CRESTLINE DENALI CAPITAL, L.P. (“Crestline Denali”) is an investment management firm specializing in the sourcing, investment, management, and administration of syndicated, non-investment grade bank loans. Crestline Denali, formerly known as Denali Capital LLC, was established in March 2001. Crestline Denali’s principal owners are Crestline Management, L.P. (“Crestline Management”) and, through their trusts, Mr. John P. Thacker and Mr. Gregory R. Cooper (the “Principals”). Crestline Management is owned by Mr. Douglas K. Bratton (including via estate planning vehicles), passive investor Thru Line, L.P. and other senior executives of Crestline Management.

As of December 31, 2018 Crestline Denali had approximately $2.5 billion in market value of bank loans and cash directly under management in seven client funds and approximately $76.5 million in market value of bank loans directly under management in a temporary, third-party financed, pre-pricing warehouse facility (the “Warehouse”). While at certain times authority may be limited, Crestline Denali typically has, and expects to have, full discretionary authority over its existing client funds, and future client funds, under its management.

The advisory services offered by Crestline Denali are tailored to the specific needs of its client funds, as set forth in their operative or offering documents. Client funds are typically subject to strict guidelines in relation to the types of securities they may own. The stage a client fund is in, in terms of its life cycle (i.e. warehouse, reinvestment or amortization period), may influence security selection. Day to day monitoring of a client fund’s portfolio composition enables Crestline Denali to customize its services to the needs of each of its client funds.

Generally, the investment advice offered by Crestline Denali is within the syndicated bank loan market space. Crestline Denali only provides advisory services to entities with which it has entered into an advisory management contract.

Crestline Denali does not participate in wrap programs. please register to get more info

The management and incentive fees of each client fund are established during the structuring of the client fund and are set forth in the offering documents provided to fund investors. Management fees for client funds structured as a collateralized loan obligation are typically determined as a percentage of a fund’s assets, billed quarterly and paid in arrears. Such fees typically range between .25% and .50%, per annum. Incentive fees for client funds structured as a collateralized loan obligation are contingent on delivering client specific minimum levels of return on investment and are determined as a percentage of client return. Upon achievement of the client specific minimum return levels, incentive fees are billed quarterly and paid in arrears. The trustees of each client fund perform all management and incentive fee calculations and distribute the fees to Crestline Denali on predetermined payment dates. Crestline Denali does not deduct fees directly from any client’s account. Other expenses that client funds pay besides management and incentive fees include, but are not limited to, interest expense on debt securities issued and outstanding and fees for placement, structuring, trustee, legal, rating agency, accounting, tax, systems and loan pricing services. Client funds at times incur brokerage and other transaction related costs. See Item 12 of this brochure for more information on Crestline Denali’s brokerage practices.

Client funds may only terminate advisory services in accordance with the terms of the advisory agreement. please register to get more info

As discussed in Item 5. Crestline Denali is entitled to receive incentive fees from client funds under its management upon achieving client specific minimum levels of return on investment. Conflicts may arise in the management of client funds as Crestline Denali may have an incentive to favor client funds for which the attainment of the incentive is more likely. As a registered investment adviser Crestline Denali acknowledges it has a fiduciary duty to act in the best interest of each of its client funds regardless of compensation. Crestline Denali’s credit policy and compliance manuals, which are relied upon and uniformly applied to all clients contain policies and procedures to mitigate any incentive to favor one client fund over another client fund.

