling interest(1,299)2,5271,593Total increase (decrease) in net assets(80,751)75,062907,520Net assets at beginning of year1,610,4851,535,423627,903Net assets at end of year$1,529,734$1,610,485$1,535,423Net asset value per common share attributable to Business Development Corporation of America$8.62$8.97$9.74Common shares outstanding at end of year177,120,791179,142,028157,534,040Accumulated under (over) distributed net investment income$48,944$(7,656)$7,710Accumulated under (over) distributed realized gains$(129,161)$(3,405)$(539)








The accompanying notes are an integral part of these consolidated financial statements.
 
 F- 7


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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (dollars in thousands)





For the Year Ended December 31,For the Year Ended December 31,For the Year Ended December 31,201620152014Operating activities:Net increase in net assets resulting from operations$94,402$8,053$79,540Adjustments to reconcile net increase in net assets from operations to net cash provided by (used in) operating activities:Paid-in-kind interest income(12,412)(19,904)(2,896)Net accretion of discount on investments(6,898)(5,231)(2,830)Amortization of deferred financing costs3,1222,6831,186Sales and repayments of investments587,893678,1661,284,029Purchases of investments(678,527)(1,150,263)(2,514,658)Net realized (gain) loss from investments23,309354(9,394)Net unrealized depreciation on investments, gross of deferred taxes3,833102,58824,533Net unrealized depreciation on total return swap——3,180(Increase) decrease in operating assets:Cash collateral on deposit with custodian——76,874Interest and dividends receivable(5,836)(308)(14,199)Receivable due on total return swap——4,053Prepaid expenses and other assets4,834(3,094)(789)Receivable for unsettled trades(2,889)32,3422,412Increase (decrease) in operating liabilities:Payable for unsettled trades67,3375,998(66,318)Management and incentive fees payable3,176(1,185)2,649Interest and credit facility fees payable3,0993,1212,671Accounts payable and accrued expenses(32)1,7446,143Directors fees payable113218Net cash provided by (used in) operating activities84,524(344,934)(1,123,796)Financing activities:Proceeds from issuance of shares of common stock, net10,000165,527888,579Repurchases of common stock(85,844)(21,459)(4,462)Decrease (increase) in deferred offering costs receivable—3,274(2,017)Proceeds from debt195,513456,250543,026Payments on debt(122,571)(232,830)(57,000)Payable for common stock repurchases56,727252584Payments of financing cost(288)(5,696)(3,319)Payments to (proceeds from) affiliate(197)(1,411)1,410Stockholder distributions(97,708)(77,959)(50,721)Increase (decrease) in non-controlling interest(1,298)2,5261,593Net cash provided by (used in) financing activities(45,666)288,4741,317,673Net increase (decrease) in cash and cash equivalents38,858(56,460)193,877Cash and cash equivalents, beginning of year150,412206,87212,995





The accompanying notes are an integral part of these consolidated financial statements.
 
 F- 8


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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (dollars in thousands)





For the Year Ended December 31,For the Year Ended December 31,For the Year Ended December 31,201620152014Cash and cash equivalents, end of year$189,270$150,412$206,872Supplemental information:Interest paid during the period$30,977$20,612$7,305Taxes, including excise tax, paid during the period$1,300$257$174Distributions reinvested$58,424$70,033$48,569











The accompanying notes are an integral part of these consolidated financial statements.
 
 F- 9


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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 CONSOLIDATED SCHEDULES OF INVESTMENTS
 (dollars in thousands)





December 31, 2016Portfolio Company (q)IndustryInvestment Coupon Rate / Maturity (n)Principal / Number of SharesAmortized CostFair Value (c)% of Net Assets (b)Senior Secured First LienDebt - 106.6% (b)Abaco Systems Holding Corp. (i)Business ServicesL+6.00% (7.00%), 12/7/2021$23,940$23,462$23,4611.5%Ability Networks Inc. (j)Health Care Providers & ServicesL+5.00% (6.00%), 5/14/202113,71213,63113,7120.9%Adams Publishing Group, LLC (i)MediaP+4.25% (8.00%), 11/3/202015,17814,90415,1781.0%Affinion Group, Inc. (j)Business ServicesL+5.25% (6.75%), 4/30/20189,9749,8279,9100.6%Amports, Inc. (m)Transportation InfrastructureL+8.14% (9.14%), 5/19/202015,00014,93614,7751.0%Amteck, LLC (f) (i)Commercial Services & SuppliesL+8.50% (9.50%), 7/2/202023,43823,06322,8521.5%Answers Corporation (i) (j) (t)Internet Software & ServicesP+6.25% (10.00%), 10/3/202134,47533,58917,0651.1%AP Gaming I, LLC (i) (j)Hotels, Restaurants & LeisureL+8.25% (9.25%), 12/20/202030,35330,14830,1502.0%APCO Holdings (i)Diversified Consumer ServicesL+6.00% (7.00%), 1/29/20228,8688,6328,6460.6%Applied Merchant Systems West Coast, Inc. (m)Diversified Financial ServicesL+11.50% (12.50%), 10/26/202026,12225,71425,5991.7%Ascensus, Inc. (j)IT ServicesL+4.50% (5.50%), 12/3/202217,83116,91517,7861.2%Asurion LLC (j)IT ServicesL+3.75% (4.75%), 11/3/2023249248253—%Avaya, Inc. Term Loan B-3 (j)Communications EquipmentL+4.50% (5.39%), 10/26/20179,6858,7848,3840.5%Avaya, Inc. Term Loan B-6 (j)Communications EquipmentL+5.50% (6.50%), 3/31/20188,4578,4617,3530.5%Avaya, Inc. Term Loan B-7 (i) (j)Communications EquipmentL+5.25% (6.25%), 5/29/20209,7939,7258,4890.5%AxleTech International, LLC (i)MachineryL+6.50% (7.50%), 1/5/202119,60019,46718,9141.2%Basho Technologies, Inc. (d) (l) (t)Software17.00%, 3/9/201810,59510,2943,8140.2%Basho Technologies, Inc. (d) (t)Software17.00%, 3/31/20172,5502,5509180.1%BDS Solutions Group, LLC (f) (i) (m)Business ServicesL+8.75% (9.59%), 6/1/202136,83036,09436,8302.4%Blount International, Inc. (j)MachineryL+6.25% (7.25%), 4/12/202312,46912,12812,5780.8%Broder Bros, Co. (m)DistributorsL+5.75% (7.00%), 6/3/20217,2757,1587,2750.5%Broder Bros, Co. (m)DistributorsL+12.25% (13.50%), 6/3/20217,3507,2327,3500.5%Capstone Nutrition (fka Integrity Nutraceuticals, Inc.) (l) (o) (t)Food ProductsL+12.50% (13.50%), 4/28/201956,47050,05319,7081.3%Catapult Learning, LLC (i) (m)Diversified Consumer ServicesL+7.99% (8.99%), 7/16/202027,50027,10926,5371.7%CCW, LLC (f) (i)Hotels, Restaurants & LeisureL+7.00% (8.00%), 3/21/202124,62524,26824,3791.6%Central Security Group, Inc. (i) (j)Commercial Services & SuppliesL+5.63% (6.63%), 10/6/202025,55425,20025,4581.7%CH Hold Corp. (f) (i)Diversified Consumer ServicesL+5.25% (6.25%), 11/20/201916,57216,43416,5311.1%Chicken Soup for the Soul Publishing, LLC (i)MediaL+6.25% (7.50%), 1/8/201928,54328,33127,1161.8%





The accompanying notes are an integral part of these consolidated financial statements.
 
 F- 10


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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 CONSOLIDATED SCHEDULES OF INVESTMENTS
 (dollars in thousands)





December 31, 2016Portfolio Company (q)IndustryInvestment Coupon Rate / Maturity (n)Principal / Number of SharesAmortized CostFair Value (c)% of Net Assets (b)Clover Technologies Group, LLC (j)Commercial Services & SuppliesP+3.50% (7.25%), 5/8/2020$14,012$13,935$13,2650.9%Contura Energy Inc.Energy Equipment & Services10.00%, 8/1/202110,00010,53410,6500.7%ConvergeOne Holdings Corp. (j)Diversified Consumer ServicesL+5.38% (6.38%), 6/17/202016,60116,47016,5181.1%Covenant Surgical PartnersHealth Care(8.75%), 8/1/201910,0009,4579,6750.6%Cvent, Inc. (j)Internet Software & ServicesL+5.00% (6.00%), 11/29/202310,0009,90010,0750.7%Danish CRJ LTD. (a) (p)Aerospace & Defense13.50%20720—%DigiCert, Inc (j)Internet Software & ServicesL+5.00% (6.00%), 10/21/202110,89010,62710,8360.7%Doskocil Manufacturing Company, Inc. (m)Household DurablesL+8.40% (9.40%), 11/10/202015,00014,79715,0001.0%Eagle Rx, LLC (i)Health Care Providers & ServicesL+6.00% (7.00%), 8/15/201914,53314,49514,5331.0%ECI Acquisition Holdings, Inc. (i)Internet Software & ServicesL+6.25% (7.25%), 3/11/201912,77512,73812,5840.8%Emergency Communications Network, LLC (m)Internet Software & ServicesL+10.08% (11.33%), 6/12/202119,75019,53019,5521.3%ERG Holding Company (i) (m)Health Care Providers & ServicesL+6.75% (8.00%), 4/4/201934,65034,19434,1302.2%Excelitas Technologies Corp. (j)Electronic Equipment, Instruments & ComponentsL+5.00% (6.00%), 11/2/202013,76113,71413,4510.9%Genesys Telecommunications Laboratories, Inc. (j)Diversified Telecommunication ServicesL+5.25% (6.25%), 12/1/202325,00024,62825,4221.7%Greenwave Holdings, Inc. (l)Internet Software & Services13.00%, 7/8/201915,69315,54315,6931.0%GTCR Valor Companies, Inc. (j)SoftwareL+6.00% (7.00%), 6/16/202324,87523,95624,5871.6%HC Group Holdings III, Inc. (j)Health CareL+5.00% (6.00%), 4/7/202214,93214,66514,2980.9%Icynene US Acquisition Corp. (f) (i) (m)Building ProductsL+6.25% (7.25%), 11/4/202021,28621,01221,2861.4%Icynene US Acquisition Corp. (f)Building ProductsL+6.25% (7.25%), 11/4/20191,0001,0001,0000.1%ILC Dover LP (i) (l)Aerospace & DefenseL+9.00% (10.00%), 3/20/202014,10114,06411,9860.8%Indivior Finance S.A.R.L. (j)Health CareL+6.00% (7.00%), 12/19/20199,2449,2449,2790.6%InMotion Entertainment Group, LLC (f) (i)Specialty RetailL+7.75% (9.00%), 10/1/201814,45014,32814,4500.9%IPC Corp. (j)Diversified Telecommunication ServicesL+4.50% (5.50%), 8/6/20219,1879,0408,7960.6%Jackson Hewitt, Inc. (j)Diversified Consumer ServicesL+7.00% (8.00%), 7/30/20206,8606,8106,5770.4%K2 Pure Solutions NoCal, L.P. (i)ChemicalsL+6.00% (7.00%), 8/19/20196,5006,4426,5000.4%Kahala Ireland OpCo Designated Activity Company (a) (d) (l) (o)Aerospace & DefenseL+8.00% (13.00%), 12/23/2028149,409149,409149,4099.8%Kahala US OpCo LLC (d) (l) (o)Aerospace & DefenseL+8.00% (13.00%), 12/23/20282,6902,6902,6900.2%





The accompanying notes are an integral part of these consolidated financial statements.
 
 F- 11


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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 CONSOLIDATED SCHEDULES OF INVESTMENTS
 (dollars in thousands)





December 31, 2016Portfolio Company (q)IndustryInvestment Coupon Rate / Maturity (n)Principal / Number of SharesAmortized CostFair Value (c)% of Net Assets (b)Kissner HLDChemicals8.38%, 12/1/2022$9,960$9,942$10,0600.7%Land Holdings I, LLC (m)Hotels, Restaurants & Leisure12.00%, 6/26/201914,25014,10814,2500.9%LenderLive Services, LLCBusiness ServicesL+12.00% (12.69%), 8/11/202010,0009,8199,8000.6%Lightsquared LP (l)Diversified Telecommunications ServicesL+8.75% (9.75%), 6/15/202010,2469,3719,5290.6%MCS AMS Sub-Holdings LLC (j)Real Estate Management & DevelopmentL+6.50% (7.50%), 10/15/201911,90611,70111,0730.7%Medical Depot Holdings, Inc. (i)Health CareL+5.50% (6.50%), 1/3/202320,27818,45318,5041.2%Metal Services LLC (j)Metals & MiningL+7.50% (8.50%), 6/30/201910,91710,78310,9440.7%MMM Holdings, LLC (j) (l)Health CareL+8.25% (9.75%), 6/28/20197,1537,0726,9380.5%Monitronics International, Inc. (j)Diversified Consumer ServicesL+5.50% (6.50%), 9/30/20222,9932,9783,0180.2%Montreign Operating Company, LLC (m)Hotels, Restaurants, & LeisureL+8.25% (9.25%), 1/24/202325,00024,50025,1871.6%Motion Recruitment Partners, LLC (f) (i)Professional ServicesL+6.00% (7.00%), 2/13/202018,00017,73318,0001.2%Motorsports Aftermarket Group, Inc. (i) (j)Auto ComponentsL+4.00% (5.00%), 5/14/202126,30924,91412,7160.8%MSO of Puerto Rico, LLC (j) (l)Health CareL+8.25% (9.75%), 6/28/20195,2005,1425,0440.3%Murray Energy Holdings Co.Energy Equipment & ServicesL+7.25% (8.25%), 4/16/20209,9749,2229,5060.6%MWI Holdings, Inc. (j)MachineryL+5.50% (6.50%), 6/28/20209,9509,8629,9500.6%National Technical Systems, Inc. (f) (i)Professional ServicesL+6.25% (7.25%), 6/12/202119,32619,07218,3591.2%New Star Metals Inc. (l)Business ServicesL+9.50% (11.00%), 12/22/202132,70732,02032,0232.1%NexSteppe Inc. (l)Chemicals15.00%, 3/30/201810,74110,4448,0560.5%Noosa Acquirer, Inc. (i) (m)Food ProductsL+5.25% (6.25%), 11/21/202025,00024,75625,0001.6%North Atlantic Trading Company, Inc. (i) (j)Food ProductsP+5.50% (9.25%), 1/13/202017,33117,30417,1581.1%NTM Acquisition Corp. (i)MediaL+6.25% (7.25%), 6/7/202212,43112,26012,2450.8%Orchid Underwriters Agency, LLC (f) (m)Insurance Broker10.00%, 11/6/201913,95513,80613,9550.9%Otter Box Holdings, Inc. (j)Electronic Equipment, Instruments & ComponentsL+4.75% (5.75%), 6/3/202014,79714,59114,6121.0%PeopLease Holdings, LLC (i)Commercial Services & SuppliesL+9.00% (10.00%), 2/26/202120,00019,83220,0001.3%PGX Holdings, Inc. (j)Transportation InfrastructureL+5.25% (6.25%), 9/29/202013,17213,07113,1480.9%Plaskolite, LLC (j)ChemicalsL+4.75% (5.75%), 11/3/20228,6938,6238,6930.6%Premier Dental Services, Inc. (i) (j)Health Care Providers & ServicesL+6.50% (7.50%), 11/1/201822,48822,44022,3191.5%





The accompanying notes are an integral part of these consolidated financial statements.
 
 F- 12


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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 CONSOLIDATED SCHEDULES OF INVESTMENTS
 (dollars in thousands)





December 31, 2016Portfolio Company (q)IndustryInvestment Coupon Rate / Maturity (n)Principal / Number of SharesAmortized CostFair Value (c)% of Net Assets (b)Premier Global Services, Inc. (j)Diversified Telecommunication ServicesL+6.50% (7.50%), 12/8/2021$9,871$9,528$9,6060.6%Pre-Paid Legal Services, Inc. (j)Diversified Consumer ServicesL+5.25% (6.50%), 7/1/201913,00913,00613,0210.9%Pride Plating, Inc. (i)Aerospace & DefenseL+5.50% (6.50%), 6/13/20197,1887,1536,8640.4%PSKW, LLC (i)Health Care Providers & ServicesL+4.25% (5.25%), 11/25/20212,0252,0082,0050.1%PSKW, LLC (m)Health Care Providers & ServicesL+8.39% (9.39%), 11/25/202117,75017,46017,2171.1%PT Network, LLC (f) (i)Health CareL+6.50% (7.50%), 11/30/202117,10516,85816,9341.1%Pure Barre, LLC (f) (i) (m)Hotels, Restaurants & LeisureL+7.00% (8.00%), 6/11/202027,82327,44427,5451.8%Resco Products, Inc. (i)Metals & MiningP+4.75% (8.50%), 3/31/201710,00010,0009,2000.6%RVNB Holdings, Inc. (dba All My Sons Moving & Storage) (f) (i)Diversified Consumer ServicesL+6.50% (7.50%), 2/25/202021,73321,44921,7331.4%Sage Automotive Holdings, Inc. (j)Auto ComponentsL+5.00% (6.00%), 10/8/202015,00014,85114,8501.0%SHO Holding II Corporation (j)Specialty RetailL+5.00% (6.00%), 10/27/202211,88011,77911,8210.8%Squan Holding Corp.Diversified Telecommunication ServicesL+4.00% (5.00%), 10/10/201910,4556,9036,8950.5%STG-Fairway Acquisitions, Inc. (j)Professional ServicesL+5.25% (6.25%), 6/30/202213,35913,19913,0420.9%Stratose Intermediate Holdings II, LLC (j)Health Care Providers & ServicesL+5.00% (6.00%), 1/26/20229,9009,8169,9370.6%SunGard Availability Services Capital, Inc. (j)IT ServicesL+5.00% (6.00%), 3/31/20198,7418,7008,4430.6%Tax Defense Network, LLC (f) (i) (m)Diversified Consumer ServicesL+10.50% (11.50%), 8/28/201926,65026,35418,3881.2%Total Outdoor Holdings Corp.MediaL+11.00% (12.00%), 8/28/201912,90012,76212,9000.8%Trojan Battery Company, LLC (j)Auto ComponentsP+3.75% (7.50%), 6/12/202110,58610,51710,5070.7%Turning Tech LLC (f) (i)SoftwareL+10.75% (11.59%), 6/30/202024,97624,66824,1021.6%Twenty Eighty, Inc. (j) (m)MediaP+5.00% (8.75%), 9/30/201921,92620,9897,9750.5%United Central Industrial Supply Company, LLC (i) (j)Commercial Services & SuppliesL+7.25% (8.50%), 10/9/20188,6408,5906,8900.5%VCVH Holding Corp. (j)Health CareL+5.00% (6.00%), 6/1/202312,93512,81612,8540.8%VetCor Professional Practices LLC (i)Diversified Consumer ServicesL+6.25% (7.25%), 4/20/202114,80814,69614,5120.9%Xplornet Communications, Inc. (a) (j)Diversified Telecommunication ServicesL+6.00% (7.00%), 7/25/20209,9759,88210,0500.7%Sub Total Senior Secured First Lien Debt$1,726,833$1,630,661106.6%Senior Secured Second Lien   Debt - 17.1% (b)Anchor Glass Container CorporationContainers & PackagingL+7.75% (8.75%), 12/7/2024$20,000$19,801$20,3251.3%





The accompanying notes are an integral part of these consolidated financial statements.
 
 F- 13


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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 CONSOLIDATED SCHEDULES OF INVESTMENTS
 (dollars in thousands)





December 31, 2016Portfolio Company (q)IndustryInvestment Coupon Rate / Maturity (n)Principal / Number of SharesAmortized CostFair Value (c)% of Net Assets (b)Appriss Holdings, Inc. (m)IT ServicesL+9.25% (10.25%), 5/21/2021$13,985$13,839$13,7750.9%Asurion LLC (j)IT ServicesL+7.50% (8.50%), 3/3/202110,0009,32010,1560.7%Boston Market Corporation (m)Hotels, Restaurants & LeisureL+8.25% (9.25%), 12/16/201824,35124,19624,1071.6%BrandMuscle Holdings Inc. (m)Internet Software & ServicesL+8.50% (9.50%), 6/1/202224,50024,09124,5001.6%Cayan Holdings (m)IT ServicesL+8.50% (9.50%), 3/24/202220,00019,57919,6001.3%CDS U.S. Intermediate Holdings, Inc. (m)Hotels, Restaurants & LeisureL+8.25% (9.25%), 7/8/20234,8004,6804,6680.3%CIG Financial, LLC (a) (f) (m)Consumer Finance10.50%, 6/30/201913,00012,93512,4150.8%CREDITCORPConsumer Finance12.00%, 7/15/201813,25013,21710,4010.7%Epic Health Services, Inc. (m)Health Care Providers & ServicesL+9.25% (10.25%), 8/17/202115,93315,70315,9331.0%J. C. Bromac Corporation (dba EagleRider, Inc.) (f) (m)Hotels, Restaurants & LeisureL+8.75% (9.59%), 2/10/20216,9506,8876,7760.4%Linc Energy Finance USA, Inc. (t)Oil, Gas & Consumable Fuels12.50%, 10/31/20179,0008,914——%NCP Finance Limited Partnership (j)Consumer FinanceL+9.75% (11.00%), 10/1/201812,14512,10911,3860.7%Rx30 HoldCo, Inc. (m)Health Care TechnologyL+9.00% (10.00%), 6/15/202211,50011,32011,5000.8%Schulman Associates Institutional Review Board, Inc. (m)Life Sciences Tools & ServicesL+8.00% (9.00%), 6/3/202117,00016,76816,7451.1%Stratose Intermediate Holdings II, LLC (m)Health Care Providers & ServicesL+9.50% (10.50%), 7/26/202230,00029,59330,0002.0%U.S. Auto (m)Diversified Consumer ServicesL+11.75% (12.75%), 6/8/202030,00029,56129,7001.9%Sub Total Senior Secured Second Lien Debt$272,513$261,98717.1%Subordinated Debt - 5.3% (b)Gold, Inc. (m)Textiles, Apparel & Luxury Goods10.00%, 6/30/2019$7,003$6,924$5,9530.4%Park Ave RE Holdings, LLC (d) (l) (o)Real Estate Management & DevelopmentL+8.00% (13.00%), 12/29/201737,19237,19237,1922.4%Steel City Media (l)Media16.00%, 3/29/202021,41821,14620,5611.4%Xplornet Communications, Inc. (a) (l)Diversified Telecommunication Services13.00%, 10/25/202014,59114,59115,1021.0%Zimbra, Inc. (t)Software12.00%, 7/10/20181,2031,2031,7320.1%Sub Total Subordinated Debt$81,056$80,5405.3%Collateralized Securities - 16.3% (b)Collateralized Securities - Debt InvestmentFifth Street Senior Loan Fund I, LLC - 1A Class F (a) (p)Diversified Investment VehiclesL+7.50% (8.38%), 1/19/2027$10,728$9,100$8,4550.5%Collateralized Securities - Equity InvestmentB&M CLO 2014-1, LTD. Subordinated Notes (a) (p) (v)Diversified Investment Vehicles7.71%, 4/16/2026$40,250$20,331$16,7721.1%





The accompanying notes are an integral part of these consolidated financial statements.
 
