---

 

 

 

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Babson Capital Participation Investors

TO OUR SHAREHOLDERS

April 30, 2016

 

We are pleased to present the March 31, 2016 Quarterly Report of Babson Capital Participation Investors (the "Trust").

 

The Board of Trustees declared a quarterly dividend of $0.27 per share, payable on May 13, 2016 to shareholders of record on May 2, 2016. The Trust paid a $0.27 per share dividend for the preceding quarter. The Trust earned $0.22 per share of net investment income, including $0.02 per share of non-recurring charges, for the first quarter of 2016, compared to $0.24 per share, including $0.01 per share of non-recurring income, in the previous quarter.

 

During the first quarter, the net assets of the Trust increased to $138,443,220 or $13.39 per share compared to $135,349,634 or $13.10 per share on December 31, 2015. This translates into a 2.1% total return for the quarter, based on the change in the Trust's net assets assuming the reinvestment of all dividends. Longer term, the Trust returned 4.1%, 9.6%, 11.1%, 10.0% and 12.3% for the 1-, 3-, 5-, 10-, and 25-year periods ended March 31, 2016, respectively, based on the change in the Trust's net asset value (net of all fees and expenses) assuming the reinvestment of all dividends and distributions.

 

The Trust's share price increased 3.9% during the quarter, from $13.75 per share as of December 31, 2015 to $14.29 per share as of March 31, 2016. The Trust's market price of $14.29 per share equates to a 6.7% premium over the March 31, 2016 net asset value per share of $13.39. The Trust's average quarter-end premium for the 3-, 5- and 10-year periods was 7.2%, 11.6% and 8.9%, respectively. U.S. equity markets, as approximated by the Russell 2000 Index, decreased 1.5% for the quarter. U.S. fixed income markets, as approximated by the Barclays Capital U.S. Corporate High Yield Index, increased 3.4% for the quarter.

 

The Trust closed four new private placement investments, as well as one add-on investment in an existing portfolio company, during the first quarter. The four new investments were in Glynlyon Holding Companies, Inc., PANOS Brands LLC, Veritext Corporation and Wolf-Gordon, Inc., while the add-on investment was in PPC Event Services. A brief description of these investments can be found in the Consolidated Schedule of Investments. The total amount invested by the Trust in these transactions was $6,942,000.

 

It was an active first quarter for the Trust in terms of new investments. Middle market merger and acquisition activity, a key driver of deal flow for the Trust, was steady during the quarter. We expect deal flow to remain steady for the rest of the year, assuming no significant external shocks to the market, so we are optimistic about the level of new investment activity for the Trust in 2016. The dark cloud on the horizon though, continues to be the high purchase prices and leverage levels that have been common in buyout transactions for the last couple of years. Average purchase price multiples for small companies continue to be at their highest levels in the past 15 years. Leverage multiples have also been worrisomely high for several years and are near their highs of the past 15 years as well. Though we are actively making new investments on behalf of the Trust in this market, we do so cautiously and with discipline, consistent with our longstanding investment philosophy of seeking to take prudent levels of risk and getting paid appropriately for the risk taken. We are not willing to provide financial leverage at levels that we believe are imprudent. This approach has served us well over the long term and through all kinds of market cycles.

 

The condition of the Trust's existing portfolio remained solid through the first quarter. The number of companies on our watch list and in default continues to be at or near the lowest level we have seen over the last five years. We successfully exited one investment during the quarter. We have a solid backlog of portfolio companies that are in the process of being sold, with three companies already having been sold so far in the second quarter. We had no companies prepay their debt instruments held by the Trust during the quarter.

 

While the Trust was able to maintain its $0.27 per share quarterly dividend for the first quarter, we must make note again, as we have for over two years now, that this dividend level may not be sustainable through 2016. The Trust's net investment income per share from recurring sources of $0.24 for the first quarter was once again below the dividend rate. Net investment income per share from recurring sources has been below the dividend rate for every quarter since the second quarter of 2012. As we have discussed in prior reports, net investment income is down due principally to the considerable reduction in the number of private debt securities in the portfolio resulting from the high level of exit and prepayment activity that occurred in 2013 and 2014. With several strong recent quarters of new investment activity, we have made some progress in rebuilding the private portfolio, but it is still well below its former size. We have been able to maintain the $0.27 per share quarterly dividend with current income, non-recurring income and earnings carried forward from prior quarters. Over time, however, the Trust's dividend-paying ability tends to be correlated with its recurring earnings capacity. This quarter, the Trust utilized $0.05 per share of earnings carry-forwards to maintain the $0.27 per share quarterly dividend. The Trust continues to have earnings carry-forwards which should be available to supplement recurring income for the next few quarters. But unless market conditions change dramatically, it is still

