The following discussion and other parts of this report contain forward-looking information that involves risks and uncertainties. The discussion and analysis contained in this section refers to our financial condition, results of operations and cash flows. The information contained in this section should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this report. Please see "Forward-Looking Statements" for a discussion of the uncertainties, risks and assumptions associated with this discussion and analysis. Our actual results could differ materially from those anticipated by such forward-looking information due to factors discussed under "Forward-Looking Statements" appearing elsewhere in this report. 79 Table of Contents 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 byBCSF Advisors, LP (our "Advisor" or "BCSF Advisors "), a subsidiary ofBain Capital Credit, LP ("Bain Capital Credit"). Our Advisor is registered as an investment adviser with theSEC 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 onOctober 13, 2016 throughDecember 31, 2022 , we have invested approximately$6,400.2 million 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. OnNovember 19, 2018 , we closed our initial public offering (the "IPO") issuing 7,500,000 shares of our common stock at a public offering price of$20.25 per share. Shares of common stock of the Company began trading on theNew York Stock Exchange under the symbol "BCSF" onNovember 15, 2018 . 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 theSEC , "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 .
As a BDC, we may also invest up to 30% of our portfolio opportunistically in
"non-qualifying" portfolio investments, such as investments in non-
80 Table of Contents 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 ofDecember 31, 2022 andDecember 31, 2021 , 94.5% and 97.8%, 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 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
? our business, including payments made to third-party providers of goods or services; 81 Table of Contents
? brokerage fees and commissions;
? federal and state registration fees;
?
? Independent Director fees and expenses;
? costs associated with our reporting and compliance obligations under the 1940
Act and applicable
? 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 byBCSF Advisors , we will generally reimburseBCSF 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"). We incurred expenses related to the Administrator of$0.1 million ,$0.0 million and$0.0 million for the years endedDecember 31, 2022 , 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$0.6 million ,$0.5 million and$0.5 million for the years endedDecember 31, 2022 , 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), is limited by applicable regulations such that our asset coverage, as defined in the 1940 Act, must
equal at least 150%. In determining 82 Table of Contents
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 ofDecember 31, 2022 , the Company's
asset coverage was 180.0%. Investment Decision Process
The Advisor's investment process can be broken into four processes: (1) Sourcing
and Idea Generation, (2) Investment Diligence & Recommendation, (3)
Sourcing and Idea Generation
The investment decision-making process begins with sourcing ideas.Bain Capital Credit's Private Credit Group interacts with a broad and deep set of global contacts, enabling the group to generate middle market investment opportunities. Our Advisor also seeks to leverage the contacts ofBain Capital Credit's industry groups, Trading Desk, and Special Situations team, including private equity firms, banks and a variety of advisors and other intermediaries.
Investment Diligence & Recommendation
Our Advisor utilizesBain Capital Credit's bottom-up approach to investing, and it starts with the due diligence performed by itsPrivate Credit Group . The group works with the close support ofBain Capital Credit's industry groups. This diligence process typically begins with a detailed review of an offering memorandum as well asBain 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.
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 utilizesBain 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 theBain 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 ofBain 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 83
Table of Contents
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 corporate actions and board seats, where applicable.
Portfolio and Investment Activity
During the year endedDecember 31, 2022 , we invested$1,517.3 million , including PIK, in 104 portfolio companies, and had$1,411.9 million in aggregate amount of principal repayments and sales, resulting in a net increase in investments of$105.4 million for the year. Of the$1,517.3 million invested during the year endedDecember 31, 2022 ,$182.1 million was related to drawdowns on delayed draw term loans and revolvers of our portfolio companies. During the year endedDecember 31, 2021 , we invested$1,185.3 million , including PIK, in 68 portfolio companies, and had$1,431.4 million in aggregate amount of principal repayments and sales, resulting in a net decrease in investments of$246.1 million for the year. During the year endedDecember 31, 2020 , we invested$535.8 million , including PIK, in 67 portfolio companies, and had$525.8 million in aggregate amount of principal repayments and sales, resulting in a net increase in investments of$10.0 million for the year.
The following table shows the composition of the investment portfolio and
associated yield data as of
As of December 31, 2022 Weighted Average Yield (1) at Percentage of Percentage of Amortized Market Amortized Cost Total Portfolio
Fair Value Total Portfolio Cost Value
First Lien Senior Secured Loans
70.4 %$ 1,630,877 68.3 % 10.9 % 11.2 % Second Lien Senior Secured Loans 98,120 4.1
93,950 3.9 13.7 14.3 Subordinated Debt 43,752 1.8 43,922 1.8 11.6 11.6 Structured Products 24,050 1.0 22,763 1.0 19.8 20.9 Preferred Equity 57,106 2.4 80,945 3.4 10.0 8.6 Equity Interests 189,896 7.8 210,689 8.8 10.6 10.7 Warrants 480 0.0 524 0.0 N/A N/A Subordinated Notes in Investment Vehicles (2) 237,974 9.8 237,974 10.0 11.4 11.4 Preferred Equity Interests in Investment Vehicles (2) 10 0.0 (644) 0.0 N/A N/A Equity Interests in Investment Vehicles (2) 64,959 2.7 65,977 2.8 17.9 17.6 Total$ 2,419,938 100.0 %$ 2,386,977 100.0 % 11.4 % 11.6 %
Weighted average yields are computed as (a) the annual stated interest rate
or yield earned on the relevant accruing debt and other income producing (1) 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 and SLP.
84 Table of Contents
The following table shows the composition of the investment portfolio and
associated yield data as of
As of December 31, 2021 Weighted Average Yield (1) at Percentage of Percentage of Amortized Market Amortized Cost Total Portfolio
Fair Value Total Portfolio Cost Value
First Lien Senior Secured Loans
78.2 %$ 1,774,675 77.5 % 7.3 % 7.4 % Second Lien Senior Secured Loans 120,058 5.2
118,561 5.2 9.8 9.9 Subordinated Debt 19,635 0.8 20,027 0.9 11.4 11.2 Preferred equity 42,452 1.8 53,991 2.4 10.0 9.5 Equity Interests 156,399 6.8 151,844 6.6 7.9 9.7 Warrants 2 0.0 126 0.0 N/A N/A Subordinated Notes in Investment Vehicles (2) 125,437 5.5 125,437 5.5 9.0 9.0 Equity Interests in Investment Vehicles (2) 39,596 1.7 44,444 1.9 8.4 7.5 Total$ 2,311,384 100.0 %$ 2,289,105 100.0 % 7.6 % 7.8 %
Weighted average yields are computed as (a) the annual stated interest rate
or yield earned on the relevant accruing debt and other income producing (1) 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 presents certain selected information regarding our
investment portfolio as of
As ofDecember 31, 2022 Number of portfolio companies 132 Percentage of debt bearing a floating rate (1) 94.5 % Percentage of debt bearing a fixed rate (1) 5.5 %
(1) Measured on a fair value basis. Subordinated Notes in Investment Vehicles are
included in floating rate.