 F- 14


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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 CONSOLIDATED SCHEDULES OF INVESTMENTS
 (dollars in thousands)





December 31, 2016Portfolio Company (q)IndustryInvestment Coupon Rate / Maturity (n)Principal / Number of SharesAmortized CostFair Value (c)% of Net Assets (b)CVP Cascade CLO, LTD. Subordinated Notes (a) (p) (v)Diversified Investment Vehicles0.04%, 1/16/2026$31,000$10,552$8,8680.6%CVP Cascade CLO-2, LTD. Subordinated Notes (a) (p) (v)Diversified Investment Vehicles4.80%, 7/18/202635,25013,66711,5930.8%Fifth Street Senior Loan Fund I, LLC - 2015-1A Subordinated Notes (a) (p) (v)Diversified Investment Vehicles13.83%, 1/19/202731,57522,07920,5791.3%Figueroa CLO 2014-1, LTD. Subordinated Notes (a) (p) (v)Diversified Investment Vehicles4.65%, 1/15/202735,05719,94116,1011.1%MidOcean Credit CLO II, LLC (a) (p) (v)Diversified Investment Vehicles7.44%, 1/29/202537,60023,09222,4191.5%MidOcean Credit CLO III, LLC (a) (p) (v)Diversified Investment Vehicles11.89%, 7/21/202640,25023,99823,3411.5%MidOcean Credit CLO IV, LLC (a) (p) (v)Diversified Investment Vehicles13.77%, 4/15/202721,50015,16015,5051.0%NewStar Arlington Senior Loan Program LLC Subordinated Notes (a) (p) (v)Diversified Investment Vehicles23.61%, 7/25/202531,60323,79524,4911.6%Ocean Trails CLO V, LTD. (a) (p) (v)Diversified Investment Vehicles14.78%, 10/13/202640,51828,22229,1441.9%OFSI Fund VI, Ltd. Subordinated Notes (a) (p) (v)Diversified Investment Vehicles13.59%, 3/20/202538,00019,01217,3541.1%Related Fee Agreements (a) (s)Diversified Investment Vehicles—11,34510,3900.7%Silver Spring CLO, Ltd. (a) (p) (v)Diversified Investment Vehicles0.26%, 10/16/202631,50018,67612,0070.8%WhiteHorse VIII, Ltd. CLO Subordinated Notes (a) (p) (v)Diversified Investment Vehicles6.99%, 5/1/202636,00015,80612,5630.8%Sub Total Collateralized Securities$274,776$249,58216.3%Equity/Other - 11.2% (b)Basho Technologies, Inc. - Series G Senior Participating Preferred Stock Warrant (e)SoftwareExpire 3/9/2025306,122$—$——%Basho Technologies, Inc. - Series G Senior Preferred Stock (e)Software2,040,8162,000——%Capstone Nutrition Common Stock (fka Integrity Nutraceuticals, Inc.) (e) (o)Food Products6,0231,630——%Capstone Nutrition Class B and C Common Stock (fka Integrity Nutraceuticals, Inc.) (e) (o) (u)Food Products24,656———%Carlyle GMS Finance, Inc. (a) (f)Diversified Investment Vehicles$6,5876,5876,2730.4%Danish CRJ LTD. (a) (e) (p) (r)Aerospace & Defense10,0001407—%Evolution Research Group - Preferred Equity (e)Health Care Providers & Services8.00%200500610—%Greenwave Holdings, Inc. - Series C Preferred Stock Warrant (e)Internet Software & ServicesExpire 8/16/2025172,414—19—%





The accompanying notes are an integral part of these consolidated financial statements.
 
 F- 15


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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 CONSOLIDATED SCHEDULES OF INVESTMENTS
 (dollars in thousands)





December 31, 2016Portfolio Company (q)IndustryInvestment Coupon Rate / Maturity (n)Principal / Number of SharesAmortized CostFair Value (c)% of Net Assets (b)Kahala Ireland OpCo Designated Activity Company - Common Equity (a) (e) (h) (o)Aerospace & Defense137$—$8,1800.5%Kahala Ireland OpCo Designated Activity Company - Profit Participating Note (a) (e) (h) (o)Aerospace & Defense3,250,0002,9003,2500.2%Kahala US OpCo LLC - Class A Preferred Units (e) (k) (o)Aerospace & Defense13.00%4,413,4724,1934,0000.3%New Star Metals Inc. (l)Business ServicesExpire 12/22/2036133,074201201—%NexSteppe Inc. Series C Preferred Stock Warrant (e)ChemicalsExpire 3/9/2025185,70450043—%NMFC Senior Loan Program I, LLC (a) (p)Diversified Investment Vehicles$50,00050,00047,0573.1%Orchid Underwriters Agency, LLC - Preferred Shares (e) (u)Insurance Broker5,000500659—%Orchid Underwriters Agency, LLC - Common Shares (e) (u)Insurance Broker5,000—304—%Park Ave RE Holdings, LLC - Common Shares (e) (o) (w)Real Estate Management & Development1,000—6,5640.4%Park Ave RE Holdings, LLC - Preferred Shares (o) (w)Real Estate Management & Development8.00%47,290$23,645$23,6451.6%PennantPark Credit Opportunities Fund II, LP (a) (f) (g) (p)Diversified Investment Vehicles$9,9439,9439,7880.7%South Grand MM CLO I, LLC (a) (f) (p)Diversified Investment Vehicles$29,09529,09528,3821.9%Squan Holding Corp. - Class A Common Stock (e) (p)Diversified Telecommunication Services180,835———%Squan Holding Corp. - Series A Preferred Stock (e) (p)Diversified Telecommunication Services8,962———%Tax Defense Network, LLC (e)Diversified Consumer Services396425——%Tennenbaum Waterman Fund, L.P. (a)Diversified Investment Vehicles$10,00010,00010,1690.7%The SAVO Group, Ltd. - Warrants (e)Internet Software & ServicesExpire 3/23/2023138,000———%THL Credit Greenway Fund II LLC (a) (p)Diversified Investment Vehicles$13,99013,99012,8500.9%U.S. Auto Series A Common Units (e) (u)Diversified Consumer Services10,0001027—%U.S. Auto Series A Preferred Units (e) (u)Diversified Consumer Services490490572—%World Business Lenders, LLC (e)Consumer Finance922,6693,7504,4410.3%Xplornet Communications, Inc. - Warrants (a) (e)Diversified Telecommunication ServicesExpire 10/25/202310,284$—$3,6470.2%Zimbra, Inc. - Warrants (Third Lien Bridge Note) (e)SoftwareExpire 7/11/20231,000,000—225—%





The accompanying notes are an integral part of these consolidated financial statements.
 
 F- 16


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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 CONSOLIDATED SCHEDULES OF INVESTMENTS
 (dollars in thousands)





December 31, 2016Portfolio Company (q)IndustryInvestment Coupon Rate / Maturity (n)Principal / Number of SharesAmortized CostFair Value (c)% of Net Assets (b)Sub Total Equity/Other$160,360$171,31311.2%TOTAL INVESTMENTS - 156.5% (b)$2,515,538$2,394,083156.5%


_____________





|    |                                                                                                                                                                                                                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | All of the Company's investments, except the investments noted by this footnote, are in eligible portfolio companies, as defined in the Investment Company Act of 1940, as amended (the “1940 Act”). Eligible assets represent 77.9% of the Company's total assets. The significant majority of all investments held are deemed to be illiquid.

|    |                                                                         
|--- | ------------------------------------------------------------------------
|(b) | Percentages are based on net assets of $1,529,734as ofDecember 31, 2016.

|    |                                                                                                                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(c) | The fair value of investments with respect to securities for which market quotations are not readily available is determined in good faith by the Company's board of directors as required by the 1940 Act. (See Note 3 to the consolidated financial statements).

|    |                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(d) | As of the date of election, the portfolio company elected to pay cash interest, noting the company has the option to elect a portion of the interest to be payment-in-kind (“PIK”).

|    |                                          
|--- | -----------------------------------------
|(e) | Non-income producing atDecember 31, 2016.

(f) The Company has various unfunded commitments to portfolio companies. The remaining amount of these unfunded commitments as of December 31, 2016 are comprised of the following: Portfolio Company NameInvestment TypeCommitment TypeOriginal CommitmentRemaining CommitmentAmteck, LLCSenior Secured First Lien DebtRevolver term loan$5,000$5,000BDS Solutions Group, LLCSenior Secured First Lien DebtRevolver term loan3,0003,000Carlyle GMS Finance, Inc.Equity/OtherEquity capital commitment10,0003,413CCW, LLCSenior Secured First Lien DebtRevolver term loan3,0003,000CH Hold Corp.Senior Secured First Lien DebtDelayed draw term loan2,175706CIG Financial, LLCSenior Secured Second Lien DebtDelayed draw term loan5,0005,000Icynene US Acquisition Corp.Senior Secured First Lien DebtDelayed draw term loan5,0005,000Icynene US Acquisition Corp.Senior Secured First Lien DebtRevolver term loan5,0004,000InMotion Entertainment Group, LLCSenior Secured First Lien DebtDelayed draw term loan2,2001,843J. C. Bromac Corporation (dba EagleRider, Inc.)Senior Secured Second Lien DebtDelayed draw term loan5,0005,000Motion Recruitment Partners, LLCSenior Secured First Lien DebtRevolver term loan2,0002,000National Technical Systems, Inc.Senior Secured First Lien DebtDelayed draw term loan5,0005,000Orchid Underwriters Agency, LLCSenior Secured First Lien DebtDelayed draw term loan5,6005,600PennantPark Credit Opportunities Fund II, LPEquity/OtherEquity capital commitment10,800538Pure Barre, LLCSenior Secured First Lien DebtRevolver term loan6,5796,579PT Network, LLCSenior Secured First Lien DebtDelayed draw term loan1,3161,316PT Network, LLCSenior Secured First Lien DebtRevolver term loan2,5002,500RVNB Holdings, Inc. (dba All My Sons Moving & Storage)Senior Secured First Lien DebtRevolver term loan852852South Grand MM CLO I, LLCEquity/OtherEquity capital commitment35,0005,476Tax Defense Network, LLCSenior Secured First Lien DebtDelayed draw term loan5,0001,000Turning Tech LLCSenior Secured First Lien DebtRevolver term loan6,0003,000Total$126,022$69,823





|    |                                                                                        
|--- | ---------------------------------------------------------------------------------------
|(g) | The investment is subject to a three year lock-up restriction on withdrawals in year 4.

|    |                                                                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(h) | The Company's investment is held through the consolidated subsidiaries, Kahala Aviation Holdings, LLC and Kahala LuxCo, which own 100% of the equity of the operating company, Kahala Ireland OpCo Designated Activity Company.

|    |                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(i) | The Company's investment or a portion thereof is pledged as collateral under the Wells Fargo Credit Facility. Individual investments can be divided into parts which are pledged to separate credit facilities.

|    |                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(j) | The Company's investment or a portion thereof is pledged as collateral under the Citi Credit Facility. Individual investments can be divided into parts which are pledged to separate credit facilities.




The accompanying notes are an integral part of these consolidated financial statements.
 
 F- 17


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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 CONSOLIDATED SCHEDULES OF INVESTMENTS
 (dollars in thousands)





December 31, 2016








|    |                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(k) | The Company's investment is held through the consolidated subsidiaries, Kahala Aviation Holdings, LLC and Kahala Aviation US, Inc. which own 100% of the equity of the operating company, Kahala US OpCo LLC.

(l) For the year ended December 31, 2016 , the following investments paid or have the option to pay all or a portion of interest and dividends via payment-in-kind (“PIK”): Portfolio CompanyInvestment TypeCashPIKAll-in RatePIK Earned for the year ended      December 31, 2016Basho Technologies, Inc.Senior Secured First Lien Debt17.00%—%17.00%$283Capstone Nutrition (fka Integrity Nutraceuticals, Inc.)Senior Secured First Lien Debt—%13.50%13.50%807CPX Interactive Holdings, LPSenior Secured Second Lien Debt11.00%2.00%13.00%315Greenwave Holdings, Inc.Senior Secured First Lien Debt10.00%3.00%13.00%510ILC Dover LPSenior Secured First Lien Debt8.00%2.00%10.00%132Kahala Ireland OpCo Designated Activity CompanySenior Secured First Lien Debt—%13.00%13.00%5,827Kahala US OpCo LLCSenior Secured First Lien Debt13.00%—%13.00%87Lightsquared LPSenior Secured First Lien Debt—%9.75%9.75%—MMM Holdings, LLCSenior Secured First Lien Debt9.75%—%9.75%—MSO of Puerto Rico, LLCSenior Secured First Lien Debt9.75%—%9.75%—New Star Metals Inc.Senior Secured First Lien Debt9.00%2.00%11.00%—NexSteppe Inc.Senior Secured First Lien Debt10.00%5.00%15.00%509Park Ave RE Holdings, LLCSubordinated Debt13.00%—%13.00%—Steel City MediaSubordinated Debt12.00%4.00%16.00%840Taqua, LLCSenior Secured First Lien Debt10.50%3.00%13.50%202The Tennis Channel Holdings, Inc.Senior Secured First Lien Debt6.88%2.00%8.88%85Visionary Integration Professionals, LLCSubordinated Debt—%15.00%15.00%1,088Xplornet Communications, Inc.Subordinated Debt—%13.00%13.00%1,727Total$12,412





|    |                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(m) | The Company's investment or a portion thereof is pledged as collateral under the UBS Credit Facility. Individual investments can be divided into parts which are pledged to separate credit facilities.

|    |                                                                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(n) | For equity investments in Collateralized Securities, the effective yield is presented in place of the investment coupon rate for each investment. Refer to footnote (v) for a further description of an equity investment in a Collateralized Security.

|    |                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(o) | The Company's investments are classified in accordance with the requirements of the 1940 Act. Under the 1940 Act, “Control Investments” are defined as investments in companies in which the Company owns more than 25% of the voting securities, maintains greater than 50% of the board representation or has the power to exercise control over the management or policies of such portfolio company.

|    |                                                                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(p) | The Company's investments are classified in accordance with the requirements of the 1940 Act. Under the 1940 Act, “Affiliated Investments” are defined as those non-control investments in companies in which the Company owns between 5% and 25% of the voting securities.

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(q) | The Company's investments are classified in accordance with the requirements of the 1940 Act. Under the 1940 Act, “Non-affiliated Investments” are defined as investments that are neither Control Investments nor Affiliated Investments. The Company classifies all investments within the consolidated schedule of investments which are not classified as Control Investments or Affiliated Investments as Non-affiliated Investments.

|    |                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(r) | The Company's investment is held through the Consolidated Holding Company, Kahala Aviation Holdings, LLC, which owns 49% of the operating company, Danish CRJ LTD.

|    |                                                                                                                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(s) | Related Fee Agreements consist of one investment with a fair value of $0.7 million that is classified as a Non-affiliated Investment and six investments with a total fair value of $9.6 million that are classified as Affiliated Investments.

|    |                                                                
|--- | ---------------------------------------------------------------
|(t) | The investment is on non-accrual status as ofDecember 31, 2016.

|    |                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------
|(u) | Investments are held in the taxable wholly-owned, consolidated subsidiary, 54thStreet Equity Holdings, Inc.

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(v) | The Collateralized Securities - debt investments and equity investments are considered equity positions in the Collateralized Loan Obligation funds. Equity investments are entitled to recurring distributions which are generally equal to the remaining cash flow of the payments made by the underlying fund’s securities less contractual payments to debt holders and fund expenses. The estimated yield indicated is based upon a current projection of the amount and timing of these recurring distributions and the estimated amount of repayment of principal upon termination. Such projections are periodically reviewed and adjusted, and the estimated yield may not ultimately be realized.

|    |                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(w) | The Company's investment is held through the consolidated subsidiary, Park Ave RE, Inc., which owns 100% of the equity of the operating company, Park Ave RE Holdings, LLC.



















The accompanying notes are an integral part of these consolidated financial statements.
 
 F- 18


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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 CONSOLIDATED SCHEDULES OF INVESTMENTS
 (dollars in thousands)





December 31, 2016





The following table shows the portfolio composition by industry grouping based on fair value at December 31, 2016 :





At December 31, 2016Investments atFair ValuePercentage ofTotal PortfolioDiversified Investment Vehicles$364,10115.2%Aerospace & Defense186,8067.8Diversified Consumer Services175,7807.3Health Care Providers & Services160,3966.7Hotels, Restaurants & Leisure157,0626.6Business Services112,2254.7Internet Software & Services110,3244.6Media95,9754.0Health Care93,5263.9Diversified Telecommunication Services89,0473.7Commercial Services & Supplies88,4653.7Real Estate Management & Development78,4743.3IT Services70,0132.9Food Products61,8662.6Software55,3782.3Professional Services49,4012.1Machinery41,4421.7Consumer Finance38,6431.6Auto Components38,0731.6Chemicals33,3521.4Electronic Equipment, Instruments & Components28,0631.2Transportation Infrastructure27,9231.2Specialty Retail26,2711.1Diversified Financial Services25,5991.1Communications Equipment24,2261.0Building Products22,2860.9Containers & Packaging20,3250.9Energy Equipment & Services20,1560.8Metals & Mining20,1440.8Life Sciences Tools & Services16,7450.7Household Durables15,0000.6Insurance14,9180.6Distributors14,6250.6Health Care Technology11,5000.5Textiles, Apparel & Luxury Goods5,9530.3Oil, Gas & Consumable Fuels——Total$2,394,083100.0%

















The accompanying notes are an integral part of these consolidated financial statements.
 
 F- 19


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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 CONSOLIDATED SCHEDULES OF INVESTMENTS
 (dollars in thousands)





December 31, 2015Portfolio Company (q)IndustryInvestment Coupon Rate / Maturity (ak)Principal / Number of SharesAmortized CostFair Value (c)% of Net AssetsSenior Secured First LienDebt - 87.3% (b)Ability Networks Inc. (aa)Health Care Providers & ServicesL+5.00% (6.00%), 5/14/2021$8,848$8,817$8,7150.5%Adams Publishing Group, LLCMediaL+6.75% (7.75%), 11/3/202019,01318,64318,6401.2%AM General LLC (aa)Aerospace & DefenseL+9.00% (10.25%), 3/22/20185,2504,8994,2530.3%Amports, Inc. (ab)Transportation InfrastructureL+8.00% (9.00%), 5/19/202015,00014,91814,8770.9%Amteck, LLC (z) (aj) (aq)Commercial Services & SuppliesL+8.50% (9.50%), 7/2/202024,68824,29824,2261.5%Answers Corporation (z) (aa)Internet Software & ServicesL+5.25% (6.25%), 10/3/202134,65033,64523,2161.4%AP Gaming I, LLC (z) (aa)Hotels, Restaurants & LeisureL+8.25% (9.25%), 12/21/202030,66730,40729,5161.8%Aperture Group LLC (fka OH Acquisition, LLC)Diversified Financial ServicesL+6.25% (7.25%), 8/29/20197,4067,3797,3350.5%Applied Merchant Systems West Coast, Inc. (aj)Diversified Financial ServicesL+11.50% (12.50%), 10/26/202020,50020,29720,0211.2%Ascensus, Inc. (ar)IT ServicesL+4.50% (5.50%), 12/3/202216,94115,93115,7551.0%AsurionIT ServicesL+3.75% (5.00%), 5/24/201919,44918,68918,1791.1%Avaya, Inc. Term Loan B-3 (aa)Communications EquipmentL+4.50% (4.82%), 10/26/20171,5001,3391,1550.1%Avaya, Inc. Term Loan B-6 (aa)Communications EquipmentL+5.50% (6.50%), 3/31/20188,4578,4656,3450.4%Avaya, Inc. Term Loan B-7 (z) (aa)Communications EquipmentL+5.25% (6.25%), 5/29/20209,9119,8226,8470.4%AxleTech International, LLC (z)MachineryL+6.50% (7.50%), 1/5/202119,80019,63219,2421.2%Basho Technologies, Inc. (ai)Software13.00%, 3/9/201810,25110,06510,2860.6%Broder Bros, Co.DistributorsL+5.75% (7.00%), 6/3/20217,4557,3087,2960.5%Broder Bros, Co.DistributorsL+12.25% (13.50%), 6/3/20217,4707,3237,3110.5%Catapult Learning, LLC (z) (aj)Diversified Investment VehiclesL+8.10% (9.10%), 7/16/202027,50027,00026,9591.7%Central Security Group, Inc. (z) (aa)Commercial Services & SuppliesL+5.25% (6.25%), 10/6/202018,31518,09417,6741.1%Chicken Soup for the Soul Publishing, LLC (z) (ab)MediaL+6.00% (7.25%), 1/8/201929,55029,32629,5331.8%Clover Technologies Group, LLC (aa)Commercial Services & SuppliesL+4.50% (5.50%), 5/8/202014,24214,14013,1020.8%ConvergeOne Holdings Corp. (aa)Diversified Consumer ServicesL+5.00% (6.00%), 6/17/202016,77116,65416,6871.0%Danish CRJ LTD. (a) (p)Aerospace & Defense13.50%202020—%DigiCert, IncInternet Software & ServicesL+5.00% (6.00%), 10/21/202111,00010,67910,6700.7%Doskocil Manufacturing Company, Inc.Household DurablesL+8.70% (9.70%), 11/10/202015,00014,74514,7380.9%Eagle Rx, LLC (z)Health Care Providers & ServicesL+6.00% (7.00%), 8/15/201915,51915,46215,6131.0%ECI Acquisition Holdings, Inc. (k) (z)Internet Software & ServicesL+6.25% (7.25%), 3/11/201912,87412,83212,6800.8%





The accompanying notes are an integral part of these consolidated financial statements.
 