 

(Continued)

 

 

 

 

---

unlikely that we will be able to completely rebuild the portfolio back to its former size in the near term and grow net investment income. As a result, it is likely that in 2016 we will have to reduce the dividend from the current $0.27 per share quarterly rate. As we move through 2016, we and the Board of Trustees will continue to evaluate the current and future earnings capacity of the Trust and formulate a dividend strategy that is consistent with that earnings level.

 

On behalf of the Trust's shareholders, the members of the Board of Trustees and the officers of the Trust, I would like to thank William J. Barrett for his many years of dedicated service to the Trust as a Trustee. Bill retired from the Board of Trustees effective as of the Trust's Annual Meeting of Shareholders which occurred on April 22, 2016. Bill had been a Trustee since 2006, and has provided the Trust with invaluable insight and guidance and has served our shareholders extremely well during his long tenure as a Trustee.

 

Lastly, as I announced at the Annual Meeting of Shareholders, I will be retiring from Babson Capital and as President of the Trust, effective June 1, 2016. At their April 22, 2016 meeting, the Board of Trustees elected Robert M. Shettle to succeed me as President of the Trust. Bob joined Babson Capital in 1998 and is currently a Vice President of the Trust and also head of Babson Capital's Mezzanine and Private Equity Group, where he oversees a team of investment professionals who originate, analyze, structure and document mezzanine and private equity investments.

 

Thank you for your continued interest in and support of Babson Capital Participation Investors.

 

Sincerely,

 

Michael L. Klofas

 

President

Portfolio Composition as of 03/31/16*

 

 

 

* Based on market value of total investments (including cash)

Cautionary Notice: Certain statements contained in this report may be "forward looking" statements. Investors are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made and which reflect management's current estimates, projections, expectations or beliefs, and which are subject to risks and uncertainties that may cause actual results to differ materially. These statements are subject to change at any time based upon economic, market or other conditions and may not be relied upon as investment advice or an indication of the Trust's trading intent. References to specific securities are not recommendations of such securities, and may not be representative of the Trust's current or future investments. We undertake no obligation to publicly update forward looking statements, whether as a result of new information, future events, or otherwise.

 

---

Babson Capital Participation Investors

CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES

March 31, 2016

(Unaudited)

 

Assets:
Investments (See Consolidated Schedule of Investments)
Corporate restricted securities at fair value (Cost - $96,708,386)		$	98,538,386
Corporate restricted securities at market value (Cost - $19,908,885)			18,999,004
Corporate public securities at market value (Cost - $24,233,254)			23,024,262
Short-term securities at amortized cost			1,999,867
Total investments (Cost - $142,850,392)			142,561,519
Cash			10,607,379
Interest receivable			1,363,925
Receivable for investments sold			313,362
Other assets			28,355
Total assets			154,874,540
Liabilities:
Note payable			15,000,000
Deferred tax liability			538,272
Investment advisory fee payable			311,497
Payable for investments purchased			305,304
Interest payable			27,267
Accrued expenses			248,980
Total liabilities			16,431,320
Total net assets		$	138,443,220
Net Assets:
Common shares, par value $.01 per share		$	103,424
Additional paid-in capital			95,439,990
Retained net realized gain on investments, prior years			40,511,310
Undistributed net investment gain			3,657,424
Accumulated net realized loss on investments			(441,783	)
Net unrealized depreciation of investments			(827,145	)
Total net assets		$	138,443,220
Common shares issued and outstanding (14,787,750 authorized)			10,342,412
Net asset value per share		$	13.39

 

 

 

 

 

 

 

See Notes to Consolidated Financial Statements

---

CONSOLIDATED STATEMENT OF OPERATIONS

For the three months ended March 31, 2016

(Unaudited)

 

