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EX-32 - EXHIBIT 32 - Bain Capital Specialty Finance, Inc.tm2029635d1_ex32.htm
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EX-10.30 - EXHIBIT 10.30 - Bain Capital Specialty Finance, Inc.tm2029635d1_ex10-30.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One) 

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

 

For the quarterly period ended September 30, 2020

 

OR

 

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

 

Commission file number: 814-01175

 

BAIN CAPITAL SPECIALTY FINANCE, INC.

(Exact name of registrant as specified in its charter)

 

Delaware   81-2878769
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)
     
200 Clarendon Street, 37th Floor
Boston, MA

(Address of principal executive offices)
  02116
(Zip Code)

 

(617) 516-2000

(Registrant’s telephone number, including area code)

 

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

 

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

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ¨ No ¨

 

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

 

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

 

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

 

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

 

As of November 5, 2020, the registrant had 64,562,265.27 shares of common stock, $0.001 par value, outstanding.

 

 

  

 

 

 

TABLE OF CONTENTS

 

 

      Page
       
PART I   FINANCIAL INFORMATION 4
       
Item 1.   Consolidated Financial Statements 4
       
    Consolidated Statements of Assets and Liabilities as of September 30, 2020 (unaudited) and December 31, 2019 4
       
    Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019 (unaudited) 5
       
    Consolidated Statements of Changes in Net Assets for the three and nine months ended September 30, 2020 and 2019 (unaudited) 6
       
    Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019 (unaudited) 7
       
    Consolidated Schedules of Investments as of September 30, 2020 (unaudited) and December 31, 2019 8
       
    Notes to Consolidated Financial Statements (unaudited) 12
       
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations 50
       
Item 3.   Quantitative and Qualitative Disclosures About Market Risk 81
       
Item 4.   Controls and Procedures 82
       
PART II   OTHER INFORMATION 83
       
Item 1.   Legal Proceedings 83
       
Item 1A.   Risk Factors 83
       
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds 85
       
Item 3.   Defaults Upon Senior Securities 86
       
Item 4.   Mine Safety Disclosures 86
       
Item 5.   Other Information 86
       
Item 6.   Exhibits 86
       
Signatures     90

 

2

 

 

FORWARD-LOOKING STATEMENTS

 

Statements contained in this Quarterly Report on Form 10-Q (the “Quarterly Report”) (including those relating to current and future market conditions and trends in respect thereof) that are not historical facts are based on current expectations, estimates, projections, opinions and/or beliefs of the Company, BCSF Advisors, LP (the “Advisor”) and/or Bain Capital Credit, LP and its affiliated advisers (collectively, “Bain Capital Credit”). Such statements involve known and unknown risks, uncertainties and other factors and undue reliance should not be placed thereon. Certain information contained in this Quarterly Report constitutes “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “seek,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue,” “target,” or “believe” or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events or results or the actual performance of the Company may differ materially from those reflected or contemplated in such forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and are difficult to predict, that could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements including, without limitation, the risks, uncertainties and other factors we identify in the section entitled Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K (the “Annual Report”) for the fiscal year ended December 31, 2019 and in our filings with the Securities and Exchange Commission (the “SEC”).

 

Although we believe that the assumptions on which these forward-looking statements are based are reasonable, some of those assumptions may be based on the work of third parties and any of those assumptions could prove to be inaccurate; as a result, the forward-looking statements based on those assumptions also could prove to be inaccurate. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this Quarterly Report should not be regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include those described or identified in the section entitled Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019. Investors should not place undue reliance on these forward-looking statements, which apply only as of the date of this Quarterly Report. We do not undertake any obligation to update or revise any forward-looking statements or any other information contained herein, except as required by applicable law. The safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which preclude civil liability for certain forward-looking statements, do not apply to the forward-looking statements in this Quarterly Report because we are an investment company.

 

3

 

 

 

PART I. FINANCIAL INFORMATION

 

Item 1. Consolidated Financial Statements

 

Bain Capital Specialty Finance, Inc.
         
Consolidated Statements of Assets and Liabilities
(in thousands, except share and per share data)
         
   As of 
   September 30,
2020
   December 31,
2019
 
   (Unaudited)     
Assets          
Investments at fair value:          
Non-controlled/non-affiliate investments (amortized cost of $2,361,890 and $2,416,854, respectively)  $2,303,209   $2,403,250 
Non-controlled/affiliate investment (amortized cost of $28,852 and $6,720, respectively)   33,549    6,720 
Controlled affiliate investment (amortized cost of $137,924 and $113,689, respectively)   122,899    117,085 
Cash and cash equivalents   43,020    36,531 
Foreign cash (cost of $2,029 and $854, respectively)   2,009    810 
Restricted cash and cash equivalents   78,895    31,505 
Collateral on forward currency exchange contracts   3,604    - 
Deferred financing costs   3,493    3,182 
Interest receivable on investments   20,232    22,482 
Receivable for sales and paydowns of investments   4,633    21,994 
Unrealized appreciation on forward currency exchange contracts   23    1,034 
Dividend receivable   5,573    961 
Total Assets  $2,621,139   $2,645,554 
           
Liabilities          
Debt (net of unamortized debt issuance costs of $7,555 and $4,584, respectively)  $1,513,852   $1,574,635 
Offering costs payable   518    - 
Interest payable   11,783    15,534 
Payable for investments purchased   2,956    293 
Collateral payable on forward currency exchange contracts   -    331 
Unrealized depreciation on forward currency exchange contracts   8,162    1,252 
Base management fee payable   8,885    7,265 
Incentive fee payable   -    4,513 
Accounts payable and accrued expenses   2,573    2,155 
Distributions payable   21,951    21,176 
Total Liabilities   1,570,680    1,627,154 
           
Commitments and Contingencies (See Note 10)          
           
Net Assets          
Preferred stock, $0.001 par value per share, 10,000,000,000 shares authorized, none issued and outstanding
as of September 30, 2020 and December 31, 2019, respectively
  $-   $- 
Common stock, par value $0.001 per share, 100,000,000,000 and 100,000,000,000 shares authorized,
64,562,265 and 51,649,812 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively
   65    52 
Paid in capital in excess of par value   1,166,685    1,038,343 
Total distributable earnings (loss)   (116,291)   (19,995)
Total Net Assets   1,050,459    1,018,400 
Total Liabilities and Total Net assets  $2,621,139   $2,645,554 
           
Net asset value per share  $16.27   $19.72 

 

See Notes to Consolidated Financial Statements

 

4

 

 

Bain Capital Specialty Finance, Inc.

 

Consolidated Statements of Operations

(in thousands, except share and per share data)

(Unaudited)

 

   For the
Three Months Ended
September 30,
   For the
Nine Months Ended
September 30,
 
   2020   2019   2020   2019 
Income                    
Investment income from non-controlled/non-affiliate investments:                    
Interest from investments  $43,558   $50,710   $135,576   $126,037 
Dividend income   34    46    748    62 
Other income   607    236    1,106    627 
Total investment income from non-controlled/non-affiliate investments   44,199    50,992    137,430    126,726 
                     
Investment income from non-controlled, affiliate investments:                    
Investment income from non-controlled/affiliate investments:                    
Interest from investments   56    -    56    - 
Total investment income from non-controlled/affiliate investments   56    -    56    - 
                     
Investment income from controlled affiliate investments:                    
Interest from investments   715    781    2,225    1,023 
Dividend income   1,847    915    6,473    15,425 
Other income   -    -    -    4 
Total investment income from controlled affiliate investments   2,562    1,696    8,698    16,452 
Total investment income   46,817    52,688    146,184    143,178 
                     
Expenses                    
Interest and debt financing expenses   14,426    19,427    49,614    46,592 
Base management fee   8,885    8,910    26,250    23,644 
Incentive fee   -    4,330    -    12,905 
Professional fees   296    789    1,909    1,615 
Directors fees   209    159    555    370 
Other general and administrative expenses   1,545    1,243    3,878    3,672 
Total expenses before fee waivers   25,361    34,858    82,206    88,798 
Base management fee waiver   -    (2,582)   -    (6,450)
Incentive fee waiver   -    (763)   -    (2,745)
Total expenses, net of fee waivers   25,361    31,513    82,206    79,603 
Net investment income   21,456    21,175    63,978    63,575 
                     
Net realized and unrealized gains (losses)                    
Net realized gain (loss) on non-controlled/non-affiliate investments   (24,263)   27    (34,667)   (1,394)
Net realized gain on controlled affiliate investments   -    -    -    265 
Net realized gain (loss) on foreign currency transactions   (19)   122    (368)   (190)
Net realized gain (loss) on forward currency exchange contracts   (130)   346    6,472    11,042 
Net change in unrealized appreciation on foreign currency translation   194    162    89    461 
Net change in unrealized appreciation (depreciation) on forward currency exchange contracts   (11,177)   9,135    (7,921)   (14)
Net change in unrealized appreciation (depreciation) on non-controlled/non-affiliate investments   73,892    (12,373)   (45,077)   2,269 
Net change in unrealized appreciation on non-controlled/affiliate investments   1,689    -    4,697    - 
Net change in unrealized appreciation (depreciation) on controlled affiliate investments   (10,185)   (395)   (18,421)   720 
Total net gains (losses)   30,001    (2,976)   (95,196)   13,159 
                     
Net increase (decrease) in net assets resulting from operations  $51,457   $18,199  $(31,218)  $76,734 
                     
Basic and diluted net investment income per common share  $0.33   $0.41   $1.13   $1.23 
Basic and diluted increase (decrease) in net assets resulting from operations per common share  $0.80   $0.35   $(0.55)  $1.49 
Basic and diluted weighted average common shares outstanding   64,562,265    51,649,812    56,692,267    51,587,779 

 

See Notes to Consolidated Financial Statements

 

5

 

 

 

Bain Capital Specialty Finance, Inc.
                 
Consolidated Statements of Changes in Net Assets
(in thousands, except share and per share data)
(Unaudited)
                 
   For the
Three Months Ended
September 30,
   For the
Nine Months Ended
September 30,
 
   2020   2019   2020   2019 
Operations:                    
Net investment income  $21,456   $21,175   $63,978   $63,575 
Net realized gain (loss)   (24,412)   495    (28,563)   9,723 
Net change in unrealized appreciation (depreciation)   54,413    (3,471)   (66,633)   3,436 
Net increase (decrease) in net assets resulting from operations   51,457    18,199    (31,218)   76,734 
Stockholder distributions:                    
Distributions from distributable earnings   (21,951)   (21,176)   (65,078)   (63,460)
Net decrease in net assets resulting from stockholder distributions   (21,951)   (21,176)   (65,078)   (63,460)
Capital share transactions:                    
Issuance of common stock, net   -    -    128,355    - 
Reinvestment of stockholder distributions   -    -    -    3,322 
Net increase in net assets resulting from capital share transactions   -    -    128,355    3,322 
                     
Total increase (decrease) in net assets   29,506    (2,977)   32,059    16,596 
Net assets at beginning of period   1,020,953    1,021,202    1,018,400    1,001,629 
Net assets at end of period  $1,050,459   $1,018,225   $1,050,459   $1,018,225 
                     
Net asset value per common share  $16.27   $19.71   $16.27   $19.71 
Common stock outstanding at end of period   64,562,265    51,649,812    64,562,265    51,649,812 

 

See Notes to Consolidated Financial Statements

 

6

 

 

Bain Capital Specialty Finance, Inc.
         
Consolidated Statements of Cash Flows
(in thousands, except share and per share data)
(Unaudited)
         
   For the
Nine Months Ended
September 30,
 
   2020   2019 
Cash flows from operating activities          
Net increase (decrease) in net assets resulting from operations  $(31,218)  $76,734 
Adjustments to reconcile net increase in net assets from operations to net cash used in operating activities:          
Purchases of investments   (351,717)   (1,068,880)
Proceeds from principal payments and sales of investments   353,372    730,260 
Net realized loss from investments   34,667    1,129 
Net realized loss on foreign currency transactions   368    190 
Net change in unrealized depreciation on forward currency exchange contracts   7,921    14 
Net change in unrealized (appreciation) depreciation on investments   58,801    (2,989)
Net change in unrealized appreciation on foreign currency translation   (89)   (461)
Increase in investments due to PIK   (3,261)   (35)
Accretion of discounts and amortization of premiums   (4,332)   (2,884)
Amortization of deferred financing costs and debt issuance costs   1,905    1,106 
Changes in operating assets and liabilities:          
Collateral on forward currency exchange contracts   (3,604)   (60)
Interest receivable on investments   2,250    (12,351)
Prepaid insurance   -    1 
Dividend receivable   (4,612)   7,672 
Other assets   -    (2,147)
Interest payable   (3,751)   7,546 
Collateral payable on forward currency exchange contracts   (331)   - 
Base management fee payable   1,620    3,378 
Incentive fee payable   (4,513)   267 
Accounts payable and accrued expenses   130    2,162 
Net cash provided by (used in) operating activities   53,606    (259,348)
           
Cash flows from financing activities          
Borrowings on debt   527,762    1,149,248 
Repayments on debt   (585,402)   (700,929)
Payments of financing costs   (4,898)   (409)
Payments of offering costs   (3,045)   (89)
Payments of debt issuance costs   -    (2,795)
Proceeds from issuance of common stock   131,917    - 
Stockholder distributions paid   (64,303)   (60,070)
Net cash provided by financing activities   2,031    384,956 
           
Net increase in cash, foreign cash, restricted cash and cash equivalents   55,637    125,608 
Effect of foreign currency exchange rates   (559)   (848)
Cash, foreign cash, restricted cash and cash equivalents, beginning of period   68,846    33,271 
Cash, foreign cash, restricted cash and cash equivalents, end of period  $123,924   $158,031 
           
Supplemental disclosure of cash flow information:          
Cash interest paid during the period  $51,460   $37,940 
Supplemental disclosure of non-cash information:          
Reinvestment of stockholder distributions  $-   $3,322 
Distribution to owner from ABCS JV  $-   $346,329 

 

   As of
September 30,
 
   2020   2019 
Cash  $43,020   $70,637 
Restricted cash   78,895    86,402 
Foreign cash   2,009    992 
Total cash, foreign cash, restricted cash, and cash equivalents shown in the consolidated statements of cash flows  $123,924   $158,031 

 

See Notes to Consolidated Financial Statements

 

7

 

 

Bain Capital Specialty Finance, Inc.