The following table presents certain selected information regarding our
investment portfolio as of
As ofDecember 31, 2021 Number of portfolio companies 106 Percentage of debt bearing a floating rate (1) 97.8 % Percentage of debt bearing a fixed rate (1) 2.2 %
(1) Measured on a fair value basis. Subordinated Notes in Investment Vehicles are
included in floating rate.
The following table shows the amortized cost and fair value of our performing
and non-accrual investments as of
As of December 31, 2022 Percentage at Amortized Amortized Percentage at Cost Cost Fair Value Fair Value Performing$ 2,348,395 97.0 %$ 2,348,571 98.4 % Non-accrual 71,543 3.0 38,406 1.6 Total$ 2,419,938 100.0 %$ 2,386,977 100.0 % 85 Table of Contents
The following table shows the amortized cost and fair value of our performing
and non-accrual investments as of
As ofDecember 31, 2021 Percentage at Amortized
Percentage at
Amortized Cost Cost Fair Value Fair Value Performing$ 2,311,384 100.0 %$ 2,289,105 100.0 % Total$ 2,311,384 100.0 %$ 2,289,105 100.0 % 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 ofDecember 31, 2022 , there were five loans from three issuers placed on non-accrual in the Company's portfolio. As ofDecember 31, 2021 , there were no loans placed on non-accrual in the Company's portfolio. The following table shows the amortized cost and fair value of the investment portfolio, cash and cash equivalents and foreign cash as ofDecember 31, 2022 (dollars in thousands): As of December 31, 2022 Percentage of Percentage of Amortized Cost Total Fair Value Total
First Lien Senior Secured Loans$ 1,703,591 66.9 %$ 1,630,877 65.0 % Second Lien Senior Secured Loans 98,120 3.9
93,950 3.7 Subordinated Debt 43,752 1.7 43,922 1.7 Structured Products 24,050 0.9 22,763 0.9 Preferred Equity 57,106 2.2 80,945 3.2 Equity Interests 189,896 7.4 210,689 8.4 Warrants 480 0.0 524 0.0 Subordinated Notes in Investment Vehicles (1) 237,974 9.3 237,974 9.5 Preferred Equity Interests in Investment Vehicles (1) 10 0.0 (644) 0.0 Equity Interests in Investment Vehicles (1) 64,959 2.5 65,977 2.6 Cash and cash equivalents 30,205 1.2 30,205 1.2 Foreign cash 34,528 1.4 29,575 1.2
Restricted cash and cash equivalents 65,950 2.6
65,950 2.6 Total$ 2,550,621 100.0 %$ 2,512,707 100.0 %
(1) Represents debt and equity investment in ISLP and SLP
86 Table of Contents The following table shows the amortized cost and fair value of the investment portfolio, cash and cash equivalents and foreign cash as ofDecember 31, 2021 (dollars in thousands): As of December 31, 2021 Percentage of Percentage of Amortized Cost Total Fair Value Total
First Lien Senior Secured Loans$ 1,807,805 71.9 %$ 1,774,675 71.2 % Second Lien Senior Secured Loans 120,058 4.8
118,561 4.7 Subordinated Debt 19,635 0.8 20,027 0.8 Preferred Equity 42,452 1.7 53,991 2.2 Equity Interests 156,399 6.1 151,844 6.1 Warrants 2 0.0 126 0.0 Subordinated Notes in Investment Vehicles (1) 125,437 5.0 125,437 5.0 Equity Interests in Investment Vehicles (1) 39,596 1.6 44,444 1.8 Cash and cash equivalents 87,443 3.5 87,443 3.5 Foreign cash 30,877 1.2 29,979 1.2 Restricted cash and cash equivalents 86,159 3.4
86,159 3.5 Total$ 2,515,863 100.0 %$ 2,492,686 100.0 %
(1) Represents debt and equity investment in ISLP
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.
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. 87 Table of Contents
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
As of December 31, 2022 Percentage Number of Percentage of Investment Performance Rating Fair Value of Total Companies(1)
Total 1$ 2,499 0.1 % 3 2.3 % 2 2,163,990 90.7 117 88.6 3 182,082 7.6 9 6.8 4 38,406 1.6 3 2.3 Total$ 2,386,977 100.0 % 132 100.0 %
(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
As of December 31, 2021 Percentage of Number of Percentage of Investment Performance Rating Fair Value Total Companies(1) Total 1$ 42,233 1.9 % 4 3.8 % 2 2,017,059 88.1 95 89.6 3 229,813 10.0 7 6.6 4 - - - - Total$ 2,289,105 100.0 % 106 100.0 %
(1) Number of investment rated companies may not agree to total portfolio
companies due to investments across investment types and structures. 88 Table of Contents Results of Operations
Our operating results for the years ended
For the Year Ended December 31, 2022 2021 2020 Total investment income$ 219,545 $ 197,394 $ 194,460
Total expenses, net of fee waivers 116,002 109,522
108,397
Net investment income before taxes 103,543 87,872
86,063
Less Income taxes, including excise tax 837 134
232 Net investment income 102,706 87,738 85,831 Net realized gain (loss) 22,359 (10,902) (27,222) Net change in unrealized appreciation (depreciation) (19,585) 42,971
(50,331)
Net increase in net assets resulting from operations$ 105,480 $ 119,807
Net increase 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 years ended
For the Year Ended December 31, 2022 2021 2020 Interest income$ 166,273 $ 167,343 $ 174,197 Dividend income 23,144 13,115 9,324 PIK income 15,037 10,763 8,778 Other income 15,091 6,173 2,161 Total investment income$ 219,545 $ 197,394 $ 194,460
Interest income from investments, which includes interest and accretion of discounts and fees, decreased to$166.3 million for the year endedDecember 31, 2022 from$167.3 million for the year endedDecember 31, 2021 , primarily due to the continued ramping of the joint ventures, ISLP and SLP, and the increase in PIK, between the periods. Our investment portfolio at amortized cost increased to$2,419.9 million from$2,311.4 million for the years endedDecember 31, 2022 and 2021, respectively. Dividend income increased to$23.1 million for the year endedDecember 31, 2022 from$13.1 million for the year endedDecember 31, 2021 , primarily due to an increase in dividend income from our equity interests in ISLP, SLP, and 2018-1 Issuer. Other income increased to approximately$15.1 million for the year endedDecember 31, 2022 from$6.2 million for the year endedDecember 31, 2021 , primarily due to an increase in one-time fees earned on certain investments. As ofDecember 31, 2022 , the weighted average yield of our investment portfolio increased to 11.4% from 7.6% as ofDecember 31, 2021 , at amortized cost. Interest income from investments, which includes interest and accretion of discounts and fees, decreased to$167.3 million for the year endedDecember 31, 2021 from$174.2 million for the year endedDecember 31, 2020 , primarily due to the formation of theInternational Senior Loan Program, LLC ("ISLP") joint venture. Our investment portfolio at amortized cost decreased to$2,311.4 million from$2,522.7 million for the years endedDecember 31, 2021 and 2020, respectively. Dividend income increased to$13.1 million for the year endedDecember 31, 2021 from$9.3 million for the year endedDecember 31, 2020 , primarily due to the formation of the ISLP joint venture and our investment inGale Aviation (Offshore) Co. PIK income increased to$10.8 million for the year endedDecember 31, 2021 from$8.8 million for the year endedDecember 31, 2020 , primarily due to the Company's investment inDirect Travel, Inc. As ofDecember 31, 2021 , the weighted average yield of our investment portfolio increased to 7.6% from 7.3% as ofDecember 31, 2020 , at amortized cost. 89 Table of Contents Operating Expenses
The composition of our operating expenses for the years ended
For the Year Ended December
31,
2022 2021
2020
Interest and debt financing expenses$ 52,318 $ 51,345 $ 63,309 Base management fee 34,669 34,888 35,215 Incentive fee 19,572 24,028 4,473 Professional fees 2,959 2,854 2,626 Directors fees 707 725 726
Other general and administrative expenses 5,777 5,038
5,398
Total expenses, before fee waivers$ 116,002 $ 118,878 $ 111,747 Base management fee waiver - (4,837) (2,676) Incentive fee waiver - (4,519) (674)
Total expenses, net of fee waivers
Interest and Debt Financing Expenses
Interest and debt financing expenses on our borrowings totaled approximately$52.3 million and$51.3 million for the years endedDecember 31, 2022 and 2021, respectively. Interest and debt financing expense for the year endedDecember 31, 2022 as compared toDecember 31, 2021 increased primarily due to rise in base rates of the variable rate debt and the usage of our Sumitomo Credit Facility, offset by the termination of the JPM Credit Facility, retirement of the 2023 Notes, refinance of the 2019-1 Debt to more favorable rates and the sale of the 2018-1 Notes to the SLP between periods. The weighted average principal debt balance outstanding for the year endedDecember 31, 2022 was$1.3 billion compared to$1.6 billion for the year endedDecember 31, 2021 .