Investment Income:
Interest		$	2,855,135
Dividends			41,909
Other			17,174
Total investment income			2,914,218
Expenses:
Investment advisory fees			311,497
Interest			153,375
Trustees' fees and expenses			75,000
Professional fees			61,104
Reports to shareholders			24,000
Custodian fees			6,000
Other			30,206
Total expenses			661,182
Investment income - net			2,253,036
Net realized and unrealized gain on investments:
Net realized loss on investments before taxes			(369,989	)
Income tax expense			(160,104	)
Net realized loss on investments after taxes			(530,093	)
Net change in unrealized appreciation of investments before taxes			1,214,335
Net change in deferred income tax expense			(29,184	)
Net change in unrealized appreciation of investments after taxes			1,185,151
Net gain on investments			655,058
Net increase in net assets resulting from operations		$	2,908,094

 

 

 

 

 

 

 

See Notes to Consolidated Financial Statements

---

 Babson Capital Participation Investors

CONSOLIDATED STATEMENT OF CASH FLOWS

For the three months ended March 31, 2016

(Unaudited)

 

 

Net increase in cash:
Cash flows from operating activities:
Purchases/Proceeds/Maturities from short-term portfolio securities, net		$	2,008,704
Purchases of portfolio securities			(8,684,370	)
Proceeds from disposition of portfolio securities			11,976,171
Interest, dividends and other income received			2,527,928
Interest expense paid			(153,375	)
Operating expenses paid			(512,216	)
Income taxes paid			(634,551	)
Net cash provided by operating activities			6,528,291
Cash flows from financing activities:
Cash dividends paid from net investment income			(2,788,666	)
Receipts for shares issued on reinvestment of dividends			185,492
Net cash used for financing activities			(2,603,174	)
Net increase in cash			3,925,117
Cash - beginning of year			6,682,262
Cash - end of period		$	10,607,379
Reconciliation of net increase in net assets to net cash provided by operating activities:
Net increase in net assets resulting from operations		$	2,908,094
Decrease in investments			3,830,162
Decrease in interest receivable			249,337
Increase in receivable for investments sold			(313,362	)
Increase in other assets			(1,572	)
Increase in deferred tax liability			29,184
Increase in investment advisory fee payable			6,960
Increase in payable for investments purchased			305,304
Decrease in accrued expenses			(11,369	)
Decrease in tax payable			(474,447	)
Total adjustments to net assets from operations			3,620,197
Net cash provided by operating activities		$	6,528,291

 

 

See Notes to Consolidated Financial Statements

---

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

 

		For the three months ended 03/31/16 (Unaudited)				For the year ended 12/31/2015
Increase in net assets:
Operations:
Investment income - net		$	2,253,036			$	9,762,813
Net realized (loss)/gain on investments after taxes			(530,093	)			161,395
Net change in unrealized appreciation/(depreciation) of investments after taxes			1,185,151				(1,368,494	)
Net increase in net assets resulting from operations			2,908,094				8,555,714
Increase from common shares issued on reinvestment of dividends
Common shares issued (2016 - 14,021; 2015 - 27,306)			185,492				368,734
Dividends to shareholders from:
Net investment income (2016 - $0.00 per share; 2015 - $1.08 per share)			—				(11,143,733	)
Total increase/(decrease) in net assets			3,093,586				(2,219,285	)
Net assets, beginning of period/year			135,349,634				137,568,919
Net assets, end of period/year (including undistributed net investment income of $3,657,424 and $1,404,388, respectively)		$	138,443,220			$	135,349,634

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See Notes to Consolidated Financial Statements

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Babson Capital Participation Investors

CONSOLIDATED SELECTED FINANCIAL HIGHLIGHTS

Selected data for each share of beneficial interest outstanding:

 

		For the three months ended 03/31/16 (Unaudited)				For the years ended December 31,
						2015				2014				2013				2012
Net asset value:
Beginning of period/year		$	13.10			$	13.35			$	12.83			$	12.56			$	11.90
Net investment income (a)			0.22				0.95				1.04				1.00				1.08
Net realized and unrealized gain (loss) on investments			0.06				(0.12)				0.57				0.35				0.64
Total from investment operations			0.28				0.83				1.61				1.35				1.72
Dividends from net investment income to common shareholders			—				(1.08)				(0.96)				(1.08)				(1.04)
Dividends from realized gain on investments to common shareholders			—				—				(0.12)				—				(0.04)
Increase from dividends reinvested			0.01				(0.00)(b)				(0.01)				(0.00)(b)				0.02
Total dividends			0.01				(1.08)				(1.09)				(1.08)				(1.06)
Net asset value: End of period/year		$	13.39			$	13.10			$	13.35			$	12.83			$	12.56
Per share market value:
End of period/year		$	14.29			$	13.75			$	13.23			$	12.88			$	13.91
Total investment return
Net asset value (c)			2.14%				6.23%				13.61%				10.97%				15.89%
Market value (c)			3.93%				12.66%				12.54%				0.47%				(4.54%)
Net assets (in millions):
End of period/year		$	138.44			$	135.35			$	137.57			$	131.42			$	127.87
Ratio of total expenses to average net assets			2.42%(e)				2.17%				2.84%				2.15%				2.83%
Ratio of operating expenses to average net assets			1.50%(e)				1.49%				1.49%				1.51%				1.51%
Ratio of interest expense to average net assets			0.45%(e)				0.44%				0.45%				0.47%				0.49%
Ratio of income tax expense to average net assets (d)			0.47%(e)				0.24%				0.90%				0.17%				0.83%
Ratio of net investment income to average net assets			6.64%(e)				6.95%				7.82%				7.77%				8.82%
Portfolio turnover			6%				30%				32%				30%				34%

