Net Realized Losses

Total net realized losses for the three and six months ended June 30, 2013 were $58.4 million and $58.2 million, respectively, compared to $75.9 million and $76.2 million for the three and six months ended June 30, 2012. Nearly all of our realized losses for the six months ended June 30, 2013 resulted from the restructuring of our debt and equity investments in Bankruptcy Management Solutions, Inc. and our debt investments in Dial Global, Inc. et. al. and AGY Holding Corp., and nearly the entire amount had already been reflected in unrealized depreciation on investments in prior periods. Details of the restructurings are as follows:
  • During April 2013, we restructured our investment in the 13.0% second lien loan of Dial Global, Inc. et. al. (“Dial”) with a fair market value of $38.6 million prior to restructuring. Post restructuring we hold half of the second lien term loans A & B which will PIK at a blended rate in excess of 14.0%, approximately 50% of Dial’s 15.0% PIK preferred stock, as well as equity warrants that will vest over time, all with a combined total fair market value for the new holdings of $30.9 million. Additionally, we invested $31.5 million in a 12.0% priority second lien term loan valued at par as of June 30 th, and received a $0.5 million capital structuring fee in conjunction with our services performed in structuring the transaction. Dial is the largest network radio operator in the U.S.
  • During June 2013, we restructured our investments in the Bankruptcy Management Solutions, Inc. (“BMS”) first lien term loans A & B, second lien term loan and our controlling interest of the BMS common stock with an aggregate value of approximately $33.4 prior to the restructuring. Post restructuring, we hold a piece of first lien term loans A & B, as well as a controlling interest in the BMS common stock, and equity warrants with a combined total fair market value of $28.2 million as of June 30 th. BMS is the leading national provider of Chapter 7 bankruptcy case management solutions for bankruptcy trustees.
  • During June 2013, we restructured our investment in the 11.0% AGY Holding Corp. (“AGY”) senior secured second lien notes with a fair market value of approximately $25.7 million into an 11.0% senior secured second lien note and an interest in AGY’s 20.0% PIK preferred stock with a combined total fair market value in the new holdings of $23.7 million. Additionally, we purchased $8.0 million of the 12.0% senior secured second lien loan valued at par as of June 30 th. AGY is a leading manufacturer of glass yarn with applications in a diverse array of end markets.

Net Unrealized Appreciation or Depreciation

For the three and six months ended June 30, 2013, the change in net unrealized appreciation on investments and foreign currency translation was an increase in net unrealized appreciation of $49.2 million and $65.8 million, respectively, versus $74.5 million and $76.1 million for the three and six months ended June 30, 2012. Net unrealized appreciation at June 30, 2013 and 2012 was $86.6 million and $24.1 million, respectively. For the three months ended June 30, 2013, while certain of our portfolio companies had strong performance, there was underperformance in certain others, but we were pleased with an improved overall health of our investment portfolio. Removing the effects of reversals due to dispositions and restructurings during the quarter, unrealized appreciation would have increased by $9.7 million from the prior quarter.

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