 F- 20


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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 CONSOLIDATED SCHEDULES OF INVESTMENTS
 (dollars in thousands)





December 31, 2015Portfolio Company (q)IndustryInvestment Coupon Rate / Maturity (ak)Principal / Number of SharesAmortized CostFair Value (c)% of Net AssetsEmergency Communications Network, LLC (aj)Internet Software & ServicesL+8.25% (9.25%), 6/12/2021$19,900$19,629$19,3871.2%ERG Holding Company (z) (ad)Health Care Providers & ServicesL+6.75% (8.00%), 4/4/201917,17716,93716,8081.0%Excelitas Technologies Corp. (aa)Electronic Equipment, Instruments & ComponentsL+5.00% (6.00%), 11/2/202013,90313,84312,2520.8%GEM Holdings Group, LLC (z)Hotels, Restaurants & LeisureL+9.00% (10.00%), 11/22/202016,00415,96316,1581.0%GK Holdings, Inc. (aa)Professional ServicesL+5.50% (6.50%), 1/20/20213,9603,9263,8810.2%Greenwave Holdings, Inc.Internet Software & Services13.00%, 7/8/201915,18315,03314,8840.9%GTCR Valor Companies, Inc. (z) (aa)SoftwareL+5.00% (6.00%), 5/30/202132,57031,96332,2452.0%Hanna Anderson, LLC (z) (an)Specialty RetailL+7.25% (8.25%), 4/21/201914,82414,72414,7200.9%Icynene US Acquisition Corp. (h) (z) (ac) (aj)Building ProductsL+6.25% (7.25%), 11/4/202023,82023,43523,6201.5%ILC Dover LP (z)Aerospace & DefenseL+7.00% (8.00%), 3/20/202014,34414,29313,1420.8%InMotion Entertainment Group, LLC (z) (ae)Specialty RetailL+7.75% (9.00%), 10/1/201815,23015,04415,2780.9%Integrity Nutraceuticals, Inc. (e) (o) (t) (z) (ab) (ai)Food ProductsL+12.50% (13.50%), 4/28/201941,73241,12029,7311.8%IPC Corp. (aa)Diversified Telecommunication ServicesL+4.50% (5.50%), 8/6/20216,9486,9166,5190.4%Jackson Hewitt, Inc. (aa)Diversified Consumer ServicesL+7.00% (8.00%), 7/30/20207,0006,8846,6940.4%Jefferson Gulf Coast Energy Partners LLC (aj)Transportation InfrastructureL+7.50% (11.00%), 2/27/201817,77517,69215,9981.0%K&N Engineering, Inc. (z)Specialty RetailL+4.25% (5.25%), 7/11/20194,9754,9534,8020.3%K2 Pure Solutions NoCal, L.P. (z)ChemicalsL+7.00% (8.00%), 8/19/20199,6259,5079,3410.6%Kahala Ireland OpCo Limited (a) (o) (ai)Aerospace & DefenseL+8.00% (13.00%), 12/23/2028170,281170,281170,28110.7%Kahala US OpCo LLC (o) (ai)Aerospace & DefenseL+8.00% (13.00%), 12/23/20282,6042,6042,6040.2%Land Holdings I, LLC (aj)Hotels, Restaurants & Leisure12.00%, 6/26/201930,00029,58030,8201.9%Liquidnet Holdings, Inc. (a) (z) (aa)Capital MarketsL+6.75% (7.75%), 5/22/20196,1906,1585,9730.4%MCS AMS Sub-Holdings LLC (aa)Real Estate Management & DevelopmentL+6.50% (7.50%), 10/15/201913,03112,72710,5550.7%Motion Recruitment Partners, LLC (l) (z)Professional ServicesL+6.00% (7.00%), 2/13/202018,62518,26118,1981.1%Motorsports Aftermarket Group, Inc. (z) (aa)Auto ComponentsL+4.00% (5.00%), 5/14/202126,57924,86717,9411.1%National Technical Systems, Inc. (v) (z)Professional ServicesL+6.00% (7.00%), 6/12/202119,95019,76919,7071.2%NexSteppe Inc. (ai)Chemicals13.00%, 3/30/201810,2329,7049,7050.6%Noosa Acquirer, Inc. (z) (aj)Food ProductsL+5.25% (6.25%), 11/21/202025,00024,69425,1361.6%





The accompanying notes are an integral part of these consolidated financial statements.
 
 F- 21


---

BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 CONSOLIDATED SCHEDULES OF INVESTMENTS
 (dollars in thousands)





December 31, 2015Portfolio Company (q)IndustryInvestment Coupon Rate / Maturity (ak)Principal / Number of SharesAmortized CostFair Value (c)% of Net AssetsNorth Atlantic Trading Company, Inc. (z) (aa)Food ProductsL+6.50% (7.75%), 1/13/2020$17,847$17,810$17,6241.1%Orchid Underwriters Agency, LLC (af) (aj)Insurance10.00%, 11/6/201914,76814,59814,5380.9%Otter Box Holdings, Inc. (aa)Electronic Equipment, Instruments & ComponentsL+4.75% (5.75%), 6/3/202015,67315,39414,8500.9%PeopLease Holdings, LLC (d) (z) (ai)Commercial Services & SuppliesL+13.00% (14.00%), 12/26/201810,0009,88010,4830.7%PGX Holdings, Inc. (z) (aa)Transportation InfrastructureL+4.75% (5.75%), 9/29/202013,89213,80113,7530.9%PlaskoliteChemicalsL+4.75% (5.75%), 11/3/20227,0006,9316,9300.4%Premier Dental Services, Inc. (z) (aa)Health Care Providers & ServicesL+5.00% (6.00%), 11/1/201822,48822,41519,4521.2%Pre-Paid Legal Services, Inc. (aa)Diversified Consumer ServicesL+5.25% (6.50%), 7/1/201911,89611,94011,7840.7%Pride Plating, Inc. (z)Aerospace & DefenseL+5.50% (6.50%), 6/13/20199,6199,5629,3750.6%PSKW IntermediateHealth Care Providers & ServicesL+4.25% (5.25%), 11/25/2021,2,2502,2282,2270.1%PSKW IntermediateHealth Care Providers & ServicesL+8.42% (9.42%), 11/25/202117,75017,40117,5721.1%Pure Barre, LLC (z) (aj) (al)Hotels, Restaurants & LeisureL+7.00% (8.00%), 6/11/202029,85029,38529,4531.8%RedPrairie Corp. (aa)SoftwareL+5.00% (6.00%), 12/21/201817,94617,51715,8971.0%Resco Products, Inc. (z)Metals & MiningL+6.25% (6.58%), 9/7/201610,0009,9629,7410.6%RVNB Holdings, Inc. (dba All My Sons Moving & Storage) (f) (z)Diversified Consumer ServicesL+7.75% (8.75%), 2/25/202023,53623,14522,9741.4%Sage Automotive Holdings, Inc. (aa)Auto ComponentsL+5.00% (6.00%), 10/8/20207,3567,2837,3380.5%SHO Holding II CorporationSpecialty RetailL+5.00% (6.00%), 10/27/202212,00011,88111,8800.7%Squan Holding Corp. (n) (z) (aj)Diversified Telecommunication ServicesL+8.75% (9.75%), 10/10/201922,24921,93121,3991.3%STG-Fairway Acquisitions, Inc. (aa)Professional ServicesL+5.25% (6.25%), 6/30/202213,35913,17013,0090.8%SunGard Availability Services Capital, Inc. (aa)IT ServicesL+5.00% (6.00%), 3/31/20198,8278,7677,6240.5%Taqua, LLC (ai)Wireless Telecommunication ServicesL+13.50%, 7/31/201913,30013,10912,9330.8%Tax Defense Network, LLC (j) (z) (aj)Diversified Consumer ServicesL+7.50% (8.50%), 8/28/201926,11725,72625,8861.6%The Tennis Channel Holdings, Inc. (ab) (ai)MediaL+8.50% (8.88%), 5/29/201716,03115,85216,0001.0%Total Outdoor Holdings Corp.MediaL+11.00% (12.00%), 8/28/201913,00012,80913,2710.8%Transportation Insight, LLC (z) (aj)Air Freight & LogisticsL+5.50% (6.50%), 9/30/201921,04920,80120,4951.3%Trojan Battery Company, LLCAuto ComponentsL+4.75% (5.75%), 6/12/202110,09310,0139,9410.6%





The accompanying notes are an integral part of these consolidated financial statements.
 
 F- 22


---

BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 CONSOLIDATED SCHEDULES OF INVESTMENTS
 (dollars in thousands)





December 31, 2015Portfolio Company (q)IndustryInvestment Coupon Rate / Maturity (ak)Principal / Number of SharesAmortized CostFair Value (c)% of Net AssetsTurning Tech LLC (z) (aj) (am)SoftwareL+8.75% (9.08%), 6/30/2020$26,250$25,814$25,7721.6%Twenty Eighty, Inc. (fka Miller Heiman, Inc.)MediaL+5.75% (6.75%), 9/30/201919,64519,15317,2871.1%United Central Industrial Supply Company, LLC (z) (aa)Commercial Services & SuppliesL+6.25% (7.50%), 10/9/20188,7308,6516,1110.4%VetCor Professional Practices LLC (m) (z)Diversified Consumer ServicesL+6.00% (7.00%), 4/20/202113,19713,07812,9980.8%Sub Total Senior Secured First Lien Debt$1,461,343$1,405,86887.3%Senior Secured Second LienDebt - 21.7% (b)Ability Networks Inc. (ab)Health Care Providers & ServicesL+8.25% (9.25%), 5/16/2022$12,050$11,954$11,8090.7%Appriss Holdings, Inc. (aj)IT ServicesL+8.25% (9.25%), 5/21/202119,65019,39819,3371.2%Asurion LLCIT ServicesL+7.50% (8.50%), 3/3/202110,0009,1568,4750.5%Boston Market Corporation (ab) (aj)Hotels, Restaurants & LeisureL+7.63% (8.63%), 12/16/201824,60124,36524,5991.5%BrandMuscle Holdings Inc.Internet Software & ServicesL+8.50% (9.50%), 6/1/202232,00031,36831,3601.9%Cayan Holdings (aj)IT ServicesL+8.50% (9.50%), 3/24/202220,00019,51719,5501.2%CIG Financial, LLC (a) (ah) (aj)Consumer Finance10.50%, 6/30/201915,00014,89514,3210.9%CPX Interactive Holdings, LP (ai)MediaL+10.00% (13.00%), 3/26/201820,61819,78517,6601.1%CREDITCORP (ab)Consumer Finance12.00%, 7/15/201813,25013,1998,5960.5%Epic Health Services, Inc. (aj)Health Care Providers & ServicesL+8.25% (9.25%), 8/17/202112,33312,17212,1370.8%High Ridge Brands Co. (ab) (aj)Personal ProductsL+8.50% (9.50%), 4/11/202022,50022,25922,4341.5%Interblock USA L.C. (ab) (aj)Electronic Equipment, Instruments & ComponentsL+8.75% (9.75%), 3/28/201823,00022,74122,3511.5%J. C. Bromac Corporation (dba EagleRider, Inc.) (aj) (ap)Hotels, Restaurants & LeisureL+9.00% (10.00%), 8/11/201914,97514,81714,9580.9%K&N Engineering, Inc. (ab)Specialty RetailL+8.63% (9.63%), 7/11/202013,00012,77912,4170.8%Linc Energy Finance USA, Inc. (e) (t) (ab)Oil, Gas & Consumable Fuels12.50%, 10/31/20179,0008,9141,4750.1%NCP Finance Limited Partnership (aa) (ab)Consumer FinanceL+9.75% (11.00%), 10/1/201817,59917,48516,3671.0%Prime Security Services Borrower, LLC (aa)Commercial Services & SuppliesL+8.75% (9.75%), 7/1/202212,50012,32511,8130.7%Rx30 HoldCo, Inc. (aj)HealthCare TechnologyL+8.25% (9.25%), 6/15/202211,50011,28811,2420.7%Sage Automotive Holdings, Inc. (aj)Auto ComponentsL+8.00% (9.00%), 10/8/202113,00012,89212,7400.8%Schulman Associates Institutional Review Board, Inc. (aj)Life Sciences Tools & ServicesL+8.00% (9.00%), 6/3/202117,00016,71616,2921.0%Stratose Intermediate Holdings II, LLC (aj)HealthCare Providers & ServicesL+9.50% (10.50%), 12/30/202110,0009,9089,9000.6%U.S. Auto (aj)Diversified Consumer ServicesL+10.50% (11.50%), 6/8/202030,00029,53229,2051.8%





The accompanying notes are an integral part of these consolidated financial statements.
 
 F- 23


---

BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 CONSOLIDATED SCHEDULES OF INVESTMENTS
 (dollars in thousands)





December 31, 2015Portfolio Company (q)IndustryInvestment Coupon Rate / Maturity (ak)Principal / Number of SharesAmortized CostFair Value (c)% of Net AssetsSub Total Senior Secured Second Lien Debt$367,465$349,03821.7%Subordinated Debt - 5.7% (b)Gold, Inc. (ab)Textiles, Apparel & Luxury Goods11.00%, 6/30/2019$12,163$12,028$11,7300.7%Park Ave RE Holdings, LLC (d) (o) (ai)Real Estate Management & DevelopmentL+8.00% (13.00%), 12/29/201735,19235,19235,1922.2%Steel City Media (ai) (aj)Media14.00%, 3/29/202020,57720,23619,8781.2%Visionary Integration Professionals, LLC (ab) (ai)IT Services17.00%, 12/3/201813,14812,38610,6630.7%Xplornet Communications, Inc. (a) (ai)Diversified Telecommunication Services13.00%, 10/25/202012,86412,86412,9740.8%Zimbra, Inc. (e) (t)Software12.00%, 7/10/20181,2031,2031,8350.1%Sub Total Subordinated Debt$93,909$92,2725.7%Collateralized Securities - 16.4% (b)Collateralized Securities - Debt InvestmentFifth Street Senior Loan Fund I, LLC - 1A Class F (a) (p)Diversified Investment VehiclesL+7.50%, 1/19/2027$10,728$8,938$8,5230.5%Collateralized Securities - Equity InvestmentB&M CLO 2014-1, LTD. Subordinated Notes (a) (p) (ao)Diversified Investment Vehicles8.05%, 4/16/2026$40,250$25,816$19,1691.1%CVP Cascade CLO, LTD. Subordinated Notes (a) (p) (ao)Diversified Investment Vehicles3.38%, 1/16/202631,00015,19311,1140.7%CVP Cascade CLO-2, LTD. Subordinated Notes (a) (e) (p) (ao)Diversified Investment Vehicles7/18/202635,25019,01412,2160.8%Fifth Street Senior Loan Fund I, LLC - 2015-1A Subordinated Notes (a) (p) (ao)Diversified Investment Vehicles11.30%, 1/19/202731,57526,73923,5661.5%Figueroa CLO 2014-1, LTD. Subordinated Notes (a) (p) (ao)Diversified Investment Vehicles3.77%, 1/15/202735,05724,45916,1121.0%MidOcean Credit CLO II, LLC (a) (p) (ao)Diversified Investment Vehicles11.87%, 1/29/202537,60027,71923,6031.5%MidOcean Credit CLO III, LLC (a) (p) (ao)Diversified Investment Vehicles11.96%, 7/21/202640,25029,13123,7481.5%MidOcean Credit CLO IV, LLC (a) (p) (ao)Diversified Investment Vehicles16.51%, 4/15/202721,50017,64914,2120.9%NewStar Arlington Senior Loan Program LLC Subordinated Notes (a) (p) (ao)Diversified Investment Vehicles14.77%, 7/25/202531,60327,20024,4611.5%Ocean Trails CLO V, LTD. (a) (p) (ao)Diversified Investment Vehicles11.64%, 10/13/202640,51831,48825,9571.6%OFSI Fund VI, Ltd. Subordinated Notes (a) (p) (ao)Diversified Investment Vehicles7.63%, 3/20/202538,00024,51020,2051.3%





The accompanying notes are an integral part of these consolidated financial statements.
 
 F- 24


---

BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 CONSOLIDATED SCHEDULES OF INVESTMENTS
 (dollars in thousands)





December 31, 2015Portfolio Company (q)IndustryInvestment Coupon Rate / Maturity (ak)Principal / Number of SharesAmortized CostFair Value (c)% of Net AssetsRelated Fee Agreements (a) (p) (s)Diversified Investment Vehicles$—$13,805$12,6740.8%Silver Spring CLO, Ltd. (a) (e) (p) (ao)Diversified Investment Vehicles10/16/202631,50022,28612,2690.8%WhiteHorse VIII, Ltd. CLO Subordinated Notes (a) (p) (ao)Diversified Investment Vehicles8.28%, 5/1/202636,00021,58713,9550.9%Sub Total Collateralized Securities$335,534$261,78416.4%Equity/Other - 12.6% (b)Basho Technologies, Inc. - Series G Senior Participating Preferred Stock Warrant (e)Software$306$—$16—%Basho Technologies, Inc. - Series G Senior Preferred Stock (e)Software$2,0002,0002,3220.1%Carlyle GMS Finance, Inc. (a) (i)Diversified Investment Vehicles$5,2745,2744,8830.3%CPX Interactive Holdings, LP - Series A Convertible Preferred Shares (e) (u)Media8.00%$6,0006,0005,3700.3%CPX Interactive Holdings, LP - Warrants (e) (u)Media3171,087——%Danish CRJ LTD. (a) (e) (p) (r)Aerospace & Defense$511,0340.1%Evolution Research Group - Preferred Equity (e)Health Care Providers & Services8.00%$500500409—%Greenwave Holdings, Inc. - Series C Preferred Stock Warrant (e)Internet Software & Services172———%HIG Integrity Nutraceuticals (e) (o) (u)Food Products21,630——%Integrity Nutraceuticals (e) (o)Food Products25———%Kahala Ireland OpCo Limited - Common Equity (a) (e) (o) (y)Aerospace & Defense——29,4281.8%Kahala Ireland OpCo Limited - Profit Participating Note (a) (e) (o) (y)Aerospace & Defense3,2503,0653,2500.2%Kahala US OpCo LLC (e) (o) (x)Aerospace & Defense13.00%4,4134,4444,1360.3%MBLOX Inc. - Warrants (e)Internet Software & Services1,531———%NexSteppe Inc. Series C Preferred Stock Warrant (e)Chemicals177500447—%NMFC Senior Loan Program I, LLC (a) (p)Diversified Investment Vehicles$50,00050,00045,9943.0%Orchid Underwriters Agency, LLC - Preferred Shares (e) (u)Insurance5500684—%Orchid Underwriters Agency, LLC - Common Shares (e) (u)Insurance5———%Park Ave RE Holdings, LLC - Common Shares (e) (o) (w)Real Estate Management & Development15878,1150.5%





The accompanying notes are an integral part of these consolidated financial statements.
 
 F- 25


---

BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 CONSOLIDATED SCHEDULES OF INVESTMENTS
 (dollars in thousands)





December 31, 2015Portfolio Company (q)IndustryInvestment Coupon Rate / Maturity (ak)Principal / Number of SharesAmortized CostFair Value (c)% of Net AssetsPark Ave RE Holdings, LLC - Preferred Shares (o) (w)Real Estate Management & Development8.00%47$23,645$23,6451.5%PennantPark Credit Opportunities Fund II, LP (a) (g) (p)Diversified Investment Vehicles$8,6868,6869,0820.6%SkyCross Inc. - Warrants (e)Electronic Equipment, Instruments & Components2,254———%South Grand MM CLO I, LLC (a) (p) (ag)Diversified Investment Vehicles$29,52429,09529,1551.9%Squan Holding Corp. - Class A Common Stock (e) (u)Diversified Telecommunication Services1,15012——%Squan Holding Corp. - Series A Preferred Stock (e) (u)Diversified Telecommunication Services11,139——%Tax Defense Network, LLC (e) (u)Diversified Consumer Services$4254258880.1%Tennenbaum Waterman Fund, L.P. (a)Diversified Investment Vehicles$10,00010,00010,3380.6%The SAVO Group, Ltd. - Warrants (e)Internet Software & Services138———%THL Credit Greenway Fund II LLC (a) (p)Diversified Investment Vehicles$16,90216,90216,9101.0%U.S. Auto Series A Common Units (e)Diversified Consumer Services1010237—%U.S. Auto Series A Preferred Units (e)Diversified Consumer Services1490403—%Visionary Integration Professionals, LLC - Warrants (e) (u)IT Services657910——%World Business Lenders, LLC (e)Consumer Finance9233,7504,7330.3%Xplornet Communications, Inc. - Warrants (a) (e)Diversified Telecommunication Services10—759—%Zimbra, Inc. - Warrants (Third Lien Bridge Note) (e)Software1,000—81—%Sub Total Equity/Other$170,652$202,31912.6%TOTAL INVESTMENTS - 143.7% (b)$2,428,903$2,311,281143.7%


_____________





|    |                                                                                                                                                                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | All of the Company's investments, except the investments noted by this footnote, are in eligible portfolio companies, as defined in the Investment Company Act of 1940, as amended (the “1940 Act”). Eligible assets represent 74.9% of the Company's total assets.

|    |                                                                                
|--- | -------------------------------------------------------------------------------
|(b) | Percentages are based on net assets of $1,610.49million as ofDecember 31, 2015.

|    |                                                                                                                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(c) | The fair value of investments with respect to securities for which market quotations are not readily available is determined in good faith by the Company's board of directors as required by the 1940 Act. (See Note 3 to the consolidated financial statements).

|    |                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------
|(d) | As ofDecember 31, 2015, the company elected to pay cash interest, noting the company has the option to elect a portion of the interest to be PIK.

|    |                                          
|--- | -----------------------------------------
|(e) | Non-income producing atDecember 31, 2015.

|    |                                                                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|(f) | The Company has committed to fund a revolver term loan of $0.9 million in RVNB Holdings, Inc. The remaining commitment as ofDecember 31, 2015was $0.4 million.

|    |                                                                                        
|--- | ---------------------------------------------------------------------------------------
|(g) | The investment is subject to a three year lock-up restriction on withdrawals in year 4.

|    |                                                                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(h) | The Company has committed to fund a revolver term loan of $5.0 million in Icynene US Acquisition Corp. The remaining commitment as ofDecember 31, 2015was $5.0 million.