Consolidated Schedule of Investments

As of September 30, 2020

(In thousands)

(unaudited)

 

Control Type  Industry  Portfolio Company  Investment Type  Spread Above
Index (1)
   Interest Rate   Maturity
Date
   Principal/Shares (9)   Cost   Market
Value
   % of
NAV (4)
 
Non-Controlled/Non-Affiliate Investments                                            
   Aerospace & Defense  Forming & Machining Industries Inc. (18) (19) (21)  Second Lien Senior Secured Loan    L+ 8.25%     8.47%   10/9/2026   $6,540    6,485    5,216      
      Forming & Machining Industries Inc. (12) (18) (29)  First Lien Senior Secured Loan    L+ 4.00%     4.22%   10/9/2025   $16,651    16,537    13,622      
      GSP Holdings, LLC (7) (12) (15) (19) (21) (29)  First Lien Senior Secured Loan    L+ 5.75%     6.75%   11/6/2025   $35,996    35,733    31,136      
      GSP Holdings, LLC (3) (7) (15) (19)  First Lien Senior Secured Loan - Revolver    L+ 5.75%     6.75%   11/6/2025   $1,813    1,775    1,201      
      Kellstrom Aerospace Group, Inc (14) (19) (25)  Equity Interest   -    -    -    1    1,963    1,255      
      Kellstrom Commercial Aerospace, Inc. (3) (18) (19) (21) (24)  First Lien Senior Secured Loan - Revolver    L+ 5.50%     6.88%   7/1/2025   $5,331    5,229    4,947      
      Kellstrom Commercial Aerospace, Inc. (12) (15) (19) (21) (29)  First Lien Senior Secured Loan    L+ 5.50%     6.50%   7/1/2025   $33,693    33,129    31,672      
      Novetta, LLC  (12) (15) (29)  First Lien Senior Secured Loan    L+ 5.00%     6.00%   10/17/2022   $6,530    6,467    6,416      
      Precision Ultimate Holdings, LLC (14) (19) (25)  Equity Interest   -    -    -    1,417    1,417    538      
      Salient CRGT, Inc. (12) (15) (29)  First Lien Senior Secured Loan    L+ 6.50%     7.50%   2/28/2022   $12,269    12,294    11,410      
      WCI-HSG HOLDCO, LLC (14) (19) (25)  Preferred Equity   -    -    -    675    675    1,493      
      WCI-HSG Purchaser, Inc. (3) (12) (15) (19) (29)  First Lien Senior Secured Loan - Revolver    L+ 4.25%     5.25%   2/24/2025   $403    373    363      
      WCI-HSG Purchaser, Inc. (12) (15) (19) (29)  First Lien Senior Secured Loan    L+ 4.50%     5.50%   2/24/2025   $17,645    17,450    17,380      
      Whitcraft LLC (3) (15) (19)  First Lien Senior Secured Loan - Revolver    L+ 6.00%     7.00%   4/3/2023   $725    710    675      
      Whitcraft LLC (12) (15) (19) (21) (29)  First Lien Senior Secured Loan    L+ 6.00%     7.00%   4/3/2023   $40,283    39,944    39,175      
      WP CPP Holdings, LLC. (12) (15) (21) (29)  Second Lien Senior Secured Loan    L+ 7.75%     8.75%   4/30/2026   $11,724    11,631    9,144      
                            Aerospace & Defense Total   $191,812   $175,643    16.7%
                                             
   Automotive  CST Buyer Company (3) (5) (15) (19) (21)  First Lien Senior Secured Loan - Revolver   -    -    10/3/2025   $-    (24)   -      
      CST Buyer Company (12) (15) (19) (21) (29)  First Lien Senior Secured Loan    L+ 5.25%     6.25%   10/3/2025   $34,166    33,716    34,166      
      JHCC Holdings, LLC (2) (3) (5) (15) (19) (28)  First Lien Senior Secured Loan - Delayed Draw   -    -    9/9/2025   $-    (35)   (250)     
      JHCC Holdings, LLC (3) (7) (15) (19)  First Lien Senior Secured Loan - Revolver    L+ 5.50%     6.50%   9/9/2025   $881    843    768      
      JHCC Holdings, LLC (7) (15) (19)  First Lien Senior Secured Loan - Delayed Draw    L+ 5.50%     6.50%   9/9/2025   $2,227    2,220    2,138      
      JHCC Holdings, LLC (7) (12) (15) (19) (21) (29)  First Lien Senior Secured Loan    L+ 5.50%     6.50%   9/9/2025   $29,453    29,082    28,275      
                            Automotive Total   $65,802   $65,097    6.2%
                                             
   Banking  Green Street Parent, LLC (2) (3) (5) (18) (19) (29)  First Lien Senior Secured Loan - Revolver   -    -    8/27/2025   $-    (40)   (145)     
      Green Street Parent, LLC (12) (18) (19) (29)  First Lien Senior Secured Loan    L+ 5.00%     5.27%   8/27/2026   $14,371    14,121    13,509      
                            Banking Total   $14,081   $13,364    1.3%
                                             
   Beverage, Food & Tobacco  NPC International, Inc.  (15) (27)  First Lien Senior Secured Loan    L+ 3.50%     4.50%   4/19/2024   $4,937    4,958    3,865      
      NPC International, Inc. (3) (32)  First Lien Senior Secured Loan    L+ 15.50%     17.00%   1/21/2021   $412    391    411      
                            Beverage, Food & Tobacco Total   $5,349   $4,276    0.4%
                                             
   Capital Equipment  Dorner Manufacturing Corp. (3) (5) (15) (19) (29)  First Lien Senior Secured Loan - Revolver   -    -    3/15/2022   $-    (8)   -      
      Dorner Manufacturing Corp. (12) (15) (19)  First Lien Senior Secured Loan    L+ 5.75%     6.75%   3/15/2023   $7,342    7,248    7,342      
      East BCC Coinvest II,LLC (14) (19) (25)  Equity Interest   -    -    -    1,419    1,419    744      
      Electronics For Imaging, Inc. (12) (18) (19) (29)  Second Lien Senior Secured Loan    L+ 9.00%     9.15%   7/23/2027   $13,070    12,308    10,390      
      Engineered Controls International, LLC (12) (19) (21) (29) (32)  First Lien Senior Secured Loan    L+ 7.00%     8.50%   11/5/2024   $32,969    32,351    32,969      
      EXC Holdings III Corp. (12) (15) (21) (29)  Second Lien Senior Secured Loan    L+ 7.50%     8.50%   12/1/2025   $8,240    8,250    8,119      
      FCG Acquisitions, Inc. (14) (19) (25)  Preferred Equity   -    -    -    4    4,251    8,671      
      FFI Holdings I Corp (3) (5) (15) (19) (30)  First Lien Senior Secured Loan - Revolver   -    -    1/24/2025   $-    (60)   -      
      FFI Holdings I Corp (7) (12) (15) (19) (21) (29)  First Lien Senior Secured Loan    L+ 5.75%     6.75%   1/24/2025   $68,579    68,081    68,579      
      Tidel Engineering, L.P. (3) (15) (19)  First Lien Senior Secured Loan - Revolver   -    -    3/1/2023   $-    -    -      
      Tidel Engineering, L.P. (7) (15) (19) (29)  First Lien Senior Secured Loan    L+ 6.25%     7.25%   3/1/2024   $37,835    37,835    37,646      
      Velvet Acquisition B.V. (6) (18) (19) (21)  Second Lien Senior Secured Loan    EURIBOR+ 8.00%     8.00%   4/17/2026   6,013    7,340    7,049      
                            Capital Equipment Total   $179,015   $181,509    17.3%
                                             
   Chemicals, Plastics & Rubber  AP Plastics Group, LLC (3) (15) (19)  First Lien Senior Secured Loan - Revolver   -    -    8/2/2021   $-    -    -      
      AP Plastics Group, LLC (7) (15) (19) (21)  First Lien Senior Secured Loan    L+ 5.25%     6.25%   8/1/2022   $19,856    19,646    19,856      
      Niacet b.v. (6) (15) (19) (21)  First Lien Senior Secured Loan    EURIBOR+ 4.50%     5.50%   2/1/2024   3,603    3,866    4,097      
      Plaskolite, Inc. (15) (29)  First Lien Senior Secured Loan    L+ 4.25%     5.25%   12/15/2025   $2,258    2,222    2,229      
                            Chemicals, Plastics & Rubber Total   $25,734   $26,182    2.5%
                                             
   Construction & Building  Chase Industries, Inc.(15) (19) (26)  First Lien Senior Secured Loan - Delayed Draw    L+ 5.50% (1.5% PIK)     8.00%   5/12/2025   $1,161    1,158    929      
      Chase Industries, Inc. (15) (19) (26)  First Lien Senior Secured Loan    L+ 5.50% (1.5% PIK)     8.00%   5/12/2025   $12,288    12,244    9,830      
      Elk Parent Holdings, LP (14) (19) (25)  Equity Interest   -    -    -    1    12    119      
      Elk Parent Holdings, LP (14) (19) (25)  Preferred Equity   -    -    -    120    1,202    1,293      
      PP Ultimate Holdings B, LLC (14) (19) (25)  Equity Interest   -    -    -    1    1,352    1,575      
      Profile Products LLC (2) (3) (5) (7) (15) (19)  First Lien Senior Secured Loan - Revolver   -    -    12/20/2024   $-    (54)   (48)     
      Profile Products LLC (7) (12) (15) (19) (21) (29)  First Lien Senior Secured Loan    L+ 5.75%     6.75%   12/20/2024   $36,260    35,697    35,807      
      Regan Development Holdings Limited (6) (17) (19)  First Lien Senior Secured Loan    EURIBOR+ 6.50%     7.00%   4/18/2022   2,087    2,274    2,447      
      Regan Development Holdings Limited (6) (17) (19)  First Lien Senior Secured Loan    EURIBOR+ 6.50%     7.00%   4/18/2022   677    768    793      
      Regan Development Holdings Limited (6) (17) (19)  First Lien Senior Secured Loan    EURIBOR+ 6.50%     7.00%   4/18/2022   6,335    6,854    7,426      
      YLG Holdings, Inc. (3) (7) (15) (19)  First Lien Senior Secured Loan - Delayed Draw    L+ 6.25%     7.25%   10/31/2025   $4,113    4,106    4,100      
      YLG Holdings, Inc. (2) (3) (5) (7) (15) (19)  First Lien Senior Secured Loan - Revolver   -    -    10/31/2025   $-    (72)   (21)     
      YLG Holdings, Inc. (7) (12) (15) (19) (21) (29)  First Lien Senior Secured Loan    L+ 5.75%     6.75%   10/31/2025   $38,571    38,265    38,474      
                            Construction & Building Total   $103,806   $102,724    9.8%
                                             
   Consumer Goods: Durable  New Milani Group LLC (12) (15) (19) (29)  First Lien Senior Secured Loan    L+ 2.50%     3.50%   6/6/2024   $16,969    16,858    15,951      
      TLC Holdco LP (14) (19) (25)  Equity Interest   -    -    -    1,188    1,186    1,411      
      TLC Purchaser, Inc. (2) (3) (5) (19)  First Lien Senior Secured Loan - Delayed Draw   -    -    10/13/2025   $-    (60)   (89)     
      TLC Purchaser, Inc. (2) (3) (5) (19) (21)  First Lien Senior Secured Loan - Revolver   -    -    10/13/2025   $-    (149)   (111)     
      TLC Purchaser, Inc. (12) (19) (21) (29)  First Lien Senior Secured Loan    L+ 5.75%     6.75%   10/13/2025   $42,401    41,663    41,871      
                            Consumer Goods: Durable Total   $59,498   $59,033    5.6%
                                             
   Consumer Goods: Non-Durable  FineLine Technologies, Inc. (15) (19) (21) (26)  First Lien Senior Secured Loan - Revolver    L+ 4.25%     5.25%   11/4/2022   $2,633    2,620    2,534      
      FineLine Technologies, Inc. (12) (15) (19) (21) (29) (26)  First Lien Senior Secured Loan    L+ 4.25%     5.25%   11/4/2022   $31,364    31,264    30,188      
      MND Holdings III Corp (12) (15) (19) (29)  First Lien Senior Secured Loan    L+ 3.50%     4.50%   6/19/2024   $10,641    10,655    8,679      
      RoC Opco LLC  (3) (5) (15) (19) (21)  First Lien Senior Secured Loan - Revolver   -    -    2/25/2025   $-    (153)   -      
      RoC Opco LLC (12) (15) (19) (21) (29)  First Lien Senior Secured Loan    L+ 7.25%     8.25%   2/25/2025   $40,589    39,796    40,589      
      Solaray, LLC (7) (15) (19)  First Lien Senior Secured Loan - Delayed Draw    L+ 6.00%     7.00%   9/11/2023   $14,462    14,462    14,173      
      Solaray, LLC (3) (7) (15) (19)  First Lien Senior Secured Loan - Revolver    L+ 4.50%     5.50%   9/9/2022   $7,424    7,391    7,424      
      Solaray, LLC (7) (15) (19) (21)  First Lien Senior Secured Loan    L+ 6.00%     7.00%   9/11/2023   $42,280    42,280    41,434      
      WU Holdco, Inc. (7) (15) (19)  First Lien Senior Secured Loan - Delayed Draw    L+ 5.25%     6.25%   3/26/2026   $5,602    5,547    5,602      
      WU Holdco, Inc. (3) (5) (18) (19)  First Lien Senior Secured Loan - Revolver   -    -    3/26/2025   $-    (49)   -      
      WU Holdco, Inc. (7) (15) (21) (19)  First Lien Senior Secured Loan    L+ 5.25%     6.25%   3/26/2026   $39,419    38,719    39,419      
                            Consumer Goods: Non-Durable Total   $192,532   $190,042    18.1%
                                             