The combined weighted average interest rate (excluding deferred upfront
financing costs and unused fees) of the aggregate borrowings outstanding for
years ended
Interest and debt financing expenses on our borrowings totaled approximately$51.3 million and$63.3 million for the years endedDecember 31, 2021 and 2020, respectively. Interest and debt financing expense for the year endedDecember 31, 2021 as compared toDecember 31, 2020 , decreased primarily due to decrease in the average principal debt balance outstanding between periods from$1.6 billion to$1.4 billion and a decrease in the average interest rate from 3.6% to 3.1%. OnDecember 24, 2021 , the Company entered into a new senior secured revolving credit agreement withSumitomo Mitsui Banking Corporation andMUFG Union Bank, N.A. , the Sumitomo Credit Agreement. The weighted average interest rate (excluding deferred upfront financing costs and unused fees) on our debt outstanding was 3.1% and 3.6% as ofDecember 31, 2021 and 2020, respectively.
Management Fee
Management fee (net of waivers) increased to$34.7 million for the year endedDecember 31, 2022 from$30.1 million for the year endedDecember 31, 2021 . Management fee decreased to$34.7 million for the year endedDecember 31, 2022 from$34.9 million for the year endedDecember 31, 2021 , primarily due to a decrease in total assets throughout the year endedDecember 31, 2022 compared to the year endedDecember 31, 2021 . Management fee waived for the years endedDecember 31, 2022 and 2021, were$0.0 million and$4.8 million , respectively. The decrease in management fee waived during the year endedDecember 31, 2022 compared toDecember 31, 2021 , was due to a reduction of the Company's voluntary fee waiver. Management fee (net of waivers) decreased to$30.1 million for the year endedDecember 31, 2021 from$32.5 million for the year endedDecember 31, 2020 . Management fee decreased to$34.9 million for the year endedDecember 31, 2021 from$35.2 million for the year endedDecember 31, 2020 , primarily due to a decrease in total assets throughout the year endedDecember 31, 2021 compared to the year endedDecember 31, 2020 . Management fee waived for the years endedDecember 31, 2021 and 2020, were$4.8 million and$2.7 million , respectively. The increase in management fees waived during the year endedDecember 31, 2021 compared toDecember 31, 2020 , was due to the Company's voluntary fee waiver. 90 Table of Contents Incentive Fee
Incentive fee (net of waivers) increased slightly to$19.6 million for the year endedDecember 31, 2022 from$19.5 million for the year endedDecember 31, 2021 . Incentive fee waivers related to pre-incentive fee net investment income consisted of voluntary waivers of$0.0 million for the year endedDecember 31, 2022 and$4.5 million for the year endedDecember 31, 2021 . For the year endedDecember 31, 2022 there were no incentive fees related to the GAAP Incentive Fee. Incentive fee (net of waivers) increased to$19.5 million for the year endedDecember 31, 2021 from$3.8 million for the year endedDecember 31, 2020 , primarily due to the IncentiveFee Cap throughout the year endedDecember 31, 2020 . Incentive fee waivers related to pre-incentive fee net investment income consisted of voluntary waivers of$4.5 million for the year endedDecember 31, 2021 and$0.7 million for the year endedDecember 31, 2020 . For the year endedDecember 31, 2021 there were no incentive fees related to the GAAP Incentive Fee.
Professional Fees and Other General and Administrative Expenses
Professional fees and other general and administrative expenses increased to$8.7 million for the year endedDecember 31, 2022 from$7.9 million for the year endedDecember 31, 2021 , primarily due to an increase in costs associated with servicing our investment portfolio. Professional fees and other general and administrative expenses decreased to$8.6 million for the year endedDecember 31, 2021 from$8.8 million for the year endedDecember 31, 2020 , due to a decrease in costs associated with servicing our investment portfolio and debt issuance costs related to ourMarch 2026 Notes andOctober 2026 Notes offering that are deferred and amortized.