The accompanying notes are an integral part of these consolidated financial statements.
 
 F- 26


---

BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 CONSOLIDATED SCHEDULES OF INVESTMENTS
 (dollars in thousands)





December 31, 2015





|    |                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------
|(i) | The Company has committed to fund $10.0 million in Carlyle GMS Finance, Inc. The remaining commitment as ofDecember 31, 2015was $4.7 million.

|    |                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(j) | The Company has committed to fund a delayed draw term loan of $5.0 million in Tax Defense Network, LLC. The remaining commitment as ofDecember 31, 2015was $2.0 million.

|    |                                                                                                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(k) | The Company has committed to fund a delayed draw term loan of $2.6 million in ECI Acquisition Holdings, Inc. The remaining commitment as ofDecember 31, 2015was $1.8 million.

|    |                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(l) | The Company has committed to fund a revolver term loan of $2.0 million in Motion Recruitment Partners, LLC. The remaining commitment as ofDecember 31, 2015was $2.0 million.

|    |                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(m) | The Company has committed to fund a delayed draw term loan of $5.0 million in VetCor Professional Practices LLC. The remaining commitment as ofDecember 31, 2015was $1.8 million.

|    |                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(n) | The Company has committed to fund a delayed draw term loan of $1.4 million in Squan Holding Corp. The remaining commitment as ofDecember 31, 2015was $0.3 million.

|    |                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(o) | The Company's investments are classified in accordance with the requirements of the 1940 Act. Under the 1940 Act, “Control Investments” are defined as investments in companies in which the Company owns more than 25% of the voting securities, maintains greater than 50% of the board representation or has the power to exercise control over the management or policies of such portfolio company.

|    |                                                                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(p) | The Company's investments are classified in accordance with the requirements of the 1940 Act. Under the 1940 Act, “Affiliated Investments” are defined as those non-control investments in companies in which the Company owns between 5% and 25% of the voting securities.

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(q) | The Company's investments are classified in accordance with the requirements of the 1940 Act. Under the 1940 Act, “Non-affiliated Investments” are defined as investments that are neither Control Investments nor Affiliated Investments. The Company classifies all investments within the consolidated schedule of investments which are not classified as Control Investments or Affiliated Investments as Non-affiliated Investments.

|    |                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(r) | The Company's investment is held through the Consolidated Holding Company, Kahala Aviation Holdings, LLC, which owns 49% of the operating company, Danish CRJ LTD.

|    |                                                                                                                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(s) | Related Fee Agreements consists of one investment with a fair value of $995 thousand that is classified as a Non-affiliated Investment and six investments with a total fair value of $11,679 thousand that are classified as Affiliated Investments.

|    |                                                                
|--- | ---------------------------------------------------------------
|(t) | The investment is on non-accrual status as ofDecember 31, 2015.

|    |                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------
|(u) | Investments are held in the taxable wholly-owned, consolidated subsidiary, 54thStreet Equity Holdings, Inc.

|    |                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(v) | The Company has committed to fund a delayed draw term loan of $5.0 million in National Technical Systems, Inc. The remaining commitment as ofDecember 31, 2015was $5.0 million.

|    |                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(w) | The Company's investment is held through the consolidated subsidiary, Park Ave RE, Inc., which owns 100% of the equity of the operating company, Park Ave RE Holdings, LLC.

|    |                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(x) | The Company's investment is held through the consolidated subsidiaries, Kahala Aviation Holdings, LLC and Kahala Aviation US, Inc. which own 100% of the equity of the operating company, Kahala US OpCo LLC.

|    |                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(y) | The Company's investment is held through the consolidated subsidiaries, Kahala Aviation Holdings, LLC and Kahala LuxCo, which own 100% of the equity of the operating company, Kahala Ireland OpCo LLC.

|    |                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(z) | The Company's investment or a portion thereof is pledged as collateral under the Wells Fargo Credit Facility. Individual investments can be divided into parts which are pledged to separate credit facilities.

|     |                                                                                                                                                                                                         
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(aa) | The Company's investment or a portion thereof is pledged as collateral under the Citi Credit Facility. Individual investments can be divided into parts which are pledged to separate credit facilities.

|     |                                                                                                                                                                                                                  
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(ab) | The Company's investment or a portion thereof is pledged as collateral under the Deutsche Bank Credit Facility. Individual investments can be divided into parts which are pledged to separate credit facilities.

|     |                                                                                                                                                                            
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(ac) | The Company has committed to fund a delayed draw term loan of $5.0 million in Icynene US Acquisition Corp. The remaining commitment as ofDecember 31, 2015was $5.0 million.

|     |                                                                                                                                                                      
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(ad) | The Company has committed to fund a delayed draw term loan of $20.2 million in ERG Holding Company. The remaining commitment as ofDecember 31, 2015was $16.4 million.

|     |                                                                                                                                                                                  
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(ae) | The Company has committed to fund a delayed draw term loan of $2.2 million in InMotion Entertainment Group, LLC. The remaining commitment as ofDecember 31, 2015was $1.8 million.

|     |                                                                                                                                                                                
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(af) | The Company has committed to fund a delayed draw term loan of $5.6 million in Orchid Underwriters Agency, LLC. The remaining commitment as ofDecember 31, 2015was $5.6 million.

|     |                                                                                                                                               
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------
|(ag) | The Company has committed to fund $35.0 million in South Grand MM CLO I, LLC. The remaining commitment as ofDecember 31, 2015was $5.5 million.

|     |                                                                                                                                                                   
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(ah) | The Company has committed to fund a delayed draw term loan of $5.0 million in CIG Financial, LLC. The remaining commitment as ofDecember 31, 2015was $5.0 million.




















































The accompanying notes are an integral part of these consolidated financial statements.
 
 F- 27


---

BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 CONSOLIDATED SCHEDULES OF INVESTMENTS
 (dollars in thousands)





December 31, 2015





(ai) For year ended December 31, 2015 , the following investments paid or have the option to pay all or a portion of interest and dividends via PIK: Portfolio CompanyInvestment TypeCashPIKAll-in RateBasho Technologies, Inc.Senior Secured First Lien Debt10.00%3.00%13.00%Greenwave Holdings, Inc.Senior Secured First Lien Debt10.00%3.00%13.00%Integrity Nutraceuticals, Inc.Senior Secured First Lien Debt10.50%1.00%11.50%Kahala Ireland OpCo LLCSenior Secured First Lien Debt—%13.00%13.00%Kahala US OpCo LLCSenior Secured First Lien Debt—%13.00%13.00%NexSteppe Inc.Senior Secured First Lien Debt10.00%3.00%13.00%PeopLease Holdings, LLCSenior Secured First Lien Debt14.00%—%14.00%The Tennis Channel Holdings, Inc.Senior Secured First Lien Debt6.88%2.00%8.88%Taqua, LLCSenior Secured First Lien Debt10.50%3.00%13.50%CPX Interactive Holdings, LPSenior Secured Second Lien Debt11.00%2.00%13.00%Park Ave RE Holdings, LLCSubordinated Debt13.00%—%13.00%Steel City MediaSubordinated Debt12.00%2.00%14.00%Visionary Integration Professionals, LLCSubordinated Debt—%17.00%17.00%Xplornet Communications, Inc.Subordinated Debt—%13.00%13.00%





|     |                                                                                                                                                                                                        
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(aj) | The Company's investment or a portion thereof is pledged as collateral under the UBS Credit Facility. Individual investments can be divided into parts which are pledged to separate credit facilities.

|     |                                                                                                                                                                                                                                                         
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(ak) | For equity investments in Collateralized Securities, the effective yield is presented in place of the investment coupon rate for each investment. Refer to footnote (ao) for a further description of an equity investment in a Collateralized Security.

|     |                                                                                                                                                            
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|(al) | The Company has committed to fund a revolver term loan of $2.5 million in Pure Barre, LLC. The remaining commitment as ofDecember 31, 2015was $2.5 million.

|     |                                                                                                                                                             
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------
|(am) | The Company has committed to fund a revolver term loan of $6.0 million in Turning Tech LLC. The remaining commitment as ofDecember 31, 2015was $4.0 million.

|     |                                                                                                                                                                    
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(an) | The Company has committed to fund a delayed draw term loan of $3.5 million in Hanna Anderson, LLC. The remaining commitment as ofDecember 31, 2015was $2.9 million.

|     |                                                                                                                                                                                                                                                                                                                                                                                     
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(ao) | The Company’s investment is considered an equity investment in a Collateralized Security.  Equity investments represent the Collateralized Security’s tranche that is entitled to recurring distributions which are generally equal to the residual cash flow of the payments made by the investment’s underlying securities less contractual payments to debt holders and expenses.

|     |                                                                                                                                                                    
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(ap) | The Company has committed to fund a $10.8 million in PennantPark Credit Opportunities Fund II, LP. The remaining commitment as ofDecember 31, 2015was $1.6 million.

|     |                                                                                                                                                        
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------
|(aq) | The Company has committed to fund a revolver term loan of $5.0 million in Amteck, LLC. The remaining commitment as ofDecember 31, 2015was $5.0 million.

|     |                                                                                                                                                              
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|(ar) | The Company has committed to fund a delayed draw term loan of $1.1 million in Ascensus, Inc. The remaining commitment as ofDecember 31, 2015was $1.1 million.










The accompanying notes are an integral part of these consolidated financial statements.
 
 F- 28


---

BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 CONSOLIDATED SCHEDULES OF INVESTMENTS
 (dollars in thousands)





December 31, 2015





The following table shows the portfolio composition by industry grouping based on fair value at December 31, 2015 :





At December 31, 2015Investments atFair ValuePercentage ofTotal PortfolioDiversified Investment Vehicles$405,10517.4%Aerospace & Defense237,52310.3Hotels, Restaurants & Leisure145,5046.3Media137,6396.0Diversified Consumer Services127,7565.5Health Care Providers & Services114,6425.0Internet Software & Services112,1974.9IT Services99,5834.3Software88,4543.8Commercial Services & Supplies83,4093.6Real Estate Management & Development77,5073.4Food Products72,4913.1Specialty Retail59,0972.6Professional Services54,7952.4Electronic Equipment, Instruments & Components49,4532.1Auto Components47,9602.1Transportation Infrastructure44,6281.9Consumer Finance44,0171.9Diversified Telecommunication Services41,6511.8Diversified Financial Services27,3561.2Chemicals26,4231.1Building Products23,6201.0Personal Products22,4341.0Air Freight & Logistics20,4950.9Machinery19,2420.8Life Sciences Tools & Services16,2920.7Insurance15,2220.7Household Durables14,7380.6Distributors14,6070.6Communications Equipment14,3470.6Wireless Telecommunication Services12,9330.6Textiles, Apparel & Luxury Goods11,7300.5Health Care Technology11,2420.5Metals & Mining9,7410.4Capital Markets5,9730.3Oil, Gas & Consumable Fuels1,4750.1Total$2,311,281100.0%





The accompanying notes are an integral part of these consolidated financial statements.
 
 F- 29


---




BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands, except share and per share amounts, percentages and as otherwise indicated)











Note 1 — Organization and Basis of Presentation





Business Development Corporation of America (the “Company”) is an externally managed, non-diversified closed-end management investment company incorporated in Maryland in May 2010 that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (“the 1940 Act”). In addition, the Company has elected to be treated for tax purposes as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). The Company’s investment activities are managed by BDCA Adviser, LLC (the “Adviser”), a subsidiary of Benefit Street Partners L.L.C. (“BSP”) and supervised by the Company’s board of directors, a majority of whom are independent of the Adviser and its affiliates. As a BDC, the Company is required to comply with certain regulatory requirements.





The Company’s investment objective is to generate both current income and to a lesser extent long-term capital appreciation through debt and equity investments. The Company invests primarily in first and second lien senior secured loans and mezzanine debt issued by middle market companies. The Company defines middle market companies as those with annual revenues between $10 million and $1 billion. The Company may also purchase interests in loans through secondary market transactions. First and second lien secured loans generally are senior debt instruments that rank ahead of subordinated debt and equity in bankruptcy priority and are generally secured by liens on the operating assets of a borrower which may include inventory, receivables, plant, property and equipment. Mezzanine debt is subordinated to senior loans and is generally unsecured. The Company may invest in the equity and junior debt tranches of collateralized loan obligation investment vehicles (“Collateralized Securities”). Structurally, Collateralized Securities are entities that are formed to manage a portfolio of senior secured loans made to companies whose debt is rated below investment grade or, in limited circumstances, unrated. The senior secured loans within these Collateralized Securities meet specified credit and diversity criteria and are subject to concentration limitations in order to create a diverse investment portfolio. In most cases, companies to whom we provide customized financing solutions will be privately held at the time the Company invests in them.





While the structure of the Company’s investments is likely to vary, we may invest in senior secured debt, senior unsecured debt, subordinated secured debt, subordinated unsecured debt, mezzanine debt, convertible debt, convertible preferred equity, preferred equity, common equity, warrants, CLOs and other instruments, many of which generate current yields. If the Adviser deems appropriate, the Company may invest in more liquid senior secured and second lien debt securities, some of which may be traded. The Company will make such investments to the extent allowed by the 1940 Act and consistent with its continued qualification as a RIC for federal income tax purposes.





On January 25, 2011, the Company commenced its initial public offering (the “IPO”) on a “reasonable best efforts basis” of up to 150.0 million shares of common stock, $0.001 par value per share, and subsequently amended the offering to issue up to an additional 101.1 million shares of its common stock (the “Offering”). The Company closed the Offering to new investments on April 30, 2015. In order to allow for associated processing time needed, the transfer agent for the Company accepted subscriptions in good order dated on or before April 30, 2015 and received no later than June 30, 2015. As of December 31, 2016 , the Company had issued 189.6 million shares of common stock for gross proceeds of $2.0 billion including the shares purchased by affiliates and shares issued under our distribution reinvestment plan (“DRIP”). As of December 31, 2016 , the Company had repurchased a cumulative 12.5 million shares of common stock through its share repurchase program for payments of $ 113.4 million.





The Company intends to co-invest, subject to the conditions included in the exemptive order the Company received from the SEC, with certain of our affiliates. The Company believes that such co-investments may afford it additional investment opportunities and an ability to achieve greater diversification





As a BDC, the Company is generally required to invest at least 70% of our total assets primarily in securities of private and certain U.S. public companies (other than certain financial institutions), cash, cash equivalents and U.S. government securities and other high quality debt investments that mature in one year or less.





The Company is permitted to borrow money from time to time within the levels permitted by the 1940 Act (which generally allows it to incur leverage for up to one half of its assets). The Company has used, and expects to continue to use, its credit facilities and other borrowings, along with proceeds from the rotation of its portfolio and proceeds from private securities offerings to finance its investment objectives.








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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands, except share and per share amounts, percentages and as otherwise indicated)





Note 2 — Summary of Significant Accounting Policies





Basis of Presentation





The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).





The Company consolidates the following subsidiaries for accounting purposes: BDCA Funding I, LLC (“Funding I”), BDCA 2L Funding I, LLC (“2L Funding I”), BDCA-CB Funding, LLC (“CB Funding”), BDCA Helvetica Funding, Ltd. (“Helvetica Funding”), 54th Street Equity Holdings, Inc. and the Consolidated Holding Companies. All significant intercompany balances and transactions have been eliminated in consolidation. In conjunction with the consolidation of subsidiaries, the Company recognizes non-controlling interests attributable to third party ownership in the following Consolidated Holding Companies: Kahala Aviation Holdings, LLC, Kahala Aviation US, Inc., and Kahala LuxCo.





Use of Estimates





The preparation of financial statements in conformity with U.S. 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.





Consolidation





As provided under Regulation S-X and ASC Topic 946 - Financial Services - Investment Companies, the Company will generally not consolidate its investment in a company other than a wholly-owned investment company or controlled operating company whose business consists of providing services to the Company. Accordingly, the Company consolidated the accounts of the Company's wholly-owned subsidiaries in its consolidated financial statements.





Valuation of Portfolio Investments





Portfolio investments are reported on the consolidated statement of assets and liabilities at fair value. On a quarterly basis the Company performs an analysis of each investment to determine fair value as follows:





Securities for which market quotations are readily available on an exchange are valued at the reported closing price on the valuation date. The Company may also obtain quotes with respect to certain of the Company's investments from pricing services or brokers or dealers in order to value assets. When doing so, the Company determines whether the quote obtained is readily available according to U.S. GAAP to determine the fair value of the security. If determined readily available, the Company uses the quote obtained.





Investments without a readily determined market value are primarily valued using a market approach, an income approach, or both approaches, as appropriate. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors that the Company may take into account in fair value pricing the Company's investments include, as relevant: available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company's ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, M&A comparables, and enterprise values, among other factors. When available, broker quotations and/or quotations provided by pricing services are considered as an input in the valuation process.





For an investment in an investment fund that does not have a readily determinable fair value, the Company measures the fair value of the investment predominately based on the net asset value per share of the investment fund if the net asset value of the investment fund is calculated in a manner consistent with the measurement principles of ASC 946, as of the Company's measurement date.





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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands, except share and per share amounts, percentages and as otherwise indicated)








For investments in Collateralized Securities, both the assets and liabilities of each Collateralized Securities' capital structure are modeled. The model uses a waterfall engine to store the collateral data, generate collateral cash flows from the assets, and distribute the cash flows to the liability structure based on the priority of payments. The waterfall cash flows are discounted using rates that incorporate risk factors such as default risk, interest rate risk, downgrade risk, and credit spread risk, among others. In addition, broker quotations and/or comparable trade activity is considered as an input to determining fair value when available.





As part of the Company's quarterly valuation process the Adviser may be assisted by one or more independent valuation firms engaged by the Company. The board of directors determines the fair value of each investment, in good faith, based on the input of the Adviser and the independent valuation firm(s) (to the extent applicable).





With respect to investments for which market quotations are not readily available, the Adviser undertakes a multi-step valuation process each quarter, as described below:





|  |                                                                                                                                                                                
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | Each portfolio company or investment will be valued by the Adviser, potentially with assistance from one or more independent valuation firms engaged by our board of directors;

|  |                                                                                                                                                            
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|• | The independent valuation firm(s), if involved, will conduct independent appraisals and make an independent assessment of the value of each investment; and

|  |                                                                                                                                                                                                                                
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | The board of directors determines the fair value of each investment, in good faith, based on the input of the Adviser, independent valuation firm (to the extent applicable) and the audit committee of the board of directors.




Because there is not a readily available market value for most of the investments in its portfolio, the Company values substantially all of its portfolio investments at fair value as determined in good faith by its board of directors, as described herein. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company's investments may fluctuate from period to period. Additionally, the fair value of the Company's investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that the Company may ultimately realize. Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If the Company was required to liquidate a portfolio investment in a forced or liquidation sale, the Company could realize significantly less than the value at which the Company has recorded it.





Investment Classification





The Company classifies its investments in accordance with the requirements of the 1940 Act. Under the 1940 Act, “control” is defined as the power to exercise a controlling influence over the management or policies of a company, unless such power is solely the result of an official position with such company. In addition, any person “who owns beneficially, either directly or through one or more controlled companies, more than 25 per centum of the voting securities of a company shall be presumed to control such company. Any person who does not so own more than 25 per centum of the voting securities of any company shall be presumed not to control such company”. Using this definition, the Company has determined to treat “Control Investments” as investments in companies in which the Company owns more than 25% of the voting securities, maintains greater than 50% of the board representation or has the power to exercise control over the management or policies of such portfolio company. Consistent with the 1940 Act, “Affiliated Investments” are defined as those non-control investments in companies in which the Company owns between 5% and 25% of the voting securities. Consistent with the 1940 Act, “Non-affiliated Investments” are defined as investments that are neither Control Investments nor Affiliated Investments.





Where appropriate, prior period consolidated financial statements have been reclassified to disclose the Company's Control Investments and Affiliate Investments as defined above. In addition, prior period consolidated financial statements have been reclassified to present investment industry classifications in a consistent manner with the current year.





Cash and Cash Equivalents





Cash and cash equivalents include short-term, liquid investments in a money market deposit account. Cash and cash equivalents are carried at cost which approximates fair value.











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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands, except share and per share amounts, percentages and as otherwise indicated)








Offering Costs





The Company incurs certain costs in connection with the registration of shares of its common stock. Offering costs principally relate to professional fees, printing costs, direct marketing expenses, due diligence costs, fees paid to regulators and other expenses, including the salaries and/or expenses of the Adviser and its affiliates engaged in registering and marketing the Company’s common stock. Such allocated expenses of the Adviser and its affiliates may include the development of marketing materials and presentations, training and educational meetings, and generally coordinating the marketing process for the Company.





Pursuant to the Investment Advisory Agreement, the Company and the Adviser have agreed that the Company will not be liable for organization and offering costs, including transfer agent fees, in excess of 1.5% of the aggregate gross proceeds from the Company’s on-going offering. Should the Company resume continually offering its shares, any offering costs incurred will be capitalized and amortized as an expense on a straight-line basis over a 12 month period. As of December 31, 2016 and December 31, 2015 , offering costs have not been incurred in excess of the 1.5% limit.





Deferred Financing Costs





Financing costs incurred in connection with the Company’s Unsecured Notes and revolving credit facilities with Wells Fargo, Citi, and UBS are capitalized and amortized into expense using the straight-line method over the life of the respective facility. See Note 5 - Borrowings - for details on the Credit Facilities and Unsecured Notes.