Crestline Denali operates under established policies and procedures designed to mitigate conflicts of interest which can arise when deciding on how to allocate loan purchases to multiple client funds. Crestline Denali’s credit policy manual states that, when determining allocations of approved purchases, Crestline Denali’s investment committee shall take into consideration all pertinent information concerning the specific characteristics of the asset being purchased in light of the investment parameters of each client fund. When an asset to be purchased is equally attractive for more than one client fund, the investment committee will generally allocate its anticipated assignment amount proportionally among the client funds. Given limited availability, the anticipated assignment amount may be too small to proportionally allocate among all relevant client funds, in which case the investment committee may prioritize the allocation amount first to the client fund(s) whose investment parameters are best matched to the specific characteristics of the asset and second to the client fund(s) which have the most available capital to invest. The investment committee may also take into account other similar opportunities concurrently available when allocating among its client funds (especially when there are several similar trade opportunities) with an overall objective that each fund receive its proportional share of all relevant trade opportunities over time. Additionally, closed client funds receive preference of allocations over client funds still in the pre-pricing warehouse phase. Additional considerations apply with respect to loan trades intended to be held for a short term only and sold at a profit. In the course of reviewing investment opportunities, Crestline Denali may determine that the anticipated market demand for a new loan offering vis-à-vis secondary trading levels for loans of similar type may provide an opportunity to realize a gain on the purchase, short term hold, and subsequent sale of the loan. Crestline Denali vests the authority to execute purchase, short term hold, and subsequent sale trades in either the Senior Managing Director or Managing Director responsible for trade execution. Due to the high market demand that gives rise to Crestline Denali's determination that a purchase, short term hold, and subsequent sale trade opportunity exists, Crestline Denali may not be allocated a sufficient amount to fill the order on behalf of all eligible Crestline Denali client funds. In such circumstances the Senior Managing Director or Managing Director responsible for trade execution will allocate purchase, short term hold, and subsequent sale trades on a rotational basis among Crestline Denali client funds for which purchase, short term hold, and subsequent sale trading is an express or implied investment strategy, and exclude any client fund that expressly excludes such trading from its investment strategy. However, a client fund will be bypassed in the rotation if the loan subject to the purchase, short term hold, and subsequent sale trade would be ineligible for investment by the client fund. Limitations on discretionary trading by certain client funds may also affect the allocation of purchase, short term hold, and subsequent sale trades. Finally, as a result of providing the entire Warehouse equity investment, Crestline Denali, or its affiliates, will be the sole beneficiary of any purchase, short term hold, and subsequent sale trade gain. In order to avoid potential conflicts of interest that could arise if purchase, short term hold, and subsequent sale trading gains were allocated to a Warehouse that Crestline Denali is the sole beneficiary, Crestline Denali, will remove the Warehouse from the purchase, short term hold, and subsequent sale trade rotation. Only non-proprietary Warehouse clients (i.e. partial or full unaffiliated, thirty party equity investment exists) are eligible to participate in the purchase, short term hold, and subsequent sale trade rotation. The preceding limitations, however, do not apply if at the time of the purchase, short term hold, and subsequent sale trade no eligible closed client fund for which the trade can be made exists. Crestline Denali may from time to time direct the purchase of a loan from, or the sale of a loan to, another client fund managed by Crestline Denali. Crestline Denali’s policy on cross fund transactions states such transactions must be conducted on an arm's-length basis and at an established fair market value of the particular loan. Because of the nature of these cross fund transactions, a potential conflict of interest exists. Crestline Denali will not conduct cross fund transactions with any client fund in which Crestline Denali, or any affiliates or Members thereof, have an ownership interest unless Crestline Denali obtains the written approval of such client fund’s third party fiduciary. Additional information regarding Crestline Denali's cross fund trading activities is available to any existing or prospective client fund upon request. please register to get more info

The typical client fund managed by Crestline Denali is an offshore, non-public, closed- end, pooled investment fund structured as a collateralized loan obligation. While each client fund is structured separately, they often operate very similarly to one another. A client fund is owned by a group of investors who contribute typically 8% to 15% of the total capital structure. Crestline Denali, or its affiliates, the Principals, and certain knowledgeable employees will often, but not always, be members of this ownership group. Debt investors will contribute the remaining portion of the capital structure. The money provided by the debt and equity investors will be managed by Crestline Denali per each client fund’s operative agreement to purchase assignments in syndicated, below investment grade, commercial bank loans and selectively other assets. Subsequent to initial closing, unless amended, the client funds managed by Crestline Denali are closed to new investors.

Crestline Denali participates in a unique environment which makes it impractical to establish a minimum client fund size requirement. Crestline Denali’s decisions to enter into and maintain fund advisory engagements are primarily based on the amount and likelihood of receipt of management and incentive fees. please register to get more info