 

(a)	Calculated using average shares.

(b)	Rounds to less than $0.01 per share.

(c)

Net asset value return represents portfolio returns based on change in the Trust's net asset value assuming the reinvestment of all dividends and distributions which differs from the total investment return based on the Trust's market value due to the difference between the Trust's net asset value and the market value of its shares outstanding; past performance is no guarantee of future results.

(d)

As additional information, this ratio is included to reflect the taxes paid on retained long-term gains. These taxes paid are netted against realized capital gains in the Statement of Operations. The taxes paid are treated as deemed distributions and a credit for the taxes paid is passed on to shareholders.

(e)	Annualized.

 

Senior borrowings:
Total principal amount (in millions)		$	15			$	15			$	15			$	15			$	15
Asset coverage per $1,000 of indebtedness		$	10,230			$	10,023			$	10,171			$	9,761			$	9,525

 

 

See Notes to Consolidated Financial Statements

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CONSOLIDATED SCHEDULE OF INVESTMENTS

March 31, 2016

(Unaudited)

 

Corporate Restricted Securities - 84.90%: (A)		Principal Amount, Shares, Units or Ownership Percentage				Acquisition Date				Cost				Fair Value
Private Placement Investments - 71.18%: (C)
1492 Acquisition LLC
A leading producer of premium Italian cured meats and deli meats in the U.S.
14% Senior Subordinated Note due 10/17/2019		$	694,597			10/17/12				$	686,223			$	694,597
Limited Liability Company Unit Class A Preferred (B)		102 uts.				10/17/12					102,270				131,676
Limited Liability Company Unit Class A Common (B)		11,364 uts.				10/17/12					11,364				111,268
											799,857				937,541
A W X Holdings Corporation
A provider of aerial equipment rental, sales and repair services to non-residential construction and maintenance contractors operating in the State of Indiana.
10.5% Senior Secured Term Note due 12/20/2016 (D)		$	420,000			05/15/08					413,944				405,300
13% Senior Subordinated Note due 12/20/2016 (D)		$	420,000			05/15/08					384,627				—
Common Stock (B)		60,000 shs.				05/15/08					60,000				—
Warrant, exercisable until 2016, to purchase common stock at $.01 per share (B)		21,099 shs.				05/15/08					35,654				—
											894,225				405,300
ABC Industries, Inc.
A manufacturer of mine and tunneling ventilation products in the U.S.
13% Senior Subordinated Note due 07/31/2019		$	181,818			08/01/12					170,259				181,818
Preferred Stock Series A (B)		125,000 shs.				08/01/12					125,000				232,289
Warrant, exercisable until 2022, to purchase common stock at $.02 per share (B)		22,414 shs.				08/01/12					42,446				39,301
											337,705				453,408
Advanced Manufacturing Enterprises LLC
A designer and manufacturer of large, custom gearing products for a number of critical customer applications.
Limited Liability Company Unit (B)		1,945 uts.					*				207,910				7,777
* 12/07/12, 07/11/13 and 06/30/15.
Advanced Technologies Holdings
A provider of factory maintenance services to industrial companies.
Preferred Stock Series A (B)		152 shs.				12/27/07					75,131				294,699
Convertible Preferred Stock Series B (B)		28 shs.				01/04/11					21,600				53,940
											96,731				348,639

 

 

 

 

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 Babson Capital Participation Investors

March 31, 2016

(Unaudited)

 

