10-Q 1 tm2126210d1_10q.htm FORM 10-Q

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended September 30, 2021

 

OR

 

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

 

Commission file number: 814-01175

 

BAIN CAPITAL SPECIALTY FINANCE, INC.

(Exact name of registrant as specified in its charter)

 

Delaware   81-2878769
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)

 

200 Clarendon Street, 37th Floor
Boston, MA
(Address of principal executive offices)		   02116
(Zip Code)

 

(617) 516-2000

(Registrant’s telephone number, including area code)

 

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

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock, par value $0.001 per share   BCSF   New York Stock Exchange

 

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 ¨

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ¨  No ¨

 

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

 

Large accelerated filer x Accelerated filer ¨
Non-accelerated filer ¨ Smaller reporting company ¨
  Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

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

 

As of November 3, 2021 the registrant had 64,562,265.27 shares of common stock, $0.001 par value, outstanding.

 

 

 

 

 

 

TABLE OF CONTENTS

 

    Page
PART I FINANCIAL INFORMATION 4
     
Item 1. Consolidated Financial Statements 4
     
  Consolidated Statements of Assets and Liabilities as of September 30, 2021 (unaudited) and December 31, 2020 4
     
  Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020 (unaudited) 5
     
  Consolidated Statements of Changes in Net Assets for the three and nine months ended September 30, 2021 and 2020 (unaudited) 6
     
  Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020 (unaudited) 7
     
  Consolidated Schedules of Investments as of September 30, 2021 (unaudited) and December 31, 2020 8
     
  Notes to Consolidated Financial Statements (unaudited) 27
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 70
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 108
     
Item 4. Controls and Procedures 109
     
PART II OTHER INFORMATION 109
     
Item 1. Legal Proceedings 109
     
Item 1A. Risk Factors 109
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 109
     
Item 3. Defaults Upon Senior Securities 109
     
Item 4. Mine Safety Disclosures 110
     
Item 5. Other Information 110
     
Item 6. Exhibits 110
     
Signatures 114

 

2

 

 

FORWARD-LOOKING STATEMENTS

 

Statements contained in this Quarterly Report on Form 10-Q (the “Quarterly Report”) (including those relating to current and future market conditions and trends in respect thereof) that are not historical facts are based on current expectations, estimates, projections, opinions and/or beliefs of the Company, BCSF Advisors, LP (the “Advisor”) and/or Bain Capital Credit, LP and its affiliated advisers (collectively, “Bain Capital Credit”). Such statements involve known and unknown risks, uncertainties and other factors and undue reliance should not be placed thereon. Certain information contained in this Quarterly Report constitutes “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “seek,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue,” “target,” or “believe” or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events or results or the actual performance of the Company may differ materially from those reflected or contemplated in such forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and are difficult to predict, that could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements including, without limitation, the risks, uncertainties and other factors we identify in the section entitled Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K (the “Annual Report”) for the fiscal year ended December 31, 2020 and in our filings with the Securities and Exchange Commission (the “SEC”).

 

Although we believe that the assumptions on which these forward-looking statements are based are reasonable, some of those assumptions may be based on the work of third parties and any of those assumptions could prove to be inaccurate; as a result, the forward-looking statements based on those assumptions also could prove to be inaccurate. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this Quarterly Report should not be regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include those described or identified in the section entitled Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020. Investors should not place undue reliance on these forward-looking statements, which apply only as of the date of this Quarterly Report. We do not undertake any obligation to update or revise any forward-looking statements or any other information contained herein, except as required by applicable law. The safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which preclude civil liability for certain forward-looking statements, do not apply to the forward-looking statements in this Quarterly Report because we are an investment company.

 

3

 

 

PART I. FINANCIAL INFORMATION

 

Item 1. Consolidated Financial Statements

 

Bain Capital Specialty Finance, Inc.

 

Consolidated Statements of Assets and Liabilities

(in thousands, except share and per share data)

  

   As of   As of 
   September 30, 2021   December 31, 2020 
   (Unaudited)     
Assets        
Investments at fair value:          
Non-controlled/non-affiliate investments (amortized cost of $2,023,858 and $2,281,809, respectively)  $2,005,635   $2,261,461 
Non-controlled/affiliate investment (amortized cost of $99,438 and $93,089, respectively)   107,576    92,915 
Controlled affiliate investment (amortized cost of $256,766 and $147,841, respectively)   243,460    130,112 
Cash and cash equivalents   34,277    53,704 
Foreign cash (cost of $1,033 and $976, respectively)   829    972 
Restricted cash and cash equivalents   57,802    27,026 
Collateral on forward currency exchange contracts   4,564    4,934 
Deferred financing costs   864    3,131 
Interest receivable on investments   20,943    15,720 
Receivable for sales and paydowns of investments   3,850    5,928 
Prepaid Insurance   376    - 
Unrealized appreciation on forward currency exchange contracts   4,071    - 
Dividend receivable   14,417    7,589 
Total Assets  $2,498,664   $2,603,492 
           
Liabilities          
Debt (net of unamortized debt issuance costs of $10,500 and $7,147, respectively)  $1,346,183   $1,458,360 
Interest payable   8,471    8,223 
Payable for investments purchased   5,400    10,991 
Unrealized depreciation on forward currency exchange contracts   -    22,614 
Base management fee payable   8,776    6,289 
Incentive fee payable   4,531    3,799 
Accounts payable and accrued expenses   3,673    3,261 
Distributions payable   21,951    21,951 
Total Liabilities   1,398,985    1,535,488 
           
Commitments and Contingencies (See Note 10)          
           
Net Assets          
Preferred stock, $0.001 par value per share, 10,000,000,000 shares authorized, none issued and outstanding
as of September 30, 2021 and December 31, 2020, respectively		  $-   $- 
Common stock, par value $0.001 per share, 100,000,000,000 and 100,000,000,000 shares authorized,
64,562,265 and 64,562,265 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		   65    65 
Paid in capital in excess of par value   1,166,453    1,166,453 
Total distributable earnings (loss)   (66,839)   (98,514)
Total Net Assets   1,099,679    1,068,004 
Total Liabilities and Total Net assets  $2,498,664   $2,603,492 
           
Net asset value per share  $17.03   $16.54 

 

See Notes to Consolidated Financial Statements    

 

4

 

 

Bain Capital Specialty Finance, Inc.

 

Consolidated Statements of Operations

(in thousands, except share and per share data)

(Unaudited)

 

   For the Three Months Ended
September 30		   For the Three Months Ended
September 30		   For the Nine Months Ended
September 30		   For the Nine Months Ended
September 30		 
   2021   2020   2021   2020 
Income                
Investment income from non-controlled/non-affiliate investments:                    
Interest from investments  $37,821   $43,558   $114,439   $135,576 
Dividend income   38    34    38    748 
PIK income   1,046    -    3,108    - 
Other income   1,181    607    5,512    1,106 
Total investment income from non-controlled/non-affiliate investments   40,086    44,199    123,097    137,430 
                     
Investment income from non-controlled/affiliate investments:                    
Interest from investments   455    56    1,355    56 
PIK income   1,421    -    4,173    - 
Total investment income from non-controlled/affiliate investments   1,876    56    5,528    56 
                     
Investment income from controlled affiliate investments:                    
Interest from investments   4,983    715    9,192    2,225 
Dividend income   2,600    1,847    7,564    6,473 
PIK income   -    -    483    - 
Total investment income from controlled affiliate investments   7,583    2,562    17,239    8,698 
Total investment income   49,545    46,817    145,864    146,184 
                     
Expenses                    
Interest and debt financing expenses   12,265    14,426    37,115    49,614 
Base management fee   8,776    8,885    26,096    26,250 
Incentive fee   4,531    -    19,301    - 
Professional fees   581    296    2,254    1,909 
Directors fees   186    209    529    555 
Other general and administrative expenses   1,445    1,545    4,075    3,878 
Total expenses before fee waivers   27,784    25,361    89,370    82,206 
Base management fee waiver   -    -    (4,837)   - 
Incentive fee waiver   -    -    (4,519)   - 
Total expenses, net of fee waivers   27,784    25,361    80,014    82,206 
Net investment income   21,761    21,456    65,850    63,978 
                     
                     
Net realized and unrealized gains (losses)                    
Net realized gain (loss) on non-controlled/non-affiliate investments   (668)   (24,263)   22,589    (34,667)
Net realized loss on controlled affiliate investments   (621)   -    (3,858)   - 
Net realized loss on foreign currency transactions   (72)   (19)   (2,093)   (368)
Net realized gain (loss) on forward currency exchange contracts   (2,085)   (130)   (23,773)   6,472 
Net realized loss on extinguishment of debt   (2,546)   -    (2,546)   - 
Net change in unrealized appreciation (depreciation) on foreign currency translation   (508)   194    (186)   89 
Net change in unrealized appreciation (depreciation) on forward currency exchange contracts   6,080    (11,177)   26,685    (7,921)
Net change in unrealized appreciation (depreciation) on non-controlled/non-affiliate investments   922    73,892    2,125    (45,077)
Net change in unrealized appreciation on non-controlled/affiliate investments   2,905    1,689    8,312    4,697 
Net change in unrealized appreciation (depreciation) on controlled affiliate investments   (1,826)   (10,185)   4,423    (18,421)
Total net gains (losses)   1,581    30,001    31,678    (95,196)
                     
Net increase (decrease) in net assets resulting from operations  $23,342   $51,457   $97,528   $(31,218)
                     
                     
Basic and diluted net investment income per common share  $0.34   $0.33   $1.02   $1.13 
Basic and diluted increase (decrease) in net assets resulting from operations per common share  $0.36   $0.80   $1.51   $(0.55)
Basic and diluted weighted average common shares outstanding   64,562,265    64,562,265    64,562,265    56,692,267 

 

See Notes to Consolidated Financial Statements

 

5

 

 

Bain Capital Specialty Finance, Inc.

 

Consolidated Statements of Changes in Net Assets

(in thousands, except share and per share data)

(Unaudited)

 

   For the Three Months Ended September 30   For the Three Months Ended September 30   For the Nine Months Ended September 30   For the Nine Months Ended September 30 
   2021   2020   2021   2020 
Operations:                
Net investment income  $21,761   $21,456   $65,850   $63,978 
Net realized loss   (5,992)   (24,412)   (9,681)   (28,563)
Net change in unrealized appreciation (depreciation)   7,573    54,413    41,359    (66,633)
Net increase (decrease) in net assets resulting from operations   23,342    51,457    97,528    (31,218)
Stockholder distributions:                    
Distributions from distributable earnings   (21,951)   (21,951)   (65,853)   (65,078)
Net decrease in net assets resulting from stockholder distributions   (21,951)   (21,951)   (65,853)   (65,078)
Capital share transactions:                    
Issuance of common stock, net   -    -    -    128,355 
Net increase in net assets resulting from capital share transactions   -    -    -    128,355 
                     
Total increase in net assets   1,391    29,506    31,675    32,059 
Net assets at beginning of period   1,098,288    1,020,953    1,068,004    1,018,400 
Net assets at end of period  $1,099,679   $1,050,459   $1,099,679   $1,050,459 
                     
Net asset value per common share  $17.03   $16.27   $17.03   $16.27 
Common stock outstanding at end of period   64,562,265    64,562,265    64,562,265    64,562,265 

  

See Notes to Consolidated Financial Statements

 

6

 

 

Bain Capital Specialty Finance, Inc.

 

Consolidated Statements of Cash Flows

(in thousands, except share and per share data)

(Unaudited)

 

   For the Nine Months Ended September 30   For the Nine Months Ended September 30 
   2021   2020 
Cash flows from operating activities          
Net increase (decrease) in net assets resulting from operations  $97,528    (31,218)
Adjustments to reconcile net increase in net assets from          
operations to net cash used in operating activities:          
Purchases of investments   (888,410)   (351,717)
Proceeds from principal payments and sales of investments   1,058,981    353,372 
Net realized (gain) loss from investments   (18,731)   34,667 
Net realized loss on foreign currency transactions   2,093    368 
Net realized loss on extinguishment of debt   2,546    - 
Net change in unrealized (appreciation) depreciation on forward currency exchange contracts   (26,685)   7,921 
Net change in unrealized (appreciation) depreciation on investments   (14,860)   58,801 
Net change in unrealized (appreciation) depreciation on foreign currency translation   186    (89)
Increase in investments due to PIK   (7,820)   (3,261)
Accretion of discounts and amortization of premiums   (4,190)   (4,332)
Amortization of deferred financing costs and debt issuance costs   3,992    1,905 
Changes in operating assets and liabilities:          
Collateral on forward currency exchange contracts   370    (3,604)
Interest receivable on investments   (5,223)   2,250 
Prepaid Insurance   (376)   - 
Dividend receivable   (6,828)   (4,612)
Interest payable   248    (3,751)
Collateral payable on forward currency exchange contracts   -    (331)
Base management fee payable   2,487    1,620 
Incentive fee payable   732    (4,513)
Accounts payable and accrued expenses   412    130 
Net cash provided by (used in) operating activities   196,452    53,606 
           
Cash flows from financing activities          
Borrowings on debt   672,550    527,762 
Repayments on debt   (783,342)   (585,402)
Payments of financing costs   -    (4,898)
Payments of offering costs   -    (3,045)
Payments of debt issuance costs   (5,657)   - 
Proceeds from issuance of common stock   -    131,917 
Stockholder distributions paid   (65,853)   (64,303)
Net cash (used in) provided by financing activities   (182,302)   2,031 
           
Net increase (decrease) in cash, foreign cash, restricted cash and cash equivalents   14,150    55,637 
Effect of foreign currency exchange rates   (2,944)   (559)
Cash, foreign cash, restricted cash and cash equivalents, beginning of period   81,702    68,846 
Cash, foreign cash, restricted cash and cash equivalents, end of period  $92,908   $123,924 
           
Supplemental disclosure of cash flow information:          
Cash interest paid during the period  $32,875   $51,460 
Cash paid for excise taxes during the period  $237   $- 
Supplemental disclosure of non-cash information:          
Debt investment sold by the Company to ISLP  $317,077   $- 
Company investment into ISLP in exchange for investments sold  $128,970   $- 

 

    2021    2020 
Cash  $34,277   $43,020 
Restricted cash   57,802    78,895 
Foreign cash   829    2,009 
Total cash, foreign cash, restricted cash, and cash equivalents shown in the consolidated statements of cash flows  $92,908   $123,924 

 

See Notes to Consolidated Financial Statements  

 

7

 

 

Bain Capital Specialty Finance, Inc.

 

Consolidated Schedule of Investments

As of September 30, 2021

(In thousands)

(unaudited)

 

Control Type  Industry  Portfolio Company  Investment
Type		  Spread Above
Index (1)		  Interest
Rate		   Maturity
Date		  Principal/Shares (9)   Cost   Market
Value		   % of
NAV (4)		 
Non-Controlled/Non-Affiliate Investments                                       
   Aerospace & Defense  Forming & Machining Industries Inc. (18) (19)  Second Lien Senior Secured Loan   L+ 8.25%  8.38%  10/9/2026  $6,540    6,493    5,821      
      Forming & Machining Industries Inc. (12) (18) (29)  First Lien Senior Secured Loan   L+ 4.25%  4.40%  10/9/2025  $16,481    16,390    15,344      
      GSP Holdings, LLC (7) (12) (15) (19) (26) (29)  First Lien Senior Secured Loan   L+ 5.75% (0.25% PIK)  6.75%  11/6/2025  $35,713    35,575    32,856      
      GSP Holdings, LLC (3) (7) (15) (19) (26)  First Lien Senior Secured Loan - Revolver   L+ 5.75% (0.25% PIK)  6.75%  11/6/2025  $1,589    1,558    1,226      
      Kellstrom Aerospace Group, Inc (14) (19) (25)  Equity Interest         -  -   -   1    1,963    936      
      Kellstrom Commercial Aerospace, Inc. (3) (15) (19) (24)  First Lien Senior Secured Loan - Revolver   L+ 5.50%  6.50%  7/1/2025  $3,092    3,025    2,772      
      Kellstrom Commercial Aerospace, Inc. (12) (15) (19) (29)  First Lien Senior Secured Loan   L+ 5.50%  6.50%  7/1/2025  $33,078    32,627    31,093      
      Precision Ultimate Holdings, LLC (14) (19) (25)  Equity Interest                -  -   -   1,417    1,417    1,163      
      WCI-HSG HOLDCO, LLC (14) (19) (25)  Preferred Equity         -  -   -   675    675    1,755      
      WCI-HSG Purchaser, Inc. (3) (12) (15) (19) (29)  First Lien Senior Secured Loan - Revolver   L+ 4.75%  5.75%  2/24/2025  $1,747    1,723    1,747      
      WCI-HSG Purchaser, Inc. (12) (15) (19) (29)  First Lien Senior Secured Loan   L+ 4.75%  5.75%  2/24/2025  $17,466    17,318    17,466      
      Whitcraft LLC (2) (3) (5) (15) (19)   First Lien Senior Secured Loan - Revolver         -  -   4/3/2023  $-    (9)   (86)     
      Whitcraft LLC (12) (15) (19) (29)  First Lien Senior Secured Loan   L+ 6.00%  7.00%  4/3/2023  $39,877    39,668    37,983      
      WP CPP Holdings, LLC. (12) (15) (29)   Second Lien Senior Secured Loan   L+ 7.75%  8.75%  4/30/2026  $11,724    11,645    11,588      
                      Aerospace & Defense Total   $170,068   $161,664    14.7%
                                        
   Automotive  American Trailer Rental Group (3) (19) (26)  Subordinated Debt  9.00% (2.00% PIK)  11.00%  12/1/2027  $1,963    1,889    1,914      
      American Trailer Rental Group (19) (26)  Subordinated Debt  9.00% (2.00% PIK)  11.00%  12/1/2027  $15,037    14,710    14,886      
      Cardo (6) (12) (17) (19)  First Lien Senior Secured Loan   L+ 6.00%  6.50%  5/12/2028  $10,898    10,792    10,898      
      CST Buyer Company (3) (5) (15) (19)  First Lien Senior Secured Loan - Revolver         -  -   10/3/2025  $-    (14)   -      
      CST Buyer Company (12) (15) (19) (29)  First Lien Senior Secured Loan   L+ 6.00%  7.00%  10/3/2025  $19,238    19,096    19,238      
      JHCC Holdings, LLC (15) (19) (28)  First Lien Senior Secured Loan - Delayed Draw   P+ 4.50%  7.75%  9/9/2025  $2,635    2,617    2,635      
      JHCC Holdings, LLC (3) (7) (19) (31)   First Lien Senior Secured Loan - Revolver   P+ 4.50%  7.75%  9/9/2025  $186    153    186      
      JHCC Holdings, LLC (7) (15) (19)  First Lien Senior Secured Loan - Delayed Draw   L+ 5.50%  6.50%  9/9/2025  $5,803    5,797    5,803      
      JHCC Holdings, LLC (7) (12) (15) (19) (29)  First Lien Senior Secured Loan   L+ 5.50%  6.50%  9/9/2025  $29,156    28,854    29,156      
                      Automotive Total   $83,894   $84,716    7.7%
                                        
   Banking  Green Street Parent, LLC (3) (5) (17) (19) (29)  First Lien Senior Secured Loan - Revolver  -  -   8/27/2025  $-    (31)   -      
      Green Street Parent, LLC (12) (17) (19) (29)  First Lien Senior Secured Loan   L+ 5.00%  5.50%  8/27/2026  $14,226    14,015    14,226      
                      Banking Total   $13,984   $14,226    1.3%
                                        
   Beverage, Food & Tobacco  NPC International, Inc. (19) (25) (27)  Equity Interest         -  -   -   700    1,046    355      
                      Beverage, Food & Tobacco Total   $1,046   $355    0.0%
                                        
   Capital Equipment  East BCC Coinvest II, LLC (14) (19) (25)  Equity Interest         -  -   -   1,419    1,419    910      
      Electronics For Imaging, Inc. (12) (18) (19) (29)  Second Lien Senior Secured Loan   L+ 9.00%  9.08%  7/23/2027  $12,070    11,441    10,863      
      Engineered Controls International, LLC (7) (12) (19) (29) (32)  First Lien Senior Secured Loan   L+ 7.00%  8.50%  11/5/2024  $52,813    51,980    53,341      
      FCG Acquisitions, Inc. (14) (19) (25)  Preferred Equity         -  -   -   4    -    -      
      Jonathan Acquisition Company (19) (15)  Second Lien Senior Secured Loan   L+ 9.00%  10.00%  12/22/2027  $8,000    7,817    7,920      
      Tidel Engineering, L.P. (3) (15) (19)  First Lien Senior Secured Loan - Revolver         -  -   3/1/2023  $-    -    -      
      Tidel Engineering, L.P. (7) (12) (15) (19) (29)  First Lien Senior Secured Loan   L+ 6.00%  7.00%  3/1/2024  $38,138    38,138    38,138      
      Tidel Engineering, L.P. (7) (15) (19)  First Lien Senior Secured Loan   L+ 6.00%  7.00%  3/1/2024  $6,354    6,283    6,354      
                      Capital Equipment Total   $117,078   $117,526    10.7%

 

8

 

 

Control Type  Industry  Portfolio Company  Investment
Type		  Spread Above
Index (1)		  Interest
Rate		   Maturity
Date		  Principal/Shares (9)   Cost   Market
Value		   % of
NAV (4)		 
   Chemicals, Plastics & Rubber  V Global Holdings LLC (7) (12) (15) (19) (29)  First Lien Senior Secured Loan   L+ 6.00%  7.00%  12/22/2027  $48,569    47,438    48,569      
      V Global Holdings LLC (3) (5) (15) (19)  First Lien Senior Secured Loan - Revolver         -  -   12/22/2025  $-    (167)   -      
                      Chemicals, Plastics & Rubber Total   $47,271   $48,569    4.4%
                                        
   Construction & Building  Chase Industries, Inc.(15) (19) (26)  First Lien Senior Secured Loan - Delayed Draw   L+ 5.50% (1.5% PIK)  6.50%  5/12/2025  $1,193    1,190    978      
      Chase Industries, Inc. (15) (19) (26)   First Lien Senior Secured Loan   L+ 5.50% (1.5% PIK)  6.50%  5/12/2025  $12,622    12,586    10,350      
      Elk Parent Holdings, LP (14) (19) (25)  Equity Interest         -  -   -   1    12    519      
      Elk Parent Holdings, LP (14) (19) (25)  Preferred Equity         -  -   -   120    1,202    1,399      
      ServiceMaster LP Interest Class B Preferred Units (14) (19) (25)  Equity Interest         -  -   -   -    327    327      
      PP Ultimate Holdings B, LLC (14) (19) (25)  Equity Interest         -  -   -   1    1,352    3,019      
      Profile Products LLC (3) (7) (19) (31)  First Lien Senior Secured Loan - Revolver   P+ 4.50%  7.75%  12/20/2024  $639    597    639      
      Profile Products LLC (7) (12) (15) (19) (29)  First Lien Senior Secured Loan   L+ 5.50%  6.50%  12/20/2024  $35,892    35,453    35,892      
      Regan Development Holdings Limited (6) (17) (19)   First Lien Senior Secured Loan   EURIBOR+ 6.50%  7.00%  4/18/2022  €2,087    2,274    2,331      
      Regan Development Holdings Limited (6) (17) (19)  First Lien Senior Secured Loan   EURIBOR+ 6.50%  7.00%  4/18/2022  €677    768    756      
      Regan Development Holdings Limited (6) (17) (19)   First Lien Senior Secured Loan   EURIBOR+ 6.50%  7.00%  4/18/2022  €6,335    6,887    7,037      
      Service Master Revolving Loan (3) (15) (19)  First Lien Senior Secured Loan - Revolver   L+ 7.50%  8.50%  7/15/2027  $990    902    900      
      Service Master Term Note (17) (19)  First Lien Senior Secured Loan   L+ 7.50%  8.50%  7/15/2027  $939    920    920      
      YLG Holdings, Inc. (7) (15) (19)  First Lien Senior Secured Loan - Delayed Draw   L+ 6.00%  7.00%  10/31/2025  $5,073    5,067    5,073      
      YLG Holdings, Inc. (3) (5) (7) (15) (19)  First Lien Senior Secured Loan - Revolver         -  -   10/31/2025  $-    (58)   -      
      YLG Holdings, Inc. (7) (12) (15) (19) (29)  First Lien Senior Secured Loan   L+ 6.00%  7.00%  10/31/2025  $38,183    37,973    38,183      
                      Construction & Building Total   $107,452   $108,323    9.9%
                                        
   Consumer Goods: Durable  New Milani Group LLC (12) (15) (19) (29)  First Lien Senior Secured Loan   L+ 6.50%  7.50%  6/6/2024  $16,796    16,713    15,956      
      TLC Holdco LP (14) (19) (25)  Equity Interest         -  -   -   1,188    1,186    506      
      TLC Purchaser, Inc. (2) (3) (5) (19)  First Lien Senior Secured Loan - Delayed Draw         -  -   10/13/2025  $-    (48)   (854)     
      TLC Purchaser, Inc. (3) (15) (19)  First Lien Senior Secured Loan - Revolver   L+ 5.75%  6.75%  10/13/2025  $6,408    6,289    5,340      
      TLC Purchaser, Inc. (12) (15) (19) (29)  First Lien Senior Secured Loan   L+ 5.75%  6.75%  10/13/2025  $41,173    40,586    36,232      
                      Consumer Goods: Durable Total   $64,726   $57,180    5.2%
                                        
   Consumer Goods: Non-Durable  Fineline Parent Holdings (14) (19) (25)  Equity Interest         -  -   -   939    939    1,123      
      FL Hawk Intermediate Holdings, Inc. (15) (19)  Second Lien Senior Secured Loan   L+ 9.00%  10.00%  8/22/2028  $21,125    20,534    21,125      
      MND Holdings III Corp (12) (15) (29)  First Lien Senior Secured Loan   L+ 3.50%  4.50%  6/19/2024  $3,962    3,962    3,839      
      New Era Cap Co., Inc. (12) (15) (19) (29)  First Lien Senior Secured Loan   L+ 6.50%  7.50%  9/10/2023  $9,996    9,996    10,296      
      RoC Opco LLC  (3) (15) (19)  First Lien Senior Secured Loan - Revolver   L+ 8.50%  9.50%  2/25/2025  $3,414    3,294    3,414      
      RoC Opco LLC (12) (15) (19) (29)  First Lien Senior Secured Loan   L+ 8.50%  9.50%  2/25/2025  $40,181    39,553    40,181      
      Solaray, LLC (7) (15) (19)  First Lien Senior Secured Loan - Delayed Draw   L+ 5.50%  6.50%  9/11/2023  $14,313    14,313    14,313      
      Solaray, LLC (3) (7) (15) (19)   First Lien Senior Secured Loan - Revolver   L+ 4.50%  5.50%  9/9/2022  $2,323    2,308    2,323      
      Solaray, LLC (7) (15) (19)  First Lien Senior Secured Loan   L+ 5.50%  6.50%  9/11/2023  $41,839    41,839    41,839      
      WU Holdco, Inc. (3) (18) (19)  First Lien Senior Secured Loan - Revolver   L+ 5.50%  5.63%  3/26/2025  $2,592    2,555    2,592      
      WU Holdco, Inc. (7) (12) (15) (19) (29)   First Lien Senior Secured Loan   L+ 5.50%  6.50%  3/26/2026  $44,566    43,929    44,566      
      WU Holdco, Inc. (12) (15) (19)  First Lien Senior Secured Loan   L+ 5.50%  6.50%  3/26/2026  $6,610    6,547    6,610      
      WU Holdco, Inc. (3) (5) (15) (19) (28)  First Lien Senior Secured Loan         -  -   3/26/2026  $-    (32)   -      
                      Consumer Goods: Non-Durable Total   $189,737   $192,221    17.5%
                                        
   Consumer Goods: Wholesale  WSP LP Interest (14) (19) (25)  Equity Interest         -  -   -   2,898    2,898    2,898      
      WSP Initial Term Loan (12) (15) (19) (29)  First Lien Senior Secured Loan   L+ 6.25%  7.25%  4/27/2027  $12,313    12,070    12,066      
      WSP Initial Term Loan (2) (3) (5) (15) (19)  First Lien Senior Secured Loan   -  -   4/27/2023  $-    (36)   (36)     
      WSP Revolving Loan (2) (3) (5) (15) (19)  First Lien Senior Secured Loan - Revolver   -  -   4/27/2027  $-    (9)   (9)     
                      Consumer Goods: Wholesale Total   $14,923   $14,919    1.4%
                                        
   Containers, Packaging, & Glass  Automate Intermediate Holdings II S.à r.l. (6) (18) (19)  Second Lien Senior Secured Loan   L+ 7.75%  7.83%  7/22/2027  $119    117    119      
                      Containers, Packaging, & Glass Total   $117   $119    0.0%
                                        
   Energy: Oil & Gas  Amspec Services, Inc. (3) (7) (15) (19)  First Lien Senior Secured Loan - Revolver   L+ 5.75%  6.75%  7/2/2024  $850    817    850      
      Amspec Services, Inc. (7) (12) (15) (19) (29)  First Lien Senior Secured Loan   L+ 5.75%  6.75%  7/2/2024  $43,319    43,007    43,319      
      Amspec Services, Inc. (7) (15) (19)   First Lien Senior Secured Loan   L+ 5.75%  6.75%  7/2/2024  $2,805    2,773    2,805      
                      Energy: Oil & Gas Total   $46,597   $46,974    4.3%

 

9

 

 

Control Type  Industry  Portfolio Company  Investment
Type		  Spread Above
Index (1)		  Interest
Rate		   Maturity
Date		  Principal/Shares (9)   Cost   Market
Value		   % of
NAV (4)		 
   FIRE: Finance  Allworth Financial Group, L.P. (3) (5) (15) (19)  First Lien Senior Secured Loan - Delayed Draw         -  -   12/23/2026  $-    (54)   -      
      Allworth Financial Group, L.P. (12) (15) (19) (29)   First Lien Senior Secured Loan   L+ 5.00%  6.00%  12/23/2026  $10,062    9,928    10,062      
      Allworth Financial Group, L.P. (3) (5) (15) (19)  First Lien Senior Secured Loan - Revolver         -  -   12/23/2026  $-    (16)   -      
      TA/Weg Holdings (15) (19) (29)  First Lien Senior Secured Loan - Delayed Draw   L+ 5.75%  6.75%  10/2/2025  $9,517    9,517    9,517      
      TA/Weg Holdings (3) (15) (19)  First Lien Senior Secured Loan - Delayed Draw   L+ 5.75%  6.75%  10/2/2025  $523    512    523      
                      FIRE: Finance Total   $19,887   $20,102    1.8%
                                        
   FIRE: Insurance  Margaux Acquisition Inc. (7) (15) (19)   First Lien Senior Secured Loan - Delayed Draw   L+ 5.50%  6.50%  12/19/2024  $9,222    9,195    9,222      
      Margaux Acquisition, Inc. (3) (15) (19)  First Lien Senior Secured Loan - Revolver   P+ 4.50%  7.75%  12/19/2024  $410    380    410      
      Margaux Acquisition Inc. (7) (12) (15) (19) (29)  First Lien Senior Secured Loan   L+ 5.50%  6.50%  12/19/2024  $28,407    28,052    28,407      
      Margaux UK Finance Limited (3) (5) (6) (15) (19)  First Lien Senior Secured Loan - Revolver         -  -   12/19/2024  £-    (6)   -      
      Margaux UK Finance Limited (6) (15) (19)  First Lien Senior Secured Loan   GBP LIBOR+ 5.50%  6.50%  12/19/2024  £7,570    9,757    10,190      
      MRHT Facility A (6) (19)  First Lien Senior Secured Loan   EURIBOR+ 5.50%  5.50%  7/26/2028  €21,550    24,828    24,686      
      MRHT Acquisition Facility (2) (3) (5) (6) (19)  First Lien Senior Secured Loan   -  -   7/26/2028  €-    (6)   (6)     
      World Insurance (3) (15) (19)  First Lien Senior Secured Loan - Delayed Draw   L+ 5.75%  6.75%  4/1/2026  $6,070    5,994    5,986      
      World Insurance (2) (3) (5) (15) (19)  First Lien Senior Secured Loan - Revolver         -  -   4/1/2026  $-    (17)   (9)     
      World Insurance (15) (19)  First Lien Senior Secured Loan   L+ 5.75%  6.75%  4/1/2026  $3,152    3,093    3,121      
                      FIRE: Insurance Total   $81,270   $82,007    7.5%
                                        
   Healthcare & Pharmaceuticals  CB Titan Holdings, Inc. (14) (19) (25)  Preferred Equity         -  -   -   1,953    1,953    1,755      
      CPS Group Holdings, Inc. (3) (5) (15) (19)  First Lien Senior Secured Loan - Revolver         -  -   3/3/2025  $-    (55)   -      
      CPS Group Holdings, Inc. (7) (12) (15) (19) (29)  First Lien Senior Secured Loan   L+ 5.25%  6.25%  3/3/2025  $54,983    54,632    54,983      
      Datix Bidco Limited (6) (18) (19)  First Lien Senior Secured Loan - Revolver   L+ 4.50%  4.55%  10/28/2024  £10    13    13      
      Datix Bidco Limited (6) (18) (19)  Second Lien Senior Secured Loan   GBP LIBOR+ 7.75%  7.86%  4/27/2026  £121    164    163      
      Datix Bidco Limited (6) (18) (19)  First Lien Senior Secured Loan   BBSW+ 4.50%  4.65%  4/28/2025  AUD        42    32    30      
      Great Expressions Dental Centers PC (3) (13) (15) (19) (26)  First Lien Senior Secured Loan - Revolver   L+ 4.75% (0.5% PIK)  5.75%  9/28/2022  $595    592    489      
      Great Expressions Dental Centers PC (15) (19) (26)  First Lien Senior Secured Loan   L+ 4.75% (0.5% PIK)  5.75%  9/28/2023  $7,822    7,827    7,118      
      Island Medical Management Holdings, LLC  (15) (19) (29)  First Lien Senior Secured Loan   L+ 6.50%  7.50%  9/1/2023  $8,547    8,605    8,120      
      Mendel Bidco, Inc. (18) (19)  First Lien Senior Secured Loan   EURIBOR+ 4.25%  4.25%  6/17/2027  €100    112    116      
      Mendel Bidco, Inc. (18) (19)  First Lien Senior Secured Loan   L+ 4.50%  4.65%  6/17/2027  $19,966    19,583    19,966      
      Mertus 522. GmbH (6) (18) (19)  First Lien Senior Secured Loan - Delayed Draw   EURIBOR+ 6.25%  6.25%  5/28/2026  €131    142    152      
      Mertus 522. GmbH (6) (18) (19)  First Lien Senior Secured Loan   EURIBOR+ 6.25%  6.25%  5/28/2026  €225    247    260      
      SunMed Group Holdings, LLC (2) (3) (16) (19)  First Lien Senior Secured Loan - Revolver   L+ 5.75%  6.50%  6/16/2027  $393    373    381      
      SunMed Group Holdings, LLC (12) (16) (19) (29)  First Lien Senior Secured Loan   L+ 5.75%  6.50%  6/16/2028  $18,556    18,240    18,371      
      TecoStar Holdings, Inc. (12) (15) (19) (29)  Second Lien Senior Secured Loan   L+ 8.50%  9.50%  11/1/2024  $9,472    9,343    9,283      
      U.S. Anesthesia Partners, Inc. (12) (15) (19) (29)  Second Lien Senior Secured Loan   L+ 7.25%  8.25%  6/23/2025  $15,639    15,539    15,639      
                      Healthcare & Pharmaceuticals Total   $137,342   $136,839    12.4%
                                        
   High Tech Industries  AMI US Holdings Inc. (3) (12) (18) (19)  First Lien Senior Secured Loan - Revolver   L+ 5.50%  5.60%  4/1/2024  $698    680    698      
      AMI US Holdings Inc. (12) (15) (19) (29)  First Lien Senior Secured Loan   L+ 5.50%  6.50%  4/1/2025  $12,925    12,759    12,925      
      Appriss Holdings, Inc. (3) (7) (15) (19)  First Lien Senior Secured Loan - Revolver   P+ 5.00%  8.25%  5/30/2025  $1,164    1,130    1,164      
      Appriss Holdings, Inc. (7) (12) (15) (19) (29)  First Lien Senior Secured Loan   L+ 6.00%  7.00%  5/29/2026  $48,141    47,710    48,141      
      Appriss Holdings, Inc. (7) (15) (19)  First Lien Senior Secured Loan   L+ 6.00%  7.00%  5/29/2026  $4,963    4,836    4,963      
      Appriss Holdings, Inc. (15) (19)  First Lien Senior Secured Loan   L+ 7.25%  8.25%  5/6/2027  $11,292    11,075    11,179      
      Appriss Holdings, Inc. (2) (3) (5) (15) (19)  First Lien Senior Secured Loan - Revolver         -  -   5/6/2027  $-    (14)   (8)     
      Appriss Holdings, Inc. (19) (25)  Equity Interest         -  -   -   2,136    1,606    1,608      
      Armstrong Bidco Limited (3) (6) (19) (21)  First Lien Senior Secured Loan   GBP LIBOR+ 4.75%  5.00%  4/30/2025  £56    78    76      
      CB Nike IntermediateCo Ltd (3) (6) (15) (19)  First Lien Senior Secured Loan - Revolver   L+ 4.75%  5.75%  10/31/2025  $44    44    44      
      CB Nike IntermediateCo Ltd (6) (15) (19)  First Lien Senior Secured Loan   L+ 4.75%  5.75%  10/31/2025  $348    343    348      
      Drilling Info Holdings, Inc (12) (18) (29)  First Lien Senior Secured Loan   L+ 4.25%  4.33%  7/30/2025  $22,209    22,155    21,931      
      Element Buyer, Inc. (7) (15) (19)  First Lien Senior Secured Loan - Delayed Draw   L+ 5.50%  6.50%  7/18/2025  $11,107    11,126    11,107      
      Element Buyer, Inc. (3) (7) (15) (19)  First Lien Senior Secured Loan - Revolver   L+ 5.50%  6.50%  7/19/2024  $283    252    283      
      Element Buyer, Inc. (7) (15) (19)  First Lien Senior Secured Loan   L+ 5.50%  6.50%  7/18/2025  $37,103    37,324    37,103      
      MRI Software LLC (7) (15) (19) (28)  First Lien Senior Secured Loan   L+ 5.50%  6.50%  2/10/2026  $25,546    25,468    25,546      
      MRI Software LLC (3) (5) (15) (19) (28)  First Lien Senior Secured Loan - Delayed Draw         -  -   2/10/2026  $-    (4)   -      
      MRI Software LLC (3) (15) (19)  First Lien Senior Secured Loan - Revolver         -  -   2/10/2026  $-    47    -      
      Utimaco, Inc. (6) (18) (19)  First Lien Senior Secured Loan   L+ 4.00%  4.09%  8/9/2027  $148    146    148      
      Ventiv Topco, Inc. (3) (5) (7) (18) (19)  First Lien Senior Secured Loan - Revolver         -  -   9/3/2025  $-    (39)   -      
      Ventiv Topco, Inc. (14) (19) (25)  Equity Interest         -  -   -   28    2,833    2,637      
      Ventiv Holdco, Inc. (7) (12) (15) (19) (29)  First Lien Senior Secured Loan   L+ 5.50%  6.50%  9/3/2025  $23,873    23,622    23,873      
      VPARK BIDCO AB (6) (16) (19)  First Lien Senior Secured Loan   CIBOR+ 4.00%  4.75%  3/10/2025  DKK570     92    89      
      VPARK BIDCO AB (6) (16) (19)  First Lien Senior Secured Loan   NIBOR+ 4.00%  4.75%  3/10/2025  NOK740     93    85      
                      High Tech Industries Total   $203,362   $203,940    18.4%

 

10

 

 

Control Type  Industry  Portfolio Company  Investment
Type		  Spread Above
Index (1)		  Interest
Rate		   Maturity
Date		  Principal/Shares (9)   Cost   Market
Value		   % of
NAV (4)		 
   Hotel, Gaming & Leisure  Aimbridge Acquisition Co., Inc. (12) (18) (19) (29)  Second Lien Senior Secured Loan   L+ 7.50%  7.59%  2/1/2027  $20,193    19,758    18,678      
      Captain D's LLC (3) (5) (15) (19)   First Lien Senior Secured Loan - Revolver         -  -   12/15/2023  $-    (7)   -      
      Captain D's LLC (12) (15) (19) (29)  First Lien Senior Secured Loan   L+ 4.50%  5.50%  12/15/2023  $12,559    12,522    12,559      
      Captain D's LLC (15) (19) (29)  First Lien Senior Secured Loan   L+ 4.50%  5.50%  12/15/2023  $2,326    2,298    2,326      
      Quidditch Acquisition, Inc. (12) (15) (29)  First Lien Senior Secured Loan   L+ 7.00%  8.00%  3/21/2025  $18,684    18,675    18,404      
                      Hotel, Gaming & Leisure Total   $53,246   $51,967    4.7%
                                        
   Hospitality Holdings  PPX Class A Units (14) (19) (25)  Preferred Equity         -  -   -   2,468    2,468    2,468      
      PPX Class B Units (14) (19) (25)  Preferred Equity         -  -   -   2,532    2,532    2,532      
                      Hospitality Holdings Total   $5,000   $5,000    0.5%
                                        
   Media: Advertising, Printing & Publishing  Ansira Holdings, Inc. (15) (19) (26) (33)   First Lien Senior Secured Loan - Delayed Draw   L+ 6.50%  7.50%  12/20/2024  $4,833    4,833    3,770      
      Ansira Holdings, Inc. (3) (19) (23) (31)  First Lien Senior Secured Loan - Revolver   P+ 4.75%  7.41%  12/20/2024  $5,383    5,383    5,383      
      Ansira Holdings, Inc. (15) (19) (26)   First Lien Senior Secured Loan   L+ 6.50% PIK  7.50%  12/20/2024  $39,332    39,296    30,679      
      TGI Sport Bidco Pty Ltd (6) (17) (19)  First Lien Senior Secured Loan   BBSY+ 7.00%  7.50%  4/30/2026  AUD  97    75    70      
      TGI Sport Bidco Pty Ltd (2) (3) (6) (17) (19)  First Lien Senior Secured Loan         -  -   4/30/2027  AUD    -    -    -      
                      Media: Advertising, Printing & Publishing Total   $49,587   $39,902    3.6%
                                        
   Media: Broadcasting & Subscription  Lightning Finco Limited (6) (15) (19)  First Lien Senior Secured Loan   L+ 5.75%  6.50%  7/14/2028  $25,350    24,658    25,096      
      Lightning Finco Limited (6) (15) (19)  First Lien Senior Secured Loan   L+ 5.75%  6.50%  7/14/2028  $4,629    4,503    4,583      
                      Media: Broadcasting & Subscription Total   $29,161   $29,679    2.7%
                                        
   Media: Diversified & Production  9 Story Media Group Inc. (3) (6) (16) (19)  First Lien Senior Secured Loan - Revolver         -  -   4/30/2026  CAD        -    -    -      
      9 Story Media Group Inc. (6) (16) (19)  First Lien Senior Secured Loan   CDOR+ 5.50%  6.25%  4/30/2026  CAD  73    54    57      
      9 Story Media Group Inc. (6) (18) (19)  First Lien Senior Secured Loan   EURIBOR+ 5.25%  5.25%  4/30/2026  €39    45    45      
      Aptus 1724 Gmbh (6) (19) (21)  First Lien Senior Secured Loan   EURIBOR+ 6.00%  6.25%  2/23/2028  €9,162    11,128    10,601      
      Aptus 1724 Gmbh (6) (19) (21)  First Lien Senior Secured Loan   L+ 6.25%  6.50%  2/23/2028  $14,971    14,971    14,971      
      Efficient Collaborative Retail Marketing Company, LLC (3) (15) (19)  First Lien Senior Secured Loan - Revolver   L+ 5.25%  6.25%  6/15/2022  $1,275    1,275    1,275      
      Efficient Collaborative Retail Marketing Company, LLC (7) (15) (19)  First Lien Senior Secured Loan   L+ 6.75%  7.75%  6/15/2022  $15,095    15,124    14,642      
      Efficient Collaborative Retail Marketing Company, LLC (7) (15) (19)   First Lien Senior Secured Loan   L+ 6.75%  7.75%  6/15/2022  $9,788    9,807    9,494      
      International Entertainment Investments Limited (6) (18) (19)  First Lien Senior Secured Loan   GBP LIBOR+ 4.75%  4.85%  5/31/2023  £87    106    117      
                      Media: Diversified & Production Total   $52,510   $51,202    4.7%
                                        
   Retail  Batteries Plus Holding Corporation (3) (19) (31)  First Lien Senior Secured Loan - Revolver   P+ 5.75%  9.00%  7/6/2022  $1,275    1,275    1,275      
      Batteries Plus Holding Corporation (7) (12) (15) (19) (29)   First Lien Senior Secured Loan   L+ 6.75%  7.75%  7/6/2022  $28,672    28,672    28,672      
      New Look Vision Group (3) (6) (15) (19)  First Lien Senior Secured Loan - Delayed Draw   CDOR+ 5.50%  6.50%  5/26/2028  CAD     2,184    1,712    1,722      
      New Look Vision Group (3) (6) (15) (19)  First Lien Senior Secured Loan - Revolver   CDOR+ 5.50%  6.50%  5/26/2026  CAD        246    174    194      
      Thrasio, LLC (3) (12) (15) (19)  First Lien Senior Secured Loan - Delayed Draw   L+ 7.00%  8.00%  12/18/2026  $12,490    12,221    12,490      
      Thrasio, LLC (12) (15) (19) (29)  First Lien Senior Secured Loan   L+ 7.00%  8.00%  12/18/2026  $10,883    10,639    10,883      
      Walker Edison Initial Term Loan (12) (15) (19) (29)  First Lien Senior Secured Loan   L+ 5.75%  6.75%  8/5/2027  $20,498    20,295    20,294      
                      Retail Total   $74,988   $75,530    6.9%

 

11

 

 

Control Type  Industry  Portfolio Company  Investment
Type		  Spread Above
Index (1)		  Interest
Rate		   Maturity
Date		  Principal/Shares (9)   Cost   Market
Value		   % of
NAV (4)		 
   Services: Business  AMCP Clean Acquisition Company, LLC (12) (18) (29)  First Lien Senior Secured Loan - Delayed Draw   L+ 4.25%  4.35%  7/10/2025  $3,825    3,820    3,232      
      AMCP Clean Acquisition Company, LLC (12) (18) (29)  First Lien Senior Secured Loan   L+ 4.25%  4.35%  7/10/2025  $15,808    15,786    13,358      
      Chamber Bidco Limited (6) (17) (19)  First Lien Senior Secured Loan   L+ 6.00%  6.50%  6/7/2028  $237    234    237      
      Elevator Holdco Inc. (14) (19) (25)  Equity Interest         -  -   -   2    2,448    2,012      
      iBanFirst Facility Series A Preferred Units (6) (14) (19) (25)  Equity Interest         -  -   -   5,080    5,996    5,878      
      iBanFirst Facility Series A Preferred Units (6) (14) (19) (25)  Equity Interest         -  -   -   4,765    6,563    6,414      
      iBanFirst Facility B (6) (18) (19)  First Lien Senior Secured Loan   EURIBOR+ 8.50%  8.50%  7/13/2028  €10,160    11,698    11,462      
      iBanFirst Revolving Facility (2) (3) (5) (6) (19)  First Lien Senior Secured Loan - Revolver   -  -   7/13/2028  €-    (60)   (59)     
      Learning Pool Capex and Acquisition Facility 1 (2) (3) (5) (6) (19)  First Lien Senior Secured Loan        -  -   7/7/2028  £-    (99)   (97)     
      Learning Pool Capex and Acquisition Facility 1 (2) (3) (5) (6) (19)  First Lien Senior Secured Loan        -  -   7/7/2028  £-    (74)   (72)     
      Learning Pool Facility B (6) (19)  First Lien Senior Secured Loan   L+ 6.00%  6.08%  7/7/2028  £21,535    29,428    28,698      
      Learning Pool Revolving Facility (2) (3) (5) (6) (19)  First Lien Senior Secured Loan - Revolver         -  -   7/7/2027  £-    (25)   (24)     
      masLabor Equity (19) (25)  Equity Interest         -  -   -   345    345    345      
      masLabor Revolver (2) (3) (5) (19)  First Lien Senior Secured Loan - Revolver         -  -   7/1/2027  $-    (22)   (23)     
      masLabor Term Loan Note (15) (19)  First Lien Senior Secured Loan   L+ 7.50%  8.50%  7/1/2027  $8,621    8,358    8,427      
      Opus2 (6) (18) (19)  First Lien Senior Secured Loan   GBP LIBOR+ 5.50%  5.83%  5/5/2028  £123    167    165      
      Opus2 (3) (5) (6) (18) (19)  First Lien Senior Secured Loan - Delayed Draw         -  -   5/5/2028  £-    (180)   -      
      Opus2 (6) (25) (19)  Equity Interest         -  -   -   1,460    1,769    2,207      
      Parcel2Go Acquisition Facility (2) (3) (5) (6) (19)  First Lien Senior Secured Loan         -  -   7/15/2028  £-    (229)   (223)     
      Parcel2Go Facility B (6) (19)  First Lien Senior Secured Loan   GBP LIBOR+ 5.75%  5.80%  7/15/2028  £12,520    16,886    16,432      
      Parcel2Go Shares (6) (14) (19) (25)   Equity Interest         -  -   -   2,881    3,983    3,878      
      Refine Intermediate, Inc. (3) (5) (18) (19)  First Lien Senior Secured Loan - Revolver         -  -   9/3/2026  $-    (101)   -      
      Refine Intermediate, Inc. (12) (15) (19) (29)  First Lien Senior Secured Loan   L+ 4.50%  5.50%  3/3/2027  $21,894    21,448    21,894      
      SumUp Holdings Luxembourg S.à.r.l. (6) (19) (32)  First Lien Senior Secured Loan   EURIBOR+ 8.50%  10.00%  2/17/2026  €6,650    7,935    7,695      
      SumUp Holdings Luxembourg S.à.r.l. (3) (6) (19) (32)  First Lien Senior Secured Loan   L+ 8.50%  10.00%  2/17/2026  €3,519    4,059    4,072      
      TEI Holdings Inc. (3) (7) (15) (19)  First Lien Senior Secured Loan - Revolver   L+ 7.25%  8.25%  12/23/2025  $910    865    831      
      TEI Holdings Inc. (7) (12) (15) (19) (26) (29)  First Lien Senior Secured Loan   L+ 6.00% (1.25% PIK)  8.25%  12/23/2026  $48,834    48,418    47,979      
                      Services: Business Total   $189,416   $184,718    16.8%
                                        