Net Realized and Unrealized Gains and Losses
The following table summarizes our net realized and unrealized gains (losses)
for the years ended
For the Year Ended December 31, 2022 2021 2020 Net realized gain on investments
(14,684) (10,048) (35,342) Net realized gain on foreign currency transactions
5,589 632 647 Net realized loss on foreign currency transactions (297) (4,128) (517) Net realized gain on forward currency exchange contracts 20,934 40 6,545 Net realized loss on forward currency exchange contracts (40) (23,813) (73) Net realized loss on extinguishment of debt (747) (4,859) - Net realized gains (losses)
Net change in unrealized appreciation on investments
(79,755) (49,180) (82,093) Net change in unrealized appreciation (depreciation) on investments
(10,682) 15,972 (28,043) Unrealized appreciation (depreciation) on foreign currency translation
(3,644) (936) 108
Unrealized appreciation (depreciation) on forward currency exchange contracts (5,259) 27,935 (22,396) Net change in unrealized appreciation (depreciation) on foreign currency and forward currency exchange contracts
(8,903) 26,999 (22,288) Net change in unrealized appreciation (depreciation)
For the years endedDecember 31, 2022 , 2021 and 2020, we had net realized gains (losses) on investments of($3.1) million ,$21.2 million and($33.8) million , respectively. For the years endedDecember 31, 2022 , 2021 and 2020, we had net realized gains (losses) on foreign currency transactions of$5.3 million ($3.5) million and$0.1 million , respectively. For the years endedDecember 31, 2022 , 2021 and 2020, we had net realized gains (losses) on forward currency contracts of$20.9 million ,($23.8) million and$6.5 million , respectively, primarily as a result of settling EUR, GBP, AUD and CAD forward contracts. 91
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For the year endedDecember 31, 2022 , we had$69.1 million in unrealized appreciation on 53 portfolio company investments, which was offset by$79.8 million in unrealized depreciation on 89 portfolio company investments. Unrealized depreciation for the year endedDecember 31, 2022 resulted from a decrease in fair value, primarily due to a widening of credit spreads and negative valuation adjustments. Unrealized appreciation was primarily due to positive valuation adjustments. For the year endedDecember 31, 2021 , we had$65.2 million in unrealized appreciation on 73 portfolio company investments, which was offset by$49.2 million in unrealized depreciation on 64 portfolio company investments. Unrealized appreciation for the year endedDecember 31, 2021 resulted from an increase in fair value, primarily due to positive investment-related adjustments, and the reversal of unrealized depreciation from the sale of our debt investments. Unrealized depreciation was primarily due to widening spread environment and negative valuation adjustments. For the year endedDecember 31, 2020 , we had$54.1 million in unrealized appreciation on 56 portfolio company investments, which was offset by$82.1 million in unrealized depreciation on 69 portfolio company investments. Unrealized appreciation for the year endedDecember 31, 2020 resulted from an increase in fair value, primarily due to positive investment-related adjustments, and the reversal of unrealized depreciation from the sale of our debt investments. Unrealized depreciation was primarily due to widening spread environment and negative valuation adjustments. For the years endedDecember 31, 2022 , 2021 and 2020, we had unrealized appreciation (depreciation) on forward currency exchange contracts of($5.3) million ,$27.9 million and($22.4) million , respectively. For the year endedDecember 31, 2022 , unrealized depreciation on forward currency exchange contracts was due to EUR, AUD, GBP, CAD and NOK forward contracts. For the year endedDecember 31, 2021 , unrealized appreciation on forward currency exchange contracts was due to EUR and GBP forward contracts. For the year endedDecember 31, 2020 , unrealized depreciation on forward currency exchange contracts was due to CAD, EUR, GBP, DKK, NOK and AUD forward contracts.
The following table summarizes the impact of foreign currency for the years
ended
For the Year
Ended
2022
2021 2020 Net change in unrealized appreciation (depreciation) on investments due to foreign currency
$ (5,211) $ (16,764) $ 16,926 Net realized gain (loss) on investments due to foreign currency (9,419)
13,945 1,053 Net change in unrealized appreciation (depreciation) on foreign currency translation
(3,644) (936) 108 Net realized gain (loss) on foreign currency transactions 5,292 (3,496) 130
Net change in unrealized appreciation (depreciation) on forward currency exchange contracts
(5,259) 27,935 (22,396) Net realized gain (loss) on forward currency exchange contracts 20,894
(23,773) 6,472 Foreign currency impact to net increase (decrease) in net assets resulting from operations
$ 2,653 $
(3,089)
Included in total net gains (losses) on the consolidated statements of operations is losses of($13.0) million ,($7.3) million and$18.2 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 years endedDecember 31, 2022 , 2021 and 2020, respectively. Including the total net realized and unrealized gains (losses) on forward currency exchange contracts of$15.6 million ,$4.2 million and($15.9) 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$2.6 million ($3.1) million and$2.3 million for the years endedDecember 31, 2022 , 2021 and 2020, respectively.
Net Increase (Decrease) in Net Assets Resulting from Operations
For the years endedDecember 31, 2022 , 2021 and 2020, the net increase in net assets resulting from operations was$105.5 million $119.8 million and$8.3 million , respectively. Based on the weighted average shares of common stock outstanding for the years endedDecember 31, 2022 , 2021 and 2020, our per share net increase in net assets resulting from operations was$1.63 ,$1.86 and$0.14 , respectively. 92 Table of Contents
Financial Condition, Liquidity and Capital Resources
Our liquidity and capital resources are derived primarily from proceeds from equity issuances, advances from our credit facilities, 2019-1 Debt,March 2026 Notes,October 2026 Notes, the Sumitomo Credit Facility 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 ofDecember 31, 2022 andDecember 31, 2021 , our asset coverage ratio was 180.0% and 177.0%, respectively.
At
AtDecember 31, 2022 , we had approximately$222.0 million of availability on our Sumitomo Credit Facility and$50.0 million of availability on our Revolving Advisor Loan, subject to existing terms and regulatory requirements. AtDecember 31, 2021 , we had approximately$300.0 million of availability on our Sumitomo Credit Facility and$50.0 million of availability on our Revolving Advisor Loan, subject to existing terms and regulatory requirements. For the year endedDecember 31, 2022 , cash, foreign cash, restricted cash, and cash equivalents decreased by$77.9 million . During the year endedDecember 31, 2022 , we used$316.8 million in cash for operating activities. The decrease in cash used for operating activities was primarily related to the purchases of investments of$1,404.1 million , which was offset by proceeds from principal payments and sales of investments of$988.1 million and a net increase in assets resulting from operations of$105.5 million .
During the year ended
For the year endedDecember 31, 2021 , cash, foreign cash, restricted cash, and cash equivalents increased by$121.9 million . During the year endedDecember 31, 2021 , we provided$267.7 million in cash for operating activities. The increase in cash provided by operating activities was primarily related to proceeds from principal payments and sales of investments of$1,399.2 million and a net increase in net assets resulting from operations of$119.8 million , offset by the purchase of investments of$1,117.3 million , net realized gains from investments of$21.2 million , and the net change in unrealized appreciation on investments of$16.0 million . During the year endedDecember 31, 2021 , we used$140.8 million for financing activities, primarily on borrowings on our debt from BCSF Revolving Credit Facility, JPM Credit Facility, Revolving Advisor Loan, the issuance of theMarch 2026 Notes, and the issuance of theOctober 2026 Notes of$1,425.1 million , offset by repayments on our debt of$1,461.8 million , distributions paid during the period of$87.8 million , and payments of our debt issuance costs of$16.2 million . For the year endedDecember 31, 2020 , cash, foreign cash, restricted cash, and cash equivalents increased by$12.9 million . During the year endedDecember 31, 2020 , we provided$89.4 million in cash for operating activities. The increase in cash used for operating activities was primarily related to the purchase of investments of$516.2 million offset by proceeds from principal payments and sales of investments of$538.5 million , a net increase in net assets resulting from operations of$8.3 million , net realized losses from investments of$33.8 million , and the net change in unrealized depreciation on investments of$28.0 million . During the year endedDecember 31, 2020 , we used($76.5) million for financing activities, primarily on borrowings on our debt from BCSF Revolving Credit Facility, JPM Credit Facility, Revolving Advisor Loan, and the issuance of the 2023 Notes of$597.3 million and the issuance of common stock of$131.9 million , offset by repayments on our debt of$710.8 million and distributions paid during the period of$86.3 million . 93 Table of Contents Equity OnNovember 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 theNew York Stock Exchange under the symbol "BCSF" onNovember 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. During the year endedDecember 31, 2022 , we did not issue shares of our common stock to investors who have opted into our dividend reinvestment plan. During the year endedDecember 31, 2021 , we did not issue shares of our common stock to investors who have opted into our dividend reinvestment plan. During the year endedDecember 31, 2020 , we did not issue shares of our common stock to investors who have opted into our dividend reinvestment plan. OnMay 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 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 ofDecember 31, 2022 , there have been no repurchases of common stock. OnMay 4, 2020 , the Company's Board of Directors approved a transferable subscription rights offering to our stockholders of record as ofMay 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 theNew York Stock Exchange under the symbol "BCSF RT". The rights offering expiredJune 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. OnJune 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
The Company's outstanding borrowings as of
As of December 31, 2022 As of December 31, 2021 Total Total Aggregate Aggregate Principal Principal Principal Principal Amount Amount Carrying Amount Amount Carrying Committed Outstanding Value (1) Committed Outstanding Value (1) 2018-1 Notes $ - $ - $ -$ 365,700 $ 365,700 $ 364,178 2019-1 Debt 352,500 352,500 351,099 352,500 352,500 350,969
Revolving Advisor Loan 50,000 - -
50,000 - - 2023 Notes - - - 150,000 112,500 111,133 March 2026 Notes 300,000 300,000 296,392 300,000 300,000 295,260 October 2026 Notes 300,000 300,000 294,812 300,000 300,000 293,442
Sumitomo Credit Facility(2) 665,000 443,000 443,000
300,000 - - Total Debt$ 1,667,500 $ 1,395,500 $ 1,385,303 $ 1,818,200 $ 1,430,700 $ 1,414,982
(1) Carrying value represents aggregate principal amount outstanding less
unamortized debt issuance costs.