Distributions





The Company’s board of directors has authorized, and the Company has declared cash distributions payable on a monthly basis to stockholders of record on each day since it commenced operations. Since November 2013, the distribution rate has been $0.002378082 per day, which is equivalent to $0.868 per annum, per share of common stock. In March 2016, the Company’s board of directors ratified the existing distribution amount equivalent to $0.868 per annum, and, for calendar year 2016, affirmed a change to the daily distribution amount to $0.002371585 per day per share of common stock, effective January 1, 2016, to accurately reflect that 2016 is a leap year.





The amount of each such distribution will be subject to the discretion of the board of directors and applicable legal restrictions related to the payment of distributions. The Company will calculate each stockholder’s specific distribution amount for the month using record and declaration dates and accrue distributions on the date the Company accepts a subscription for shares of the Company’s common stock. The distributions are payable by the fifth day following each month end to stockholders of record at the close of business each day during the prior month. From time to time, the Company may also pay interim distributions, including capital gains distributions, at the discretion of the Company’s board of directors. The Company’s distributions may exceed earnings, especially during the period before it has substantially invested the proceeds from the offering. As a result, a portion of the distributions made by the Company may represent a return of capital for U.S. federal income tax purposes. A return of capital is a return of each stockholder’s investment rather than earnings or gains derived from the Company’s investment activities.





The Company may fund cash distributions to stockholders from any sources of funds available to the Company, including expense payments from the Adviser that are subject to reimbursement, as well as offering proceeds, borrowings, net investment income from operations, capital gain proceeds from the sale of assets, and non-capital gain proceeds from the sale of assets. The Company has not established limits on the amount of funds it may use from available sources to make distributions. See Note 13 - Income Tax Information and Distributions to Stockholders for additional information.








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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands, except share and per share amounts, percentages and as otherwise indicated)





Revenue Recognition





Interest Income





Investment transactions are accounted for on the trade date. Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis. Discounts and premiums on investments purchased are accreted/amortized over the expected life of the respective investment using the effective yield method. The amortized cost of investments represents the original cost adjusted for the accretion of discounts and amortizations of premiums on investments.





The Company has a number of investments in Collateralized Securities. Interest income from investments in the “equity” class of these Collateralized Securities (in the Company's case, preferred shares or subordinated notes) is recorded based upon an estimation of an effective yield to expected maturity utilizing assumed cash flows in accordance with ASC Topic 325-40-35, Beneficial Interests in Securitized Financial Assets. The Company monitors the expected cash inflows from its equity investments in Collateralized Securities, including the expected principal repayments. The effective yield is determined and updated quarterly.


Fee Income


Fee income, such as structuring fees, origination, closing, amendment fees, commitment and other upfront fees are generally non-recurring and are recognized as revenue when earned, either upfront or amortized into income. Upon the payment of a loan or debt security, any prepayment penalties and unamortized loan origination, structuring, closing, commitment and other upfront fees are recorded as income.


Payment-in-Kind Interest/Dividends





The Company holds debt and equity investments in its portfolio that contain payment-in-kind (“PIK”) interest and dividend provisions. The PIK interest and PIK dividend, which represent contractually deferred interest or dividends that add to the investment balance that is generally due at maturity, are generally recorded on the accrual basis.





Non-accrual income





Investments are placed on non-accrual status when principal or interest/dividend payments are past due 30 days or more and/or when there is reasonable doubt that principal or interest will be collected. Accrued cash and un-capitalized PIK interest is generally reversed when an investment is placed on non-accrual status. Previously capitalized PIK interest is not reversed when an investment is placed on non-accrual status. Interest payments received on non-accrual investments may be recognized as income or applied to principal depending upon management's judgment of the ultimate outcome. Non-accrual investments are restored to accrual status when past due principal and interest is paid and, in management's judgment, are likely to remain current.





Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation





Gains or losses on the sale of investments are calculated using the specific identification method. The Company measures 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. Net change in unrealized appreciation or depreciation will reflect the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized.





Income Taxes





The Company has elected to be treated for federal income tax purposes as a RIC under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). Generally, a RIC is exempt from federal income taxes if it distributes to stockholders at least 90% of ‘‘investment company taxable income,’’ as defined in the Code, each year. Distributions declared prior to the filing of the previous year's tax return and paid up to one year after the current tax year can be carried back to the prior tax year for determining the distributions paid in such tax year. The Company intends to make sufficient distributions to maintain its RIC status each year. The Company may be subject to federal excise taxes of 4%. See Note 13 - Income Tax Information and Distributions to Stockholders for additional information.








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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands, except share and per share amounts, percentages and as otherwise indicated)





New Accounting Pronouncements





In December 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-19, Technical Corrections and Improvements , which includes minor corrections and clarifications that affect a wide variety of topics in the Accounting Standards Codification, including an amendment to Topic 820, Fair Value Measurement , which clarifies the difference between a valuation approach and a valuation technique when applying the guidance of that Topic. The amendment also requires an entity to disclose when there has been a change in either or both a valuation approach and/or a valuation technique.  The transition guidance for the Topic 820 amendment must be applied prospectively because it could potentially involve the use of hindsight that includes fair value measurements. The guidance is effective for fiscal years, and interim periods within those fiscal years, for all entities beginning after December 15, 2016.  Early application is permitted for any fiscal year or interim period for which the entity’s financial statements have not yet been issued. We are currently evaluating the impact this ASU will have on the Company's consolidated financial position or disclosures.





In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230)”, which seeks to reduce diversity in how certain cash payments are presented in the Statement of Cash Flows. Under ASU 2016-15, an entity will need to conform to the presentation as prescribed for eight specific cash flow issues. ASU 2016-15 will be effective for annual and interim reporting periods after December 15, 2017. The application of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.





In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606),” which amends the criteria for revenue recognition where an entity enters into contracts with customers to transfer goods or services or where there is a transfer of non-financial assets. Under ASU 2016-10, an entity should recognize revenue in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. ASU 2016-10 will be effective for annual and interim reporting periods after December 15, 2018. The Company does not believe that the adoption of ASU 2016-10 will have any impact on the Company’s consolidated financial statements.





In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). ASU 2016-01 retains many current requirements for the classification and measurement of financial instruments; however, it significantly revises an entity’s accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. ASU 2016-01 also amends certain disclosure requirements associated with the fair value of financial instruments. This guidance is effective for annual and interim periods beginning after December 15, 2017, and early adoption is not permitted for public business entities. The Company is currently evaluating the impact the adoption of this standard has on its consolidated financial statements and disclosures.





In May 2015, the FASB issued ASU No. 2015-07, Disclosures for Investments in Certain Entities that Calculate Net Asset Value per Share (or its Equivalent) . The guidance removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the NAV per share practical expedient. Sufficient information must be provided to permit reconciliation of the fair value of assets categorized within the fair value hierarchy to the amounts presented in the Statements of Assets and Liabilities. The guidance is required to be presented for annual periods beginning after December 15, 2015, and for interim periods within those fiscal years. Accordingly, the Company adopted ASU 2015-07, during the quarter ended March 31, 2016, which removes investments measured using the net asset value per share practical expedient from the fair value hierarchy in all periods presented. The adoption of ASU 2015-07 did not have a material impact on the Company’s consolidated financial statements.





On April 7, 2015, the FASB issued ASU No. 2015-03, Presentation of Debt Issuance Costs .  The ASU requires debt issuance costs to be presented on the balance sheet as a direct deduction from the debt liability.  The ASU is effective for interim and annual reporting periods beginning after December 14, 2015.  The Company adopted this guidance during the quarter ended March 31, 2016 and adjusted prior period balance sheets to reflect the change. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.





In February 2015, the FASB issued ASU 2015-02, Consolidation (Topic 810) - Amendments to the Consolidation Analysis , which amends the current consolidation guidance and ends the deferral granted to investment companies from applying the variable interest entity (“VIE”) guidance. The ASU is effective for fiscal periods beginning after December 15, 2015. ASU 2015-02 changes the manner in which a reporting entity assesses one of the five characteristics that determine if an entity is a VIE. Accordingly, the Company adopted this guidance during the quarter ended March 31, 2016 and has evaluated





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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands, except share and per share amounts, percentages and as otherwise indicated)





the impact of ASU 2015-02 on its consolidated financial statements and determined that the adoption of ASU 2015-02 did not have a material impact on our consolidated financial statements.





Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s consolidated financial statements.











Note 3 — Fair Value of Financial Instruments





Accounting guidance establishes a hierarchal disclosure framework which prioritizes and ranks the level of market price observability of inputs used in measuring investments at fair value. Market price observability is affected by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.





The Company determines fair value based on quoted prices when available or through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment. This alternative approach also reflects the contractual terms of the derivatives, if any, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The guidance defines three levels of inputs that may be used to measure fair value:





|  |                                                                                                                                                          
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|• | Level 1—Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.

|  |                                                                                                                                                                                                                                            
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability.

|  |                                                                                                                                                                                                                                                                               
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | Level 3—Unobservable inputs that reflect the entity’s own assumptions about the assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.




The determination of where an asset or liability falls in the above hierarchy requires significant judgment and factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company evaluates its hierarchy disclosures each quarter and depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter.





All of the Company’s investment portfolio at December 31, 2016 was comprised of debt and equity instruments for which Level 1 inputs, such as quoted prices, were not available. Therefore, at December 31, 2016 , the investments were valued at fair value as determined in good faith using the valuation policy approved by the board of directors using Level 2 and Level 3 inputs. The Company evaluates the source of inputs, including any markets in which the Company's investments are trading, in determining fair value. Due to the inherent uncertainty in the valuation process, the estimate of fair value of the Company’s investment portfolio at December 31, 2016 may differ materially from values that would have been used had a ready market for the securities existed.





In addition to using the above inputs in investment valuations, the Company continues to employ the valuation policy approved by the board of directors. Portfolio investments are reported on the consolidated statements of assets and liabilities at fair value. On a quarterly basis the Company performs an analysis of each investment to determine fair value as described below.





Securities for which market quotations are readily available on an exchange are valued at the reported closing price on the valuation date. The Company may also obtain quotes with respect to certain of the Company's investments from pricing services or brokers or dealers in order to value assets. When doing so, the Company determines whether the quote obtained is readily available according to U.S. GAAP to determine the fair value of the security. If determined readily available, the Company uses the quote obtained.





Investments without a readily determined market value are primarily valued using a market approach, an income





F- 36


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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands, except share and per share amounts, percentages and as otherwise indicated)





approach, or both approaches, as appropriate. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors that the Company may take into account in fair value pricing the Company's investments include, as relevant: available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company's ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, M&A comparables, and enterprise values, among other factors. When available, broker quotations and/or quotations provided by pricing services are considered as an input in the valuation process.





For an investment in an investment fund that does not have a readily determinable fair value, the Company measures the fair value of the investment predominately based on the net asset value per share of the investment fund if the net asset value of the investment fund is calculated in a manner consistent with the measurement principles of ASC Topic 946, as of the Company's measurement date. Prior to its termination in June 2014, the value of our TRS was primarily based on the increase or decrease in the value of the loans underlying the TRS, as determined by Citi based upon indicative pricing by an independent third-party pricing service.





For investments in Collateralized Securities, the Adviser models both the assets and liabilities of each Collateralized Securities' capital structure. The model uses a waterfall engine to store the collateral data, generate collateral cash flows from the assets, and distribute the cash flows to the liability structure based on priority of payments. The waterfall cash flows are discounted using rates that incorporate risk factors such as default risk, interest rate risk, downgrade risk, and credit spread risk, among others. In addition, the Adviser considers broker quotations and/or comparable trade activity is considered as an input to determining fair value when available.





As part of the Company's quarterly valuation process, the Adviser may be assisted by one or more independent valuation firms engaged by the Company. The board of directors determines the fair value of each investment, in good faith, based on the input of the Adviser and the independent valuation firm(s) (to the extent applicable).





Determination of fair values involves subjective judgments and estimates. Accordingly, the notes to the consolidated financial statements refer to the uncertainty with respect to the possible effect of such valuations, and any change in such valuations on the consolidated financial statements.





For discussion of the fair value measurement of the Company's borrowings, refer to Note 5 - Borrowings - in the consolidated financial statements included in this report.





The following table presents fair value measurements of investments, by major class, as of December 31, 2016 , according to the fair value hierarchy :


Fair Value MeasurementsLevel 1Level 2Level 3TotalSenior Secured First Lien Debt$—$714,562$916,099$1,630,661Senior Secured Second Lien Debt—56,936205,051261,987Subordinated Debt——80,54080,540Collateralized Securities——249,582249,582Equity/Other——56,79456,794Other investments measured at net asset value(1)———114,519Total$—$771,498$1,508,066$2,394,083


______________





(1) In accordance with Subtopic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated statements of assets and liabilities.





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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands, except share and per share amounts, percentages and as otherwise indicated)








The following table presents fair value measurements of investments, by major class, as of December 31, 2015 , according to the fair value hierarchy :


Fair Value MeasurementsLevel 1Level 2Level 3TotalSenior Secured First Lien Debt$—$310,828$1,095,040$1,405,868Senior Secured Second Lien Debt—8,475340,563349,038Subordinated Debt——92,27292,272Collateralized Securities——261,784261,784Equity/Other——115,112115,112Other investments measured at net asset value(1)———87,207Total$—$319,303$1,904,771$2,311,281


______________





(1) In accordance with Subtopic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated statements of assets and liabilities.





The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the year ended December 31, 2016 :





Senior Secured First Lien DebtSenior Secured Second Lien DebtSubordinated DebtCollateralized SecuritiesEquity/OtherTotalBalance as of December 31, 2015$1,095,040$340,563$92,272$261,784$115,112$1,904,771Net change in unrealized appreciation (depreciation) on investments(39,045)4,5061,12048,557(19,214)(4,076)Purchases and other adjustments to cost255,98527,4165,813162201289,577Sales and redemptions(241,206)(118,913)(7,403)(60,921)(4,069)(432,512)Net realized gains (losses)(9,461)1,538(11,262)—(6,081)(25,266)Transfers in4,252————4,252Transfers out(149,466)(50,059)——(29,155)(228,680)Balance as of December 31, 2016$916,099$205,051$80,540$249,582$56,794$1,508,066Unrealized gains (losses) for theperiod relating to those Level 3assets that were still held bythe Company at the end of theperiod:Net change in unrealizedgains (losses):$(41,722)$1,653$(603)$48,557$(21,841)$(13,956)





Purchases represent the acquisition of new investments at cost. Redemptions represent principal payments received during the period.





For the year ended December 31, 2016 , there were no transfers out of Level 1 to Level 2. For the year ended December 31, 2016 , one company was transferred out of Level 2 to Level 3. For the year ended December 31, 2016 , seventeen companies were transferred from Level 3 to Level 2 as the number of observable market quotes increased.








F- 38


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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands, except share and per share amounts, percentages and as otherwise indicated)





Transfers between levels, if any, are recognized at the beginning of the period in which transfers occur.





The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the year ended December 31, 2015 :





Senior Secured First Lien DebtSenior Secured Second Lien DebtSubordinated DebtCollateralized SecuritiesEquity/OtherTotalBalance as of December 31, 2014$672,244$225,695$60,930$364,897$134,101$1,457,867Net change in unrealized appreciation (depreciation) on investments(25,796)(15,964)2,932(65,713)21,966(82,575)Purchases and other adjustments to cost674,884160,54233,26856,14447,346972,184Sales and redemptions(293,559)(38,472)(797)(93,744)(88,505)(515,077)Net realized gains (losses)2,075349(4,061)200(296)(1,733)Transfers in256,42142,663——500299,584Transfers out(191,229)(34,250)———(225,479)Balance as of December 31, 2015$1,095,040$340,563$92,272$261,784$115,112$1,904,771Unrealized gains (losses) for theperiod relating to those Level 3assets that were still held bythe Company at the end of theperiod:Net change in unrealizedgains (losses):$(25,745)$(15,874)$(1,129)$(65,713)$22,030$(86,431)





Purchases represent the acquisition of new investments at cost. Redemptions represent principal payments received during the period.





For the year ended December 31, 2015 , there were no transfers out of Level 1 to Level 2. For the year ended December 31, 2015 , nine companies were transferred from Level 2 to Level 3 as the number of observable market quotes available for these investments decreased. For the year ended December 31, 2015 , six companies were transferred from Level 3 to Level 2 as the number of observable market quotes increased.





The composition of the Company’s investments as of December 31, 2016 , at amortized cost and fair value, were as follows:





Investments atAmortized CostInvestments atFair ValueFair ValuePercentage ofTotal PortfolioSenior Secured First Lien Debt$1,726,833$1,630,66168.1%Senior Secured Second Lien Debt272,513261,98710.9Subordinated Debt81,05680,5403.4Collateralized Securities274,776249,58210.4Equity/Other160,360171,3137.2Total$2,515,538$2,394,083100.0%











F- 39


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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands, except share and per share amounts, percentages and as otherwise indicated)





The composition of the Company’s investments as of December 31, 2015 , at amortized cost and fair value, were as follows:





Investments atAmortized CostInvestments atFair ValueFair ValuePercentage ofTotal PortfolioSenior Secured First Lien Debt$1,461,343$1,405,86860.8%Senior Secured Second Lien Debt367,465349,03815.1Subordinated Debt93,90992,2724.0Collateralized Securities335,534261,78411.3Equity/Other170,652202,3198.8Total$2,428,903$2,311,281100.0%





Significant Unobservable Inputs





The following table summarizes the significant unobservable inputs used to value the majority of the Level 3 investments as of December 31, 2016 . The table is not intended to be all-inclusive, but instead identifies the significant unobservable inputs relevant to the determination of fair values.





RangeAsset CategoryFair ValuePrimary Valuation TechniqueUnobservable InputsMinimumMaximumWeighted Average(a)Senior Secured First Lien Debt(b)$823,974Yield AnalysisMarket Yield6.00%27.00%10.88%Senior Secured First Lien Debt(c)19,708Joint Venture/Merger StrategyEBITDA Multiple6.75x7.50xN/ASenior Secured Second Lien Debt205,051Yield AnalysisMarket Yield10.60%13.60%11.91%Subordinated Debt(d)78,808Yield AnalysisMarket Yield12.25%17.25%14.11%Collateralized Securities249,582Discounted Cash FlowDiscount Rate7.54%45.06%19.84%Equity/Other(e)10,279Market Multiple AnalysisEBITDA Multiple2.4x11.2x7.0x


______________





|    |                                                                     
|--- | --------------------------------------------------------------------
|(a) | Weighted averages are calculated based on fair value of investments.

|    |                                                                                                                                                                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | Refer to note (c) below for one senior secured first lien debt investment valued using an alternative technique. The remaining $72.4 million of senior secured first lien debt were valued at their respective acquisition prices as the investments closed near year end.

|    |                                                                                
|--- | -------------------------------------------------------------------------------
|(c) | Weighted average not applicable as this asset category contains one investment.

|    |                                                                                               
|--- | ----------------------------------------------------------------------------------------------
|(d) | The remaining $1.7 million of subordinated debt were valued based on a Monte-Carlo simulation.

|    |                                                                                                                                                                                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(e) | The remaining $46.5 million of equity/other investments consisted of $46.0 million which were valued with consideration of their respective appraisal value, $0.3 million which were based on a Monte-Carlo simulation, and $0.2 million which were valued at their respective acquisition prices as the investment closed near year end.




Increases or decreases in any of the above unobservable inputs in isolation would result in a lower or higher fair value measurement for such assets.





F- 40


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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands, except share and per share amounts, percentages and as otherwise indicated)








The following table summarizes the significant unobservable inputs used to value the majority of the Level 3 investments as of December 31, 2015 . The table is not intended to be all-inclusive, but instead identifies the significant unobservable inputs relevant to the determination of fair values.





RangeAsset CategoryFair ValuePrimary Valuation TechniqueUnobservable InputsMinimumMaximumWeighted Average(a)Senior Secured First Lien Debt(b)$880,433Yield AnalysisMarket Yield6.00%24.00%10.55%Senior Secured Second Lien Debt(c)247,878Yield AnalysisMarket Yield8.50%30.00%11.51%Subordinated Debt(e)90,437Yield AnalysisMarket Yield12.25%21.00%14.51%Collateralized Securities261,784Discounted Cash FlowDiscount Rate8.39%47.68%26.13%Equity/Other(d)16,268Market Multiple AnalysisEBITDA Multiple0.3x17.7x3.5xEquity/Other(d)29,155Discounted Cash FlowDiscount Rate10.60%10.60%10.60%


______________





|    |                                                                     
|--- | --------------------------------------------------------------------
|(a) | Weighted averages are calculated based on fair value of investments.

|    |                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | The remaining $214.6 million of senior secured first lien debt were valued based on broker quotes or at their respective acquisition prices as the investments closed near year end.

|    |                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(c) | The remaining $92.7 million of senior secured second lien debt were valued based on broker quotes or at their respective acquisition prices as the investments closed near year end.

|    |                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(d) | The remaining $69.7 million of equity/other investments consisted of $69.6 million which were valued with consideration of their respective appraisal value, and $0.1 million which were based on a Monte-Carlo simulation.

|    |                                                                                               
|--- | ----------------------------------------------------------------------------------------------
|(e) | The remaining $1.8 million of subordinated debt were valued based on a Monte-Carlo simulation.




Increases or decreases in any of the above unobservable inputs in isolation would result in a lower or higher fair value measurement for such assets.





As of December 31, 2016 , the Company had six portfolio companies, which represented eight portfolio investments, on non-accrual status with a total principal amount of $136.2 million, amortized cost of $127.6 million, and fair value of $51.2 million which represented 5.0%, 5.1% and 2.1% of the investment portfolio total principal, amortized cost and fair value, respectively. As of December 31, 2015 , the Company had three portfolio companies, which represented three portfolio investments, on non-accrual status with a total principal amount of $51.9 million, amortized cost of $51.2 million, and fair value of $33.0 million which represented 2.0%, 2.1% and 1.4% of the investment portfolio total principal, amortized cost and fair value, respectively. Refer to Note 2 - Summary of Significant Accounting Policies - in our consolidated financial statements included in this report for additional details regarding the Company’s non-accrual policy.