   Services: Consumer  MZR Aggregator (14) (19) (25)  Equity Interest         -  -   -   1    798    827      
      MZR Buyer, LLC (3) (5) (15) (19)  First Lien Senior Secured Loan - Revolver         -  -   12/21/2026  $-    (91)   -      
      MZR Buyer, LLC (7) (12) (15) (19) (29)  First Lien Senior Secured Loan   L+ 6.75%  7.75%  12/21/2026  $40,330    39,620    40,330      
      Sontiq, Inc. (fka EZShield, Inc.) (3) (5) (15) (19)  First Lien Senior Secured Loan - Revolver         -  -   3/1/2026  $-    (25)   -      
      Sontiq, Inc. (fka EZShield, Inc.) (12) (15) (19) (29)  First Lien Senior Secured Loan   L+ 7.50%  8.50%  3/1/2026  $23,881    23,442    24,358      
      Surrey Bidco Limited (6) (17) (19)  First Lien Senior Secured Loan   GBP LIBOR+ 7.00%  7.50%  5/11/2026  £50    62    64      
      Zeppelin BidCo Pty Limited (6) (18) (19)  First Lien Senior Secured Loan   BBSY+ 6.00%  6.12%  6/28/2024  AUD  206    142    149      
                      Services: Consumer Total   $63,948   $65,728    6.0%
                                        
   Telecommunications  ACM dcBLOX LLC (14) (19) (25)  Preferred Equity         -  -   -   3,822    3,851    4,027      
      Conterra Ultra Broadband Holdings, Inc. (15) (29)  First Lien Senior Secured Loan   L+ 4.75%  5.75%  4/30/2026  $6,337    6,315    6,345      
      DC Blox Inc. (15) (19) (26)  First Lien Senior Secured Loan   L+ 2.00% (6.00% PIK)  9.00%  3/22/2026  $14,916    14,646    14,916      
      DC Blox Inc. (3) (15) (19)  First Lien Senior Secured Loan         -  -   3/22/2026  $-    -    -      
      DC Blox Inc. (14) (19) (25)  Warrants         -  -   -   177    2    -      
      Horizon Telcom, Inc.  (15) (19) (29)  First Lien Senior Secured Loan - Revolver   L+ 5.00%  6.00%  6/15/2023  $116    114    116      
      Horizon Telcom, Inc. (12) (15) (19) (29)  First Lien Senior Secured Loan - Delayed Draw   L+ 5.00%  6.00%  6/15/2023  $902    900    902      
      Horizon Telcom, Inc. (12) (15) (19) (29)  First Lien Senior Secured Loan   L+ 5.00%  6.00%  6/15/2023  $13,278    13,206    13,278      
      Masergy Holdings, Inc. (15) (29)  Second Lien Senior Secured Loan   L+ 7.50%  8.50%  12/16/2024  $857    861    855      
                      Telecommunications Total   $39,895   $40,439    3.7%
                                        
   Transportation: Cargo  A&R Logistics, Inc. (3) (15) (19)  First Lien Senior Secured Loan - Revolver   L+ 6.00%  7.00%  5/5/2025  $2,815    2,743    2,815      
      A&R Logistics, Inc. (7) (12) (15) (19) (29)  First Lien Senior Secured Loan   L+ 6.00%  7.00%  5/5/2025  $43,202    42,610    43,202      
      A&R Logistics, Inc. (7) (15) (19)   First Lien Senior Secured Loan   L+ 6.25%  7.25%  5/5/2025  $2,430    2,395    2,430      
      A&R Logistics, Inc. (7) (15) (19)   First Lien Senior Secured Loan   L+ 6.25%  7.25%  5/5/2025  $5,989    5,927    5,989      
      A&R Logistics, Inc. (7) (15) (19)   First Lien Senior Secured Loan   L+ 6.75%  7.75%  5/5/2025  $2,723    2,701    2,723      
      ARL Holdings, LLC (14) (19) (25)  Equity Interest         -  -   -   -    445    561      
      ARL Holdings, LLC (14) (19) (25)  Equity Interest         -  -   -   9    9    87      
      Grammer Investment Holdings LLC (14) (19) (25)  Equity Interest         -  -   -   1,011    1,011    1,022      
      Grammer Investment Holdings LLC (19) (25) (26)  Preferred Equity   10% PIK  10.00%  -   8    790    810      
      Grammer Investment Holdings LLC (14) (19) (25)  Warrants         -  -  -   122    -    122      
      Grammer Purchaser, Inc. (3) (12) (15) (19) (29)  First Lien Senior Secured Loan - Revolver         -  -  9/30/2024  $-    -    -      
      Grammer Purchaser, Inc. (12) (15) (19) (29)  First Lien Senior Secured Loan - Revolver   L+ 4.50%  5.50%  9/30/2024  $7,319    7,202    7,319      
      Omni Logistics, LLC (15) (19)  Second Lien Senior Secured Loan   L+ 9.00%  10.00%  12/30/2027  $13,770    13,501    14,184      
      REP Coinvest III- A Omni, L.P. (14) (19) (25)  Equity Interest         -  -  -   1,377    1,377    2,103      
                      Transportation: Cargo Total   $80,711   $83,367    7.6%

 

12

 

 

Control Type  Industry  Portfolio Company  Investment
Type		  Spread Above
Index (1)		  Interest
Rate		   Maturity
Date		  Principal/Shares (9)   Cost   Market
Value		   % of
NAV (4)		 
   Transportation: Consumer  Toro Private Investments II, L.P. (6) (14) (19) (25)  Equity Interest         -  -  -   3,090    3,090    2,015      
      Toro Private Investments II, L.P. (6) (12) (18) (19) (29)  First Lien Senior Secured Loan   L+ 6.75%  6.90%  5/29/2026  $6,693    4,735    5,781      
      Toro Private Investments II, L.P. (6) (15) (26)  First Lien Senior Secured Loan   L+ 1.50% (6.50% PIK)  9.00%  2/28/2025  $360    357    374      
                      Transportation: Consumer Total   $8,182   $8,170    0.7%
                                        
   Wholesale  Abracon Group Holding, LLC (14) (19) (25)  Equity Interest         -  -   -   2    1,833    2,334      
      Abracon Group Holding, LLC (3) (5) (15) (19)   First Lien Senior Secured Loan - Revolver         -  -   7/18/2024  $-    (20)   -      
      Abracon Group Holding, LLC (7) (12) (15) (19) (29)  First Lien Senior Secured Loan   L+ 5.25%  6.25%  7/18/2024  $35,454    35,353    35,454      
      Aramsco, Inc. (3) (7) (18) (19)   First Lien Senior Secured Loan - Revolver   L+ 5.25%  5.37%  8/28/2024  $564    533    564      
      Aramsco, Inc. (7) (12) (18) (19) (29)  First Lien Senior Secured Loan   L+ 5.25%  5.35%  8/28/2024  $23,858    23,592    23,858      
      Armor Group, LP (14) (19) (25)  Equity Interest         -  -   -   10    1,012    2,282      
      PetroChoice Holdings, Inc. (12) (15) (29)  First Lien Senior Secured Loan   L+ 5.00%  6.00%  8/19/2022  $9,766    9,740    9,485      
      PetroChoice Holdings, Inc. (12) (15) (29)  First Lien Senior Secured Loan   L+ 5.00%  6.00%  8/19/2022  $6,462    6,417    6,276      
                      Wholesale Total   $78,460   $80,253    7.3%
                      Non-Controlled/Non-Affiliate Investments Total   $2,023,858   $2,005,635    182.4%
                                        
Non-Controlled/Affiliate Investments                                       
   Beverage, Food & Tobacco  ADT Pizza, LLC (10) (14) (19) (25)  Equity Interest         -  -   -   6,720    6,720    19,527      
                      Beverage, Food & Tobacco Total   $6,720   $19,527    1.8%
                                        
   Energy: Oil & Gas  Blackbrush Oil & Gas, L.P. (10) (14) (19) (25)  Equity Interest         -  -   -   1,123    -    -      
      Blackbrush Oil & Gas, L.P. (10) (14) (19) (25)  Preferred Equity         -  -   -   36,084    10,104    17,393      
      Blackbrush Oil & Gas, L.P. (10) (12) (15) (19) (26) (29)   First Lien Senior Secured Loan   L+ 5.00% (2% PIK)  8.00%  9/3/2025  $12,274    12,274    12,274      
                      Energy: Oil & Gas Total   $22,378   $29,667    2.7%
                                        
   Transportation: Consumer  Direct Travel, Inc. (10) (18) (19) (26)  First Lien Senior Secured Loan   L+ 1.00% (6.30% PIK)  7.50%  10/2/2023  $4,690    4,690    4,690      
      Direct Travel, Inc. (10) (14) (19) (25)  Equity Interest         -  -   -   68    -    -      
      Direct Travel, Inc. (7) (10) (19) (26)  First Lien Senior Secured Loan - Delayed Draw   L+ 1.00% (8.37% PIK)  9.50%  10/2/2023  $3,299    3,299    2,656      
      Direct Travel, Inc. (7) (10) (19) (26) (28)  First Lien Senior Secured Loan - Delayed Draw   L+ 1.00% (8.37% PIK)  9.50%  10/2/2023  $1,674    1,674    1,347      
      Direct Travel, Inc. (7) (10) (19) (26)  First Lien Senior Secured Loan   L+ 1.00% (8.37% PIK)  9.50%  10/2/2023  $56,350    56,350    45,362      
      Direct Travel, Inc. (3) (10) (15) (19) (28)  First Lien Senior Secured Loan - Delayed Draw   L+ 6.00%  7.00%  10/2/2023  $4,125    4,125    4,125      
      Direct Travel, Inc. (10) (18) (19) (28)  First Lien Senior Secured Loan   L+ 6.00%  7.00%  10/2/2023  $202    202    202      
                      Transportation: Consumer Total   $70,340   $58,382    5.3%
                      Non-Controlled/Affiliate Investments Total   $99,438   $107,576    9.8%
                                        
Controlled Affiliate Investments                                       
   Aerospace & Defense  BCC Jetstream Holdings Aviation (Off I), LLC (6) (10) (11) (19) (20) (25)  Equity Interest         -  -   -   11,863    11,863    10,786      
      BCC Jetstream Holdings Aviation (On II), LLC (10) (11) (19) (20) (25)   Equity Interest         -  -   -   1,116    1,116    -      
      BCC Jetstream Holdings Aviation (On II), LLC (10) (11) (19) (20) (26)  First Lien Senior Secured Loan  10.00%  10.00%  6/2/2022  $7,252    7,251    6,767      
      Gale Aviation (Offshore) Co (6) (10) (11) (19) (25)  Equity Interest         -  -   -   86,618    86,618    72,169      
                      Aerospace & Defense Total   $106,848   $89,722    8.2%
                                        
   Investment Vehicles  International Senior Loan Program, LLC (6) (10) (11) (19) (25)  Equity Interest Investment Vehicles         -  -   -   35,302    33,596    37,427      
      International Senior Loan Program, LLC (6) (10) (11) (15) (19)  Subordinated Note Investment Vehicles   L+ 8.00%  9.00%  2/22/2028   105,873    105,873    105,873      
                      Investment Vehicles Total   $139,469   $143,300    13.0%
                                        
   Transportation: Cargo  Lightning Holdings B, LLC (6) (10) (11) (14) (19) (25)  Equity Interest         -  -   -   10,070    10,449    10,438      
                      Transportation: Cargo Total   $10,449   $10,438    0.9%
                      Controlled Affiliate Investments Total   $256,766   $243,460    22.1%
                      Investments Total   $2,380,062   $2,356,671    214.3%
                                        
Cash Equivalents                                       
   Cash Equivalents  Goldman Sachs Financial Square Government Fund Institutional Share Class (30)  Cash Equivalents         -  0.03%  -  $87,318   $87,318   $87,318      
                      Cash Equivalents Total   $87,318   $87,318    7.9%
                      Investments and Cash Equivalents Total   $2,467,380   $2,443,989    222.2%

 

13

 

 

Forward Foreign Currency Exchange Contracts

 

Currency Purchased  Currency Sold  Counterparty  Settlement Date  Unrealized
Appreciation
(Depreciation) (8)		 
US DOLLARS 7,623  AUSTRALIAN DOLLARS 10,240  Bank of New York Mellon  3/2/2022  $184 
US DOLLARS 29,087  POUND STERLING 20,990  Bank of New York Mellon  9/2/2022   821 
US DOLLARS 75,862  EURO 63,360  Bank of New York Mellon  9/2/2022   1,908 
US DOLLARS 35,821  POUND STERLING 41,600  Citibank  2/18/2022   1,158 
            $4,071 

 

 

(1) The investments bear interest at a rate that may be determined by reference to the London Interbank Offered Rate (“LIBOR” or “L”), the Euro Interbank Offered Rate (“EURIBOR” or “E”), British Pound Sterling LIBOR Rate (“GBP LIBOR”), the Norwegian Interbank Offered Rate (“NIBOR” or “N”), the Copenhagen Interbank Offered Rate (“CIBOR” or “C”), Canadian Dollar LIBOR Rate (“CDOR LIBOR”), the Bank Bill Swap Rate ("BBSW"),  the Bank Bill Swap Bid Rate ("BBSY"), or the Prime Rate (“Prime” or "P") and which reset daily, monthly, quarterly or semiannually. Investments or a portion thereof may bear Payment-in-Kind ("PIK"). For each, the Company has provided the PIK or the spread over LIBOR, EURIBOR, GBP LIBOR, NIBOR, CIBOR, CDOR, BBSW, BBSY, or Prime and the current weighted average interest rate in effect at September 30, 2021. Certain investments are subject to a LIBOR, EURIBOR, GBP LIBOR, NIBOR, CIBOR, CDOR, BBSW, or Prime interest rate floor.
(2) The negative fair value is the result of the capitalized discount on the loan or the unfunded commitment being valued below par.
(3) Position or portion thereof is an unfunded loan commitment, and no interest is being earned on the unfunded portion. The investment may be subject to an unused/letter of credit facility fee.
(4) Percentages are based on the Company’s net assets of $1,099,679 as of September 30, 2021.
(5) The negative amortized cost is the result of the capitalized discount being greater than the principal amount outstanding on the loan.
(6) The investment is not a qualifying asset under Section 55(a) of the Investment Company Act of 1940. The Company may not acquire any non-qualifying asset unless, at the time of acquisition, qualifying assets represent at least 70% of the Company’s total assets. As of September 30, 2021, non-qualifying assets totaled 18.1% of the Company’s total assets.
(7) Assets or a portion thereof are pledged as collateral for the BCSF Complete Financing Solution LLC. See Note 6  "Debt".
(8) Unrealized appreciation/(depreciation) on forward currency exchange contracts.
(9) The principal amount (par amount) for all debt securities is denominated in U.S. dollars, unless otherwise noted. £ represents Pound Sterling, € represents Euro, NOK represents Norwegian krone, AUD represents Australian, CAD represents Canadian Dollar and DKK represents Kroner.
(10) As defined in the 1940 Act, the Company is deemed to be an “Affiliated Investment” of the Company as the Company owns 5% or more of the portfolio company’s securities.
(11) As defined in the 1940 Act, the Company is deemed to “Control” this portfolio company as the Company either owns more than 25% of the portfolio company’s outstanding voting securities or has the power to exercise control over management or policies of such portfolio company.
(12) Assets or a portion thereof are pledged as collateral for the 2018-1 Issuer. See Note 6  "Debt".
(13) $317 of the total par amount for this security is at P+ 4.25%.
(14) Non-Income Producing.
(15) Loan includes interest rate floor of 1.00%.
(16) Loan includes interest rate floor of 0.75%.
(17) Loan includes interest rate floor of 0.50%.
(18) Loan includes interest rate floor of 0.00%.
(19) Security valued using unobservable inputs (Level 3).
(20) The Company holds controlling, affiliate interest in an aircraft-owning special purpose vehicle through this investment.
(21) Loan includes interest rate floor of 0.25%.
(22) The Company generally earns a higher interest rate on the “last out” tranche of debt, to the extent the debt has been allocated to “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.
(23) $992 of the total par amount for this security is at L+ 5.75%.
(24) $533 of the total par amount for this security is at P+ 4.50%.
(25) Security exempt from registration under the Securities Act of 1933 (the “Securities Act”), and may be deemed to be “restricted securities” under the Securities Act. As of September 30, 2021, the aggregate fair value of these securities is $230,574 or 20.97% of the Company’s net assets. The acquisition dates of the restricted securities are as follows:

 

14

 

 

Investment  Acquisition Date
Abracon Group Holding, LLC  7/18/2018
ACM dcBLOX LLC  3/22/2021
ADT Pizza, LLC  10/29/2018
Appriss Holdings, Inc.  5/3/2021
ARL Holdings, LLC  5/3/2019
ARL Holdings, LLC  5/3/2019
Armor Group, LP  8/28/2018
BCC Jetstream Holdings Aviation (Off I), LLC  6/1/2017
BCC Jetstream Holdings Aviation (On II), LLC  6/1/2017
Blackbrush Oil & Gas, L.P.  9/3/2020
Blackbrush Oil & Gas, L.P.  9/3/2020
CB Titan Holdings, Inc.  5/1/2017
DC Blox Inc.  3/23/2021
Direct Travel, Inc.  10/2/2020
East BCC Coinvest II, LLC  7/23/2019
Elevator Holdco Inc.  12/23/2019
Elk Parent Holdings, LP  11/1/2019
Elk Parent Holdings, LP  11/1/2019
FCG Acquisitions, Inc.  1/24/2019
Fineline Technologies, Inc.  2/22/2021
Gale Aviation (Offshore) Co  1/2/2019
Grammer Investment Holdings LLC  10/1/2018
Grammer Investment Holdings LLC  10/2/2018
Grammer Investment Holdings LLC  10/1/2018
iBanFirst Facility Series A Preferred Units  7/13/2021
iBanFirst Facility Series A Preferred Units  7/8/2021
International Senior Loan Program, LLC  2/22/2021
Kellstrom Aerospace Group, Inc  7/1/2019
Lightning Holdings B, LLC  1/2/2020
ServiceMaster LP Interest Class B Preferred Units  8/16/2021
masLabor Equity  7/1/2021
MZR Aggregator  12/22/2020
NPC International, Inc.  4/1/2021
Opus2  6/16/2021
Parcel2Go Shares  7/15/2021
PP Ultimate Holdings B, LLC  12/20/2018
PPX Class A Units  7/29/2021
PPX Class B Units  7/29/2021
Precision Ultimate Holdings, LLC  11/6/2019
REP Coinvest III- A Omni, L.P.  2/5/2021
TLC Holdco LP  10/11/2019
Toro Private Investments II, L.P.  4/2/2019
Ventiv Topco, Inc.  9/3/2019
WCI-HSG HOLDCO, LLC  2/22/2019
WSP LP Interest  8/31/2021

 

(26)  Denotes that all or a portion of the debt investment includes PIK interest during the period.

(27) Asset is in an escrow liquidating trust.

(28) Assets or a portion thereof are pledged as collateral for the BCSF Complete Financing Solution Holdco LLC. See Note 6  "Debt".

(29) Assets or a portion thereof are pledged as collateral for the 2019-1 Issuer. See Note 6  "Debt".

(30) Cash equivalents include $57,802 of restricted cash.

(31) Loan includes interest rate floor of 2.00%.

(32) Loan includes interest rate floor of 1.50%.

(33) $2 of the total par amount for this security is at P+ 5.50%

 

See Notes to Consolidated Financial Statements

 

15

 

 

Bain Capital Specialty Finance, Inc.

 

Consolidated Schedule of Investments

As of December 31, 2020

(In thousands)

 

             Spread Above  Interest  Maturity           Market    % of 
Control Type   Industry  Portfolio Company  Investment Type  Index(1)  Rate  Date  Principal/Shares(9)   Cost    Value    NAV(4) 
Non-Controlled/Non-Affiliate Investments                                    
    Aerospace & Defense  Forming & Machining Industries Inc.(18)(19)(21)  Second Lien Senior Secured Loan  L+ 8.25%  8.50%  10/9/2026  $6,540    6,486     5,036       
       Forming & Machining Industries Inc.(12)(18)(29)  First Lien Senior Secured Loan  L+ 4.25%  4.50%  10/9/2025  $16,608    16,498     13,301       
       GSP Holdings, LLC(7)(12)(15)(19)(21)(26)(29)  First Lien Senior Secured Loan  L+ 5.75% (0.25% PIK)  7.00%  11/6/2025  $35,917    35,686     31,607       
       GSP Holdings, LLC(3)(7)(15)(19)(26)  First Lien Senior Secured Loan— Revolver  L+ 5.50% (0.25% PIK)  6.75%  11/6/2025  $1,134    1,097     590       
       Kellstrom Aerospace Group, Inc(14)(19)(25)  Equity Interest  —  —   —   1    1,963     753       
       Kellstrom Commercial Aerospace, Inc.(3)(18)(19)(21)(24)  First Lien Senior Secured Loan— Revolver  L+ 5.50%  6.88%  7/1/2025  $5,331    5,234     4,755       
       Kellstrom Commercial Aerospace, Inc.(12)(15)(19)(21)(29)  First Lien Senior Secured Loan  L+ 5.50%  6.50%  7/1/2025  $33,608    33,067     30,583       
       Novetta, LLC(12)(15)(29)  First Lien Senior Secured Loan  L+ 5.00%  6.00%  10/17/2022  $6,513    6,457     6,499       
       Precision Ultimate Holdings, LLC(14)(19)(25)  Equity Interest  —  —   —   1,417    1,417     952       
       Salient CRGT, Inc.(12)(15)(29)  First Lien Senior Secured Loan  L+ 6.50%  7.50%  2/28/2022  $12,087    12,109     11,634       
       WCI-HSG HOLDCO, LLC(14)(19)(25)  Preferred Equity  —  —   —   675    675     1,550       
       WCI-HSG Purchaser, Inc.(3)(12)(15)(19)(29)  First Lien Senior Secured Loan— Revolver  L+ 4.50%  5.50%  2/24/2025  $1,075    1,047     1,048       
       WCI-HSG Purchaser, Inc.(12)(15)(19)(29)  First Lien Senior Secured Loan  L+ 4.50%  5.50%  2/24/2025  $17,600    17,416     17,424       
       Whitcraft LLC(2)(3)(5)(15)(19)   First Lien Senior Secured Loan— Revolver  —  —   4/3/2023  $—    (13 )  (91 )    
       Whitcraft LLC(12)(15)(19)(21)(29)  First Lien Senior Secured Loan  L+ 6.00%  7.00%  4/3/2023  $40,182    39,870     38,172       
       WP CPP Holdings, LLC. (12)(15)(21)(29)  Second Lien Senior Secured Loan  L+ 7.75%  8.75%  4/30/2026  $11,724    11,632     9,936       
                      Aerospace & Defense Total   $190,641     $173,749     16.3%
    Automotive  CST Buyer Company(3)(5)(15)(19)(21)  First Lien Senior Secured Loan—Revolver  —  —   10/3/2025  $—    (21 )  —       
       CST Buyer Company(12)(15)(19)(21)(29)  First Lien Senior Secured Loan  L+ 6.00%  7.00%  10/3/2025  $34,166    33,764     34,166       
       JHCC Holdings, LLC(2)(3)(5)(15)(19)(28)  First Lien Senior Secured Loan—Delayed Draw  —  —   9/9/2025  $—    (33 )  (188 )    
       JHCC Holdings, LLC(3)(7)(15)(19)(22)(31)  First Lien Senior Secured Loan—Revolver  P+ 4.50%  7.10%  9/9/2025  $1,561    1,519     1,470       
       JHCC Holdings, LLC(7)(15)(19)   First Lien Senior Secured Loan—Delayed Draw  L+ 5.50%  6.50%  9/9/2025  $2,222    2,214     2,155       
       JHCC Holdings, LLC(7)(12)(15)(19)(21)(29)  First Lien Senior Secured Loan  L+ 5.50%  6.50%  9/9/2025  $29,379    29,027     28,497       
                       Automotive Total   $66,470     $66,100     6.2%
    Banking  Green Street Parent, LLC(2)(3)(5)(18)(19)(29)  First Lien Senior Secured Loan—Revolver  —  —   8/27/2025  $—    (38 )  (103 )    
       Green Street Parent, LLC(12)(18)(19)(29)  First Lien Senior Secured Loan  L+ 5.25%  5.52%  8/27/2026  $14,335    14,096     13,725       
                       Banking Total   $14,058     $13,622     1.3%
    Beverage, Food & Tobacco  NPC International, Inc.(15)(27)(31)  First Lien Senior Secured Loan  P+ 4.50%  7.75%  4/19/2024  $4,937    4,957     4,694       
       NPC International, Inc.(32)  First Lien Senior Secured Loan  L+ 15.50%  17.00%  1/21/2021  $412    410     412       
                       Beverage, Food & Tobacco Total   $5,367     $5,106    0.5%

 

  

16

 

 

             Spread Above  Interest   Maturity           Market   % of 
Control Type   Industry  Portfolio Company  Investment Type  Index(1)  Rate   Date  Principal/Shares(9)   Cost    Value   NAV(4) 
    Capital Equipment  Dorner Manufacturing Corp.(3)(5)(15)(19)(29)  First Lien Senior Secured Loan—Revolver  —  —   3/15/2022  $—    (7)    —      
       Dorner Manufacturing Corp.(12)(15)(19)  First Lien Senior Secured Loan  L+ 5.75%  6.75%  3/15/2023  $6,799    6,721     6,799      
       East BCC Coinvest II, LLC(14)(19)(25)  Equity Interest  —  —   —   1,419    1,419     754      
       Electronics For Imaging, Inc.(12)(18)(19)(29)  Second Lien Senior Secured Loan  L+ 9.00%  9.15%  7/23/2027  $13,070    12,327     10,717      
       Engineered Controls International, LLC (12)(19)(21)(29)(32)  First Lien Senior Secured Loan  L+ 7.00%  8.50%  11/5/2024  $32,759    32,174     32,759      
       EXC Holdings III Corp.(12)(15)(21)(29)  Second Lien Senior Secured Loan  L+ 7.50%  8.50%  12/1/2025  $8,240    8,251     8,274      
       FCG Acquisitions, Inc.(14)(19)(25)  Preferred Equity  —  —   —   4    4,251     10,398      
       FFI Holdings I Corp(3)(19)(30)(31)  First Lien Senior Secured Loan— Revolver  P+ 4.75%  8.00%  1/24/2025  $1,494    1,437     1,494      
       FFI Holdings I Corp(7)(12)(13)(15)(19)(21)(29)  First Lien Senior Secured Loan  L+ 5.75%  6.75%  1/24/2025  $68,317    67,850     68,317      
       FFI Holdings I Corp(3)(5)(15)(19)(28)   First Lien Senior Secured Loan— Delayed Draw  —  —   1/24/2025  $—    (63)    —      
       FFI Holdings I Corp(7)(15)(19)  First Lien Senior Secured Loan  L+ 6.25%  7.25%  1/24/2025  $789    781     789      
       Jonathan Acquisition Company(15)(19)(21)  Second Lien Senior Secured Loan  L+ 9.00%  10.00%  12/22/2027  $8,000    7,801     7,800      
       Tidel Engineering, L.P.(3)(15)(19)  First Lien Senior Secured Loan—Revolver  —  —   3/1/2023  $—    —     —      
       Tidel Engineering, L.P.(7)(15)(19)(29)  First Lien Senior Secured Loan  L+ 6.25%  7.25%  3/1/2024  $37,835    37,835     37,835      
       Velvet Acquisition B.V.(6)(18)(19)(21)  Second Lien Senior Secured Loan  EURIBOR+ 8.00%  8.00%  4/17/2026  €6,013    7,346     7,351      
                       Capital Equipment Total   $188,123    $193,287    18.1%
    Chemicals, Plastics & Rubber  AP Plastics Group, LLC(3)(15)(19)  First Lien Senior Secured Loan—Revolver  L+ 4.00%  5.00%  8/2/2021  $2,833    2,833     2,833      
       AP Plastics Group, LLC(7)(15)(19)(21)  First Lien Senior Secured Loan  L+ 5.25%  6.25%  8/1/2022  $19,856    19,671     19,856      
       Niacet b.v.(15)(19)(21)  First Lien Senior Secured Loan  EURIBOR+ 4.50%  5.50%  2/1/2024  €3,437    3,690     4,128      
       Plaskolite, Inc.(15)(29)  First Lien Senior Secured Loan  L+ 4.25%  5.25%  12/15/2025  $2,253    2,218     2,250      
       V Global Holdings LLC(7)(12)(15)(19)(29)  First Lien Senior Secured Loan  L+ 6.00%  7.00%  12/22/2027  $48,813    47,593     47,593      
       V Global Holdings LLC(2)(3)(5)(15)(19)  First Lien Senior Secured Loan—Revolver  —  —   12/22/2025  $—    (197)    (197)     
                       Chemicals, Plastics & Rubber Total   $75,808    $76,463    7.2%
    Construction & Building  Chase Industries, Inc.(15)(19)(26)   First Lien Senior Secured Loan—Delayed Draw  L+ 5.50% (1.5% PIK)  8.00%  5/12/2025  $1,166    1,162     947      
       Chase Industries, Inc.(15)(19)(26)  First Lien Senior Secured Loan  L+ 5.50% (1.5% PIK)  8.00%  5/12/2025  $12,333    12,290     10,021      
       Elk Parent Holdings, LP(14)(19)(25)  Equity Interest  —  —   —   1    12     145      
       Elk Parent Holdings, LP(14)(19)(25)  Preferred Equity  —  —   —   120    1,202     1,319      
       PP Ultimate Holdings B, LLC(14)(19)(25)  Equity Interest  —  —   —   1    1,352     1,675      
       Profile Products LLC(3)(7)(19)(31)  First Lien Senior Secured Loan—Revolver  P+ 5.00%  8.25%  12/20/2024  $831    779     783      
       Profile Products LLC(7)(12)(15)(19)(21)(29)  First Lien Senior Secured Loan  L+ 6.00%  7.00%  12/20/2024  $36,168    35,635     35,716      
       Regan Development Holdings Limited(6)(17)(19)  First Lien Senior Secured Loan  EURIBOR+ 6.50%  7.00%  4/18/2022  €2,087    2,274     2,488      
       Regan Development Holdings Limited(6)(17)(19)  First Lien Senior Secured Loan  EURIBOR+ 6.50%  7.00%  4/18/2022  €677    768     807      
       Regan Development Holdings Limited (6)(17)(19)  First Lien Senior Secured Loan  EURIBOR+ 6.50%  7.00%  4/18/2022  €6,335    6,869     7,513      

 

 

17

 

 

             Spread Above  Interest   Maturity          Market   % of 
Control Type   Industry  Portfolio Company  Investment Type  Index(1)  Rate   Date  Principal/Shares(9)   Cost   Value   NAV(4) 
       YLG Holdings, Inc.(7)(15)(19)  First Lien Senior Secured Loan—Delayed Draw  L+ 6.25%  7.25%  10/31/2025  $5,111    5,104    5,111      
       YLG Holdings, Inc.(3)(5)(7)(15)(19)  First Lien Senior Secured Loan—Revolver  —  —   10/31/2025  $—    (69)   —      
       YLG Holdings, Inc.(7)(12)(15)(19)(21)(29)  First Lien Senior Secured Loan  L+ 6.25%  7.25%  10/31/2025  $38,474    38,189    38,474      
                       Construction & Building Total   $105,567   $ 104,999    9.8%
    Consumer Goods: Durable  New Milani Group LLC(12)(15)(19)(29)  First Lien Senior Secured Loan  L+ 5.00%  6.00%  6/6/2024  $16,926    16,822    15,403      
       TLC Holdco LP(14)(19)(25)  Equity Interest  —  —   —   1,188    1,186    1,096      
       TLC Purchaser, Inc.(2)(3)(5)(19)  First Lien Senior Secured Loan—Delayed Draw  —  —   10/13/2025  $—    (57)   (89)     
       TLC Purchaser, Inc.(2)(3)(5)(19)(21)  First Lien Senior Secured Loan—Revolver  —  —   10/13/2025  $—    (142)   (111)     
       TLC Purchaser, Inc.(12)(19)(21)(29)  First Lien Senior Secured Loan  L+ 5.75%  6.75%  10/13/2025  $42,294    41,590    41,766      
                       Consumer Goods: Durable Total   $59,399   $ 58,065    5.4%
    Consumer Goods: Non-Durable  FineLineTechnologies,Inc.(2)(3)(5)(15)(19)(21)  First Lien Senior Secured Loan—Revolver  —  —   11/4/2022  $—    (9)   (72)     
       FineLine Technologies, Inc.(12)(15)(19)(21)(29)  First Lien Senior Secured Loan  L+ 4.25%  5.25%  11/4/2022  $31,066    30,974    30,212      
       MND Holdings III Corp(12)(15)(29)  First Lien Senior Secured Loan  L+ 3.50%  4.50%  6/19/2024  $10,614    10,627    9,907      
       RoC Opco LLC(3)(5)(15)(19)(21)  First Lien Senior Secured Loan—Revolver  —  —   2/25/2025  $—    (145)   —      
       RoC Opco LLC(12)(15)(19)(21)(29)  First Lien Senior Secured Loan  L+ 7.75%  8.75%  2/25/2025  $40,487    39,737    40,487      
       Solaray, LLC(7)(15)(19)  First Lien Senior Secured Loan—Delayed Draw  L+ 6.00%  7.00%  9/11/2023  $14,425    14,425    14,136      
       Solaray, LLC(3)(7)(15)(19)  First Lien Senior Secured Loan—                              
          Revolver  L+ 4.50%  5.50%  9/9/2022  $7,424    7,395    7,424      
       Solaray, LLC(7)(15)(19)(21)  First Lien Senior Secured Loan  L+ 6.00%  7.00%  9/11/2023  $42,170    42,170    41,326      
       WU Holdco, Inc.(7)(15)(19)  First Lien Senior Secured Loan—                              
          Delayed Draw  L+ 5.25%  6.25%  3/26/2026  $5,588    5,536    5,588      
       WU Holdco, Inc.(3)(18)(19)  First Lien Senior Secured Loan—Revolver  L+ 5.25%  5.50%  3/26/2025  $902    857    902      
       WU Holdco, Inc.(7)(15)(19)(21)(29)  First Lien Senior Secured Loan  L+ 5.25%  6.25%  3/26/2026  $39,319    38,649    39,319      
                       Consumer Goods: Non-Durable Total    $190,216   $ 189,229    17.7%
    Containers, Packaging, & Glass  Automate Intermediate Holdings II S.à r.l.(6)(18)(19)(21)  Second Lien Senior Secured Loan  L+ 7.75%  7.90%  7/22/2027  $11,870    11,659    11,781      
                       Containers, Packaging, & Glass Total   $11,659   $ 11,781    1.1%
    Energy: Electricity  Infinite Electronics International Inc.(12)(18)(19)(29)  First Lien Senior Secured Loan  L+ 4.00%  4.15%  7/2/2025  $19,552    19,541    18,868      
       Infinite Electronics International Inc.(18)(19)(21)  Second Lien Senior Secured Loan  L+ 8.00%  8.15%  7/2/2026  $2,480    2,438    2,381      
                       Energy: Electricity Total   $21,979   $ 21,249    2.0%
    Energy: Oil & Gas  Amspec Services, Inc.(3)(5)(7)(15)(19)  First Lien Senior Secured Loan—Revolver  —  —   7/2/2024  $—    (42)   —      
       Amspec Services, Inc.(7)(12)(15)(19)(29)  First Lien Senior Secured Loan  L+ 5.75%  6.75%  7/2/2024  $43,653    43,261    43,653      
       Amspec Services, Inc.(7)(15)(19)  First Lien Senior Secured Loan  L+ 5.75%  6.75%  7/2/2024  $2,826    2,786    2,826      
                       Energy: Oil & Gas Total   $46,005   $ 46,479    4.4%

 

18

 

 

             Spread Above  Interest    Maturity          Market   % of 
Control Type   Industry  Portfolio Company  Investment Type  Index(1)  Rate    Date  Principal/Shares(9)   Cost   Value   NAV(4) 
    FIRE: Finance   Allworth Financial Group, L.P.(2)(3)(5)(15)(19)   First Lien Senior Secured Loan—Delayed Draw  —  —    12/23/2026  $—    (61)   (61)     
       Allworth Financial Group, L.P.(12)(15)(19)(29)  First Lien Senior Secured Loan  L+ 5.50%  6.50%   12/23/2026  $10,138    9,987    9,936      
       Allworth Financial Group, L.P.(2)(3)(5)(15)(19)  First Lien Senior Secured Loan—Revolver  —  —    12/23/2026  $—    (18)   (18)     
       TA/Weg Holdings(3)(18)(19)   First Lien Senior Secured Loan—Delayed Draw  L+ 5.75%  6.75%   10/2/2025  $1,992    1,922    1,921      
                        FIRE: Finance Total   $11,830   $11,778    1.1%
    FIRE: Insurance  Ivy Finco Limited(6)(18)(19)(21)  First Lien Senior Secured Loan  GBP LIBOR+ 5.75%  5.83%   5/19/2025  £7,217    8,992    9,704      
       Ivy Finco Limited(6)(18)(19)  First Lien Senior Secured Loan  GBP LIBOR+ 5.75%  5.83%   5/19/2025  £7,077    8,827    9,502      
       Margaux Acquisition Inc.(7)(15)(19)   First Lien Senior Secured Loan—Delayed Draw  L+ 5.75%  6.75%   12/19/2024  $9,288    9,256    9,195      
       Margaux Acquisition, Inc.(2)(3)(5)(15)(19)   First Lien Senior Secured Loan—Revolver  —  —    12/19/2024  $—    (50)   (29)     
       Margaux Acquisition Inc.(7)(12)(15)(19)(29)  First Lien Senior Secured Loan  L+ 5.75%  6.75%   12/19/2024  $28,625    28,196    28,339      
       Margaux UK Finance Limited(3)(5)(6)(15)(19)  First Lien Senior Secured Loan—Revolver  —  —    12/19/2024  £—    (8)   —      
       Margaux UK Finance Limited(6)(15)(19)(21)  First Lien Senior Secured Loan  GBP LIBOR+ 5.75%  6.75%   12/19/2024  £7,629    9,804    10,414      
                        FIRE: Insurance Total   $65,017   $67,125    6.3%
    FIRE: Real Estate  Spectre (Carrisbrook House) Limited(6)(15)(19)  First Lien Senior Secured Loan  EURIBOR+ 9.50%  10.50%   8/9/2021  €9,300    10,894    10,289      
                        FIRE: Real Estate Total   $10,894   $10,289    1.0%
    Healthcare & Pharmaceuticals  CB Titan Holdings, Inc.(14)(19)(25)  Preferred Equity  —  —    —   1,953    1,953    2,625      
       CPS Group Holdings, Inc.(3)(5)(15)(19)  First Lien Senior Secured Loan—Revolver  —  —    3/3/2025  $—    (64)   —      
       CPS Group Holdings, Inc.(7)(12)(15)(19)(21)(29)  First Lien Senior Secured Loan  L+ 5.50%  6.50%   3/3/2025  $55,347    54,925    55,347      
       Datix Bidco Limited(2)(3)(5)(6)(18)(19)(21)  First Lien Senior Secured Loan—Revolver  —  —    10/28/2024  £—    (17)   (7)     
       Datix Bidco Limited(6)(18)(19)(21)  Second Lien Senior Secured Loan  GBP LIBOR+ 7.75%  7.81%   4/27/2026  £12,134    16,369    16,564      
       Datix Bidco Limited(6)(18)(19)(21)  First Lien Senior Secured Loan  BBSW+ 4.50%  4.62%   4/28/2025   AUD4,212    3,215    3,224      
       Golden State Buyer, Inc.(12)(16)(29)  First Lien Senior Secured Loan  L+ 4.75%  5.50%   6/22/2026  $15,077    14,952    14,992      
       Great Expressions Dental Centers PC(3)(15)(19)(26)  First Lien Senior Secured Loan—Revolver  L+ 4.75% (0.5% PIK)  6.25%   9/28/2022  $661    655    454      
       Great Expressions Dental Centers PC(15)(19)(26)  First Lien Senior Secured Loan  L+ 4.75% (0.5% PIK)  6.25%   9/28/2023  $7,802    7,789    6,437      
       Island Medical Management Holdings, LLC(15)(19)(29)  First Lien Senior Secured Loan  L+ 6.50%  7.50%   9/1/2023  $8,627    8,570    7,764      
       Medical Depot Holdings, Inc.(12)(15)(26)  First Lien Senior Secured Loan  L+ 5.50% (2% PIK)  8.50%   1/3/2023  $16,520    15,638    14,084      
       Mendel Bidco, Inc.(18)(19)(21)  First Lien Senior Secured Loan  EURIBOR+ 4.50%  4.50%   6/17/2027  €10,033    11,169    12,204      
       Mendel Bidco, Inc.(18)(19)(21)  First Lien Senior Secured Loan  L+ 4.50%  4.73%   6/17/2027  $19,966    19,541    19,667      
       Mertus 522. GmbH(6)(18)(19)(21)  First Lien Senior Secured Loan—Delayed Draw  EURIBOR+ 6.00%  6.00%   5/28/2026  €13,131    14,138    15,892      
       Mertus 522. GmbH(6)(18)(19)(21)  First Lien Senior Secured Loan  EURIBOR+ 6.00%  6.00%   5/28/2026  €22,468    24,635    27,193      
       TecoStar Holdings, Inc.(12)(15)(19)(21)(29)  Second Lien Senior Secured Loan  L+ 8.50%  9.50%   11/1/2024  $9,472    9,315    9,306      
       U.S. Anesthesia Partners, Inc.(12)(15)(19)(21)  Second Lien Senior Secured Loan  L+ 7.25%  7.49%   6/23/2025  $16,520    16,364    15,859      
                        Healthcare & Pharmaceuticals Total   $219,147   $221,605    20.7%

 

19

 

 

            Spread Above  Interest   Maturity          Market   % of 
Control Type  Industry  Portfolio Company  Investment Type  Index(1)  Rate   Date  Principal/Shares(9)   Cost   Value   NAV(4) 
   High Tech Industries  AMI US Holdings Inc.(3)(12)(18)(19)  First Lien Senior Secured Loan— Revolver  L+ 5.50%  5.65%  4/1/2024   $1,256    1,232    1,256      
      AMI US Holdings Inc.(12)(15)(19)(29)  First Lien Senior Secured Loan  L+ 5.50%  6.50%  4/1/2025   $13,025    12,825    13,025      
      Appriss Holdings, Inc.(2)(3)(5)(7)(18)(19)  First Lien Senior Secured Loan— Revolver  —  —   5/30/2025   $—    (46)   (47)     
      Appriss Holdings, Inc.(7)(12)(18)(19)(21)(29)  First Lien Senior Secured Loan  L+ 5.25%  5.50%  5/29/2026   $48,386    47,879    47,902      
      Appriss Holdings, Inc.(7)(18)(19)  First Lien Senior Secured Loan  L+ 6.00%  6.25%  5/29/2026   $4,988    4,843    4,988      
      CB Nike IntermediateCo Ltd(3)(5)(6)(15)(19)(21)  First Lien Senior Secured Loan— Revolver  —  —   10/31/2025   $—    (71)   —      
      CB Nike IntermediateCo Ltd(6)(12)(15)(19)(21)(29)  First Lien Senior Secured Loan  L+ 4.75%  5.75%  10/31/2025   $35,068    34,485    35,068      
      CMI Marketing Inc(3)(5)(15)(19)(29)  First Lien Senior Secured Loan— Revolver  —  —   5/24/2023   $—    (10)   —      
      CMI Marketing Inc(12)(15)(19)(29)  First Lien Senior Secured Loan  L+ 4.50%  5.50%  5/24/2024   $15,101    15,008    15,101      
      Drilling Info Holdings, Inc(12)(18)(21)(29)  First Lien Senior Secured Loan  L+ 4.25%  4.40%  7/30/2025   $22,380    22,317    21,728      
      Element Buyer, Inc.(7)(15)(19)  First Lien Senior Secured Loan— Delayed Draw  L+ 5.25%  6.25%  7/18/2025   $11,192    11,216    11,192      
      Element Buyer, Inc.(3)(7)(15)(19)  First Lien Senior Secured Loan— Revolver  L+ 5.25%  6.25%  7/19/2024  $283    244    283      
      Element Buyer, Inc.(7)(15)(19)(21)  First Lien Senior Secured Loan  L+ 5.25%  6.25%  7/18/2025   $37,390    37,660    37,390      
      Everest Bidco(6)(15)(19)(21)  Second Lien Senior Secured Loan  GBP LIBOR+ 7.50%  8.50%  7/3/2026   £10,216    13,142    13,946      
      MRI Software LLC(7)(15)(28)  First Lien Senior Secured Loan  L+ 5.50%  6.50%  2/10/2026   $25,454    25,359    25,390      
      MRI Software LLC(2)(3)(5)(15)(28)  First Lien Senior Secured Loan— Delayed Draw  —  —   2/10/2026   $—    (7)   (2)     
      MRI Software LLC(2)(3)(15)(19)  First Lien Senior Secured Loan— Revolver  —  —   2/10/2026   $—    44    (45)     
      nThrive, Inc.(15)(19)(21)  Second Lien Senior Secured Loan  L+ 9.75%  10.75%  4/20/2023   $8,000    7,988    8,000      
      Utimaco, Inc.(6)(18)(19)(21)(29)  First Lien Senior Secured Loan  L+ 4.25%  4.91%  8/9/2027   $14,849    14,535    14,849      
      Ventiv Topco, Inc.(14)(19)(25)  Equity Interest  —  —   —   28    2,833    3,065      
      Ventiv Holdco, Inc.(3)(7)(18)(19)  First Lien Senior Secured Loan— Revolver  L+ 5.50%  5.68%  9/3/2025   $426    382    417      
      Ventiv Holdco, Inc.(7)(15)(19)(21)  First Lien Senior Secured Loan  L+ 5.50%  6.50%  9/3/2025   $24,056    23,760    23,996      
      VPARK BIDCO AB(6)(16)(19)(21)  First Lien Senior Secured Loan  CIBOR+ 4.00%  4.75%  3/10/2025  DKK56,999    9,198    9,364      
      VPARK BIDCO AB(6)(16)(19)(21)  First Lien Senior Secured Loan  NIBOR+ 4.00%  4.75%  3/10/2025  NOK74,020    9,230    8,620      
                      High Tech Industries Total     $294,046    $295,486    27.7%
   Hotel, Gaming & Leisure  Aimbridge Acquisition Co., Inc.(12)(18)(19)(21)(29)  Second Lien Senior Secured Loan  L+ 7.50%  7.65%  2/1/2027   $20,193    19,707    18,174      
      Captain D’s LLC(3)(15)(19)  First Lien Senior Secured Loan— Revolver  L+ 4.50%  5.50%  12/15/2023   $1,382    1,373    1,382      
      Captain D’s LLC(12)(15)(19)(29)  First Lien Senior Secured Loan  L+ 4.50%  5.50%  12/15/2023   $12,559    12,489    12,559      
      Quidditch Acquisition, Inc.(12)(15)(29)  First Lien Senior Secured Loan  L+ 9.00%  10.00%  3/21/2025   $18,829    18,820    17,778      
                      Hotel, Gaming & Leisure Total    $52,389    $49,893    4.7%
   Media: Advertising, Printing &  Ansira Holdings, Inc.(15)(19)(26)(33)  First Lien Senior Secured Loan— Publishing Delayed Draw  L+ 6.50% PIK  7.50%  12/20/2024   $4,613    4,610    3,944      
      Ansira Holdings, Inc.(3)(19)(23)(31)  First Lien Senior Secured Loan— Revolver  P+ 4.75%  7.77%  12/20/2024   $5,383    5,383    5,383      
      Ansira Holdings, Inc.(15)(19)(26)  First Lien Senior Secured Loan  L+ 6.50% PIK  7.50%  12/20/2024  $37,208    37,150    31,813      
                      Media: Advertising, Printing & Publishing Total   $47,143   $41,140    3.9%

 

 

20

 

 