Corporate Restricted Securities: (A) (Continued)		Principal Amount, Shares, Units or Ownership Percentage				Acquisition Date				Cost				Fair Value
AFC - Dell Holding Corporation
A distributor and provider of inventory management services for "C-Parts" used by OEMs in their manufacturing and production facilities.
12.5% Senior Subordinated Note due 09/27/2020		$	1,194,350			03/27/15				$	1,173,934			$	1,217,337
Preferred Stock (B)	1,122 shs.					03/27/15					112,154				112,722
Common Stock (B)	346 shs.					03/27/15					346				—
											1,286,434				1,330,059
Airxcel Holdings
A leading manufacturer of a broad range of climate control solutions, including air-conditioners, heat pumps, cooking appliances, furnaces, powered vents, and water heaters.
12.5% Senior Subordinated Note due 11/18/2020		$	1,466,770			11/18/14					1,442,810				1,477,025
Limited Liability Company Unit	288 uts.					11/18/14					288,000				306,663
											1,730,810				1,783,688
AMS Holding LLC
A leading multi-channel direct marketer of high-value collectible coins and proprietary-branded jewelry and watches.
Limited Liability Company Unit Class A Preferred (B)	114 uts.					10/04/12					113,636				331,345
Animal Supply Company
A distributor of pet products to independent pet stores, veterinary clients and other pet specialty retailers.
10.5% Second Lien Term Loan due 09/17/2019		$	1,759,500			03/30/15					1,739,474				1,670,894
ARI Holding Corporation
A leading national supplier of products used primarily by specialty contractors.
11.5% Senior Subordinated Note due 02/01/2020		$	1,706,704				*				1,686,272				1,710,392
Limited Partnership Interest	524 uts.					08/01/14					523,950				612,763
* 05/21/13 and 08/01/14.											2,210,222				2,323,155
ASC Holdings, Inc.
A manufacturer of capital equipment used by corrugated box manufacturers.
13% Senior Subordinated Note due 05/18/2021		$	743,096			11/19/15					728,982				740,900
Limited Liability Company Unit (B)	111,100 uts.					11/18/15					111,100				49,662
											840,082				790,562
Aurora Parts & Accessories LLC
A distributor of aftermarket over-the-road semi-trailer parts and accessories sold to customers across North America.
11% Senior Subordinated Note due 02/17/2022		$	1,515,400			08/17/15					1,487,566				1,527,153
Preferred Stock (B)	210 shs.					08/17/15					209,390				207,642
Common Stock (B)	210 shs.					08/17/15					210				—
											1,697,166				1,734,795

 

 

 

 

 

---

March 31, 2016

(Unaudited)

 

Corporate Restricted Securities: (A) (Continued)		Principal Amount, Shares, Units or Ownership Percentage				Acquisition Date				Cost				Fair Value
Avantech Testing Services LLC
A manufacturer of custom Non-Destructive Testing ("NDT") systems and provider of NDT and inspections services primarily to the oil country tubular goods market.
15% Senior Subordinated Note due 01/31/2020 (D)		$	500,587			07/31/14				$	491,228			$	—
Limited Liability Company Unit	45,504 uts.						*				—				—
* 07/31/14 and 10/14/15.											491,228				—
Blue Wave Products, Inc.
A distributor of pool supplies.
10% Senior Secured Term Note due 09/30/2018		$	198,582			10/12/12					196,627				198,582
13% Senior Subordinated Note due 09/30/2019		$	328,942			10/12/12					314,275				328,942
Common Stock (B)	51,064 shs.					10/12/12					51,064				184,835
Warrant, exercisable until 2022, to purchase common stock at $.01 per share (B)	20,216 shs.					10/12/12					20,216				73,175
											582,182				785,534
BlueSpire Holding, Inc.
A marketing services firm that integrates strategy, technology, and content to deliver customized marketing solutions for clients in the senior living, financial services and healthcare end markets.
12.5% Senior Subordinated Note due 06/30/2021		$	1,585,909			06/30/15					1,557,300				1,542,004
Common Stock (B)	1,417 shs.					06/30/15					156,800				114,637
											1,714,100				1,656,641
BP SCI LLC
A leading value-added distributor of branded pipes, valves, and fittings (PVF) to diversified end markets.
Limited Liability Company Unit Class A (B)	417 uts.					10/17/12					41,667				134,171
Limited Liability Company Unit Class B (B)	167 uts.					10/17/12					166,666				244,757
											208,333				378,928
CG Holdings Manufacturing Company
A coating provider serving the automotive, agricultural, heavy truck and other end markets.
13% Senior Subordinated Note due 11/01/2019		$	1,412,605				*				1,354,208				1,426,731
Preferred Stock (B)	1,350 shs.						*				134,972				159,761
Preferred Stock (B)	489 shs.						*				48,721				57,904
Common Stock (B)	140 shs.						*				14,864				67,834
Warrant, exercisable until 2023, to purchase common stock at $.01 per share (B)	58 shs.						*				5,430				28,176
* 05/09/13 and 11/01/13.											1,558,195				1,740,406