   Containers, Packaging, & Glass  Automate Intermediate Holdings II S.à r.l. (6) (18) (19) (21)  Second Lien Senior Secured Loan    L+ 7.75%     7.90%   7/22/2027   $11,870    11,653    11,752      
                            Containers, Packaging, & Glass Total   $11,653   $11,752    1.1%
                                             
   Energy: Electricity  Infinite Electronics International Inc. (12) (18) (19) (21) (29)  First Lien Senior Secured Loan    L+ 4.00%     4.15%   7/2/2025   $19,602    19,590    18,867      
      Infinite Electronics International Inc. (18) (19) (21)  Second Lien Senior Secured Loan    L+ 8.00%     8.15%   7/2/2026   $2,480    2,437    2,368      
                            Energy: Electricity Total   $22,027   $21,235    2.0%
                                             
   Energy: Oil & Gas  Amspec Services, Inc. (3) (7) (15) (19)  First Lien Senior Secured Loan - Revolver    L+ 4.75%     5.75%   7/2/2024   $4,114    4,069    4,114      
      Amspec Services, Inc. (7) (15) (19) (29)  First Lien Senior Secured Loan    L+ 5.75%     6.75%   7/2/2024   $43,765    43,344    43,765      
                            Energy: Oil & Gas Total   $47,413   $47,879    4.6%
                                             
   Environmental Industries  Adler & Allan Group Limited (6) (17) (19) (21) (22) (26)  First Lien Last Out    GBP LIBOR+ 8.25% (2% PIK)     10.75%   9/30/2022   £13,340    16,936    17,223      
                            Environmental Industries Total   $16,936   $17,223    1.6%
                                             
   FIRE: Finance  Allworth Financial Group, L.P. (3) (7) (18) (19)  First Lien Senior Secured Loan - Revolver    L+ 5.50%     5.66%   12/31/2025   $486    465    480      
      Allworth Financial Group, L.P. (7) (15) (19) (21) (29)  First Lien Senior Secured Loan    L+ 5.50%     6.50%   12/31/2025   $14,956    14,824    14,919      
                            FIRE: Finance Total   $15,289   $15,399    1.5%
                                             
                                             
   FIRE: Insurance  Ivy Finco Limited (6) (18) (19) (21)  First Lien Senior Secured Loan    GBP LIBOR+ 5.50%     6.23%   5/19/2025   £7,217    8,979    9,155      
      Ivy Finco Limited (3) (6) (18) (19)  First Lien Senior Secured Loan    GBP LIBOR+ 5.50%     5.83%   5/19/2025   £7,077    8,813    8,964      
      Margaux Acquisition Inc. (3) (7) (15) (19)  First Lien Senior Secured Loan - Delayed Draw    L+ 5.75%     6.75%   12/19/2024   $7,899    7,843    7,712      
      Margaux Acquisition, Inc. (15) (19)  First Lien Senior Secured Loan - Revolver    L+ 5.75%     6.75%   12/19/2024   $2,872    2,820    2,815      
      Margaux Acquisition Inc. (7) (12) (15) (19) (29)  First Lien Senior Secured Loan    L+ 5.75%     6.75%   12/19/2024   $28,698    28,244    28,124      
      Margaux UK Finance Limited (3) (5) (6) (15) (19)  First Lien Senior Secured Loan - Revolver   -    -    12/19/2024   £-    (9)   -      
      Margaux UK Finance Limited (6) (15) (19) (21)  First Lien Senior Secured Loan    GBP LIBOR+ 5.75%     6.75%   12/19/2024   £7,648    9,817    9,874      
                            FIRE: Insurance Total   $66,507   $66,644    6.4%
                                             
   FIRE: Real Estate  Spectre (Carrisbrook House) Limited (6) (15) (19)  First Lien Senior Secured Loan    EURIBOR+ 7.50%     8.50%   8/9/2021   9,300    10,856    10,901      
                            FIRE: Real Estate Total   $10,856   $10,901    1.0%
                                             
   Forest Products & Paper  Solenis International LLC (18) (21)  Second Lien Senior Secured Loan    L+ 8.50%     8.76%   6/26/2026   $10,601    10,326    9,922      
                            Forest Products & Paper Total   $10,326   $9,922    0.9%
                                             
   Healthcare & Pharmaceuticals  CB Titan Holdings, Inc. (14) (19) (25)  Preferred Equity   -    -    -    1,953    1,953    2,775      
      CPS Group Holdings, Inc. (3) (5) (15) (19)  First Lien Senior Secured Loan - Revolver   -    -    3/3/2025   $-    (67)   -      
      CPS Group Holdings, Inc. (7) (12) (15) (19) (21) (29)  First Lien Senior Secured Loan    L+ 5.50%     6.50%   3/3/2025   $55,486    55,039    55,486      
      Datix Bidco Limited (6) (18) (19) (21)  First Lien Senior Secured Loan - Revolver    GBP LIBOR+ 4.50%     5.22%   10/28/2024   £973    1,154    1,243      
      Datix Bidco Limited (6) (18) (19) (21)  Second Lien Senior Secured Loan    GBP LIBOR+ 7.75%     8.43%   4/27/2026   £12,134    16,355    15,510      
      Datix Bidco Limited (6) (18) (19) (21)  First Lien Senior Secured Loan    BBSW+ 4.50%     4.68%   4/28/2025   AUD 4,212     3,212    2,982      
      Golden State Buyer, Inc. (12) (18) (19) (29)  First Lien Senior Secured Loan    L+ 4.75%     4.90%   6/22/2026   $15,115    14,985    14,964      
      Great Expressions Dental Centers PC (15) (19) (26)  First Lien Senior Secured Loan - Revolver    L+ 4.75% (0.5% PIK)     6.25%   9/28/2022   $1,190    1,184    943      
      Great Expressions Dental Centers PC (12) (15) (19) (26)  First Lien Senior Secured Loan    L+ 2.50% (2.75% PIK)     6.25%   9/28/2023   $7,769    7,750    6,157      
      Island Medical Management Holdings, LLC (15) (19) (26) (29)  First Lien Senior Secured Loan    L+ 6.50%     7.50%   9/1/2023   $8,654    8,587    7,788      
      Medical Depot Holdings, Inc. (12) (15) (26) (34)  First Lien Senior Secured Loan    L+ 7.50%     8.50%   1/3/2023   $16,436    15,457    11,999      
      Mendel Bidco, Inc. (6) (18) (19) (21)  First Lien Senior Secured Loan    EURIBOR+ 4.50%     4.50%   6/17/2027   10,033    11,158    11,585      
      Mendel Bidco, Inc. (18) (19) (21)  First Lien Senior Secured Loan    L+ 4.50%     4.73%   6/17/2027   $19,966    19,525    19,367      
      Mertus 522. GmbH (6) (18) (19) (21)  First Lien Senior Secured Loan - Delayed Draw    EURIBOR+ 6.25%     6.25%   5/28/2026   13,131    14,120    15,084      
      Mertus 522. GmbH (6) (18) (19) (21)  First Lien Senior Secured Loan    EURIBOR+ 6.25%     6.25%   5/28/2026   22,468    24,606    25,811      
      TecoStar Holdings, Inc. (12) (15) (19) (21) (29)  Second Lien Senior Secured Loan    L+ 8.50%     9.68%   11/1/2024   $9,472    9,308    9,211      
      U.S. Anesthesia Partners, Inc. (12) (15) (19) (21)  Second Lien Senior Secured Loan    L+ 7.25%     8.25%   6/23/2025   $16,520    16,356    15,818      
                            Healthcare & Pharmaceuticals Total   $220,682   $216,723    20.7%
                                             
   High Tech Industries  AMI US Holdings Inc. (3) (12) (18) (19)  First Lien Senior Secured Loan - Revolver    L+ 5.50%     5.91%   4/1/2024   $1,256    1,231    1,238      
      AMI US Holdings Inc. (12) (15) (19) (21) (29)  First Lien Senior Secured Loan    L+ 5.50%     6.59%   4/1/2025   $13,058    12,848    12,927      
      Appriss Holdings, Inc. (3) (7) (18) (19)  First Lien Senior Secured Loan - Revolver    L+ 5.50%     5.65%   5/30/2025   $2,329    2,279    2,246      
      Appriss Holdings, Inc. (7) (12) (18) (19) (21) (29)  First Lien Senior Secured Loan    L+ 5.50%     5.75%   5/29/2026   $48,508    47,978    47,659      
      CB Nike IntermediateCo Ltd (3) (5) (15) (19) (21)  First Lien Senior Secured Loan - Revolver   -    -    10/31/2025   $-    (75)   -      
      CB Nike IntermediateCo Ltd (6) (12) (15) (19) (21) (29)  First Lien Senior Secured Loan    L+ 4.75%     5.75%   10/31/2025   $35,157    34,549    35,157      
      CMI Marketing Inc (3) (5) (15) (19) (29)  First Lien Senior Secured Loan - Revolver   -    -    5/24/2023   $-    (11)   -      
      CMI Marketing Inc (12) (15) (19) (29)  First Lien Senior Secured Loan    L+ 4.50%     5.50%   5/24/2024   $15,140    15,040    15,140      
      Drilling Info Holdings, Inc (12) (18) (21) (29)  First Lien Senior Secured Loan    L+ 4.25%     4.40%   7/30/2025   $22,438    22,370    20,530      
      Element Buyer, Inc. (7) (15) (19)  First Lien Senior Secured Loan - Delayed Draw    L+ 5.25%     6.25%   7/18/2025   $11,220    11,246    11,220      
      Element Buyer, Inc. (3) (7) (15) (19)  First Lien Senior Secured Loan - Revolver    L+ 5.25%     6.25%   7/19/2024   $850    808    850      
      Element Buyer, Inc. (7) (15) (19) (21)  First Lien Senior Secured Loan    L+ 5.25%     6.25%   7/18/2025   $37,486    37,771    37,486      
      Everest Bidco (6) (15) (19) (21)  Second Lien Senior Secured Loan    GBP LIBOR+ 7.50%     8.50%   7/3/2026   £10,216    13,127    13,124      
      MeridianLink, Inc. (15) (29)  First Lien Senior Secured Loan    L+ 3.75%     4.75%   5/30/2025   $1,811    1,793    1,789      
      MRI Software LLC (7) (15) (19)  First Lien Senior Secured Loan    L+ 5.50%     6.50%   2/10/2026   $25,233    25,135    25,233      
      MRI Software LLC (3) (5) (15) (19) (28)  First Lien Senior Secured Loan - Delayed Draw   -    -    2/10/2026   $-    (10)   -      
      MRI Software LLC (3) (15) (19)  First Lien Senior Secured Loan - Revolver   -    -    2/10/2026   $-    43    -      
      Netsmart Technologies, Inc. (21) (31)  Second Lien Senior Secured Loan    P+ 6.50%     9.75%   10/19/2023   $2,749    2,749    2,749      
      nThrive, Inc. (15) (19) (21)  Second Lien Senior Secured Loan    L+ 9.75%     10.75%   4/20/2023   $8,000    7,984    7,280      
      Park Place Technologies (15) (19) (21)  Second Lien Senior Secured Loan    L+ 8.00%     9.00%   3/30/2026   $6,733    6,687    6,396      
      Symplr Software, Inc. (2) (3) (5) (7) (18) (19)  First Lien Senior Secured Loan - Revolver   -    -    11/30/2023   $-    (48)   (112)     
      Symplr Software, Inc. (7) (18) (19) (21)  First Lien Senior Secured Loan    L+ 5.50%     5.72%   11/28/2025   $60,597    59,843    59,234      
      Symplr Software, Inc. (7) (18) (19)  First Lien Senior Secured Loan    L+ 6.00%     6.23%   11/28/2025   $3,783    3,745    3,754      
      Utimaco, Inc. (6) (18) (19) (21) (29)  First Lien Senior Secured Loan    L+ 4.50%     5.16%   8/9/2027   $14,849    14,525    14,701      
      Ventiv Topco, Inc. (14) (19) (25)  Equity Interest   -    -    -    28    2,833    3,729      
      Ventiv Holdco, Inc. (3) (7) (18) (19)  First Lien Senior Secured Loan - Revolver    L+ 5.50%     5.66%   9/3/2025   $426    381    409      
      Ventiv Holdco, Inc. (7) (15) (19) (21)  First Lien Senior Secured Loan    L+ 5.50%     6.50%   9/3/2025   $24,117    23,806    23,996      
      VPARK BIDCO AB (6) (16) (19) (21)  First Lien Senior Secured Loan    CIBOR+ 4.00%     4.75%   3/10/2025   DKK 56,999     9,187    8,974      
      VPARK BIDCO AB (6) (16) (19) (21)  First Lien Senior Secured Loan    NIBOR+ 4.00%     4.75%   3/10/2025   NOK 74,020     9,217    7,914      
      Zywave, Inc. (3) (5) (15) (19) (29)  First Lien Senior Secured Loan - Revolver   -    -    11/17/2022   $-    (7)   -      
      Zywave, Inc. (12) (15) (19) (29)  First Lien Senior Secured Loan    L+ 5.00%     6.00%   11/17/2022   $17,236    17,173    17,236      
                            High Tech Industries Total   $384,197   $380,859    36.3%
                                             
   Hotel, Gaming & Leisure  Aimbridge Acquisition Co., Inc. (12) (18) (19) (21) (29)  Second Lien Senior Secured Loan    L+ 7.50%     7.66%   2/1/2027   $20,193    19,694    18,174      
      Captain D's LLC (3) (15) (19)  First Lien Senior Secured Loan - Revolver    L+ 4.50%     5.50%   12/15/2023   $1,393    1,383    1,383      
      Captain D's LLC (12) (15) (19) (29)  First Lien Senior Secured Loan    L+ 4.50%     5.50%   12/15/2023   $12,809    12,729    12,745      
      Quidditch Acquisition, Inc. (12) (15) (19) (29)  First Lien Senior Secured Loan    L+ 7.00%     8.00%   3/21/2025   $18,880    18,868    17,559      
                            Hotel, Gaming & Leisure Total   $52,674   $49,861    4.7%
                                             