            Spread Above  Interest   Maturity          Market   % of 
Control Type  Industry  Portfolio Company  Investment Type  Index(1)  Rate   Date  Principal/Shares(9)   Cost   Value   NAV(4) 
   Media: Broadcasting & Subscription  Vital Holdco Limited(6)(12)(15)(19)(21)(29)  First Lien Senior Secured Loan  L+ 4.75%  5.75%  5/29/2026  $35,357    34,654    35,357      
      Vital Holdco Limited(6)(18)(19)(21)  First Lien Senior Secured Loan  EURIBOR+ 4.75%  4.75%  5/29/2026  €7,917    8,645    9,679      
                      Media: Broadcasting & Subscription Total   $43,299   $45,036    4.2%
   Media: Diversified & Production  9 Story Media Group Inc.(3)(6)(15)(19)  First Lien Senior Secured Loan— Revolver  CDOR+ 5.50%  6.50%  4/30/2026  CAD56    40    44      
      9 Story Media Group Inc.(6)(15)(19)(21)  First Lien Senior Secured Loan  CDOR+ 5.50%  6.50%  4/30/2026  CAD7,310    5,363    5,725      
      9 Story Media Group Inc.(6)(18)(19)(21)  First Lien Senior Secured Loan  EURIBOR+ 5.50%  5.50%  4/30/2026  €3,938    4,507    4,814      
      Efficient Collaborative Retail Marketing Company, LLC(3)(15)(19)  First Lien Senior Secured Loan—Revolver  L+ 5.25%  6.25%  6/15/2022  $2,267    2,267    2,267      
      Efficient Collaborative Retail Marketing Company, LLC(7)(15)(19)(21)  First Lien Senior Secured Loan  L+ 6.75%  7.75%  6/15/2022  $15,095    15,151    14,416      
      Efficient Collaborative Retail Marketing Company, LLC(7)(15)(19)  First Lien Senior Secured Loan  L+ 6.75%  7.75%  6/15/2022  $9,788    9,825    9,347      
      International Entertainment Investments Limited(6)(18)(19)(21)  First Lien Senior Secured Loan  GBP LIBOR+ 4.75%  4.82%  5/31/2023  £8,686    10,657    11,857      
                      Media: Diversified & Production Total   $47,810   $48,470    4.5%
   Retail  Batteries Plus Holding Corporation(3)(15)(19)  First Lien Senior Secured Loan— Revolver  —  —   7/6/2022  $—    —    —      
      Batteries Plus Holding Corporation(7)(15)(19)  First Lien Senior Secured Loan  L+ 6.75%  7.75%  7/6/2022  $28,672    28,672    28,672      
      Thrasio, LLC(2)(3)(5)(15)(19)  First Lien Senior Secured Loan— Delayed Draw  —  —   12/18/2026  $—    (313)   (313)     
      Thrasio, LLC(15)(19)(21)  First Lien Senior Secured Loan  L+ 7.00%  8.00%  12/18/2026  $10,965    10,691    10,691      
                      Retail Total   $39,050   $39,050    3.7%
   Services: Business  AMCP Clean Acquisition Company, LLC(12)(18)(29)  First Lien Senior Secured Loan— Delayed Draw  L+ 4.25%  4.40%  7/10/2025  $3,855    3,848    2,660      
      AMCP Clean Acquisition Company, LLC(12)(18)(29)  First Lien Senior Secured Loan  L+ 4.25%  4.40%  7/10/2025  $15,930    15,904    10,992      
      Comet Bidco Limited(6)(18)(21)  First Lien Senior Secured Loan  GBP LIBOR+ 5.25%  5.34%  9/30/2024  £7,362    9,523    8,911      
      Elevator Holdco Inc.(14)(19)(25)  Equity Interest  —  —   —   2    2,448    1,605      
      Hightower Holding, LLC(12)(15)(19)(21)(29)  First Lien Senior Secured Loan  L+ 5.00%  6.00%  1/31/2025  $40,850    40,708    40,850      
      Refine Intermediate, Inc.(3)(5)(18)(19)  First Lien Senior Secured Loan— Revolver  —  —   9/3/2026  $—    (117)   —      
      Refine Intermediate, Inc.(15)(19)(21)  First Lien Senior Secured Loan  L+ 4.75%  5.75%  3/3/2027  $21,894    21,396    21,894      
      SumUp Holdings Luxembourg S.à.r.l.(6)(15)(19)(21)  First Lien Senior Secured Loan  EURIBOR+ 8.00%  9.00%  8/1/2024  €15,715    17,453    19,212      
      SumUp Holdings Luxembourg S.à.r.l.(6)(15)(19)(21)  First Lien Senior Secured Loan  EURIBOR+ 8.00%  9.00%  8/1/2024  €16,697    18,244    20,412      
      TEI Holdings Inc.(3)(7)(15)(19)  First Lien Senior Secured Loan— Revolver  L+ 7.25%  8.25%  12/23/2025  $3,471    3,426    3,200      
      TEI Holdings Inc.(7)(12)(15)(19)(21)(26)(29)  First Lien Senior Secured Loan  L+ 6.00% (1.25% PIK)  8.25%  12/23/2026  $48,749    48,204    45,824      
                      Services: Business Total   $181,037   $175,560    16.3%

 

21

 

 

                Spread Above   Interest     Maturity               Market       % of  
Control Type   Industry   Portfolio Company   Investment Type   Index(1)   Rate     Date   Principal/Shares(9)     Cost     Value       NAV(4)  
   Services: Consumer  MZR Aggregator(14)(19)(25)  Equity Interest  —  —   —   1    798    798      
        MZR Buyer, LLC(15)(19)   First Lien Senior Secured Loan— Revolver   L+ 6.75%   7.75 %   12/21/2026   $ 5,210       5,106       5,105          
        MZR Buyer, LLC(7)(15)(19)   First Lien Senior Secured Loan   L+ 6.75%   7.75 %   12/21/2026   $ 40,634       39,828       39,822          
        Pearl Intermediate Parent LLC(18)(29)   Second Lien Senior Secured Loan   L+ 6.25%   6.40 %   2/13/2026   $ 2,571       2,584       2,558          
        Surrey Bidco Limited(6)(17)(19)(21)   First Lien Senior Secured Loan   GBP LIBOR+ 6.00%   6.50 %   5/11/2026   £ 5,000       6,163       6,501          
        Trafalgar Bidco Limited(6)(18)(19)(21)   First Lien Senior Secured Loan   GBP LIBOR+ 5.00%   5.02 %   9/11/2024   £ 6,011       7,763       8,206          
        Zeppelin BidCo Pty Limited(6)(18)(19)(21)   First Lien Senior Secured Loan   BBSY+ 6.00%   6.23 %   6/28/2024   AUD 20,621       14,099       15,707          
                              Services: Consumer Total      $ 76,341     $ 78,697       7.4 %
    Telecommunications   Conterra Ultra Broadband Holdings, Inc.(18)(29)   First Lien Senior Secured Loan   L+ 4.50%   4.65 %   4/30/2026   $ 6,386       6,360       6,373          
        Horizon Telcom, Inc.(15)(19)(29)   First Lien Senior Secured Loan— Revolver   L+ 5.00%   6.00 %   6/15/2023   $ 116       113       114          
        Horizon Telcom, Inc.(12)(15)(19)(29)   First Lien Senior Secured Loan— Delayed Draw   L+ 5.00%   6.00 %   6/15/2023   $ 919       914       903          
        Horizon Telcom, Inc.(12)(15)(19)(29)   First Lien Senior Secured Loan   L+ 5.00%   6.00 %   6/15/2023   $ 13,538       13,431       13,302          
        Masergy Holdings, Inc.(15)(29)   Second Lien Senior Secured Loan   L+ 7.50%   8.50 %   12/16/2024   $ 857       862       851          
                              Telecommunications Total      $ 21,680     $ 21,543       2.0 %
    Transportation: Cargo   A&R Logistics, Inc.(2)(3)(5)(15)(19)   First Lien Senior Secured Loan— Revolver   —   —     5/5/2025   $ —       (90 )     (46 )        
        A&R Logistics, Inc.(7)(12)(15)(19)(21)(29)   First Lien Senior Secured Loan   L+ 6.00%   7.00 %   5/5/2025   $ 43,534       42,827       43,207          
        A&R Logistics, Inc.(7)(15)(19)   First Lien Senior Secured Loan   L+ 6.00%   7.00 %   5/5/2025   $ 2,448       2,408       2,430          
        A&R Logistics, Inc.(7)(15)(19)   First Lien Senior Secured Loan   L+ 6.00%   7.00 %   5/5/2025   $ 6,035       5,961       5,989          
        A&R Logistics, Inc.(7)(15)(19)   First Lien Senior Secured Loan   L+ 6.50%   7.50 %   5/5/2025   $ 2,743       2,717       2,743          
        ARL Holdings, LLC(14)(19)(25)   Equity Interest   —   —     —     —       445       522          
        ARL Holdings, LLC(14)(19)(25)   Equity Interest   —   —     —     9       9       16          
        ENC Holding Corporation(12)(18)(19)(29)   First Lien Senior Secured Loan   L+ 4.00%   4.25 %   5/30/2025   $ 10,173       10,163       10,072          
        Grammer Investment Holdings LLC(14)(19)(25)   Equity Interest   —   —     —     1,011       1,011       805          
        Grammer Investment Holdings LLC(19)(25)(26)   Preferred Equity   10% PIK   10.00 %   —     7       714       754          
        Grammer Investment Holdings LLC(14)(19)(25)   Warrants   —   —     —     122       —       —          
        Grammer Purchaser, Inc.(3)(12)(15)(19)(29)   First Lien Senior Secured Loan— Revolver   —   —     9/30/2024   $ —       6       —          
        Grammer Purchaser, Inc.(12)(15)(19)(29)   First Lien Senior Secured Loan— Revolver   L+ 4.75%   5.75 %   9/30/2024   $ 9,277       9,128       9,277          
        Omni Logistics, LLC(15)(19)(21)   Second Lien Senior Secured Loan   L+ 9.00%   10.00 %   12/30/2027   $ 13,770       13,427       13,426          
        PS HoldCo, LLC(12)(15)(29)   First Lien Senior Secured Loan   L+ 4.75%   5.75 %   3/13/2025   $ 22,295       22,286       21,849          
                              Transportation: Cargo Total      $ 111,012     $ 111,044       10.3 %
    Transportation: Consumer   Toro Private Investments II, L.P.(6)(14)(19)(25)   Equity Interest   —   —     —     3,090       3,090       1,969          
        Toro Private Investments II, L.P.(6)(12)(18)(29)   First Lien Senior Secured Loan   L+ 5.00%   5.25 %   5/29/2026   $ 6,715       4,484       4,605          
                              Transportation: Consumer Total      $ 7,574     $ 6,574       0.6 %

 

22

 

 

            Spread Above  Interest   Maturity          Market   % of 
Control Type  Industry  Portfolio Company  Investment Type  Index(1)  Rate   Date  Principal/Shares(9)   Cost   Value   NAV(4) 
    Wholesale   Abracon Group Holding, LLC(14)(19)(25)   Equity Interest   —   —     —     2       1,833       1,618          
        Abracon Group Holding, LLC(2)(3)(5)(15)(19)   First Lien Senior Secured Loan— Revolver   —   —     7/18/2024   $ —       (25 )     (50 )        
      Abracon Group Holding, LLC(7)(15)(19)(21)(29)  First Lien Senior Secured Loan  L+ 5.75%  6.75%  7/18/2024  $35,639    35,511    35,015      
      Aramsco, Inc.(2)(3)(5)(7)(18)(19)  First Lien Senior Secured Loan— Revolver  —  —   8/28/2024  $—    (36)   (51)     
      Aramsco, Inc.(7)(12)(18)(19)(21)(29)  First Lien Senior Secured Loan  L+ 5.25%  5.40%  8/28/2024  $24,042    23,729    23,681      
      Armor Group, LP(14)(19)(25)  Equity Interest  —  —   —   10    1,012    2,126      
      PetroChoice Holdings, Inc.(12)(15)(29)  First Lien Senior Secured Loan  L+ 5.00%  6.00%  8/19/2022  $9,844    9,794    9,450      
      PetroChoice Holdings, Inc.(12)(15)(29)  First Lien Senior Secured Loan  L+ 5.00%  6.00%  8/19/2022  $6,514    6,430    6,253      
                      Wholesale Total   $78,248   $78,042    7.3%
                      Non-Controlled/ Non-Affiliate Investments Total   $2,281,809   $2,261,461    211.7%
Non-Controlled/Affiliate Investments                                    
   Beverage, Food & Tobacco  ADT Pizza, LLC(10)(14)(19)(25)  Equity Interest  —  —   —   6,720    6,720    15,918      
                      Beverage, Food & Tobacco Total   $6,720   $15,918    1.5%
   Energy: Oil & Gas  Blackbrush Oil & Gas, L.P.(10)(14)(19)(25)  Equity Interest  —  —   —   1,123    —    —      
      Blackbrush Oil & Gas, L.P.(10)(14)(19)(25)  Preferred Equity  —  —   —   36    10,104    10,239      
      Blackbrush Oil & Gas, L.P.(10)(12)(15)(19)(26)(29)  First Lien Senior Secured Loan  L+ 5.00% (2% PIK)  8.00%  9/3/2025  $12,089    12,089    12,089      
                      Energy: Oil & Gas   $22,193   $22,328    2.1%
   Transportation: Consumer  Direct Travel, Inc.(10)(18)(19)(21)  First Lien Senior Secured Loan  L+ 1.00%  1.25%  10/2/2023  $4,404    4,404    4,404      
      Direct Travel, Inc.(10)(14)(19)(25)  Equity Interest  —  —   —   68    —    —      
      Direct Travel, Inc.(7)(10)(15)(19)(26)  First Lien Senior Secured Loan— Delayed Draw  L+ 1.00% (8.25% PIK)  9.50%  10/2/2023  $3,100    3,100    2,588      
      Direct Travel, Inc.(7)(10)(15)(19)(26)  First Lien Senior Secured Loan— Delayed Draw  L+ 1.00% (8.25% PIK)  9.50%  10/2/2023  $1,572    1,572    1,313      
      Direct Travel, Inc.(7)(10)(15)(19)(21)(26)  First Lien Senior Secured Loan  L+ 1.00% (8.27% PIK)  9.50%  10/2/2023  $52,948    52,948    44,212      
      Direct Travel, Inc.(3)(10)(15)(19)(28)  First Lien Senior Secured Loan— Delayed Draw  L+ 6.00%  7.00%  10/2/2023  $1,950    1,950    1,950      
      Direct Travel, Inc.(10)(18)(19)(28)  First Lien Senior Secured Loan  L+ 6.00%  7.00%  10/2/2023  $202    202    202      
                      Transportation: Consumer   $64,176   $54,669    5.1%
                      Non-Controlled/Affiliate Investments Total   $93,089   $92,915    8.7%
Controlled Affiliate Investments                                    
   Aerospace & Defense  ACC Holdco, LLC(10)(11)(19)(25)  Preferred Equity  —  16.00%  —   10,828    10,824    10,828      
      Air Comm Corporation LLC(10)(11)(12)(15)(19)(21)(29)  First Lien Senior Secured Loan  L+ 6.50%  7.50%  6/30/2025  $27,023    26,362    26,484      
      BCC Jetstream Holdings Aviation (Off I), Equity Interest LLC(3)(6)(10)(11)(19)(20)(25)     —  —   —   11,863    11,863    11,703      
      BCC Jetstream Holdings Aviation (On II), Equity Interest LLC(10)(11)(19)(20)(25)     —  —   —   1,116    1,116    629      
      BCC Jetstream Holdings Aviation (On II),  First Lien Senior Secured Loan                              
      LLC(3)(10)(11)(19)(20)(26)     —  10.00 % PIK   6/2/2022  $6,712    6,712    6,712      
      Gale Aviation (Offshore) Co(6)(10)(11)(19)(25)  Equity Interest  —  —   —   84    83,656    66,448      
                      Aerospace & Defense Total   $140,533   $122,804    11.5%
   Transportation: Cargo  Lightning Holdings B, LLC(6)(10)(11)(19)(25)  Equity Interest  —  —   —   7,308    7,308    7,308      
                           $7,308   $7,308    0.7%
                      Controlled Affiliate Investments Total   $147,841    $130,112     12.2 % 
                      Investments Total   $2,522,739    $2,484,488     232.6 % 

 

 

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Control Type  Industry  Portfolio Company  Investment
Type		  Spread Above
Index(1)		  Interest
Rate		   Maturity
Date		  Principal/Shares(9)  Cost   Market
Value		      % of
NAV (4)		  
Cash Equivalents                                           
   Cash Equivalents   Goldman Sachs Financial Square Government Fund Institutional Share Class  Cash Equivalents  —  0.03%  —  $ 1,846    1,846    1,846         
   Cash Equivalents  Goldman Sachs US Treasury Liquid Reserves Fund(30)  Cash Equivalents  —  0.01%  —  $ 53,106    53,106    53,106         
                      Cash Equivalents Total   $54,952    $54,952     5.2 % 
                      Investments and Cash Equivalents Total   $2,577,691    $2,539,440     237.8 % 

 

Forward Foreign Currency Exchange Contracts      
            Unrealized 
            Appreciation 
Currency Purchased  Currency Sold  Counterparty  Settlement Date  (Depreciation)(8) 
US DOLLARS 183  CANADIAN DOLLAR 256  Bank of New York Mellon  4/14/2021  $(18)
US DOLLARS 088  CANADIAN DOLLAR 122  Bank of New York Mellon  4/15/2021   (7)
US DOLLARS 141  EURO 129  Bank of New York Mellon  4/15/2021   (17)
POUND STERLING 6,460  US DOLLARS 8,406  Bank of New York Mellon  9/10/2021   (440)
US DOLLARS 7,609  EURO 6,840  Citibank  3/26/2021   (776)
US DOLLARS 5,616  CANADIAN DOLLAR 7,662  Citibank  4/15/2021   (400)
US DOLLARS 4,217  EURO 3,731  Citibank  4/15/2021   (359)
US DOLLARS 12,756  EURO 11,200  Citibank  5/21/2021   (990)
US DOLLARS 31,103  EURO 27,540  Goldman Sachs  3/9/2021   (2,644)
US DOLLARS 82,431  EURO 72,370  Goldman Sachs  5/21/2021   (6,395)
US DOLLARS 16,734  AUSTRALIAN DOLLARS 23,870  Goldman Sachs  6/7/2021   (1,630)
US DOLLARS 19,442  POUND STERLING 14,522  Goldman Sachs  6/7/2021   434 
US DOLLARS 97,874  POUND STERLING 77,470  Goldman Sachs  6/7/2021   (8,159)
US DOLLARS 8,606  DANISH KRONE 56,290  Goldman Sachs  6/7/2021   (642)
US DOLLARS 2,794  CANADIAN DOLLAR 3,713  Goldman Sachs  9/10/2021   (121)
US DOLLARS 8,187  NORWEGIAN KRONE 74,020  Goldman Sachs  9/10/2021   (450)
            $(22,614)

 

 

(1) The investments bear interest at a rate that may be determined by reference to the London Interbank Offered Rate (“LIBOR” or “L”), the Euro Interbank Offered Rate (“EURIBOR” or “E”), British Pound Sterling LIBOR Rate (“GBP LIBOR”), the Norwegian Interbank Offered Rate (“NIBOR” or “N”), the Copenhagen Interbank Offered Rate (“CIBOR” or “C”), Canadian Dollar LIBOR Rate (“CDOR LIBOR”), the Bank Bill Swap Rate (“BBSW”), the Bank Bill Swap Bid Rate (“BBSY”), or the Prime Rate (“Prime” or “P”) and which reset daily, monthly, quarterly or semiannually. Investments or a portion thereof may bear Payment-in-Kind (“PIK”). For each, the Company has provided the PIK or the spread over LIBOR, EURIBOR, GBP LIBOR, NIBOR, CIBOR, CDOR, BBSW, BBSY, or Prime and the current weighted average interest rate in effect at December 31, 2020. Certain investments are subject to a LIBOR, EURIBOR, GBP LIBOR, NIBOR, CIBOR, CDOR, BBSW, or Prime interest rate floor.

(2) The negative fair value is the result of the capitalized discount on the loan or the unfunded commitment being valued below par.

(3) Position or portion thereof is an unfunded loan commitment, and no interest is being earned on the unfunded portion. The investment may be subject to an unused/letter of credit facility fee.

(4) Percentages are based on the Company’s net assets of $1,068,004 as of December 31, 2020.

 

24

 

 

(5) The negative amortized cost is the result of the capitalized discount being greater than the principal amount outstanding on the loan.

(6) The investment is not a qualifying asset under Section 55(a) of the Investment Company Act of 1940. The Company may not acquire any non-qualifying asset unless, at the time of acquisition, qualifying assets represent at least 70%

of the Company’s total assets. As of December 31, 2020, non-qualifying assets totaled 17.6% of the Company’s total assets.

(7) Assets or a portion thereof are pledged as collateral for the BCSF Complete Financing Solution LLC. See Note 6 “Debt”.

(8) Unrealized appreciation/(depreciation) on forward currency exchange contracts.

(9) The principal amount (par amount) for all debt securities is denominated in U.S. dollars, unless otherwise noted. Share amounts of equity investments are presented in thousands. £ represents Pound Sterling, € represents Euro, NOK

represents Norwegian krone, AUD represents Australian, CAD represents Canadian Dollar and DKK represents Kroner.

(10) As defined in the 1940 Act, the portfolio company is deemed to be an “Affiliated Investment” of the Company as the Company owns 5% or more of the portfolio company’s securities.

(11) As defined in the 1940 Act, the Company is deemed to “Control” this portfolio company as the Company either owns more than 25% of the portfolio company’s outstanding voting

securities or has the power to exercise control over management or policies of such portfolio company.

(12) Assets or a portion thereof are pledged as collateral for the 2018-1 Issuer. See Note 6 “Debt”.

(13) $85 of the total par amount for this security is at P+ 4.75%.

(14) Non-Income Producing.

(15) Loan includes interest rate floor of 1.00%.

(16) Loan includes interest rate floor of 0.75%.

(17) Loan includes interest rate floor of 0.50%.

(18) Loan includes interest rate floor of 0.00%.

(19) Security valued using unobservable inputs (Level 3).

(20) The Company holds non-controlling, affiliate interest in an aircraft-owning special purpose vehicle through this investment.

(21) Assets or a portion thereof are pledged as collateral for the BCSF Revolving Credit Facility. See Note 6 “Debt”.

(22) $751 of the total par amount for this security is at P+ 4.50%.

(23) $992 of the total par amount for this security is at L+ 5.75%.

(24) $1,621 of the total par amount for this security is at P+ 4.50%.

(25) Security exempt from registration under the Securities Act of 1933 (the “Securities Act”), and may be deemed to be “restricted securities” under the Securities Act. As of December 31, 2020, the aggregate fair value of these securities is $157,618 or 14.76% of the Company’s net assets. The acquisition dates of the restricted securities are as follows:  

 

25

 

 

Investment  Acquisition Date
BCC Jetstream Holdings Aviation (On II), LLC—Equity Interest  6/1/2017
BCC Jetstream Holdings Aviation (Off I), LLC—Equity Interest  6/1/2017
CB Titan Holdings, Inc.—Preferred Equity  11/14/2017
Abracon Group Holding, LLC.—Equity Interest  7/18/2018
Armor Group, LP—Equity Interest  8/28/2018
Grammer Investment Holdings LLC—Warrants  10/1/2018
Grammer Investment Holdings LLC—Equity Interest  10/1/2018
Grammer Investment Holdings LLC—Preferred Equity  10/1/2018
ADT Pizza, LLC—Equity Interest  10/29/2018
PP Ultimate Holdings B, LLC—Equity Interest  12/20/2018
FCG Acquisitions, Inc.—Preferred Equity  1/24/2019
WCI-HSG HOLDCO, LLC—Preferred Equity  2/22/2019
Toro Private Investments II, L.P.—Equity Interest  3/19/2019
ARL Holdings, LLC.—Equity Interest  5/3/2019
ARL Holdings, LLC.—Equity Interest  5/3/2019
ACC Holdco, LLC.—Equity Interest  6/28/2019
Kellstrom Aerospace Group, Inc—Equity Interest  7/1/2019
East BCC Coinvest II,LLC—Equity Interest  7/23/2019
Gale Aviation (Offshore) Co—Equity Interest  8/2/2019
Ventiv Topco, Inc.—Equity Interest  9/3/2019
TLC Holdco LP—Equity Interest  10/11/2019
Elk Parent Holdings, LP—Equity Interest  11/1/2019
Elk Parent Holdings, LP—Preferred Equity  11/1/2019
Precision Ultimate Holdings, LLC—Equity Interest  11/6/2019
Elevator Holdco Inc.—Equity Interest  12/23/2019
Blackbrush Oil & Gas, L.P.—Equity Interest  9/3/2020
Blackbrush Oil & Gas, L.P.—Preferred Equity  9/3/2020
Direct Travel, Inc.—Equity Interest  10/2/2020
Lightning Holdings—Equity Interest  11/5/2020
MZR Aggregator—Equity Interest  12/22/2020

 

(26) Denotes that all or a portion of the debt investment includes PIK interest during the period. 

(27) Asset has been placed on non-accrual. 

(28) Assets or a portion thereof are pledged as collateral for the BCSF Complete Financing Solution Holdco LLC. See Note 6 “Debt”. 

(29) Assets or a portion thereof are pledged as collateral for the 2019-1 Issuer. See Note 6 “Debt”. 

(30) Cash equivalents include $27,026 of restricted cash. 

(31) Loan includes interest rate floor of 2.00%. 

(32) Loan includes interest rate floor of 1.50%. 

(33) $2 of the total par amount for this security is at P+ 5.50%. 

 

See Notes to Consolidated Financial Statements

 

26

 

 

BAIN CAPITAL SPECIALTY FINANCE, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(in thousands, except share and per share data)

 

Note 1. Organization

 

Bain Capital Specialty Finance, Inc. (the “Company”) was formed on October 5, 2015 and commenced investment operations on October 13, 2016. The Company has elected to be treated and is regulated as a business development company (a “BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, for tax purposes the Company has elected to be treated and intends to operate in a manner so as to continuously qualify as a regulated investment company (a “RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). The Company is externally managed by BCSF Advisors, LP (the “Advisor” or “BCSF Advisors”), our investment adviser that is registered with the Securities and Exchange Commission (the “SEC”) under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). The Advisor also provides the administrative services necessary for the Company to operate (in such capacity, the “Administrator” or “BCSF Advisors”).

 

On November 19, 2018, the Company closed its initial public offering (the “IPO”), which was a Qualified IPO, issuing 7,500,000 shares of its common stock at a public offering price of $20.25 per share. Shares of common stock of the Company began trading on the New York Stock Exchange under the symbol “BCSF” on November 15, 2018.

 

The Company’s primary focus is capitalizing on opportunities within its Advisor’s Senior Direct Lending Strategy, which seeks to provide risk-adjusted returns and current income to its stockholders by investing primarily in middle-market companies with between $10.0 million and $150.0 million in EBITDA. The Company focuses on senior investments with a first or second lien on collateral and strong structures and documentation intended to protect the lender. The Company generally seeks to retain voting control in respect of the loans or particular classes of securities in which the Company invests through maintaining affirmative voting positions or negotiating consent rights that allow the Company to retain a blocking position. The Company may also invest in mezzanine debt and other junior securities and in secondary purchases of assets or portfolios, as described below. Investments are likely to include, among other things, (i) senior first lien, stretch senior, senior second lien, unitranche, (ii) mezzanine debt and other junior investments and (iii) secondary purchases of assets or portfolios that primarily consist of middle-market corporate debt. The Company may also invest, from time to time, in equity securities, distressed debt, debtor-in-possession loans, structured products, structurally subordinate loans, investments with deferred interest features, zero-coupon securities and defaulted securities.

 

Our operations comprise only a single reportable segment.

 

Note 2. Summary of Significant Accounting Policies

 

Basis of Presentation

 

The Company’s consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”). The Company’s consolidated financial statements and related financial information have been prepared pursuant to the requirements for reporting on Form 10-Q and Regulation S-X. These consolidated financial statements reflect adjustments that in the opinion of the Company are necessary for the fair statement of the financial position and results of operations for the periods presented herein and are not necessarily indicative of the full fiscal year. The Company has determined it meets the definition of an investment company and follows the accounting and reporting guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946 — Financial Services — Investment Companies. The functional currency of the Company is U.S. dollars and these consolidated financial statements have been prepared in that currency. Certain prior period information has been reclassified to conform to the current period presentation and this had no effect on the Company’s consolidated financial position or the consolidated results of operations as previously reported.

 

The information included in this Form 10-Q should be read in conjunction with the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020.

 

27

 

 

Basis of Consolidation

 

The Company will generally consolidate any wholly, or substantially, owned subsidiary when the design and purpose of the subsidiary is to act as an extension of the Company’s investment operations and to facilitate the execution of the Company’s investment strategy. Accordingly, the Company consolidated the results of its subsidiaries BCSF I, LLC, BCSF II-C, LLC, BCSF CFSH, LLC, BCSF CFS, LLC, BCC Middle Market CLO 2018-1, LLC, and BCC Middle Market CLO 2019-1, LLC in its consolidated financial statements. All intercompany transactions and balances have been eliminated in consolidation. Since the Company is an investment company, portfolio investments held by the Company are not consolidated into the consolidated financial statements. The portfolio investments held by the Company (including its investments held by consolidated subsidiaries) are included on the consolidated statements of assets and liabilities as investments at fair value.

 

Use of Estimates

 

The preparation of the consolidated financial statements in conformity with US GAAP requires the Company 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 consolidated financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates and such differences could be material.

 

Valuation of Portfolio Investments

 

Investments for which market quotations are readily available are typically valued at such market quotations. Market quotations are obtained from an independent pricing service, where available. If a price cannot be obtained from an independent pricing service or if the independent pricing service is not deemed to be current with the market, certain investments held by the Company will be valued on the basis of prices provided by principal market makers. Generally, investments marked in this manner will be marked at the mean of the bid and ask of the independent broker quotes obtained. To validate market quotations, the Company utilizes a number of factors to determine if the quotations are representative of fair value, including the source and number of quotations. Debt and equity securities that are not publicly traded or whose market prices are not readily available are valued at fair value, subject at all times to the oversight and approval of the Board of Directors of the Company (the “Board”), based on, among other things, the input of the Advisor, the Company’s audit committee of the Board (the “Audit Committee”) and one or more independent third-party valuation firms engaged by the Board.

 

With respect to unquoted portfolio investments, the Company will value each investment considering, among other measures, discounted cash flow models, comparisons of financial ratios of peer companies that are public and other factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the Company will use the pricing indicated by the external event to corroborate and/or assist us in our valuation. 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 differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material.

 

With respect to investments for which market quotations are not readily available, the Advisor will undertake a multi-step valuation process, which includes among other things, the below:

 

  • The Company’s quarterly valuation process begins with each portfolio company or investment being initially valued by the investment professionals of the Advisor responsible for the portfolio investment or by an independent valuation firm;
  • Preliminary valuation conclusions are then documented and discussed with the Company’s senior management and the Advisor. Agreed upon valuation recommendations are presented to the Audit Committee;
  • The Audit Committee of the Board reviews the valuations presented and recommends values for each of the investments to the Board; and
  • The Board will discuss valuations and determine the fair value of each investment in good faith based upon, among other things, the input of the Advisor, independent valuation firms, where applicable, and the Audit Committee.

  

In following this approach, the types of factors that are taken into account in the fair value pricing of investments include, as relevant, but are not limited to: comparison to publicly traded securities, including factors such as yield, maturity and measures of credit quality; the enterprise value of a portfolio company; the nature and realizable value of any collateral; the portfolio company’s ability to make payments and its earnings and discounted cash flows; and the markets in which the portfolio company does business. In cases where an independent valuation firm provides fair valuations for investments, the independent valuation firm provides a fair valuation report, a description of the methodology used to determine the fair value and their analysis and calculations to support their conclusion.

 

28

 

 

The Company applies ASC Topic 820, Fair Value Measurement (“ASC 820”), which establishes a framework for measuring fair value in accordance with US GAAP and required disclosures of fair value measurements. The fair value of a financial instrument is the amount that would be received in an orderly transaction between market participants at the measurement date. The Company determines the fair value of investments consistent with its valuation policy. The Company discloses the fair value of its investments in a hierarchy which prioritizes and ranks the level of market observability used in the determination of fair value. In accordance with ASC 820, these levels are summarized below:

 

  • Level 1 — Valuations based on quoted prices (unadjusted) in active markets for identical assets or liabilities at the measurement date.
     
  • Level 2 — Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
     
  • Level 3 — Valuations based on inputs that are unobservable and significant to the fair value measurement.

 

A financial instrument’s level within the hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuations of Level 2 investments are generally based on quotations received from pricing services, dealers or brokers. Consideration is given to the source and nature of the quotations and the relationship of recent market activity to the quotations provided.

 

Transfers between levels, if any, are recognized at the beginning of the reporting period in which the transfers occur. The Company evaluates the source of inputs used in the determination of fair value, including any markets in which the investments, or similar investments, are trading. When the fair value of an investment is determined using inputs from a pricing service (or principal market makers), the Company considers various criteria in determining whether the investment should be classified as a Level 2 or Level 3 investment. Criteria considered includes the pricing methodologies of the pricing services (or principal market makers) to determine if the inputs to the valuation are observable or unobservable, as well as the number of prices obtained and an assessment of the quality of the prices obtained. The level of an investment within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment.

 

The fair value assigned to these investments is based upon available information and may fluctuate from period to period. In addition, it does not necessarily represent the amount that might ultimately be realized upon sale. Due to inherent uncertainty of valuation, the estimated fair value of investments may differ from the value that would have been used had a ready market for the security existed, and the difference could be material.

 

Securities Transactions, Revenue Recognition and Expenses

 

The Company records its investment transactions on a trade date basis. 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, using the specified identification method. Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis. Discount and premium to par value on investments acquired are accreted and amortized, respectively, into interest income over the life of the respective investment using the effective interest method. Commitment fees are recorded on an accrual basis and recognized as interest income. Loan origination fees, original issue discount and market discount or premium are capitalized and amortized against or accreted into interest income using the effective interest method or straight-line method, as applicable. For the Company’s investments in revolving bank loans, the cost basis of the investment purchased is adjusted for the cash received for the discount on the total balance committed. The fair value is also adjusted for price appreciation or depreciation on the unfunded portion. As a result, the purchase of commitments not completely funded may result in a negative value until it is offset by the future amounts called and funded. Upon prepayment of a loan or debt security, any prepayment premium, unamortized upfront loan origination fees and unamortized discount are recorded as interest income.

 

Dividend income on preferred equity investments is recorded on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity investments is recorded on the record date for private portfolio companies and on the ex-dividend date for publicly traded portfolio companies. Distributions received from an equity interest, limited liability company or a limited partnership investment are evaluated to determine if the distribution should be recorded as dividend income or a return of capital.

 

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Certain investments may have contractual payment-in-kind (“PIK”) interest or dividends. PIK represents accrued interest or accumulated dividends that are added to the loan principal of the investment on the respective interest or dividend payment dates rather than being paid in cash and generally becomes due at maturity or upon being called by the issuer. PIK is recorded as interest or dividend income, as applicable. If at any point the Company believes PIK is not expected to be realized, the investment generating PIK will be placed on non-accrual status. Accrued PIK interest or dividends are generally reversed through interest or dividend income, respectively, when an investment is placed on non-accrual status.

 

Certain structuring fees and amendment fees are recorded as other income when earned. Administrative agent fees received by the Company are recorded as other income when the services are rendered.

 

Expenses are recorded on an accrual basis.

 

Non-Accrual Loans

 

Loans or debt securities are placed on non-accrual status when there is reasonable doubt that principal or interest will be collected. Accrued interest generally is reversed when a loan or debt security is placed on non-accrual status. Interest payments received on non-accrual loans or debt securities may be recognized as income or applied to principal depending upon management’s judgment. Non-accrual loans and debt securities are restored to accrual status when past due principal and interest are paid and, in management’s judgment, principal and interest payments are likely to remain current. The Company may make exceptions to this treatment if a loan has sufficient collateral value and is in the process of collection. As of September 30, 2021, there were no loans on non-accrual. As of December 31, 2020, there was one loan placed on non-accrual status.

 

Distributions

 

Distributions to common stockholders are recorded on the record date. The amount to be distributed, if any, is determined by the Board each quarter, and is generally based upon the earnings estimated by the Advisor. Distributions from net investment income and net realized capital gains are determined in accordance with U.S. federal income tax regulations, which may differ from those amounts determined in accordance with US GAAP. The Company may pay distributions to its stockholders in a year in excess of its investment company taxable income and net capital gain for that year and, accordingly, a portion of such distributions may constitute a return of capital for U.S. federal income tax purposes. This excess generally would be a tax-free return of capital in the period and generally would reduce the stockholder’s tax basis in its shares. These book/tax differences are either temporary or permanent in nature. To the extent these differences are permanent, they are charged or credited to paid-in capital in excess of par, accumulated undistributed net investment income or accumulated net realized gain (loss), as appropriate, in the period that the differences arise. Temporary and permanent differences are primarily attributable to differences in the tax treatment of certain loans and the tax characterization of income and non-deductible expenses.

 

The Company intends to timely distribute to its stockholders substantially all of its annual taxable income for each year, except that the Company may retain certain net capital gains for reinvestment and, depending upon the level of the Company’s taxable income earned in a year, the Company may choose to carry forward taxable income for distribution in the following year and incur applicable U.S. federal excise tax. The specific tax characteristics of the Company’s distributions will be reported to stockholders after the end of the calendar year. All distributions will be subject to available funds, and no assurance can be given that the Company will be able to declare such distributions in future periods.

 

The Company distributes net capital gains (i.e., net long-term capital gains in excess of net short-term capital losses), if any, at least annually out of the assets legally available for such distributions. However, the Company may decide in the future to retain such capital gains for investment, incur a corporate-level tax on such capital gains, and elect to treat such capital gains as deemed distributions to stockholders.

 

 Dividend Reinvestment Plan

 

The Company has adopted a dividend reinvestment plan that provides for the reinvestment of cash dividends and distributions. Prior to the IPO, stockholders who elected to “opt in” to the Company’s dividend reinvestment plan had their cash dividends and distributions automatically reinvested in additional shares of the Company’s common stock, rather than receiving cash dividends and distributions.

 

Subsequent to the IPO, stockholders who do not “opt out” of the Company’s dividend reinvestment plan will have their cash dividends and distributions automatically reinvested in additional shares of the Company’s common stock, rather than receiving cash dividends and distributions.

 

30

 

 

Offering Costs

 

Offering costs consist primarily of fees and expenses incurred in connection with the offering of shares, legal, printing and other costs associated with the preparation and filing of applicable registration statements. To the extent such expenses relate to equity offerings, these expenses are charged as a reduction of paid-in-capital upon each such offering.

 

Cash, Restricted Cash, and Cash Equivalents

 

Cash and cash equivalents consist of deposits held at custodian banks and highly liquid investments, such as money market funds, with original maturities of three months or less. Cash and cash equivalents are carried at cost or amortized cost, which approximates fair value. The Company may deposit its cash and cash equivalents in financial institutions and, at certain times, such balances may exceed the Federal Deposit Insurance Corporation insurance limits. Cash equivalents are presented separately on the consolidated schedules of investments. Restricted cash is collected and held by the trustee who has been appointed as custodian of the assets securing certain of the Company’s financing transactions.

 

Foreign Currency Translation

 

The accounting records of the Company are maintained in U.S. dollars. The fair values of foreign securities, foreign cash and other assets and liabilities denominated in foreign currency are translated to U.S. dollars based on the current exchange rates at the end of each business day. Income and expenses denominated in foreign currencies are translated at current exchange rates when accrued or incurred. Unrealized gains and losses on foreign currency holdings and non-investment assets and liabilities attributable to the changes in foreign currency exchange rates are included in the net change in unrealized appreciation (depreciation) on foreign currency translation on the consolidated statements of operations. Net realized gains and losses on foreign currency holdings and non-investment assets and liabilities attributable to changes in foreign currency exchange rates are included in net realized gain (loss) on foreign currency transactions on the consolidated statements of operations. The portion of both realized and unrealized gains and losses on investments that result from changes in foreign currency exchange rates is not separately disclosed, but is included in net realized gain (loss) on investments and net change in unrealized appreciation (depreciation) on investments, respectively, on the consolidated statements of operations.

 

Forward Currency Exchange Contracts

 

The Company may enter into forward currency exchange contracts to reduce the Company’s exposure to foreign currency exchange rate fluctuations in the value of foreign currencies. A forward currency exchange contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The Company does not utilize hedge accounting and as such the Company recognizes the value of its derivatives at fair value on the consolidated statements of assets and liabilities with changes in the net unrealized appreciation (depreciation) on forward currency exchange contracts recorded on the consolidated statements of operations. Forward currency exchange contracts are valued using the prevailing forward currency exchange rate of the underlying currencies. Unrealized appreciation (depreciation) on forward currency exchange contracts are recorded on the consolidated statements of assets and liabilities by counterparty on a net basis, not taking into account collateral posted which is recorded separately, if applicable. Cash collateral maintained in accounts held by counterparties is included in collateral on forward currency exchange contracts on the consolidated statements of assets and liabilities. Notional amounts and the gross fair value of forward currency exchange contracts assets and liabilities are presented separately on the consolidated schedules of investments.

 

Changes in net unrealized appreciation (depreciation) are recorded on the consolidated statements of operations in net change in unrealized appreciation (depreciation) on forward currency exchange contracts. Net realized gains and losses are recorded on the consolidated statements of operations in net realized gain (loss) on forward currency exchange contracts.

 

Realized gains and losses on forward currency exchange contracts are determined using the difference between the fair market value of the forward currency exchange contract at the time it was opened and the fair market value at the time it was closed or covered. Additionally, losses, up to the fair value, may arise if the counterparties do not perform under the contract terms.

 

31

 

 

Deferred Financing Costs and Debt Issuance Costs

 

The Company records costs related to issuance of revolving debt obligations as deferred financing costs. These costs are deferred and amortized using the straight-line method over the stated maturity life of the obligation. The Company records costs related to the issuance of term debt obligations as debt issuance costs. These costs are deferred and amortized using the effective interest method. These costs are presented as a reduction to the outstanding principal amount of the term debt obligations on the consolidated statements of assets and liabilities. In the event that we modify or extinguish our debt before maturity, the Company follows the guidance in ASC Topic 470-50, Modification and Extinguishments. For modifications to or exchanges of our revolving debt obligations, any unamortized deferred financing costs related to lenders who are not part of the new lending group are expensed. For extinguishments of our term debt obligations, any unamortized debt issuance costs are deducted from the carrying amount of the debt in determining the gain or loss from the extinguishment.

 

Income Taxes

 

The Company has elected to be treated for U.S. federal income tax purposes as a RIC under the Code. So long as the Company maintains its status as a RIC, it will generally not be subject to corporate-level U.S. federal income taxes on any ordinary income or capital gains that it distributes at least annually as dividends to its stockholders. As a result, any tax liability related to income earned and distributed by the Company represents obligations of the Company’s stockholders and will not be reflected in the consolidated financial statements of the Company.

 

The Company intends to comply with the applicable provisions of the Code pertaining to RICs and to make distributions of taxable income sufficient to relieve it from substantially all federal income taxes. Accordingly, no provision for income taxes is required in the consolidated financial statements. For income tax purposes, distributions made to stockholders are reported as ordinary income, capital gains, non-taxable return of capital, or a combination thereof. The tax character of distributions paid to stockholders through September 30, 2021 may include return of capital, however, the exact amount cannot be determined at this point. The final determination of the tax character of distributions will not be made until the Company files our tax return for the tax year ending December 31, 2021. The character of income and gains that the Company distributes is determined in accordance with income tax regulations that may differ from GAAP. BCSF I, LLC, BCSF II-C, LLC, BCSF CFSH, LLC, BCSF CFS, LLC, BCC Middle Market CLO 2018-1, LLC, and BCC Middle Market CLO 2019-1, LLC are disregarded entities for tax purposes and are consolidated with the tax return of the Company.

 

The Company evaluates tax positions taken or expected to be taken in the course of preparing its consolidated financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are reversed and recorded as a tax benefit or expense in the current year. All penalties and interest associated with income taxes, if any, are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, on-going analyses of tax laws, regulations and interpretations thereof. Management has analyzed the Company’s tax positions and has concluded that no liability for unrecognized tax benefits related to uncertain tax positions on returns to be filed by the Company for all open tax years should be recorded. The Company identifies its major tax jurisdiction as the United States, and the Company is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months. As of September 30, 2021, the tax years that remain subject to examination are from 2017 forward.

 

Recent Accounting Pronouncements

 

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848),” which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848), which expanded the scope of Topic 848 to include derivative instruments impacted by discounting transition. ASU 2020-04 and ASU 2021-01 are effective for all entities through December 31, 2022. The expedients and exceptions provided by the amendments do not apply to contract modifications and hedging relationships entered into or evaluated after December 31, 2022, except for hedging transactions as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The Company is currently evaluating the impact of the adoption of ASU 2020-04 and 2021-01 on its consolidated financial statements.

 

32

 

 

Note 3. Investments

 

The following table shows the composition of the investment portfolio, at amortized cost and fair value as of September 30, 2021 (with corresponding percentage of total portfolio investments):

 

   As of September 30, 2021 
   Amortized Cost   Percentage of
Total Portfolio		   Fair Value   Percentage of
Total Portfolio		 
First Lien Senior Secured Loans  $1,918,761    80.6%  $1,887,186    80.1%
Equity Interest   164,443    6.9    160,886    6.8 
Second Lien Senior Secured Loan   117,213    4.9    116,238    4.9 
Subordinated Note Investment Vehicles (1)   105,873    4.5    105,873    4.5 
Equity Interest Investment Vehicles (1)   33,596    1.4    37,427    1.6 
Preferred equity   23,575    1.0    32,139    1.4 
Subordinated Debt   16,599    0.7    16,800    0.7 
Warrants   2    0.0    122    0.0 
Total  $2,380,062    100.0%  $2,356,671    100.0%

 

 

(1) Represents debt and equity investment in ISLP

 

The following table shows the composition of the investment portfolio, at amortized cost and fair value as of December 31, 2020 (with corresponding percentage of total portfolio investments):

 

   As of December 31, 2020 
   Amortized Cost   Percentage of
Total Portfolio		   Fair Value   Percentage of
Total Portfolio		 
First Lien Senior Secured Loans  $2,193,827    87.0%  $2,164,910    87.1%
Second Lien Senior Secured Loans   167,698    6.6    161,960    6.6 
Equity Interests   131,491    5.2    119,905    4.8 
Preferred Equity   29,723    1.2    37,713    1.5 
Warrants   —    0.0    —    0.0 
Total  $2,522,739    100.0%  $2,484,488    100.0%

 

The following table shows the composition of the investment portfolio by geographic region, at amortized cost and fair value as of September 30, 2021 (with corresponding percentage of total portfolio investments):

 

   As of September 30, 2021 
   Amortized Cost   Percentage of
Total Portfolio		   Fair Value   Percentage of
Total Portfolio		 
United States  $2,075,563    87.2%  $2,066,306    87.7%
Cayman Islands   109,626    4.6    94,899    4.0 
United Kingdom   72,789    3.1    73,926    3.1 
Germany   51,310    2.2    50,664    2.2 
Ireland   39,159    1.6    38,629    1.6 
Luxembourg   17,203    0.7    18,041    0.8 
Belgium   11,638    0.5    11,403    0.5 
Canada   1,985    0.1    2,018    0.1 
Israel   387    0.0    392    0.0 
Australia   217    0.0    219    0.0 
Sweden   185    0.0    174    0.0 
Total  $2,380,062    100.0%  $2,356,671    100.0%

 

33

 

 

The following table shows the composition of the investment portfolio by geographic region, at amortized cost and fair value as of December 31, 2020 (with corresponding percentage of total portfolio investments):

 

   As of December 31, 2020 
   Amortized Cost  

Percentage of

Total Portfolio  

   Fair Value  

Percentage of

Total Portfolio

 
United States  $2,094,741    83.0%  $2,055,861    82.7%
United Kingdom   106,768    4.2    110,706    4.5 
Cayman Islands   90,964    3.7    73,756    3.0 
Luxembourg   51,840    2.1    56,010    2.3 
Germany   38,773    1.5    43,085    1.7 
Israel   34,414    1.4    35,068    1.4 
Ireland   20,805    0.8    21,097    0.8 
Jersey   17,819    0.7    19,206    0.8 
Sweden   18,428    0.7    17,984    0.7 
Australia   14,099    0.6    15,707    0.6 
France   13,142    0.5    13,946    0.6 
Netherlands   11,036    0.4    11,479    0.5 
Canada   9,910    0.4    10,583    0.4 
Total  $2,522,739    100.0%  $2,484,488    100.0%

 

The following table shows the composition of the investment portfolio by industry, at amortized cost and fair value as of September 30, 2021 (with corresponding percentage of total portfolio investments):

 

   As of September 30, 2021 
   Amortized Cost   Percentage of
Total Portfolio		   Fair Value   Percentage of
Total Portfolio		 
Aerospace & Defense  $276,916    11.6%  $251,386    10.7%
High Tech Industries   203,362    8.6    203,940    8.7 
Consumer Goods: Non-Durable   189,737    8.0    192,221    8.2 
Services: Business   189,416    8.0    184,718    7.8 
Investment Vehicles (2)   139,469    5.9    143,300    6.1 
Healthcare & Pharmaceuticals   137,342    5.8    136,839    5.8 
Capital Equipment   117,078    4.9    117,526    5.0 
Construction & Building   107,452    4.5    108,323    4.6 
Transportation: Cargo   91,160    3.8    93,805    4.0 
Automotive   83,894    3.5    84,716    3.5 
FIRE: Insurance (1)   81,270    3.4    82,007    3.5 
Wholesale   78,460    3.3    80,253    3.4 
Energy: Oil & Gas   68,975    2.9    76,641    3.3 
Retail   74,988    3.2    75,530    3.2 
Transportation: Consumer   78,522    3.3    66,552    2.8 
Services: Consumer   63,948    2.7    65,728    2.8 
Consumer Goods: Durable   64,726    2.7    57,180    2.4 
Hotel, Gaming & Leisure   53,246    2.2    51,967    2.2 
Media: Diversified & Production   52,510    2.2    51,202    2.2 
Chemicals, Plastics & Rubber   47,271    2.0    48,569    2.1 
Telecommunications   39,895    1.7    40,439    1.7 
Media: Advertising, Printing & Publishing   49,587    2.1    39,902    1.7 
Media: Broadcasting and Subscription   29,161    1.2    29,679    1.3 
FIRE: Finance (1)   19,887    0.8    20,102    0.8 
Beverage, Food & Tobacco   7,766    0.3    19,882    0.8 
Consumer goods: Wholesale   14,923    0.6    14,919    0.6 
Banking   13,984    0.6    14,226    0.6 
Hospitality Holdings   5,000    0.2    5,000    0.2 
Containers, Packaging, & Glass   117    0.0    119    0.0 
Total  $2,380,062    100.0%  $2,356,671    100.0%

 

 

(1) Finance, Insurance, and Real Estate (“FIRE”).

(2) Represents debt and equity investment in ISLP.