OF LOSS

Crestline Denali will tailor its investment strategy, which is best summarized as primarily long-only, buy and hold, to each client fund. Crestline Denali attempts to keep its client funds reasonably fully invested at all times by purchasing assignments in first lien senior secured non-investment grade syndicated bank loan obligations extended primarily to U.S.-based companies operating across numerous sectors of the economy. This strategy is intended to create diverse investment portfolios designed to help mitigate default and issuer risk and to enable its client funds to profit from the interest rate arbitrage between the interest earned on the underlying investment pool and the interest paid to its borrowing source. Crestline Denali targets small investment positions typically equal to .25% - 2.0% of an individual client fund’s total size in an effort to minimize individual obligor default risk. Crestline Denali will generally invest in bank loan obligations possessing the following core credit attributes:
• The transaction will involve a private company and be sponsored by a private equity sponsor firm having significant or meaningful capital invested or at risk, or a transaction with a public or privately-held company represented by a financial intermediary.
• The borrower will have a professional management team with a combination of experience, balance and depth.
• The borrower will be a market leader or possess a demonstrable strategic advantage.
• The borrower will have a proven or provable record of earnings in line with the capital structure in place or proposed.
• The transactions will be generally structured along one or more of the following key financial ratios: − Pro forma First Lien Debt/EBITDA less than 4.5x − Pro forma Total Debt/EBITDA less than 6.0x − Pro forma Cash Flow Interest Coverage greater than or equal to 2.0x − Pro forma Fixed Charge Coverage greater than 1.2x − Sub-debt plus equity at least 40% of total capitalization − Cash or market value of equity at least 20% of total capitalization

The investment strategies of Crestline Denali pose the following material risks to its client funds under management and client fund investors:


• Limited Liquidity: There is limited ability to sell the client funds’ investments as secondary markets often do not exist and the ability to transfer ownership to another entity is restricted. This risk may be heightened in times of economic downturn or in response to a specific economic event. In addition, loans to companies at the smaller end of the syndicated loan market trade less frequently than loans to larger companies and, in some instances, have no or only a limited trading market.


• High Leverage: The client fund is highly leveraged and this may result in situations where the interest expense due is greater than interest income collected. The more subordinate the investor, the greater risk of non-payment.


• Credit: A borrower may not make required principal or interest payments under its borrowing terms.


• Interest rate and prepayment: Companies are likely to prepay their outstanding loans during periods of declining interest rates. Proceeds received from prepayment may be reinvested in a lower yielding investment.
• Non-investment grade investments: Non-investment grade loans will have greater credit and liquidity risk than investment grade obligations and are more likely to be impaired during periods of economic downturn. Client funds and their investors should be prepared to bear the risk of loss of principal when investing in bank loans. Additional risk factors are set out in detail in the offering documents for each client fund, which are available to prospective investors prior to a client fund’s closing. Existing investors may receive an additional copy of the offering document upon request. please register to get more info

Crestline Denali has no disciplinary information to report. please register to get more info

Crestline Denali is operating under an agreement with DC Funding, a related party, which is no longer material to Crestline Denali’s advisory business. DC Funding was a registered investment adviser and is the portfolio manager, as of December 31, 2018, of two collateralized loan obligation funds (“CLOs”), both of which have relatively insignificant remaining assets. Crestline Denali’s employees perform minimal operational and administrative services on behalf of DC Funding to support DC Funding’s CLO management responsibilities.

Crestline Denali’s principal owner, Crestline Management, is a registered investment advisor. Certain affiliates of Crestline Management have sponsored a Warehouse managed by Crestline Denali and may sponsor, and or invest in, future Warehouses managed by Crestline Denali. Certain principal owners of Crestline Management have an indirect ownership interest in Crestline Denali. Because of the principals’ ownership interest in Crestline Denali, those related persons share in the fees, revenues or profits that Crestline Denali generates.

As of December 31, 2018, Crestline Denali, or an affiliate, was the collateral manager for, and held a minority equity ownership interest of Denali Capital CLO X, Ltd., Crestline Denali CLO XVI, Ltd., and Crestline Denali CLO XVII, Ltd. and a majority equity ownership interest of Denali Capital CLO XI, Ltd., Denali Capital CLO XII, Ltd., Crestline Denali CLO XIV, Ltd., and Crestline Denali CLO XV, Ltd.

Crestline Denali does not select or recommend other advisers for its client funds.