(2)OnJanuary 26, 2022 ,Gale Aviation (Offshore) Co investment, a controlled affiliate investment of the Company, entered into a letter of credit agreement withSumitomo Mitsui Banking Corporation for$14.7M . As ofDecember 31, 2022 ,$14.7M is outstanding on the letter of credit and the amount has been drawn against the total aggregate principal amount committed of the Sumitomo Credit Facility. 94 Table of Contents
BCSF Revolving Credit Facility
OnOctober 4, 2017 , the Company entered into the revolving credit agreement (the "BCSF Revolving Credit Facility") with us, as equity holder,BCSF I, LLC , aDelaware limited liability company and a wholly owned and consolidated subsidiary of the Company, as borrower, andGoldman Sachs Bank USA , as sole lead arranger ("Goldman Sachs"). The BCSF Revolving Credit Facility was subsequently amended onMay 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
OnMarch 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 toJune 22, 2020 ; and, afterJune 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 . OnMay 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. OnAugust 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.
On
Borrowings under the BCSF Revolving Credit Facility bore interest at LIBOR plus a margin. For the period fromJanuary 1, 2021 throughMarch 11, 2021 , the BCSF Revolving Credit Facility accrued 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. 2018-1 Notes OnSeptember 28, 2018 (the "2018-1 Closing Date"), we, through BCC Middle Market CLO 2018-1 LLC (the "2018-1 Issuer"), aDelaware 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. 95
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The CLO Transaction was executed through a private placement of the following 2018-1 Notes. 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 onOctober 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. As ofDecember 31, 2021 , the Class A-1 A, A-1 B, A-2, B and C 2018-1 Notes were included in the consolidated financial statements. The Membership Interests were eliminated in consolidation. OnMarch 7, 2022 , the Company sold 70% of the membership equity interests of the Company's 2018-1 Notes to SLP, which resulted in the deconsolidation of the 2018-1 Notes from the Company's consolidated financial statements as further discussed in Note 3. JPM Credit Facility OnApril 30, 2019 , the Company entered into a loan and security agreement (the "JPM Credit Agreement" or the "JPM Credit Facility") as Borrower, withJPMorgan Chase Bank, National Association , as Administrative Agent, andWells 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%. OnJanuary 29, 2020 , the Company entered into an amended and restated loan and security agreement (the "Amended Loan and Security Agreement") as Borrower, withJPMorgan Chase Bank, National Association , as Administrative Agent, andWells 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 fromJanuary 29, 2020 toJuly 29, 2020 (the minimum facility amount will increase to$350.0 million afterJuly 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 fromNovember 29, 2022 toJanuary 29, 2025 . OnMarch 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, provided flexibility to contribute and borrow against revolving loans, reduce the amount required to be reserved for unfunded revolvers and delayed draw obligations and decreased 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 paid the Administrative Agent$50.0 million to the prepayment of Advances and the Financing Commitments reduced by the amount of principal so prepaid on the earlier of two Business days following the closing of the Rights Offering andJune 18, 2020 .
On
The facility amount under the JPM Credit Agreement is$450.0 million . Proceeds of the loans under the JPM Credit Facility were 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 untilJanuary 29, 2023 is referred to as the reinvestment period and during such reinvestment period, the Borrower could request drawdowns under the JPM Credit Facility. The maturity date was 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 ofJanuary 29, 2025 could be extended for successive one-year periods by mutual agreement of the Borrower and the Administrative Agent. The JPM Credit Agreement included 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 bore interest at LIBOR plus a margin. The Company paid 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 96 Table of Contents facility. Interest was payable quarterly in arrears. As ofDecember 31, 2020 , the JPM Credit Facility was accruing interest expense at a rate of LIBOR plus 2.375%. We paid an unused commitment fee of 75 basis points (0.75%) per annum.
On
2019-1 Debt
OnAugust 28, 2019 , the Company, through BCC Middle Market CLO 2019-1 LLC (the "2019-1 Issuer"), aCayman Islands limited liability company and a wholly-owned and consolidated subsidiary of the Company, and BCC Middle Market CLO 2019-1Co-Issuer, LLC (the "Co-Issuer" and, together with the Issuer, the "Co-Issuers"), aDelaware 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. OnNovember 30, 2021 , the Co-Issuers refinanced the 2019-1 CLO Transaction through a private placement of$410 million of senior secured and senior deferrable notes consisting of: (i)$282.5 million of Class A-1-R Senior Secured Floating Rate Notes, which currently bear interest at the applicable reference rate plus 1.50% per annum; (ii)$55 million of Class A-2-R Senior Secured Floating Rate Notes, which bear interest at the applicable reference rate plus 2.00% per annum; (iii)$47.5 million of Class B-R Senior Deferrable Floating Rate Notes, which bear interest at the applicable reference rate plus 2.60% per annum; and (iv)$25.0 million of Class C-R Senior Deferrable Floating Rate Notes, which bear interest at the applicable reference rate plus 3.75% per annum (collectively, the "2019-1 CLO Reset Notes"). As part of the transactions, the 2019-1 Issuer was redomiciled from Cayman to Jersey. The 2019-1 CLO Reset Notes are scheduled to mature onOctober 15, 2033 and the reinvestment period endsOctober 15, 2025 . The Company retained$32.5 million of the Class B-R Notes and$25.0 million of the Class C-R Notes. The retained notes by the Company are eliminated in consolidation. The transaction resulted in a realized loss on the extinguishment of debt of$2.3 million from the acceleration of unamortized debt issuance costs of. The obligations of the Issuer under the CLO Transaction are non-recourse to the Company. The Loans and Class A-1-R, A-2-R, and B-R Notes are included in the consolidated financial statements of the Company. The$32.5 million of the Class B-R Notes,$25.0 million of the Class C-R Notes and Membership Interests retained by the Company 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 ofDecember 31, 2022 , there were 49 first lien and second lien senior secured loans with a total fair value of approximately$447.4 million and cash of$56.0 million securing the 2019-1 Debt. As ofDecember 31, 2021 , there were 45 first lien and second lien senior secured loans with a total fair value of approximately$441.0 million and cash of$62.6 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 97
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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 ofDecember 31, 2022 , the Company was in compliance with its covenants related to the 2019-1 Debt. Costs of the offering of$1.5 million were incurred in connection with the 2019-1 CLO Reset Notes 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 using the effective interest method. The balance of the unamortized debt issuance costs was$1.4 million and$1.5 million as ofDecember 31, 2022 andDecember 31, 2021 , respectively.