 

34

 

 

The following table shows the composition of the investment portfolio by industry, at amortized cost and fair value as of December 31, 2020 (with corresponding percentage of total portfolio investments):

 

   As of December 31, 2020 
   Amortized Cost  

Percentage of

Total Portfolio

   Fair Value   Percentage of
Total Portfolio		 
Aerospace & Defense  $331,174    13.1%  $296,553    11.9%
High Tech Industries   294,046    11.7    295,486    11.9 
Healthcare & Pharmaceuticals   219,147    8.7    221,605    8.9 
Capital Equipment   188,123    7.5    193,287    7.8 
Consumer Goods: Non-Durable   190,216    7.5    189,229    7.5 
Services: Business   181,037    7.1    175,560    7.1 
Transportation: Cargo   118,320    4.7    118,352    4.8 
Construction & Building   105,567    4.2    104,999    4.2 
Services: Consumer   76,341    3.0    78,697    3.2 
Wholesale   78,248    3.1    78,042    3.1 
Chemicals, Plastics & Rubber   75,808    3.0    76,463    3.1 
Energy: Oil & Gas   68,198    2.7    68,807    2.7 
FIRE: Insurance (1)   65,017    2.6    67,125    2.7 
Automotive   66,470    2.6    66,100    2.7 
Transportation: Consumer   71,750    2.8    61,243    2.5 
Consumer Goods: Durable   59,399    2.3    58,065    2.3 
Hotel, Gaming & Leisure   52,389    2.1    49,893    2.0 
Media: Diversified & Production   47,810    1.9    48,470    2.0 
Media: Broadcasting & Subscription   43,299    1.7    45,036    1.8 
Media: Advertising, Printing & Publishing   47,143    1.9    41,140    1.7 
Retail   39,050    1.5    39,050    1.6 
Telecommunications   21,680    0.9    21,543    0.9 
Energy: Electricity   21,979    0.9    21,249    0.9 
Beverage, Food & Tobacco   12,087    0.5    21,024    0.8 
Banking   14,058    0.6    13,622    0.5 
Containers, Packaging, & Glass   11,659    0.5    11,781    0.5 
FIRE: Finance (1)   11,830    0.5    11,778    0.5 
FIRE: Real Estate (1)   10,894    0.4    10,289    0.4 
Total  $2,522,739    100.0%  $2,484,488    100.0%

 

 

(1) Finance, Insurance, and Real Estate (“FIRE”).

 

35

 

 

International Senior Loan Program, LLC

 

On February 9, 2021, the Company and Pantheon ("Pantheon"), a leading global alternative private markets manager, formed the International Senior Loan Program, LLC (“ISLP”), an unconsolidated joint venture. ISLP invests primarily in non-US first lien senior secured loans. ISLP was formed as a Delaware limited liability company. The Company and Pantheon committed to initially provide $138.3 million of debt and $43.9 million of equity capital, to ISLP. Equity contributions will be called from each member on a pro-rata basis, based on their equity commitments. Pursuant to the terms of the transaction, Pantheon invested $50.0 million to acquire a 29.5% stake in ISLP. The Company contributed debt investments of $317.1 million for a 70.5% stake in ISLP, and received a one-time gross distribution of $190.2 million in cash in consideration of contributing such investments. As of September 30, 2021, the Company’s investment in ISLP consisted of subordinated notes of $105.9 million, and equity interests of $37.4 million.

 

In future periods, the Company may sell certain of its investments or a participating interest in certain of its investments to ISLP. Since inception, the Company has sold $440.0 million of its investments to ISLP. The sale of the investments met the criteria set forth in ASC 860, Transfers and Servicing for treatment as a sale.

 

The Company has determined that ISLP is an investment company under ASC, Topic 946, Financial Services - Investment Companies; however, in accordance with such guidance, the Company will generally not consolidate its investment in a company other than a wholly or substantially owned investment company subsidiary, which is an extension of the operations of the Company, or a controlled operating company whose business consists of providing services to the Company. The Company does not consolidate its investments in ISLP as it is not a substantially wholly owned investment company subsidiary. In addition, the Company does not control ISLP due to the allocation of voting rights among ISLP members. The Company measures the fair value of ISLP in accordance with ASC Subtopic 820, Fair Value Measurements and Disclosures, using the net asset value (or its equivalent) as a practical expedient. The Company and Pantheon each appointed two members to ISLP's four-person Member Designees' Committee. All material decisions with respect to ISLP, including those involving its investment portfolio, require unanimous approval of a quorum of Member Designees' Committee.

 

As of September 30, 2021, ISLP had $395.8 million in debt investments, at fair value.

 

Additionally, ISLP, through a wholly-owned subsidiary, has entered into a $300.0 million senior secured revolving credit facility which bears interest at LIBOR (or an alternative risk-free interest rate index) plus 225 basis points with JP Morgan through its wholly-owned subsidiary, subject to leverage and borrowing base restrictions (the “ISLP Credit Facility”). The maturity date of the ISLP Credit Facility is February 9, 2026. As of September 30, 2021 the ISLP Credit Facility had $217.8 million of outstanding debt under the credit facility. As of September 30, 2021, the effective rate on the ISLP Credit Facility was 2.4% per annum.

 

Below is a summary of ISLP’s portfolio at fair value:

 

   As of September 30,
2021		 
Total investments  $395,802 
Weighted average yield on investments   6.6%
Number of borrowers in ISLP   23 
Largest portfolio company investment  $40,780 
Total of five largest portfolio company investments  $162,053 
Unfunded commitments  $97 

 

36

 

 

Below is a listing of ISLP’s individual investments as of:

 

International Senior Loan Program, LLC

Consolidated Schedule of Investments

As of September 30, 2021

(unaudited)

 

Currency  Industry  Portfolio Company  Investment
Type		  Spread Above
Index		  Interest
Rate		   Maturity
Date		  Principal/Shares    Cost   Market
Value		    % of
NAV		  
Australian Dollar                                           
   Healthcare & Pharmaceuticals  Datix Bidco Limited  First Lien Senior Secured Loan   BBSW+ 4.50%  4.65%  4/28/2025  AUD 4,169    3,288    3,007         
                        Healthcare & Pharmaceuticals Total   $3,288   $3,007      5.7 %
                                            
   Information Technology Services  LEAP Legal Software PTY Ltd  First Lien Senior Secured Loan   BBSY+ 5.75%  6.75%  9/12/2022  AUD 30,093    22,829    21,706         
                        Information Technology Services Total   $22,829   $21,706      40.8 %
                                            
   Media: Advertising, Printing & Publishing  TGI Sport Bidco Pty Ltd  First Lien Senior Secured Loan  BBSY+ 7.00%  7.50%  4/30/2026  AUD 9,610    6,874    6,932         
                        Media: Advertising, Printing & Publishing Total   $6,874   $6,932      13.1 % 
                                            
   Services: Consumer  Zeppelin BidCo Pty Limited  First Lien Senior Secured Loan   BBSY + 6.00%  6.12%  6/28/2024  AUD 20,415    16,034    14,725         
                        Services: Consumer Total   $16,034   $14,725      27.7 % 
                                            
                        Australian Dollar Total   $49,025   $46,370      87.3 % 
                                            
British Pounds                                           
   Healthcare & Pharmaceuticals  Datix Bidco Limited  First Lien Senior Secured Loan - Revolver  GBP LIBOR+ 7.75%  7.86%  10/28/2024  £ 12,013    16,916    16,170         
      Datix Bidco Limited  Second Lien Senior Secured Loan  LIBOR+ 4.50%  4.55%  4/27/2026  £ 963    1,323    1,296         
                        Healthcare & Pharmaceuticals Total   $18,239   $17,466      32.9 % 
                                            
   High Tech Industries  Armstrong Bidco Limited  First Lien Senior Secured Loan   GBP LIBOR+ 4.75%  5.00%  4/30/2025  £ 5,602    7,711    7,541         
                        High Tech Industries Total   $7,711   $7,541      14.2 % 
                                            
   Media: Diversified & Production  International Entertainment Investments Limited  First Lien Senior Secured Loan   GBP LIBOR+ 4.75%  4.85%  5/31/2023  £ 8,626    12,109    11,575         
                        Media: Diversified & Production Total   $12,109   $11,575      21.8 % 
                                            
   Services: Business  Comet Bidco Limited  First Lien Senior Secured Loan   GBP LIBOR+ 5.25%  5.42%  9/30/2024  £ 7,362    9,380    9,242         
      Opus2  First Lien Senior Secured Loan  GBP LIBOR+ 5.50%  5.83%  5/5/2028  £ 12,151    16,311    16,357         
                        Services: Business Total   $25,691   $25,599      48.2 % 
                                            
   Services: Consumer  Surrey Bidco Limited  First Lien Senior Secured Loan   GBP LIBOR+ 7.00%  7.50%  5/11/2026  £ 4,979    6,716    6,317         
                        Services: Consumer Total   $6,716   $6,317      11.9 % 
                                            
                        British Pounds Total   $70,466   $68,498      129.0 % 

 

37

 

 

Currency  Industry  Portfolio Company  Investment
Type		  Spread Above
Index		  Interest
Rate		   Maturity
Date		  Principal/Shares    Cost   Market
Value		    % of
NAV		  
Canadian Dollar                                           
   Media: Diversified & Production  9 Story Media Group Inc.  First Lien Senior Secured Loan - Revolver  CDOR+ 5.25%  6.25%  4/30/2026  CAD 149    20    20         
      9 Story Media Group Inc.  First Lien Senior Secured Loan   CDOR+ 5.50%  6.25%  4/30/2026  CAD 7,183    5,702    5,661         
                        Media: Diversified & Production Total   $5,722   $5,681      10.7 % 
                                            
   Retail  New Look Vision Group  First Lien Senior Secured Loan - Delayed Draw  LIBOR+ 5.50%  6.50%  5/26/2028  CAD 18,102    14,781    14,268         
                        Retail Total   $14,781   $14,268      26.9 % 
                                            
                        Canadian Dollar Total   $20,503   $19,949      37.6 % 
                                            
Danish Krone                                           
   High Tech Industries  VPARK BIDCO AB  First Lien Senior Secured Loan   CIBOR+ 4.00%  4.75%  3/10/2025  DKK 56,429    9,233    8,780         
                        High Tech Industries Total   $9,233   $8,780      16.5 % 
                                            
                        Danish Krone Total   $9,233   $8,780      16.5 % 
                                            
European Currency                                           
   Healthcare & Pharmaceuticals  Mendel Bidco, Inc.  First Lien Senior Secured Loan   EURIBOR+ 4.25%  4.25%  6/17/2027  € 9,933    12,028    11,493         
      Mertus 522. GmbH  First Lien Senior Secured Loan - Delayed Draw   EURIBOR+ 6.25%  6.25%  5/28/2026  € 12,999    15,673    15,042         
      Mertus 522. GmbH  First Lien Senior Secured Loan   EURIBOR+ 6.25%  6.25%  5/28/2026  € 22,244    26,818    25,738         
                        Healthcare & Pharmaceuticals Total   $54,519   $52,273      98.5 % 
                                            
   Media: Diversified & Production  9 Story Media Group Inc.  First Lien Senior Secured Loan   EURIBOR+ 5.25%  5.25%  4/30/2026  € 3,869    4,706    4,477         
      Aptus 1724 Gmbh  First Lien Senior Secured Loan   EURIBOR+ 6.00%  6.25%  2/23/2028  € 30,000    35,087    34,713         
                        Media: Diversified & Production Total   $39,793   $39,190      73.8 % 
                                            
   Services: Business  SumUp Holdings Luxembourg S.à.r.l.  First Lien Senior Secured Loan   EURIBOR+ 8.50%  10.00%  2/17/2026  € 21,000    25,026    24,299         
                        Services: Business Total   $25,026   $24,299      45.8 % 
                                            
                        European Currency Total   $119,338   $115,762      218.1 % 
                                            
Norwegian Krone                                           
   High Tech Industries  VPARK BIDCO AB  First Lien Senior Secured Loan   NIBOR+ 4.00%  4.75%  3/10/2025  NOK 73,280    8,651    8,370         
                        High Tech Industries Total   $8,651   $8,370      15.8 % 
                                            
                        Norwegian Krone Total   $8,651   $8,370      15.8 % 
                                            
U.S. Dollars                                           
   Automotive  CST Buyer Company  First Lien Senior Secured Loan   L+ 6.00%  7.00%  10/3/2025  $ 14,927    14,927    14,927         
      Cardo  First Lien Senior Secured Loan   L+ 6.00%  6.50%  5/12/2028  $ 9,653    9,557    9,653         
                        Automotive Total   $24,484   $24,580      46.3 % 
                                            
   Containers, Packaging, & Glass  Automate Intermediate Holdings II S.à r.l.  Second Lien Senior Secured Loan   L+ 7.75%  7.83%  7/22/2027  $ 11,752    11,672    11,752         
                        Containers, Packaging, & Glass Total   $11,672   $11,752      22.1 % 
                                            
   Healthcare & Pharmaceuticals  Golden State Buyer, Inc.  First Lien Senior Secured Loan   L+ 4.75%  5.50%  6/22/2026  $ 14,779    14,705    14,779         
                        Healthcare & Pharmaceuticals Total   $14,705   $14,779      27.8 % 
                                            
   High Tech Industries  CB Nike IntermediateCo Ltd  First Lien Senior Secured Loan - Revolver   L+ 4.75%  5.75%  10/31/2025  $ 4,384    4,384    4,384         
      CB Nike IntermediateCo Ltd  First Lien Senior Secured Loan   L+ 4.75%  5.75%  10/31/2025  $ 34,454    34,454    34,454         
      Utimaco, Inc.  First Lien Senior Secured Loan   L+ 4.00%  4.09%  8/9/2027  $ 14,701    14,701    14,701         
                        High Tech Industries Total   $53,539   $53,539      101.0 % 
                                            
   Services: Business  Chamber Bidco Limited  First Lien Senior Secured Loan   L+ 6.00%  6.50%  6/7/2028  $ 23,423    23,191    23,423         
                        Services: Business Total   $23,191   $23,423      44.1 % 
                                            
                        U.S. Dollars Total   $127,591   $128,073      241.3 %
                                            
                        Total   $404,807   $395,802      745.6 % 

 

38

 

 

Forward Foreign Currency Exchange Contracts          
              
Currency Purchased  Currency Sold  Counterparty  Settlement Date  Unrealized
Appreciation
(Depreciation) 		 
EURO 1,873  AUSTRALIAN DOLLARS 2,979  Goldman Sachs  10/21/2021  $18 
EURO 569  CANADIAN DOLLARS 849  Goldman Sachs  10/21/2021   (11)
EURO 874  DANISH KRONE 6,502  Goldman Sachs  10/21/2021   -
EURO 7,779  BRITISH POUNDS 6,644  Goldman Sachs  10/21/2021   56 
EURO 229  BRITISH POUNDS 196  Goldman Sachs  10/21/2021   2 
EURO 807  NORWEGIAN KRONE 8,443  Goldman Sachs  10/21/2021   (31)
EURO 13,511  US DOLLARS 15,987  Goldman Sachs  10/21/2021   (327)
EURO 2,137  US DOLLARS 2,510  Goldman Sachs  10/21/2021   (33)
US DOLLARS 8,584  AUSTRALIAN DOLLARS 11,533  Goldman Sachs  10/21/2021   249 
US DOLLARS 2,606  CANADIAN DOLLARS 3,287  Goldman Sachs  10/21/2021   10 
US DOLLARS 4,001  DANISH KRONE 25,170  Goldman Sachs  10/21/2021   77 
US DOLLARS 29,876  EURO 25,254  Goldman Sachs  10/21/2021   603 
US DOLLARS 35,665  EURO 2,850  Goldman Sachs  10/21/2021   974 
US DOLLARS 3,697  BRITISH POUNDS 25,722  Goldman Sachs  10/21/2021   (45)
US DOLLARS 1,045  BRITISH POUNDS 760  Goldman Sachs  10/25/2021   20 
US DOLLARS 3,340  NORWEGIAN KRONE 32,686  Goldman Sachs  10/25/2021   37 
            $1,599 

 

39

 

 

 

 

Below is the financial information for ISLP:

 

Selected Balance Sheet Information

 

   As of 
   September 30,
2021		 
Investments at fair value (cost - $404,807)  $395,802 
Cash   5,048 
Foreign cash   17,485 
Deferred financing costs   2,102 
Other assets   7,731 
Total assets  $428,168 
Debt  $217,837 
Subordinated notes payable to members   149,221 
Dividend payable   1,459 
Other payables   6,564 
Total liabilities  $375,081 
Members’ equity   53,087 
Total liabilities and members’ equity  $428,168 

 

Selected Statement of Operations Information

 

   For the Three
Months Ended		   For the Nine
Months Ended		 
   September 30,
2021		   September 30,
2021		 
Investment Income          
Interest Income  $6,055   $14,167 
Other   —    — 
Total investment income   6,055    14,167 
Expenses          
Interest and debt financing expenses   1,515    3,423 
Interest expense on members subordinated notes   3,242    7,686 
General and administrative expenses   457    1,215 
Total expenses   5,214    12,324 
Net investment income   841    1,843 
Net realized and unrealized gain (losses)          
Net realized gain (loss) on investments   (904)   (924)
Net realized gain (loss) on foreign currency transactions   843    3,509 
Net realized gain (loss) on forward contracts   330    1,524 
Net unrealized gain (loss) on foreign currency   4,279    9,148 
Net change in unrealized appreciation (depreciation) on forward contracts   1,169    1,599 
Net change in unrealized appreciation (depreciation) on investments   (5,228)   (9,005)
Net gain (loss) on investments   489    5,851 
Net increase (decrease) in members’ equity resulting from operations  $1,330   $7,694 

  

40

 

 

Note 4. Fair Value Measurements

 

Fair Value Disclosures

 

The following table presents fair value measurements of investments by major class, cash equivalents and derivatives as of September 30, 2021, according to the fair value hierarchy:

 

   Fair Value Measurements 
   Level 1   Level 2   Level 3   Measured at
Net Asset
Value (2)		   Total 
Investments:                    
First Lien Senior Secured Loans  $—   $104,369   $1,782,817    —   $1,887,186 
Equity Interests   —    —    160,886    —    160,886 
Second Lien Senior Secured Loans   —    12,443    103,795    —    116,238 
Subordinated Note in Investment Vehicles (1)   —    —    105,873    —    105,873 
Equity Interest in Investment Vehicles (1)   —    —         37,427    37,427 
Preferred Equity   —    —    32,139         32,139 
Subordinated Debt             16,800    —    16,800 
Warrants   —    —    122    —    122 
Total Investments  $—   $116,812   $2,202,432   $37,427   $2,356,671 
Cash equivalents  $87,318   $—   $—   $—   $87,318 
Forward currency exchange contracts (asset)  $—   $4,071   $—   $—   $4,071 

 

 

  (1) Represents debt and equity investment in ISLP.

 

  (2) In accordance with ASC Subtopic 820-10, Fair Value Measurements and Disclosures, or ASC 820-10, our equity investment in ISLP is measured using the net asset value per share (or its equivalent) as a practical expedient for fair value, have not been classified in the fair value hierarchy.

 

The following table presents fair value measurements of investments by major class, cash equivalents and derivatives as of December 31, 2020, according to the fair value hierarchy:

 

   Fair Value Measurements 
   Level 1   Level 2   Level 3   Total 
Investments:                    
First Lien Senior Secured Loans  $—   $213,760   $1,951,150   $2,164,910 
Second Lien Senior Secured Loans   —    21,619    140,341    161,960 
Equity Interests   —    —    119,905    119,905 
Preferred Equity   —    —    37,713    37,713 
Warrants   —    —    —    — 
Total Investments  $—   $235,379   $2,249,109   $2,484,488 
Cash equivalents  $54,952   $—   $—   $54,952 
Forward currency exchange contracts (liability)  $—   $22,614   $—   $22,614 

  

41

 

 

The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the nine months ended September 30, 2021:

 

   First Lien
Senior
Secured
Loans		   Equity
Interests		   Second
Lien
Senior
Secured
Loans		   Subordinated
Note in
Investment
Vehicles (2)		   Preferred
Equity		   Subordinated
Debt		   Warrants   Total
Investments		 
Balance as of January 1, 2021  $1,951,150   $119,905   $140,341   $—   $37,713   $—   $—   $2,249,109 
Purchases of investments and other adjustments to cost (1)   637,641    32,977    44,741    105,873    8,927    16,557    2    846,718 
Paid-in-kind interest   7,762    —    —    —    —    28    —    7,790 
Net accretion of discounts (amortization of premiums)   3,383    —    352    —    —    14    —    3,749 
Proceeds from principal repayments and sales of investments (1)   (843,804)   (24)   (86,598)   —    (22,096)   —    —    (952,522)
Net change in unrealized appreciation (depreciation) on investments   (13,937)   8,028    3,117    —    574    201    120    (1,897)
Net realized gains (losses) on investments   15,234    —    1,842    —    7,021    —    —    24,097 
Transfers out of Level 3   —    —    —    —    —    —    —    — 
Transfers to Level 3   25,388    —    —    —    —    —    —    25,388 
Balance as of September 30, 2021  $1,782,817   $160,886   $103,795   $105,873   $32,139   $16,800   $122   $2,202,432 
Change in unrealized appreciation (depreciation) attributable to investments still held at September 30, 2021  $(6,918)  $8,025   $3,878   $—   $578   $201   $120   $5,884 

  

 

(1) Includes reorganizations and restructuring of investments.

 

(2) Represents debt investment in ISLP.

 

Transfers between levels, if any, are recognized at the beginning of the quarter in which transfers occur. For the nine months ended September 30, 2021, transfers from Level 2 to Level 3 were primarily due to decreased price transparency. For the nine months ended September 30, 2021, transfers from Level 3 to Level 2 were primarily due to increased price transparency.

 

The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 investments for the nine months ended September 30, 2020:

 

   First Lien
Senior Secured
Loans		   First Lien
Last Out
Loans		   Second Lien
Senior Secured
Loans		   Subordinated
Debt		   Equity
Interests		   Preferred
Equity		   Warrants   Total
Investments		 
Balance as of January 1, 2020  $1,989,621   $29,300   $124,027   $15,000   $99,293   $24,318   $122   $2,281,681 
Purchases of investments and other adjustments to cost   339,482    2,561    —    —    24,100    10,104    —    376,247 
Paid-in-kind interest   2,858    88    —    —    —    67    —    3,013 
Net accretion of discounts (amortization of premiums)   3,475    54    288    35    —    —    —    3,852 
Proceeds from principal repayments and sales of investments   (256,113)   (14,308)   (4,420)   —    —    —    —    (274,841)
Net change in unrealized appreciation (depreciation) on investments   (40,313)   (699)   (4,757)   (35)   (16,020)   1,401    (122)   (60,545)
Net realized gains (losses) on investments   (126)   227    (4,115)   —    —    —    —    (4,014)
Transfers out of Level 3   (74,759)   —    (2,735)   —    —    —    —    (77,494)
Transfers to Level 3   29,578    —    7,604    —    —    —    —    37,182 
Balance as of September 30, 2020  $1,993,703   $17,223   $115,892   $15,000   $107,373   $35,890   $—   $2,285,081 
Change in unrealized appreciation (depreciation) attributable to investments still held at September 30, 2020  $(38,878)  $(512)  $(5,657)  $(35)  $(16,020)  $1,401   $(122)  $(59,823)

  

42

 

 

Transfers between levels, if any, are recognized at the beginning of the quarter in which transfers occur. For the nine months ended September 30, 2020, transfers from Level 2 to Level 3 were primarily due to decreased price transparency. For the nine months ended September 30, 2020, transfers from Level 3 to Level 2 were primarily due to increased price transparency.

 

Significant Unobservable Inputs

 

ASC 820 requires disclosure of quantitative information about the significant unobservable inputs used in the valuation of assets and liabilities classified as Level 3 within the fair value hierarchy. Disclosure of this information is not required in circumstances where a valuation (unadjusted) is obtained from a third-party pricing service and the information regarding the unobservable inputs is not reasonably available to the Company and as such, the disclosures provided below exclude those investments valued in that manner.

 

The valuation techniques and significant unobservable inputs used in Level 3 fair value measurements of assets as of September 30, 2021 were as follows:

 

   As of September 30, 2021     
   Fair Value
of Level 3
Assets (1)		   Valuation
Technique		  Significant
Unobservable
Inputs		  Range of Significant
Unobservable Inputs
(Weighted Average (2))
First Lien Senior Secured Loans  $1,527,632   Discounted Cash Flows  Comparative Yields   4.4%-17.9% (8.1 %)
First Lien Senior Secured Loans   73,298   Comparable Company Multiple  EBITDA Multiple   6.7x-7.6x (6.9 x)
First Lien Senior Secured Loans   19,041   Discounted Cash Flows  Discount Rate   10.0 %
First Lien Senior Secured Loans   9,831   Collateral Analysis  Recovery Rate   100.0 %
Second Lien Senior Secured Loans   89,611   Discounted Cash Flows  Comparative Yields   8.8%-13.6% (11.1 %)
Second Lien Senior Secured Loans   14,184   Comparable Company Multiple  EBITDA Multiple   12.8 x
Subordinated Debt   16,800   Discounted Cash Flows  Comparative Yields   11.4 %
Subordinated Note Investment Vehicles   105,873   Collateral Analysis  Recovery Rate   100 %
Equity Interests   93,393   Discounted Cash Flows  Discount Rate   10.0%-16.4% (15.1 %)
Equity Interests   47,397   Comparable Company Multiple  EBITDA Multiple   7.3x-23.5x (11.5 x)
Preferred Equity   9,746   Comparable Company Multiple  EBITDA Multiple   7.6x-13.0x (10.0 x)
Preferred Equity   17,394   Discounted Cash Flows  Discount Rate   10.0 %
Warrants   122   Comparable Company Multiple  EBITDA Multiple   7.6x-8.0x (8.0 x)
Total investments  $2,024,322             

   

 

(1) Included within the Level 3 assets of $2,202,432 is an amount of $178,110 for which the Advisor did not develop the unobservable inputs for the determination of fair value (examples include single source quotation and prior or pending transactions such as investments originated in the quarter or imminent payoffs).
(2) Weighted average is calculated by weighing the significant unobservable input by the relative fair value of each investment in the category.

 

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The Company used the income approach and market approach to determine the fair value of certain Level 3 assets as of September 30, 2021. The significant unobservable inputs used in the income approach are the comparative yield and discount rate. The comparative yield and discount rate are used to discount the estimated future cash flows expected to be received from the underlying investment. An increase/decrease in the comparative yield or discount rate would result in a decrease/increase, respectively, in the fair value. The significant unobservable inputs used in the market approach are the comparable company multiple and the recovery rate. The multiple is used to estimate the enterprise value of the underlying investment. An increase/decrease in the multiple would result in an increase/decrease, respectively, in the fair value. The recovery rate represents the extent to which proceeds can be recovered. An increase/decrease in the recovery rate would result in an increase/decrease, respectively, in the fair value.

 

The valuation techniques and significant unobservable inputs used in Level 3 fair value measurements of assets as of December 31, 2020 were as follows:

 

   As of December 31, 2020  
   Fair Value of
Level 3 Assets (1)		   Valuation
Technique		  Significant
Unobservable
Inputs		  Range of Significant
Unobservable Inputs
(Weighted Average(2))
First Lien Senior Secured Loans  $1,730,334   Discounted Cash Flows  Comparative Yields   4.7%-15.2% (7.7 )%
First Lien Senior Secured Loans   54,669   Comparable Company Multiple  EBITDA Multiple   7.5x-7.5x (7.5 x)
           Probability weighting
of alternative
outcomes		   33.3%-66.7 %
First Lien Senior Secured Loans   18,801   Discounted Cash Flows  Discount Rate   10.0%-10.0% (10.0 )%
First Lien Senior Secured Loans   17,907   Collateral Analysis  Recovery Rate   100 %
Second Lien Senior Secured Loans   103,764   Discounted Cash Flows  Comparative Yields   8.3%-15.7% (10.5 )%
Equity Interests   33,019   Comparable Company Multiple  EBITDA Multiple   7.0x-17.0x (10.0 x)
Equity Interests   78,780   Discounted Cash Flows  Discount Rate   10.0%-16.4% (15.4 )%
Preferred Equity   27,474   Comparable Company Multiple  EBITDA Multiple   7.8x-13.3x (11.5 x)
Preferred Equity   10,239   Discounted Cash Flows  Discount Rate   10.0 %
Warrants   —   Comparable Company Multiple  EBITDA Multiple   7.8 x
Total investments  $2,074,987             

  

 

(1) Included within the Level 3 assets of $2,249,109 is an amount of $174,122 for which the Advisor did not develop the unobservable inputs for the determination of fair value (examples include single source quotation and prior or pending transactions).
(2) Weighted average is calculated by weighing the significant unobservable input by the relative fair value of each investment in the category.

 

The Company used the income approach and market approach to determine the fair value of certain Level 3 assets as of December 31, 2020. The significant unobservable input used in the income approach is the comparative yield. The significant unobservable inputs used in the income approach are the comparative yield and discount rate. The comparative yield and discount rate are used to discount the estimated future cash flows expected to be received from the underlying investment. An increase/decrease in the comparative yield or discount rate would result in a decrease/increase, respectively, in the fair value. The significant unobservable input used in the market approach is the comparable company multiple. The multiple is used to estimate the enterprise value of the underlying investment. An increase/decrease in the multiple would result in an increase/decrease, respectively, in the fair value. The recovery rate represents the extent to which proceeds can be recovered. An increase/decrease in the recovery rate would result in an increase/decrease, respectively, in the fair value.

 

The fair values of the 2018-1 Notes (as defined in Note 6), which are categorized as Level 3 within the fair value hierarchy as of September 30, 2021 and December 31, 2020, approximate the carrying value of such notes. The fair value of the JPM Credit Facility (as defined in Note 6), which is categorized as Level 3 within the fair value hierarchy as of September 30, 2021 and December 31, 2020, approximates the carrying value of such facility. The fair values of the 2019-1 Debt (as defined in Note 6), which are categorized as Level 3 within the fair value hierarchy as of September 30, 2021 and December 31, 2020, approximate the carrying value of such debt. The fair values of the 2023 Notes (as defined in Note 6), which are categorized as Level 3 within the fair value hierarchy as of September 30, 2021 and December 31, 2020, approximate the carrying value of such notes. The fair values of the 2026 Notes (as defined in Note 6), which are categorized as Level 3 within the fair value hierarchy as of September 30, 2021, approximate the carrying value of such notes.

 

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Note 5. Related Party Transactions

 

Investment Advisory Agreement

 

The Company entered into the first amended and restated investment advisory agreement as of November 14, 2018 (the “Investment Advisory Agreement”) with the Advisor, pursuant to which the Advisor manages the Company’s investment program and related activities. On November 28, 2018, the Board, including a majority of the Independent Directors, approved a second amended and restated advisory agreement (the “Amended Advisory Agreement”) between the Company and BCSF Advisors, LP (“the Advisor”). On February 1, 2019, Shareholders approved the Amended Advisory Agreement which replaced the existing Investment Advisory Agreement.

 

Base Management Fee

 

The Company pays the Advisor a base management fee (the “Base Management Fee”), accrued and payable quarterly in arrears. The Base Management Fee is calculated at an annual rate of 1.5% (0.375% per quarter) of the average value of the Company’s gross assets (excluding cash and cash equivalents, but including assets purchased with borrowed amounts) at the end of each of the two most recently completed calendar quarters. Such amount shall be appropriately adjusted (based on the actual number of days elapsed relative to the total number of days in such calendar quarter) for any share issuance or repurchases by the Company during a calendar quarter. The Base Management Fee for any partial quarter will be appropriately prorated. Effective February 1, 2019, the base management fee has been revised to a tiered management fee structure so that the base management fee of 1.5% (0.375% per quarter) of the average value of the Company’s gross assets (excluding cash and cash equivalents, but including assets purchased with borrowed amounts) will continue to apply to assets held at an asset coverage ratio down to 200%, but a lower base management fee of 1.0% (0.25% per quarter) of the average value of the Company’s gross assets (excluding cash and cash equivalents, but including assets purchased with borrowed amounts) will apply to any amount of assets attributable to leverage decreasing the Company’s asset coverage ratio below 200%.

 

For the three months ended September 30, 2021 and 2020, management fees were $8.8 million and $8.9 million, respectively. For the nine months ended September 30, 2021 and 2020, management fees were $26.1 million and $26.3 million, respectively. For the three months ended September 30, 2021, no management fees were contractually or voluntarily waived. For the nine months ended September 30, 2021, no management fees were contractually waived and $4.8 million was voluntarily waived. For the three and nine months ended September 30, 2020, there was no contractual or voluntary waivers.

 

As of September 30, 2021, and December 31, 2020, management fees payable were $8.8 million and $6.3 million, respectively.

 

Incentive Fee

 

The incentive fee consists of two parts that are determined independently of each other such that one component may be payable even if the other is not.

  

The first part, the Incentive Fee based on income is calculated and payable quarterly in arrears as detailed below.

 

The second part, the capital gains incentive fee, is determined and payable in arrears as detailed below.

 

Incentive Fee on Pre-Incentive Fee Net Investment Income

 

Pre-incentive fee net investment income means interest income, dividend income and any other income (including any other fees such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies but excluding fees for providing managerial assistance) accrued during the calendar quarter, minus operating expenses for the quarter (including the Base Management Fee, any expenses payable under the Administration Agreement, and any interest expense and dividends paid on any 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 market discount, original issue discount (“OID”), debt instruments with PIK interest, preferred stock with PIK dividends and zero-coupon securities, accrued income that the Company has not yet received in cash.

 

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Pre-incentive fee net investment income does not include any realized or unrealized capital gains or losses or unrealized capital appreciation or depreciation. Because of the structure of the incentive fee, it is possible that the Company may pay an incentive fee in a quarter where the Company incurs a loss. For example, if the Company receives pre-incentive fee net investment income in excess of the Hurdle rate for a quarter, the Company will pay the applicable incentive fee even if the Company has incurred a loss in that quarter due to realized and unrealized capital losses.

 

Prior to the calendar quarter that commenced on January 1, 2019 the incentive on income was calculated as follows:

 

  (i) 15.0% of the pre-incentive fee net investment income for the current quarter prior to the IPO; or
     
  (ii) 17.5% of the pre-incentive fee net income for the current quarter after the IPO; and
     
  (i) 15.0% of all remaining pre-incentive fee net investment income above the “catch-up” prior to the IPO, or
     
  (ii) 17.5% of all remaining pre-incentive fee net investment income above the “catch-up” after the IPO.

 

Beginning with the calendar quarter that commenced on January 1, 2019, the incentive fee based on income is calculated and payable quarterly in arrears based on the aggregate pre-incentive fee net investment income in respect of the current calendar quarter and the eleven preceding calendar quarters beginning with the calendar quarter that commenced on or after January 1, 2019 (or the appropriate portion thereof in the case of any of the Company’s first eleven calendar quarters that commence on or after January 1, 2019) (in either case, the “Trailing Twelve Quarters”). This calculation is referred to as the “Three-Year Lookback.”

 

With respect to any calendar quarter that commenced on or after January 1, 2019, pre-incentive fee net investment income in respect of the relevant Trailing Twelve Quarters is compared to a “Hurdle Amount” equal to the product of (i) the hurdle rate of 1.5% per quarter (6% annualized) and (ii) the sum of our net assets (defined as total assets less indebtedness and before taking into account any incentive fees payable during the period) at the beginning of each applicable calendar quarter comprising the relevant Trailing Twelve Quarters. The Hurdle Amount will be calculated after making appropriate adjustments to our NAV at the beginning of each applicable calendar quarter for our subscriptions (which shall include all issuances by us of shares of our Common Stock, including issuances pursuant to the Company’s dividend reinvestment plan) and distributions during the applicable calendar quarter.

 

Commencing on January 1, 2019, the quarterly incentive fee based on income is calculated, subject to the Incentive Fee Cap (as defined below), based on the amount by which (A) aggregate pre-incentive fee net investment income in respect of the relevant Trailing Twelve Quarters exceeds (B) the Hurdle Amount for such Trailing Twelve Quarters. The amount of the excess of (A) over (B) described in this paragraph for such Trailing Twelve Quarters is referred to as the “Excess Income Amount.” The incentive fee based on income that is paid to the Advisor in respect of a particular calendar quarter will equal the Excess Income Amount less the aggregate incentive fees based on income that were paid to the Advisor in the preceding eleven calendar quarters (or portion thereof) comprising the relevant Trailing Twelve Quarters.

 

The incentive fee based on income for each calendar quarter is determined as follows:

 

  (i) No incentive fee based on income is payable to the Advisor for any calendar quarter for which there is no Excess Income Amount;
     
  (ii) 100% of the aggregate pre-incentive fee net investment income in respect of the Trailing Twelve Quarters with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the Hurdle Amount, but is less than or equal to an amount, which the Company refers to as the “Catch-up Amount,” determined as the sum of 1.8182% multiplied by our NAV at the beginning of each applicable calendar quarter comprising the relevant Trailing Twelve Quarters; and
     
  (iii) 17.5% of the aggregate pre-incentive fee net investment income in respect of the Trailing Twelve Quarters that exceeds the Catch-up Amount.

 

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Incentive Fee Cap 

 

With respect to any calendar quarter that commences on or after January 1, 2019, the incentive fee based on income is subject to a cap (the “Incentive Fee Cap”). The Incentive Fee Cap in respect of any calendar quarter is an amount equal to 17.5% of the Cumulative Net Return (as defined below) during the relevant Trailing Twelve Quarters less the aggregate incentive fees based on income that were paid to the Advisor in the preceding eleven calendar quarters (or portion thereof) comprising the relevant Trailing Twelve Quarters.

 

“Cumulative Net Return” during the relevant Trailing Twelve Quarters means (x) the pre-incentive fee net investment income in respect of the relevant Trailing Twelve Quarters less (y) any Net Capital Loss, if any, in respect of the relevant Trailing Twelve Quarters. If, in any quarter, the Incentive Fee Cap is zero or a negative value, the Company will pay no incentive fee based on income to the Advisor in respect of that quarter. If, in any quarter, the Incentive Fee Cap for such quarter is a positive value but is less than the incentive fee based on income that is payable to the Advisor for such quarter calculated as described above, the Company will pay an incentive fee based on income to the Advisor equal to the Incentive Fee Cap in respect of such quarter. If, in any quarter, the Incentive Fee Cap for such quarter is equal to or greater than the incentive fee based on income that is payable to the Advisor for such quarter calculated as described above, the Company will pay an incentive fee based on income to the Advisor equal to the incentive fee calculated as described above for such quarter without regard to the Incentive Fee Cap.

 

“Net Capital Loss” in respect of a particular period means the difference, if positive, between (i) aggregate capital losses, whether realized or unrealized, in respect of such period and (ii) aggregate capital gains, whether realized or unrealized, in respect of such period.

 

For the three months ended September 30, 2021 and 2020, the Company incurred $4.5 million and $0.0 million, respectively, of income incentive fees (before waivers), which are included in incentive fees on the consolidated statements of operations. None of the income incentive fees earned by the Advisor during the three months ended September 30, 2021 and 2020, respectively, were voluntarily waived by the Advisor. Such income incentive fee waiver is irrevocable and such waived income incentive fees will not be subject to recoupment in future periods. This income incentive fee waiver does not impact any income incentive fees earned by the Advisor in future periods.

 

For the nine months ended September 30, 2021 and 2020, the Company incurred $19.3 million and $0.0 million, respectively, of income incentive fees (before waivers), which are included in incentive fees on the consolidated statements of operations. The Advisor has voluntarily waived $4.5 million and $0.0 million, respectively, of the income incentive fees earned by the Advisor during the nine months ended September 30, 2021 and 2020. Such income incentive fee waiver is irrevocable and such waived income incentive fees will not be subject to recoupment in future periods. This income incentive fee waiver does not impact any income incentive fees earned by the Advisor in future periods.

 

As of September 30, 2021 and December 31, 2020, there was $4.5 million and $3.8 million, respectively, related to the income incentive fee accrued in incentive fee payable on the consolidated statements of assets and liabilities

 

Annual Incentive Fee Based on Capital Gains

 

The second part of the incentive fee is a capital gains incentive fee that will be determined and payable in arrears in cash as of the end of each fiscal year (or upon termination of the Amended Advisory Agreement, as of the termination date), and equals (i) 15% of our realized capital gains as of the end of the fiscal year prior to the IPO, and (ii) 17.5% of our realized capital gains as of the end of the fiscal year after the IPO. In determining the capital gains incentive fee payable to the Advisor, the Company calculates the cumulative aggregate realized capital gains and cumulative aggregate realized capital losses since our inception, and the aggregate unrealized capital depreciation as of the date of the calculation, as applicable, with respect to each of the investments in our portfolio. For this purpose, cumulative aggregate realized capital gains, if any, equals the sum of the differences between the net sales price of each investment, when sold, and the cost of such investment. Cumulative aggregate realized capital losses equals the sum of the amounts by which the net sales price of each investment, when sold, is less than the cost of such investment. Aggregate unrealized capital depreciation equals the sum of the difference, if negative, between the valuation of each investment as of the applicable calculation date and the cost of such investment. At the end of the applicable year, the amount of capital gains that serves as the basis for our calculation of the capital gains incentive fee equals the cumulative aggregate realized capital gains less cumulative aggregate realized capital losses, less aggregate unrealized capital depreciation, with respect to our portfolio of investments. If this number is positive at the end of such year, then the capital gains incentive fee for such year will equal 15% before the IPO or 17.5% after the IPO, as applicable, of such amount, less the aggregate amount of any capital gains incentive fees paid in respect of our portfolio in all prior years.

 

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Because the IPO occurred on a date other than the first day of a fiscal year, a capital gains incentive fee was calculated as of the day before the IPO, with such capital gains incentive fee paid to the Advisor following the end of the fiscal year in which the IPO occurred. For the avoidance of doubt, such capital gains incentive fee was equal to 15% of the Company’s realized capital gains on a cumulative basis from inception through the day before the IPO, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gains incentive fees. Following the IPO, solely for the purposes of calculating the capital gains incentive fee, the Company will be deemed to have previously paid capital gains incentive fees prior to the IPO equal to the product obtained by multiplying (a) the actual aggregate amount of previously paid capital gains incentive fees for all periods prior to the IPO by (b) the percentage obtained by dividing (x) 17.5% by (y) 15%. In the event that the Amended Advisory Agreement shall terminate as of a date that is not a fiscal year end, the termination date shall be treated as though it were a fiscal year end for purposes of calculating and paying a capital gains incentive fee.

 

There was no capital gains incentive fee payable to the Advisor under the Amended Advisory Agreement as of September 30, 2021 and December 31, 2020.

 

US GAAP requires that the incentive fee accrual consider the cumulative aggregate unrealized capital appreciation of investments or other financial instruments in the calculation, as an incentive fee would be payable if such unrealized capital appreciation were realized, even though such unrealized capital appreciation is not permitted to be considered in calculating the fee actually payable under the Amended Advisory Agreement (“GAAP Incentive Fee”). There can be no assurance that such unrealized appreciation will be realized in the future. Accordingly, such fee, as calculated and accrued, would not necessarily be payable under the Amended Advisory Agreement, and may never be paid based upon the computation of incentive fees in subsequent period.

 

For the three months ended September 30, 2021 and 2020, the Company incurred no incentive fees related to the GAAP Incentive Fee. For the nine months ended September 30, 2021 and 2020, the Company incurred no incentive fees related to the GAAP Incentive Fee. As of September 30, 2021 and December 31, 2020 there were no amounts related to the GAAP Incentive Fee accrued in incentive fee payable on the consolidated statements of assets and liabilities, respectively.

 

Administration Agreement

 

The Company has entered into an administration agreement (the “Administration Agreement”) with the advisor pursuant to which the Administrator will provide the administrative services necessary for us to operate, and the Company will utilize the Administrator’s office facilities, equipment and recordkeeping services. Pursuant to the Administration Agreement, the Administrator has agreed to oversee our public reporting requirements and tax reporting and monitor our expenses and the performance of professional services rendered to us by others. The Administrator has also hired a sub-administrator to assist in the provision of administrative services. The Company will reimburse the Administrator for its costs and expenses and our allocable portion of overhead incurred by it in performing its obligations under the Administration Agreement, including certain compensation paid to or compensatory distributions received by our officers (including our Chief Compliance Officer and Chief Financial Officer) and any of their respective staff who provide services to us, operations staff who provide services to us, and internal audit staff, if any, to the extent internal audit performs a role in our Sarbanes-Oxley internal control assessment. Our allocable portion of overhead will be determined by the Administrator, which expects to use various methodologies such as allocation based on the percentage of time certain individuals devote, on an estimated basis, to the business and affairs of the Company, and will be subject to oversight by the Board. The Company did not incur any expenses related to the Administrator for the three months ended September 30, 2021 and 2020, respectively, which is included in other general and administrative expenses on the consolidated statements of operations. The Company did not incur any expenses related to the Administrator for the nine months ended September 30, 2021 and 2020, respectively, which is included in other general and administrative expenses on the consolidated statements of operations. As of September 30, 2021 and December 31, 2020, there were no expenses related to the Administrator that were payable and included in “accounts payable and accrued expenses” in the consolidated statements of assets and liabilities, respectively. The sub-administrator is paid its compensation for performing its sub-administrative services under the sub-administration agreement. The Company incurred expenses related to the sub-administrator of $0.2 million and $0.1 million for the three months ended September 30, 2021 and 2020, respectively, which is included in other general and administrative expenses on the consolidated statements of operations. The sub-administrator is paid its compensation for performing its sub-administrative services under the sub-administration agreement. The Company incurred expenses related to the sub-administrator of $0.4 million and $0.4 million for the nine months ended September 30, 2021 and 2020, respectively, which is included in other general and administrative expenses on the consolidated statements of operations. The Administrator will not seek reimbursement in the event that any such reimbursements would cause any distributions to our stockholders to constitute a return of capital. In addition, the Administrator is permitted to delegate its duties under the Administration Agreement to affiliates or third parties and the Company will reimburse the expenses of these parties incurred and paid by the Advisor on our behalf.

 

48

 

 

Resource Sharing Agreement

 

The Company’s investment activities are managed by the Advisor, an investment adviser that is registered with the SEC under the Advisers Act. The Advisor is responsible for originating prospective investments, conducting research and due diligence investigations on potential investments, analyzing investment opportunities, negotiating and structuring our investments and monitoring our investments and portfolio companies on an ongoing basis.

 

The Advisor has entered into a Resource Sharing Agreement (the “Resource Sharing Agreement”) with Bain Capital Credit, LP (“Bain Capital Credit”), pursuant to which Bain Capital Credit provides the Advisor with experienced investment professionals (including the members of the Advisor’s Credit Committee) and access to the resources of Bain Capital Credit so as to enable the Advisor to fulfill its obligations under the Amended Advisory Agreement. Through the Resource Sharing Agreement, the Advisor intends to capitalize on the significant deal origination, credit underwriting, due diligence, investment structuring, execution, portfolio management and monitoring experience of Bain Capital Credit’s investment professionals. There can be no assurance that Bain Capital Credit will perform its obligations under the Resource Sharing Agreement. The Resource Sharing Agreement may be terminated by either party on 60 days’ notice, which if terminated may have a material adverse consequence on the Company’s operations.

 

Co-investments

 

The Company will invest alongside our affiliates, subject to compliance with applicable regulations and our allocation procedures. Certain types of negotiated co-investments will be made only in accordance with the terms of the exemptive order the Company received from the SEC initially on August 23, 2016, as amended on March 23, 2018 (the “Order”). Under the terms of the Order, a “required majority” (as defined in Section 57(o) of the 1940 Act) of our independent directors must be able to reach certain conclusions in connection with a co-investment transaction, including that (1) the terms of the proposed transaction are reasonable and fair to us and our stockholders and do not involve overreaching of 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 Board’s approved criteria. In certain situations where co-investment with one or more funds managed by the Advisor or its affiliates is not covered by the Order, the personnel of the Advisor or its affiliates will need to decide which funds will proceed with the investment. Such personnel will make these determinations based on policies and procedures, which are designed to reasonably ensure that investment opportunities are allocated fairly and equitably among affiliated funds over time and in a manner that is consistent with applicable laws, rules and regulations.

 

Revolving Advisor Loan

 

On March 27, 2020, the Company entered into an unsecured revolving loan agreement (the “Revolving Advisor Loan”) with BCSF Advisors, LP, the investment adviser of the Company. The Revolving Advisor Loan has a maximum credit limit of $50.0 million and a maturity date of March 27, 2023. The Revolving Advisor Loan accrues interest at the Applicable Federal Rate from the date of such loan until the loan is repaid in full. Please see Note 6 for additional details.

 

Related Party Commitments

 

As of September 30, 2021 and December 31, 2020, the Advisor held 487,845.07 and 487,574.03 shares of the Company’s common stock, respectively. An affiliate of the Advisor is the investment manager to certain pooled investment vehicles which are investors in the Company. Collectively, these investors held 12,875,920.66 and 12,875,920.66 shares of the Company at September 30, 2021 and December 31, 2020, respectively.

 

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Non-Controlled/Affiliate and Controlled Affiliate Investments

 

Transactions during the nine months ended September 30, 2021 in which the issuer was either an Affiliated Person or an Affiliated Person that the Company is deemed to Control are as follows:

 

Portfolio Company  Fair Value
as of
December 31,
2020		  Gross
Additions		  Gross
Reductions		  Change in
Unrealized
Gains
(Losses)		  Realized
Gains
(Losses)		  Fair Value
as of
September 30,
2021		  Dividend,
Interest, and
PIK
Income		  Other
Income
Non-Controlled/affiliate investment                                                                
ADT Pizza, LLC, Equity Interest (1)  $15,918  $-  $-  $3,609  $-  $19,527  $-  $-
Blackbrush Oil & Gas, L.P. Equity Interest (1)   -   -   -   -   -   -   -   -
Blackbrush Oil & Gas, L.P. Preferred Equity (1)   10,239   -   -   7,154   -   17,393   -   -
Blackbrush Oil & Gas, L.P. First Lien Senior Secured Loan   12,089   185   -   -   -   12,274   738   -
Direct Travel, Inc. First Lien Senior Secured Loan   4,404   286   -   -   -   4,690   328   -
Direct Travel, Inc. Equity Interest (1)   -   -   -   -   -   -   -   -
Direct Travel, Inc. First Lien Senior Secured Loan–Delayed Draw   2,588   200   -   (132)  -   2,656   228   -
Direct Travel, Inc. First Lien Senior Secured Loan–Delayed Draw   1,313   101   -   (67)  -   1,347   116   -
Direct Travel, Inc. First Lien Senior Secured Loan   44,212   3,402   -   (2,252)  -   45,362   3,905   -
Direct Travel, Inc. First Lien Senior Secured Loan–Delayed Draw   1,950   2,175   -   -   -   4,125   202   -
Direct Travel, Inc. First Lien Senior Secured Loan   202   -   -   -   -   202   11   -
Total Non-Controlled/affiliate investment  $92,915  $6,349  $-  $8,312  $-  $107,576  $5,528  $-

 

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Portfolio Company   Fair Value
as of
December 31,
2020		  Gross
Additions		  Gross
Reductions		  Change in
Unrealized
Gains
(Losses)		  Realized
Gains
(Losses)		  Fair Value
as of
September30,
2021		  Dividend,
Interest,
and PIK
Income		  Other
Income
Controlled affiliate investment                                         
ACC Holdco, LLC, Preferred Equity  $10,828  $-  $(10,828) $(3) $3  $-  $2,306  $-
Air Comm Corporation LLC, First Lien Senior Secured Loan   26,484   661   (27,023)  (122)  -   -   1,948   -
BCC Jetstream Holdings Aviation (On II), LLC, Equity Interest   629   -   -   (629)  -   -   75   -
BCC Jetstream Holdings Aviation (On II), LLC, First Lien Senior Secured Loan   6,712   539   -   (484)  -   6,767   700   -
BCC Jetstream Holdings Aviation (Off I), LLC, Equity Interest   11,703   -   -   (917)  -   10,786   801   -
Gale Aviation (Offshore) Co, Equity Interest   66,448   2,962   -   2,759   -   72,169   4,186   -
International Senior Loan Program, LLC, Equity Interest Investment Vehicle   -   37,457   -   3,831   (3,861)  37,427   1,804   -
International Senior Loan Program, LLC, Subordinated Note Investment Vehicle   -   105,873   -   -   -   105,873   5,419   -
Lightning Holdings B, LLC - Equity Interest   7,308   3,142   -   (12)  -   10,438   -   -
Total Controlled affiliate investment  $130,112  $150,634  $(37,851) $4,423  $(3,858) $243,460  $17,239  $-
Total  $223,027  $156,983  $(37,851) $12,735  $(3,858) $351,036  $22,767  $-

 

 

  (1) Non-income producing.