   Media: Advertising, Printing & Publishing  Ansira Holdings, Inc. (15) (19) (26)  First Lien Senior Secured Loan - Delayed Draw    L+ 6.50%     7.50%   12/20/2024   $4,464    4,460    3,817      
      Ansira Holdings, Inc. (3) (19) (23) (31)  First Lien Senior Secured Loan - Revolver    P+ 4.75%     7.58%   12/20/2024   $3,400    3,400    3,400      
      Ansira Holdings, Inc. (7) (15) (19) (26)  First Lien Senior Secured Loan    L+ 6.50%     7.50%   12/20/2024   $36,493    36,428    31,201      
      Cruz Bay Publishing, Inc. (3) (15) (19) (26)  First Lien Senior Secured Loan - Delayed Draw    P+ 6.00%     9.25%   2/1/2021   $705    696    705      
      Cruz Bay Publishing (3) (15) (19)  First Lien Senior Secured Loan - Revolver    P+ 4.00%     7.25%   2/1/2021   $1,978    1,978    1,978      
      Cruz Bay Publishing, Inc. (7) (15) (19) (26)  First Lien Senior Secured Loan    L+ 6.75%     7.75%   2/1/2021   $3,882    3,882    3,882      
      Cruz Bay Publishing, Inc. (7) (15) (19) (26)  First Lien Senior Secured Loan    P+ 6.75%     10.00%   2/1/2021   $1,309    1,309    1,309      
                            Media: Advertising, Printing & Publishing Total   $52,153   $46,292    4.4%
                                             
   Media: Broadcasting & Subscription  Vital Holdco Limited (6) (12) (15) (19) (21) (29)  First Lien Senior Secured Loan    L+ 4.75%     5.75%   5/29/2026   $35,357    34,630    35,357      
      Vital Holdco Limited (6) (18) (19) (21)  First Lien Senior Secured Loan    EURIBOR+ 4.75%     4.75%   5/29/2026   7,917    8,636    9,281      
                            Media: Broadcasting & Subscription Total   $43,266   $44,638    4.2%
                                             
   Media: Diversified & Production  9 Story Media Group Inc. (3) (15) (19)  First Lien Senior Secured Loan - Revolver    CDOR+ 5.50%     6.50%   4/30/2026   CAD 56     41    40      
      9 Story Media Group Inc. (6) (15) (19) (21)  First Lien Senior Secured Loan    CDOR+ 5.50%     6.50%   4/30/2026   CAD 7,329     5,371    5,382      
      9 Story Media Group Inc. (6) (18) (19) (21)  First Lien Senior Secured Loan    EURIBOR+ 5.50%     5.50%   4/30/2026   3,947    4,514    4,523      
      Efficient Collaborative Retail Marketing Company, LLC (3) (15) (19)  First Lien Senior Secured Loan - Revolver    L+ 5.25%     6.25%   6/15/2022   $2,267    2,267    2,267      
      Efficient Collaborative Retail Marketing Company, LLC (7) (15) (19) (21)  First Lien Senior Secured Loan    L+ 6.75%     7.75%   6/15/2022   $15,095    15,159    14,416      
      Efficient Collaborative Retail Marketing Company, LLC (7) (15) (19)  First Lien Senior Secured Loan    L+ 6.75%     7.75%   6/15/2022   $9,788    9,830    9,347      
      International Entertainment Investments Limited (6) (18) (19) (21)  First Lien Senior Secured Loan    GBP LIBOR+ 4.75%     5.27%   5/31/2023   £8,686    10,648    10,934      
                            Media: Diversified & Production Total   $47,830   $46,909    4.5%
                                             
   Retail  Batteries Plus Holding Corporation (3) (15) (19)  First Lien Senior Secured Loan - Revolver   -    -    7/6/2022   $-    -    -      
      Batteries Plus Holding Corporation (7) (15) (19)  First Lien Senior Secured Loan    L+ 6.75%     7.75%   7/6/2022   $28,672    28,672    28,672      
                            Retail Total   $28,672   $28,672    2.7%
                                             
   Services: Business  AMCP Clean Acquisition Company, LLC (12) (18) (19) (29)  First Lien Senior Secured Loan - Delayed Draw    L+ 4.25%     4.41%   7/10/2025   $3,865    3,857    2,512      
      AMCP Clean Acquisition Company, LLC (12) (18) (19) (29)  First Lien Senior Secured Loan    L+ 4.25%     4.47%   7/10/2025   $15,971    15,943    10,381      
      Comet Bidco Limited (6) (18) (21)  First Lien Senior Secured Loan    GBP LIBOR+ 5.00%     5.09%   9/30/2024   £7,362    9,505    7,259      
      Elevator Holdco Inc. (14) (19) (25)  Equity Interest   -    -    -    2    2,448    1,677      
      Hightower Holding, LLC (12) (15) (19) (21) (29)  First Lien Senior Secured Loan    L+ 5.00%     6.00%   1/31/2025   $40,953    40,804    40,953      
      Refine Intermediate, Inc. (3) (18) (19)  First Lien Senior Secured Loan - Revolver    GBP LIBOR+ 4.75%     4.80%   9/3/2026   $534    412    494      
      Refine Intermediate, Inc. (15) (19) (21)  First Lien Senior Secured Loan    L+ 4.75%     5.75%   3/3/2027   $21,894    21,380    21,730      
      SumUp Holdings Luxembourg S.à.r.l. (6) (15) (19) (21)  First Lien Senior Secured Loan    EURIBOR+ 8.00%     9.00%   8/1/2024   15,715    17,433    18,421      
      SumUp Holdings Luxembourg S.à.r.l. (6) (15) (19) (21)  First Lien Senior Secured Loan    EURIBOR+ 8.00%     9.00%   8/1/2024   16,697    18,223    19,573      
      TEI Holdings Inc. (3) (7) (15) (19)  First Lien Senior Secured Loan - Revolver    L+ 7.00%     8.00%   12/23/2025   $3,471    3,426    3,200      
      TEI Holdings Inc. (7) (12) (15) (19) (21) (26) (29)  First Lien Senior Secured Loan    L+ 7.00%     8.00%   12/23/2026   $48,682    48,094    45,761      
                            Services: Business Total   $181,525   $171,961    16.4%
                                             
   Services: Consumer  Pearl Intermediate Parent LLC (18) (29)  Second Lien Senior Secured Loan    L+ 6.25%     6.40%   2/13/2026   $2,571    2,585    2,508      
      Surrey Bidco Limited (6) (17) (19) (21)  First Lien Senior Secured Loan    GBP LIBOR+ 6.00%     6.50%   5/11/2026   £5,000    6,155    5,971      
      Trafalgar Bidco Limited (6) (18) (19) (21)  First Lien Senior Secured Loan    GBP LIBOR+ 5.00%     5.05%   9/11/2024   £6,011    7,751    7,761      
      Zeppelin BidCo Pty Limited (6) (18) (19) (21)  First Lien Senior Secured Loan    BBSY+ 6.00%     6.23%   6/28/2024   AUD20,621     14,069    14,455      
                            Services: Consumer Total   $30,560   $30,695    2.9%
                                             
   Telecommunications  Conterra Ultra Broadband Holdings, Inc. (18) (29)  First Lien Senior Secured Loan    L+ 4.50%     4.65%   4/30/2026   $6,402    6,375    6,338      
      Horizon Telcom, Inc. (15) (19) (29)  First Lien Senior Secured Loan - Revolver    L+ 4.75%     5.75%   6/15/2023   $116    113    114      
      Horizon Telcom, Inc. (12) (15) (19) (29)  First Lien Senior Secured Loan - Delayed Draw    L+ 4.75%     5.75%   6/15/2023   $925    919    907      
      Horizon Telcom, Inc. (12) (15) (19) (29)  First Lien Senior Secured Loan    L+ 4.75%     5.75%   6/15/2023   $13,625    13,505    13,353      
      Masergy Holdings, Inc. (15) (29)  Second Lien Senior Secured Loan    L+ 7.50%     8.50%   12/16/2024   $857    862    812      
                            Telecommunications Total   $21,774   $21,524    2.0%
                                             
   Transportation: Cargo  A&R Logistics, Inc. (2) (3) (5) (15) (19)  First Lien Senior Secured Loan - Revolver   -    -    5/5/2025   $-    (95)   (91)     
      A&R Logistics, Inc. (7) (12) (15) (19) (21) (29)  First Lien Senior Secured Loan    L+ 6.00%     7.20%   5/5/2025   $43,644    42,906    42,990      
      A&R Logistics, Inc. (7) (15) (19)  First Lien Senior Secured Loan    L+ 6.00%     7.20%   5/5/2025   $2,454    2,411    2,418      
      A&R Logistics, Inc. (7) (15) (19)  First Lien Senior Secured Loan    L+ 6.00%     7.00%   5/5/2025   $6,050    5,972    5,959      
      A&R Logistics, Inc. (7) (15) (19)  First Lien Senior Secured Loan    L+ 6.50%     7.50%   5/5/2025   $2,750    2,723    2,750      
      ARL Holdings, LLC. (14) (19) (25)  Equity Interest   -    -    -    -    445    509      
      ARL Holdings, LLC. (14) (19) (25)  Equity Interest   -    -    -    9    9    10      
      ENC Holding Corporation (12) (18) (19) (29)  First Lien Senior Secured Loan    L+ 4.00%     4.22%   5/30/2025   $10,198    10,186    9,892      
      Grammer Investment Holdings LLC (14) (19) (25)  Equity Interest   -    -    -    1,011    1,011    943      
      Grammer Investment Holdings LLC (19) (25) (26)  Preferred Equity    10% PIK     10.00%   -    7    714    726      
      Grammer Investment Holdings LLC (14) (19) (25)  Warrants   -    -    -    122    -    -      
      Grammer Purchaser, Inc. (2) (3) (12) (15) (19) (29)  First Lien Senior Secured Loan - Revolver   -    -    9/30/2024   $-    5    (11)     
      Grammer Purchaser, Inc. (12) (15) (19) (29)  First Lien Senior Secured Loan - Revolver    L+ 4.50%     5.50%   9/30/2024   $10,128    9,966    10,027      
      Omni Logistics, LLC (15) (19)  Subordinated Debt    L+ 11.50%     12.50%   1/19/2024   $15,000    14,787    15,000      
      PS HoldCo, LLC (12) (15) (29)  First Lien Senior Secured Loan    L+ 4.75%     5.75%   3/13/2025   $23,100    23,090    21,869      
                            Transportation: Cargo Total   $114,130   $112,991    10.8%
                                             
   Transportation: Consumer  Direct Travel, Inc. (7) (15) (19)  First Lien Senior Secured Loan - Delayed Draw    L+ 8.50%     9.50%   12/1/2021   $1,467    1,467    1,265      
      Direct Travel, Inc. (7) (13) (15) (19)  First Lien Senior Secured Loan - Delayed Draw    L+ 8.50%     9.50%   12/1/2021   $2,913    2,913    2,512      
      Direct Travel, Inc. (15) (19) (21)  First Lien Senior Secured Loan - Revolver    L+ 6.50%     7.50%   12/1/2021   $4,250    4,250    3,666      
      Direct Travel, Inc. (7) (15) (19) (21)  First Lien Senior Secured Loan    L+ 8.50%     9.50%   12/1/2021   $49,540    49,540    42,729      
      Toro Private Investments II, L.P. (14) (19) (25)  Equity Interest   -    -    -    3,090    3,090    1,497      
      Toro Private Investments II, L.P. (12) (18) (29)  First Lien Senior Secured Loan    L+ 5.00%     5.22%   5/29/2026   $6,749    4,426    4,228      
                            Transportation: Consumer Total   $65,686   $55,897    5.3%
                                             
   Wholesale  Abracon Group Holding, LLC. (14) (19) (25)  Equity Interest   -    -    -    2    1,833    1,306      
      Abracon Group Holding, LLC. (2) (3) (5) (15) (19)  First Lien Senior Secured Loan - Revolver   -    -    7/18/2024   $-    (27)   (71)     
      Abracon Group Holding, LLC. (7) (15) (19) (21)  First Lien Senior Secured Loan    L+ 5.75%     6.75%   7/18/2024   $35,639    35,500    34,748      
      Aramsco, Inc. (3) (7) (18) (19)  First Lien Senior Secured Loan - Revolver    L+ 5.25%     5.40%   8/28/2024   $1,806    1,769    1,747      
      Aramsco, Inc. (7) (18) (19) (21)  First Lien Senior Secured Loan    L+ 5.25%     5.40%   8/28/2024   $24,103    23,771    23,682      
      Armor Group, LP (14) (19) (25)  Equity Interest   -    -    -    10    1,012    1,668      
      PetroChoice Holdings, Inc. (12) (15) (29)  First Lien Senior Secured Loan    L+ 5.00%     6.00%   8/19/2022   $9,870    9,812    8,595      
      PetroChoice Holdings, Inc. (12) (15) (29)  First Lien Senior Secured Loan    L+ 5.00%     6.00%   8/19/2022   $6,531    6,435    5,687      
                            Wholesale Total   $80,105   $77,362    7.4%
                            Non-Controlled/Non-Affiliate Investments Total   $2,361,890   $2,303,209    219.3%
                                             
Non-Controlled/Affiliate Investments                                            
   Beverage, Food & Tobacco  ADT Pizza, LLC (10) (14) (19) (25)  Equity Interest   -    -    -    6,720    6,720    11,417      
                            Beverage, Food& Tobacco Total   $6,720   $11,417    1.1%
                                             