Note 4 — Related Party Transactions and Arrangements





The Transaction





On July 19, 2016, American Realty Capital II Advisors, LLC, the former parent of the Adviser, entered into a membership interest purchase agreement with a subsidiary of BSP, pursuant to which BSP acquired all of the outstanding limited liability company interests of the Adviser (the “Transaction”). In connection with the Transaction, the Company amended the Investment Advisory Agreement, effective as of November 1, 2016, to allow the Adviser to serve as investment adviser to the Company following the closing of the Transaction.








F- 41


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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands, except share and per share amounts, percentages and as otherwise indicated)





Investment Advisory Agreement





Pursuant to the Investment Advisory Agreement and for the investment advisory and management services provided thereunder, the Company pays the Adviser a base management fee and an incentive fee.





Base Management Fee





The base management fee is calculated at an annual rate of 1.5% of the Company’s average gross assets. The base management fee is payable quarterly in arrears, and is calculated based on the average value of the Company’s gross assets at the end of the two most recently completed calendar quarters. All or any part of the base management fee not taken as to any quarter shall be deferred without interest and may be taken in such other quarter as the Adviser will determine. The base management fee for any partial month or quarter is appropriately pro-rated.





Incentive Fees





The incentive fee consists of two parts. The first part is referred to as the incentive fee on income and it is calculated and payable quarterly in arrears based on the Company’s “Pre-Incentive Fee Net Investment Income” for the immediately preceding quarter. ). “Pre-Incentive Fee Net Investment Income” means interest income, dividend income and any other income (including any other fees, other than fees for providing managerial assistance, such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies) accrued during the calendar quarter, minus the Company’s operating expenses for the quarter (including the base management fee, expenses payable under the administration agreement and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-Incentive Fee Net Investment Income includes, in the case of investments with a deferred interest feature (such as original issue discount debt instruments with payment-in-kind interest and zero coupon securities), accrued income that the Company has not yet received in cash. Pre-Incentive Fee Net Investment Income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation. The payment of the incentive fee on income shall be subject to payment of a preferred return to investors each quarter, expressed as a quarterly rate of return on the value of our net assets at the end of the most recently completed calendar quarter, of 1.75% (7.00% annualized), subject to a “catch up” feature (as described below). The calculation of the incentive fee on income for each quarter is as follows:





|  |                                                                                                                                                                                                                                                                 
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | No incentive fee on income shall be payable to the Adviser in any calendar quarter in which the Company’s Pre-Incentive Fee Net Investment Income does not exceed the preferred return rate of 1.75% or 7.00% annualized (the “Preferred Return”) on net assets;

|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | 100% of the Company’s Pre-Incentive Fee Net Investment Income, if any, that exceeds the preferred return but is less than or equal to 2.1875% in any calendar quarter (8.75% annualized) shall be payable to the Adviser. This portion of the Company’s incentive fee on income is referred to as the “catch up” and is intended to provide the Adviser with an incentive fee of 20% on all of the Company’s Pre-Incentive Fee Net Investment Income when the Company’s Pre-Incentive Fee Net Investment Income reaches 2.1875% (8.75% annualized) in any calendar quarter; and

|  |                                                                                                                                                                                                                                                                                           
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | For any quarter in which our Pre-Incentive Fee Net Investment Income exceeds 2.1875% (8.75% annualized), the incentive fee on income shall equal 20% of the amount of the Company’s Pre-Incentive Fee Net Investment Income, as the Preferred Return and catch-up will have been achieved.




The second part of the incentive fee, referred to as the “incentive fee on capital gains during operations,” shall be an incentive fee on capital gains earned on liquidated investments from the portfolio during operations prior to the Company’s liquidation and shall be determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, if earlier). This fee shall equal 20.0% of the Company’s incentive fee capital gains, which shall equal 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 previously paid capital gain incentive fees.


Administration Agreement





In connection with the closing of the Transaction, the Company terminated the previous administration agreement and entered into a new administration agreement with BSP on November 1, 2016. In connection with the New Administration Agreement, BSP will provide the Company with office facilities and administrative services.





F- 42


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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands, except share and per share amounts, percentages and as otherwise indicated)








Co-Investment Relief





The 1940 Act generally prohibits BDCs from making certain negotiated co-investments with affiliates absent an order from the SEC permitting the BDC to do so. Unless otherwise provided in the allocation policy, if an investment opportunity is appropriate for both the Company and other investment funds and the investment opportunity requires more than the price to be negotiated, the investment opportunity will be made available to the other investment fund or the Company on an alternating basis based on the date of closing of each such investment opportunity and each fund’s available capital. As a result, the Adviser and/or its affiliates may face conflicts in allocating investment opportunities between the Company and such other entities. Although the Adviser and its affiliates will endeavor to allocate investment opportunities in a fair and equitable manner and consistent with applicable allocation procedures, it is possible that, in the future, the Company may not be given the opportunity to participate in investments made by investment funds managed by the Adviser or its affiliates.





The SEC staff has granted the Company relief sought in an exemptive application that expands its ability to co-invest in portfolio companies with other funds managed by the Adviser or its affiliates (“Affiliated Funds”) in a manner consistent with its investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors, subject to compliance with certain conditions (the “Order”). Pursuant to the Order, the Company is permitted to co-invest with its affiliates if a “required majority” (as defined in Section 57(o) of the 1940 Act) or its independent directors make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transactions, including the consideration to be paid, are reasonable and fair to the Company and our stockholders and do not involve overreaching by the Company or our stockholders on the part of any person concerned, and (2) the transaction is consistent with the interests of the Company’s stockholders and is consistent with the Company’s investment objective and strategies.





Transactions with Affiliates





In connection with the closing of the Transaction, an affiliate of BSP purchased $10.0 million of the Company’s common stock based on its net asset value per share in a private placement in reliance on Section 4(a)(2) of the Securities Act of 1933. On November 7, 2016, the Company issued approximately 1.2 million shares of its common stock to the BSP affiliate.





Offering Costs





The Company incurs certain costs in connection with the registration of shares of its common stock. Offering costs principally relate to professional fees, printing costs, direct marketing expenses, due diligence costs, fees paid to regulators and other expenses, including the salaries and/or expenses of the Adviser and its affiliates engaged in registering and marketing the Company’s common stock. Such allocated expenses of the Adviser and its affiliates may include the development of marketing materials and presentations, training and educational meetings, and generally coordinating the marketing process for the Company.





Due (to)/from affiliate





As of December 31, 2016 and 2015 there was zero and $200.0 thousand due (to)/from a previous affiliate, respectively.





Other Affiliated Parties





BDCA Adviser, LLC (“BDCA Adviser”) is the investment adviser of BDCA. BDCA Adviser is an affiliate of BSP an SEC registered investment adviser. BDCA Adviser and BSP Advisor are under common control. BDCA Advisers affiliated and under common control with Providence Equity Capital Markets L.L.C. (“PECM”), an SEC registered investment adviser on the BSP platform. BDCA Adviser is affiliated and under common control with Providence Equity Partners L.L.C. (“PEP”) an SEC registered investment adviser. PEP is a global private equity investment adviser and maintains an information barrier between itself and BDCA Adviser, BSP and PECM. BSP, PECM, and PEP’s respective Form ADV’s are publicly available for review on the SEC Investment Adviser Public Disclosure website.








F- 43


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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands, except share and per share amounts, percentages and as otherwise indicated)





Note 5 — Borrowings





Wells Fargo Credit Facility





On July 24, 2012, the Company, through a wholly-owned, consolidated special purpose financing subsidiary, Funding I, entered into a revolving credit facility with Wells Fargo and U.S. Bank as collateral agent, account bank and collateral custodian (the “Wells Fargo Credit Facility”). The Wells Fargo Credit Facility, which was subsequently amended on April 26, 2013, September 9, 2013, June 30, 2014, May 29, 2015, and November 4, 2015, provides for borrowings in an aggregate principal amount of up to $400.0 million on a committed basis.





The Wells Fargo Credit Facility is priced at the one month maturity London Interbank Offered Rate (“LIBOR”), with no LIBOR floor, plus a spread ranging between 1.75% and 2.50% per annum, depending on the composition of the portfolio of loans owned by Funding I for the relevant period. Interest is payable quarterly in arrears. Funding I is subject to a non-usage fee to the extent the aggregate principal amount available under the Wells Fargo Credit Facility has not been borrowed. The non-usage fee per annum for the first six months is 0.50%; thereafter, the non-usage fee per annum is 0.50% for the first 20% of the unused balance and 2.0% for the portion of the unused balance that exceeds 20%.





Borrowings under the Wells Fargo Credit Facility are subject to compliance with a borrowing base, pursuant to which the amount of funds advanced to Funding I varies depending upon the types of loans in Funding I's portfolio. The Wells Fargo Credit Facility may be prepaid in whole or in part, subject to customary breakage costs.





The Wells Fargo Credit Facility contains customary default provisions for facilities of this type pursuant to which Wells Fargo may terminate the rights, obligations, power and authority of the Company, in its capacity as servicer of the portfolio assets under the Wells Fargo Credit Facility, including, but not limited to, non-performance of Wells Fargo Credit Facility obligations, insolvency, defaults of certain financial covenants and other events with respect to the Company that may be adverse to Wells Fargo and the secured parties under the Wells Fargo Credit Facility.





In connection with the Wells Fargo Credit Facility, Funding I has made certain representations and warranties, is required to comply with various covenants, reporting requirements and other customary requirements for similar facilities and is subject to certain customary events of default. Upon the occurrence and during the continuation of an event of default, Wells Fargo may declare the outstanding advances and all other obligations under the Wells Fargo Credit Facility immediately due and payable. During the continuation of an event of default, Funding I must pay interest at a default rate.





Deutsche Bank Credit Facility





On February 21, 2014, the Company, through a wholly-owned, consolidated special purpose financing subsidiary, BDCA 2L Funding I, LLC (“2L Funding I”), entered into the a credit facility with Deutsche Bank (the “Deutsche Bank Credit Facility”) as lender and as administrative agent and U.S. Bank as collateral agent and collateral custodian. The Deutsche Bank Credit Facility was amended on February 19, 2016 and it was terminated in accordance with its terms on June 3, 2016.





The Deutsche Bank Credit Facility provided for borrowings in an aggregate principal amount of up to $60.0 million with a term of 36 months. The Deutsche Bank Credit Facility was priced at LIBOR plus 4.25%, with no LIBOR floor. Prior to its termination, the Deutsche Bank Credit Facility was subject to a minimum utilization of 82.5% of the loan amount thereafter, measured quarterly. If the utilized portion of the loan amount was less than the foregoing thresholds, such shortfalls bore interest at LIBOR plus 4.25%. The Deutsche Bank Credit Facility provided for monthly interest payments for each drawn loan. 2L Funding I paid a structuring fee and incurred certain other customary costs and expenses in connection with obtaining the Deutsche Bank Credit Facility.





Citi Credit Facility





On June 27, 2014, the Company, through a wholly-owned, special purpose financing subsidiary, CB Funding, entered into a credit facility with Citi (the “Citi Credit Facility”) as administrative agent and U.S. Bank as collateral agent, account bank and collateral custodian. The Citi Credit Facility, which was subsequently amended on October 14, 2015, provides for borrowings in an aggregate principal amount of up to $400.0 million on a committed basis, subject to the administrative agent’s right to approve the assets acquired by CB Funding and pledged as collateral under the Citi Credit Facility. The Citi Credit Facility has a maturity date of June 27, 2018.





F- 44


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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands, except share and per share amounts, percentages and as otherwise indicated)








The Citi Credit Facility is priced at LIBOR, with no LIBOR floor, plus a spread of 1.70% per annum for the first twenty-four months and 2.00% per annum thereafter. Interest is payable quarterly in arrears. CB Funding is subject to a non-usage fee to the extent the aggregate principal amount available under the Citi Credit Facility has not been borrowed. Any amounts borrowed under the Citi Credit Facility along with any accrued and unpaid interest thereunder will mature, and will be due and payable, in three years.





UBS Credit Facility


On April 7, 2015, the Company, through a wholly-owned, special-purpose, bankruptcy-remote subsidiary, Helvetica Funding, entered into a debt financing facility with UBS AG, London Branch (“UBS”), pursuant to which $150.0 million will be made available to the Company to fund investments in new securities and for other general corporate purposes (the “UBS Credit Facility”). The UBS Credit Facility was subsequently amended on July 10, 2015 to increase the amount of debt available to the Company under the facility from $150.0 million to $210.0 million. On June 6, 2016, the UBS credit facility was again amended to increase the amount of debt available from $210.0 million to $232.5 million. In addition, the amended facility increased the applicable spread over a three-month LIBOR from 3.90% to 4.05% per annum for the relevant period and increased the permissible percentage of second lien loans from 60% to 70%. Pricing under the transaction is based on three-month LIBOR plus a spread of 4.05% per annum for the relevant period. The UBS Credit Facility has a maturity date of April 4, 2018.





Unsecured Notes


On August 26, 2015, the Company entered into a Purchase Agreement with the initial purchasers, relating to the Company’s sale of $100.0 million aggregate principal amount of its 6.00% fixed rate senior notes due 2020 to the initial purchasers in a private placement in reliance on Section 4(a)(2) of the Securities Act and for initial resale by the initial purchasers to qualified institutional buyers pursuant to the exemption from registration provided by Rule 144A promulgated under the Securities Act (the “Unsecured Notes”). The Company relied upon these exemptions from registration based in part on representations made by the initial purchasers. The Purchase Agreement includes customary representations, warranties and covenants by the Company. Under the terms of the Purchase Agreement, the Company has agreed to indemnify the initial purchasers against certain liabilities under the Securities Act. The Unsecured Notes have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. The net proceeds from the sale of the Unsecured Notes was approximately $97.9 million, after deducting initial purchasers’ discounts and commissions of approximately $1.6 million payable by the Company and estimated offering expenses of approximately $0.5 million payable by the Company. The Company used the net proceeds to make investments in accordance with the Company’s investment objectives and for general corporate purposes.





The Unsecured Notes were issued pursuant to the Indenture, dated as of August 31, 2015, between the Company and the Trustee. The Unsecured Notes will mature on September 1, 2020, and may be redeemed in whole or in part at the Company’s option at any time, or from time to time, at the redemption prices set forth in the Indenture. The Unsecured Notes bear interest at a rate of 6.00% per year payable semi-annually on March 1 and September 1 of each year, commencing on March 1, 2016. The Unsecured Notes will be general unsecured obligations of the Company that rank senior in right of payment to all of the Company’s existing and future indebtedness that is expressly subordinated in right of payment to the Unsecured Notes. The Unsecured Notes will rank equally in right of payment with all of the Company’s existing and future senior liabilities that are not so subordinated, effectively junior to any of the Company’s secured indebtedness (including unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness, and structurally junior to all existing and future indebtedness incurred by the Company’s subsidiaries, financing vehicles or similar facilities, including credit facilities held by the Company’s wholly owned, special purpose financing subsidiaries.





The Indenture contains certain covenants, including covenants requiring the Company to: (i) comply with the asset coverage requirements of Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act as in effect immediately prior to the issuance of the Unsecured Notes, whether or not the Company is subject to such provisions; (ii) provide financial information to the holders of the Unsecured Notes and the Trustee if the Company is no longer subject to the reporting requirements under the Securities Exchange Act of 1934, as amended; and (iii) maintain total unencumbered assets, as defined in the Indenture, of at least 175% of the aggregate principal amount of all of the Company and the Company’s consolidated subsidiaries’ outstanding unsecured debt determined on a consolidated basis in accordance with U.S. GAAP. These covenants





F- 45


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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands, except share and per share amounts, percentages and as otherwise indicated)





are subject to important limitations and exceptions that are described in the Indenture.


The weighted average annualized interest cost for all borrowings for the years ended December 31, 2016 , 2015 and 2014 was 3.54%, 2.86% and 2.33%, respectively. The average daily debt outstanding for the years ended December 31, 2016 and 2015 was $870.0 million and $742.0 million, respectively. The maximum debt outstanding for the years ended December 31, 2016 and 2015 was $993.1 million and $842.2 million, respectively.





The following table represents borrowings by credit facility, as of December 31, 2016 :


LevelMaturity DateTotal Aggregate Borrowing CapacityTotal Principal OutstandingLess Deferred Financing CostsAmount per Balance SheetWells Fargo Credit Facility35/29/2020$400,000$298,152$(2,939)$295,213Citi Credit Facility36/27/2018400,000286,003(1,097)284,906UBS Credit Facility34/7/2018232,500232,500(517)231,983Subtotal$1,032,500$816,655$(4,553)$812,102Unsecured Notes39/1/2020$100,000$98,842$(460)$98,382Totals$1,132,500$915,497$(5,013)$910,484





The following table represents borrowings by credit facility, as of December 31, 2015:


LevelMaturity DateTotal Aggregate Borrowing CapacityTotal Principal OutstandingLess Deferred Financing CostsAmount per Balance SheetWells Fargo Credit Facility35/29/2020$400,000$263,087$(4,020)$259,067Deutsche Bank Credit Facility32/21/201760,000—(380)(380)Citi Credit Facility36/27/2016400,000270,625(1,984)268,641UBS Credit Facility34/7/2018210,000210,000(560)209,440Subtotal$1,070,000$743,712$(6,944)$736,768Unsecured Notes39/1/2020$100,000$98,526$(586)$97,940Totals$1,170,000$842,238$(7,530)$834,708
























































F- 46


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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands, except share and per share amounts, percentages and as otherwise indicated)





The following table represents borrowings by credit facility for the year ended December 31, 2016 :


Year ended December 31, 2016Interest RateNon-Usage RateInterest ExpenseNon-Usage Fees(5)Wells Fargo Credit Facility(1)(2)$7,758$1,413Deutsche Bank Credit FacilityL+4.25%(3) (4)679295Citi Credit FacilityL+1.70%0.50%6,891593UBS Credit FacilityL+4.05%n/a10,55753Subtotal$25,885$2,354Unsecured Notes6.00%n/a$6,283n/aTotals$32,168$2,354


_________________


(1) Interest rate is priced at one month's LIBOR with no LIBOR floor, plus a spread ranging between 1.75% and 2.50% per annum, depending on the composition of the portfolio of loans owned.


(2) The non-usage fee per annum for the first nine months is 0.50%; thereafter, 0.50% for the first 20% of the unused balance and 2.0% for the unused balance that exceeds 20%.


(3) The undrawn rate is 0.75%. The Facility is subject to minimum utilization of 82.5% of the loan amount measured quarterly. If the utilized portion of the loan amount is less than the foregoing, such thresholds shall bear interest at LIBOR + 4.25%.


(4) On June 3, 2016, the Deutsche Bank Credit Facility was repaid and terminated.


(5) Includes custody fees.





The following table represents borrowings by credit facility for the year ended December 31, 2015:


Year ended December 31, 2015Interest RateNon-Usage RateInterest ExpenseNon-Usage Fees(4)Wells Fargo Credit Facility(1)(2)$6,983$744Deutsche Bank Credit FacilityL+4.25%(3)1,256676Citi Credit FacilityL+1.70%0.50%5,385706UBS Credit FacilityL+3.90%n/a5,92071Subtotal$19,544$2,197Unsecured Notesn/an/a$2,156n/aTotals$21,700$2,197


_________________


(1) Interest rate is priced at one month's LIBOR with no LIBOR floor, plus a spread ranging between 1.75% and 2.50% per annum, depending on the composition of the portfolio of loans owned.


(2) The non-usage fee per annum for the first nine months is 0.50%; thereafter, 0.50% for the first 20% of the unused balance and 2.0% for the unused balance that exceeds 20%.


(3) The undrawn rate is 0.75%. The Facility is subject to minimum utilization of 82.5% of the loan amount measured quarterly. If the utilized portion of the loan amount is less than the foregoing, such thresholds shall bear interest at LIBOR + 4.25%.


(4) Includes custody fees.











F- 47


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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands, except share and per share amounts, percentages and as otherwise indicated)





The following table represents borrowings by credit facility for the year ended December 31, 2014:


Year ended December 31, 2014Interest RateNon-Usage RateInterest ExpenseNon-Usage Fees(4)Wells Fargo Credit Facility(1)(2)$4,761$709Deutsche Bank Credit FacilityL+4.25%(3)1,147278Citi Credit FacilityL+1.70%0.50%2,602374Subtotal$8,510$1,361


_________________


(1) Interest rate is priced at one month's LIBOR with no LIBOR floor, plus a spread ranging between 1.75% and 2.50% per annum, depending on the composition of the portfolio of loans owned.


(2) The non-usage fee per annum for the first nine months is 0.50%; thereafter, 0.50% for the first 20% of the unused balance and 2.0% for the unused balance that exceeds 20%.


(3) The undrawn rate is 0.75%. The Facility is subject to minimum utilization of 82.5% of the loan amount measured quarterly. If the utilized portion of the loan amount is less than the foregoing, such thresholds shall bear interest at LIBOR + 4.25%.


(4) Includes custody fees.





The Company is required to disclose the fair value of financial instruments for which it is practicable to estimate that value. The fair value of short-term financial instruments such as cash and cash equivalents, due to affiliates and accounts payable approximate their carrying value on the accompanying statements of assets and liabilities due to their short-term nature. The fair values of the Company’s remaining financial instruments that are not reported at fair value on the accompanying consolidated statements of assets and liabilities are reported below (amounts in thousands):





LevelCarrying Amount at December 31, 2016Fair Value at December 31, 2016Wells Fargo Credit Facility3$298,152$298,152Citi Credit Facility3286,003286,003UBS Credit Facility3232,500232,500Unsecured Notes398,84298,125$915,497$914,780





LevelCarrying Amount at December 31, 2015Fair Value at December 31, 2015Wells Fargo Credit Facility3$263,087$263,087Deutsche Bank Credit Facility3——Citi Credit Facility3270,625270,625UBS Credit Facility3210,000210,000Unsecured Notes398,52698,526$842,238$842,238











Note 6 — Total Return Swap





On July 13, 2012, the Company, through its wholly-owned subsidiary, 405 Sub, entered into a TRS with Citi, which was most recently amended on May 6, 2014, to increase the aggregate market value of the portfolio of loans selected by 405 Sub. The Company terminated its amended and restated TRS with Citi on June 27, 2014.