Revolving Advisor Loan
OnMarch 27, 2020 , the Company entered into an unsecured revolving loan agreement (the "Revolving Advisor Loan") withBCSF 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 ofMarch 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 ofDecember 31, 2022 , there were no borrowings under the Revolving Advisor Loan.
2023 Notes
OnJune 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 were scheduled to mature onJune 10, 2023 and could 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 bore interest at a rate of 8.50% per year payable semi-annually onJune 10 andDecember 10 of each year, commencing onDecember 10, 2020 . As ofDecember 31, 2021 , the Company was in compliance with the terms of the Note Purchase Agreement governing the 2023 Notes. OnJuly 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 and original issue discount of$0.5 million . OnAugust 24, 2022 , the Company issued a notice to the noteholders of the 2023 Notes, indicating its intention to prepay the total aggregate principal amount committed of$150,000,000 , including the principal amount outstanding of$112,500,000 , under the 2023 Notes pursuant to the terms of the Note Purchase Agreement governing the 2023 Notes. The Notes were prepaid at 100% of their principal amount, plus accrued and unpaid interest thereon, onSeptember 6, 2022 .
OnMarch 10, 2021 , the Company andU.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 2.95% notes due 2026 (the "March 2026 Notes"). TheMarch 2026 Notes will mature onMarch 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. TheMarch 2026 Notes bear interest at a rate of 2.95% per year payable semi-annually onMarch 10th andSeptember 10th of each year, commencing onSeptember 10, 2021 . TheMarch 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 theMarch 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 98 Table of Contents (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 net proceeds to the Company were approximately
OnOctober 13, 2021 , the Company and the Trustee entered into a Second Supplemental Indenture (the "Second Supplemental Indenture") to the Indenture between the Company and the Trustee. The Second Supplemental Indenture relates to the Company's issuance of$300.0 million aggregate principal amount of its 2.55% notes due 2026 (the "October 2026 Notes," and together with theMarch 2026 Notes, the "2026 Notes"). TheOctober 2026 Notes will mature onOctober 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. TheOctober 2026 Notes bear interest at a rate of 2.55% per year payable semi-annually onApril 13 andOctober 13 of each year, commencing onApril 13, 2022 . TheOctober 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 theOctober 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 net proceeds to the Company were approximately
Sumitomo Credit Facility
OnDecember 24, 2021 , the Company entered into a senior secured revolving credit agreement (the "Sumitomo Credit Agreement" or the "Sumitomo Credit Facility") as Borrower, withSumitomo Mitsui Banking Corporation , as Administrative Agent and Sole Book Runner, and withSumitomo Mitsui Banking Corporation andMUFG Union Bank, N.A. , as Joint Lead Arrangers. The Credit Agreement is effective as ofDecember 24, 2021 . The facility amount under the Sumitomo Credit Agreement is$300.0 million with an accordion provision to permit increases to the total facility amount up to$1.0 billion . Proceeds of the loans under the Sumitomo Credit Agreement may be used for general corporate purposes of the Company, including, without limitation, repaying outstanding indebtedness, making distributions, contributions and investments, and acquisition and funding, and such other uses as permitted under the Sumitomo Credit Agreement. The maturity date isDecember 24, 2026 . OnJuly 6, 2022 , the Company entered into the First Amendment to the Sumitomo Credit Agreement. The First Amendment provides for an upsize in the total commitments from lenders under the revolving credit facility governed by the Sumitomo Credit Agreement from$300.0 million to$385.0 million . The First Amendment also replaced the LIBOR benchmark provisions under the Sumitomo Credit Agreement with SOFR benchmark provisions, including applicable credit spread adjustments. OnJuly 22, 2022 , the Company entered into the Increasing Lender/Joinder Lender Agreement (the "Joinder Agreement"), dated as ofJuly 22, 2022 , pursuant to Section 2.08(e) of the Sumitomo Credit Agreement. The Joinder Agreement provides for, among other things, an upsize in the total commitments from lenders under the revolving credit facility governed by the Sumitomo Credit Agreement from$385.0 million to$485.0 million .
On
99 Table of Contents OnDecember 14, 2022 , the Company entered into a second Increasing Lender/Joinder Lender Agreement (the "Second Joinder Agreement"), dated as ofDecember 14, 2022 , pursuant to Section 2.08(e) of the Sumitomo Credit Agreement. The Second Joinder Agreement provides for, among other things, an upsize in the total commitments from lenders under the revolving credit facility governed by the Sumitomo Credit Agreement from$635.0 million to$665.0 million . Interest under the Sumitomo Credit Agreement for (i) loans for which the Company elects the base rate option, (A) if the borrowing base is equal to or greater than the product of 1.60 and the revolving credit exposure, is payable at an "alternate base rate" (which is the greater of zero and the highest of (a) the prime rate as published in the print edition ofThe Wall Street Journal , Money Rates Section, (b) the federal funds effective rate plus 0.5% and (c) the one-month Eurocurrency rate plus 1% per annum) plus 0.75% per annum and (B) if the borrowing base is less than the product of 1.60 and the revolving credit exposure, the alternate base rate plus 0.875% per annum; (ii) loans for which the Company elects the Eurocurrency option, (A) if the borrowing base is equal to or greater than the product of 1.60 and the revolving credit exposure, is payable at a rate equal to the Eurocurrency rate plus 1.75% per annum and (B) if the borrowing base is less than the product of 1.60 and the revolving credit exposure, is payable at a rate equal to the Eurocurrency rate plus 1.875% per annum; and (iii) loans for which the Company elects the risk-free-rate option, (A) if the borrowing base is equal to or greater than the product of 1.60 and the revolving credit exposure, is payable at a rate equal to risk-free-rate plus 1.8693% per annum and (B) if the borrowing base is less than the product of 1.60 and the revolving credit exposure, is payable at a rate equal to risk-free-rate plus 1.9943% per annum. The Company pays a used commitment fee of 37.5 basis points (0.375%) on the average daily unused amount of the dollar commitment. The Sumitomo 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. As ofDecember 31, 2022 , the Company was in compliance with its covenants related to the Sumitomo Credit Facility.