   Energy: Oil & Gas  Blackbrush Oil & Gas, L.P. (10) (14) (19)  Equity Interest   -    -    -    1,123    -    -      
      Blackbrush Oil & Gas, L.P. (10) (14) (19)  Preferred Equity   -    -    -    36,084    10,104    10,104      
      Blackbrush Oil & Gas, L.P. (10) (12) (15) (19) (29)  First Lien Senior Secured Loan   L+ 5.00%    6.00%   9/3/2025   $12,028    12,028    12,028      
                            Energy: Oil& Gas   $22,132   $22,132    2.1%
                            Non-Controlled/Affiliate Investments Total   $28,852   $33,549    3.2%
                                             
Controlled Affiliate Investments                                            
   Aerospace & Defense  ACC Holdco, LLC (10) (11) (19) (25)  Preferred Equity   -    16.00%   -    10,828    10,823    10,828      
      Air Comm Corporation LLC (10) (11) (12) (15) (19) (21) (29)  First Lien Senior Secured Loan   L+ 6.50%    7.50%   6/30/2025   $27,092    26,401    26,482      
      BCC Jetstream Holdings Aviation (Off I), LLC (10) (11) (19) (20) (25)  Equity Interest   -    -    -    11,863    11,863    11,777      
      BCC Jetstream Holdings Aviation (On II), LLC (10) (11) (19) (20) (25)  Equity Interest   -    -    -    1,116    1,116    792      
      BCC Jetstream Holdings Aviation (On II), LLC (10) (11) (19) (20) (26)  First Lien Senior Secured Loan   -    10.00%   6/2/2022   $6,614    6,614    6,614      
      Gale Aviation (Offshore) Co (10) (11) (19) (25)  Equity Interest   -    -    -    81,107    81,107    66,406      
                            Aerospace& Defense Total   $137,924   $122,899    11.7%
                            Controlled Affiliate Investments Total   $137,924   $122,899    11.7%
                            Investments Total   $2,528,666   $2,459,657    234.2%
                                             
Cash Equivalents                                            
   Cash Equivalents  Goldman Sachs Financial Square Government Fund Institutional Share Class (30)  Cash Equivalents   -    0.03%   -   $101,970    101,970    101,970      
                            Cash Equivalents Total   $101,970   $101,970    9.7%
                            Investments and Cash Equivalents Total   $2,630,636   $2,561,627    243.9%

 

Forward Foreign Currency Exchange Contracts

 

Currency Purchased  Currency Sold  Counterparty  Settlement Date  Unrealized
Appreciation
(Depreciation) (8)
 
US DOLLARS 183  CANADIAN DOLLAR 256  Bank of New York Mellon  4/14/2021  $(9)
US DOLLARS 088  CANADIAN DOLLAR 122  Bank of New York Mellon  4/15/2021   (3)
US DOLLARS 141  EURO 129  Bank of New York Mellon  4/15/2021   (11)
POUND STERLING 6,460  US DOLLARS 8,406  Bank of New York Mellon  9/10/2021   46 
US DOLLARS 7,609  EURO 6,840  Citibank  3/26/2021   (445)
US DOLLARS 5,616  CANADIAN DOLLAR 7,662  Citibank  4/15/2021   (129)
US DOLLARS 4,217  EURO 3,731  Citibank  4/15/2021   (177)
US DOLLARS 12,756  EURO 11,200  Citibank  5/21/2021   (448)
US DOLLARS 25,559  EURO 22,820  Goldman Sachs  3/9/2021   (1,301)
US DOLLARS 82,431  EURO 72,370  Goldman Sachs  5/21/2021   (2,887)
US DOLLARS 16,734  AUSTRALIAN DOLLARS 23,870  Goldman Sachs  6/7/2021   (383)
US DOLLARS 94,608  POUND STERLING 75,000  Goldman Sachs  6/7/2021   (2,409)
US DOLLARS 8,606  DANISH KRONE 56,290  Goldman Sachs  6/7/2021   (257)
US DOLLARS 8,187  NORWEGIAN KRONE 74,020  Goldman Sachs  9/10/2021   274 
            $(8,139)

 

(1) The investments bear interest at a rate that may be determined by reference to the London Interbank Offered Rate (“LIBOR” or “L”), the Euro Interbank Offered Rate (“EURIBOR” or “E”), British Pound Sterling LIBOR Rate (“GBP LIBOR”), the Norwegian Interbank Offered Rate (“NIBOR” or “N”), the Copenhagen Interbank Offered Rate (“CIBOR” or “C”), Canadian Dollar LIBOR Rate (“CDOR LIBOR”), the Bank Bill Swap Rate ("BBSW"), the Bank Bill Swap Bid Rate ("BBSY"), or the Prime Rate (“Prime” or "P") and which reset daily, monthly, quarterly or semiannually. Investments or a portion thereof may bear Payment-in-Kind ("PIK"). For each, the Company has provided the PIK or the spread over LIBOR, EURIBOR, GBP LIBOR, NIBOR, CIBOR, CDOR, BBSW, BBSY, or Prime and the current weighted average interest rate in effect at September 30, 2020. Certain investments are subject to a LIBOR, EURIBOR, GBP LIBOR, NIBOR, CIBOR, CDOR, BBSW, or Prime interest rate floor.

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

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

(4) Percentages are based on the Company’s net assets of $1,050,459 as of September 30, 2020.

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

(6) The investment is not a qualifying asset under Section 55(a) of the Investment Company Act of 1940. The Company may not acquire any non-qualifying asset unless, at the time of acquisition, qualifying assets represent at least 70% of the Company’s total assets. As of September 30, 2020, non-qualifying assets totaled 17.3% of the Company’s total assets.

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

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

(9) The principal amount (par amount) for all debt securities is denominated in U.S. dollars, unless otherwise noted. £ represents Pound Sterling, € represents Euro, NOK represents Norwegian krone, AUD represents Australian, CAD represents Canadian Dollar and DKK represents Kroner.

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

(11) As defined in the 1940 Act, the Company is deemed to “Control” this portfolio company as the Company either owns more than 25% of the portfolio company’s outstanding voting securities or has the power to exercise control over management or policies of such portfolio company.

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

(13) $7 of the total par amount for this security is at P+ 5.50%.

(14) Non-Income Producing.

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

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

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

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

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

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

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

(22) The Company generally earns a higher interest rate on the “last out” tranche of debt, to the extent the debt has been allocated to “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.

(23) $1,133 of the total par amount for this security is at L+ 5.75%.

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

(25) Security exempt from registration under the Securities Act of 1933 (the “Securities Act”), and may be deemed to be “restricted securities” under the Securities Act. As of September 30, 2020, the aggregate fair value of these securities is $143,263 or 13.64% of the Company’s net assets. The acquisition dates of the restricted securities are as follows:

 

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

 

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

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

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

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

(30) Cash equivalents include $78,895 of restricted cash.

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

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

 

See Notes to Consolidated Financial Statements

 

8

 

 

Bain Capital Specialty Finance, Inc.

Consolidated Schedule of Investments

As of December 31, 2019

(In thousands)

 

Control Type     Industry     Portfolio Company     Investment Type   Spread Above
Index (1)
    Interest Rate     Maturity
Date
    Principal/Shares (9)     Cost     Market
Value
    % of
NAV (4)
 
Non-Controlled/Non-Affiliate Investments                                                                            
      Aerospace & Defense     Forming & Machining Industries Inc. (18) (19) (21)     Second Lien Senior Secured Loan       L+ 8.25%       10.19 %     10/9/2026     $ 6,540       6,480       6,278          
            Forming & Machining Industries Inc. (12) (18) (19) (29)     First Lien Senior Secured Loan       L+ 4.00%       5.94 %     10/9/2025     $ 16,778       16,648       16,275          
            GSP Holdings, LLC (7) (12) (15) (19) (29)     First Lien Senior Secured Loan       L+ 5.50%       7.39 %     11/6/2025     $ 36,268       35,917       35,542          
            GSP Holdings, LLC (3) (15) (19)     First Lien Senior Secured Loan - Revolver       L+ 5.50%       7.29 %     11/6/2025     $ 227       182       136          
            Kellstrom Aerospace Group, Inc (14) (19) (25)     Equity Interest       -       -       -       1       1,963       1,911          
            Kellstrom Commercial Aerospace, Inc. (2) (3) (5) (18) (19)     First Lien Senior Secured Loan - Delayed Draw       -       -       7/1/2025     $ -       (35 )     (77 )        
            Kellstrom Commercial Aerospace, Inc. (3) (18) (19) (26)     First Lien Senior Secured Loan - Revolver       L+ 5.00%       8.35 %     7/1/2025     $ 5,758       5,639       5,630          
            Kellstrom Commercial Aerospace, Inc. (12) (18) (19) (21) (29)     First Lien Senior Secured Loan       L+ 5.00%       7.10 %     7/1/2025     $ 33,949       33,304       33,270          
            Novetta, LLC (12) (15) (29)     First Lien Senior Secured Loan       L+ 5.00%       6.80 %     10/17/2022     $ 6,581       6,497       6,484          
            Precision Ultimate Holdings, LLC (14) (19) (25)     Equity Interest       -       -       -       1,417       1,417       1,417          
            Salient CRGT, Inc. (12) (15) (29)     First Lien Senior Secured Loan       L+ 6.50%       8.29 %     2/28/2022     $ 12,723       12,770       12,087          
            TCFI Aevex LLC (3) (15) (19)     First Lien Senior Secured Loan - Revolver       L+ 6.25%       8.20 %     5/13/2025     $ 2,627       2,571       2,627          
            TCFI Aevex LLC (12) (15) (19) (21) (29)     First Lien Senior Secured Loan       L+ 6.25%       8.24 %     5/13/2025     $ 38,515       37,854       38,515          
            WCI-HSG HOLDCO, LLC (14) (19) (25)     Preferred equity       -       -       -       675       675       968          
            WCI-HSG Purchaser, Inc. (3) (15) (19)     First Lien Senior Secured Loan - Revolver       L+ 4.25%       6.04 %     2/24/2025     $ 403       369       396          
            WCI-HSG Purchaser, Inc. (12) (15) (19) (29)     First Lien Senior Secured Loan       L+ 4.50%       6.30 %     2/24/2025     $ 17,779       17,551       17,735          
            WP CPP Holdings, LLC. (12) (15) (21) (29)     Second Lien Senior Secured Loan       L+ 7.75%       9.68 %     4/30/2026     $ 11,724       11,620       11,584          
                                                  Aerospace & Defense Total     $ 191,422     $ 190,778       18.7 %
                                                                             
      Automotive     CST Buyer Company (3) (5) (15) (19)     First Lien Senior Secured Loan - Revolver       -       -       10/3/2025     $ -       (31 )     -          
            CST Buyer Company (12) (15) (19) (21) (29)     First Lien Senior Secured Loan       L+ 5.75%       7.55 %     10/3/2025     $ 36,890       36,286       36,890          
            JHCC Holdings, LLC (2) (3) (5) (18) (19) (28)     First Lien Senior Secured Loan - Delayed Draw       -       -       9/9/2025     $ -       (40 )     (43 )        
            JHCC Holdings, LLC (3) (18) (19)     First Lien Senior Secured Loan - Revolver       P+ 4.50%       10.00 %     9/9/2025     $ 1,013       972       999          
            JHCC Holdings, LLC (7) (18) (19)     First Lien Senior Secured Loan       L+ 5.50%       7.21 %     9/9/2025     $ 29,676       29,335       29,528          
                                                  Automotive Total     $ 66,522     $ 67,374       6.6 %
                                                                             
      Banking     Green Street Parent, LLC (2) (3) (5) (18) (19)     First Lien Senior Secured Loan - Revolver       -       -       8/27/2025     $ -       (46 )     (48 )        
            Green Street Parent, LLC (12) (18) (19) (29)     First Lien Senior Secured Loan       L+ 5.25%       7.05 %     8/27/2026     $ 14,480       14,201       14,190          
            Transaction Network Services, Inc. (12) (15) (19) (21) (29)     First Lien Senior Secured Loan       L+ 4.00%       5.93 %     8/15/2022     $ 11,630       11,501       11,324          
                                                  Banking Total     $ 25,656     $ 25,466       2.5 %
                                                                             
      Beverage, Food & Tobacco     Hearthside Food Solutions, LLC     Corporate Bond       -       8.50 %     6/1/2026     $ 10,000       9,814       9,382          
            NPC International, Inc. (12) (15) (21) (33)     Second Lien Senior Secured Loan       L+ 7.50%       9.43 %     4/18/2025     $ 9,159       9,190       1,101          
            NPC International, Inc. (15) (33)     First Lien Senior Secured Loan       L+ 3.50%       5.42 %     4/19/2024     $ 4,937       4,963       2,328          
                                                  Beverage, Food & Tobacco Total     $ 23,967     $ 12,811       1.3 %
                                                                             
      Capital Equipment     Dorner Manufacturing Corp. (3) (5) (15) (19)     First Lien Senior Secured Loan - Revolver       -       -       3/15/2022     $ -       (12 )     -          
            Dorner Manufacturing Corp. (12) (15) (19)     First Lien Senior Secured Loan       L+ 5.75%       7.71 %     3/15/2023     $ 7,890       7,766       7,890          
            East BCC Coinvest II,LLC (14) (19) (25)     Equity Interest       -       -       -       1,419       1,419       1,419          
            Electronics For Imaging, Inc. (18) (19) (21)     Second Lien Senior Secured Loan       L+ 9.00%       10.94 %     7/23/2027     $ 13,070       12,253       12,220          
            Engineered Controls International, LLC (12) (19) (21) (29) (32)     First Lien Senior Secured Loan       L+ 7.00%       8.70 %     11/5/2024     $ 33,599       32,861       32,843          
            EXC Holdings III Corp. (12) (15) (21) (29)     Second Lien Senior Secured Loan       L+ 7.50%       9.59 %     12/1/2025     $ 8,240       8,252       7,993          
            FCG Acquisitions, Inc. (14) (19) (25)     Preferred equity       -       -       -       4       4,251       7,263          
            FFI Holdings I Corp (3) (5) (15) (19) (28)     First Lien Senior Secured Loan - Delayed Draw       -       -       1/24/2025     $ -       (9 )     3          
            FFI Holdings I Corp (3) (15) (19) (30)     First Lien Senior Secured Loan - Revolver       L+ 5.75%       7.95 %     1/24/2025     $ 3,438       3,368       3,465          
            FFI Holdings I Corp (7) (12) (15) (19) (29)     First Lien Senior Secured Loan       L+ 5.75%       7.60 %     1/24/2025     $ 68,421       67,842       68,763          
            Tidel Engineering, L.P. (3) (15) (19)     First Lien Senior Secured Loan - Revolver       -       -       3/1/2023     $ -       -       -          
            Tidel Engineering, L.P. (7) (15) (19)     First Lien Senior Secured Loan       L+ 6.25%       8.19 %     3/1/2024     $ 38,302       38,302       38,302          
            Velvet Acquisition B.V. (6) (18) (19) (21)     Second Lien Senior Secured Loan       EURIBOR+ 8.00%       8.00 %     4/17/2026     6,013       7,325       6,752          
                                                  Capital Equipment Total     $ 183,618     $ 186,913       18.4 %
                                                                             