F- 48


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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands, except share and per share amounts, percentages and as otherwise indicated)





A total return swap 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 the specified period, in return for periodic payments based on a fixed or variable interest rate. The TRS effectively added leverage to the Company's portfolio by providing investment exposure to a security or market without owning or taking physical custody of such security or investing directly in such market. The TRS enabled the Company, through its ownership of 405 Sub, to obtain the economic benefit of owning the loans subject to the TRS, without actually owning them, in return for an interest-type payment to Citi.





The obligations of 405 Sub under the TRS are non-recourse to the Company and the Company's exposure to the TRS was limited to the amount that it contributed to 405 Sub in connection with the TRS. Generally, that amount will be the amount that 405 Sub was required to post as cash collateral for each loan (which in most instances was approximately 25% of the market value of a loan at the time that such loan was purchased). There was no cash collateral on deposit as of December 31, 2016 and December 31, 2015 as the TRS was terminated on June 27, 2014. As amended, the TRS provided that 405 Sub could have selected a portfolio of loans with a maximum aggregate market value (determined at the time such loans become subject to the TRS) of $450.0 million.





405 Sub paid interest to Citi for each loan at a rate equal to one-month LIBOR plus 1.20% per annum. Upon the termination or repayment of any loan selected by 405 Sub under the Agreement, 405 Sub would deduct the appreciation of such loan's value from any interest owed to Citi or pay the depreciation amount to Citi in addition to remaining interest payments.





On June 27, 2014, the Company terminated the TRS and CB Funding entered into a Merger Agreement with Loan Funding, an affiliate of Citi formed for the purpose of holding the loans underlying the TRS. Pursuant to the terms of the Merger Agreement, CB Funding acquired such loans through the merger of Loan Funding with and into CB Funding (the “Merger”) for approximately $389.0 million. The Company recorded such loans at a cost equal to the respective fair values as of June 27, 2014 and as a result, the $4.0 million of unrealized gain on the TRS at the termination date was realized which resulted in an offsetting unrealized loss and realized gain on the TRS. The $4.0 million gain equates to fair value of the loans underlying the TRS as of June 27, 2014 less the respective costs of such assets as purchased through the TRS.





Previously, the Adviser did not recognize incentive fees based on the returns or capital gains of the TRS and therefore did not receive any additional fees as a direct result of the Merger or termination of the TRS. However, such loans are now included in the Company's portfolio of investments and subject to any fees applicable under the Investment Advisory Agreement.





The Company did not hold the TRS at December 31, 2016 and December 31, 2015 .





At December 31, 2014, the receivable and realized gain on the total return swap on the consolidated statements of assets and liabilities and consolidated statements of operations consisted of the following (dollars in thousands):





Net ReceivableNet Realized GainsInterest and other income from TRS portfolio$—$11,361TRS interest expense—(2,187)Gains on TRS asset sales—5,378Net realized gain from TRS$—$14,552





The Company valued its TRS in accordance with the agreements between 405 Sub and Citi, which collectively established the TRS and are collectively referred to herein as the TRS Agreement. Pursuant to the TRS Agreement, the value of the TRS was 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 were valued by Citi. Citi based its valuation primarily on the indicative bid prices provided by an independent third-party pricing service. Bid prices reflected the highest price that market participants would have been willing to pay. These valuations were sent to the Company for review and testing. The Company's management reviewed and approved the value of the TRS, as well as the value of the loans underlying the TRS, on a quarterly basis as part of their quarterly valuation process. To the extent the Company's management had any questions or concerns regarding the valuation of the loans underlying the TRS, such valuations were discussed or challenged pursuant to the terms of the TRS.








F- 49


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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands, except share and per share amounts, percentages and as otherwise indicated)





The fair value of the TRS was reflected as an unrealized gain or loss on the total return swap on the consolidated statements of assets and liabilities. The change in value of the TRS was reflected in the consolidated statements of operations as net unrealized appreciation (depreciation) on the total return swap.








Note 7 — Commitments and Contingencies





Commitments





In the ordinary course of business, the Company may enter into future funding commitments. As of December 31, 2016 , had unfunded commitments on delayed draw term loans of $35.7 million, unfunded commitments on revolver term loans of $24.7 million and unfunded equity capital commitments of $9.4 million. As of December 31, 2015 , the Company had unfunded commitments on delayed draw term loans of $48.7 million, unfunded commitments on revolver term loans of $18.9 million and unfunded equity capital commitments of $11.8 million. The unfunded commitments are disclosed in the Company's consolidated schedule of investments. The Company maintains sufficient cash on hand and available borrowings to fund such unfunded commitments.





Litigation and Regulatory Matters





In the ordinary course of business, the Company may become subject to litigation, claims and regulatory matters. The Company has no knowledge of material legal or regulatory proceedings pending or known to be contemplated against the Company at this time.





Indemnifications





In the ordinary course of its business, the Company may enter into contracts or agreements that contain indemnifications or warranties. Future events could occur that lead to the execution of these provisions against the Company. Based on its history and experience, management feels that the likelihood of such an event is remote.





Guarantees





The Company has provided a guarantee to its controlled portfolio company, Park Ave RE Holdings, LLC, in connection with a secured loan whereby the Company will be responsible for certain liabilities of the portfolio company upon the occurrence of certain events (such as a bankruptcy or the incurrence of additional indebtedness in violation of the terms of the loan).








Note 8 — Economic Dependency





Under various agreements, the Company has engaged or will engage the Adviser and its affiliates to provide certain services that are essential to the Company, including asset management services, asset acquisition and disposition decisions, the sale of shares of the Company’s common stock available for issuance, as well as other administrative responsibilities for the Company including accounting services and investor relations.





As a result of these relationships, the Company is dependent upon the Adviser and its affiliates. In the event that these companies were unable to provide the Company with the respective services, the Company would be required to find alternative providers of these services.








Note 9 — Common Stock





On August 25, 2011, the Company had raised sufficient funds to break escrow on its IPO. On July 1, 2014, the Company's registration statement on Form N-2 (File No.333-193241) for its Follow-on was declared effective by the SEC. Simultaneously with the effectiveness of the registration statement of the Follow-on, the Company's IPO terminated. Through December 31, 2016 , the Company sold 189.6 million shares of common stock for gross proceeds of $2.0 billion, including shares purchased by an affiliate of BSP and shares issued under the DRIP. Following the time the Company's updated registration statement was declared effective on June 30, 2015, the Company issued shares for subscription agreements that had been accepted through that date. The Company is no longer issuing new shares except for DRIP shares. As of December 31,





F- 50


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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands, except share and per share amounts, percentages and as otherwise indicated)





2016 , the Company had repurchased 12.5 million shares of common stock through its share repurchase program for payments of $ 113.4 million.





The following table reflects the common stock activity for the year ended December 31, 2016 (dollars in thousands except share amounts):





SharesValueShares Sold1,165,501$10,000Shares Issued through DRIP6,591,97258,424Share Repurchases(9,778,710)(85,844)(2,021,237)$(17,420)





The following table reflects the common stock activity for the year ended December 31, 2015 (dollars in thousands except share amounts):





SharesValueShares Sold16,586,551$183,562Shares Issued through DRIP7,158,34670,033Share Repurchases(2,136,909)(21,459)21,607,988$232,136








Note 10 — Share Repurchase Program





The Company intends to conduct semi-tender offers pursuant to its share repurchase program (“SRP”). 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 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 or portions thereof; and


• the condition of the securities markets.


• the effect of such repurchases on the Company's qualification as a RIC (including the consequences of


any necessary asset sales);





On March 8, 2016, the Company's board of directors amended the Company's SRP. The Company will conduct tender offers on a semi-annual basis, instead of on a quarterly basis as was done previously. The Company will continue to limit the number of shares to be repurchased in any calendar year to 10% of the weighted average number of shares outstanding in the prior calendar year, or 5.0% at each semi-annual tender offer. In addition, in the event of a stockholder’s death or disability, any repurchases of shares made in connection with a stockholder’s death or disability may be included within the overall limitation imposed on tender offers during the relevant redemption period, which provides that the Company may limit the number of shares to be repurchased during any redemption period to the number of shares of common stock the Company is able to repurchase with the proceeds received from the sale of shares of common stock under the DRIP during such redemption period.








F- 51


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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands, except share and per share amounts, percentages and as otherwise indicated)





Quarterly Offer DateRepurchase DateShares TenderedShares RepurchasedRepurchase Price Per ShareAggregate Consideration for Repurchased Shares (in thousands)September 12, 2012October 8, 2012——$9.71$—December 13, 2012January 15, 201346,97510,732$9.90$106.22March 27, 2013April 25, 201329,62529,625$10.18$301.58July 15, 2013August 13, 201330,36530,365$10.18$308.97October 22, 2013November 21, 201355,25555,255$10.36$572.44February 4, 2014March 6, 201468,96968,969$10.36$714.52June 6, 2014July 11, 2014117,425117,425$10.36$1,216.38August 7, 2014September 10, 2014111,854111,854$10.36$1,158.80December 19, 2014January 23, 2015313,101313,101$10.36$3,243.73March 16, 2015April 15, 2015162,688162,688$10.36$1,685.45June 26, 2015July 31, 2015533,527533,527$9.72$5,185.88September 18, 2015October 20, 2015728,874728,874$9.53$6,946.17December 23, 2015January 25, 20167,375,8713,053,869$9.22$28,156.67July 26, 2016December 31, 201617,004,3546,715,864$8.58$57,622.10





Share amounts in the table above represent amounts filed in the tender offer.





Through December 31, 2016 , the Company had repurchased an aggregate of 12.5 million shares of common stock for payments of $ 113.4 million. As of December 31, 2015, the Company had repurchased 2.7 million shares of common stock for payments of $27.6 million. Amounts include additional shares tendered for death and disability as permitted.








Note 11 — Net Increase in Net Assets





Basic earnings per share is computed by dividing earnings available to common stockholders by the weighted average number of shares outstanding during the period. Other potentially dilutive shares, and the related impact to earnings, are considered when calculating earnings per share on a diluted basis. The Company had no potentially dilutive securities as of December 31, 2016 , 2015 and 2014.





The following information sets forth the computation of the weighted average basic and diluted net increase (decrease) in net assets per share from operations for the years ended December 31, 2016 , 2015 and 2014:





For the Year Ended December 31,For the Year Ended December 31,For the Year Ended December 31,201620152014Basic and dilutedNet increase in net assets from operations$94,402$8,053$79,540Weighted average common shares outstanding180,215,713172,208,186122,154,778Net increase in net assets resulting from operations per share - basic and diluted$0.52$0.05$0.65





The table below shows changes in the Company's offering price and distribution rates since the commencement of the Company's public offering.





F- 52


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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands, except share and per share amounts, percentages and as otherwise indicated)





Announcement DateNew Public Offering PriceEffective DateDaily Distribution Amount per shareAnnualized Distribution RateNovember 14, 2011$10.26November 16, 20110.0022219207.90%May 1, 2012$10.44June 1, 20120.0022158507.75%August 14, 2012$10.50September 4, 20120.0022465757.81%September 24, 2012$10.60October 16, 20120.0022465757.74%October 15, 2012$10.70November 1, 20120.0022739737.76%February 5, 2013$10.80February 18, 20130.0022931517.75%February 25, 2013$10.90March 1, 20130.0023143847.75%April 3, 2013$11.00April 16, 20130.0023356167.75%August 15, 2013$11.10August 16, 20130.0023568497.75%October 29, 2013$11.20November 1, 20130.0023780827.75%May 28, 2015$11.15April 16, 20150.0023780827.78%








Note 12 — Distributions





The Company’s board of directors has authorized, and the Company has declared cash distributions payable on a monthly basis to stockholders of record on each day since it commenced operations. Since November 2013, the distribution rate has been $0.002378082 per day, which is equivalent to $0.868 per annum, per share of common stock. In March 2016, the Company’s board of directors ratified the existing distribution amount equivalent to $0.868 per annum, and, for calendar year 2016, affirmed a change to the daily distribution amount to $0.002371585 per day per share of common stock, effective January 1, 2016, to accurately reflect that 2016 is a leap year.





The amount of each such distribution will be subject to the discretion of the board of directors and applicable legal restrictions related to the payment of distributions. The Company will calculate each stockholder’s specific distribution amount for the month using record and declaration dates and accrue distributions on the date the Company accepts a subscription for shares of the Company’s common stock. The distributions are payable by the fifth day following each month end to stockholders of record at the close of business each day during the prior month.





From time to time, the Company may also pay interim distributions at the discretion of its board of directors. The Company may fund its cash distributions to stockholders from any sources of funds available to it, including offering proceeds, borrowings, net investment income from operations, capital gains proceeds from the sale of assets and non-capital gains proceeds from the sale of assets. The Company’s distributions may exceed its earnings, especially during the period before the Company has substantially invested the proceeds from its IPO and Follow-on. As a result, a portion of the distributions the Company will make may represent a return of capital for tax purposes. As of December 31, 2016 , the Company had accrued $ 13.5 million in stockholder distributions that were unpaid. As of December 31, 2015, the Company had accrued $ 13.2 million in stockholder distributions that were unpaid.








F- 53


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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands, except share and per share amounts, percentages and as otherwise indicated)





The table below reflects the cash distributions per share that we have paid on our common stock for the years ended December 31, 2016 and December 31, 2015 (dollars in thousands except per share amounts). Additionally, distributions made through the filing of this Form 10-K are included for reference.


Record DatePayment DatePer shareDistributions Paid in CashDistributions Paid Through the DRIPTotal Distributions Paid2015:January 31, 2015February 4, 2015$0.07$5,948$5,797$11,745February 28, 2015March 2, 20150.075,5205,23610,756March 31, 2015April 1, 20150.076,2655,89812,163April 30, 2015May 1, 20150.076,2425,84912,091May 29, 2015June 1, 20150.076,6805,90512,585June 30, 2015July 1, 20150.076,4855,73512,220July 31, 2015August 3, 20150.076,9766,12613,102August 31, 2015September 1, 20150.077,0536,04913,102September 30, 2015October 1, 20150.076,8705,83512,705October 31, 2015November 2, 20150.077,1406,03013,170November 30, 2015December 1, 20150.076,9325,83512,767December 31, 2015January 4, 20160.077,2245,98913,213$79,335$70,284$149,6192016:January 31, 2016February 3, 2016$0.07$8,922$4,298$13,220February 28, 2016March 1, 20160.077,0145,33312,347March 31, 2016April 1, 20160.077,3635,71813,081April 30, 2016May 2, 20160.0712,708(2)12,706May 31, 2016June 2, 20160.077,5825,53913,121June 30, 2016July 1, 20160.077,4385,30412,742July 31, 2016August 1, 20160.077,7895,42113,210August 31, 2016September 1, 20160.077,9085,35113,259September 30, 2016October 3, 20160.077,7455,12712,872October 31, 2016November 1, 20160.078,0675,27313,340November 30, 2016December 1, 20160.077,9475,07313,020December 31, 2016January 3, 20170.078,3115,20513,516$98,794$57,640$156,4342017:January 31, 2017February 3, 20170.07$7,983$5,081$13,064February 28, 2017March 1, 20170.077,2504,59011,840$15,233$9,671$24,904$193,362$137,595$330,957





The following table reflects the stock distributions per share that the Company declared on its common stock to date:





Date DeclaredRecord DatePayment DatePer ShareDistribution PercentageShares IssuedMarch 29, 2012May 1, 2012May 2, 2012$0.050.49%25,709








F- 54


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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands, except share and per share amounts, percentages and as otherwise indicated)





The Company has not established any limit on the extent to which it may use borrowings, if any, or proceeds from its IPO and Follow-on to fund distributions (which may reduce the amount of capital it ultimately invests in assets). There can be no assurance that the Company will be able to sustain distributions at any particular level.








Note 13 — Income Tax Information and Distributions to Stockholders





The Company has elected to be treated for federal income tax purposes as a RIC under the Code. Generally, a RIC is exempt from federal income taxes if it meets, certain quarterly asset diversification requirements, annual income tests, and distributes to stockholders its ‘‘investment company taxable income,’’ as defined in the Code, each taxable year. Distributions declared prior to the filing of the previous year's tax return and paid up to one year after the previous tax year can be carried back to the prior tax year for determining the distributions paid in such tax year. The Company intends to make sufficient distributions to maintain its RIC status each year. The Company may also be subject to federal excise taxes of 4%.





A RIC is limited in its ability to deduct expenses in excess of its “investment company taxable income” (which is, generally, ordinary income plus net realized short-term capital gains in excess of net realized long-term capital losses). If the Company's expenses in a given taxable year exceed gross taxable income (e.g., as the result of large amounts of equity-based compensation), it would incur a net operating loss for that year. However, a RIC is not permitted to carry forward net operating losses to subsequent taxable years and such net operating losses do not pass through to the RIC’s stockholders. In addition, deductible expenses can be used only to offset investment company taxable income, not net capital gain. A RIC may not use any net capital losses (that is, realized capital losses in excess of realized capital gains) to offset the RIC’s investment company taxable income, but may carry forward such net capital losses, and use them to offset capital gains indefinitely. Due to these limits on the deductibility of expenses and net capital losses, the Company may for tax purposes have aggregate taxable income for several taxable years that it is required to distribute and that is taxable to stockholders even if such taxable income is greater than the aggregate net income the Company actually earned during those taxable years. Such required distributions may be made from the Company cash assets or by liquidation of investments, if necessary. The Company may realize gains or losses from such liquidations. In the event the Company realizes net capital gains from such transactions, the Company may receive a larger capital gain distribution than it would have received in the absence of such transactions.





The tax character of distributions for the fiscal years ended December 31, 2016 , 2015 and 2014 were as follows (dollars in thousands):


201620152014Ordinary income distributions$156,434100.0%$133,35589.1%$99,60394.0%Capital gains distributions————6,6966.0%Return of capital——16,26410.9——Total distributions$156,434100.0%$149,619100.0%$106,299100.0%





For the years ended December 31, 2016 , 2015 and 2014, the reconciliation of net increase in net assets resulting from operations to taxable income is as follows (dollars in thousands):


201620152014Book income from operating activities$94,402$8,053$79,540Net unrealized (gain) loss on investments2,267105,74830,762Nondeductible expenses1,1401,6715Temporary differences76,469(4,872)(972)Taxable income before deductions for distributions paid$174,278$110,600$109,335





























F- 55


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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands, except share and per share amounts, percentages and as otherwise indicated)





As of December 31, 2016 , 2015 and 2014, the components of accumulated gain and losses on a tax basis were as follows (dollars in thousands):


201620152014Undistributed ordinary income (loss)$46.797$—$9,187Undistributed long-term net capital gains (capital loss carryforward)(16,896)(354)—Total undistributed net earnings (loss carryforward)29,901(354)9,187Net unrealized gain (loss) on investments(231,229)(115,116)(16,658)Total distributed (undistributable) taxable income$(201,328)$(115,470)$(7,471)





During 2016, as a result of permanent book-to-tax differences, the Company made reclassifications among components of net assets as follows:


Accumulated over distributed net investment incomeAccumulated over distributed realized lossesPaid in capital2016$56,600$(102,448)$45,848





The differences were attributable to non-deductible expenses, investments in partnerships, controlled foreign corporations, certain debt investments and subsidiaries. Aggregate stockholders’ equity was not affected by this reclassification.





Tax information for the fiscal year ended December 31, 2016 is an estimate and will not be finally determined until the Company files its 2016 tax return.





The Company did not have any uncertain tax positions that met the recognition or measurement criteria of ASC 740-10-25, Income Taxes (“ASC Topic 740”), nor did the Company have any unrecognized tax benefits as of the periods presented herein. The Company's 2015, 2014 and 2013 federal tax returns remain subject to examination by the Internal Revenue Service.





As of December 31, 2016 , the Company had a deferred tax asset of $2.3 million and a deferred tax liability of $(2.6) million.  Given the losses generated by certain entities, deferred tax assets have been offset by valuation allowances of $2.2 million. As of December 31, 2015, the Company had a deferred tax asset of $2.1 million and a deferred tax liability of $(3.0) million.  Given the losses generated by certain entities, deferred tax assets have been offset by valuation allowances of $2.1 million. As of December 31, 2014, the Company had a deferred tax asset of $0.9 million and a deferred tax liability of $(2.4) million pertaining to the unrealized depreciation (appreciation) on investments and a $1.1 million deferred asset pertaining to operating income.  Given the losses generated by certain entities, deferred tax assets have been offset by valuation allowances of $0.9 million and $1.0 million for the deferred tax assets generated from unrealized depreciation and operating income, respectively.





The deferred tax asset valuation allowance has been determined pursuant to the provisions of ASC Topic 740, including the Company's estimation of future taxable income, if necessary, and is adequate to reduce the total deferred tax asset to an amount that will more likely than not be realized.





As of December 31, 2016 , the Company had differences between book basis and tax basis cost of investments of $112.3 million from investments classified as partnerships, passive foreign investment companies, or controlled foreign corporations for US tax purposes and $(2.1) million from amortization of market discounts. As of December 31, 2015, the Company had differences between book basis and tax basis cost of investments of $3.1 million from investments classified as partnerships, passive foreign investment companies, or controlled foreign corporations for US tax purposes and $(5.6) million from amortization of market discounts. As of December 31, 2014, the Company had differences between book basis and tax basis cost of investments of $2.1 million from investments classified as partnerships for US tax purposes and $(0.4) million from amortization of market discounts.