 

 

 

 

 

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 Babson Capital Participation Investors

March 31, 2016

(Unaudited)

 

Corporate Restricted Securities: (A) (Continued)		Principal Amount, Shares, Units or Ownership Percentage				Acquisition Date				Cost				Fair Value
CHG Alternative Education Holding Company
A leading provider of publicly-funded, for profit pre-K-12 education services targeting special needs children at therapeutic day schools and "at risk" youth through alternative education programs.
13.5% Senior Subordinated Note due 01/19/2018		$	771,020			01/19/11				$	755,678			$	771,020
14% Senior Subordinated Note due 08/03/2019		$	201,909			08/03/12					199,668				201,909
Common Stock (B)	375 shs.					01/19/11					37,500				46,355
Warrant, exercisable until 2021, to purchase common stock at $.01 per share (B)	295 shs.					01/19/11					29,250				36,437
											1,022,096				1,055,721
Church Services Holding Company
A provider of diversified residential services to homeowners in the Houston, Dallas, and Austin markets.
14.5% Senior Subordinated Note due 03/26/2018		$	190,933			03/26/12					188,125				175,046
10% Senior Subordinated Note due 09/15/2099		$	6,492			09/15/14					6,492				—
Common Stock (B)	1,327 shs.						*				132,700				—
Warrant, exercisable until 2022, to purchase common stock at $.01 per share (B)	57 shs.					03/26/12					5,740				—
* 03/26/12, 05/25/12 and 06/19/12.											333,057				175,046
Clarion Brands Holding Corp.
A portfolio of six over-the-counter (OTC) pharmaceutical brands whose products are used to treat tinnitus or ringing of the ear, excessive sweating, urinary tract infections, muscle pain, and skin conditions.
12.5% Senior Subordinated Note due 04/01/2021		$	1,603,799			10/01/14					1,577,036				1,619,837
Common Stock (B)	1,568 shs.					10/01/14					156,818				85,436
											1,733,854				1,705,273
Clough, Harbour and Associates
An engineering service firm that is located in Albany, NY.
Preferred Stock (B)	147 shs.					12/02/08					146,594				672,523
Compass Chemical International LLC
A manufacturer and supplier of standard and specialty formulated chemicals, primarily phosphoric acid derivatives called phosphonates.
13% Senior Subordinated Note due 10/04/2020		$	1,527,328			03/04/15					1,501,975				1,525,784
Limited Liability Company Unit (B)	230 uts.					03/04/15					230,000				237,599
											1,731,975				1,763,383

 

 

 

 

 

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March 31, 2016

(Unaudited)

 

Corporate Restricted Securities: (A) (Continued)		Principal Amount, Shares, Units or Ownership Percentage			Acquisition Date		Cost				Fair Value
Connecticut Electric, Inc.
A supplier and distributor of electrical products sold into the retail and wholesale markets.
Limited Liability Company Unit Class A (B)	82,613 uts.				01/12/07		$	82,613			$	104,200
Limited Liability Company Unit Class C (B)	59,756 uts.				01/12/07			59,756				80,209
Limited Liability Company Unit Class D (B)	671,525 uts.				05/03/10			—				829,401
Limited Liability Company Unit Class E (B)	1,102 uts.				05/03/10			—				121,420
								142,369				1,135,230
CTM Holding, Inc.
A leading owner and operator of coin-operated children's rides, penny presses and candy kiosks in the U.S.
15% Senior Subordinated Note due 11/22/2019		$	1,268,134		11/22/13			1,251,348				1,254,891
Common Stock (B)	78 shs.				11/22/13			443,182				484,218
								1,694,530				1,739,109
Custom Engineered Wheels, Inc.
A manufacturer of custom engineered, non-pneumatic plastic wheels and plastic tread cap tires used primarily for lawn and garden products and wheelchairs.
Preferred Stock PIK (B)	156 shs.				10/26/09			156,468				265,493
Preferred Stock Series A (B)	114 shs.				10/27/09			104,374				193,974
Common Stock (B)	38 shs.				10/26/09			38,244				119,834
Warrant, exercisable until 2016, to purchase common stock at $.01 per share (B)	28 shs.				10/27/09			25,735				87,556
								324,821				666,857
DPL Holding Corporation
A distributor and manufacturer of aftermarket undercarriage parts for medium and heavy duty trucks and trailers.
14% Senior Subordinated Note due 05/04/2019		$	1,383,110		05/04/12			1,368,640				1,383,110
Preferred Stock (B)	25 shs.				05/04/12			252,434				329,419
Common Stock (B)	25 shs.				05/04/12			28,048				7,292
								1,649,122				1,719,821
Dunn Paper
A provider of specialty paper for niche product applications.
Preferred Stock (B)	261 shs.				12/30/14			261,364				885,158
Eagle Family Foods, Inc.
A producer of low-cost branded and private label canned milk.
10.05% Last Out Term Loan due 06/30/2016		$	1,725,000		12/22/15			1,700,211				1,702,730