As of
Distribution Policy
The following table summarizes distributions declared during the years ended
Amount Total Date Declared Record Date Payment Date Per Share 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 October 28, 2020 December 31, 2020 January 29, 2021$ 0.34 $ 21,951 Feburuary 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 October 28, 2021 December 31, 2021 January 28, 2022$ 0.34 $ 21,951 February 16, 2022 March 31, 2022 April 29, 2022$ 0.34 $ 21,951 April 26, 2022 June 30, 2022 July 29, 2022$ 0.34 $ 21,951 July 26, 2022 September 30, 2022 October 28, 2022$ 0.34 $ 21,951 November 9, 2022 December 31, 2022 January 27, 2023$ 0.36 $ 23,242 Total distributions declared$ 4.17 $ 263,928 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
100 Table of Contents 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 onOctober 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. TheU.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. 101 Table of Contents
As of
Portfolio Company & Investment Expiration Date (1) Unfunded Commitments (2) 9 Story Media Group Inc. - Revolver 4/30/2026 $ 497 A&R Logistics, Inc. - Revolver 5/5/2025 5,735 Abracon Group Holding, LLC. - Delayed Draw 7/6/2028 5,046 Abracon Group Holding, LLC. - Revolver 7/6/2028 2,018 Access - First Lien Senior Secured Loan 6/4/2029 2,642 Allworth Financial Group, L.P. - Delayed Draw 12/23/2026 7 Allworth Financial Group, L.P. - Revolver 12/23/2026 2,440 Amspec Services, Inc. - Revolver 7/2/2024 4,463 Ansira Holdings New DD T/L(2) - First Lien Senior Secured Loan 12/20/2024 1,508 Ansira Holdings, Inc. - Revolver 12/20/2024 1,700 Apollo Intelligence - Delayed Draw 6/1/2028 9,611 Apollo Intelligence - Revolver 6/1/2028 7,208 Applitools - Revolver 5/25/2028 3,430 Appriss Holdings, Inc. - Revolver 5/6/2027 753 Aramsco, Inc. - Revolver 8/28/2024 2,709 ASP-r-pac Acquisition Co LLC - Revolver 12/29/2027 3,253 Avalon Acquiror, Inc. - Revolver 3/10/2028 7,353 Batteries Plus Holding Corporation - Revolver 6/30/2023 3,334 Caribou Bidco Limited - First Lien Senior Secured Loan 1/29/2029 21 CB Nike IntermediateCo Ltd - Revolver 10/31/2025 44 Cloud Technology Solutions (CTS) - Revolver 7/3/2029 1,705 Concert Golf Partners Holdco LLC - Delayed Draw 4/2/2029 2,340 Concert Golf Partners Holdco LLC - Revolver 3/31/2028 2,492 CPS Group Holdings, Inc. - Revolver 3/3/2025 4,933 Darcy Partners R/C - First Lien Senior Secured Loan 6/1/2028 349 DC Blox Inc. - First Lien Senior Secured Loan 3/22/2026 1,915 Direct Travel, Inc. - Delayed Draw 10/2/2025 2,625 Efficient Collaborative Retail Marketing Company, LLC - Revolver 6/30/2024 2,267 Element Buyer, Inc. - Revolver 7/19/2024 4,250 Eleven Software - Revolver 9/25/2026 1,339 Grammer Purchaser, Inc. - Revolver 9/30/2024 234 Great Expressions Dental Center PC - Revolver 9/28/2023 127 Gulf Winds International - Revolver 12/16/2028 5,292 Intoxalock - Revolver 11/1/2028 3,087 JHCC Holdings, LLC - Delayed Draw 9/9/2025 31 JHCC Holdings, LLC - Revolver 9/9/2025 1,088 Kellstrom Commercial Aerospace, Inc. - Revolver 7/1/2025 3,092 Mach Acquisition R/C - Revolver
10/18/2026 6,026 102 Table of Contents
Portfolio Company & Investment Expiration Date (1) Unfunded Commitments (2) Margaux Acquisition Inc. - Revolver 12/19/2025 1,915 Margaux UK Finance Limited - Revolver 12/19/2024 603 masLabor - Revolver 7/1/2027 345 Meriplex Communications, Ltd. - Delayed Draw 7/17/2028 8,931 Meriplex Communications, Ltd. - Revolver 7/17/2028 2,542 Morrow Sodali - Delayed Draw 4/25/2028 1,345 Morrow Sodali - Revolver 4/25/2028 1,312 MRH Trowe Beteiligungsgesellschaft MBH - First Lien Senior Secured Loan
7/26/2028 7,888 MRI Software LLC - Revolver 2/10/2026 1,782 MZR Buyer, LLC - Revolver 12/21/2026 5,210 NearMap - Revolver 12/9/2029 4,652
New Look (Delaware) Corporation - Delayed Draw 5/26/2028 1,938 New Look Vision Group - Delayed Draw 5/26/2028 62 New Look Vision Group - Revolver 5/26/2026 571 OGH Bidco Limited - Delayed Draw 6/29/2029 7,440 Omni Intermediate - Delayed Draw 11/23/2026 504 Omni Intermediate R/C - First Lien Senior Secured Loan 11/30/2026 732 Paisley Bidco Limited - Revolver 11/26/2028 1,460 Parcel2Go - First Lien Senior Secured Loan 7/15/2028 33Premier Imaging, LLC - Delayed Draw 1/2/2025 4,816 Reconomy - First Lien Senior Secured Loan 6/24/2029 7,949 Reconomy - First Lien Senior Secured Loan 6/24/2029 7,949Refine Intermediate, Inc. - Revolver
9/3/2026 5,340 Revalize, Inc. - Revolver 4/15/2027 1,340 RoadOne - Delayed Draw 12/29/2028 5,666 RoadOne - Revolver 12/29/2028 3,388 RoC Opco LLC - Revolver 2/25/2025 7,510 Saltoun - Delayed Draw 4/11/2028 14,358
Saturn Purchaser Corp. - Revolver
7/22/2029 4,883 Service Master - Revolver 8/16/2027 7,470 Smartronix - Revolver 11/23/2027 6,321 Solaray, LLC - Revolver 9/9/2023 6,800
Spring Finco DD T/L - First Lien Senior Secured Loan 7/15/2029 1,259 SunMed Group Holdings, LLC - Revolver 6/16/2027 639Superna Inc. - Delayed Draw
3/6/2028 2,631 Superna Inc. - Revolver 3/6/2028 2,631 SureWerx - Delayed Draw 12/28/2029 2,013 SureWerx - Revolver 12/28/2028 939 Swoogo LLC - Revolver 12/9/2026 1,243 103 Table of Contents Portfolio Company & Investment Expiration Date (1) Unfunded Commitments (2) TEI Holdings Inc. - Revolver 12/23/2025 4,221 Titan Cloud Software, Inc - Delayed Draw 9/7/2029 11,429 Titan Cloud Software, Inc - Revolver 9/7/2028 5,714 TGI Sport Bidco Pty Ltd - Delayed Draw 4/30/2026 1,315 TLC Purchaser, Inc. - Revolver 10/13/2025 1,828 V Global Holdings LLC - Revolver 12/22/2025 9,690 Ventiv Holdco, Inc. - Revolver 9/3/2025 1,704 WCI Gigawatt Purchaser - Revolver 11/19/2027 2,253 Whitcraft LLC - Revolver 4/3/2023 362 World Insurance - Revolver 4/1/2026 326 WSP Initial Term Loan - Delayed Draw 4/27/2027 1,797 WSP Revolving Loan - Revolver 4/27/2027 402 WU Holdco, Inc. - Revolver 3/26/2025 2,705 YLG Holdings, Inc. - Revolver 10/31/2025 8,545 Total $ 303,665
(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
been converted to
rate as ofDecember 31, 2022 . 104 Table of Contents
As of