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TRANSACTIONS AND PERSONAL TRADING
Crestline Denali has adopted a code of ethics pursuant to SEC Rule 204A-1, which incorporates general principles in which all Crestline Denali employees are expected to uphold. As an investment adviser, Crestline Denali is a fiduciary of its client funds. Accordingly, Crestline Denali has a fiduciary duty at all times to place the interests of its client funds before the interests of itself and all access persons. In accordance with the code of ethics, neither Crestline Denali nor a related person buys or sells for client funds, securities in which Crestline Denali, or its affiliates, have a material financial interest. Except when attempting to satisfy the manager-originator requirements associated with European risk retention criteria, neither Crestline Denali nor a related person is permitted to invest in the same or similar securities that it recommends to its client funds. In regard to the European risk retention exception mentioned, Crestline Denali does not receive any direct economic benefit when it invests in the same securities that it recommends to its client funds. Note, during a Warehouse period in which Crestline Denali, or an affiliate, is an equity investor, Crestline Denali, or an affiliate, will be exposed to the credit and market risk associated with ownership of the securities purchased for the Warehouse. In such an instance Crestline Denali may be viewed as buying the same securities for itself (via its equity ownership in the Warehouse) that it buys for its other advisory clients. Upon securing long term financing for a client fund and terminating a Warehouse, Crestline Denali may be viewed as selling securities it owned (via its equity ownership in the Warehouse) to an advisory client.

The Principals have a direct beneficial interest in Denali Capital CLO XI, Ltd., a client fund of Crestline Denali. The Principals and certain knowledgeable employees have a direct beneficial interest in Denali Capital CLO XII, Ltd., Crestline Denali CLO XIV, Ltd., and Crestline Denali CLO XV, Ltd., all client funds of Crestline Denali.

Under the code of ethics, all Crestline Denali employees are deemed access persons and required to provide all personal securities transaction reports to Crestline Denali’s compliance personnel. Access persons also must obtain the pre-approval of the compliance area before entering into trades involving initial public offerings or private placements. All employee personal securities transactions must be conducted in a manner consistent with the code of ethics and avoid any actual or potential conflicts of interest or any abuse of an employee's position. Employees may not take any inappropriate advantage of their positions at Crestline Denali. Information concerning the identity of securities and financial circumstances of client funds and their investors must be kept confidential. Crestline Denali maintains a list of all companies with public debt or equity from whom it has received financial or other material information. Employees are restricted from investing in securities of companies on this list. This list of companies is updated and available to all employees on a weekly basis. All employee brokerage accounts are monitored for any activity with companies on the restricted list.

Employees are prohibited from accepting or giving a gift, favor, entertainment, special accommodation, or other item of value of more than de minimis value ($250). A copy of the code of ethics is available to any existing or prospective client fund upon request. You may obtain a free copy of the code of ethics by contacting Scott Marienau at 630-928-2571 or [email protected]. please register to get more info

Crestline Denali trades on behalf of its clients in bank loans on both a primary and secondary basis. A primary transaction occurs when an issue first comes to market, as a result of an acquisition, refinance or recapitalization of a company or business. Crestline Denali typically accesses a primary transaction through large commercial or investment banks, regional banks or specialty finance companies. In a primary transaction the organization responsible for the syndication of the bank debt is the party Crestline Denali negotiates the possible purchase. A secondary transaction involves one existing holder of the bank debt selling its position, in full or part, to another institution. These transactions usually occur through a trading desk whose function is to bring buyers and sellers together. Crestline Denali is from time to time both a seller and a buyer in the secondary market. As a result of Crestline Denali’s, and its predecessor Denali Capital LLC’s, long standing participation in this market sector, it believes it has more than adequate access to assets for its client funds.

Crestline Denali has full discretionary authority to place trades on behalf of its clients. As a result, Crestline Denali is obligated to obtain best execution of securities transactions for its client funds. Best execution is generally described as a duty to execute securities transactions so that a client's total costs or proceeds are the most favorable under the circumstances. The Securities and Exchange Commission (the “SEC”) has stated that, when seeking best execution, an adviser should consider the full range and quality of a broker-dealer's services in placing trades. Best execution therefore is not necessarily determined solely by the lowest possible commission costs, but rather by the best qualitative execution. Factors Crestline Denali may consider when selecting broker-dealers generally include price, execution risk, market conditions, and historical performance.