 

 

 

 

 

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 Babson Capital Participation Investors

March 31, 2016

(Unaudited)

 

Corporate Restricted Securities: (A) (Continued)		Principal Amount, Shares, Units or Ownership Percentage			Acquisition Date		Cost				Fair Value
ECG Consulting Group
A healthcare management consulting company who provides strategic, financial, operational, and technology related consulting services to healthcare providers.
11.75% Senior Subordinated Note due 11/21/2020		$	1,306,986		11/21/14		$	1,282,473			$	1,333,125
Limited Liability Company Unit (B)	230 uts.				11/19/14			71,875				84,644
								1,354,348				1,417,769
ERG Holding Company LLC
A provider of inpatient and outpatient clinical trial services to pharmaceutical companies and contract research organizations.
13.5% Senior Subordinated Note due 10/04/2019		$	958,522		04/04/14			945,095				961,702
Common Stock (B)	31 shs.				04/04/14			77,533				83,727
								1,022,628				1,045,429
F F C Holding Corporation
A leading U.S. manufacturer of private label frozen novelty and ice cream products.
Limited Liability Company Unit Preferred (B)	171 uts.				09/27/10			58,345				74,274
Limited Liability Company Unit Common (B)	171 uts.				09/27/10			17,073				103,298
								75,418				177,572
F G I Equity LLC
A manufacturer of a broad range of filters and related products that are used in commercial, light industrial, healthcare, gas turbine, nuclear, laboratory, clean room, hotel, educational system, and food processing settings.
Limited Liability Company Unit Preferred (B)	80,559 uts.				04/15/14			—				80,559
Limited Liability Company Unit Class B-1 (B)	65,789 uts.				12/15/10			65,789				148,450
Limited Liability Company Unit Class B-2 (B)	8,248 uts.				12/15/10			8,248				18,611
Limited Liability Company Unit Class B-3 (B)	6,522 uts.				08/30/12			15,000				16,412
Limited Liability Company Unit Class C (B)	1,575 uts.				12/20/10			16,009				29,928
								105,046				293,960
FMH Holdings Corporation
A designer and manufacturer of highly engineered components for the aerospace, defense and space industries.
11.5% Senior Subordinated Note due 11/01/2020		$	1,443,937		05/01/15			1,418,988				1,472,816
Common Stock (B)	148 shs.				05/01/15			148,096				237,069
								1,567,084				1,709,885
G C Holdings
A leading manufacturer of gaming tickets, industrial recording charts, security-enabled point-of sale receipts, and medical charts and supplies.
Warrant, exercisable until 2018, to purchase common stock at $.01 per share (B)	198 shs.				10/19/10			46,958				118,252

 

 

 

 

 

 

 

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March 31, 2016

(Unaudited)

 