Portfolio Company & Investment Expiration Date (1) Unfunded Commitments (2) 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 507 Allworth Financial Group, L.P. - Revolver 12/23/2026 2,440 AMI US Holdings Inc. - Revolver 4/1/2024 1,047 Amspec Services, Inc. - Revolver 7/2/2024 4,179 Ansira Holdings, Inc. - Revolver 12/20/2022 1,700 Appriss Holdings, Inc. - Revolver 5/6/2027 753 Aramsco, Inc. - Revolver 8/28/2024 3,387 Armstrong Bidco T/L - First Lien Senior Secured Loan 4/30/2025 6,542 ASP-r-pac Acquisition Co LLC - Revolver 12/29/2027 2,603 Batteries Plus Holding Corporation - Revolver 6/30/2023 3,433 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 2,550 Grammer Purchaser, Inc. - Revolver 9/30/2024 1,050 Great Expressions Dental Center PC - Revolver 9/28/2022 215Green Street Parent, LLC - Revolver
8/27/2025 2,419 GSP Holdings, LLC - Revolver 11/6/2025 2,947 JHCC Holdings, LLC - Revolver 9/9/2025 1,939
Kellstrom Commercial Aerospace, Inc. - Revolver 7/1/2025 3,092 Mach Acquisition R/C - Revolver 10/18/2026 10,043 Margaux Acquisition Inc. - Revolver 12/19/2024 2,872 Margaux UK Finance Limited - Revolver 12/19/2024 675 masLabor Revolver - Revolver 7/1/2027 1,034 MRHT Acquisition Facility - First Lien Senior Secured Loan
7/26/2028 569 MRI Software LLC - Revolver 2/10/2026 1,782 MZR Buyer, LLC - Revolver 12/22/2026 5,210
New Look (Delaware) Corporation - Delayed Draw 5/26/2028 2,005 New Look Vision Group - Delayed Draw 5/26/2028 3,803 New Look Vision Group - Revolver 5/26/2026 1,700 Omni Intermediate DD T/L 2 - First Lien Senior Secured Loan 11/30/2027 870 Omni Intermediate R/C - Revolver
11/30/2026 549 Opus2 - Delayed Draw 5/5/2028 7,382 105 Table of Contents Portfolio Company & Investment Expiration Date (1) Unfunded Commitments (2) Paisley Bidco Limited - Delayed Draw 11/24/2028 8,624 Parcel2Go Acquisition Facility - Subordinated Debt 7/17/2028 3,731 Refine Intermediate, Inc. - Revolver 9/3/2026 5,340 Revalize, Inc. - Delayed Draw 4/15/2027 13,395 Revalize, Inc. - Revolver 4/15/2027 1,340 RoC Opco LLC - Revolver 2/25/2025 10,241 Service Master Revolving Loan - Revolver 8/16/2027 3,240 Smartronix RC - Revolver 11/23/2028 6,321 Solaray, LLC - Revolver 9/9/2022 11,844 SunMed Group Holdings, LLC - Revolver 6/16/2027 1,032 Swoogo LLC - Revolver 12/9/2026 1,243 TEI Holdings Inc. - Revolver 12/23/2025 4,070 TGI Sport Bidco Pty Ltd - Revolver 4/30/2027 3,026 Tidel Engineering, L.P. - Revolver 3/1/2023 4,250 TLC Purchaser, Inc. - Delayed Draw 10/10/2025 7,119 TLC Purchaser, Inc. - Revolver 10/13/2025 2,492 V Global Holdings LLC - Revolver 12/22/2025 5,835 Ventiv Holdco, Inc. - Revolver 9/3/2025 3,407 WCI Gigawatt Purchaser DD T/L - Delayed Draw 11/19/2027 1,646 WCI Gigawatt Purchaser R/C - Revolver 11/19/2027 3,218 WCI-HSG Purchaser, Inc. - Revolver 2/24/2025 1,478 Whitcraft LLC - Revolver 4/3/2023 1,812 World Insurance - Revolver 4/1/2026 861 WSP Initial Term Loan - First Lien Senior Secured Loan 4/27/2023 1,797 WSP Revolving Loan - Revolver 4/27/2027 402 WU Holdco, Inc. - First Lien Senior Secured Loan 3/26/2026 1,708 WU Holdco, Inc. - Revolver 3/26/2025 3,944 YLG Holdings, Inc. - Revolver 10/31/2025 8,545 Total $ 234,031
(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
been converted to
rate as ofDecember 31, 2021 . 106 Table of Contents
Significant Accounting Estimates and Critical Accounting Policies
Basis of Presentation
The Company's consolidated financial statements have been prepared in accordance with generally accepted accounting principles inthe 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-K 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 theFinancial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 946 - Financial Services - Investment Companies ("ASC 946"). Our financial currency isU.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.
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
The Advisor shall value the investments owned by the Company, subject at all times to the oversight of the Board. The Advisor shall follow its own written valuation policies and procedures as approved by the Board when determining valuations. A short summary of the Advisor's valuation policies is below. 107
Table of Contents
Investments for which market quotations are readily available are typically valued at such market quotations. Pursuant to Rule 2a-5 under the 1940 Act, the Board designates the Advisor as Valuation Designee to perform fair value determinations for the Company for investments that do not have readily available 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 will be valued at a price that reflects such security's fair value. 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, in particular, illiquid/hard to value assets, the Advisor will typically 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;
? Preliminary valuation conclusions are then documented and discussed with the
Company's senior management and the Advisor;
? Generally investments that constitute a material portion of the Company's
portfolio are periodically reviewed by an independent valuation firm; and
?
process, including requesting such materials as they deem appropriate.
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.
Contractual Obligations
We have entered into the Amended Advisory Agreement with our Advisor (which supersedes the Prior Investment Advisory Agreement datedNovember 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. OnNovember 28, 2018 , our Board, including a majority of our Independent Directors, approved the Amended Advisory Agreement. OnFebruary 1, 2019 the Company's stockholders approved the Amended Advisory Agreement. Pursuant to this Agreement, effectiveFebruary 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%. The Amended 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. 108 Table of Contents 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.
The following table shows the contractual maturities of our debt obligations as
of
Payments Due by Period Less than More than Total 1 year 1 - 3 years 3 - 5 years 5 years 2019-1 Debt$ 352,500 $ - $ - $ -$ 352,500 March 2026 Notes 300,000 - - 300,000 - October 2026 Notes 300,000 - - 300,000 - Sumitomo Credit Facility 443,000 - - 443,000 - Total Debt Obligations$ 1,395,500 $ - $ -$ 1,043,000 $ 352,500
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