 

51

 

 

Transactions during the year ended December 31, 2020 in which the issuer was either an Affiliated Person or an Affiliated Person that the Company is deemed to Control are as follows:

 

Portfolio Company  Fair Value
as of
December 31,
2019		  Gross
Additions		  Gross
Reductions		  Change in
Unrealized Gains
(Losses)		  Realized
Gains
(Losses)		  Fair Value
as of
December 31,
2020		  Dividend
and
Interest
Income		  Other
Income
Non-Controlled/affiliate investment                                
ADT Pizza, LLC, Equity Interest (1)  $6,720  $-  $-  $9,198  $-  $15,918  $-  $-
Blackbrush Oil & Gas, L.P. Equity Interest (1)   -   -   -   -   -   -   -   -
Blackbrush Oil & Gas, L.P. Preferred Equity (1)   -   10,104   -   135   -   10,239   -   -
Blackbrush Oil & Gas, L.P. First Lien Senior Secured Loan   -   12,089   -   -   -   12,089   321   -
Direct Travel, Inc. First Lien Senior Secured Loan   -   4,404   -   -   -   4,404   14   -
Direct Travel, Inc. Equity Interest (1)   -   -   -   -   -   -   -   -
Direct Travel, Inc. First Lien Senior Secured Loan–Delayed Draw   -   3,100   -   (512)  -   2,588   73   -
Direct Travel, Inc. First Lien Senior Secured Loan–Delayed Draw   -   1,572   -   (259)  -   1,313   37   -
Direct Travel, Inc. First Lien Senior Secured Loan   -   52,948   -   (8,736)  -   44,212   1,236   -
Direct Travel, Inc. First Lien Senior Secured Loan–Delayed Draw   -   1,950   -   -   -   1,950   28   -
Direct Travel, Inc. First Lien Senior Secured Loan   -   202   -   -   -   202   157   202
Total Non-Controlled/affiliate investment  $6,720  $86,369  $-  $(174) $-  $92,915  $1,866  $202

 

52

 

 

Portfolio Company  Fair Value
as of
December 31,
2019		  Gross
Additions		  Gross
Reductions		  Change in
Unrealized Gains
(Losses)		  Realized
Gains
(Losses)		  Fair Value
as of
December 31,
2020		  Dividend
and
Interest
Income		  Other
Income
Controlled affiliate investment                                
ACC Holdco, LLC, Preferred Equity  $10,828  $-  $-  $-  $-  $10,828  $868  $-
Air Comm Corporation LLC, First Lien Senior Secured Loan   27,161   121   (274)  (524)  -   26,484   2,290   4
BCC Jetstream Holdings Aviation (On II), LLC, Equity Interest   1,869   -   -   (1,240)  -   629   100   -
BCC Jetstream Holdings Aviation (On II), LLC, First Lien Senior Secured Loan   6,363   349   -   -   -   6,712   634   -
BCC Jetstream Holdings Aviation (Off I), LLC, Equity Interest   13,091   -   -   (1,388)  -   11,703   1,068   -
Gale Aviation (Offshore) Co, Equity Interest   57,773   26,648   -   (17,973)  -   66,448   6,500   -
Lightning Holdings B, LLC - Equity Interest   -   7,308   -   -   -   7,308   -   -
Total Controlled affiliate investment  $117,085  $34,426  $(274) $(21,125) $-  $130,112  $11,460  $4
Total  $123,805  $120,795  $(274) $(21,299) $-  $223,027  $13,326  $206

 

 

(1)Non-income producing.

 

Note 6. Debt

 

In accordance with applicable SEC staff guidance and interpretations, as a BDC, with certain exceptions, effective February 2, 2019, the Company is permitted to borrow amounts such that its asset coverage ratio is at least 150% after such borrowing (if certain requirements are met), rather than 200%, as previously required. As of September 30, 2021 and December 31, 2020, the Company’s asset coverage ratio based on aggregated borrowings outstanding was 181% and 173%, respectively.

 

The Company’s outstanding borrowings as of September 30, 2021 and December 31, 2020 were as follows:

 

    As of September 30 2021     As of December 31, 2020  
    Total
Aggregate
Principal
Amount
Committed		     Principal
Amount
Outstanding		     Carrying
Value (1)		     Total
Aggregate
Principal
Amount
Committed		     Principal
Amount
Outstanding		     Carrying
Value (1)		  

BCSF Revolving Credit

Facility

   $ -     $ -     $ -     $ 425,000     $ 257,774     $ 257,774  
2018-1 Notes     365,700       365,700       364,135       365,700       365,700       364,006  
JPM Credit Facility     450,000             179,733       179,733       450,000       293,283       293,283  
2019-1 Debt     398,750       398,750       396,437       398,750       398,750       396,265  
Revolving Advisor Loan     50,000       -       -       50,000       -       -  
2023 Notes     150,000        112,500       110,903       150,000       150,000       147,032  
2026 Notes     300,000       300,000        294,975       -       -       -  
Total Debt   $          1,714,450     $    1,356,683     $ 1,346,183     $ 1,839,450     $ 1,465,507     $ 1,458,360  

 

53

 

 

 

(1) Carrying value represents aggregate principal amount outstanding less unamortized debt issuance costs.

 

The combined weighted average interest rate (excluding deferred upfront financing costs and unused fees) of the aggregate borrowings outstanding for the nine months ended September 30, 2021 and year ended December 31, 2020 were 3.1% and 3.6%, respectively.

 

The following table shows the contractual maturities of our debt obligations as of September 30, 2021:

 

   Payments Due by Period 
   Total   Less than
1 year		   1 — 3 years   3 — 5 years   More than
5 years		 
2018-1 Notes  $365,700   $-   $-   $-   $365,700 
JPM Credit Facility   179,733    -    -    179,733    - 
2019-1 Debt   398,750    -    -    -    398,750 
2023 Notes   112,500    -    112,500    -    - 
2026 Notes   300,000    -    -    300,000    - 
Total Debt Obligations  $1,356,683   $-   $112,500   $479,733   $764,450 

 

BCSF Revolving Credit Facility

 

On October 4, 2017, the Company entered into the revolving credit agreement (the “BCSF Revolving Credit Facility”) with us, as equity holder, BCSF I, LLC, a Delaware limited liability company and a wholly owned and consolidated subsidiary of the Company, as borrower, and Goldman Sachs Bank USA, as sole lead arranger (“Goldman Sachs”). The BCSF Revolving Credit Facility was subsequently amended on May 15, 2018 to reflect certain clarifications regarding margin requirements and hedging currencies. The maximum commitment amount under the BCSF Revolving Credit Facility is $500.0 million, and may be increased up to $750.0 million. Proceeds of the loans under the BCSF Revolving Credit Facility may be used to acquire certain qualifying loans and such other uses as permitted under the BCSF Revolving Credit Facility. The BCSF Revolving Credit Facility includes customary affirmative and negative covenants, including certain limitations on the incurrence of additional indebtedness and liens, as well as usual and customary events of default for revolving credit facilities of this nature.

 

On January 8, 2020, the Company entered into an amended and restated credit agreement of its BCSF Revolving Credit Facility. The amendment amended the existing credit facility to, among other things, modify various financial covenants, including removing a liquidity covenant and adding a net asset value covenant with respect to the Company, as sponsor.

 

On March 31, 2020, the Parties entered into Omnibus Amendment No. 1 to the amended and restated credit agreement. The amendment amended the existing credit facility to, among other things, provide for enhanced flexibility to purchase or contribute and borrow against revolving loans and delayed draw term loans, and to count certain additional assets in the calculation of collateral for the outstanding advances; increase the spread payable under the facility from 2.50% to 3.25% per annum; include additional events of default to the existing credit facility, including but not limited to, a qualified equity raise not effected on or prior to June 22, 2020; and, after June 22, 2020, require the Company to maintain at least $50.0 million of unencumbered liquidity or pay down the facility by at least $50.0 million.

 

On May 27, 2020, the Parties entered into Amendment No. 2 to the amended and restated credit agreement. The amendment amended the existing credit facility to, among other things, (i) permit the Company to incur a lien on assets purchased with the proceeds of the rights offering and (ii) remove the requirement that the Company maintain $50.0 million in unencumbered cash after the completion of the rights offering, instead requiring a pay down of $50.0 million within two business days after the closing of the rights offering, which was subsequently paid.

 

On August 14, 2020, the Parties entered into the second amended and restated credit agreement and the third amended and restated margining agreement (collectively, the “Amendment”), which amended and restated the terms of the existing credit facility (the “Amended and Restated Credit Facility”). The Amendment amends the existing credit facility to, among other things, (i) decrease the financing limit from $500.0 million to $425.0 million, (ii) decrease the interest rate on financing from LIBOR plus 3.25% per annum to LIBOR plus 3.00% per annum, and (iii) provide enhanced flexibility to contribute and borrow against revolving and delayed draw loans and modify certain other terms relating to collaterals.

 

54

 

 

 

Borrowings under the BCSF Revolving Credit Facility bear interest at LIBOR plus a margin. As of December 31, 2020, the BCSF Revolving Credit Facility was accruing interest expense at a rate of LIBOR plus 3.00%. The Company paid an unused commitment fee of 30 basis points (0.30%) per annum.

 

On March 11, 2021, the BCSF Revolving Credit Facility was terminated. The proceeds from the 2026 Notes were used to repay the total outstanding debt.

 

For the three months ended September 30, 2021 and 2020, the components of interest expense related to the BCSF Revolving Credit Facility were as follows:

 

   For the Three Months Ended
September 30,		 
   2021   2020 
Borrowing interest expense  $—   $2,823 
Unused facility fee   —    106 
Amortization of deferred financing costs and upfront commitment fees   —    297 
Total interest and debt financing expenses  $—   $3,226 

 

For the nine months ended September 30, 2021 and 2020, the components of interest expense related to the BCSF Revolving Credit Facility were as follows:

 

   For the Nine Months Ended
September 30,		 
   2021   2020 
Borrowing interest expense  $509   $12,428 
Unused facility fee   118    270 
Amortization of deferred financing costs and upfront commitment fees   —    830 
Total interest and debt financing expenses  $627   $13,528 

 

2018-1 Notes

 

On September 28, 2018 (the “2018-1 Closing Date”), we, through BCC Middle Market CLO 2018-1 LLC (the “2018-1 Issuer”), a Delaware limited liability company and a wholly owned and consolidated subsidiary of the Company, completed its $451.2 million term debt securitization (the “CLO Transaction”). The notes issued in connection with the CLO Transaction (the “2018-1 Notes”) are secured by a diversified portfolio of the 2018-1 Issuer consisting primarily of middle market loans, the majority of which are senior secured loans (the “2018-1 Portfolio”). At the 2018-1 Closing Date, the 2018-1 Portfolio was comprised of assets transferred from the Company and its consolidated subsidiaries. All transfers were eliminated in consolidation and there were no realized gains or losses recognized in the CLO Transaction.

 

The CLO Transaction was executed through a private placement of the following 2018-1 Notes:

 

2018-1 Notes  Principal Amount   Spread above Index  Interest rate at
September 30, 2021		 
Class A-1 A  $205,900   1.55% + 3 Month LIBOR   1.68%
Class A-1 B   45,000   1.50% + 3 Month LIBOR (first 24 months)   1.93%
        1.80% + 3 Month LIBOR (thereafter)     
Class A-2   55,100   2.15% + 3 Month LIBOR   2.28%
Class B   29,300   3.00% + 3 Month LIBOR   3.13%
Class C   30,400   4.00% + 3 Month LIBOR   4.13%
Total 2018-1 Notes   365,700         
Membership Interests   85,450   Non-interest bearing   Not applicable 
Total  $451,150         

 

The Class A-1 A, A-1 B, A-2, B and C 2018-1 Notes were issued at par and are scheduled to mature on October 20, 2030. The Company received 100% of the membership interests (the “Membership Interests”) in the 2018-1 Issuer in exchange for its sale to the 2018-1 Issuer of the initial closing date loan portfolio. The Membership Interests do not bear interest.

 

55

 

 

The Class A-1 A, A-1 B, A-2, B and C 2018-1 Notes are included in the consolidated financial statements. The Membership Interests are eliminated in consolidation.

 

The Company serves as portfolio manager of the 2018-1 Issuer pursuant to a portfolio management agreement between the Company and the 2018-1 Issuer. For so long as the Company serves as portfolio manager, the Company will not charge any management fee or subordinated interest to which it may be entitled.

 

During the reinvestment period (four years from the closing date of the CLO Transaction), pursuant to the indenture governing the 2018-1 Notes, all principal collections received on the underlying collateral may be used by the 2018-1 Issuer to purchase new collateral under the direction of the Company in its capacity as portfolio manager of the 2018-1 Issuer and in accordance with the 2018-1 Issuer’s investment strategy and the terms of the indenture.

 

The Company has agreed to hold on an ongoing basis the Membership Interests with an aggregate dollar purchase price of at least equal to 5% of the aggregate amount of all obligations issued by the 2018-1 Issuer for so long as the 2018-1 Notes remain outstanding.

 

The 2018-1 Issuer pays ongoing administrative expenses to the trustee, independent accountants, legal counsel, rating agencies and independent managers in connection with developing and maintaining reports and providing required services in connection with the administration of the 2018-1 Issuer.

 

As of September 30, 2021, there were 61 first lien and second lien senior secured loans with a total fair value of approximately $427.6 million and cash of $16.8 million securing the 2018-1 Notes. As of December 31, 2020, there were 60 first lien and second lien senior secured loans with a total fair value of approximately $424.0 million and cash of $11.1 million securing the 2018-1 Notes. Assets that are pledged as collateral for the 2018-1 Notes are not directly available to the creditors of the Company to satisfy any obligations of the Company other than the Company’s obligations under the indenture governing the 2018-1 Notes. Such assets are included in the Company’s consolidated financial statements. The creditors of the 2018-1 Issuer have received security interests in such assets and such assets are not intended to be available to the creditors of the Company (or an affiliate of the Company). The 2018-1 Portfolio must meet certain requirements, including asset mix and concentration, term, agency rating, collateral coverage, minimum coupon, minimum spread and sector diversity requirements in the indenture governing the 2018-1 Notes. As of September 30, 2021 and December 31, 2020, the Company was in compliance with its covenants related to the 2018-1 Notes.

 

Costs of $2.1 million were incurred in connection with debt securitization of the 2018-1 Notes by the 2018-1 Issuer which have been recorded as debt issuance costs and presented as a reduction to the outstanding principal amount of the 2018-1 Notes on the consolidated statements of assets and liabilities and are being amortized over the life of the 2018-1 Issuer using the effective interest method. The balance of the unamortized debt issuance costs related to the 2018-1 Issuer was $1.6 million and $1.7 million as of September 30, 2021 and December 31, 2020, respectively.

 

For the three months ended September 30, 2021 and 2020, the components of interest expense related to the 2018-1 Issuer were as follows:

 

   For the Three Months Ended
September 30,		 
   2021   2020 
Borrowing interest expense  $1,997   $2,246 
Amortization of debt issuance costs and upfront commitment fees   44    44 
Total interest and debt financing expenses  $2,041   $2,290 

 

For the nine months ended September 30, 2021 and 2020, the components of interest expense related to the 2018-1 Issuer were as follows:

 

   For the Nine Months Ended
September 30,		 
   2021   2020 
Borrowing interest expense  $6,042   $8,752 
Amortization of debt issuance costs and upfront commitment fees   130    130 
Total interest and debt financing expenses  $6,172   $8,882 

 

JPM Credit Facility

 

On April 30, 2019, the Company entered into a loan and security agreement (the “JPM Credit Agreement” or the “JPM Credit Facility”) as Borrower, with JPMorgan Chase Bank, National Association, as Administrative Agent, and Wells Fargo Bank, National Association as Collateral Administrator, Collateral Agent, Securities Intermediary and Bank. The facility amount under the JPM Credit Agreement was $666.6 million. Borrowings under the JPM Credit Facility bore interest at LIBOR plus 2.75%.

 

56

 

 

On January 29, 2020, the Company entered into an amended and restated loan and security agreement (the "Amended Loan and Security Agreement") as Borrower, with JPMorgan Chase Bank, National Association, as Administrative Agent, and Wells Fargo Bank, National Association as Collateral Administrator, Collateral Agent, Securities Intermediary and Bank. The Amended Loan and Security Agreement amended the Existing Loan and Security Agreement to, among other things, (1) decrease the financing limit under the agreement from $666.6 million to $500.0 million; (2) decrease the minimum facility amount from $466.6 million to $300.0 million period from January 29, 2020 to July 29, 2020 (the minimum facility amount will increase to $350.0 million after July 29, 2020 until the end of the reinvestment period); (3) decrease the interest rate on financing from 2.75% per annum over the applicable LIBOR to 2.375% per annum over the applicable LIBOR; and (4) extend the scheduled termination date of the agreement from November 29, 2022 to January 29, 2025.

 

On March 20, 2020, the Company entered into a second amended and restated loan and security agreement between the parties (the "Second Amended Loan and Security Agreement"). The Second Amended Loan and Security Agreement, among other things, provides flexibility to contribute and borrow against revolving loans, reduce the amount required to be reserved for unfunded revolvers and delayed draw obligations and decreases the financing limit by $50.0 million within 90 days or, based on the occurrence of certain events, such earlier period as may be set forth in the Second Amended Loan and Security Agreement. The Company shall pay to the Administrative Agent $50.0 million to the prepayment of Advances and the Financing Commitments shall be reduced by the amount of principal so prepaid on the earlier of two Business days following the closing of the Rights Offering and June 18, 2020, which the Company subsequently paid.

 

On July 2, 2020, the Company entered into a third amended and restated loan and security agreement with respect to the JPM Credit Agreement to, among other things, adjust the advance rates and make certain changes of an updating nature.

 

The facility amount under the JPM Credit Agreement is $450.0 million. Proceeds of the loans under the JPM Credit Facility may be used to acquire certain qualifying loans and such other uses as permitted under the JPM Credit Agreement. The period from the effective date of the amendment until January 29, 2023 is referred to as the reinvestment period and during such reinvestment period, the Borrower may request drawdowns under the JPM Credit Facility.

 

The maturity date is the earliest of: (a) January 29, 2025, (b) the date on which the secured obligations become due and payable following the occurrence of an event of default, (c) the date on which the advances are repaid in full and (d) the date after a market value cure failure occurs on which all portfolio investments have been sold and proceeds there from have been received by the Borrower. The stated maturity date of January 29, 2025 may be extended for successive one year periods by mutual agreement of the Borrower and the Administrative Agent.

 

The JPM Credit Agreement includes customary affirmative and negative covenants, including certain limitations on the incurrence of additional indebtedness and liens, as well as usual and customary events of default for revolving credit facilities of this nature.

 

Borrowings under the JPM Credit Facility bear interest at LIBOR plus a margin. As of September 30, 2021, the JPM Credit Facility was accruing interest expense at a rate of LIBOR plus 2.375%. The Company pays an unused commitment fee of between 37.5 basis points (0.375%) and 75 basis points (0.75%) per annum depending on the size of the unused portion of the facility. Interest is payable quarterly in arrears.

 

As of September 30, 2021 and December 31, 2020, there were $179.7 million and $293.3 million of borrowings under the JPM Credit Facility, respectively, and the Company was in compliance with the terms of the JPM Credit Facility.

 

For the three months ended September 30, 2021 and 2020, the components of interest expense related to the JPM Credit Facility were as follows:

 

   For the Three Months Ended
September 30,		 
   2021   2020 
Borrowing interest expense  $1,558   $2,444 
Unused facility fee   860    94 
Amortization of deferred financing costs and upfront commitment fees   65    65 
Total interest and debt financing expenses  $2,483   $2,603 

 

57

 

 

For the nine months ended September 30, 2021 and 2020, the components of interest expense related to the JPM Credit Facility were as follows:

 

   For the Nine Months Ended
September 30,		 
   2021   2020 
Borrowing interest expense  $3,977   $11,469 
Unused facility fee   3,204    310 
Amortization of deferred financing costs and upfront commitment fees   194    402 
Total interest and debt financing expenses  $7,375   $12,181 

 

2019-1 Debt

 

On August 28, 2019, the Company, through BCC Middle Market CLO 2019-1 LLC (the “2019-1 Issuer”), a Cayman Islands limited liability company and a wholly-owned and consolidated subsidiary of the Company, and BCC Middle Market CLO 2019-1 Co-Issuer, LLC (the “Co-Issuer” and, together with the Issuer, the “Co-Issuers”), a Delaware limited liability company, completed its $501.0 million term debt securitization (the “2019-1 CLO Transaction”). The notes issued in connection with the 2019-1 CLO Transaction (the “2019-1 Notes”) are secured by a diversified portfolio of the Co-Issuers consisting primarily of middle market loans, the majority of which are senior secured loans (the “2019-1 Portfolio”). The Co-Issuers also issued Class A-1L Loans (the “Loans” and, together with the 2019-1 Notes, the “2019-1 Debt”). The Loans are also secured by the 2019-1 Portfolio. At the 2019-1 closing date, the 2019-1 Portfolio was comprised of assets transferred from the Company and its consolidated subsidiaries. All transfers were eliminated in consolidation and there were no realized gains or losses recognized in the 2019-1 CLO Transaction.

 

2019-1 CLO Transaction was executed through a private placement of the following 2019-1 Debt:

 

2019-1 Debt   Principal Amount     Spread above Index   Interest rate at
September 30, 2021		  
Class A-1L   $ 50,000     1.70% + 3 Month LIBOR     1.83 %
Class A-1     222,500     1.70% + 3 Month LIBOR     1.83 %
Class A-2A     50,750     2.70% + 3 Month LIBOR     2.83 %
Class A-2B     13,000     4.23% (Fixed)     4.23 %
Class B     30,000     3.60% + 3 Month LIBOR     3.73 %
Class C     32,500     4.75% + 3 Month LIBOR     4.88 %
Total 2019-1 Debt     398,750              
Membership Interests     102,250     Non-interest bearing     Not applicable  
Total   $ 501,000              

 

The Loans and the Class A-1, A-2A, A-2B, and B Notes were issued at par. The Class C Notes were issued at a discount. The Notes are scheduled to mature on October 15, 2031. The Company received 100% of the membership interests (the “Membership Interests”) in the 2019-1 Issuer in exchange for its sale to the 2019-1 Issuer of the initial closing date loan portfolio. The Membership Interests do not bear interest.

 

The Loans and Class A-1, A-2A, A-2B, B, and C Notes are included in the consolidated financial statements of the Company. The Membership Interests are eliminated in consolidation.

 

The Company serves as portfolio manager of the 2019-1 Issuer pursuant to a portfolio management agreement between the Company and the 2019-1 Issuer. For so long as the Company serves as portfolio manager, the Company will not charge any management fee or subordinated interest to which it may be entitled.

 

During the reinvestment period, pursuant to the indenture and loan agreement governing the 2019-1 Notes and Loans, respectively, all principal collections received on the underlying collateral may be used by the 2019-1 Issuer to purchase new collateral under the direction of the Company in its capacity as portfolio manager of the 2019-1 Issuer and in accordance with the 2019-1 Issuer investment strategy and the terms of the indenture and loan agreement, as applicable.

 

The Company has agreed to hold on an ongoing basis the Membership Interests with an aggregate dollar purchase price at least equal to 5% of the aggregate amount of all obligations issued by the 2019-1 Co-Issuers for so long as the 2019-1 Debt remains outstanding.

 

58

 

 

The 2019-1 Issuer pays ongoing administrative expenses to the trustee, independent accountants, legal counsel, rating agencies and independent managers in connection with developing and maintaining reports, and providing required services in connection with the administration of the 2019-1 Issuer.

 

As of September 30, 2021, there were 62 first lien and second lien senior secured loans with a total fair value of approximately $455.4 million and cash of $41.0 million securing the 2019-1 Debt. As of December 31, 2020, there were 67 first lien and second lien senior secured loans with a total fair value of approximately $469.4 million and cash of $15.9 million securing the 2019-1 Debt. Assets that are pledged as collateral for the 2019-1 Debt are not directly available to the creditors of the Company to satisfy any obligations of the Company other than the Company’s obligations under the indenture and loan agreement governing the 2019-1 Debt. The creditors of the 2019-1 Co-Issuers have received security interests in such assets and such assets are not intended to be available to the creditors of the Company (or an affiliate of the Company). The 2019-1 Portfolio must meet certain requirements, including asset mix and concentration, term, agency rating, collateral coverage, minimum coupon, minimum spread and sector diversity requirements in the indenture and loan agreement governing the 2019-1 Debt. As of September 30, 2021, the Company was in compliance with its covenants related to the 2019-1 Debt.

 

Costs of the offering, including the discount of the Class C Notes, of $2.8 million were incurred in connection with debt securitization of the 2019-1 Debt by the 2019-1 Co-Issuers which have been recorded as debt issuance costs and presented as a reduction to the outstanding principal amount of the 2019-1 Debt on the consolidated statements of assets and liabilities and are being amortized over the life of the 2019-1 Issuer using the effective interest method. The balance of the unamortized debt issuance costs related to the 2019-1 Issuer was $2.3 million and $2.5 million as of September 30, 2021 and December 31, 2020, respectively.

 

For the three months ended September 30, 2021 and 2020, the components of interest expense related to the 2019-1 Co-Issuers were as follows:

 

   For the Three Months Ended
September 30,		 
   2021   2020 
Borrowing interest expense  $2,475   $2,755 
Amortization of debt issuance costs and upfront commitment fees   58    58 
Total interest and debt financing expenses  $2,533   $2,813 

 

For the nine months ended September 30, 2021 and 2020, the components of interest expense related to the 2019-1 Co-Issuers were as follows:

 

   For the Nine Months Ended
September 30,		 
   2021   2020 
Borrowing interest expense  $7,507   $10,490 
Amortization of debt issuance costs and upfront commitment fees   172    172 
Total interest and debt financing expenses  $7,679   $10,662 

 

Revolving Advisor Loan

 

On March 27, 2020, the Company entered into an unsecured revolving loan agreement (the “Revolving Advisor Loan”) with BCSF Advisors, LP, the investment adviser of the Company. The Revolving Advisor Loan has a maximum credit limit of $50.0 million and a maturity date of March 27, 2023. The Revolving Advisor Loan accrues interest at the Applicable Federal Rate from the date of such loan until the loan is repaid in full. As of September 30, 2021, there were no borrowings under the Revolving Advisor Loan.

 

For the three months ended September 30, 2021 and 2020, the components of interest expense related to the Revolving Advisor Loan were as follows:

 

   For the Three Months Ended
September 30,		 
   2021   2020 
Borrowing interest expense  $          —   $            — 
Total interest and debt financing expenses  $—   $— 

 

59

 

 

For the nine months ended September 30, 2021 and 2020, the components of interest expense related to the Revolving Advisor Loan were as follows:

 

   For the Nine Months Ended
September 30,		 
   2021   2020 
Borrowing interest expense  $     —   $           58 
Total interest and debt financing expenses  $—   $58 

 

2023 Notes

 

On June 10, 2020, the Company entered into a Master Note Purchase Agreement with institutional investors listed on the Purchaser Schedule thereto (the “Note Purchase Agreement”), in connection with the Company’s issuance of $150.0 million aggregate principal amount of its 8.50% senior unsecured notes due 2023 (the “2023 Notes”). The sale of the 2023 Notes generated net proceeds of approximately $146.4 million, including an offering discount of $1.5 million and debt issuance costs in connection with the transaction, including fees and commissions, of $2.1 million.

 

The 2023 Notes will mature on June 10, 2023 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 Note Purchase Agreement. The 2023 Notes will bear interest at a rate of 8.50% per year payable semi-annually on June 10 and December 10 of each year, commencing on December 10, 2020. As of September 30, 2021, the Company was in compliance with the terms of the Note Purchase Agreement governing the 2023 Notes.

 

On July 16, 2021 the Company repurchased $37.5 million of the 2023 Notes at a total cost of $39.5 million. This resulted in a realized loss on the extinguishment of debt of $2.5 million, which included a premium paid of $2.0 million and acceleration of unamortized debt issuance costs of $0.5 million.

 

As of September 30, 2021 and December 31, 2020, the components of the carrying value of the 2023 Notes were as follows:

 

   September 30,
2021		   December 31,
2020		 
Principal amount of debt  $112,500   $150,000 
Unamortized debt issuance cost   (960)   (1,785)
Original issue discount, net of accretion   (637)   (1,183)
Carrying value of 2023 Notes  $110,903   $147,032 

 

For the three months ended September 30, 2021 and 2020, the components of interest expense related to the 2023 Notes were as follows:

 

   For the Three Months Ended
September 30,		 
   2021   2020 
Borrowing interest expense  $2,520   $3,188 
Amortization of debt issuance cost   114    184 
Accretion of original issue discount   76    122 
Total interest and debt financing expenses  $2,710   $3,494 

 

For the nine months ended September 30, 2021 and 2020, the components of interest expense related to the 2023 Notes were as follows:

 

   For the Nine Months Ended
September 30,		 
   2021   2020 
Borrowing interest expense  $8,895   $3,932 
Amortization of debt issuance cost   477    222 
Accretion of original issue discount   316    149 
Total interest and debt financing expenses  $9,688   $4,303 

 

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2026 Notes

 

On March 10, 2021, the “Company and U.S. Bank National Association (the “Trustee”), entered into an Indenture (the “Base Indenture”) and First Supplemental Indenture (the “First Supplemental Indenture,” and together with the Base Indenture, the “Indenture”) between the Company and the Trustee. The First Supplemental Indenture relates to the Company’s issuance of $300.0 million aggregate principal amount of its 2.950% notes due 2026 (the “2026 Notes”).

 

The 2026 Notes will mature on March 10, 2026 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 2026 Notes bear interest at a rate of 2.950% per year payable semi-annually on March 10th and September 10th of each year, commencing on September 10, 2021. The 2026 Notes are 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 2026 Notes, rank pari passu with all existing and future unsecured unsubordinated indebtedness issued by the Company, rank 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 rank structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company’s subsidiaries, financing vehicles or similar facilities.

 

As of September 30, 2021 and December 31, 2020, the components of the carrying value of the 2026 Notes were as follows:

 

   September 30,
2021		   December 31,
2020		 
Principal amount of debt  $300,000   $— 
Unamortized debt issuance cost   (2,882)   — 
Original issue discount, net of accretion   (2,143)   — 
Carrying value of 2026 Notes  $294,975   $— 

 

For the three months ended September 30, 2021 and 2020, the components of interest expense related to the 2026 Notes were as follows (dollars in thousands):

 

   For the Three Months Ended
September 30,		 
   2021   2020 
Borrowing interest expense  $2,213   $— 
Amortization of debt issuance cost   163    — 
Amortization of original issue discount   122    — 
Total interest and debt financing expenses  $2,498   $— 

 

For the nine months ended September 30, 2021 and 2020, the components of interest expense related to the 2026 Notes were as follows (dollars in thousands):

 

   For the Nine Months Ended
September 30,		 
   2021   2020 
Borrowing interest expense  $4,942   $— 
Amortization of debt issuance cost   362    — 
Amortization of original issue discount   270    — 
Total interest and debt financing expenses  $5,574   $— 

 

Note 7. Derivatives

 

The Company is subject to foreign currency exchange rate risk in the normal course of pursuing its investment objectives. The value of foreign investments held by the Company may be significantly affected by changes in foreign currency exchange rates. The dollar value of a foreign security generally decreases when the value of the dollar rises against the foreign currency in which the security is denominated and tends to increase when the value of the dollar declines against such foreign currency.

 

The Company may enter into forward currency exchange contracts to reduce the Company’s exposure to foreign currency exchange rate fluctuations in the value of foreign currencies, as described in Note 2. The fair value of derivative contracts open as of September 30, 2021 and December 31, 2020 is included on the consolidated schedules of investments by contract. The Company had collateral receivables of $4.6 million and $4.9 million for September 30, 2021 and December 31, 2020, respectively with the counterparties on foreign currency exchange contracts. Collateral amounts posted are included in collateral on forward currency exchange contracts on the consolidated statements of assets and liabilities. Collateral payable is included in collateral payable on forward currency exchange contracts on the consolidated statements of assets and liabilities.

 

61

 

 

For the three and nine months ended September 30, 2021, the Company’s average U.S. dollar notional exposure to forward currency exchange contracts was $108.0 million and $213.5 million, respectively. For the three and nine months ended September 30, 2020, the Company’s average U.S. dollar notional exposure to forward currency exchange contracts was $276.5 million and $258.5 million, respectively.

 

By using derivative instruments, the Company is exposed to the counterparty’s credit risk—the risk that derivative counterparties may not perform in accordance with the contractual provisions offset by the value of any collateral received. The Company’s exposure to credit risk associated with counterparty non-performance is limited to collateral posted and the unrealized gains inherent in such transactions that are recognized in the consolidated statements of assets and liabilities. The Company minimizes counterparty credit risk through credit monitoring procedures, executing master netting arrangements and managing margin and collateral requirements, as appropriate.

 

The Company presents forward currency exchange contracts on a net basis by counterparty on the consolidated statements of assets and liabilities. The Company has elected not to offset assets and liabilities in the consolidated statements of assets and liabilities that may be received or paid as part of collateral arrangements, even when an enforceable master netting arrangement or other arrangement is in place that provides the Company, in the event of counterparty default, the right to liquidate collateral and the right to offset a counterparty’s rights and obligations.

 

The following table presents both gross and net information about derivative instruments eligible for offset in the consolidated statements of assets and liabilities as of September 30, 2021:

 

Counterparty  Account in the
consolidated
statements of
assets and liabilities		  Gross amount of
assets on the
consolidated
statements of
assets and liabilities		   Gross amount of
(liabilities) on the
consolidated
statements of
assets and liabilities		   Net amount of assets or
(liabilities)
presented on
the consolidated
statements of
assets and liabilities		   Cash Collateral
paid
(received) (1)		   Net
Amounts (2)		 
Bank of New York  Unrealized
appreciation on
forward currency
contracts		  $2,947   $(34)  $2,913   $—   $2,913 
Citi Bank  Unrealized
appreciation on
forward currency
contracts		  $1,470   $(312)  $1,158   $—   $1,158 

 

 

(1)  Amount excludes excess cash collateral paid.
   
(2)  Net amount represents the net amount due (to) from counterparty in the event of default based on the contractual set-off rights under the agreement. Net amount excludes any over-collateralized amounts.

 

The following table presents both gross and net information about derivative instruments eligible for offset in the consolidated statements of assets and liabilities as of December 31, 2020:

 

Counterparty  Account in the
consolidated
statements of
assets and liabilities		  Gross amount of
assets on the
consolidated
statements of
assets and liabilities		    Gross amount of
(liabilities) on the
consolidated
statements of
assets and liabilities		    Net amount of
assets or 
(liabilities) presented on
the consolidated statements of
assets and liabilities		    Cash Collateral
paid
(received)(1)		    Net
Amounts(2)		 
Bank of New York  Unrealized
depreciation on
forward currency
contracts		  $—   $(482)  $(482)  $482   $— 
Citibank  Unrealized
depreciation on
forward currency
contracts		  $—   $(2,525)  $(2,525)  $2,525   $— 
Goldman Sachs  Unrealized
depreciation on
forward currency
contracts		  $—   $(19,607)  $(19,607)  $—   $(19,607)

 

 

(1) Amount excludes excess cash collateral paid.
(2) Net amount represents the net amount due (to) from counterparty in the event of default based on the contractual set-off rights under the agreement. Net amount excludes any over-collateralized amounts.

 

62

 

 

The effect of transactions in derivative instruments to the consolidated statements of operations during the three months ended September 30, 2021 and 2020 was as follows:

 

   For the Three Months Ended
September 30,		 
   2021   2020 
Net realized gains (losses) on forward currency exchange contracts  $(2,085)  $(130)
Net change in unrealized appreciation (depreciation) on forward currency exchange contracts   6,080    (11,177)
Total net realized and unrealized gains (losses) on forward currency exchange contracts  $3,995   $(11,307)

 

Included in total net gains (losses) on the consolidated statements of operations is net gains (losses) of ($4.1) million and $11.5 million related to realized and unrealized gains and losses on investments, foreign currency holdings and non-investment assets and liabilities attributable to the changes in foreign currency exchange rates for the three months ended September 30, 2021 and 2020, respectively. Including the total net realized and unrealized gains (losses) on forward currency exchange contracts of $4.0 million and ($11.3) million, respectively, included in the above table, the net impact of foreign currency on total net gains (losses) on the consolidated statements of operations is ($0.1) million and $0.2 million for the three months ended September 30, 2021 and 2020, respectively.

 

The effect of transactions in derivative instruments to the consolidated statements of operations during the nine months ended September 30, 2021 and 2020 was as follows:

 

   For the Nine Months Ended
September 30,		 
   2021   2020 
Net realized gain (losses) on forward currency exchange contracts  $(23,773)  $6,472 
Net change in unrealized appreciation (depreciation) on forward currency exchange contracts   26,685    (7,921)
Total net realized and unrealized gains (losses) on forward currency exchange contracts  $2,912   $(1,449)

 

Included in total net gains (losses) on the consolidated statements of operations is net gains (losses) of ($6.0) million and $3.6 million related to realized and unrealized gains and losses on investments, foreign currency holdings and non-investment assets and liabilities attributable to the changes in foreign currency exchange rates for the nine months ended September 30, 2021 and 2020, respectively. Including the total net realized and unrealized gains (losses) on forward currency exchange contracts of $2.9 million and ($1.4) million, respectively, included in the above table, the net impact of foreign currency on total net gains (losses) on the consolidated statements of operations is ($3.1) million and $2.2 million for the nine months ended September 30, 2021 and 2020, respectively.

 

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Note 8. Distributions

 

The Company’s distributions are recorded on the record date. The following table summarizes distributions declared during the nine months ended September 30, 2021:

 

Date Declared  Record Date  Payment Date  Amount
Per Share		   Total
Distributions		 
February 18, 2021  March 31, 2021  April 30, 2021  $0.34   $21,951 
April 27, 2021  June 30, 2021  July 30, 2021  $0.34   $21,951 
July 29, 2021  September 30, 2021  October 29, 2021  $0.34   $21,951 
Total distributions declared        $1.02   $65,853 

 

The distributions declared during the nine months ended September 30, 2021 were derived from investment company taxable income and net capital gain, if any.

 

The Company’s distributions are recorded on the record date. The following table summarizes distributions declared during the nine months ended September 30, 2020:

 

Date Declared  Record Date  Payment Date  Amount
Per Share		   Total
Distributions		 
February 20, 2020  March 31, 2020  April 30, 2020  $0.41   $21,176 
May 4, 2020  June 30, 2020  July 30, 2020  $0.34   $21,951 
July 30, 2020  September 30, 2020  October 30, 2020  $0.34   $21,951 
Total distributions declared        $1.09   $65,078 

  

The distributions declared during the nine months ended September 30, 2020 were derived from investment company taxable income and net capital gain, if any.

 

The federal income tax characterization of distributions declared and paid for the fiscal year will be determined at fiscal year-end based upon the Company’s investment company taxable income for the full fiscal year and distributions paid during the full year.

 

Note 9. Common Stock/Capital

 

The Company has authorized 100,000,000,000 shares of its common stock with a par value of $0.001 per share. The Company has authorized 10,000,000,000 shares of its preferred stock with a par value of $0.001 per share. Shares of preferred stock have not been issued.

 

Prior to the IPO, the Company had issued 43,982,137.46 shares in the private placement of the Company’s common shares (the “Private Offering”). Each investor had entered into a separate subscription agreement relating to the Company’s common stock (the “Subscription Agreements”). Each investor had made a capital commitment to purchase shares of the Company’s common stock pursuant to the Subscription Agreements. Investors were required to make capital contributions to purchase shares of the Company’s common stock each time the Company delivered a drawdown notice, which were delivered at least 10 business days prior to the required funding date in an aggregate amount not to exceed their respective capital commitments. The number of shares to be issued to a stockholder was determined by dividing the total dollar amount of the contribution by a stockholder by the net asset value per share of the common stock as of the last day of the Company’s fiscal quarter or such other date and price per share as determined by the Board in accordance with the requirements of the 1940 Act. As of December 31, 2018, aggregate commitments relating to the Private Offering were $1.3 billion. All outstanding commitments related to these Subscription Agreements were cancelled due to the completion of the IPO on November 15, 2018. As of September 30, 2021 and December 31, 2020, BCSF Advisors, LP contributed in aggregate $8.9 million to the Company and received 487,845.07 shares of the Company and contributed $8.9 million to the Company and received 487,574.03 shares of the Company, respectively. At September 30, 2021 and December 31, 2020, BCSF Advisors, LP owned 0.76% and 0.76%, respectively, of the outstanding common stock of the Company.

 

On November 19, 2018, the Company closed its initial public offering (the “IPO”) issuing 7,500,000 shares of its common stock at a public offering price of $20.25 per share. Shares of common stock of the Company began trading on the New York Stock Exchange under the symbol “BCSF” on November 15, 2018. The offering generated proceeds, before expenses, of $147.3 million. All outstanding commitments were cancelled due to the completion of the initial public offering.

 

For the three months ended September 30, 2021 and 2020, there were no shares issued pursuant to the dividend reinvestment plan. For the nine months ended September 30, 2021 and 2020, there were no shares issued pursuant to the dividend reinvestment plan.

 

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BCSF Investments, LLC and certain individuals, including Michael A. Ewald, the Company’s Chief Executive Officer and a Managing Director of Bain Capital Credit; Jonathan S. Lavine, Co-Managing Partner of Bain Capital, LP and Founder and Chief Investment Officer of Bain Capital Credit; John Connaughton, Co-Managing Partner of Bain Capital, LP; Jeffrey B. Hawkins, Chairman of the Company’s Board of Directors and a Managing Director of Bain Capital Credit; and Michael J. Boyle, the Company’s Vice President and Treasurer and a Managing Director of Bain Capital Credit, adopted the 10b5-1 Plan in accordance with Rules 10b5-1 and 10b-18 under the Exchange Act, under which such parties would buy up to $20 million in the aggregate of the Company’s common stock in the open market during the period beginning after four full calendar weeks after the closing of the IPO and ending on the earlier of the date on which the capital committed to the 10b5-1 has been exhausted or one year after the closing of the IPO. As of December 31, 2020, zero dollars remain under the 10b5-1 Plan and no further purchases are intended under the 10b5-1 Plan.

 

On May 7, 2019, the Company’s Board of Directors authorized the Company to repurchase up to $50 million of its outstanding common stock in accordance with safe harbor rules under the Securities Exchange Act of 1934. Any such repurchases will depend upon market conditions and there is no guarantee that the Company will repurchase any particular number of shares or any shares at all. As of September 30, 2021, there have been no repurchases of common stock.

 

On May 4, 2020, the Company’s Board of Directors approved a transferable subscription rights offering to our stockholders of record as of May 13, 2020. The rights entitled record stockholders to subscribe for up to an aggregate of 12,912,453 shares of our common stock. Record stockholders received one right for each share of common stock owned on the record date. The rights entitled the holders to purchase one new share of common stock for every four rights held, and record stockholders who fully exercised their rights were entitled to subscribe, subject to certain limitations and allotment rules, for additional shares that remain unsubscribed as a result of any unexercised rights. The rights were transferable and on the New York Stock Exchange under the symbol “BCSF RT”. The rights offering expired June 5, 2020. Based on the terms of the offering and the market price of the stock during the applicable period, holders of rights participating in the offering were entitled to purchase one new share of common stock for every four rights held at a subscription price of $10.2163 per share. On June 16, 2020, the Company closed its transferrable rights offering and issued 12,912,453 shares. The offering generated net proceeds, before expenses, of $129.6 million, including the underwriting discount and commissions of $2.3 million.

 

Note 10. Commitments and Contingencies

 

Commitments

 

The Company’s investment portfolio may contain debt investments that are in the form of lines of credit and unfunded delayed draw commitments, which require the Company to provide funding when requested by portfolio companies in accordance with the terms of the underlying loan agreements.

 

As of September 30, 2021, the Company had $225.3 million of unfunded commitments under loan and financing agreements as follows:

 

   Expiration Date (1)   Unfunded Commitments (2) 
Portfolio Company & Investment          
9 Story Media Group Inc. - Revolver   4/30/2026   $1 
A&R Logistics, Inc. - Revolver   5/5/2025    3,281 
Abracon Group Holding, LLC - Revolver   7/18/2024    2,833 
Allworth Financial Group, L.P. - Delayed Draw   12/23/2026    3,042 
Allworth Financial Group, L.P. - Revolver   12/23/2026    2,440 
American Trailer Rental Group - Delayed Draw   12/1/2027    2,940 
AMI US Holdings Inc. - Revolver   4/1/2024    1,047 
Amspec Services, Inc. - Revolver   7/2/2024    4,817 
Ansira Holdings, Inc. - Revolver   12/20/2024    1,700 
Appriss Holdings, Inc. – Equity Interest   N/A    530 
Appriss Holdings, Inc. - Revolver   5/30/2025    3,547 
Appriss Holdings, Inc. - Revolver   5/6/2027    753 
Aramsco, Inc. - Revolver   8/28/2024    2,822 
Batteries Plus Holding Corporation - Revolver   7/6/2022    2,975 
Captain D's LLC - Revolver   12/15/2023    1,862 
CPS Group Holdings, Inc. - Revolver   3/3/2025    4,933 
CST Buyer Company - Revolver   10/3/2025    2,190 
DC Blox Inc. - First Lien Senior Secured Loan   3/22/2026    12,781 

 

65

 

 

   Expiration Date (1)   Unfunded Commitments (2) 
Direct Travel, Inc. - Delayed Draw   10/2/2023    2,625 
Efficient Collaborative Retail Marketing Company, LLC - Revolver   6/15/2022    2,267 
Element Buyer, Inc. - Revolver   7/19/2024    3,967 
Grammer Purchaser, Inc. - Revolver   9/30/2024    1,050 
Great Expressions Dental Center PC - Revolver   9/28/2022    578 
Green Street Parent, LLC - Revolver   8/27/2025    2,419 
GSP Holdings, LLC - Revolver   11/6/2025    2,947 
iBanFirst Revolving Facility - Revolver   7/13/2028    2,349 
JHCC Holdings, LLC - Revolver   9/9/2025    2,648 
Kellstrom Commercial Aerospace, Inc. - Revolver   7/1/2025    2,239 
Learning Pool Capex and Acquisition Facility 1 - First Lien Senior Secured Loan   7/7/2028    9,665 
Learning Pool Capex and Acquisition Facility 2 - First Lien Senior Secured Loan   7/7/2028    7,249 
Learning Pool Revolving Facility - Revolver   7/7/2027    2,416 
Margaux Acquisition Inc. - Revolver   12/19/2024    2,462 
Margaux UK Finance Limited - Revolver   12/19/2024    672 
masLabor Revolver - Revolver   7/1/2027    1,034 
MRHT Acquisition Facility - First Lien Senior Secured Loan   7/26/2029    579 
MRI Software LLC - Delayed Draw   2/10/2026    446 
MRI Software LLC - Revolver   2/10/2026    1,782 
MZR Buyer, LLC - Revolver   12/21/2026    5,210 
New Look Vision Group - Delayed Draw   5/26/2028    3,942 
New Look Vision Group - Revolver   5/26/2026    1,747 
Opus2 - Delayed Draw   5/5/2028    7,343 
Parcel2Go Acquisition Facility - First Lien Senior Secured Loan   7/15/2028    8,911 
Profile Products LLC - Revolver   12/20/2024    3,194 
Refine Intermediate, Inc. - Revolver   9/3/2026    5,340 
RoC Opco LLC - Revolver   2/25/2025    6,828 
Service Master Revolving Loan - Revolver   8/16/2027    3,510 
Solaray, LLC - Revolver   9/9/2022    10,427 
Sontiq, Inc. (fka EZShield, Inc.) - Revolver   3/1/2026    1,412 
SumUp Holdings Luxembourg S.à.r.l. - First Lien Senior Secured Loan   2/17/2026    7,573 
SunMed Group Holdings, LLC - Revolver   6/16/2027    836 
TA/Weg Holdings - Delayed Draw   10/2/2025    1,872 
TEI Holdings Inc. - Revolver   12/23/2025    3,621 
TGI Sport Bidco Pty Ltd - First Lien Senior Secured Loan   4/30/2027    3,005 
Tidel Engineering, L.P. - Revolver   3/1/2023    4,250 
TLC Purchaser, Inc. - Delayed Draw   10/13/2025    7,119 
TLC Purchaser, Inc. - Revolver   10/13/2025    2,492 
V Global Holdings LLC - Revolver   12/22/2025    7,885 
Ventiv Holdco, Inc. - Revolver   9/3/2025    3,407 
WCI-HSG Purchaser, Inc. - Revolver   2/24/2025    940 
Whitcraft LLC - Revolver   4/3/2023    1,812 
World Insurance - Delayed Draw   4/1/2026    2,309 
World Insurance - Revolver   4/1/2026    931 
WSP Initial Term Loan - First Lien Senior Secured Loan   4/27/2023    1,797 
WSP Revolving Loan - Revolver   4/27/2027    449 
WU Holdco, Inc. - First Lien Senior Secured Loan   3/26/2026    1,708 
WU Holdco, Inc. - Revolver   3/26/2025    3,043 
YLG Holdings, Inc. - Revolver   10/31/2025    8,545 
Total First Lien Senior Secured Loans       $225,346 

 

 

(1) Commitments are generally subject to borrowers meeting certain criteria such as compliance with covenants and certain operational metrics. These amounts may remain outstanding until the commitment period of an applicable loan expires, which may be shorter than its maturity.
   