      Chemicals, Plastics & Rubber     AP Plastics Group, LLC (3) (15) (19)     First Lien Senior Secured Loan - Revolver       -       -       8/2/2021     $ -       -       -          
            AP Plastics Group, LLC (7) (15) (19)     First Lien Senior Secured Loan       L+ 5.25%       6.94 %     8/1/2022     $ 19,856       19,566       19,756          
            Niacet b.v. (15) (19) (21)     First Lien Senior Secured Loan       EURIBOR+ 4.50%       5.50 %     2/1/2024     3,684       3,949       4,126          
            Plaskolite, Inc. (15) (29)     First Lien Senior Secured Loan       L+ 4.25%       6.04 %     12/15/2025     $ 8,933       8,773       8,564          
                                                  Chemicals, Plastics & Rubber Total     $ 32,288     $ 32,446       3.2 %
                                                                             
      Construction & Building     Chase Industries, Inc. (15) (19) (29)     First Lien Senior Secured Loan - Delayed Draw       L+ 4.00%       5.94 %     5/12/2025     $ 1,115       1,115       1,111          
            Chase Industries, Inc. (12) (15) (19) (29)     First Lien Senior Secured Loan       L+ 4.00% (1.5% PIK)       7.44 %     5/12/2025     $ 11,812       11,762       11,753          
            Crown Subsea (12) (18) (29)     First Lien Senior Secured Loan       L+ 6.00%       7.69 %     11/3/2025     $ 9,696       9,566       9,675          
            Elk Parent Holdings, LP (14) (19) (25)     Equity Interest       -       -       -       1       12       12          
            Elk Parent Holdings, LP (14) (19) (25)     Preferred Equity       -       -       -       120       1,202       1,202          
            PP Ultimate Holdings B, LLC (14) (19) (25)     Equity Interest       -       -       -       1       1,352       1,613          
            Profile Products LLC (2) (3) (5) (15) (19)     First Lien Senior Secured Loan - Revolver       -       -       12/20/2024     $ -       (64 )     (10 )        
            Profile Products LLC (7) (15) (19)     First Lien Senior Secured Loan       L+ 5.50%       7.44 %     12/20/2024     $ 35,003       34,367       34,915          
            Regan Development Holdings Limited (6) (17) (19)     First Lien Senior Secured Loan       EURIBOR+ 6.50%       7.00 %     4/18/2022     2,051       2,235       2,303          
            Regan Development Holdings Limited (6) (17) (19)     First Lien Senior Secured Loan       EURIBOR+ 6.50%       7.00 %     4/18/2022     665       755       747          
            Regan Development Holdings Limited (6) (17) (19)     First Lien Senior Secured Loan       EURIBOR+ 6.50%       7.00 %     4/18/2022     6,226       6,710       6,992          
            YLG Holdings, Inc. (2) (3) (15) (19) (28)     First Lien Senior Secured Loan - Delayed Draw       -       -       10/31/2025     -       -       (51 )        
            YLG Holdings, Inc. (2) (3) (5) (15) (19)     First Lien Senior Secured Loan - Revolver       L+ 5.75%       -       10/31/2025     -       (83 )     (171 )        
            YLG Holdings, Inc. (7) (12) (15) (19) (29)     First Lien Senior Secured Loan       L+ 5.75%       7.66 %     10/31/2025     38,862       38,484       38,085          
                                                  Construction & Building Total     $ 107,413     $ 108,176       10.6 %
                                                                             
      Consumer Goods: Durable     New Milani Group LLC (12) (15) (19) (29)     First Lien Senior Secured Loan       L+ 5.00%       6.94 %     6/6/2024     $ 17,100       16,968       16,672          
            TLC Holdco LP (14) (19) (25)     Equity Interest       -       -       -       1,188       1,186       1,188          
            TLC Purchaser, Inc. (2) (3) (5) (19)     First Lien Senior Secured Loan - Delayed Draw       -       -       10/13/2025     $ -       (69 )     (71 )        
            TLC Purchaser, Inc. (3) (19)     First Lien Senior Secured Loan - Revolver       P+ 4.75%       9.50 %     10/13/2025     $ 3,916       3,745       3,738          
            TLC Purchaser, Inc. (12) (19) (21) (29)     First Lien Senior Secured Loan       L+ 5.75%       7.49 %     10/13/2025     $ 42,721       41,882       41,867          
                                                  Consumer Goods: Durable Total     $ 63,712     $ 63,394       6.2 %
                                                                             
      Consumer Goods: Non-Durable     FineLine Technologies, Inc. (3) (15) (19)     First Lien Senior Secured Loan - Revolver       P+ 3.25%       8.00 %     11/4/2022     $ 1,966       1,944       1,952          
            FineLine Technologies, Inc. (12) (15) (19) (21) (29)     First Lien Senior Secured Loan       L+ 4.25%       6.05 %     11/4/2022     $ 31,384       31,217       31,228          
            Kronos Acquisition Holdings Inc. (18) (19) (21)     First Lien Senior Secured Loan       L+ 7.00%       8.80 %     5/15/2023     $ 2,647       2,605       2,627          
            MND Holdings III Corp (15) (19) (21) (29)     First Lien Senior Secured Loan       L+ 3.50%       5.44 %     6/19/2024     $ 11,642       11,667       10,944          
            RoC Opco LLC (3) (5) (15) (19)     First Lien Senior Secured Loan - Revolver       -       -       2/25/2025     $ -       (176 )     -          
            RoC Opco LLC (12) (15) (19) (21) (29)     First Lien Senior Secured Loan       L+ 7.25%       9.19 %     2/25/2025     $ 40,793       39,888       40,793          
            Solaray, LLC (7) (15) (19)     First Lien Senior Secured Loan - Delayed Draw       L+ 6.00%       7.85 %     9/11/2023     $ 14,573       14,573       14,501          
            Solaray, LLC (3) (15) (19)     First Lien Senior Secured Loan - Revolver       L+ 4.50%       6.40 %     9/9/2022     $ 11,674       11,629       11,674          
            Solaray, LLC (7) (15) (19)     First Lien Senior Secured Loan       L+ 6.00%       7.82 %     9/11/2023     $ 42,610       42,610       42,397          
            WU Holdco, Inc. (3) (7) (15) (19)     First Lien Senior Secured Loan - Delayed Draw       L+ 5.50%       7.44 %     3/26/2026     $ 832       778       832          
            WU Holdco, Inc. (3) (5) (18) (19)     First Lien Senior Secured Loan - Revolver       -       -       3/26/2025     $ -       (56 )     -          
            WU Holdco, Inc. (7) (15) (19)     First Lien Senior Secured Loan       L+ 5.50%       7.44 %     3/26/2026     $ 39,705       38,923       39,705          
                                                  Consumer Goods: Non-Durable Total     $ 195,602     $ 196,653       19.3 %
                                                                             
      Containers, Packaging, & Glass     Automate Intermediate Holdings II S.à r.l. (6) (18) (19) (21)     Second Lien Senior Secured Loan       L+ 7.75%       9.55 %     7/22/2027     $ 11,870       11,637       11,633          
                                                  Containers, Packaging, & Glass Total     $ 11,637     $ 11,633       1.1 %
                                                                             
      Energy: Electricity     Infinite Electronics International Inc. (12) (18) (19) (29)     First Lien Senior Secured Loan       L+ 4.00%       5.80 %     7/2/2025     $ 19,752       19,739       19,654          
            Infinite Electronics International Inc. (18) (19) (21)     Second Lien Senior Secured Loan       L+ 8.00%       9.80 %     7/2/2026     $ 2,480       2,433       2,480          
                                                  Energy: Electricity Total     $ 22,172     $ 22,134       2.2 %
                                                                             
      Energy: Oil & Gas     Amspec Services, Inc. (3) (15) (19)     First Lien Senior Secured Loan - Revolver       P+ 3.75%       9.00 %     7/2/2024     $ 2,125       2,071       2,125          
            Amspec Services, Inc. (7) (15) (19)     First Lien Senior Secured Loan       L+ 6.25%       8.19 %     7/2/2024     $ 44,100       43,605       44,100          
            Blackbrush Oil & Gas, L.P. (12) (15) (19) (21) (29)     First Lien Senior Secured Loan       L+ 8.00%       9.89 %     2/9/2024     $ 32,075       31,588       31,754          
                                                  Energy: Oil & Gas Total     $ 77,264     $ 77,979       7.7 %
                                                                             
      Environmental Industries     Adler & Allan Group Limited (6) (17) (19) (21) (22)     First Lien Last Out       GBP LIBOR+ 8.25% (2% PIK)       11.04 %     9/30/2022     £ 13,279       16,814       17,612          
                                                  Environmental Industries Total     $ 16,814     $ 17,612       1.7 %
                                                                             
      FIRE: Insurance     Ivy Finco Limited (6) (18) (19) (21)     First Lien Senior Secured Loan       GBP LIBOR+ 5.00%       5.70 %     5/19/2025     £ 7,217       8,950       9,381          
            Ivy Finco Limited (3) (6) (18) (19)     First Lien Senior Secured Loan       GBP LIBOR+ 5.00%       5.70 %     5/19/2025     £ 2,691       3,194       3,382          
            Margaux Acquisition Inc. (3) (7) (15) (19)     First Lien Senior Secured Loan - Delayed Draw       L+ 6.00%       8.10 %     12/19/2024     $ 2,186       2,020       2,186          
            Margaux Acquisition, Inc. (3) (5) (15) (19)     First Lien Senior Secured Loan - Revolver       -       -       12/19/2024     $ -       (48 )     -          
            Margaux Acquisition Inc. (7) (15) (19) (29)     First Lien Senior Secured Loan       L+ 5.50%       7.60 %     12/19/2024     $ 28,916       28,392       28,916          
            Margaux UK Finance Limited (3) (5) (6) (15) (19)     First Lien Senior Secured Loan - Revolver       -       -       12/19/2024     £ -       (10 )     -          
            Margaux UK Finance Limited (6) (7) (15) (19)     First Lien Senior Secured Loan       GBP LIBOR+ 5.50%       6.50 %     12/19/2024     £ 7,706       9,869       10,221          
                                                  FIRE: Insurance Total     $ 52,367     $ 54,086       5.3 %
                                                                             
      FIRE: Real Estate     Spectre (Carrisbrook House) Limited (6) (15) (19)     First Lien Senior Secured Loan       EURIBOR+ 7.50%       8.50 %     8/9/2021     9,300       10,786       10,443          
                                                  FIRE: Real Estate Total     $ 10,786     $ 10,443       1.0 %
                                                                             
      Forest Products & Paper     Solenis International LLC (18) (21)     Second Lien Senior Secured Loan       L+ 8.50%       10.41 %     6/26/2026     $ 10,601       10,301       9,700          
                                                  Forest Products & Paper Total     $ 10,301     $ 9,700       1.0 %
                                                                             