In placing specific orders to purchase and sell securities for its client funds, Crestline Denali considers a number of factors in selecting the appropriate broker-dealer, such as:

(i) determining which broker-dealers with whom Crestline Denali conducts business make an active market in the asset; (ii) determining what their respective current bid or offer prices, as applicable, are; (iii) comparing what, if any, assignment fees may be charged depending on which broker-dealer is selected; (iv) taking into account whether the quoted prices are immediately actionable (i.e. whether the broker-dealer actually owns and is ready to sell an asset, or is ready to confirm an order for purchase). Crestline Denali does not seek to obtain products, research or services, (“soft dollars”), other than transactional services from its intermediaries, nor has it entered into any soft dollar arrangements. In managing the client funds, Crestline Denali will generally aggregate trades subject to best execution. Trade aggregation opportunities for Crestline Denali generally arise when more than one client fund is capable of purchasing or selling a particular security based on investment objectives, available cash and other factors. Crestline Denali may aggregate client fund orders when doing so will result in an equal or better overall price for client fund trades. In addition, when Crestline Denali encounters investment opportunities that are appropriate for more than one client fund or when an aggregated order is only partially filled, Crestline Denali will allocate the investment opportunity on a fair and equitable basis.

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Weekly reviews of client fund performance and portfolio composition are performed by middle and senior management to ensure each client fund is managed in accordance with its respective operative agreements. In addition to such internally performed reviews, third party service providers such as administrators, accounting firms, and trustees independently review client fund and advisory activities monthly to ensure further compliance with each client fund's governing document.

Reports are distributed to each client fund and its investors as required by each client fund’s operative agreement. Middle and senior management perform a detailed review of all reports for accuracy and compliance prior to distribution. Reporting requirements differ by client fund and range from detailed reports of underlying transactions to a summarized view of client fund activity. Crestline Denali prepares quarterly investor letters and third party service providers prepare monthly and quarterly portfolio reports. These documents are distributed directly to investors by each client fund’s trustee.

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Neither Crestline Denali nor its related persons operate under any arrangement where it or they receive compensation or any economic benefit from a non-client for providing advisory services to a client.

In consideration for certain investors investing in a majority of a client fund’s equity class Crestline Denali has in certain instances shared with such investors a percentage of the management fees paid by a client fund. If fees are shared with investors they are payable by a client fund to such investors solely when the management fees are paid from the client fund. please register to get more info

Crestline Denali does not have custody of the client funds under its management. Any cash and securities owned by the client funds under its management are maintained with trustees and can only be disbursed by the trustees according to defined uses as outlined in each client fund’s operative agreements. The client funds and their investors receive account statements, prepared independently from Crestline Denali, directly from the trustees. The client funds and its investors should carefully review these account statements and are encouraged to compare these account statements with any statements or letters they receive from Crestline Denali. please register to get more info

Crestline Denali has full discretionary authority over all client funds to operate within the parameters of each client fund’s operative agreements. Crestline Denali performs a thorough review of the operative agreements of its clients and engages in day to day monitoring of client fund performance and portfolio composition to ensure customization of its services to the needs of each of its clients.

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Crestline Denali does not engage in typical proxy voting activities as defined by the SEC but considers voting on loan amendments, modifications, waivers, and other related items to be similar to proxy voting. Crestline Denali has authority to vote on behalf of client funds as granted to it within each client fund management agreement.

The Chief Credit Officer of Crestline Denali possesses the overall responsibility to ensure compliance with procedures relating to approval of amendments, modifications and waivers, and other similar items. All positions with respect to such items must be approved by the required individuals in accordance with Crestline Denali’s current Delegations of Authority and Pre-Funding and Amendment Authority matrices.

Crestline Denali’s general policy is to vote in favor of proposed amendments it believes are a necessary aspect of a business’ operations and/or that Crestline Denali believes will preserve or enhance the value of the investment for each client fund. Crestline Denali must act as a fiduciary when voting on behalf of its client funds. In that regard, Crestline Denali will seek to avoid possible conflicts of interest in connection with voting. If a conflict of interest with respect to voting exists, Crestline Denali must either seek the client fund’s informed direction or abstain from voting. Crestline Denali will not make any decisions as to whether to participate in or opt out of a class action suit involving securities in which client funds are invested. Additional information regarding Crestline Denali's voting policies and procedures and any specific voting decision are available upon request. Contact Scott Marienau 630-928- 2571 or [email protected] to obtain further information. please register to get more info

As of the date of this report, to the best of Crestline Denali’s knowledge, no financial condition exists that is reasonably likely to impair Crestline Denali’s ability to meet its contractual commitments. please register to get more info