(2) Unfunded commitments denominated in currencies other than U.S. dollars have been converted to U.S. dollars using the applicable foreign currency exchange rate as of September 30, 2021.

 

66

 

As of December 31, 2020, the Company had $189.9 million of unfunded commitments under loan and financing agreements as follows:

 

   Expiration Date (1)   Unfunded Commitments (2) 
First Lien Senior Secured Loans          
9 Story Media Group Inc. - Revolver   4/30/2026   $74 
A&R Logistics, Inc. - Revolver   5/5/2025    6,096 
Abracon Group Holding, LLC. - Revolver   7/18/2024    2,833 
Allworth Financial Group, L.P. - Delayed Draw   12/23/2026    3,042 
Allworth Financial Group, L.P. - Revolver   12/23/2026    2,440 
AMI US Holdings Inc. - Revolver   4/1/2024    488 
Amspec Services, Inc. - Revolver   7/2/2024    5,667 
Ansira Holdings, Inc. - Revolver   12/20/2024    1,700 
AP Plastics Group, LLC - Revolver   8/2/2021    5,667 
Appriss Holdings, Inc. - Revolver   5/30/2025    4,711 
Aramsco, Inc. - Revolver   8/28/2024    3,387 
Batteries Plus Holding Corporation - Revolver   7/6/2022    4,250 
Captain D’s LLC - Revolver   12/15/2023    490 
CB Nike IntermediateCo Ltd - Revolver   10/31/2025    4,428 
CMI Marketing Inc - Revolver   5/24/2023    2,112 
CPS Group Holdings, Inc. - Revolver   3/3/2025    4,933 
CST Buyer Company - Revolver   10/3/2025    2,190 
Datix Bidco Limited - Revolver   10/28/2024    1,328 
Direct Travel, Inc. - Delayed Draw   10/2/2023    4,800 
Dorner Manufacturing Corp - Revolver   3/15/2022    1,099 
Efficient Collaborative Retail Marketing Company, LLC - Revolver   6/15/2022    1,275 
Element Buyer, Inc. - Revolver   7/19/2024    3,967 
FFI Holdings I Corp - Delayed Draw   1/24/2025    3,156 
FFI Holdings I Corp - Revolver   1/24/2025    3,938 
Fineline Technologies, Inc. - Revolver   11/4/2022    2,633 
Grammer Purchaser, Inc. - Revolver   9/30/2024    1,050 
Great Expressions Dental Center PC - Revolver   9/28/2022    513 
Green Street Parent, LLC - Revolver   8/27/2025    2,419 
GSP Holdings, LLC - Revolver   11/6/2025    3,400 
JHCC Holdings, LLC - Delayed Draw   9/9/2025    6,262 
JHCC Holdings, LLC - Revolver   9/9/2025    1,272 
Kellstrom Commercial Aerospace, Inc. - Revolver   7/1/2025    1,066 
Margaux Acquisition Inc. - Revolver   12/19/2024    2,872 
Margaux UK Finance Limited - Revolver   12/19/2024    681 
MRI Software LLC - Delayed Draw   2/10/2026    731 
MRI Software LLC - Revolver   2/10/2026    1,782 
Profile Products LLC - Revolver   12/20/2024    3,003 
Refine Intermediate, Inc. – Revolver   9/3/2026    5,340 
RoC Opco LLC – Revolver   2/25/2025    10,241 
Solaray, LLC - Revolver   9/9/2022    5,327 
TA/WEG Holdings - Delayed Draw   10/2/2025    7,538 
TEI Holdings Inc. - Revolver   12/23/2025    1,055 
Thrasio - Delayed Draw   12/18/2026    12,522 
Tidel Engineering, L.P. - Revolver   3/1/2023    4,250 
TLC Purchaser, Inc. - Delayed Draw   10/13/2025    7,119 
TLC Purchaser, Inc. - Revolver   10/13/2025    8,900 
V Global - Revolver   12/22/2025    7,885 
Ventiv Holdco, Inc. - Revolver   9/3/2025    2,981 
WCI-HSG Purchaser, Inc. - Revolver   2/24/2025    1,612 
Whitcraft LLC - Revolver   4/3/2023    1,812 
WU Holdco, Inc. - Revolver   3/26/2025    3,043 
YLG Holdings, Inc. - Revolver   10/31/2025    8,545 
Total First Lien Senior Secured Loans       $189,925 

 

 

(1)Commitments are generally subject to borrowers meeting certain criteria such as compliance with covenants and certain operational metrics. These amounts may remain outstanding until the commitment period of an applicable loan expires, which may be shorter than its maturity.
  
(2)Unfunded commitments denominated in currencies other than U.S. dollars have been converted to U.S. dollars using the applicable foreign currency exchange rate as of December 31, 2020.

 

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Contingencies

 

In the normal course of business, the Company may enter into certain contracts that provide a variety of indemnities. The Company’s maximum exposure under these indemnities is unknown as it would involve future claims that may be made against the Company. Currently, the Company is not aware of any such claims and no such claims are expected to occur. As such, the Company does not consider it necessary to record a liability in this regard.

 

Note 11. Financial Highlights

 

The following is a schedule of financial highlights for the nine months ended September 30, 2021 and 2020:

 

   For the Nine months Ended
September 30,		 
   2021   2020 
Per share data:          
Net asset value at beginning of period  $16.54   $19.72 
Net investment income (1)   1.02    1.13 
Net realized gain (loss) (1) (7)   (0.15)   (0.50)
Net change in unrealized appreciation (depreciation) (1) (2) (8)   0.64    (1.18)
Net increase (decrease) in net assets resulting from operations (1) (9) (10)   1.51    (0.55)
Stockholder distributions from income (3)   (1.02)   (1.09)
Dilution due to issuance of common stock   —    (1.81)
Net asset value at end of period  $17.03   $16.27 
Net assets at end of period  $1,099,679   $1,050,459 
Shares outstanding at end of period   64,562,265.27    64,562,265.27 
Per share market value at end of period  $14.84   $10.20 
Total return based on market value (12)   30.87%   (42.59)%
Total return based on net asset value (4)   9.30%   (11.92)%
Ratios:          
Ratio of net investment income to average net assets (5) (11) (13)   8.45%   8.68%
Ratio of total net expenses to average net assets (5) (11) (13)   9.58%   11.16%
Supplemental data:          
Ratio of interest and debt financing expenses to average net assets (5) (13)   4.59%   6.73%
Ratio of expenses (without incentive fees) to average net assets (5) (11) (13)   8.21%   11.16%
Ratio of incentive fees and management fees, net of contractual and voluntary waivers, to average net assets (5) (11) (13)   4.15%   3.56%
Average principal debt outstanding  $1,395,028   $1,594,268 
Portfolio turnover (6)   37.21%   13.58%

 

 

(1) The per share data was derived by using the weighted average shares outstanding during the period.
(2) Net change in unrealized appreciation (depreciation) on investments per share may not be consistent with the consolidated statements of operations due to the timing of shareholder transactions.
(3) The per share data for distributions reflects the actual amount of distributions declared during the period.
(4) Total return based on net asset value is calculated as the change in net asset value per share during the period, assuming dividends and distributions, including those distributions that have been declared. Total return has not been annualized.
(5) The computation of average net assets during the period is based on averaging net assets for the periods reported.
(6) Portfolio turnover rate is calculated using the lesser of year-to-date sales or year-to-date purchases over the average of the invested assets at fair value for the periods reported.
(7) Net realized gain (loss) includes net realized gain (loss) on investments, net realized gain (loss) on forward currency exchange contracts, net realized gain (loss) on foreign currency transactions, and net realized loss on extinguishment of debt.

 

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(8) Net change in unrealized appreciation (depreciation) includes net change in unrealized appreciation (depreciation) on investments, net change in unrealized appreciation (depreciation) on forward currency exchange contracts and net change in unrealized appreciation (depreciation) on foreign currency translation.
(9) The sum of quarterly per share amounts presented in previously filed financial statements on Form 10-Q may not equal earnings per share. This is due to changes in the number of weighted average shares outstanding and the effects of rounding.
10) Net increase (decrease) in net assets resulting from operations per share in these financial highlights may be different from the net increase (decrease) in net assets per share on the consolidated statements of operations due to changes in the number of weighted average shares outstanding and the effects of rounding.
(11) The ratio of voluntary incentive fee waiver to average net assets was (0.42%) and 0.00% for the nine months ended September 30, 2021 and 2020, respectively (Note 5). The ratio of voluntary management fee waiver to average net assets was (0.45%) and 0.00% for the nine months ended September 30, 2021 and 2020, respectively (Note 5). The ratio of net investment income without the voluntary incentive fee waiver and voluntary management fee waiver to average net assets for the nine months ended September 30, 2021 would be 7.58%. The ratio of net investment income without the voluntary incentive fee waiver to average net assets for the nine months ended September 30, 2020 would be 8.68%. The ratio of total expenses without the voluntary incentive fee waiver and voluntary management fee waiver to average net assets for the nine months ended September 30, 2021 would be 10.45%. The ratio of total expenses without the voluntary incentive fee waiver to average net assets for the nine months ended September 30, 2020 would be 11.16%.
(12) Total return based on market value (not annualized) is calculated as the change in market value per share during the period, assuming dividends and distributions, plus the declared distributions, divided by the beginning market price for the period. Total return has not been annualized.
(13) Ratio is annualized. Incentive fees, voluntary incentive fee waivers, and voluntary management fee waivers, if any, included within the ratio are not annualized.

 

Note 12. Subsequent Events

 

On October 13, 2021, the Company and U.S. Bank National Association (the “Trustee”) entered into a Second Supplemental Indenture (the “Second Supplemental Indenture”) to the Indenture between the Company and the Trustee, dated March 10, 2021 (the “Base Indenture,” and together with the Second Supplemental Indenture, the “Indenture”). The Second Supplemental Indenture relates to the Company’s issuance of $300.0 million aggregate principal amount of its 2.550% notes due 2026 (the “October 2026 Notes”).

 

The October 2026 Notes will mature on October 13, 2026 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 October 2026 Notes bear interest at a rate of 2.550% per year payable semi-annually on April 13 and October 13 of each year, commencing on April 13, 2022. The October 2026 Notes are 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 October 2026 Notes, rank pari passu with all existing and future unsecured unsubordinated indebtedness issued by the Company, rank 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 rank structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company’s subsidiaries, financing vehicles or similar facilities.

 

The October 2026 Notes were offered and sold in an offering registered under the Securities Act of 1933, as amended, pursuant to the Company’s Registration Statement on Form N-2 (File No. 333-250965), the prospectus supplement dated October 5, 2021 and the pricing term sheet filed with the SEC on October 5, 2021. The transaction closed on October 13, 2021. The net proceeds to the Company were approximately $293.0 million, after deducting the underwriting discounts and commissions of approximately $3.0 million payable by the Company and estimated offering expenses of approximately $0.8 million payable by the Company. The Company intends to use the net proceeds to repay outstanding indebtedness under its financing arrangements and for general corporate purposes.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

You should read the following analysis of our financial condition and results of operations in conjunction with our financial statements and related notes appearing in our Annual Report on Form 10-K (the “Annual Report”) for the year ended December 31, 2020, filed with the U.S. Securities and Exchange Commission (“SEC”) on February 24, 2021. The information contained in this section should also be read in conjunction with our unaudited financial statements and related notes and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q (the “Quarterly Report”).

 

Overview

 

Bain Capital Specialty Finance, Inc. (the “Company”, “we”, “our” and “us”) is an externally managed specialty finance company focused on lending to middle market companies. We have elected to be regulated as a business development company (a “BDC”) under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the “1940 Act”). We are managed by BCSF Advisors, LP (our “Advisor” or “BCSF Advisors”), a subsidiary of Bain Capital Credit, LP (“Bain Capital Credit”). Our Advisor is registered as an investment adviser with the SEC under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). Our Advisor also provides the administrative services necessary for us to operate (in such capacity, our “Administrator” or “BCSF Advisors”). Since we commenced operations on October 13, 2016 through September 30, 2021, we have invested approximately $4.7 billion in aggregate principal amount of debt and equity investments prior to any subsequent exits or repayments. We seek to generate current income and, to a lesser extent, capital appreciation through direct originations of secured debt, including first lien, first lien/last-out, unitranche and second lien debt, investments in strategic joint ventures, equity investments and, to a lesser extent, corporate bonds.

 

Our primary focus is capitalizing on opportunities within our Senior Direct Lending strategy, which seeks to provide risk-adjusted returns and current income to our stockholders by investing primarily in middle-market companies with between $10.0 million and $150.0 million in annual earnings before interest, taxes, depreciation and amortization (“EBITDA”). However, we may, from time to time, invest in larger or smaller companies. We generally seek to retain effective voting control in respect of the loans or particular classes of securities in which we invest through maintaining affirmative voting positions or negotiating consent rights that allow us to retain a blocking position. We focus on senior investments with a first or second lien on collateral and strong structures and documentation intended to protect the lender. We may also invest in mezzanine debt and other junior securities, including common and preferred equity, on an opportunistic basis, and in secondary purchases of assets or portfolios but such investments are not the principal focus of our investment strategy. In addition, we may invest, from time to time, in distressed debt, debtor-in-possession loans, structured products, structurally subordinate loans, investments with deferred interest features, zero-coupon securities and defaulted securities.

 

We generate revenues primarily through receipt of interest income from the investments we hold. In addition, we generate income from various loan origination and other fees, dividends on direct equity investments and capital gains on the sales of investments. The companies in which we invest use our capital for a variety of reasons, including to support organic growth, to fund changes of control, to fund acquisitions, to make capital investments and for refinancing and recapitalizations.

 

Investments

 

Our level of investment activity may vary substantially from period to period depending on many factors, including the amount of debt and equity capital available to middle-market companies, the level of merger and acquisition activity for such companies, the level of investment and capital expenditures of such companies, the general economic environment, the amount of capital we have available to us and the competitive environment for the type of investments we make. Due to the impact of COVID-19 and related measures taken to contain its spread, the future duration and breadth of the adverse impact of COVID-19 on the broader markets in which the Company invests cannot currently be accurately predicted and future investment activity of the Company will be subject to these effects and the related uncertainty.

 

As a BDC, we may not acquire any assets other than “qualifying assets” specified in the 1940 Act, unless, at the time the acquisition is made, at least 70% of our total assets are qualifying assets (with certain limited exceptions). Qualifying assets include investments in “eligible portfolio companies.” Pursuant to rules adopted by the SEC, “eligible portfolio companies” include certain companies that do not have any securities listed on a national securities exchange and public companies whose securities are listed on a national securities exchange but whose market capitalization is less than $250 million.

 

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As a BDC, we may also invest up to 30% of our portfolio opportunistically in “non-qualifying” portfolio investments, such as investments in non-U.S. companies.

 

Revenues

 

We primarily generate revenue in the form of interest income on debt investments and distributions on equity investments and, to a lesser extent, capital gains, if any, on equity securities that we may acquire in portfolio companies. Some of our investments may provide for deferred interest payments or payment-in-kind (“PIK”) interest. The principal amount of the debt investments and any accrued but unpaid interest generally becomes due at the maturity date. In addition, we may generate revenue in the form of commitment, origination, structuring or diligence fees, fees for providing managerial assistance and consulting fees. Loan origination fees, original issue discount and market discount or premium are capitalized, and we accrete or amortize such amounts into or against income over the life of the loan. We record contractual prepayment premiums on loans and debt securities as interest income.

 

Our debt investment portfolio consists of primarily floating rate loans. As of September 30, 2021 and December 31, 2020, 98.9% and 99.2%, respectively, of our debt investments, based on fair value, bore interest at floating rates, which may be subject to interest rate floors. Variable-rate investments subject to a floor generally reset periodically to the applicable floor, only if the floor exceeds the index. Trends in base interest rates, such as LIBOR, may affect our net investment income over the long term. In addition, our results may vary from period to period depending on the interest rates of new investments made during the period compared to investments that were sold or repaid during the period; these results reflect the characteristics of the particular portfolio companies that we invested in or exited during the period and not necessarily any trends in our business or macroeconomic trends.

 

Dividend income on preferred equity investments is recorded on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity investments is recorded on the record date for private portfolio companies and on the ex-dividend date for publicly traded portfolio companies.

 

Expenses

 

Our primary operating expenses include the payment of fees to our Advisor under the second amended and restated investment advisory agreement (the “Amended Advisory Agreement”), our allocable portion of overhead expenses under the administration agreement (the “Administration Agreement”) and other operating costs, including those described below. The Base Management Fee and Incentive Fee compensate our Advisor for its work in identifying, evaluating, negotiating, closing and monitoring our investments. We bear all other out-of-pocket costs and expenses of our operations and transactions, including:

 

  • our operational and organizational cost;

 

  • the costs of any public offerings of our common stock and other securities, including registration and listing fees;

 

  • costs of calculating our net asset value (including the cost and expenses of any third-party valuation services);

 

  • fees and expenses payable to third parties relating to evaluating, making and disposing of investments, including our Advisor’s or its affiliates’ travel expenses, research costs and out-of-pocket fees and expenses associated with performing due diligence and reviews of prospective investments, monitoring our investments and, if necessary, enforcing our rights;

 

  • interest payable on debt and other borrowing costs, if any, incurred to finance our investments;

 

  • costs of effecting sales and repurchases of our common stock and other securities;

 

  • distributions on our common stock;

 

  • transfer agent and custody fees and expenses;

 

  • the allocated costs incurred by the Administrator in providing managerial assistance to those portfolio companies that request it;

 

  • other expenses incurred by BCSF Advisors or us in connection with administering our business, including payments made to third-party providers of goods or services;

 

  • brokerage fees and commissions;

 

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  • federal and state registration fees;

 

  • U.S. federal, state and local taxes;

 

  • Independent Director fees and expenses;

 

  • costs associated with our reporting and compliance obligations under the 1940 Act and applicable U.S. federal and state securities laws;

 

  • costs of any reports, proxy statements or other notices to our stockholders, including printing costs;

 

  • costs of holding stockholder meetings;

 

  • our fidelity bond;

 

  • directors’ and officers’ errors and omissions liability insurance, and any other insurance premiums;

 

  • litigation, indemnification and other non-recurring or extraordinary expenses;

 

  • direct costs and expenses of administration and operation, including printing, mailing, long distance telephone, staff, audit, compliance, tax and legal costs;

 

  • fees and expenses associated with marketing efforts;

 

  • dues, fees and charges of any trade association of which we are a member; and

 

  • all other expenses reasonably incurred by us or the Administrator in connection with administering our business.

 

To the extent that expenses to be borne by us are paid by BCSF Advisors, we will generally reimburse BCSF Advisors for such expenses. To the extent the Administrator outsources any of its functions, the Company will pay the fees associated with such functions on a direct basis without profit to the Administrator. We will also reimburse the Administrator for its costs and expenses and our allocable portion of overhead incurred by it in performing its obligations under the Administration Agreement, including certain rent and compensation paid to or compensatory distributions received by our officers (including our Chief Compliance Officer and Chief Financial Officer) and any of their respective staff who provide services to us, operations staff who provide services to us, internal audit staff, if any, to the extent internal audit performs a role in our Sarbanes-Oxley internal control assessment and fees paid to third-party providers for goods or services. Our allocable portion of overhead will be determined by the Administrator, which expects to use various methodologies such as allocation based on the percentage of time certain individuals devote, on an estimated basis, to our business and affairs, and will be subject to oversight by our Board of Directors (our “Board”). The Company did not incur any expenses related to the Administrator for the three months ended September 30, 2021 and 2020, respectively, and for the nine months ended September 30, 2021 and 2020, respectively, which is included in other general and administrative expenses on the consolidated statements of operations. The sub-administrator is paid its compensation for performing its sub-administrative services under the sub-administration agreement. We incurred expenses related to the sub-administrator of $0.2 million and $0.1 million for the three months ended September 30, 2021 and 2020, respectively, and $0.4 million and $0.4 million for the nine months ended September 30, 2021 and 2020, respectively, which is included in other general and administrative expenses on the consolidated statements of operations. BCSF Advisors will not be reimbursed to the extent that such reimbursements would cause any distributions to our stockholders to constitute a return of capital. All of the foregoing expenses are ultimately borne by our stockholders.

 

Leverage

 

We may borrow money from time to time. However, our ability to incur indebtedness (including by issuing preferred stock), as of September 30, 2021, is limited by applicable regulations such that our asset coverage, as defined in the 1940 Act, must equal at least 150%. In determining whether to borrow money, we will analyze the maturity, covenant package and rate structure of the proposed borrowings as well as the risks of such borrowings compared to our investment outlook. As of September 30, 2021, the Company’s asset coverage was 181%.

 

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Impact of COVID-19

 

In late 2019 and early 2020, a novel coronavirus (SARS-CoV-2) and related respiratory disease ("COVID-19") emerged in China and spread rapidly to across the world, including to the U.S. This outbreak has led and for an unknown period of time will continue to lead to disruptions in local, regional, national and global markets and economies affected thereby. The extent to which the COVID-19 pandemic will adversely impact the Company’s business, financial condition, liquidity and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of this outbreak, and any future outbreaks.

 

It is clear that these types of events are negatively impacting and will, for at least some time, continue to negatively impact the Company and portfolio companies and in many instances the impact will be profound. For example, smaller and middle market companies in which we may invest are being significantly impacted by these emerging events and the uncertainty caused by these events. With respect to loans to such companies, the Company will be impacted if, among other things, (i) amendments and waivers are granted (or are required to be granted) to borrowers permitting deferral of loan payments or allowing for payment-in-kind (“PIK”) interest payments, (ii) borrowers default on their loans, are unable to refinance their loans at maturity, or go out of business permanently, and/or (iii) the value of loans held by the Company decreases as a result of such events and the uncertainty they cause. Such emerging events, to the extent experienced, will cause the Company to suffer a loss on its investments or interest thereon. The Company will also be negatively affected if the operations and effectiveness of the Adviser or a portfolio company (or any of the key personnel or service providers of the foregoing) is compromised or if necessary or beneficial systems and processes are disrupted as a result of stay-at-home orders or other related interruptions to regular business operations.

 

With respect to the Company’s investments, we have taken incremental steps in actively overseeing all of our individual portfolio companies. These measures include, among other things, (i) frequent communication with our portfolio company management teams and related private equity sponsors to understand the expected financial performance impact of the COVID-19 pandemic; (ii) re-underwriting our portfolio companies to understand the impact if the current economic environment persists; and (iii) the creation of an internal working group focused on understanding the potential financial needs of our portfolio companies and engaging with these companies and their private equity sponsors, as needed.

 

The effects of the COVID-19 pandemic on economic and market conditions have increased the Company’s demands to provide capital to its existing portfolio companies. During the month of March 2020, we received unprecedented draw requests on revolving credit and delayed draw facilities we provided to our portfolio companies as many of them sought to husband excess cash as a defensive measure in these uncertain times. All of those draws were met in a timely fashion and we maintain adequate cash and additional borrowing capacity in reserve to meet any further such draw requests.

 

As of September 30, 2021, the Company was in compliance with its asset coverage requirements under the 1940 Act. In addition, the Company was in compliance with all financial covenants within its credit facilities as of September 30, 2021. However, any continued increase in realized or unrealized depreciation of our investment portfolio or further significant reductions in our net asset value as a result of the effects of the COVID-19 pandemic or otherwise increase the risk of breaching the relevant covenants and requirements. Any breach of these requirements may adversely affect the Company’s access to sufficient debt and equity capital. The effects of the COVID-19 pandemic may also cause the Company to limit distributions.

 

It is impossible to determine the scope of this outbreak, or any future outbreaks, how long any such outbreak, market disruption or uncertainties may last, the effect any governmental actions will have or the full potential impact on the Company, the Adviser and portfolio companies.

 

Investment Decision Process

 

The Advisor’s investment process can be broken into four processes: (1) Sourcing and Idea Generation, (2) Investment Diligence & Recommendation, (3) Credit Committee Approval and Portfolio Construction and (4) Portfolio & Risk Management.

 

Sourcing and Idea Generation

 

The investment decision-making process begins with sourcing ideas. Bain Capital Credit’s Private Credit Group interacts with over 1,500 global contacts as a means to generate middle market investment opportunities. Our Advisor also seeks to leverage the contacts of Bain Capital Credit’s industry groups, Trading Desk, Portfolio Group and Restructuring team, including private equity firms, banks and a variety of advisors and other intermediaries.

 

Investment Diligence & Recommendation

 

Our Advisor utilizes Bain Capital Credit’s bottom-up approach to investing, and it starts with the due diligence performed by its Private Credit Group. The group works with the close support of Bain Capital Credit’s industry groups. This diligence process typically begins with a detailed review of an offering memorandum as well as Bain Capital Credit’s own independent diligence efforts, including in-house materials and expertise, third-party independent research and interviews, and hands-on field checks where appropriate. For deals that progress beyond an initial stage, the team will usually schedule one or more meetings with company management, facilities visits and also meetings with the sponsor in order to ask more detailed questions and to better understand the sponsor’s view of the business and plans for it going forward. The team’s diligence work is summarized in investment memoranda and accompanying credit packs. Work product also includes full models and covenant analysis.

 

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Credit Committee Approval and Portfolio Construction

 

If the reviewing team deems an investment worthy of serious consideration, it generally must be presented to the credit committee, which is comprised of at least three experienced credit professionals, who are selected based on strategy and geography. A portfolio manager leads the decision making process for each investment and engages the credit committee throughout the investment process in order to prioritize and direct the underwriting of each potential investment opportunity. For middle market holdings, the path to exit an investment is often discussed at credit committee meetings, including restructurings, acquisitions and sale to strategic buyers. Since most middle market investments are illiquid, exits are driven by a sale of the portfolio company or a refinancing of the portfolio company’s debt.

 

Portfolio & Risk Management

 

Our Advisor utilizes Bain Capital Credit’s Private Credit Group for the daily monitoring of its respective credits after an investment has been made. Our Advisor believes that the ongoing monitoring of financial performance and market developments of portfolio investments is critical to successful investment management. Accordingly, our Advisor is actively involved in an on-going portfolio review process and attends board meetings. To the extent a portfolio investment is not meeting our Advisor’s expectations, our Advisor takes corrective action when it deems appropriate, which may include raising interest rates, gaining a more influential role on its board, taking warrants and, where appropriate, restructuring the balance sheet to take control of the company. Our Advisor will utilize the Bain Capital Credit Risk and Oversight Committee. The Risk and Oversight Committee is responsible for monitoring and reviewing risk management, including portfolio risk, counterparty risk and firm-wide risk issues. In addition to the methods noted above, there are a number of proprietary methods and tools used through all levels of Bain Capital Credit to manage portfolio risk.

 

Environmental, Social and Governance

 

Our Advisor believes that environmental, social, and governance (ESG) management helps to create lasting impact for all of its stakeholder groups, including investors, portfolio companies, employees and communities. ESG risks can have a negative impact on an issuer’s ability to meet its financial obligations. Therefore, strong ESG management aligns with our Advisor’s goal to seek and generate attractive risk-adjusted returns with the capital it invests. Our Advisor considers ESG factors throughout its investment decision-making process. These factors include, but are not limited to, applying a negative screen to avoid investing in companies with outsized ESG risks; examining the impact a company has on society and the environment during the diligence process; seeking to consider ESG factors from a company-specific and sector-wide perspective; and engaging companies via proxy voting, corporate actions and board seats, where applicable.

 

Portfolio and Investment Activity

 

During the three months ended September 30, 2021, we invested $288.9 million, including PIK, in 45 portfolio companies, and had $254.9 million in aggregate amount of principal repayments and sales, resulting in a net increase in investments of $34.0 million for the period. Of the $288.9 million invested during the three months ended September 30, 2021, $38.8 million was related to drawdowns on delayed draw term loans and revolvers of our portfolio companies.

 

During the three months ended September 30, 2020, we invested $30.8 million, including PIK, in 24 portfolio companies, and had $89.9 million in aggregate amount of principal repayments and sales, resulting in a net decrease in investments of $59.1 million for the period. Of the $30.8 million invested during the three months ended September 30, 2020, $11.9 million was related to drawdowns on delayed draw term loans and revolvers of our portfolio companies.

 

During the nine months ended September 30, 2021, we invested $891.3 million, including PIK, in 63 portfolio companies, and had $1,062.0 million in aggregate amount of principal repayments and sales, resulting in a net decrease in investments of $170.7 million for the period. Of the $891.3 million invested during the nine months ended September 30, 2021, $116.8 million was related to drawdowns on delayed draw term loans and revolvers of our portfolio companies.

 

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During the nine months ended September 30, 2020, we invested $357.7 million, including PIK, in 59 portfolio companies, and had $337.7 million in aggregate amount of principal repayments and sales, resulting in a net increase in investments of $20.0 million for the period. Of the $357.7 million invested during the nine months ended September 30, 2020, $197.0 million was related to drawdowns on delayed draw term loans and revolvers of our portfolio companies.

 

The following table shows the composition of the investment portfolio and associated yield data as of September 30, 2021 (dollars in thousands):

 

   As of September 30, 2021 
                   Weighted Average
Yield (1)
at		 
   Amortized Cost   Percentage of
Total Portfolio		   Fair Value   Percentage of
Total Portfolio		   Amortized
Cost		   Market
Value		 
First Lien Senior Secured Loans  $1,918,761    80.6%  $1,887,186    80.1%   7.2%   7.3%
Equity Interest   164,443    6.9    160,886    6.8    9.0    10.8 
Second Lien Senior Secured Loans   117,213    4.9    116,238    4.9    9.6    9.6 
Subordinated Note Investment Vehicles (2)   105,873    4.5    105,873    4.5    9.0    9.0 
Equity Interest in Investment Vehicles (2)   33,596    1.4    37,427    1.6    12.2    11.0 
Preferred equity   23,575    1.0    32,139    1.4    10.0    9.8 
Subordinated Debt   16,599    0.7    16,800    0.7    11.5    11.3 
Warrants   2    0.0    122    0.0    N/A    N/A 
Total  $2,380,062    100.0%  $2,356,671    100.0%   7.5%   7.6%

 

 

(1) Weighted average yields are computed as (a) the annual stated interest rate or yield earned on the relevant accruing debt and other income producing securities, divided by (b) the total relevant investments at amortized cost or at fair value, as applicable. The weighted average yield does not represent the total return to our stockholders.
   
(2) Represents debt and equity investment in ISLP.

 

The following table shows the composition of the investment portfolio and associated yield data as of December 31, 2020 (dollars in thousands):

 

   As of December 31, 2020 
                   Weighted Average
Yield (1)
at		 
   Amortized Cost   Percentage of
Total Portfolio		   Fair Value   Percentage of
Total Portfolio		   Amortized
Cost		   Market
Value		 
First Lien Senior Secured Loans  $2,193,827    87.0%  $2,164,910    87.1%   7.1%   7.2%
Second Lien Senior Secured Loans   167,698    6.6    161,960    6.6    9.0    9.3 
Equity Interests   131,491    5.2    119,905    4.8    8.8    10.7 
Preferred Equity   29,723    1.2    37,713    1.5    15.0    15.0 
Warrants   —    0.0    —    0.0    N/A    N/A 
Total  $2,522,739    100.0%  $2,484,488    100.0%   7.3%   7.5%

 

 

(1) Weighted average yields are computed as (a) the annual stated interest rate or yield earned on the relevant acquiring debt and other income producing securities, divided by (b) the total relevant investments at amortized cost or at fair value, as applicable. The weighted average yield does not represent the total return to our stockholders.

 

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The following table presents certain selected information regarding our investment portfolio as of September 30, 2021:

 

   As of
September 30, 2021		 
Number of portfolio companies   105 
Percentage of debt bearing a floating rate (1)   98.9%
Percentage of debt bearing a fixed rate (1)   1.1%

 

 

(1)   Measured on a fair value basis.

 

The following table presents certain selected information regarding our investment portfolio as of December 31, 2020:

 

    As of
December 31, 2020 		 
Number of portfolio companies     105  
Percentage of debt bearing a floating rate (1)     99.2 %
Percentage of debt bearing a fixed rate (1)     0.8 %

 

 

(1)   Measured on a fair value basis.

 

The following table shows the amortized cost and fair value of our performing and non-accrual investments as of September 30, 2021 (dollars in thousands):

 

   As of September 30, 2021 
   Amortized Cost   Percentage at
Amortized
Cost		   Fair Value   Percentage at
Fair Value		 
Performing  $2,380,062    100.0%  $2,356,671    100.0%
Non-accrual   —    0.0    —    0.0 
Total  $2,380,062    100.0%  $2,356,671    100.0%

 

The following table shows the amortized cost and fair value of our performing and non-accrual investments as of December 31, 2020 (dollars in thousands):

 

   As of December 31, 2020 
   Amortized Cost   Percentage at
Amortized
Cost		   Fair Value   Percentage at
Fair Value		 
Performing  $2,517,782    99.8%  $2,479,794    99.8%
Non-accrual   4,957    0.2    4,694    0.2 
Total  $2,522,739    100.0%  $2,484,488    100.0%

 

Loans or debt securities are placed on non-accrual status when there is reasonable doubt that principal or interest will be collected. Accrued interest generally is reversed when a loan or debt security is placed on non-accrual status. Interest payments received on non-accrual loans or debt securities may be recognized as income or applied to principal depending upon management’s judgment. Non-accrual loans and debt securities are restored to accrual status when past due principal and interest is paid and, in management’s judgment, are likely to remain current. We may make exceptions to this treatment if the loan has sufficient collateral value and is in the process of collection. As of September 30, 2021, there are no loans on non-accrual. This is compared to one loan on non-accrual as of December 31, 2020, comprising 0.2% of the Company’s portfolio, based on fair value.

 

76

 

 

The following table shows the amortized cost and fair value of the investment portfolio, cash and cash equivalents and foreign cash as of September 30, 2021 (dollars in thousands):

 

   As of September 30, 2021 
   Amortized Cost   Percentage of
Total		   Fair Value   Percentage of
Total		 
Cash and cash equivalents  $34,277    1.4%  $34,277    1.4%
Foreign cash   1,033    0.0    829    0.0 
Restricted cash   57,802    2.3    57,802    2.4 
First Lien Senior Secured Loans   1,918,761    77.6    1,887,186    77.0 
Equity Interest   164,443    6.6    160,886    6.6 
Second Lien Senior Secured Loan   117,213    4.7    116,238    4.8 
Subordinated Note in Investment Vehicles (1)   105,873    4.3    105,873    4.3 
Equity Interests in Investment Vehicles (1)   33,596    1.4    37,427    1.5 
Preferred Equity   23,575    1.0    32,139    1.3 
Subordinated Debt   16,599    0.7    16,800    0.7 
Warrants   2    0.0    122    0.0 
Total  $2,473,174    100.0%  $2,449,579    100.0%

 

 

(1)   Represents debt and equity investment in ISLP

 

The following table shows the amortized cost and fair value of the investment portfolio, cash and cash equivalents and foreign cash as of December 31, 2020 (dollars in thousands):

 

    As of December 31, 2020  
    Amortized Cost     Percentage of
 Total 		    Fair Value     Percentage of
 Total 		 
Cash and cash equivalents   $ 53,704       2.2 %   $ 53,704       2.1 %
Foreign cash     976       0.0       972       0.0  
Restricted cash and cash equivalents     27,026       1.0       27,026       1.1  
First Lien Senior Secured Loans     2,193,827       84.3       2,164,910       84.3  
Second Lien Senior Secured Loans     167,698       6.4       161,960       6.3  
Equity Interests     131,491       5.0       119,905       4.7  
Preferred Equity     29,723       1.1       37,713       1.5  
Warrants     —       0.0       —       0.0  
Total   $ 2,604,445       100.0 %   $ 2,566,190       100.0 %

 

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The following table shows the composition of the investment portfolio by industry, at amortized cost and fair value as of September 30, 2021 (with corresponding percentage of total portfolio investments) (dollars in thousands):

 

   As of September 30, 2021 
   Amortized Cost   Percentage of
Total
Portfolio		   Fair Value   Percentage of
Total Portfolio		 
Aerospace & Defense  $276,916    11.6%  $251,386    10.7%
High Tech Industries   203,362    8.6    203,940    8.7 
Consumer Goods: Non-Durable   189,737    8.0    192,221    8.2 
Services: Business   189,416    8.0    184,718    7.8 
Investment Vehicles (2)   139,469    5.9    143,300    6.1 
Healthcare & Pharmaceuticals   137,342    5.8    136,839    5.8 
Capital Equipment   117,078    4.9    117,526    5.0 
Construction & Building   107,452    4.5    108,323    4.6 
Transportation: Cargo   91,160    3.8    93,805    4.0 
Automotive   83,894    3.5    84,716    3.5 
FIRE: Insurance (1)   81,270    3.4    82,007    3.5 
Wholesale   78,460    3.3    80,253    3.4 
Energy: Oil & Gas   68,975    2.9    76,641    3.3 
Retail   74,988    3.2    75,530    3.2 
Transportation: Consumer   78,522    3.3    66,552    2.8 
Services: Consumer   63,948    2.7    65,728    2.8 
Consumer Goods: Durable   64,726    2.7    57,180    2.4 
Hotel, Gaming & Leisure   53,246    2.2    51,967    2.2 
Media: Diversified & Production   52,510    2.2    51,202    2.2 
Chemicals, Plastics & Rubber   47,271    2.0    48,569    2.1 
Telecommunications   39,895    1.7    40,439    1.7 
Media: Advertising, Printing & Publishing   49,587    2.1    39,902    1.7 
Media: Broadcasting and Subscription   29,161    1.2    29,679    1.3 
FIRE: Finance (1)   19,887    0.8    20,102    0.8 
Beverage, Food & Tobacco   7,766    0.3    19,882    0.8 
Consumer goods: Wholesale   14,923    0.6    14,919    0.6 
Banking   13,984    0.6    14,226    0.6 
Hospitality Holdings   5,000    0.2    5,000    0.2 
Containers, Packaging, & Glass   117    0.0    119    0.0 
Total  $2,380,062    100.0%  $2,356,671    100.0%

 

 

(1)   Finance, Insurance and Real Estate (“FIRE”).

(2)   Represents debt and equity investment in ISLP.  

 

78

 

 

 

 

The following table shows the composition of the investment portfolio by industry, at amortized cost and fair value as of December 31, 2020 (with corresponding percentage of total portfolio investments) (dollars in thousands):

 

    As of December 31, 2020  
    Amortized
Cost		     Percentage of
 Total
Portfolio 		    Fair Value     Percentage of
Total
Portfolio		  
Aerospace & Defense   $ 331,174       13.1 %   $ 296,553       11.9 %
High Tech Industries     294,046       11.7       295,486       11.9  
Healthcare & Pharmaceuticals     219,147       8.7       221,605       8.9  
Capital Equipment     188,123       7.5       193,287       7.8  
Consumer Goods: Non-Durable     190,216       7.5       189,229       7.5  
Services: Business     181,037       7.1       175,560       7.1  
Transportation: Cargo     118,320       4.7       118,352       4.8  
Construction & Building     105,567       4.2       104,999       4.2  
Services: Consumer     76,341       3.0       78,697       3.2  
Wholesale     78,248       3.1       78,042       3.1  
Chemicals, Plastics & Rubber     75,808       3.0       76,463       3.1  
Energy: Oil & Gas     68,198       2.7       68,807       2.7  
FIRE: Insurance (1)     65,017       2.6       67,125       2.7  
Automotive     66,470       2.6       66,100       2.7  
Transportation: Consumer     71,750       2.8       61,243       2.5  
Consumer Goods: Durable     59,399       2.3       58,065       2.3  
Hotel, Gaming & Leisure     52,389       2.1       49,893       2.0  
Media: Diversified & Production     47,810       1.9       48,470       2.0  
Media: Broadcasting & Subscription     43,299       1.7       45,036       1.8  
Media: Advertising, Printing & Publishing     47,143       1.9       41,140       1.7  
Retail     39,050       1.5       39,050       1.6  
Telecommunications     21,680       0.9       21,543       0.9  
Energy: Electricity     21,979       0.9       21,249       0.9  
Beverage, Food & Tobacco     12,087       0.5       21,024       0.8  
Banking     14,058       0.6       13,622       0.5  
Containers, Packaging, & Glass     11,659       0.5       11,781       0.5  
FIRE: Finance (1)     11,830       0.5       11,778       0.5  
FIRE: Real Estate (1)     10,894       0.4       10,289       0.4  
Total   $ 2,522,739       100.0 %   $ 2,484,488       100.0 %

 

 

(1)   Finance, Insurance, and Real Estate (“FIRE”).

 

Our Advisor monitors our portfolio companies on an ongoing basis. It monitors the financial trends of each portfolio company to determine if they are meeting their respective business plans and to assess the appropriate course of action for each company. The Advisor has several methods of evaluating and monitoring the performance and fair value of our investments, which may include the following:

 

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

 

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

 

  • comparisons to our other portfolio companies in the industry, if any;

 

  • attendance at and participation in board meetings or presentations by portfolio companies; and

 

  • review of monthly and quarterly financial statements and financial projections of portfolio companies.

 

79 

 

 

Our Advisor rates the investments in our portfolio at least quarterly and it is possible that the rating of a portfolio investment may be reduced or increased over time. For investments rated 3 or 4, our Advisor enhances its level of scrutiny over the monitoring of such portfolio company. Our internal performance ratings do not constitute any rating of investments by a nationally recognized statistical rating organization or represent or reflect any third-party assessment of any of our investments.

 

  • An investment is rated 1 if, in the opinion of our Advisor, it is performing above underwriting expectations, and the business trends and risk factors are generally favorable, which may include the performance of the portfolio company or the likelihood of a potential exit.

 

  • An investment is rated 2 if, in the opinion of our Advisor, it is performing as expected at the time of our underwriting and there are generally no concerns about the portfolio company’s performance or ability to meet covenant requirements, interest payments or principal amortization, if applicable. All new investments or acquired investments in new portfolio companies are initially given a rating of 2.

 

  • An investment is rated 3 if, in the opinion of our Advisor, the investment is performing below underwriting expectations and there may be concerns about the portfolio company’s performance or trends in the industry, including as a result of factors such as declining performance, non-compliance with debt covenants or delinquency in loan payments (but generally not more than 180 days past due).

 

  • An investment is rated 4 if, in the opinion of our Advisor, the investment is performing materially below underwriting expectations. For debt investments, most of or all of the debt covenants are out of compliance and payments are substantially delinquent. Investments rated 4 are not anticipated to be repaid in full, if applicable, and there is significant risk that we may realize a substantial loss on our investment.

 

The following table shows the composition of our portfolio on the 1 to 4 rating scale as of September 30, 2021 (dollars in thousands):

 

   As of September 30, 2021 
Investment Performance Rating  Fair
Value		   Percentage of
Total		   Number of
Companies(1)		   Percentage of
Total		 
1  $20,532    0.9%   3    2.9%
2   2,092,547    88.8    94    89.5 
3   243,592    10.3    8    7.6 
4   -    0.0    -    0.0 
Total  $2,356,671    100.0%   105    100.0%

 

(1) Number of investment rated companies may not agree to total portfolio companies due to investments across investment types and structures.

 

The following table shows the composition of our portfolio on the 1 to 4 rating scale as of December 31, 2020 (dollars in thousands):

 

   As of December 31, 2020 
Investment Performance Rating  Fair
Value		   Percentage of
Total		   Number of
Companies		   Percentage of
Total		 
1  $42,942    1.7%   3    2.9%
2   2,121,057    85.4    87    82.8 
3   315,383    12.7    14    13.3 
4   5,106    0.2    1    1.0 
Total  $2,484,488    100.0%   105    100.0%

 

80 

 

 

International Senior Loan Program, LLC

 

On February 9, 2021, the Company and Pantheon ("Pantheon"), a leading global alternative private markets manager, formed the International Senior Loan Program, LLC (“ISLP”), an unconsolidated joint venture. ISLP invests primarily in non-US first lien senior secured loans. ISLP was formed as a Delaware limited liability company. The Company and Pantheon committed to initially provide $138.3 million of debt and $43.9 million of equity capital, to ISLP. Equity contributions will be called from each member on a pro-rata basis, based on their equity commitments. Pursuant to the terms of the transaction, Pantheon invested $50.0 million to acquire a 29.5% stake in ISLP. The Company contributed debt investments of $317.1 million for a 70.5% stake in ISLP, and received a one-time gross distribution of $190.2 million in cash in consideration of contributing such investments. As of September 30, 2021, the Company’s investment in ISLP consisted of subordinated notes of $105.9 million, and equity interests of $37.4 million. 

 

In future periods, the Company may sell certain of its investments or a participating interest in certain of its investments to ISLP. Since inception, the Company has sold $440.0 million of its investments to ISLP. The sale of the investments met the criteria set forth in ASC 860, Transfers and Servicing for treatment as a sale.

 

The Company has determined that ISLP is an investment company under ASC, Topic 946, Financial Services - Investment Companies; however, in accordance with such guidance, the Company will generally not consolidate its investment in a company other than a wholly or substantially owned investment company subsidiary, which is an extension of the operations of the Company, or a controlled operating company whose business consists of providing services to the Company. The Company does not consolidate its investments in ISLP as it is not a substantially wholly owned investment company subsidiary. In addition, the Company does not control ISLP due to the allocation of voting rights among ISLP members. The Company measures the fair value of ISLP in accordance with ASC Subtopic 820, Fair Value Measurements and Disclosures, using the net asset value (or its equivalent) as a practical expedient. The Company and Pantheon each appointed two members to ISLP's four-person Member Designees' Committee. All material decisions with respect to ISLP, including those involving its investment portfolio, require unanimous approval of a quorum of Member Designees' Committee.

 

As of September 30, 2021, ISLP had $395.8 million in debt investments, at fair value.

 

Additionally, ISLP, through a wholly-owned subsidiary, has entered into a $300.0 million senior secured revolving credit facility which bears interest at LIBOR (or an alternative risk-free interest rate index) plus 225 basis points with JP Morgan through its wholly-owned subsidiary, subject to leverage and borrowing base restrictions (the “ISLP Credit Facility”). The maturity date of the ISLP Credit Facility is February 9, 2026. As of September 30, 2021 the ISLP Credit Facility had $217.8 million of outstanding debt under the credit facility. As of September 30, 2021, the effective rate on the ISLP Credit Facility was 2.4% per annum.