      Healthcare & Pharmaceuticals     CB Titan Holdings, Inc. (14) (19) (25)     Preferred equity       -       -       -       1,953       1,953       3,378          
            Clarkson Eyecare, LLC (12) (15) (19) (21) (29)     First Lien Senior Secured Loan       L+ 6.25%       8.05 %     4/2/2021     $ 23,118       22,747       23,118          
            Clarkson Eyecare, LLC (12) (15) (19) (21) (29)     First Lien Senior Secured Loan       L+ 6.25%       8.05 %     4/2/2021     $ 15,284       15,031       15,284          
            Clinical Innovations, LLC (3) (15) (19) (22)     First Lien Last Out - Revolver       L+ 5.50%       7.21 %     10/17/2022     $ 772       757       772          
            Clinical Innovations, LLC (12) (15) (19) (22) (29)     First Lien Last Out       L+ 5.50%       7.30 %     10/17/2023     $ 10,916       10,744       10,916          
            Clinical Innovations (12) (15) (19) (29)     First Lien Senior Secured Loan       L+ 5.50%       7.30 %     10/17/2023     $ 511       500       511          
            CPS Group Holdings, Inc. (3) (5) (15) (19)     First Lien Senior Secured Loan - Revolver       -       -       3/3/2025     $ -       (64 )     -          
            CPS Group Holdings, Inc. (7) (15) (19)     First Lien Senior Secured Loan       L+ 5.25%       7.19 %     3/3/2025     $ 55,905       55,390       55,905          
            Datix Bidco Limited (3) (5) (6) (18) (19)     First Lien Senior Secured Loan - Revolver       -       -       10/28/2024     £ -       (21 )     -          
            Datix Bidco Limited (6) (18) (19) (21)     Second Lien Senior Secured Loan       GBP LIBOR+ 7.75%       8.63 %     4/27/2026     £ 12,134       16,314       16,093          
            Datix Bidco Limited (6) (18) (19) (21)     First Lien Senior Secured Loan       BBSW+ 4.50%       5.50 %     4/28/2025       AUD4,212       3,205       2,958          
            Golden State Buyer, Inc. (12) (18) (19) (29)     First Lien Senior Secured Loan       L+ 4.75%       6.55 %     6/22/2026     $ 15,230       15,084       14,887          
            Great Expressions Dental Centers PC (3) (15) (19) (34)     First Lien Senior Secured Loan - Revolver       L+ 4.75% (0.5% PIK)       7.22 %     9/28/2022     $ 1,017       1,009       789          
            Great Expressions Dental Centers PC (12) (15) (19)     First Lien Senior Secured Loan       L+ 5.25%       7.17 %     9/28/2023     $ 7,609       7,540       6,125          
            Island Medical Management Holdings, LLC (15) (19) (29)     First Lien Senior Secured Loan       L+ 6.50%       8.30 %     9/1/2022     $ 9,160       9,071       8,428          
            Medical Depot Holdings, Inc. (12) (15) (21)     First Lien Senior Secured Loan       L+ 7.50%       9.44 %     1/3/2023     $ 16,189       14,935       12,293          
            Mendel Bidco, Inc. (18) (19) (21)     First Lien Senior Secured Loan       EURIBOR+ 4.50%       4.50 %     6/17/2027     10,033       11,134       10,985          
            Mendel Bidco, Inc. (12) (18) (19) (29)     First Lien Senior Secured Loan       L+ 4.50%       6.45 %     6/17/2027     $ 19,966       19,492       19,467          
            Mertus 522. GmbH (3) (6) (18) (19)     First Lien Senior Secured Loan - Delayed Draw       EURIBOR+ 5.75%       5.75 %     5/28/2026     875       602       946          
            Mertus 522. GmbH (6) (18) (19) (21)     First Lien Senior Secured Loan       EURIBOR+ 5.75%       5.75 %     5/28/2026     22,468       24,540       25,167          
            TecoStar Holdings, Inc. (12) (15) (19) (21)     Second Lien Senior Secured Loan       L+ 8.50%       10.24 %     11/1/2024     $ 9,472       9,282       9,472          
            U.S. Anesthesia Partners, Inc. (12) (15) (19) (21)     Second Lien Senior Secured Loan       L+ 7.25%       9.05 %     6/23/2025     $ 16,520       16,334       16,520          
                                                  Healthcare & Pharmaceuticals Total     $ 255,579     $ 254,014       24.9 %
                                                                             
      High Tech Industries     AMI US Holdings Inc. (3) (6) (15) (19)     First Lien Senior Secured Loan - Revolver       L+ 5.50%       7.25 %     4/1/2024     $ 767       737       767          
            AMI US Holdings Inc. (6) (12) (15) (19) (29)     First Lien Senior Secured Loan       L+ 5.50%       7.19 %     4/1/2025     $ 13,157       12,916       13,157          
            Appriss Holdings, Inc. (3) (5) (18) (19)     First Lien Senior Secured Loan - Revolver       -       -       5/30/2025     $ -       (61 )     -          
            Appriss Holdings, Inc. (7) (18) (19)     First Lien Senior Secured Loan       L+ 5.50%       7.44 %     5/29/2026     $ 48,876       48,272       48,876          
            CB Nike IntermediateCo Ltd (3) (6) (15) (19)     First Lien Senior Secured Loan - Revolver       L+ 5.00%       6.93 %     10/31/2025     $ 1,550       1,464       1,461          
            CB Nike IntermediateCo Ltd (6) (12) (15) (19) (21) (29)     First Lien Senior Secured Loan       L+ 5.00%       6.93 %     10/31/2025     $ 35,422       34,729       34,714          
            CMI Marketing Inc (3) (5) (15) (19)     First Lien Senior Secured Loan - Revolver       -       -       5/24/2023     $ -       (14 )     -          
            CMI Marketing Inc (12) (15) (19) (29)     First Lien Senior Secured Loan       L+ 4.50%       6.30 %     5/24/2024     $ 15,256       15,136       15,256          
            Drilling Info Holdings, Inc (12) (18) (21) (29)     First Lien Senior Secured Loan       L+ 4.25%       6.05 %     7/30/2025     $ 22,609       22,532       22,496          
            Element Buyer, Inc. (3) (7) (15) (19)     First Lien Senior Secured Loan - Delayed Draw       L+ 5.25%       7.05 %     7/18/2025     $ 3,366       3,466       3,366          
            Element Buyer, Inc. (3) (15) (19)     First Lien Senior Secured Loan - Revolver       L+ 5.25%       7.05 %     7/19/2024     $ 1,417       1,368       1,417          
            Element Buyer, Inc. (7) (15) (19)     First Lien Senior Secured Loan       L+ 5.25%       7.05 %     7/18/2025     $ 37,772       38,104       37,772          
            Elo Touch Solutions, Inc. (18) (29)     First Lien Senior Secured Loan       L+ 6.50%       8.24 %     12/15/2025     $ 3,261       3,168       3,244          
            Everest Bidco (6) (15) (19) (21)     Second Lien Senior Secured Loan       GBP LIBOR+ 7.50%       8.50 %     7/3/2026     £ 10,216       13,098       13,076          
            MeridianLink, Inc. (15) (29)     First Lien Senior Secured Loan       L+ 4.00%       5.80 %     5/30/2025     $ 1,825       1,804       1,798          
            Netsmart Technologies, Inc. (15) (19) (21)     Second Lien Senior Secured Loan       L+ 7.50%       9.30 %     10/19/2023     $ 2,749       2,749       2,735          
            nThrive, Inc. (15) (19) (21)     Second Lien Senior Secured Loan       L+ 9.75%       11.55 %     4/20/2023     $ 8,000       7,986       7,080          
            Park Place Technologies (15) (21)     Second Lien Senior Secured Loan       L+ 8.00%       9.80 %     3/30/2026     $ 6,733       6,688       6,682          
            Symplr Software, Inc. (3) (18) (19)     First Lien Senior Secured Loan - Revolver       L+ 6.00%       7.95 %     11/30/2023     $ 4,499       4,445       4,499          
            Symplr Software, Inc. (7) (18) (19)     First Lien Senior Secured Loan       L+ 6.00%       7.94 %     11/28/2025     $ 61,060       60,211       61,060          
            Utimaco, Inc. (6) (18) (19) (21) (29)     First Lien Senior Secured Loan       L+ 4.50%       6.42 %     8/9/2027     $ 14,849       14,490       14,775          
            Ventiv Topco, Inc. (14) (19) (25)     Equity Interest       -       -       -       28       2,833       2,886          
            Ventiv Holdco, Inc. (2) (3) (5) (18) (19)     First Lien Senior Secured Loan - Revolver       L+ 5.50%       -       9/3/2025     $ -       (49 )     (17 )        
            Ventiv Holdco, Inc. (7) (15) (19)     First Lien Senior Secured Loan       L+ 5.50%       7.44 %     9/3/2025     $ 24,299       23,948       24,178          
            VPARK BIDCO AB (6) (19) (21)     First Lien Senior Secured Loan       CIBOR+ 4.00%       4.75 %     3/10/2025       DKK56,999       9,160       8,566          
            VPARK BIDCO AB (6) (16) (19) (21)     First Lien Senior Secured Loan       NIBOR+ 4.00%       5.86 %     3/10/2025       NOK74,020       9,197       8,430          
            Zywave, Inc. (3) (15) (19)     First Lien Senior Secured Loan - Revolver       L+ 5.00%       6.80 %     11/17/2022     $ 428       419       429          
            Zywave, Inc. (12) (15) (19) (29)     First Lien Senior Secured Loan       L+ 5.00%       6.93 %     11/17/2022     $ 17,370       17,290       17,370          
                                                  High Tech Industries Total     $ 356,086     $ 356,073       35.0 %
                                                                             
      Hotel, Gaming & Leisure     Aimbridge Acquisition Co., Inc. (12) (18) (19) (21) (29)     Second Lien Senior Secured Loan       L+ 7.50%       9.19 %     2/1/2027     $ 20,193       19,649       19,688          
            Captain D’s LLC (3) (15) (19) (35)     First Lien Senior Secured Loan - Revolver       P+ 3.50%       7.45 %     12/15/2023     $ 1,285       1,273       1,266          
            Captain D’s LLC (12) (15) (19) (29)     First Lien Senior Secured Loan       L+ 4.50%       6.44 %     12/15/2023     $ 13,037       12,940       12,907          
            Quidditch Acquisition, Inc. (12) (15) (19) (29)     First Lien Senior Secured Loan       L+ 7.00%       8.80 %     3/21/2025     $ 19,023       19,004       19,213          
                                                  Hotel, Gaming & Leisure Total     $ 52,866     $ 53,074       5.2 %
                                                                             
      Media: Advertising, Printing & Publishing     A-L Parent LLC (12) (15) (21)     Second Lien Senior Secured Loan       L+ 7.25%       9.05 %     12/2/2024     $ 4,050       4,020       3,594          
            Ansira Holdings, Inc. (3) (7) (15) (19)     First Lien Senior Secured Loan - Delayed Draw       L+ 5.75%       7.51 %     12/20/2022     $ 2,936       2,926       2,458          
            Ansira Holdings, Inc. (15) (19) (24)     First Lien Senior Secured Loan - Revolver       L+ 5.00%       7.22 %     12/20/2022     $ 7,084       7,084       7,084          
            Ansira Holdings, Inc. (7) (15) (19)     First Lien Senior Secured Loan       L+ 5.75%       7.55 %     12/20/2022     $ 35,877       35,791       32,020          
            Cruz Bay Publishing, Inc. (3) (15) (19)     First Lien Senior Secured Loan - Delayed Draw       P+ 5.00%       9.75 %     2/28/2020     $ 876       865       876          
            Cruz Bay Publishing (3) (15) (19)     First Lien Senior Secured Loan - Revolver       P+ 3.00%       7.75 %     2/28/2020     $ 2,298       2,298       2,298          
            Cruz Bay Publishing, Inc. (7) (15) (19) (27)     First Lien Senior Secured Loan       L+ 5.75%       7.70 %     2/28/2020     $ 4,824       4,824       4,824          
            Cruz Bay Publishing, Inc. (7) (15) (19)     First Lien Senior Secured Loan       L+ 6.75%       8.46 %     2/28/2020     $ 1,611       1,611       1,611          
                                                  Media: Advertising, Printing & Publishing Total     $ 59,419     $ 54,765       5.4 %
                                                                             
      Media: Broadcasting & Subscription     Vital Holdco Limited (6) (12) (15) (19) (21) (29)     First Lien Senior Secured Loan       L+ 5.25%       7.05 %     5/29/2026     $ 35,357       34,552       35,357          
            Vital Holdco Limited (6) (18) (19) (21)     First Lien Senior Secured Loan       EURIBOR+ 5.25%       5.25 %     5/29/2026     7,917       8,613       8,890          
                                                  Media: Broadcasting & Subscription Total     $ 43,165     $ 44,247       4.3 %
                                                                             
      Media: Diversified & Production     Efficient Collaborative Retail Marketing Company, LLC (3) (15) (19)     First Lien Senior Secured Loan - Revolver       -       -       6/15/2022     $ -       -       -          
            Efficient Collaborative Retail Marketing Company, LLC (7) (15) (19)     First Lien Senior Secured Loan       L+ 6.75%       8.69 %     6/15/2022     $ 15,095       15,185       15,095          
            Efficient Collaborative Retail Marketing Company, LLC (7) (15) (19)     First Lien Senior Secured Loan       L+ 6.75%       8.69 %     6/15/2022     $ 9,788       9,847       9,788          
            International Entertainment Investments Limited (6) (18) (19) (21)     First Lien Senior Secured Loan       GBP LIBOR+ 4.00%       4.86 %     5/31/2023     £ 8,686       10,638       11,520          
                                                  Media: Diversified & Production Total     $ 35,670     $ 36,403       3.6 %
                                                                             
      Retail     Batteries Plus Holding Corporation (3) (15) (19)     First Lien Senior Secured Loan - Revolver       -       -       7/6/2022     $ -       -       -          
            Batteries Plus Holding Corporation (7) (15) (19)     First Lien Senior Secured Loan       L+ 6.75%       8.55 %     7/6/2022     $ 28,827       28,827       28,827          
            Calceus Acquisition, Inc. (12) (18) (29)     First Lien Senior Secured Loan       L+ 5.50%       7.30 %     2/12/2025     $ 5,997       5,947       6,000          
                                                  Retail Total     $ 34,774     $ 34,827       3.4 %
                                                                             
      Services: Business     AMCP Clean Acquisition Company, LLC (12) (18) (29)     First Lien Senior Secured Loan - Delayed Draw       L+ 4.25%       6.19 %     6/16/2025     $ 3,894       3,886       3,806          
            AMCP Clean Acquisition Company, LLC (12) (18) (29)     First Lien Senior Secured Loan       L+ 4.25%       6.19 %     6/16/2025     $ 16,093       16,062       15,731          
            Comet Bidco Limited (6) (18) (21)     First Lien Senior Secured Loan       GBP LIBOR+ 5.00%       5.70 %     9/30/2024     £ 7,362       9,488       9,605          
            Elevator Holdco Inc. (14) (19) (25)     Equity Interest       -       -       -       2       2,448       2,448          
            Hightower Holding, LLC (2) (3) (5) (15) (19)     First Lien Senior Secured Loan - Delayed Draw       -       -       1/31/2025     $ -       (15 )     (17 )        
            Hightower Holding, LLC (12) (15) (19) (21) (29) (31)     First Lien Senior Secured Loan       L+ 5.00%       6.80 %     1/31/2025     $ 34,589       34,432       34,503          
            SumUp Holdings Luxembourg S.à.r.l. (6) (15) (19) (21)     First Lien Senior Secured Loan       EURIBOR+ 8.00%       9.00 %     8/1/2024     15,957       17,658       17,873          
            SumUp Holdings Luxembourg S.à.r.l. (3) (6) (15) (19) (21)     First Lien Senior Secured Loan       EURIBOR+ 8.00%       9.00 %     8/1/2024     7,480       7,823       8,351          
            TEI Holdings Inc. (3) (15) (19)     First Lien Senior Secured Loan - Revolver       L+ 6.00%       7.83 %     12/23/2025     $ 1,509       1,464       1,464          
            TEI Holdings Inc. (7) (12) (15) (19) (29)     First Lien Senior Secured Loan       L+ 6.00%       7.93 %     12/23/2026     $ 49,050       48,340       48,559          
            Valet Waste Holdings, Inc (12) (18) (21) (29)     First Lien Senior Secured Loan       L+ 3.75%       5.55 %     9/29/2025     $ 23,747       23,700       23,539          
                                                  Services: Business Total     $ 165,286     $ 165,862       16.3 %
                                                                             