F- 56


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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands, except share and per share amounts, percentages and as otherwise indicated)





Note 14 — Financial Highlights





The following is a schedule of financial highlights for the years ended December 31, 2016 , 2015, 2014, 2013 and 2012:





For the Year Ended December 31,For the Year Ended December 31,For the Year Ended December 31,For the Year Ended December 31,For the Year Ended December 31,20162015201420132012Per share data:Net asset value, beginning of period$8.97$9.74$9.86$9.41$9.00Results of operations(1)Net investment income0.670.660.710.360.63Net realized and unrealized appreciation (depreciation) on investments, net of deferred taxes(0.14)(0.60)(0.14)0.330.39Net realized and unrealized appreciation on total return swap——0.090.480.34Net unrealized depreciation on minority interests(0.01)(0.01)(0.01)——Net increase in net assets resulting from operations0.520.050.651.171.36Stockholder distributions(2)Distributions from net investment income(0.67)(0.77)(0.71)(0.36)(0.63)Distributions from net realized gain on investments and total return swap—(0.01)(0.16)(0.49)(0.43)Return of capital(0.20)(0.09)———Net decrease in net assets resulting from stockholder distributions(0.87)(0.87)(0.87)(0.85)(1.06)Capital share transactionsIssuance of common stock(3)—0.180.250.310.39Repurchases of common stock(4)—(0.12)(0.04)0.04—Offering costs—(0.01)(0.11)(0.22)(0.28)Net increase in net assets resulting from capital share transactions—0.050.100.130.11Net asset value, end of period$8.62$8.97$9.74$9.86$9.41Shares outstanding at end of period177,120,791179,142,028157,534,04063,671,64414,943,215Total return(6)6.02%0.67%7.63%14.12%15.19%Ratio/Supplemental data:Net assets, end of period (in thousands)$1,529,734$1,610,485$1,535,423$627,903$140,685Ratio of net investment income to average net assets(5)(8)7.64%7.11%7.41%3.68%5.51%Ratio of operating expenses to average net assets(5)(8)6.91%5.08%4.46%5.14%3.12%Ratio of incentive fees to average net assets(5)1.14%0.41%0.51%1.98%0.50%Ratio of credit facility related expenses to average net assets2.38%1.65%0.95%0.63%0.85%Portfolio turnover rate(7)24.99%32.21%89.03%76.79%158.35%














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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands, except share and per share amounts, percentages and as otherwise indicated)





______________


|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The per share data was derived by using the weighted average shares outstanding during the period. Net investment income per share excluding the expense waiver and reimbursement equals $0.67for the year endedDecember 31, 2016. Net investment income per share excluding the expense waiver and reimbursement equals $0.64for the year ended December 31, 2015. Net investment income per share excluding the expense waiver and reimbursement equals $0.72for the year ended December 31, 2014. Net investment income per share excluding the expense waiver and reimbursement equals $0.31 for the year ended December 31, 2013. Net investment income per share excluding the expense waiver and reimbursements equals $1.09 for the year ended December 31, 2012.

|    |                                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------
|(2) | The per share data for distributions reflects the actual amount of distributions declared per share during the period.

|    |                                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | 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.

|    |                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(4) | 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 the twelve months ended December 31, 2012.

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(5) | For the year endedDecember 31, 2016, there was no expense waiver. For the year ended December 31, 2015, excluding the expense waiver and reimbursement, the ratio of net investment income, operating expenses, and incentive fees to average net assets is6.89%,5.30%, and0.63%, respectively. For the year ended December 31, 2014, excluding the expense waiver and reimbursement, the ratio of net investment income, operating expenses, and incentive fees to average net assets is7.53%,4.58%, and0.62%, respectively. For the year ended December 31, 2013, excluding the expense waiver and reimbursement, the ratio of net investment income, operating expenses, and incentive fees to average net assets is3.17%,5.66%, and2.48%, respectively. For the year ended December 31, 2012, excluding the expense waiver and reimbursement, the ratio of net investment   income, operating expenses and incentive fees to average net assets was3.17%,5.47%, and1.71%, respectively.

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(6) | Total return is calculated assuming a purchase of shares of common stock at the current net asset value on the first day and a sale at the current net asset value on the last day of the periods reported. Distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the DRIP. The total return based on net asset value for the year endedDecember 31, 2016, includes the effect of the expense waiver and reimbursement which equaled0.00%. The total return based on net asset value for the year ended December 31, 2015, includes the effect of the expense waiver and reimbursement which equaled0.22%. The total return based on net asset value for the year ended December 31, 2014, includes the effect of the expense waiver and reimbursement which equaled0.11%. The total return based on net asset value for the year ended December 31, 2013, includes the effect of the expense waiver and reimbursement which equaled0.51%. The total return based on net asset value for the year ended December 31, 2012, includes the effect of the expense waiver and reimbursement which equaled2.35%.

|    |                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------
|(7) | Portfolio turnover rate is calculated using the lesser of year-to-date purchases or sales over the average of the invested assets at fair value.

|    |                                                                               
|--- | ------------------------------------------------------------------------------
|(8) | Offering cost are not included as an expense in the calculation of this ratio.







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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands, except share and per share amounts, percentages and as otherwise indicated)





Note 15 – Selected Quarterly Data (Unaudited)





The following is the quarterly results of operations for the years ended December 31, 2016 , 2015 and 2014. The operating results for any quarter are not necessarily indicative of results for any future period (dollars in thousands except share and per share amounts):


Quarter EndedTotal Investment IncomeNet Investment IncomeNet Realized and Unrealized Gain (Loss)Net Increase (Decrease) In Net Assets Resulting from OperationsNet Investment Income per ShareNet Increase (Decrease) in Net Assets Resulting from Operations per ShareNet Asset Value per Common Share at End of QuarterDecember 31, 2016$52,929$27,228$18,689$45,917$0.15$0.25$8.62September 30, 201662,23931,560(38,307)(6,747)0.18(0.04)8.58June 30, 201657,57327,6597,28834,9470.150.208.84March 31, 201656,91833,531(13,247)20,2840.190.118.86December 31, 201538,31617,544(21,402)(4,820)0.10(0.03)8.97September 30, 201551,97431,490(50,722)(19,317)0.18(0.11)9.22June 30, 201555,67531,573(30,408)1,0670.190.019.53March 31, 201549,88133,549(2,937)31,1230.210.199.72December 31, 201447,66130,728(17,021)11,3190.200.079.74September 30, 201442,38726,1328426,2160.190.199.86June 30, 201429,74317,5497,05624,6050.150.219.89March 31, 201418,49011,9465,45417,4000.150.229.88











Note 16 – Senior Securities





Information about our senior securities (including debt securities and other indebtedness) is shown in the following table as of the years ended December 31, 2016 , 2015, 2014, 2013 , 2012 and 2011. The Company had no senior securities outstanding as of December 31, 2010 or any prior fiscal years.





The following is a summary of the senior securities as of December 31, 2016 (dollars in thousands).


Total Amount Outstanding Exclusive of Treasury SecuritiesAsset Coverage Ratio Per Unit(1)Involuntary Liquidation Preference Per Unit(2)Asset Market Value Per Unit(3)Wells Fargo Credit Facility$298,152$—$—N/ACiti Credit Facility286,003——N/AUBS Credit Facility232,500——N/AUnsecured Notes98,842——N/A$915,497$2,671$—N/A





The following is a summary of the senior securities as of December 31, 2015 (dollars in thousands).


Total Amount Outstanding Exclusive of Treasury SecuritiesAsset Coverage Ratio Per Unit(1)Involuntary Liquidation Preference Per Unit(2)Asset Market Value Per Unit(3)Wells Fargo Credit Facility$263,087$—$—N/ADeutsche Bank Credit Facility———N/ACiti Credit Facility270,625——N/AUBS Credit Facility210,000——N/AUnsecured Notes98,526——N/A$842,238$2,912$—N/A





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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands, except share and per share amounts, percentages and as otherwise indicated)








The following is a summary of the senior securities as of December 31, 2014 (dollars in thousands).


Total Amount Outstanding Exclusive of Treasury SecuritiesAsset Coverage Ratio Per Unit(1)Involuntary Liquidation Preference Per Unit(2)Asset Market Value Per Unit(3)Total Return Swap$—$—$—N/AWells Fargo Credit Facility288,087——N/ADeutsche Bank Credit Facility60,000——N/ACiti Credit Facility270,625——N/A$618,712$3,482$—N/A





The following is a summary of the senior securities as of December 31, 2013 (dollars in thousands).


Total Amount Outstanding Exclusive of Treasury SecuritiesAsset Coverage Ratio Per Unit(1)Involuntary Liquidation Preference Per Unit(2)Asset Market Value Per Unit(3)Total Return Swap$216,106$—$—N/ARevolving Credit Facility132,687——N/A$348,793$2,800$—N/A





The following is a summary of the senior securities as of December 31, 2012 (dollars in thousands).


Total Amount Outstanding Exclusive of Treasury SecuritiesAsset Coverage Ratio Per Unit(1)Involuntary Liquidation Preference Per Unit(2)Asset Market Value Per Unit(3)Total Return Swap$52,577$—$—N/ARevolving Credit Facility33,907——N/A$86,484$2,627$—N/A





The following is a summary of the senior securities as of December 31, 2011 (dollars in thousands).


Total Amount Outstanding Exclusive of Treasury SecuritiesAsset Coverage Ratio Per Unit(1)Involuntary Liquidation Preference Per Unit(2)Asset Market Value Per Unit(3)Revolving Credit Facility5,9002,391—N/A


_____ _________


|    |                                                                                                                                                                                                                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Asset coverage per unit is the ratio of the carrying value of the Company's total consolidated assets, less all liabilities and indebtedness not represented by senior securities, to the aggregate amount of senior securities representing indebtedness. Asset coverage per unit is expressed in terms of dollar amounts per $1,000 of indebtedness.

|    |                                                                                                                                                                                                                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | The amount to which such class of senior security would be entitled upon the voluntary liquidation of the issuer in preference to any security junior to it. The “—” in this column indicates that the Securities and Exchange Commission expressly does not require this information to be disclosed for certain types of senior securities.

|    |                                                                                
|--- | -------------------------------------------------------------------------------
|(3) | Not applicable because senior securities are not registered for public trading.



















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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands, except share and per share amounts, percentages and as otherwise indicated)





Note 17 – Schedules of Investments and Advances to Affiliates





The following table presents the Schedule of Investments and Advances to Affiliates as of December 31, 2016 :





Portfolio Company(1)Type of AssetAmount of dividends and interest included in incomeBeginning Fair Value at December 31, 2015Gross additionsGross reductionsRealized Gain/(Loss)Change in Unrealized Gain (Loss)(6)Fair Value at December 31, 2016Control InvestmentsCapstone Nutrition (fka Integrity Nutraceuticals, Inc.)(4)Senior Secured First Lien Debt$713$29,731$8,933$—$—$(18,956)$19,708Capstone Nutrition Common Stock (fka Integrity Nutraceuticals, Inc.)(4)Equity/Other———————Capstone Nutrition Class B and C Common Stock (fka Integrity Nutraceuticals, Inc.)(4)Equity/Other———————Kahala Ireland OpCo Designated Activity Company(3)Senior Secured First Lien Debt21,354170,2815,828(26,700)——149,409Kahala Ireland OpCo Designated Activity Company - Common Equity(3)Equity/Other—29,428———(21,248)8,180Kahala Ireland OpCo Designated Activity Company - Profit Participating Note(3)Equity/Other—3,250—(166)—1663,250Kahala US OpCo LLCSenior Secured First Lien Debt3542,60486———2,690Kahala US OpCo LLC - Class A Preferred UnitsEquity/Other14,136—(250)—1144,000Park Ave RE Holdings, LLC(2)Subordinated Debt4,75035,1922,000———37,192Park Ave RE Holdings, LLC(2)- Common SharesEquity/Other—8,115—(587)—(964)6,564Park Ave RE Holdings, LLC(2)- Preferred SharesEquity/Other2,01023,645————23,645Total Control Investments$29,182$306,382$16,847$(27,703)$—$(40,888)$254,638Affiliate InvestmentsB&M CLO 2014-1, LTD. Subordinated NotesCollateralized Securities$1,938$19,169$—$(5,485)$—$3,088$16,772CVP Cascade CLO, LTD. Subordinated NotesCollateralized Securities98111,114—(4,642)—2,3968,868CVP Cascade CLO-2, LTD. Subordinated NotesCollateralized Securities86012,216—(5,349)—4,72611,593Danish CRJ LTD.Senior Secured First Lien Debt—20—(13)—1320Danish CRJ LTD.Equity/Other—1,034———(627)407Fifth Street Senior Loan Fund LLC 2015-1A Class FCollateralized Securities1,0548,523162——(230)8,455Fifth Street Senior Loan Fund I, LLC - 2015-1A Subordinated NotesCollateralized Securities2,91923,566—(4,660)—1,67320,579Figueroa CLO 2014-1, LTD. Subordinated NotesCollateralized Securities1,19916,112—(4,518)—4,50716,101MidOcean Credit CLO II, LLCCollateralized Securities2,46323,603—(4,627)—3,44322,419MidOcean Credit CLO III, LLCCollateralized Securities3,51623,748—(5,133)—4,72623,341MidOcean Credit CLO IV, LLCCollateralized Securities2,45614,212—(2,488)—3,78115,505NMFC Senior Loan Program I, LLCEquity/Other7,46645,994———1,06347,057NewStar Arlington Senior Loan Program LLC Subordinated NotesCollateralized Securities5,10924,461—(3,405)—3,43524,491Ocean Trails CLO V, LTD.Collateralized Securities4,15825,957—(3,266)—6,45329,144OFSI Fund VI, Ltd. Subordinated NotesCollateralized Securities2,57720,205—(5,497)—2,64617,354





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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands, except share and per share amounts, percentages and as otherwise indicated)





Portfolio Company(1)Type of AssetAmount of dividends and interest included in incomeBeginning Fair Value at December 31, 2015Gross additionsGross reductionsRealized Gain/(Loss)Change in Unrealized Gain (Loss)(6)Fair Value at December 31, 2016PennantPark Credit Opportunities Fund II, LPEquity/Other6509,0822,691(1,615)180(550)9,788Related Fee Agreements(5)Collateralized Securities1,43411,679—(2,182)—1509,647South Grand MM CLO I, LLCEquity/Other2,23429,155———(773)28,382Silver Spring CLO, Ltd.Collateralized Securities(229)12,269—(3,609)—3,34712,007Squan Holding Corp.Senior Secured First Lien Debt——20,421(3,022)(11,017)5136,895Squan Holding Corp.Senior Secured First Lien Debt——1,035(1,045)—10—Squan Holding Corp. - Class A Common StockEquity/Other————(12)12—Squan Holding Corp. - Series A Preferred StockEquity/Other————(1,139)1,139—THL Credit Greenway Fund II LLCEquity/Other1,13516,910—(2,912)—(1,148)12,850WhiteHorse VIII, Ltd. CLO Subordinated NotesCollateralized Securities1,65913,955—(5,781)—4,38912,563Total Affiliate Investments$43,579$362,984$24,309$(69,249)$(11,988)$48,182$354,238Total Control & Affiliate Investments$72,761$669,366$41,156$(96,952)$(11,988)$7,294$608,876


______________________________________________________


|    |                                                                                                  
|--- | -------------------------------------------------------------------------------------------------
|(1) | The principal amount and ownership detail are shown in the consolidated schedules of investments.

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | This investment was not deemed significant under SEC Rule 4-08(g) as of December 31, 2016. However, financial information is provided for comparative purposes. As of December 31, 2016, Park Ave RE Holdings LLC had total assets and liabilities of $136.3 million and $110.2 million, respectively. Total revenue and net income for the year ended December 31, 2016 were approximately $13.4 million and $1.9 million, respectively.

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | This investment was not deemed significant under SEC Rule 4-08(g) as of December 31, 2016. However, financial information is provided for comparative purposes. As of December 31, 2016, Kahala Ireland OpCo Designated Activity Company had total assets and liabilities of $463.1 million and $463.8 million, respectively. Total revenue and net income for the year ended December 31, 2016 were approximately $93.4 million and $2.2 million, respectively.

|    |                                                                                                                                                                                                                                                                                                                                                             
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(4) | This investment is deemed significant under SEC Rule 4-08(g) as of December 31, 2016. As of December 31, 2016, Capstone Nutrition had total assets and liabilities of $86.0 million and $101.5 million, respectively. Total revenue and net (loss) for the year ended December 31, 2016 were approximately $129.3 million and $(51.6) million, respectively.

|    |                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------
|(5) | Not all Related Fee Agreements shown on the consolidated schedules of investments are Affiliated Investments.

|    |                         
|--- | ------------------------
|(6) | Gross of deferred taxes.























































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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands, except share and per share amounts, percentages and as otherwise indicated)





The following table presents the Schedule of Investments and Advances to Affiliates as of December 31, 2015:


Portfolio Company(1)Type of AssetAmount of dividends and interest included in incomeBeginning Fair Value at December 31, 2014Gross additionsGross reductionsRealized Gain/(Loss)Change in Unrealized Gain (Loss)(3)Fair Value at December 31, 2015Control InvestmentsIntegrity Nutraceuticals Inc.Senior Secured First Lien Debt$2,012$29,150$7,636$(932)$14$(6,137)$29,731HIG Integrity NutraceuticalsEquity/Other———————Integrity NutraceuticalsEquity/Other———————Kahala US OpCo LLCSenior Secured First Lien Debt3547,1312,114(6,641)——2,604Kahala Ireland OpCo LimitedSenior Secured First Lien Debt13,50047,843122,438———170,281Kahala Ireland OpCo Limited - Common EquityEquity/Other—5,275———24,15329,428Kahala Ireland OpCo Limited - Profit Participating NoteEquity/Other—1,6251,625(148)—1483,250Kahala US OpCo LLCEquity/Other—7,500—(1,770)(65)(1,529)4,136Park Ave RE Holdings, LLC(2)Subordinated Debt2,5856,10729,085———35,192Park Ave RE Holdings, LLC(2)- Common SharesEquity/Other—5,551595(1,237)—3,2068,115Park Ave RE Holdings, LLC(2)- Preferred SharesEquity/Other8857,80915,836———23,645Total Control Investments$19,336$117,991$179,329$(10,728)$(51)$19,841$306,382Affiliate InvestmentsB&M CLO 2014-1, LTD. Subordinated NotesCollateralized Securities$1,558$31,280$—$(7,919)$—$(4,192)$19,169CVP Cascade CLO, LTD. Subordinated NotesCollateralized Securities(1,980)22,553—(8,396)—(3,043)11,114CVP Cascade CLO-2, LTD. Subordinated NotesCollateralized Securities(1,397)26,479—(8,925)—(5,338)12,216Danish CRJ LTD.Senior Secured First Lien Debt26181—(161)——20Danish CRJ LTD.Equity/Other—260———7741,034Fifth Street Senior Loan Fund LLC 2015-1A Class FEquity/Other877—8,938——(415)8,523Fifth Street Senior Loan Fund I, LLC - 2015-1A Subordinated NotesCollateralized Securities4,005—27,486(747)—(3,173)23,566Figueroa CLO 2014-1, LTD. Subordinated NotesCollateralized Securities85927,128—(3,405)—(7,611)16,112MidOcean Credit CLO II, LLCCollateralized Securities2,57733,712—(5,305)—(4,804)23,603MCF CLO V Warehouse LLCEquity/Other2,501—23,486(23,239)(247)——MidOcean Credit CLO III, LLCCollateralized Securities3,68436,120—(6,290)—(6,082)23,748MidOcean Credit CLO IV, LLC - WarehouseCollateralized Securities—18,500—(18,700)200——MidOcean Credit CLO IV, LLCCollateralized Securities3,549—18,500(851)—(3,437)14,212NMFC Senior Loan Program I, LLCEquity/Other6,80849,371———(3,377)45,994NewStar Arlington Senior Loan Program LLC Subordinated NotesCollateralized Securities6,43530,474—(2,314)—(3,699)24,461Ocean Trails CLO V, LTD.Collateralized Securities3,92734,607—(4,352)—(4,298)25,957OFSI Fund VI, Ltd. Subordinated NotesCollateralized Securities1,31832,707—(8,384)—(4,118)20,205PennantPark Credit Opportunities Fund II, LPEquity/Other83410,7641,615(3,229)301(369)9,082Related Fee AgreementsCollateralized Securities—15,0811,220(3,514)—(1,108)11,679South Grand MM CLO I, LLCCollateralized Securities2,69027,7442,880(1,100)22(391)29,155





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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands, except share and per share amounts, percentages and as otherwise indicated)





Silver Spring CLO, Ltd.Collateralized Securities(955)27,398—(7,416)—(7,713)12,269THL Credit Greenway Fund II LLCEquity/Other1,48218,877230(2,412)—21516,910WhiteHorse VIII, Ltd. CLO Subordinated NotesCollateralized Securities81727,570—(7,017)—(6,598)13,955Total Affiliate Investments$39,615$470,806$84,355$(123,676)$276$(68,777)$362,984Total Control & Affiliate Investments$58,951$588,797$263,684$(134,404)$225$(48,936)$669,366





______________________________________________________


|    |                                                                                                  
|--- | -------------------------------------------------------------------------------------------------
|(1) | The principal amount and ownership detail are shown in the consolidated schedules of investments.

|    |                                                                                                                                                                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | This investment is deemed significant under the SEC Rule 4-08(g). As of December 31, 2015, Park Ave RE Holdings LLC had total assets and liabilities of approximately $104.7 million and $79.5 million, respectively. Total revenue and net income for the year ended December 31, 2015 were approximately $5.8 million and $0.7 million, respectively.

|    |                         
|--- | ------------------------
|(3) | Gross of deferred taxes.




For the year ended December 31, 2015, the Company has determined that it must include audited financial statements of Kahala Ireland OpCo Limited because it is a controlled investment and is required to do so under Rule 3-09. The audited financial statements were attached to the Company's 2015 Annual Report on Form 10-K as Exhibit 99.1.








Note 18 – Subsequent Events





The Company has evaluated subsequent events through the filing of this Form 10-K and determined that there have been no events that have occurred that would require adjustments to the Company’s disclosures in the consolidated financial statements except for the following:





DRIP Sales





From January 1, 2017 through the filing of this Form 10-K, the Company has issued 1.7 million shares of common stock including shares issued pursuant to the DRIP. Total gross proceeds from these issuances including proceeds from shares issued pursuant to the DRIP were $14.9 million.





Borrowings





On January 20, 2017, the Company entered into a prime brokerage account agreement with JP Morgan Securities LLC (the “JPMC PB Account”). The JPMC PB Account provides a full suite of services around the custody of bonds and equities and also access to leverage, which is dependent on the price, credit quality and diversity of the pool of assets held within the account. The borrowing availability is recalculated daily based on changes to the assets, with margin calls issued in the morning as appropriate. The cost to borrow is 1 week LIBOR + 90 bps and there is no mandatory usage or period wherein the debt needs to be repaid.

















F- 64