  

Below is a summary of ISLP’s portfolio at fair value:

 

   As of September 30, 2021 
Total investments  $395,802 
Weighted average yield on investments   6.6%
Number of borrowers in ISLP   23 
Largest portfolio company investment  $40,780 
Total of five largest portfolio company investments  $162,053 
Unfunded commitments  $97 

 

81 

 

 

Below is a listing of ISLP’s individual investments as of:

 

International Senior Loan Program, LLC

Consolidated Schedule of Investments

As of September 30, 2021

(unaudited)

 

Currency  Industry  Portfolio
Company		  Investment
Type		  Spread Above
Index		  Interest
Rate		   Maturity
Date		  Principal/Shares   Cost   Market
Value		   % of
NAV		  
Australian Dollar                                          
   Healthcare & Pharmaceuticals  Datix Bidco Limited  First Lien Senior Secured Loan   BBSW+ 4.50%   4.65%  4/28/2025  AUD 4,169    3,288    3,007       
                         Healthcare & Pharmaceuticals Total   $3,288   $3,007   5.7%  
                                           
   Information Technology Services  LEAP Legal Software PTY Ltd  First Lien Senior Secured Loan   BBSY+ 5.75%   6.75%  9/12/2022  AUD 30,093   22,829    21,706       
                         Information Technology Services Total   $22,829   $21,706   40.8%  
                                           
   Media: Advertising, Printing & Publishing  TGI Sport Bidco Pty Ltd  First Lien Senior Secured Loan  BBSY+ 7.00%   7.50%  4/30/2026  AUD 9,610   6,874    6,932       
                         Media: Advertising, Printing & Publishing Total   $6,874   $6,932   13.1%  
                                           
   Services: Consumer  Zeppelin BidCo Pty Limited  First Lien Senior Secured Loan   BBSY + 6.00%   6.12%  6/28/2024  AUD 20,415   16,034    14,725       
                         Services: Consumer Total   $16,034   $14,725   27.7%  
                                           
                         Australian Dollar Total   $49,025   $46,370   87.3%  
                                           
British Pounds                                          
   Healthcare & Pharmaceuticals  Datix Bidco Limited  First Lien Senior Secured Loan - Revolver  GBP LIBOR+ 7.75%   7.86%  10/28/2024  £ 12,013   16,916    16,170       
      Datix Bidco Limited  Second Lien Senior Secured Loan  LIBOR+ 4.50%   4.55%  4/27/2026  £ 963   1,323    1,296       
                         Healthcare & Pharmaceuticals Total   $18,239   $17,466   32.9%  
                                           
   High Tech Industries  Armstrong Bidco Limited  First Lien Senior Secured Loan   GBP LIBOR+ 4.75%   5.00%  4/30/2025  £ 5,602    7,711    7,541       
                         High Tech Industries Total   $7,711   $7,541   14.2%  
                                           
   Media: Diversified & Production  International Entertainment Investments Limited  First Lien Senior Secured Loan   GBP LIBOR+ 4.75%   4.85%  5/31/2023  £ 8,626    12,109    11,575       
                         Media: Diversified & Production Total   $12,109   $11,575   21.8%  
                                           
   Services: Business  Comet Bidco Limited  First Lien Senior Secured Loan   GBP LIBOR+ 5.25%   5.42%  9/30/2024  £ 7,362    9,380    9,242       
      Opus2  First Lien Senior Secured Loan  GBP LIBOR+ 5.50%   5.83%  5/5/2028  £ 12,151    16,311    16,357       
                         Services: Business Total   $25,691   $25,599   48.2%  
                                           
   Services: Consumer  Surrey Bidco Limited  First Lien Senior Secured Loan   GBP LIBOR+ 7.00%   7.50%  5/11/2026  £ 4,979    6,716    6,317       
                         Services: Consumer Total   $6,716   $6,317   11.9%  
                                           
                         British Pounds Total   $70,466   $68,498   129.0%  
                                           

 

82 

 

 

Currency  Industry  Portfolio
Company		  Investment
Type		  Spread Above
Index		  Interest
Rate		   Maturity
Date		  Principal/Shares   Cost   Market
Value		   % of
NAV		  
Canadian Dollar                                          
   Media: Diversified & Production  9 Story Media Group Inc.  First Lien Senior Secured Loan - Revolver  CDOR+ 5.25%   6.25%  4/30/2026  CAD 149    20    20       
      9 Story Media Group Inc.  First Lien Senior Secured Loan   CDOR+ 5.50%   6.25%  4/30/2026  CAD 7,183    5,702    5,661       
                         Media: Diversified & Production Total   $5,722   $5,681   10.7%  
                                           
   Retail  New Look Vision Group  First Lien Senior Secured Loan - Delayed Draw  LIBOR+ 5.50%   6.50%  5/26/2028  CAD 18,102    14,781    14,268       
                         Retail Total   $14,781   $14,268   26.9%  
                                           
                         Canadian Dollar Total   $20,503   $19,949   37.6%  
                                           
Danish Krone                                          
   High Tech Industries  VPARK BIDCO AB  First Lien Senior Secured Loan   CIBOR+ 4.00%   4.75%  3/10/2025  DKK 56,429   9,233    8,780       
                         High Tech Industries Total   $9,233   $8,780   16.5%  
                                           
                         Danish Krone Total   $9,233   $8,780   16.5%  
                                           
European Currency                                          
   Healthcare & Pharmaceuticals  Mendel Bidco, Inc.  First Lien Senior Secured Loan   EURIBOR+ 4.25%   4.25%  6/17/2027  € 9,933    12,028    11,493       
      Mertus 522. GmbH  First Lien Senior Secured Loan - Delayed Draw   EURIBOR+ 6.25%   6.25%  5/28/2026  € 12,999    15,673    15,042       
      Mertus 522. GmbH  First Lien Senior Secured Loan   EURIBOR+ 6.25%   6.25%  5/28/2026  € 22,244    26,818    25,738       
                         Healthcare & Pharmaceuticals Total   $54,519   $52,273   98.5%  
                                           
   Media: Diversified & Production  9 Story Media Group Inc.  First Lien Senior Secured Loan   EURIBOR+ 5.25%   5.25%  4/30/2026  € 3,869    4,706    4,477       
      Aptus 1724 Gmbh  First Lien Senior Secured Loan   EURIBOR+ 6.00%   6.25%  2/23/2028  €  30,000    35,087    34,713       
                         Media: Diversified & Production Total   $39,793   $39,190   73.8%  
                                           
   Services: Business  SumUp Holdings Luxembourg S.à.r.l.  First Lien Senior Secured Loan   EURIBOR+ 8.50%   10.00%  2/17/2026  € 21,000    25,026    24,299       
                         Services: Business Total   $25,026   $24,299   45.8%  
                                           
                                           
                         European Currency Total   $119,338   $115,762   218.1%  
                                           
Norwegian Krone                                          
   High Tech Industries  VPARK BIDCO AB  First Lien Senior Secured Loan   NIBOR+ 4.00%   4.75%  3/10/2025  NOK 73,280    8,651    8,370       
                         High Tech Industries Total   $8,651   $8,370   15.8%  
                                           
                         Norwegian Krone Total   $8,651   $8,370   15.8%  
                                           
U.S. Dollars                                          
   Automotive  CST Buyer Company  First Lien Senior Secured Loan   L+ 6.00%   7.00%  10/3/2025  $ 14,927    14,927    14,927       
      Cardo  First Lien Senior Secured Loan   L+ 6.00%   6.50%  5/12/2028  $ 9,653    9,557    9,653       
                         Automotive Total   $24,484   $24,580   46.3%  
                                           
   Containers, Packaging, & Glass  Automate Intermediate Holdings II S.à r.l.  Second Lien Senior Secured Loan   L+ 7.75%   7.83%  7/22/2027  $ 11,752    11,672    11,752       
                         Containers, Packaging, & Glass Total   $11,672   $11,752   22.1%  
                                           
   Healthcare & Pharmaceuticals  Golden State Buyer, Inc.  First Lien Senior Secured Loan   L+ 4.75%   5.50%  6/22/2026  $ 14,779    14,705    14,779       
                         Healthcare & Pharmaceuticals Total   $14,705   $14,779   27.8%  
                                           
   High Tech Industries  CB Nike IntermediateCo Ltd  First Lien Senior Secured Loan - Revolver   L+ 4.75%   5.75%  10/31/2025  $ 4,384    4,384    4,384       
      CB Nike IntermediateCo Ltd  First Lien Senior Secured Loan   L+ 4.75%   5.75%  10/31/2025  $ 34,454    34,454    34,454       
      Utimaco, Inc.  First Lien Senior Secured Loan   L+ 4.00%   4.09%  8/9/2027  $ 14,701    14,701    14,701       
                         High Tech Industries Total   $53,539   $53,539   101.0%  
                                           
   Services: Business  Chamber Bidco Limited  First Lien Senior Secured Loan   L+ 6.00%   6.50%  6/7/2028  $ 23,423    23,191    23,423       
                         Services: Business Total   $23,191   $23,423   44.1%  
                                           
                         U.S. Dollars Total   $127,591   $128,073   241.3%  
                                           
                                           
                         Total   $404,807   $395,802   745.6%  

 

83 

 

 

Forward Foreign Currency Exchange Contracts                    

 

Currency Purchased  Currency Sold  Counterparty   Settlement Date  Unrealized Appreciation (Depreciation)  
EURO 1,873  AUSTRALIAN DOLLARS 2,979   Goldman Sachs                  10/21/2021  $18 
EURO 569  CANADIAN DOLLARS 849   Goldman Sachs   10/21/2021   (11)
EURO 874  DANISH KRONE 6,502   Goldman Sachs   10/21/2021   -
EURO 7,779  BRITISH POUNDS 6,644   Goldman Sachs   10/21/2021   56 
EURO 229  BRITISH POUNDS 196   Goldman Sachs   10/21/2021   2 
EURO 807  NORWEGIAN KRONE 8,443   Goldman Sachs   10/21/2021   (31)
EURO 13,511  US DOLLARS 15,987   Goldman Sachs   10/21/2021   (327)
EURO 2,137  US DOLLARS 2,510   Goldman Sachs   10/21/2021   (33)
US DOLLARS 8,584  AUSTRALIAN DOLLARS 11,533   Goldman Sachs   10/21/2021   249 
US DOLLARS 2,606  CANADIAN DOLLARS 3,287   Goldman Sachs   10/21/2021   10 
US DOLLARS 4,001  DANISH KRONE 25,170   Goldman Sachs   10/21/2021   77 
US DOLLARS 29,876  EURO 25,254   Goldman Sachs   10/21/2021   603 
US DOLLARS 35,665  EURO 2,850   Goldman Sachs   10/21/2021   974 
US DOLLARS 3,697  BRITISH POUNDS 25,722   Goldman Sachs   10/21/2021   (45)
US DOLLARS 1,045  BRITISH POUNDS 760   Goldman Sachs   10/25/2021   20 
US DOLLARS 3,340  NORWEGIAN KRONE 32,686   Goldman Sachs   10/25/2021   37 
              $1,599 

 

84 

 

 

 Below is the financial information for ISLP:

 

Selected Balance Sheet Information

 

    As of  
    September 30, 2021  
Investments at fair value (cost - $404,807)   $ 395,802  
Cash     5,048  
Foreign cash     17,485  
Deferred financing costs     2,102  
Other assets     7,731  
Total assets   $ 428,168  
Debt   $ 217,837  
Subordinated notes payable to members     149,221  
Dividend payable     1,459  
Other payables     6,564  
Total liabilities   $ 375,081  
Members’ equity     53,087  
Total liabilities and members’ equity   $ 428,168  

 

Selected Statement of Operations Information

 

    For the Three
Months Ended		     For the Nine
Months Ended		  
    September 30, 2021     September 30, 2021  
Investment Income                
Interest Income   $ 6,055     $ 14,167  
Other     —       —  
Total investment income     6,055       14,167  
Expenses                
Interest and debt financing expenses     1,515       3,423  
Interest expense on members subordinated notes     3,242       7,686  
General and administrative expenses     457       1,215  
Total expenses     5,214       12,324  
Net investment income     841       1,843  
Net realized and unrealized gain (losses)                
Net realized gain (loss) on investments     (904)       (924 )
Net realized gain (loss) on foreign currency transactions     843       3,509  
Net realized gain (loss) on forward contracts     330       1,524  
Net unrealized gain (loss) on foreign currency     4,279       9,148  
Net change in unrealized appreciation (depreciation) on forward contracts     1,169       1,599  
Net change in unrealized appreciation (depreciation) on investments     (5,228)       (9,005 )
Net gain (loss) on investments     489       5,851  
Net increase (decrease) in members’ equity resulting from operations   $ 1,330     $ 7,694  

 

85 

 

 

Results of Operations

 

Our operating results for the three months ended September 30, 2021 and 2020 were as follows (dollars in thousands):

 

   For the Three Months Ended September 30, 
   2021   2020 
Total investment income  $49,545   $46,817 
Total expenses, net of fee waivers   27,784    25,361 
Net investment income   21,761    21,456 
Net realized loss   (5,992)   (24,412)
Net change in unrealized appreciation   7,573    54,413 
Net increase (decrease) in net assets resulting from operations  $23,342   $51,457 

 

Our operating results for the nine months ended September 30, 2021 and 2020 were as follows (dollars in thousands): 

 

   For the Nine Months Ended September 30, 
   2021   2020 
Total investment income  $145,864   $146,184 
Total expenses, net of fee waivers   80,014    82,206 
Net investment income   65,850    63,978 
Net realized loss   (9,681)   (28,563)
Net change in unrealized appreciation (depreciation)   41,359    (66,633)
Net increase (decrease) in net assets resulting from operations  $97,528   $(31,218)

 

 Net increase (decrease) in net assets resulting from operations can vary from period to period as a result of various factors, including additional financing, new investment commitments, the recognition of realized gains and losses and changes in unrealized appreciation and depreciation on the investment portfolio. Due to these factors, comparisons may not be meaningful.

 

Investment Income

 

The composition of our investment income for the three months ended September 30, 2021 and 2020 was as follows (dollars in thousands):

 

   For the Three Months Ended September 30, 
   2021   2020 
Interest income  $43,259   $44,329 
Dividend income   2,638    1,881 
PIK income   2,467    — 
Other income   1,181    607 
Total investment income  $49,545   $46,817 

 

Interest income from investments, which includes interest and accretion of discounts and fees, decreased to $43.3 million for the three months ended September 30, 2021 from $44.3 million for the three months ended September 30, 2020, due to the decrease in LIBOR and the investment portfolio between the periods. Our investment portfolio at amortized cost decreased to $2,380.1 million as of September 30, 2021 compared to $2,528.7 million as of September 30, 2020. Accelerated unamortized discounts from paydowns increased to $2.7 million for the three months ended September 30, 2021 from $0.1 million for the three months ended September 30, 2020. Dividend income increased to $2.6 million for the three months ended September 30, 2021 from $1.9 million for the three months ended September 30, 2020. PIK income increased $2.5 million for the three months ended September 30, 2021 due to the number of investments earning PIK income. Other income increased to approximately $1.2 million for the three months ended September 30, 2021 from $0.6 million for the three months ended September 30, 2020, primarily due to an increase in one-time fees earned on certain investments. As of September 30, 2021, the weighted average yield of our investment portfolio at amortized cost increased to 7.5% from 6.9% as of September 30, 2020.

 

86 

 

 

 

The composition of our investment income for the nine months ended September 30, 2021 and 2020 was as follows (dollars in thousands):

 

   For the Nine Months Ended
September 30,		 
   2021   2020 
Interest income  $124,986   $137,857 
Dividend income   7,602    7,221 
PIK income   7,764    — 
Other income   5,512    1,106 
Total investment income  $145,864   $146,184 

 

Interest income from investments, which includes interest and accretion of discounts and fees, decreased to $125.0 million for the nine months ended September 30, 2021 from $137.9 million for the nine months ended September 30, 2020, primarily due to the decrease in LIBOR and investment portfolio between the periods. Our investment portfolio at amortized cost decreased to $2,380.1 million as September 30, 2021 compared to $2,528.7 million as of September 30, 2020. Accelerated unamortized discounts from paydowns increased to $5.2 million for the nine months ended September 30, 2021 from $1.8 million for the nine months ended September 30, 2020. Dividend income increased to $7.6 million for the nine months ended September 30, 2021 from $7.2 million for the nine months ended September 30, 2020, primarily due to an increase in dividend income from our equity interests. PIK income increased $7.8 million for the nine months ended September 30, 2021 due to the number of investments earning PIK income. Other income increased to approximately $5.5 million for the nine months ended September 30, 2021 from $1.1 million for the nine months ended September 30, 2020, primarily due to an increase in one-time fees earned on certain investments.

 

Operating Expenses

 

The composition of our operating expenses for the three months ended September 30, 2021 and 2020 was as follows (dollars in thousands):

 

   For the Three Months Ended
September 30,		 
   2021   2020 
Interest and debt financing expenses  $12,265   $14,426 
Base management fee   8,776    8,885 
Incentive fee   4,531    — 
Professional fees   581    296 
Directors fees   186    209 
Other general and administrative expenses   1,445    1,545 
Total expenses, before fee waivers  $27,784   $25,361 
Base management fee waiver   —    — 
Incentive fee waiver   —    — 
Total expenses, net of fee waivers  $27,784   $25,361 

 

87 

 

 

The composition of our operating expenses for the nine months ended September 30, 2021 and 2020 was as follows (dollars in thousands):

 

   For the Nine Months Ended
September 30,		 
   2021   2020 
Interest and debt financing expenses  $37,115   $49,614 
Base management fee   26,096    26,250 
Incentive fee   19,301    — 
Professional fees   2,254    1,909 
Directors fees   529    555 
Other general and administrative expenses   4,075    3,878 
Total expenses, before fee waivers  $89,370   $82,206 
Base management fee waiver   (4,837)   — 
Incentive fee waiver   (4,519)   — 
Total expenses, net of fee waivers  $80,014   $82,206 

 

Interest and Debt Financing Expenses

 

Interest and debt financing expenses on our borrowings totaled approximately $12.3 million and $14.4 million for the three months ended September 30, 2021 and 2020, respectively. Interest and debt financing expense for the three months ended September 30, 2021 as compared to September 30, 2020 decreased primarily due to a decrease in total principal debt outstanding. Interest and debt financing expenses on our borrowings totaled approximately $37.1 million and $49.6 million for the nine months ended September 30, 2021 and 2020, respectively. Interest and debt financing expense for the nine months ended September 30, 2021 as compared to September 30, 2020 decreased primarily due to a decrease in total principal debt outstanding. The weighted average principal debt balance outstanding for the three months ended September 30, 2021 was $1,423.7 million compared to $1,552.4 million for the three months ended September 30, 2020. The weighted average principal debt balance outstanding for the nine months ended September 30, 2021 was $1,395.0 million compared to $1,594.3 million for the nine months ended September 30, 2020.

 

The weighted average interest rate (excluding deferred upfront financing costs and unused fees) on our debt outstanding was 3.1% and 3.6% as of September 30, 2021 and December 31, 2020, respectively.

 

Management Fees

 

Management fees (gross of waivers) slightly decreased to $8.8 million for the three months ended September 30, 2021 compared to $8.9 million for the three months ended September 30, 2020. No management fees were waived for the three months ended September 30, 2021 and 2020, respectively.

 

Management fees (net of waivers) decreased to $26.1 million for the nine months ended September 30, 2021 from $26.3 million for the nine months ended September 30, 2020. Management fees (gross of waivers) decreased to $21.3 million for the nine months ended September 30, 2021 compared to $26.3 million for the nine months ended September 30, 2020. Management fees waived for the nine months ended September 30, 2021 and 2020 were $4.8 million and $0.0 million, respectively.

 

Incentive Fees

 

Incentive fee (net of waivers) increased to $4.5 million for the three months ended September 30, 2021 from $0.0 million for the three months ended September 30, 2020. There were no voluntary incentive fee waivers related to pre-incentive fee net investment income for the three months ended September 30, 2021 and for the three months ended September 30, 2020. For the three months ended September 30, 2021 there were no incentive fees related to the GAAP Incentive Fee. Incentive fee (net of waivers) increased to $14.8 million for the nine months ended September 30, 2021 from $0.0 million for the nine months ended September 30, 2020. Incentive fee waivers related to pre-incentive fee net investment income consisted of voluntary waivers of $4.5 million for the nine months ended September 30, 2021 and $0.0 million for the nine months ended September 30, 2020. For the nine months ended September 30, 2021 there were no incentive fees related to the GAAP Incentive Fee.

 

88 

 

 

Professional Fees and Other General and Administrative Expenses

 

Professional fees and other general and administrative expenses increased to $2.0 million for the three months ended September 30, 2021 from $1.8 million for the three months ended September 30, 2020, primarily due to an increase in costs associated with servicing our investment portfolio and legal fees.

 

Professional fees and other general and administrative expenses increased to $6.3 million for the nine months ended September 30, 2021 from $5.8 million for the nine months ended September 30, 2020, primarily due to an increase in costs associated with servicing our investment portfolio and legal fees.

 

Net Realized and Unrealized Gains and Losses

 

The following table summarizes our net realized and unrealized gains (losses) for the three months ended September 30, 2021 and 2020 (dollars in thousands):

 

   For the Three Months Ended
September 30,		 
   2021   2020 
Net realized gain on investments  $192   $407 
Net realized loss on investments   (1,481)   (24,670)
Net realized gain on foreign currency transactions   279    28 
Net realized loss on foreign currency transactions   (351)   (47)
Net realized gain on forward currency exchange contracts   374    342 
Net realized loss on forward currency exchange contracts   (2,459)   (472)
Net realized loss on extinguishment of debt   (2,546)   - 
Net realized gains (losses)  $(5,992)  $(24,412)
           
Change in unrealized appreciation on investments  $14,261   $84,532 
Change in unrealized depreciation on investments   (12,260)   (19,136)
Net change in unrealized appreciation on investments   2,001    65,396 
Unrealized appreciation (depreciation) on foreign currency translation   (508)   194 
Unrealized appreciation (depreciation) on forward currency exchange contracts   6,080    (11,177)
Net change in unrealized appreciation (depreciation) on foreign currency and forward currency exchange contracts   5,572    (10,983)
Net change in unrealized appreciation  $7,573   $54,413 

 

For the three months ended September 30, 2021, and 2020, we had net realized gains (losses) on investments of ($1.3) million and $(24.3) million, respectively. For the three months ended September 30, 2021 and 2020, we had net realized gains (losses) on foreign currency transactions of ($0.1) million and ($0.0) million, respectively. For the three months ended September 30, 2021 and 2020, we had net realized gains (losses) on forward currency contracts of ($2.1) million and ($0.1) million, respectively, primarily as a result of settling GBP, EUR, and NOK forward contracts. During the three months ended September 30, 2021, the Company repurchased $37.5 million of the 2023 Notes at a total cost of $39.5 million. This resulted in a realized loss on the extinguishment of debt of $2.5 million, which included a premium paid of $2.0 million and acceleration of unamortized debt issuance costs of $0.5 million.

 

For the three months ended September 30, 2021, we had $14.3 million in unrealized appreciation on 43 portfolio company investments, which was offset by $12.3 million in unrealized depreciation on 68 portfolio company investments. Unrealized appreciation for the three months ended September 30, 2021 resulted from an increase in fair value, primarily due to a tightening spread environment, positive investment-related adjustments, and the reversal of unrealized depreciation from the sale of our debt investments. Unrealized depreciation was primarily due to negative valuation adjustments.

 

For the three months ended September 30, 2020, we had $84.5 million in unrealized appreciation on 87 portfolio company investments, which was offset by $19.1 million in unrealized depreciation on 26 portfolio company investments. Unrealized appreciation for the three months ended September 30, 2020 resulted from an increase in fair value, primarily due to a tightening spread environment, positive investment-related adjustments, and the reversal of unrealized depreciation from the sale of our debt investments. Unrealized depreciation was primarily due to negative valuation adjustments. 

 

89 

 

 

For the three months ended September 30, 2021 and 2020, we had unrealized appreciation on forward currency exchange contracts of $6.1 million and ($11.2) million, respectively. For the three months ended September 30, 2021, unrealized appreciation on forward currency exchange contracts was due to EUR, GBP, NOK, and CAD forward contracts. For the three months ended September 30, 2020, unrealized depreciation on forward currency exchange contracts was due to EUR, GBP, DKK, NOK, AUD and CAD forward contracts.

  

The following table summarizes our net realized and unrealized gains (losses) for the nine months ended September 30, 2021 and 2020 (dollars in thousands):

 

   For the Nine Months Ended
September 30,		 
   2021   2020 
Net realized gain on investments  $27,918   $772 
Net realized loss on investments   (9,187)   (35,439)
Net realized gain on foreign currency transactions   868    134 
Net realized loss on foreign currency transactions   (2,961)   (502)
Net realized gain on forward currency exchange contracts   40    6,545 
Net realized loss on forward currency exchange contracts   (23,813)   (73)
Net realized loss on extinguishment of debt   (2,546)   - 
Net realized losses  $(9,681)  $(28,563)
           
Change in unrealized appreciation on investments  $61,756   $32,391 
Change in unrealized depreciation on investments   (46,896)   (91,192)
Net change in unrealized appreciation (depreciation) on investments   14,860    (58,801)
Unrealized appreciation (depreciation) on foreign currency translation   (186)   89 
Unrealized appreciation (depreciation) on forward currency exchange contracts   26,685    (7,921)
Net change in unrealized appreciation (depreciation) on foreign currency and forward currency exchange contracts   26,499    (7,832)
Net change in unrealized appreciation (depreciation)  $41,359   $(66,633)

 

For the nine months ended September 30, 2021, and 2020, we had net realized gains (losses) on investments of $18.7 million and ($34.7) million, respectively. For the nine months ended September 30, 2021 and 2020, we had net realized gains (losses) on foreign currency transactions of ($2.1) million and ($0.4) million, respectively. For the nine months ended September 30, 2021 and 2020, we had net realized gains (losses) on forward currency contracts of ($23.8) million and $6.5 million, respectively, primarily as a result of settling GBP, DKK, EUR, AUD and NOK forward contracts.

 

For the nine months ended September 30, 2021, we had $61.8 million in unrealized appreciation on 73 portfolio company investments, which was offset by $46.9 million in unrealized depreciation on 56 portfolio company investments. Unrealized appreciation for the nine months ended September 30, 2021 resulted from an increase in fair value, primarily due to a tightening spread environment, positive investment-related adjustments, and the reversal of unrealized depreciation from the sale of our debt investments. Unrealized depreciation was primarily due to negative valuation adjustments.

 

For the nine months ended September 30, 2020, we had $32.4 million in unrealized appreciation on 43 portfolio company investments which was primarily related to unrealized appreciation due to the reversal of unrealized depreciation upon pay-off and positive valuation adjustments, which was offset by $91.2 million in unrealized depreciation on 79 portfolio company investments. Unrealized depreciation for the nine months ended September 30, 2020 resulted from a decrease in fair value, primarily due to negative valuation adjustments.

 

For the nine months ended September 30, 2021 and 2020, we had unrealized appreciation on forward currency exchange contracts of $26.7 million and $(7.9) million, respectively. For the nine months ended September 30, 2021, unrealized appreciation on forward currency exchange contracts was due to EUR, GBP, DKK, AUD and CAD forward contracts.  For the nine months ended September 30, 2020, unrealized depreciation on forward currency exchange contracts was due to EUR, GBP, DKK, NOK, AUD and CAD forward contracts.

 

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The following table summarizes the impact of foreign currency for the three months ended September 30, 2021 and 2020 (dollars in thousands):

 

   For the Three months ended
September 30,		 
   2021   2020 
Net change in unrealized appreciation (depreciation) on investments due to foreign currency  $(2,953)  $10,911 
Net realized gain (loss) on investments due to foreign currency   (561)   396 
Net change in unrealized appreciation (depreciation) on foreign currency translation   (508)   194 
Net realized loss on foreign currency transactions   (72)   (19)
Net change in unrealized appreciation (depreciation) on forward currency exchange contracts   6,080    (11,177)
Net realized loss on forward currency exchange contracts   (2,085)   (130)
Foreign currency impact to net increase (decrease) in net assets resulting from operations  $(99)  $175 

 

Included in total net gains (losses) on the consolidated statements of operations is net gains (losses) of ($4.1) million and $11.5 million related to realized and unrealized gains and losses on investments, foreign currency holdings and non-investment assets and liabilities attributable to the changes in foreign currency exchange rates for the three months ended September 30, 2021 and 2020, respectively. Including the total net realized and unrealized gains (losses) on forward currency exchange contracts of $4.0 million and ($11.3) million, respectively, included in the above table, the net impact of foreign currency on total net gains (losses) on the consolidated statements of operations is ($0.1) million and $0.2 million for the three months ended September 30, 2021 and 2020, respectively.

 

The following table summarizes the impact of foreign currency for the nine months ended September 30, 2021 and 2020 (dollars in thousands):

 

   For the Nine months ended
September 30,		 
   2021   2020 
Net change in unrealized appreciation (depreciation) on investments due to foreign currency  $(18,664)  $3,521 
Net realized gain on investments due to foreign currency   14,968    396 
Net change in unrealized appreciation (depreciation) on foreign currency translation   (186)   89 
Net realized loss on foreign currency transactions   (2,093)   (368)
Net change in unrealized appreciation (depreciation) on forward currency exchange contracts   26,685    (7,921)
Net realized gain (loss) on forward currency exchange contracts   (23,773)   6,472 
Foreign currency impact to net increase (decrease) in net assets resulting from operations  $(3,063)  $2,189 

 

Included in total net gains (losses) on the consolidated statements of operations is net gains (losses) of ($6.0) million and $3.6 million related to realized and unrealized gains and losses on investments, foreign currency holdings and non-investment assets and liabilities attributable to the changes in foreign currency exchange rates for the nine months ended September 30, 2021 and 2020, respectively. Including the total net realized and unrealized gains (losses) on forward currency exchange contracts of $2.9 million and ($1.4) million, respectively, included in the above table, the net impact of foreign currency on total net gains (losses) on the consolidated statements of operations is ($3.1) million and $2.2 million for the nine months ended September 30, 2021 and 2020, respectively.

 

Net Increase (Decrease) in Net Assets Resulting from Operations

 

For the three months ended September 30, 2021 and 2020, the net increase in net assets resulting from operations was $23.3 million and $51.5 million, respectively. Based on the weighted average shares of common stock outstanding for the three months ended September 30, 2021 and 2020, our per share net increase in net assets resulting from operations was $0.36 and $0.80 respectively.

 

For the nine months ended September 30, 2021 and 2020, the net increase (decrease) in net assets resulting from operations was $97.5 million and ($31.2) million, respectively. Based on the weighted average shares of common stock outstanding for the nine months ended September 30, 2021 and 2020, our per share net increase (decrease) in net assets resulting from operations was $1.51 and ($0.55), respectively.

 

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Financial Condition, Liquidity and Capital Resources

 

Our liquidity and capital resources are derived primarily from proceeds from equity issuances, advances from our credit facilities, 2018-1 Notes, 2019-1 Debt, 2023 Notes, 2026 Notes and cash flows from operations. The primary uses of our cash are for (1) investments in portfolio companies and other investments and to comply with certain portfolio diversification requirements; (2) the cost of operations (including payments to the Advisor under the Investment Advisory and Administration Agreements); (3) debt service, repayment, and other financing costs; and, (4) cash distributions to the holders of our common shares.

 

We intend to continue to generate cash primarily from cash flows from operations, future borrowings and future offerings of securities. We may from time to time raise additional equity or debt capital through registered offerings, enter into additional debt facilities, or increase the size of existing facilities or issue debt securities. Any such incurrence or issuance would be subject to prevailing market conditions, our liquidity requirements, contractual and regulatory restrictions and other factors. We are required to meet an asset coverage ratio, defined under the 1940 Act as the ratio of our total assets (less all liabilities and indebtedness not represented by senior securities) to our outstanding senior securities, of at least 150% after each issuance of senior securities. As of September 30, 2021 and December 31, 2020, our asset coverage ratio was 181% and 173%, respectively.

 

At September 30, 2021 and December 31, 2020, we had $92.9 million and $81.7 million in cash, foreign cash, restricted cash and cash equivalents, respectively.

 

At September 30, 2021, we had approximately $270.2 million of availability on our JPM Credit Facility and $50.0 million of availability on our Revolving Advisor Loan, subject to existing terms and regulatory requirements. At December 31, 2020, we had approximately $167.2 million of availability on our BCSF Revolving Credit Facility, $156.7 million of availability on our JPM Credit Facility and $50.0 million of availability on our Revolving Advisor Loan, subject to existing terms and regulatory requirements.

 

For the nine months ended September 30, 2021, cash, foreign cash, restricted cash, and cash equivalents increased by $11.2 million. During the nine months ended September 30, 2021, we provided $196.5 million in cash for operating activities. The increase in cash used for operating activities was primarily related to the proceeds from principal payments and sales of investments of $1,059.0 million, and a net increase in net assets resulting from operations of $97.5 million, which was offset by purchases of investments of $888.4 million, net realized loss from investments of $18.7 million, net change in unrealized appreciation on forward currency exchange contracts of $26.7 million, and net change in unrealized appreciation on investments of $14.9 million.

 

During the nine months ended September 30, 2021, we used $182.3 million from financing activities, primarily from borrowings on our debt from the JPM Credit Facility and the issuance of the $300.0 million 2026 Notes, offset by repayments on our debt of $672.6 million, including the termination of our BCSF Revolving Credit Facility, and distributions paid during the period of $65.9 million.

 

For the nine months ended September 30, 2020, cash, foreign cash, restricted cash, and cash equivalents increased by $55.1 million. During the nine months ended September 30, 2020, we provided $53.6 million in cash for operating activities. The increase in cash used for operating activities was primarily related to the purchase of investments of $351.7 million and a net decrease in net assets resulting from operations of ($31.2) million, which was offset by proceeds from principal payments and sales of investments of $353.4 million, net realized losses from investments of $34.7 million, and the net change in unrealized depreciation on investments of $58.8 million.

 

During the nine months ended September 30, 2020, we generated $2.0 million from financing activities, primarily from issuance of our common stock of $131.9 million and borrowings on our debt from BCSF Revolving Credit Facility, JPM Credit Facility, Revolving Advisor Loan, and the issuance of the 2023 Notes of $527.8 million, offset by repayments on our debt of $585.4 million and distributions paid during the period of $64.3 million.

 

Equity

 

On November 19, 2018, we closed our initial public offering (the “IPO”) issuing 7,500,000 shares of its common stock at a public offering price of $20.25 per share. Shares of common stock of the Company began trading on the New York Stock Exchange under the symbol “BCSF” on November 15, 2018. The offering generated net proceeds, after expenses, of $145.4 million. All outstanding capital commitments from the Company’s Private Offering were cancelled as of the completion of the IPO.

 

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BCSF Investments, LLC and certain individuals adopted the 10b5-1 Plan in accordance with Rules 10b5-1 and 10b-18 under the Exchange Act, under which such parties would buy up to $20 million in the aggregate of our common stock in the open market during the period beginning after four full calendar weeks after the closing of the IPO and ending on the earlier of the date on which the capital committed to the 10b5-1 has been exhausted or one year after the closing of the IPO. As of December 31, 2019, zero dollars remain under the 10b5-1 Plan and no further purchases are intended under the 10b5-1 Plan.

 

During the nine months ended September 30, 2021, we did not issue shares of our common stock to investors who have opted into our dividend reinvestment plan. During the nine months ended September 30, 2020, we did not issue shares of our common stock to investors who have opted into our dividend reinvestment plan.

 

On May 7, 2019, the Company’s Board of Directors authorized the Company to repurchase up to $50 million of its outstanding common stock in accordance with safe harbor rules under the Exchange Act. Any such repurchases will depend upon market conditions and there is no guarantee that the Company will repurchase any particular number of shares or any shares at all. As of September 30, 2021, there have been no repurchases of common stock.

 

On May 4, 2020, the Company’s Board of Directors approved a transferable subscription rights offering to our stockholders of record as of May 13, 2020. The rights entitled record stockholders to subscribe for up to an aggregate of 12,912,453 shares of our common stock. Record stockholders received one right for each share of common stock owned on the record date. The rights entitled the holders to purchase one new share of common stock for every four rights held, and record stockholders who fully exercised their rights were entitled to subscribe, subject to certain limitations and allotment rules, for additional shares that remain unsubscribed as a result of any unexercised rights. The rights were transferable and listed on the New York Stock Exchange under the symbol “BCSF RT”. The rights offering expired June 5, 2020. Based on the terms of the offering and the market price of the stock during the applicable period, holders of rights participating in the offering were entitled to purchase one new share of common stock for every four rights held at a subscription price of $10.2163 per share. On June 16, 2020, the Company closed its transferrable rights offering and issued 12,912,453 shares. The offering generated net proceeds, before expenses, of $129.6 million, including the underwriting discount and commissions of $2.3 million.

 

Debt

 

Debt consisted of the following as of September 30, 2021 and December 31, 2020 (dollars in thousands):

 

   As of September 30 2021   As of December 31, 2020 
   Total Aggregate
Principal
Amount
Committed		   Principal
Amount
Outstanding		   Carrying
Value (1)		   Total Aggregate
Principal
Amount
Committed		   Principal
Amount
Outstanding		   Carrying
Value (1)		 
BCSF Revolving Credit Facility  $-   $-   $-   $425,000   $257,774   $257,774 
2018-1 Notes   365,700    365,700    364,135    365,700    365,700    364,006 
JPM Credit Facility   450,000    179,733    179,733    450,000    293,283    293,283 
2019-1 Debt   398,750    398,750    396,437    398,750    398,750    396,265 
Revolving Advisor Loan   50,000    -    -    50,000    -    - 
2023 Notes   150,000    112,500    110,903    150,000    150,000    147,032 
2026 Notes   300,000    300,000    294,975    -    -    - 
Total Debt  $1,714,450   $1,356,683   $1,346,183   $1,839,450   $1,465,507   $1,458,360 

 

 

(1)     Carrying value represents aggregate principal amount outstanding less unamortized debt issuance costs.

 

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BCSF Revolving Credit Facility

 

On October 4, 2017, the Company entered into the revolving credit agreement (the “BCSF Revolving Credit Facility”) with us, as equity holder, BCSF I, LLC, a Delaware limited liability company and a wholly owned and consolidated subsidiary of the Company, as borrower, and Goldman Sachs Bank USA, as sole lead arranger (“Goldman Sachs”). The BCSF Revolving Credit Facility was subsequently amended on May 15, 2018 to reflect certain clarifications regarding margin requirements and hedging currencies. The maximum commitment amount under the BCSF Revolving Credit Facility is $500.0 million, and may be increased up to $750.0 million. Proceeds of the loans under the BCSF Revolving Credit Facility may be used to acquire certain qualifying loans and such other uses as permitted under the BCSF Revolving Credit Facility. The BCSF Revolving Credit Facility includes customary affirmative and negative covenants, including certain limitations on the incurrence of additional indebtedness and liens, as well as usual and customary events of default for revolving credit facilities of this nature.

 

On January 8, 2020, the Company entered into an amended and restated credit agreement of its BCSF Revolving Credit Facility. The amendment amended the existing credit facility to, among other things, modify various financial covenants, including removing a liquidity covenant and adding a net asset value covenant with respect to the Company, as sponsor.

 

On March 31, 2020, the Parties entered into Omnibus Amendment No. 1 to the amended and restated credit agreement. The amendment amended the existing credit facility to, among other things, provide for enhanced flexibility to purchase or contribute and borrow against revolving loans and delayed draw term loans, and to count certain additional assets in the calculation of collateral for the outstanding advances; increase the spread payable under the facility from 2.50% to 3.25% per annum; include additional events of default to the existing credit facility, including but not limited to, a qualified equity raise not effected on or prior to June 22, 2020; and, after June 22, 2020, require the Company to maintain at least $50.0 million of unencumbered liquidity or pay down the facility by at least $50.0 million.

 

On May 27, 2020, the Parties entered into Amendment No. 2 to the amended and restated credit agreement. The amendment amended the existing credit facility to, among other things, (i) permit the Company to incur a lien on assets purchased with the proceeds of the rights offering and (ii) remove the requirement that the Company maintain $50.0 million in unencumbered cash after the completion of the rights offering, instead requiring a pay down of $50.0 million within two business days after the closing of the rights offering, which was subsequently paid.

 

On August 14, 2020, the Parties entered into the second amended and restated credit agreement and the third amended and restated margining agreement (collectively, the “Amendment”), which amended and restated the terms of the existing credit facility (the “Amended and Restated Credit Facility”). The Amendment amends the existing credit facility to, among other things, (i) decrease the financing limit from $500.0 million to $425.0 million, (ii) decrease the interest rate on financing from LIBOR plus 3.25% per annum to LIBOR plus 3.00% per annum, and (iii) provide enhanced flexibility to contribute and borrow against revolving and delayed draw loans and modify certain other terms relating to collaterals.

 

Borrowings under the BCSF Revolving Credit Facility bear interest at LIBOR plus a margin. As of December 31, 2020, the BCSF Revolving Credit Facility was accruing interest expense at a rate of LIBOR plus 3.00%. The Company paid an unused commitment fee of 30 basis points (0.30%) per annum.

 

On March 11, 2021, the BCSF Revolving Credit Facility was terminated. The proceeds from the 2026 Notes were used to repay the total outstanding debt.

 

For the three months ended September 30, 2021 and 2020, the components of interest expense related to the BCSF Revolving Credit Facility were as follows (dollars in thousands):

 

   For the Three Months Ended
September 30,		 
   2021   2020 
Borrowing interest expense  $—   $2,823 
Unused facility fee   —    106 
Amortization of deferred financing costs and upfront commitment fees   —    297 
Total interest and debt financing expenses  $—   $3,226 

 

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For the nine months ended September 30, 2021 and 2020, the components of interest expense related to the BCSF Revolving Credit Facility were as follows (dollars in thousands):

 

   For the Nine Months Ended
September 30,		 
   2021   2020 
Borrowing interest expense  $509   $12,428 
Unused facility fee   118    270 
Amortization of deferred financing costs and upfront commitment fees   —    830 
Total interest and debt financing expenses  $627   $13,528 

 

2018-1 Notes

 

On September 28, 2018 (the “2018-1 Closing Date”), we, through BCC Middle Market CLO 2018-1 LLC (the “2018-1 Issuer”), a Delaware limited liability company and a wholly owned and consolidated subsidiary of the Company, completed its $451.2 million term debt securitization (the “CLO Transaction”). The notes issued in connection with the CLO Transaction (the “2018-1 Notes”) are secured by a diversified portfolio of the 2018-1 Issuer consisting primarily of middle market loans, the majority of which are senior secured loans (the “2018-1 Portfolio”). At the 2018-1 Closing Date, the 2018-1 Portfolio was comprised of assets transferred from the Company and its consolidated subsidiaries. All transfers were eliminated in consolidation and there were no realized gains or losses recognized in the CLO Transaction.

 

The CLO Transaction was executed through a private placement of the following 2018-1 Notes (dollars in thousands):

 

2018-1 Notes   Principal
Amount		     Spread above Index   Interest rate at
September 30,
2021		  
Class A-1 A   $ 205,900     1.55% + 3 Month LIBOR     1.68 %
Class A-1 B     45,000     1.50% + 3 Month LIBOR (first 24 months)     1.93 %
            1.80% + 3 Month LIBOR (thereafter)        
Class A-2     55,100     2.15% + 3 Month LIBOR     2.28 %
Class B     29,300     3.00% + 3 Month LIBOR     3.13 %
Class C     30,400     4.00% + 3 Month LIBOR     4.13 %
Total 2018-1 Notes     365,700              
Membership Interests     85,450     Non-interest bearing     Not applicable  
Total   $ 451,150              

 

The Class A-1 A, A-1 B, A-2, B and C 2018-1 Notes were issued at par and are scheduled to mature on October 20, 2030. The Company received 100% of the membership interests (the “Membership Interests”) in the 2018-1 Issuer in exchange for its sale to the 2018-1 Issuer of the initial closing date loan portfolio. The Membership Interests do not bear interest.

 

The Class A-1 A, A-1 B, A-2, B and C 2018-1 Notes are included in the consolidated financial statements. The Membership Interests are eliminated in consolidation.

 

The Company serves as portfolio manager of the 2018-1 Issuer pursuant to a portfolio management agreement between the Company and the 2018-1 Issuer. For so long as the Company serves as portfolio manager, the Company will not charge any management fee or subordinated interest to which it may be entitled.

 

During the reinvestment period (four years from the closing date of the CLO Transaction), pursuant to the indenture governing the 2018-1 Notes, all principal collections received on the underlying collateral may be used by the 2018-1 Issuer to purchase new collateral under the direction of the Company in its capacity as portfolio manager of the 2018-1 Issuer and in accordance with the 2018-1 Issuer’s investment strategy and the terms of the indenture.

 

The Company has agreed to hold on an ongoing basis the Membership Interests with an aggregate dollar purchase price of at least equal to 5% of the aggregate amount of all obligations issued by the 2018-1 Issuer for so long as the 2018-1 Notes remain outstanding.

 

The 2018-1 Issuer pays ongoing administrative expenses to the trustee, independent accountants, legal counsel, rating agencies and independent managers in connection with developing and maintaining reports, and providing required services in connection with the administration of the 2018-1 Issuer.

 

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As of September 30, 2021, there were 61 first lien and second lien senior secured loans with a total fair value of approximately $427.6 million and cash of $16.8 million securing the 2018-1 Notes. As of December 31, 2020, there were 60 first lien and second lien senior secured loans with a total fair value of approximately $424.0 million and cash of $11.1 million securing the 2018-1 Notes. Assets that are pledged as collateral for the 2018-1 Notes are not directly available to the creditors of the Company to satisfy any obligations of the Company other than the Company’s obligations under the indenture governing the 2018-1 Notes. Such assets are included in the Company’s consolidated financial statements. The creditors of the 2018-1 Issuer have received security interests in such assets and such assets are not intended to be available to the creditors of the Company (or an affiliate of the Company). The 2018-1 Portfolio must meet certain requirements, including asset mix and concentration, term, agency rating, collateral coverage, minimum coupon, minimum spread and sector diversity requirements in the indenture governing the 2018-1 Notes. As of September 30, 2021 and December 31, 2020, the Company was in compliance with its covenants related to the 2018-1 Notes.

 

Costs of $2.1 million were incurred in connection with debt securitization of the 2018-1 Notes by the 2018-1 Issuer which have been recorded as debt issuance costs and presented as a reduction to the outstanding principal amount of the 2018-1 Notes on the consolidated statements of assets and liabilities and are being amortized over the life of the 2018-1 Issuer using the effective interest method. The balance of the unamortized debt issuance costs related to the 2018-1 Issuer was $1.6 million and $1.7 million as of September 30, 2021 and December 31, 2020, respectively.

 

For the three months ended September 30, 2021 and 2020, the components of interest expense related to the 2018-1 Issuer were as follows (dollars in thousands):

 

   For the Three Months Ended
September 30,		 
   2021   2020 
Borrowing interest expense  $1,997   $2,246 
Amortization of debt issuance costs and upfront commitment fees   44    44 
Total interest and debt financing expenses  $2,041   $2,290 

 

For the nine months ended September 30, 2021 and 2020, the components of interest expense related to the 2018-1 Issuer were as follows (dollars in thousands):

 

   For the Nine Months Ended
September 30,		 
   2021   2020 
Borrowing interest expense  $6,042   $8,752 
Amortization of debt issuance costs and upfront commitment fees   130    130 
Total interest and debt financing expenses  $6,172   $8,882 

 

JPM Credit Facility

 

On April 30, 2019, the Company entered into a loan and security agreement (the “JPM Credit Agreement” or the “JPM Credit Facility”) as Borrower, with JPMorgan Chase Bank, National Association, as Administrative Agent, and Wells Fargo Bank, National Association as Collateral Administrator, Collateral Agent, Securities Intermediary and Bank. The facility amount under the JPM Credit Agreement was $666.6 million. Borrowings under the JPM Credit Facility bore interest at LIBOR plus 2.75%.

 

On January 29, 2020, the Company entered into an amended and restated loan and security agreement (the "Amended Loan and Security Agreement") as Borrower, with JPMorgan Chase Bank, National Association, as Administrative Agent, and Wells Fargo Bank, National Association as Collateral Administrator, Collateral Agent, Securities Intermediary and Bank. The Amended Loan and Security Agreement amended the Existing Loan and Security Agreement to, among other things, (1) decrease the financing limit under the agreement from $666.6 million to $500.0 million; (2) decrease the minimum facility amount from $466.6 million to $300.0 million period from January 29, 2020 to July 29, 2020 (the minimum facility amount will increase to $350.0 million after July 29, 2020 until the end of the reinvestment period); (3) decrease the interest rate on financing from 2.75% per annum over the applicable LIBOR to 2.375% per annum over the applicable LIBOR; and (4) extend the scheduled termination date of the agreement from November 29, 2022 to January 29, 2025.

 

On March 20, 2020, the Company entered into a second amended and restated loan and security agreement between the parties (the "Second Amended Loan and Security Agreement"). The Second Amended Loan and Security Agreement, among other things, provides flexibility to contribute and borrow against revolving loans, reduce the amount required to be reserved for unfunded revolvers and delayed draw obligations and decreases the financing limit by $50.0 million within 90 days or, based on the occurrence of certain events, such earlier period as may be set forth in the Second Amended Loan and Security Agreement. The Company shall pay to the Administrative Agent $50.0 million to the prepayment of Advances and the Financing Commitments shall be reduced by the amount of principal so prepaid on the earlier of two Business days following the closing of the Rights Offering and June 18, 2020, which the Company subsequently paid.

 

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On July 2, 2020, the Company entered into a third amended and restated loan and security agreement with respect to the JPM Credit Agreement to, among other things, adjust the advance rates and make certain changes of an updating nature.

 

The facility amount under the JPM Credit Agreement is currently $450.0 million. Proceeds of the loans under the JPM Credit Facility may be used to acquire certain qualifying loans and such other uses as permitted under the JPM Credit Agreement. The period from the effective date of the amendment until January 29, 2023 is referred to as the reinvestment period and during such reinvestment period, the Borrower may request drawdowns under the JPM Credit Facility.

 

The maturity date is the earliest of: (a) January 29, 2025, (b) the date on which the secured obligations become due and payable following the occurrence of an event of default, (c) the date on which the advances are repaid in full and (d) the date after a market value cure failure occurs on which all portfolio investments have been sold and proceeds therefrom have been received by the Borrower. The stated maturity date of January 29, 2025 may be extended for successive one year periods by mutual agreement of the Borrower and the Administrative Agent.

 

The JPM Credit Agreement includes customary affirmative and negative covenants, including certain limitations on the incurrence of additional indebtedness and liens, as well as usual and customary events of default for revolving credit facilities of this nature.

 

Borrowings under the JPM Credit Facility bear interest at LIBOR plus a margin. As of September 30, 2021, the JPM Credit Facility was accruing interest expense at a rate of LIBOR plus 2.375%. The Company pays an unused commitment fee of between 37.5 basis points (0.375%) and 75 basis points (0.75%) per annum depending on the size of the unused portion of the facility. Interest is payable quarterly in arrears.

 

As of September 30, 2021 and December 31, 2020, there were $179.7 million and $293.3 million of borrowings under the JPM Credit Facility, respectively, the Company was in compliance with the terms of the JPM Credit Facility.

 

For the three months ended September 30, 2021 and 2020, the components of interest expense related to the JPM Credit Facility were as follows (dollars in thousands):

 

   For the Three Months Ended
September 30,		 
   2021   2020 
Borrowing interest expense  $1,558   $2,444 
Unused facility fee   860    94 
Amortization of deferred financing costs and upfront commitment fees   65    65 
Total interest and debt financing expenses  $2,483   $2,603 

 

For the nine months ended September 30, 2021 and 2020, the components of interest expense related to the JPM Credit Facility were as follows (dollars in thousands):

 

   For the Nine Months Ended
September 30,		 
   2021   2020 
Borrowing interest expense  $3,977   $11,469 
Unused facility fee   3,204    310 
Amortization of deferred financing costs and upfront commitment fees   194    402 
Total interest and debt financing expenses  $7,375   $12,181 

 

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2019-1 Debt

 

On August 28, 2019, the Company, through BCC Middle Market CLO 2019-1 LLC (the “2019-1 Issuer”), a Cayman Islands limited liability company and a wholly-owned and consolidated subsidiary of the Company, and BCC Middle Market CLO 2019-1 Co-Issuer, LLC (the “Co-Issuer” and, together with the Issuer, the “Co-Issuers”), a Delaware limited liability company, completed its $501.0 million term debt securitization (the “2019-1 CLO Transaction”). The notes issued in connection with the 2019-1 CLO Transaction (the “2019-1 Notes”) are secured by a diversified portfolio of the Co-Issuers consisting primarily of middle market loans, the majority of which are senior secured loans (the “2019-1 Portfolio”). The Co-Issuers also issued Class A-1L Loans (the “Loans” and, together with the 2019-1 Notes, the “2019-1 Debt”). The Loans are also secured by the 2019-1 Portfolio. At the 2019-1 closing date, the 2019-1 Portfolio was comprised of assets transferred from the Company and its consolidated subsidiaries. All transfers were eliminated in consolidation and there were no realized gains or losses recognized in the 2019-1 CLO Transaction.