Corporate Restricted Securities: (A) (Continued)		Principal Amount, Shares, Units or Ownership Percentage			Acquisition Date		Cost				Fair Value
GD Dental Services LLC
A provider of convenient "onestop" general, specialty, and cosmetic dental services with 21 offices located throughout South and Central Florida.
Limited Liability Company Unit Preferred (B)		76 uts.			10/05/12		$	75,920			$	95,000
Limited Liability Company Unit Common (B)		767 uts.			10/05/12			767				50,627
								76,687				145,627
GenNx Novel Holding, Inc.
A manufacturer and distributor of nutraceutical ingredients.
13% Senior Subordinated Note due 03/27/2020		$	1,597,905		03/27/14			1,574,475				1,517,913
Common Stock (B)		15,500 shs.			03/27/14			155,000				114,705
								1,729,475				1,632,618
gloProfessional Holdings, Inc.
A marketer and distributor of premium mineral-based cosmetics, cosmeceuticals and professional hair care products to the professional spa and physician's office channels.
14% Senior Subordinated Note due 03/27/2019		$	1,201,902		03/27/13			1,188,258				1,174,208
Common Stock (B)		1,181 shs.			03/27/13			118,110				114,538
								1,306,368				1,288,746
Glynlyon Holding Companies, Inc.
A technology-enabled curriculum provider of K-12 and support services predominantly to small and medium public school districts.
12% Senior Subordinated Note due 01/05/2022		$	1,580,894		01/15/16			1,550,105				1,613,977
Common Stock (B)		147 shs.			01/15/16			147,436				124,227
								1,697,541				1,738,204
GlynnDevins Acquisition Corporation
A marketing communications agency that services senior living facilities.
13% Senior Subordinated Note due 12/19/2020		$	792,816		06/19/15			778,766				797,533
Preferred Stock Series A (B)		342 shs.			06/19/15			70,683				73,696
Common Stock (B)		342 shs.			06/19/15			2,945				1,009
								852,394				872,238
Grakon Parent
The leading designer and manufacturer of highly-engineered and customized LED and incandescent lighting systems for transportation-based markets.
Common Stock (B)		175 shs.			10/31/14			174,831				237,488

 

 

 

 

 

 

 

---

Babson Capital Participation Investors

March 31, 2016

(Unaudited)

 

Corporate Restricted Securities: (A) (Continued)		Principal Amount, Shares, Units or Ownership Percentage			Acquisition Date		Cost				Fair Value
GTI Holding Company
A designer, developer, and marketer of precision specialty hand tools and handheld test instruments.
12% Senior Subordinated Note due 02/05/2020		$	727,865		02/05/14		$	690,354			$	691,317
Common Stock (B)		846 shs.			02/05/14			84,636				64,752
Warrant, exercisable until 2024, to purchase common stock at $.01 per share (B)		397 shs.			02/05/14			36,816				30,386
								811,806				786,455
Handi Quilter Holding Company
A designer and manufacturer of long-arm quilting machines and related components for the consumer quilting market.
12% Senior Subordinated Note due 06/19/2021		$	1,437,500		12/19/14			1,412,766				1,425,973
Limited Liability Company Unit Preferred (B)		288 uts.			12/19/14			287,500				213,849
Limited Liability Company Unit Common Class A (B)		2,875 uts.			12/19/14			—				—
								1,700,266				1,639,822
Hartland Controls Holding Corporation
A manufacturer and distributor of electronic and electromechanical components.
14% Senior Subordinated Note due 08/14/2019		$	1,089,948		02/14/14			1,074,628				1,100,847
12% Senior Subordinated Note due 08/14/2019		$	431,250		06/22/15			427,602				434,453
Preferred Stock Series A (B)		1,208 shs.			02/14/14			114,011				127,293
Common Stock (B)		821 shs.			02/14/14			822				97,021
								1,617,063				1,759,614
Healthcare Direct Holding Company
A direct-to-customer marketer of discount dental plans.
Common Stock (B)		517 shs.			03/09/12			51,724				100,711
HHI Group, LLC
A developer, marketer, and distributor of hobby-grade radio control products.
14% Senior Subordinated Note due 01/17/2020		$	1,615,730		01/17/14			1,593,578				1,402,912
Limited Liability Company Unit (B)		102 uts.			01/17/14			101,563				5,945
								1,695,141				1,408,857
Hi-Rel Group LLC
A manufacturer and distributor of precision metal piece parts for the microelectronic packaging industry, serving the aerospace/defense, telecommunications, and medical end markets.
12% Senior Subordinated Note due 03/15/2018		$	703,125		04/15/13			680,380				702,643
Limited Liability Company Unit (B)		234 uts.			04/15/13			234,375				331,590
Warrant, exercisable until 2020, to purchase common stock at $.01 per share (B)		37,177 shs.			04/15/13			32,344				65,743
								947,099				1,099,976