 

The 2019-1 CLO Transaction was executed through a private placement of the following 2019-1 Debt (dollars in thousands):

 

2019-1 Debt   Principal Amount     Spread above Index   Interest rate at
September 30,
2021		  
Class A-1L   $ 50,000     1.70% + 3 Month LIBOR     1.83 %
Class A-1     222,500     1.70% + 3 Month LIBOR     1.83 %
Class A-2A     50,750     2.70% + 3 Month LIBOR     2.83 %
Class A-2B     13,000     4.23% (Fixed)     4.23 %
Class B     30,000     3.60% + 3 Month LIBOR     3.73 %
Class C     32,500     4.75% + 3 Month LIBOR     4.88 %
Total 2019-1 Debt     398,750              
Membership Interests     102,250     Non-interest bearing     Not applicable  
Total   $ 501,000              

 

The Loans and the Class A-1, A-2A, A-2B, and B Notes were issued at par. The Class C Notes were issued at a discount. The Notes are scheduled to mature on October 15, 2031. The Company received 100% of the membership interests (the “Membership Interests”) in the 2019-1 Issuer in exchange for its sale to the 2019-1 Issuer of the initial closing date loan portfolio. The Membership Interests do not bear interest.

 

The Loans and Class A-1, A-2A, A-2B, B, and C Notes are included in the consolidated financial statements of the Company. The Membership Interests are eliminated in consolidation.

 

The Company serves as portfolio manager of the 2019-1 Issuer pursuant to a portfolio management agreement between the Company and the 2019-1 Issuer. For so long as the Company serves as portfolio manager, the Company will not charge any management fee or subordinated interest to which it may be entitled.

 

During the reinvestment period, pursuant to the indenture and loan agreement governing the 2019-1 Notes and Loans, respectively, all principal collections received on the underlying collateral may be used by the 2019-1 Issuer to purchase new collateral under the direction of the Company in its capacity as portfolio manager of the 2019-1 Issuer and in accordance with the 2019-1 Issuer investment strategy and the terms of the indenture and loan agreement, as applicable.

 

The Company has agreed to hold on an ongoing basis the Membership Interests with an aggregate dollar purchase price at least equal to 5% of the aggregate amount of all obligations issued by the 2019-1 Co-Issuers for so long as the 2019-1 Debt remains outstanding.

 

The 2019-1 Issuer pays ongoing administrative expenses to the trustee, independent accountants, legal counsel, rating agencies and independent managers in connection with developing and maintaining reports, and providing required services in connection with the administration of the 2019-1 Issuer.

 

As of September 30, 2021, there were 62 first lien and second lien senior secured loans with a total fair value of approximately $455.4 million and cash of $41.0 million securing the 2019-1 Debt. As of December 31, 2020, there were 67 first lien and second lien senior secured loans with a total fair value of approximately $469.4 million and cash of $15.9 million securing the 2019-1 Notes. Assets that are pledged as collateral for the 2019-1 Debt are not directly available to the creditors of the Company to satisfy any obligations of the Company other than the Company’s obligations under the indenture and loan agreement governing the 2019-1 Debt. The creditors of the 2019-1 Co-Issuers have received security interests in such assets and such assets are not intended to be available to the creditors of the Company (or an affiliate of the Company). The 2019-1 Portfolio must meet certain requirements, including asset mix and concentration, term, agency rating, collateral coverage, minimum coupon, minimum spread and sector diversity requirements in the indenture and loan agreement governing the 2019-1 Debt. As of September 30, 2021, the Company was in compliance with its covenants related to the 2019-1 Debt.

 

98 

 

 

Costs of the offering, including the discount of the Class C Notes, of $2.8 million were incurred in connection with debt securitization of the 2019-1 Debt by the 2019-1 Co-Issuers which have been recorded as debt issuance costs and presented as a reduction to the outstanding principal amount of the 2019-1 Debt on the consolidated statements of assets and liabilities and are being amortized over the life of the 2019-1 Issuer using the effective interest method. The balance of the unamortized debt issuance costs related to the 2019-1 Issuer was $2.3 million and $2.5 million as of September 30, 2021 and December 31, 2020, respectively.

 

For the three months ended September 30, 2021 and 2020, the components of interest expense related to the 2019-1 Co-Issuers were as follows (dollars in thousands):

 

   For the Three Months Ended
September 30,		 
   2021   2020 
Borrowing interest expense  $2,475   $2,755 
Amortization of debt issuance costs and upfront commitment fees   58    58 
Total interest and debt financing expenses  $2,533   $2,813 

 

For the nine months ended September 30, 2021 and 2020, the components of interest expense related to the 2019-1 Co-Issuers were as follows (dollars in thousands):

 

   For the Nine Months Ended
September 30,		 
   2021   2020 
Borrowing interest expense  $7,507   $10,490 
Amortization of debt issuance costs and upfront commitment fees   172    172 
Total interest and debt financing expenses  $7,679   $10,662 

 

Revolving Advisor Loan

 

On March 27, 2020, the Company entered into an unsecured revolving loan agreement (the “Revolving Advisor Loan”) with BCSF Advisors, LP, the investment adviser of the Company. The Revolving Advisor Loan has a maximum credit limit of $50.0 million and a maturity date of March 27, 2023. The Revolving Advisor Loan accrues interest at the Applicable Federal Rate from the date of such loan until the loan is repaid in full. As of September 30, 2021, there were no borrowings under the Revolving Advisor Loan.

 

For the three months ended September 30, 2021 and 2020, the components of interest expense related to the Revolving Advisor Loan were as follows (dollars in thousands):

 

    For the Three Months Ended
September 30,		 
    2021    2020 
Borrowing interest expense  $—   $— 
Total interest and debt financing expenses  $—   $— 

 

For the nine months ended September 30, 2021 and 2020, the components of interest expense related to the Revolving Advisor Loan were as follows (dollars in thousands):

 

   For the Nine Months Ended
September 30,		 
   2021   2020 
Borrowing interest expense  $—   $58 
Total interest and debt financing expenses  $—   $58 

 

99 

 

 

2023 Notes

 

On June 10, 2020, the Company entered into a Master Note Purchase Agreement with institutional investors listed on the Purchaser Schedule thereto (the “Note Purchase Agreement”), in connection with the Company’s issuance of $150.0 million aggregate principal amount of its 8.50% senior unsecured notes due 2023 (the “2023 Notes”). The sale of the 2023 Notes generated net proceeds of approximately $146.4 million, including an offering discount of $1.5 million and debt issuance costs in connection with the transaction, including fees and commissions, of $2.1 million.

 

The 2023 Notes will mature on June 10, 2023 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 Note Purchase Agreement. The 2023 Notes will bear interest at a rate of 8.50% per year payable semi-annually on June 10 and December 10 of each year, commencing on December 10, 2020. As of September 30, 2021, the Company was in compliance with the terms of the Note Purchase Agreement governing the 2023 Notes.

 

On July 16, 2021 the Company repurchased $37.5 million of the 2023 Notes at a total cost of $39.5 million. This resulted in a realized loss on the extinguishment of debt of $2.5 million, which included a premium paid of $2.0 million and acceleration of unamortized debt issuance costs of $0.5 million.

 

As of September 30, 2021 and December 31, 2020, the components of the carrying value of the 2023 Notes were as follows (dollars in thousands):

 

   September 30, 2021   December 31, 2020 
Principal amount of debt  $112,500   $150,000 
Unamortized debt issuance cost   (960)   (1,785)
Original issue discount, net of accretion   (637)   (1,183)
Carrying value of 2023 Notes  $110,903   $147,032 

 

For the three months ended September 30, 2021 and 2020, the components of interest expense related to the 2023 Notes were as follows (dollars in thousands):

 

   For the Three Months Ended
September 30,		 
   2021   2020 
Borrowing interest expense  $2,520   $3,188 
Amortization of debt issuance cost   114    184 
Accretion of original issue discount   76    122 
Total interest and debt financing expenses  $2,710   $3,494 

 

For the nine months ended September 30, 2021 and 2020, the components of interest expense related to the 2023 Notes were as follows (dollars in thousands):

 

   For the Nine Months Ended
September 30,		 
   2021   2020 
Borrowing interest expense  $8,895   $3,932 
Amortization of debt issuance cost   477    222 
Accretion of original issue discount   316    149 
Total interest and debt financing expenses  $9,688   $4,303 

 

2026 Notes

 

On March 10, 2021, the “Company and U.S. Bank National Association (the “Trustee”), entered into an Indenture (the “Base Indenture”) and First Supplemental Indenture (the “First Supplemental Indenture,” and together with the Base Indenture, the “Indenture”) between the Company and the Trustee. The First Supplemental Indenture relates to the Company’s issuance of $300,000,000 aggregate principal amount of its 2.950% notes due 2026 (the “2026 Notes”).

 

The 2026 Notes will mature on March 10, 2026 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 2026 Notes bear interest at a rate of 2.950% per year payable semi-annually on March 10th and September 10th of each year, commencing on September 10, 2021. The 2026 Notes are 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 2026 Notes, rank pari passu with all existing and future unsecured unsubordinated indebtedness issued by the Company, rank 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 rank structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company’s subsidiaries, financing vehicles or similar facilities.

 

100 

 

 

As of September 30, 2021 and December 31, 2020, the components of the carrying value of the 2026 Notes were as follows (dollars in thousands):

 

   September 30, 2021   December 31, 2020 
Principal amount of debt  $300,000   $— 
Unamortized debt issuance cost   (2,882)   — 
Original issue discount, net of accretion   (2,143)   — 
Carrying value of 2026 Notes  $294,975   $— 

 

For the three months ended September 30, 2021 and 2020, the components of interest expense related to the 2026 Notes were as follows (dollars in thousands):

 

   For the Three Months Ended
September 30,		 
   2021   2020 
Borrowing interest expense  $2,213   $— 
Amortization of debt issuance cost   163    — 
Amortization of original issue discount   122    — 
Total interest and debt financing expenses  $2,498   $— 

 

For the nine months ended September 30, 2021 and 2020, the components of interest expense related to the 2026 Notes were as follows (dollars in thousands):

 

   For the Nine Months Ended
September 30,		 
   2021   2020 
Borrowing interest expense  $4,942   $— 
Amortization of debt issuance cost   362    — 
Amortization of original issue discount   270    — 
Total interest and debt financing expenses  $5,574   $— 

 

Distribution Policy

 

The following table summarizes distributions declared during the nine months ended September 30, 2021 (dollars in thousands, except per share data):

 

Date Declared  Record Date  Payment Date  Amount
Per Share		   Total
Distributions		 
February 18, 2021  March 31, 2021  April 30, 2021  $0.34   $21,951 
April 27, 2021  June 30, 2021  July 30, 2021  $0.34   $21,951 
July 29, 2021  September 30, 2021  October 29, 2021  $0.34   $21,951 
Total distributions declared        $1.02   $65,853 

 

The following table summarizes distributions declared during the nine months ended September 30, 2020 (dollars in thousands, except per share data):

 

Date Declared  Record Date  Payment Date  Amount
Per Share		   Total
Distributions		 
February 20, 2020  March 31, 2020  April 30, 2020  $0.41   $21,176 
May 4, 2020  June 30, 2020  July 30, 2020  $0.34   $21,951 
July 30, 2020  September 30, 2020  October 30, 2020  $0.34   $21,951 
Total distributions declared        $1.09   $65,078 

 

101 

 

 

Distributions to common stockholders are recorded on the record date. To the extent that we have income available, we intend to distribute quarterly distributions to our stockholders. Our quarterly distributions, if any, will be determined by the Board. Any distributions to our stockholders will be declared out of assets legally available for distribution.

 

We have elected to be treated, and intend to operate in a manner so as to continuously qualify, as a regulated investment company (a “RIC) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), beginning with our taxable year ended December 31, 2016. To qualify for and maintain RIC tax treatment, among other things, we must distribute dividends to our stockholders in respect of each taxable year of an amount generally at least equal to 90% of the sum of our net ordinary income and net short-term capital gains in excess of our net long-term capital losses. In order to avoid the imposition of certain excise taxes imposed on RICs, we must distribute dividends to our stockholders in respect of each calendar year of an amount at least equal to the sum of: (1) 98% of our net ordinary income (taking into account certain deferrals and elections) for such calendar year; (2) 98.2% of our capital gains in excess of capital losses, adjusted for certain ordinary losses, generally for the one-year period ending on October 31 of such calendar year; and (3) the sum of any net ordinary income plus capital gains net income for preceding years that were not distributed during such years and on which we paid no federal income tax.

 

We intend to distribute net capital gains (i.e., net long-term capital gains in excess of net short-term capital losses), if any, at least annually out of the assets legally available for such distributions. However, we may decide in the future to retain all or a portion of our net capital gains for investment, incur a corporate-level tax on such capital gains, and elect to treat such capital gains as deemed distributions to our stockholders.

 

We have adopted a dividend reinvestment plan that provides for the reinvestment of cash dividends and distributions. Prior to the IPO, stockholders who “opted in” to our dividend reinvestment plan had their cash dividends and distributions automatically reinvested in additional shares of our common stock, rather than receiving cash dividends and distributions. Subsequent to the IPO, stockholders who do not “opt out” of our dividend reinvestment plan will have their cash dividends and distributions automatically reinvested in additional shares of our common stock, rather than receiving cash dividends and distributions. Stockholders could elect to “opt in” or “opt out” of our dividend reinvestment plan in their subscription agreements, through the private offering. The elections of stockholders prior to the IPO shall remain effective after the IPO.

 

The U.S. federal income tax characterization of distributions declared and paid for the fiscal year will be determined at fiscal year-end based upon our investment company taxable income for the full fiscal year and distributions paid during the full year.

 

Commitments and Off-Balance Sheet Arrangements

 

We may become a party to financial instruments with off-balance sheet risk in the normal course of our business to fund investments and to meet the financial needs of our portfolio companies. These instruments may include commitments to extend credit and involve, to varying degrees, elements of liquidity and credit risk in excess of the amount recognized on the statements of assets and liabilities.  

 

102 

 

 

As of September 30, 2021, the Company had $225.3 million of unfunded commitments under loan and financing agreements as follows (dollars in thousands): 

 

   Expiration Date (1)  Unfunded Commitments (2) 
Portfolio Company & Investment        
9 Story Media Group Inc. - Revolver  4/30/2026  $1 
A&R Logistics, Inc. - Revolver  5/5/2025   3,281 
Abracon Group Holding, LLC - Revolver  7/18/2024   2,833 
Allworth Financial Group, L.P. - Delayed Draw  12/23/2026   3,042 
Allworth Financial Group, L.P. - Revolver  12/23/2026   2,440 
American Trailer Rental Group - Delayed Draw  12/1/2027   2,940 
AMI US Holdings Inc. - Revolver  4/1/2024   1,047 
Amspec Services, Inc. - Revolver  7/2/2024   4,817 
Ansira Holdings, Inc. - Revolver  12/20/2024   1,700 
Appriss Holdings, Inc. – Equity Interest  N/A   530 
Appriss Holdings, Inc. - Revolver  5/30/2025   3,547 
Appriss Holdings, Inc. - Revolver  5/6/2027   753 
Aramsco, Inc. - Revolver  8/28/2024   2,822 
Batteries Plus Holding Corporation - Revolver  7/6/2022   2,975 
Captain D's LLC - Revolver  12/15/2023   1,862 
CPS Group Holdings, Inc. - Revolver  3/3/2025   4,933 
CST Buyer Company - Revolver  10/3/2025   2,190 
DC Blox Inc. - First Lien Senior Secured Loan  3/22/2026   12,781 
Direct Travel, Inc. - Delayed Draw  10/2/2023   2,625 
Efficient Collaborative Retail Marketing Company, LLC - Revolver  6/15/2022   2,267 
Element Buyer, Inc. - Revolver  7/19/2024   3,967 
Grammer Purchaser, Inc. - Revolver  9/30/2024   1,050 
Great Expressions Dental Center PC - Revolver  9/28/2022   578 
Green Street Parent, LLC - Revolver  8/27/2025   2,419 
GSP Holdings, LLC - Revolver  11/6/2025   2,947 
iBanFirst Revolving Facility - Revolver  7/13/2028   2,349 
JHCC Holdings, LLC - Revolver  9/9/2025   2,648 
Kellstrom Commercial Aerospace, Inc. - Revolver  7/1/2025   2,239 
Learning Pool Capex and Acquisition Facility 1 - First Lien Senior Secured Loan  7/7/2028   9,665 
Learning Pool Capex and Acquisition Facility 2 - First Lien Senior Secured Loan  7/7/2028   7,249 
Learning Pool Revolving Facility - Revolver  7/7/2027   2,416 
Margaux Acquisition Inc. - Revolver  12/19/2024   2,462 
Margaux UK Finance Limited - Revolver  12/19/2024   672 
masLabor Revolver - Revolver  7/1/2027   1,034 
MRHT Acquisition Facility - First Lien Senior Secured Loan  7/26/2029   579 
MRI Software LLC - Delayed Draw  2/10/2026   446 
MRI Software LLC - Revolver  2/10/2026   1,782 
MZR Buyer, LLC - Revolver  12/21/2026   5,210 
New Look Vision Group - Delayed Draw  5/26/2028   3,942 
New Look Vision Group - Revolver  5/26/2026   1,747 
Opus2 - Delayed Draw  5/5/2028   7,343 
Parcel2Go Acquisition Facility - First Lien Senior Secured Loan  7/15/2028   8,911 
Profile Products LLC - Revolver  12/20/2024   3,194 
Refine Intermediate, Inc. - Revolver  9/3/2026   5,340 
RoC Opco LLC - Revolver  2/25/2025   6,828 
Service Master Revolving Loan - Revolver  8/16/2027   3,510 
Solaray, LLC - Revolver  9/9/2022   10,427 
Sontiq, Inc. (fka EZShield, Inc.) - Revolver  3/1/2026   1,412 
SumUp Holdings Luxembourg S.à.r.l. - First Lien Senior Secured Loan  2/17/2026   7,573 
SunMed Group Holdings, LLC - Revolver  6/16/2027   836 
TA/Weg Holdings - Delayed Draw  10/2/2025   1,872 
TEI Holdings Inc. - Revolver  12/23/2025   3,621 
TGI Sport Bidco Pty Ltd - First Lien Senior Secured Loan  4/30/2027   3,005 
Tidel Engineering, L.P. - Revolver  3/1/2023   4,250 
TLC Purchaser, Inc. - Delayed Draw  10/13/2025   7,119 
TLC Purchaser, Inc. - Revolver  10/13/2025   2,492 
V Global Holdings LLC - Revolver  12/22/2025   7,885 
Ventiv Holdco, Inc. - Revolver  9/3/2025   3,407 
WCI-HSG Purchaser, Inc. - Revolver  2/24/2025   940 
Whitcraft LLC - Revolver  4/3/2023   1,812 
World Insurance - Delayed Draw  4/1/2026   2,309 
World Insurance - Revolver  4/1/2026   931 
WSP Initial Term Loan - First Lien Senior Secured Loan  4/27/2023   1,797 
WSP Revolving Loan - Revolver  4/27/2027   449 
WU Holdco, Inc. - First Lien Senior Secured Loan  3/26/2026   1,708 
WU Holdco, Inc. - Revolver  3/26/2025   3,043 
YLG Holdings, Inc. - Revolver  10/31/2025   8,545 
Total First Lien Senior Secured Loans     $225,346 

 

103 

 

 

 

  (1) Commitments are generally subject to borrowers meeting certain criteria such as compliance with covenants and certain operational metrics. These amounts may remain outstanding until the commitment period of an applicable loan expires, which may be shorter than its maturity.

 

  (2) Unfunded commitments denominated in currencies other than U.S. dollars have been converted to U.S. dollars using the applicable foreign currency exchange rate as of September 30, 2021.

 

As of December 31, 2020, the Company had $189.9 million of unfunded commitments under loan and financing agreements as follows (dollars in thousands):

 

   Expiration Date (1)  Unfunded Commitments (2) 
First Lien Senior Secured Loans        
9 Story Media Group Inc. - Revolver  4/30/2026  $74 
A&R Logistics, Inc. - Revolver  5/5/2025   6,096 
Abracon Group Holding, LLC. - Revolver  7/18/2024   2,833 
Allworth Financial Group, L.P. - Delayed Draw  12/23/2026   3,042 
Allworth Financial Group, L.P. - Revolver  12/23/2026   2,440 
AMI US Holdings Inc. - Revolver  4/1/2024   488 
Amspec Services, Inc. - Revolver  7/2/2024   5,667 
Ansira Holdings, Inc. - Revolver  12/20/2024   1,700 
AP Plastics Group, LLC - Revolver  8/2/2021   5,667 
Appriss Holdings, Inc. - Revolver  5/30/2025   4,711 
Aramsco, Inc. - Revolver  8/28/2024   3,387 
Batteries Plus Holding Corporation - Revolver  7/6/2022   4,250 
Captain D’s LLC - Revolver  12/15/2023   490 
CB Nike IntermediateCo Ltd - Revolver  10/31/2025   4,428 
CMI Marketing Inc - Revolver  5/24/2023   2,112 
CPS Group Holdings, Inc. - Revolver  3/3/2025   4,933 
CST Buyer Company - Revolver  10/3/2025   2,190 
Datix Bidco Limited - Revolver  10/28/2024   1,328 
Direct Travel, Inc. - Delayed Draw  10/2/2023   4,800 
Dorner Manufacturing Corp - Revolver  3/15/2022   1,099 
Efficient Collaborative Retail Marketing Company, LLC - Revolver  6/15/2022   1,275 
Element Buyer, Inc. - Revolver  7/19/2024   3,967 
FFI Holdings I Corp - Delayed Draw  1/24/2025   3,156 
FFI Holdings I Corp - Revolver  1/24/2025   3,938 
Fineline Technologies, Inc. - Revolver  11/4/2022   2,633 
Grammer Purchaser, Inc. - Revolver  9/30/2024   1,050 
Great Expressions Dental Center PC - Revolver  9/28/2022   513 
Green Street Parent, LLC - Revolver  8/27/2025   2,419 

 

104 

 

 

   Expiration Date (1)  Unfunded Commitments (2) 
GSP Holdings, LLC - Revolver  11/6/2025   3,400 
JHCC Holdings, LLC - Delayed Draw  9/9/2025   6,262 
JHCC Holdings, LLC - Revolver  9/9/2025   1,272 
Kellstrom Commercial Aerospace, Inc. - Revolver  7/1/2025   1,066 
Margaux Acquisition Inc. - Revolver  12/19/2024   2,872 
Margaux UK Finance Limited - Revolver  12/19/2024   681 
MRI Software LLC - Delayed Draw  2/10/2026   731 
MRI Software LLC - Revolver  2/10/2026   1,782 
Profile Products LLC - Revolver  12/20/2024   3,003 
Refine Intermediate, Inc. - Revolver  9/3/2026   5,340 
RoC Opco LLC - Revolver  2/25/2025   10,241 
 Solaray, LLC - Revolver  9/9/2022   5,327 
TA/WEG Holdings - Delayed Draw  10/2/2025   7,538 
TEI Holdings Inc. - Revolver  12/23/2025   1,055 
Thrasio - Delayed Draw  12/18/2026   12,522 
Tidel Engineering, L.P. - Revolver  3/1/2023   4,250 
TLC Purchaser, Inc. - Delayed Draw  10/13/2025   7,119 
TLC Purchaser, Inc. - Revolver  10/13/2025   8,900 
V Global - Revolver  12/22/2025   7,885 
Ventiv Holdco, Inc. - Revolver  9/3/2025   2,981 
WCI-HSG Purchaser, Inc. - Revolver  2/24/2025   1,612 
Whitcraft LLC - Revolver  4/3/2023   1,812 
WU Holdco, Inc. - Revolver  3/26/2025   3,043 
YLG Holdings, Inc. - Revolver  10/31/2025   8,545 
Total First Lien Senior Secured Loans     $189,925 

 

 

  (1) Commitments are generally subject to borrowers meeting certain criteria such as compliance with covenants and certain operational metrics. These amounts may remain outstanding until the commitment period of an applicable loan expires, which may be shorter than its maturity.

 

  (2) Unfunded commitments denominated in currencies other than U.S. dollars have been converted to U.S. dollars using the applicable foreign currency exchange rate as of December 31, 2020.

 

Significant Accounting Estimates and Critical Accounting Policies

 

Basis of Presentation

 

The Company’s unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”). The Company’s unaudited consolidated financial statements and related financial information have been prepared pursuant to the requirements for reporting on Form 10-Q and Articles 1, 6, 10 and 12 of Regulation S-X. These consolidated financial statements reflect adjustments that in the opinion of the Company are necessary for the fair statement of the financial position and results of operations for the periods presented herein and are not necessarily indicative of the full fiscal year. We have determined we meet the definition of an investment company and follow the accounting and reporting guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946 — Financial Services — Investment Companies (“ASC 946”). Our financial currency is U.S. dollars and these consolidated financial statements have been prepared in that currency.

 

Use of Estimates

 

The preparation of the consolidated financial statements in conformity with US GAAP requires us 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 consolidated financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates and such differences could be material.

 

105 

 

 

Revenue Recognition

 

We record our investment transactions on a trade date basis. We record realized gains and losses based on the specific identification method. We record interest income, adjusted for amortization of premium and accretion of discount, on an accrual basis. Discount and premium to par value on investments acquired are accreted and amortized, respectively, into interest income over the life of the respective investment using the effective interest method. Loan origination fees, original issue discount and market discount or premium are capitalized and amortized into or against interest income using the effective interest method or straight-line method, as applicable. We record any prepayment premiums, unamortized upfront loan origination fees and unamortized discounts received upon prepayment of a loan or debt security as interest income.

 

Dividend income on preferred equity investments is recorded on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity investments is recorded on the record date for such distributions in the case of private portfolio companies, and on the ex-dividend date for publicly traded portfolio companies. Distributions received from a limited liability company or limited partnership investment are evaluated to determine if the distribution should be recorded as dividend income or a return of capital.

 

Certain investments may have contractual PIK interest or dividends. PIK represents accrued interest or accumulated dividends that are added to the loan principal of the investment on the respective interest or dividend payment dates rather than being paid in cash and generally becomes due at maturity or upon being called by the issuer. We record PIK as interest or dividend income, as applicable. If at any point we believe PIK may not be realized, we place the investment generating PIK on non-accrual status. When a PIK investment is placed on non-accrual status, the accrued, uncapitalized interest or dividends are generally reversed through interest or dividend income, as applicable.

 

Certain structuring fees and amendment fees are recorded as other income when earned. We record administrative agent fees received as other income when the services are rendered.

 

Valuation of Portfolio Investments

 

Investments for which market quotations are readily available are typically valued at such market quotations. Market quotations are obtained from an independent pricing service, where available. If we cannot obtain a price from an independent pricing service or if the independent pricing service is not deemed to be representative with the market, we value certain investments held by us on the basis of prices provided by principal market makers. Generally investments marked in this manner will be marked at the mean of the bid and ask of the independent broker quotes obtained, in some cases, primarily illiquid securities, multiple quotes may not be available and the mid of the bid/ask from one broker will be used. To validate market quotations, we utilize a number of factors to determine if the quotations are representative of fair value, including the source and number of quotations. Debt and equity securities that are not publicly traded or whose market prices are not readily available are valued at fair value, subject at all times to the oversight and approval of the Board, based on the input of our Advisor, our Audit Committee and one or more independent third-party valuation firms engaged by our Board.

 

With respect to unquoted securities, we value each investment considering, among other measures, discounted cash flow models, comparisons of financial ratios of peer companies that are public and other factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, we use the pricing indicated by the external event to corroborate and/or assist us in our valuation. 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 differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material. 

 

With respect to investments for which market quotations are not readily available, the Advisor will undertake a multi-step valuation process, which includes among other things, the below:

 

  • Our quarterly valuation process begins with each portfolio company or investment being initially valued by the investment professionals of our Advisor responsible for the portfolio investment or by an independent valuation firm;

 

  • Preliminary valuation conclusions are then documented and discussed with our senior management and our Advisor. Agreed upon valuation recommendations are presented to our Audit Committee;

 

  • Our Audit Committee of our Board reviews the valuations presented and recommends values for each of the investments to our Board;

 

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  • At least once annually, the valuation for each portfolio investment constituting a material portion of the Company’s portfolio will be reviewed by an independent valuation firm; and

 

  • Our Board discusses valuations and determines the fair value of each investment in good faith based upon, among other things, the input of our Advisor, independent valuation firms, where applicable, and our Audit Committee.

 

In following this approach, the types of factors that are taken into account in the fair value pricing of investments include, as relevant, but are not limited to: comparison to publicly traded securities, including factors such as yield, maturity and measures of credit quality; the enterprise value of a portfolio company; the nature and realizable value of any collateral; the portfolio companies ability to make payments and its earnings and discounted cash flows; and the markets in which the portfolio company does business. In cases where an independent valuation firm provides fair valuations for investments, the independent valuation firm provides a fair valuation report, a description of the methodology used to determine the fair value and their analysis and calculations to support their conclusion.

 

Contractual Obligations

 

We have entered into the Amended Advisory Agreement with our Advisor (which supersedes the Investment Advisory Agreement dated November 14, 2018 we had previously entered into). Our Advisor has agreed to serve as our investment adviser in accordance with the terms of the Amended Advisory Agreement. Under the Amended Advisory Agreement, we have agreed to pay an annual base management fee as well as an incentive fee based on our investment performance.

 

On October 11, 2018, the Board approved, subject to completion of the IPO, the Investment Advisory Agreement. Beginning with the calendar quarter that commences January 1, 2019, this Investment Advisory Agreement incorporates (i) a three-year lookback provision and (ii) a cap on quarterly income incentive fee payments based on net realized or unrealized capital loss, if any, during the applicable three-year lookback period.

 

On November 28, 2018, our Board, including a majority of our Independent Directors, approved the Amended Advisory Agreement. On February 1, 2019 the Company’s stockholders approved the Amended Advisory Agreement. Pursuant to this Agreement, effective February 1, 2019, the base management fee of 1.5% (0.375% per quarter) of the average value of the Company’s gross assets (excluding cash and cash equivalents, but including assets purchased with borrowed amounts) will continue to apply to assets held at an asset coverage ratio of 200%, but a lower base management fee of 1.0% (0.25% per quarter) of the average value of the Company’s gross assets (excluding cash and cash equivalents, but including assets purchased with borrowed amounts) will apply to any amount of assets attributable to leverage decreasing the Company’s asset coverage ratio below 200%.

 

We have entered into an Administration Agreement with the Administrator pursuant to which the Administrator will furnish us with administrative services necessary to conduct our day-to-day operations. We reimburse the Administrator for its costs and expenses and our allocable portion of overhead incurred by it in performing its obligations under the Administration Agreement, including certain compensation paid to or compensatory distributions received by our officers (including our Chief Compliance Officer and Chief Financial Officer) and any of their respective staff who provide services to us, operations staff who provide services to us, and internal audit staff, if any, to the extent internal audit performs a role in our Sarbanes-Oxley internal control assessment.

 

If any of our contractual obligations discussed above are terminated, our costs may increase under any new agreements that we enter into as replacements. We would also likely incur expenses in locating alternative parties to provide the services we expect to receive under our Amended Advisory Agreement and Administration Agreement.

 

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A summary of the maturities of our principal amounts of debt and other contractual payment obligations as of September 30, 2021 are as follows (dollars in thousands):

 

   Payments Due by Period 
   Total   Less than
1 year		   1 — 3 years   3 — 5 years   More than
5 years		 
2018-1 Notes  $365,700   $-   $-   $-   $365,700 
JPM Credit Facility   179,733    -    -    179,733    - 
2019-1 Debt   398,750    -    -    -    398,750 
2023 Notes   112,500    -    112,500    -    - 
2026 Notes   300,000    -    -    300,000    - 
Total Debt Obligations  $1,356,683   $       -   $112,500   $479,733   $764,450 

 

Subsequent Events

 

On October 13, 2021, the Company and U.S. Bank National Association (the “Trustee”) entered into a Second Supplemental Indenture (the “Second Supplemental Indenture”) to the Indenture between the Company and the Trustee, dated March 10, 2021 (the “Base Indenture,” and together with the Second Supplemental Indenture, the “Indenture”). The Second Supplemental Indenture relates to the Company’s issuance of $300.0 million aggregate principal amount of its 2.550% notes due 2026 (the “October 2026 Notes”).

 

The October 2026 Notes will mature on October 13, 2026 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 October 2026 Notes bear interest at a rate of 2.550% per year payable semi-annually on April 13 and October 13 of each year, commencing on April 13, 2022. The October 2026 Notes are 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 October 2026 Notes, rank pari passu with all existing and future unsecured unsubordinated indebtedness issued by the Company, rank 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 rank structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company’s subsidiaries, financing vehicles or similar facilities.

 

The October 2026 Notes were offered and sold in an offering registered under the Securities Act of 1933, as amended, pursuant to the Company’s Registration Statement on Form N-2 (File No. 333-250965), the prospectus supplement dated October 5, 2021 and the pricing term sheet filed with the SEC on October 5, 2021. The transaction closed on October 13, 2021. The net proceeds to the Company were approximately $293.0 million, after deducting the underwriting discounts and commissions of approximately $3.0 million payable by the Company and estimated offering expenses of approximately $0.8 million payable by the Company. The Company intends to use the net proceeds to repay outstanding indebtedness under its financing arrangements and for general corporate purposes.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

We are subject to financial market risks, including changes in interest rates. We will generally invest in illiquid loans and securities including debt and equity securities of middle-market companies. Because we expect that there will not be a readily available market for many of the investments in our portfolio, we expect to value many of our portfolio investments at fair value as determined in good faith by the Board using a documented valuation policy and a consistently applied valuation process. 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 differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material. 

 

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Assuming that the statement of financial condition as of September 30, 2021 were to remain constant and that we took no actions to alter our existing interest rate sensitivity, the following table shows the annualized impact of hypothetical base rate changes in interest rates (dollars in thousands):

 

Change in Interest Rates  Increase (Decrease) in
Interest Income		   Increase (Decrease) in
Interest Expense		   Net Increase
(Decrease) in
Net Investment Income		 
Down 25 basis points  $(719)  $(1,212)  $493 
Up 100 basis points   8,341    9,312    (971)
Up 200 basis points   32,200    18,624    13,576 
Up 300 basis points   56,427    27,935    28,492 

 

From time to time, we may make investments that are denominated in a foreign currency. These investments are translated into U.S. dollars at the balance sheet date, exposing us to movements in foreign exchange rates. We may employ hedging techniques to minimize these risks, but we cannot assure you that such strategies will be effective or without risk to us. We may seek to utilize instruments such as, but not limited to, forward contracts to seek to hedge against fluctuations in the relative values of our portfolio positions from changes in currency exchange rates.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

As of September 30, 2021 (the end of the period covered by this report), our management has carried out an evaluation, under the supervision of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15 under the Exchange Act). Based on that evaluation our Chief Executive Officer and Chief Financial Officer have concluded that our current disclosure controls and procedures are effective in timely alerting management, including the Chief Executive Officer and Chief Financial Officer, to material information relating to us that is required to be disclosed by us in the reports we file or submit under the Exchange Act. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

 

Changes in Internal Controls Over Financial Reporting

 

There have been no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us. From time to time, we may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under loans to or other contracts with our portfolio companies.

 

Item 1A. Risk Factors

 

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, which could materially affect our business, financial condition and/or operating results. The risks described in our Annual Report on Form 10-K are not the only risks we face. Additional risks and uncertainties are not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. During the nine months ended September 30, 2021, other than set forth below, there have been no material changes from the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2020.

 

The COVID-19 pandemic has caused severe disruptions in the U.S. economy and has disrupted financial activity in the areas in which we or our portfolio companies operate.

 

Throughout much of 2020 and 2021, the COVID-19 pandemic has delivered a shock to the global economy. During the second quarter of 2021, the economic recovery gained significant traction in countries in which comprehensive vaccination programs have led to the lifting of health and safety restrictions, such as the U.S. and China. The extent to which the COVID-19 pandemic will continue to affect our business, financial condition, liquidity, our portfolio companies’ results of operations and by extension our operating results will depend on future developments, such as the speed and extent of further vaccine distribution and the impact of the Delta variant or other variants that might arise, which are highly uncertain and cannot be predicted.

 

As COVID-19 continues to spread, the potential impacts, including a global, regional, or other economic recession, remain uncertain and difficult to assess. The extent of the impact of the COVID-19 pandemic on the financial performance of our current and future investments will depend on future developments, including the duration and spread of the virus, related advisories and restrictions, and the health of the financial markets and economy, all of which are highly uncertain and cannot be predicted. To the extent our portfolio companies are adversely impacted by the effects of the COVID-19 pandemic, it may have a material adverse impact on our future net investment income, the fair value of our portfolio investments and our financial condition.

 

Uncertainty about presidential administration initiatives could negatively impact our business, financial condition and results of operations.

 

The current administration has called for significant changes to U.S. trade, healthcare, immigration, foreign and government regulatory policy. In this regard, there is significant uncertainty with respect to legislation, regulation and government policy at the federal level, as well as the state and local levels. Recent events have created a climate of heightened uncertainty and introduced new and difficult-to-quantify macroeconomic and political risks with potentially far-reaching implications. There has been a corresponding meaningful increase in the uncertainty surrounding interest rates, inflation, foreign exchange rates, trade volumes and fiscal and monetary policy. To the extent the U.S. Congress or the current administration implements changes to U.S. policy, those changes may impact, among other things, the U.S. and global economy, international trade and relations, unemployment, immigration, corporate taxes, healthcare, the U.S. regulatory environment, inflation and other areas. Although we cannot predict the impact, if any, of these changes to our business, they could adversely affect our business, financial condition, operating results and cash flows. Until we know what policy changes are made and how those changes impact our business and the business of our competitors over the long term, we will not know if, overall, we will benefit from them or be negatively affected by them. 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

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Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None.

 

Item 6. Exhibits, Financial Statement Schedules

 

The following exhibits are included, or incorporated by reference, in this Quarterly Report on Form 10-Q for the nine months ended September 30, 2021 (and are numbered in accordance with Item 601 of Regulation S-K under the Securities Act).

 

Exhibit
Number		   Description of Document
3.1   Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form 10 (File No. 000-55528) filed on October 6, 2016).
     
3.2   Bylaws (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form 10 (File No. 000-55528) filed on October 6, 2016).
     
4.1   Dividend Reinvestment Plan (incorporated by reference to Exhibit 10.5 to the Company’s Registration Statement on Form 10 (File No. 000-55528) filed on October 6, 2016).
     
10.1   Investment Advisory Agreement, dated October 6, 2016, by and between the Company and the Advisor (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement on Form 10 (File No. 000-55528) filed on October 6, 2016).
     
10.2   Administration Agreement, dated October 6, 2016, by and between the Company and the Administrator (incorporated by reference to Exhibit 10.2 to the Company’s Registration Statement on Form 10 (File No. 000-55528) filed on October 6, 2016).
     
10.3   Form of Advisory Fee Waiver Agreement by and between the Company and the Advisor (incorporated by reference to Exhibit 10.3 to the Company’s Registration Statement on Form 10 (File No. 000-55528) filed on October 6, 2016).
     
10.5   Form of Custodian Agreement by and between the Company and U.S. Bank National Association (incorporated by reference to Exhibit 10.6 to the Company’s Registration Statement on Form 10 (File No. 000-55528) filed on October 6, 2016).
     
10.6   Revolving Credit Agreement, dated December 22, 2016, among the Company, as Borrower, BCSF Holdings, L.P., as the Feeder Fund, and BCSF Holdings Investors, L.P., as the Feeder Fund General Partner and Sumitomo Mitsui Banking Corporation, as Sole Lead Arranger, Administrative Agent, Letter of Credit Issuer and Lender. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 814-01175), filed on December 23, 2016).
     
10.7   Revolving Credit Agreement, dated October 4, 2017, among the Company as Equity Holder, BCSF I, LLC as Borrower, and Goldman Sachs Bank USA, as Sole Lead Arranger, Syndication Agent and Administrative Agent, and U.S. Bank National Association as Collateral Administrator, Collateral Agent and Collateral Custodian (incorporated by reference to Exhibit 10.7. to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on November 13, 2017).
     
10.8   Omnibus Amendment No. 1, dated May 15, 2018, to Revolving Credit Agreement, dated October 4, 2017, among the Company as Equity Holder, BCSF I, LLC as Borrower, and Goldman Sachs Bank USA, as Sole Lead Arranger, Syndication Agent and Administrative Agent, and U.S. Bank National Association as Collateral Administrator, Collateral Agent and Collateral Custodian (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 814-01175), filed on May 17, 2018).

 

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10.9   Indenture, dated as of September 28, 2018, between BCC Middle Market CLO 2018-1, LLC, as issuer, and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on October 17, 2018).
     
10.10   Portfolio Management Agreement, dated as of September 28, 2018, by and between BCC Middle Market CLO 2018-1, LLC, as issuer, and Bain Capital Specialty Finance, Inc., as portfolio manager (incorporated by reference to Exhibit 10.10 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on October 17, 2018).
     
10.11   Loan Sale Agreement, dated as of September 28, 2018, by and between BCC Middle Market CLO 2018-1, LLC, as issuer, and Bain Capital Specialty Finance, Inc., as the transferor (incorporated by reference to Exhibit 10.11 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on October 17, 2018).
     
10.12   Collateral Administration Agreement, dated as of September 28, 2018, by and between BCC Middle Market CLO 2018-1, LLC, as issuer, Bain Capital Specialty Finance, Inc., as portfolio manager, and Wells Fargo Bank, National Association, as collateral administrator (incorporated by reference to Exhibit 10.12 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on October 17, 2018).
     
10.13   Master Participation Agreement, dated as of September 28, 2018, by and between BCSF I, LLC, as financing subsidiary, and BCC Middle Market CLO 2018-1, LLC, as issuer (incorporated by reference to Exhibit 10.13 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on October 17, 2018).
     
10.14   Credit and Security Agreement, dated February 19, 2019, by and among the Company as Equityholder and Servicer, BCSF II-C, LLC as Borrower, Citibank, N.A., as Administrative Agent, and Wells Fargo Bank, National Association as Collateral Administrator, Collateral Agent and Custodian (incorporated by reference to Exhibit 10.9 to the Company’s Annual Report on Form 10-K (File No. 814-01175), filed on February 28, 2019).
     
10.15   Loan and Security Agreement, dated April 30, 2019, by and among BCSF Complete Financing Solution LLC, as Borrower, JPMorgan Chase Bank, National Association, as Administrative Agent and Wells Fargo Bank, National Association as Collateral Administrator, Collateral Agent, Securities Intermediary and Bank (incorporated by reference to Exhibit 10.10 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on August 7, 2019).
     
10.16   Indenture, dated as of August 28, 2019, between BCC Middle Market CLO 2019-1, LLC, as issuer, BCC Middle Market CLO 2019-1 Co-Issuer, LLC, as co-issuer and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 10.16 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on November 6, 2019).

 

10.17   Class A-1L Credit Agreement, dated as of August 28, 2019, among BCC Middle Market CLO 2019-1, LLC, as borrower, BCC Middle Market CLO 2019-1 Co-Issuer, LLC, as co-borrower, Capital One, National Association, as lender, Wells Fargo Bank, National Association, as loan agent, and Wells Fargo, National Association, as collateral trustee (incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K (File No. 814-01175), filed on February 26, 2020).
     
10.18   Portfolio Management Agreement, dated as of August 28, 2019, by and between BCC Middle Market CLO 2019-1, LLC, as issuer, and Bain Capital Specialty Finance, Inc., as portfolio manager (incorporated by reference to Exhibit 10.17 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on November 6, 2019).
     
10.19   Loan Sale Agreement, dated as of August 28, 2019, by and between BCC Middle Market CLO 2019-1, LLC, as issuer, and Bain Capital Specialty Finance, Inc., as the transferor (incorporated by reference to Exhibit 10.18 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on November 6, 2019).
     
10.20   Collateral Administration Agreement, dated as of August 28, 2019, by and between BCC Middle Market CLO 2019-1, LLC, as issuer, Bain Capital Specialty Finance, Inc., as portfolio manager, and Wells Fargo Bank, National Association, as collateral administrator (incorporated by reference to Exhibit 10.19 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on November 6, 2019).

 

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10.21   Master Participation Agreement, dated as of August 28, 2019, by and between BCSF I, LLC, as financing subsidiary, and BCC Middle Market CLO 2019-1, LLC, as issuer (incorporated by reference to Exhibit 10.20 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on November 6, 2019).
     
10.22   Master Participation Agreement, dated as of August 28, 2019, by and between BCSF II-C, LLC, as financing subsidiary, and BCC Middle Market CLO 2019-1, LLC, as issuer (incorporated by reference to Exhibit 10.21 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on November 6, 2019).
     
10.23   Amended and Restated Credit Agreement, dated January 8, 2020, among the Company as Equity Holder, BCSF I, LLC as Borrower, and Goldman Sachs Bank USA, as Sole Lead Arranger, Syndication Agent and Administrative Agent, and U.S. Bank National Association as Collateral Administrator, Collateral Agent and Collateral Custodian (incorporated by reference to Exhibit 10.23 to the Company’s Annual Report on Form 10-K (File No. 814-01175), filed on February 26, 2020).
     
10.24   First Amendment to Loan and Security Agreement, dated January 29, 2020, by and among BCSF Complete Financing Solution LLC, as Borrower, JPMorgan Chase Bank, National Association, as Administrative Agent and Wells Fargo Bank, National Association as Collateral Administrator, Collateral Agent, Securities Intermediary and Bank (incorporated by reference to Exhibit 10.24 to the Company’s Annual Report on Form 10-K (File No. 814-01175), filed on February 26, 2020).
     
10.25   Second Amendment to Loan and Security Agreement, dated March 20, 2020, by and among BCSF Complete Financing Solution LLC, as Borrower, JPMorgan Chase Bank, National Association, as Administrative Agent and Wells Fargo Bank, National Association as Collateral Administrator, Collateral Agent, Securities Intermediary and Bank (incorporated by reference to Exhibit 10.25 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on May 4, 2020).
     
10.26   Revolving Loan Agreement, dated March 27, 2020, by and between the Company, as Borrower, and BCSF Advisors, LP, as Lender (incorporated by reference to Exhibit 10.26 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on May 4, 2020).
     
10.27   Omnibus Amendment No. 1 to Amended and Restated Credit Agreement, dated March 31, 2020, among the Company as Equity Holder, BCSF I, LLC as Borrower, and Goldman Sachs Bank USA, as Sole Lead Arranger, Syndication Agent and Administrative Agent, and U.S. Bank National Association as Collateral Administrator, Collateral Agent and Collateral Custodian (incorporated by reference to Exhibit 10.27 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on May 4, 2020).
     
10.28   Master Note Purchase Agreement, dated June 10, 2020, of the Company (incorporated by reference to Exhibit 10.28 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on August 5, 2020).
     
10.29   Third Amendment to Loan and Security Agreement, dated July 2, 2020, by and among BCSF Complete Financing Solution LLC, as Borrower, JPMorgan Chase Bank, National Association, as Administrative Agent and Wells Fargo Bank, National Association as Collateral Administrator, Collateral Agent, Securities Intermediary and Bank (incorporated by reference to Exhibit 10.29 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on August 5, 2020).
     
10.30   Second Amended and Restated Credit Agreement, dated August 14, 2020, among the Company as Equity Holder, BCSF I, LLC as Borrower, and Goldman Sachs Bank USA, as Sole Lead Arranger, Syndication Agent and Administrative Agent, and U.S. Bank National Association as Collateral Administrator, Collateral Agent and Collateral Custodian (incorporated by reference to Exhibit 10.30 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on November 5, 2020).
     
10.31   Amended and Restated Limited Liability Company Agreement, dated February 9, 2021, of International Senior Loan Program, LLC, by and among the Company, Pantheon Private Debt Program SCSp SICAV—RAIF—Pantheon Senior Debt Secondaries II (USD), Pantheon Private Debt Program SCSp SICAV—RAIF—Tubera Credit 2020, Solutio Premium Private Debt I SCSp and Solutio Premium Private Debt II Master SCSp (incorporated by reference to Exhibit 10.31 to the Company’s Annual Report on Form 10-K (File No. 814-01175), filed on February 24, 2021).

 

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10.32   Underwriting Agreement, dated March 3, 2021, by and among Bain Capital Specialty Finance, Inc., BCSF Advisors, LP and Goldman Sachs & Co. LLC, as the representative of the underwriters (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K (File No. 814-01175), filed on March 5, 2021).
     
10.33   Indenture, dated as of March 10, 2021, by and between the Company and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K (File No. 814-01175), filed on March 10, 2021).
     
10.34   First Supplemental Indenture, dated as of March 10, 2021, relating to the 2.950% Notes due 2026, by and between the Company and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K (File No. 814-01175), filed on March 10, 2021).
     
10.35   Form of 2.950% Notes due 2026 (incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K (File No. 814-01175), filed on March 10, 2021).
     
10.36  

Underwriting Agreement, dated October 5, 2021, by and among Bain Capital Specialty Finance, Inc., BCSF Advisors, LP, and Goldman Sachs & Co. LLC and SMBC Nikko Securities America Inc., as the representative of the underwriters (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K (File No. 814-01175), filed on October 6, 2021).

 

10.37  

Second Supplemental Indenture, dated as of October 13, 2021, relating to the 2.550% Notes due 2026, by and between the Company and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K (File No. 814-01175), filed on October 13, 2021).

 

10.38   Form of 2.550% Notes due 2026 (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K (File No. 814-01175), filed on October 13, 2021).
     
23.1   Consent of Independent Registered Public Accounting Firm (incorporated by reference to Exhibit 23.1 to the Company's Annual Report on Form 10-K (File No. 814-01175) filed on February 24, 2021). 
     
24.1   Powers of Attorney (incorporated by reference to Exhibit 24.1 to the Company’s Annual Report on Form 10-K (File No. 814-01175), filed on March 29, 2017).
     
31.1*   Certification of Chief Executive Officer pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended.
     
31.2*   Certification of Chief Financial Officer pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended.
     
32*   Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended.

 

*             Filed herewith.

 

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SIGNATURES

 

Pursuant to the requirements 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.

 

Bain Capital Specialty Finance, Inc.    
     
Date: November 3, 2021 By: /s/ Michael A. Ewald
  Name: Michael A. Ewald
  Title: Chief Executive Officer

 

Date: November 3, 2021 By: /s/ Sally F. Dornaus
  Name: Sally F. Dornaus
  Title: Chief Financial Officer

 

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