      Services: Consumer     Pearl Intermediate Parent LLC (18) (29)     Second Lien Senior Secured Loan       L+ 6.25%       8.05 %     2/13/2026     $ 2,571       2,587       2,545          
            Surrey Bidco Limited (6) (17) (19) (21)     First Lien Senior Secured Loan       GBP LIBOR+ 6.00%       6.78 %     5/11/2026     £ 5,000       6,138       6,466          
            Trafalgar Bidco Limited (6) (18) (19) (21)     First Lien Senior Secured Loan       GBP LIBOR+ 5.00%       5.70 %     9/11/2024     £ 6,011       7,727       7,733          
            Zeppelin BidCo Pty Limited (6) (18) (19) (21)     First Lien Senior Secured Loan       BBSY+ 6.00%       6.90 %     6/28/2024       AUD20,621       14,006       14,050          
                                                  Services: Consumer Total     $ 30,458     $ 30,794       3.0 %
                                                                             
      Telecommunications     Conterra Ultra Broadband Holdings, Inc. (18) (29)     First Lien Senior Secured Loan       L+ 4.50%       6.30 %     4/30/2026     $ 6,451       6,420       6,448          
            Horizon Telcom, Inc. (3) (12) (15) (19) (29)     First Lien Senior Secured Loan - Delayed Draw       L+ 4.75%       6.46 %     6/15/2023     $ 481       465       464          
            Horizon Telcom, Inc. (2) (3) (5) (15) (19)     First Lien Senior Secured Loan - Revolver       -       -       6/15/2023     $ -       (2 )     (1 )        
            Horizon Telcom, Inc. (12) (15) (19) (29)     First Lien Senior Secured Loan       L+ 4.75%       6.44 %     6/15/2023     $ 13,730       13,577       13,592          
            Masergy Holdings, Inc. (15) (29)     Second Lien Senior Secured Loan       L+ 7.50%       9.46 %     12/16/2024     $ 857       863       840          
                                                  Telecommunications Total     $ 21,323     $ 21,343       2.1 %
                                                                             
      Transportation: Cargo     A&R Logistics, Inc. (3) (15) (19)     First Lien Senior Secured Loan - Revolver       L+ 5.75%       7.85 %     5/5/2025     $ 1,053       940       1,053          
            A&R Logistics, Inc. (7) (12) (15) (19) (29)     First Lien Senior Secured Loan       L+ 5.75%       7.85 %     5/5/2025     $ 43,976       43,130       43,976          
            A&R Logistics, Inc. (7) (15) (19)     First Lien Senior Secured Loan       L+ 5.75%       7.85 %     5/5/2025     $ 2,473       2,424       2,473          
            A&R Logistics, Inc. (7) (15) (19)     First Lien Senior Secured Loan       L+ 5.75%       7.66 %     5/5/2025     $ 6,096       6,004       6,096          
            ARL Holdings, LLC. (14) (19) (25)     Equity Interest       -       -       -       -       445       448          
            ARL Holdings, LLC. (14) (19) (25)     Equity Interest       -       -       -       9       9       8          
            ENC Holding Corporation (12) (18) (29)     First Lien Senior Secured Loan       L+ 4.00%       5.94 %     5/30/2025     $ 10,272       10,259       10,041          
            Grammer Investment Holdings LLC (14) (19) (25)     Equity Interest       -       -       -       1,011       1,011       1,021          
            Grammer Investment Holdings LLC (19) (25)     Preferred Equity       10% PIK       10.00 %     -       6       646       679          
            Grammer Investment Holdings LLC (14) (19) (25)     Warrants       -       -       -       122       -       122          
            Grammer Purchaser, Inc. (3) (15) (19)     First Lien Senior Secured Loan - Revolver       L+ 4.50%       6.30 %     9/30/2024     $ 52       56       42          
            Grammer Purchaser, Inc. (12) (15) (19) (29)     First Lien Senior Secured Loan - Revolver       L+ 4.50%       6.31 %     9/30/2024     $ 10,206       10,043       10,104          
            Omni Logistics, LLC (15) (19)     Subordinated Debt       L+ 11.50%       13.30 %     1/19/2024     $ 15,000       14,752       15,000          
            PS HoldCo, LLC (12) (15) (29)     First Lien Senior Secured Loan       L+ 4.75%       6.55 %     3/13/2025     $ 23,277       23,265       22,084          
            Toro Private Investments II, L.P. (6) (14) (19) (25)     Equity Interest       -       -       -       3,090       3,090       3,090          
                                                  Transportation: Cargo Total     $ 116,074     $ 116,237       11.4 %
                                                                             
      Transportation: Consumer     Direct Travel, Inc. (3) (7) (15) (19)     First Lien Senior Secured Loan - Delayed Draw       L+ 6.50%       8.44 %     12/1/2021     $ 1,471       1,382       1,471          
            Direct Travel, Inc. (7) (15) (19)     First Lien Senior Secured Loan - Delayed Draw       L+ 6.50%       8.45 %     12/1/2021     $ 2,920       2,920       2,920          
            Direct Travel, Inc. (3) (15) (19)     First Lien Senior Secured Loan - Revolver       -       -       12/1/2021     $ -       -       -          
            Direct Travel, Inc. (7) (15) (19) (23)     First Lien Senior Secured Loan       L+ 6.50%       8.40 %     12/1/2021     $ 49,667       49,667       49,667          
            Toro Private Holdings III, Ltd (6) (12) (18) (29)     Second Lien Senior Secured Loan       L+ 9.00%       10.94 %     5/28/2027     $ 8,998       8,504       7,604          
                                                  Transportation: Consumer Total     $ 62,473     $ 61,662       6.1 %
                                                                             
      Utilities: Electric     CSVC Acquisition Corp     Corporate Bond       -       7.75 %     6/15/2025     $ 13,478       12,598       8,126          
                                                  Utilities: Electric Total     $ 12,598     $ 8,126       0.8 %
                                                                             
      Wholesale     Abracon Group Holding, LLC. (14) (19) (25)     Equity Interest       -       -       -       2       1,833       1,294          
            Abracon Group Holding, LLC. (2) (3) (5) (15) (19)     First Lien Senior Secured Loan - Revolver       -       -       7/18/2024     $ -       (32 )     (28 )        
            Abracon Group Holding, LLC. (7) (13) (15) (19)     First Lien Senior Secured Loan       L+ 5.75%       7.70 %     7/18/2024     $ 36,094       35,929       35,733          
            Aramsco, Inc. (3) (18) (19)     First Lien Senior Secured Loan - Revolver       L+ 5.25%       7.05 %     8/28/2024     $ 621       579       553          
            Aramsco, Inc. (7) (18) (19)     First Lien Senior Secured Loan       L+ 5.25%       7.05 %     8/28/2024     $ 24,288       23,902       23,802          
            Armor Group, LP (14) (19) (25)     Equity Interest       -       -       -       10       1,012       1,085          
            PetroChoice Holdings, Inc. (12) (15) (19) (29)     First Lien Senior Secured Loan       L+ 5.00%       6.93 %     8/19/2022     $ 9,948       9,867       9,500          
            PetroChoice Holdings, Inc. (12) (15) (19) (29)     First Lien Senior Secured Loan       L+ 5.00%       6.93 %     8/19/2022     $ 6,582       6,452       6,286          
                                                  Wholesale Total     $ 79,542     $ 78,225       7.7 %
                                                  Non-Controlled/Non-Affiliate Investments Total     $ 2,416,854     $ 2,403,250       236.0 %
                                                                             
Non-Controlled/Affiliate Investments                                                                            
      Beverage, Food & Tobacco     ADT Pizza, LLC (10) (14) (19) (25)     Equity Interest       -       -       -       6,720       6,720       6,720          
                                                  Beverage, Food & Tobacco Total     $ 6,720     $ 6,720       0.6 %
                                                  Non-Controlled/Affiliate Investments Total     $ 6,720     $ 6,720       0.6 %
                                                                             
Controlled Affiliate Investments                                                                            
      Aerospace & Defense     ACC Holdco, LLC (10) (11) (19) (25)     Preferred equity       -       16.00 %     -       10,828       10,824       10,828          
            Air Comm Corporation LLC (10) (11) (12) (18) (19) (21) (29)     First Lien Senior Secured Loan       L+ 6.50%       8.44 %     6/30/2025     $ 27,298       26,516       27,161          
            BCC Jetstream Holdings Aviation (Off I), LLC (6) (10) (11) (19) (20) (25)     Equity Interest       -       -       -       11,863       11,863       13,091          
            BCC Jetstream Holdings Aviation (On II), LLC (10) (11) (19) (20) (25)     Equity Interest       -       -       -       1,116       1,116       1,869          
            BCC Jetstream Holdings Aviation (On II), LLC (10) (11) (19) (20)     First Lien Senior Secured Loan       -       10.00 %     6/2/2022     $ 6,363       6,363       6,363          
            Gale Aviation (Offshore) Co (6) (10) (11) (19) (25)     Equity Interest       -       -       -       57,007       57,007       57,773          
                                                  Aerospace & Defense Total     $ 113,689     $ 117,085       11.5 %
                                                  Controlled Affiliate Investments Total     $ 113,689     $ 117,085       11.5 %
                                                  Investments Total     $ 2,537,263     $ 2,527,055       248.1 %
Cash Equivalents                                                                            
      Cash Equivalents     Goldman Sachs Financial Square Government Fund Institutional Share Class (36)     Cash Equivalents       -       1.64 %     -     $ 66,965       66,965       66,965          
                                                  Cash Equivalents Total     $ 66,965     $ 66,965       6.6 %
                                                  Investments and Cash Equivalents Total     $ 2,604,228     $ 2,594,020       254.7 %

  

9

 

 

Forward Foreign Currency Exchange Contracts

 

Currency Purchased  Currency Sold  Counterparty  Settlement Date  Unrealized
Appreciation
(Depreciation) (8)
 
US DOLLARS 8,720  POUND STERLING 6,400  Bank of New York Mellon  9/21/2020  $288 
POUND STERLING 6,220  US DOLLARS 8,192  Bank of New York Mellon  9/21/2020   - 
US DOLLARS 12,177  EURO 10,370  Bank of New York Mellon  1/10/2020   552 
EURO 3,270  US DOLLARS 2,930  Bank of New York Mellon  1/10/2020   - 
US DOLLARS 11,874  EURO 10,300  Bank of New York Mellon  6/15/2020   194 
US DOLLARS 412  POUND STERLING 310  Citibank  9/23/2020   (1)
US DOLLARS 25,257  POUND STERLING 19,410  Goldman Sachs  1/10/2020   (465)
US DOLLARS 68,701  POUND STERLING 53,430  Goldman Sachs  6/15/2020   (2,399)
US DOLLARS 83,784  EURO 72,370  Goldman Sachs  6/15/2020   1,716 
US DOLLARS 16,897  AUSTRALIAN DOLLARS 24,180  Goldman Sachs  6/15/2020   (167)
US DOLLARS 8,885  DANISH KRONE 57,000  Goldman Sachs  6/15/2020   225 
US DOLLARS 8,257  NORWEGIAN KRONE 74,020  Goldman Sachs  3/20/2020   (161)
            $(218)

 

(1) The investments bear interest at a rate that may be determined by reference to the London Interbank Offered Rate (“LIBOR” or “L”), the Euro Interbank Offered Rate (“EURIBOR” or “E”), British Pound Sterling LIBOR Rate (“GBP LIBOR”), the Norwegian Interbank Offered Rate (“NIBOR” or “N”), the Copenhagen Interbank Offered Rate (“CIBOR” or “C”), the Bank Bill Swap Rate (“BBSW”), the Bank Bill Swap Bid Rate (“BBSY”), or the Prime Rate (“Prime” or “P”) and which reset daily, monthly, quarterly or semiannually. Investments or a portion thereof may bear Payment-in-Kind (“PIK”). For each, the Company has provided the PIK or the spread over LIBOR, EURIBOR, GBP LIBOR, NIBOR, CIBOR, BBSW, BBSY, or Prime and the current weighted average interest rate in effect at December 31, 2019. Certain investments are subject to a LIBOR, EURIBOR, GBP LIBOR, NIBOR, CIBOR, BBSW, or Prime interest rate floor.
(2) The negative fair value is the result of the capitalized discount on the loan or the unfunded commitment being valued below par.
(3) Position or portion thereof is an unfunded loan commitment, and no interest is being earned on the unfunded portion. The investment may be subject to an unused/letter of credit facility fee.
(4) Percentages are based on the Company’s net assets of $1,018,400 as of December 31, 2019.
(5) The negative amortized cost is the result of the capitalized discount being greater than the principal amount outstanding on the loan.
(6) The investment is not a qualifying asset under Section 55(a) of the Investment Company Act of 1940. The Company may not acquire any non-qualifying asset unless, at the time of acquisition, qualifying assets represent at least 70% of the Company’s total assets. As of December 31, 2019, non-qualifying assets totaled 15.6% of the Company’s total assets.
(7) Assets or a portion thereof are pledged as collateral for the BCSF Complete Financing Solution LLC. See Note 6 “Debt”.
(8) Unrealized appreciation/(depreciation) on forward currency exchange contracts.
(9) The principal amount (par amount) for all debt securities is denominated in U.S. dollars, unless otherwise noted. £ represents Pound Sterling, € represents Euro, NOK represents Norwegian krone, AUD represents Australian and DKK represents Kroner.
(10) As defined in the 1940 Act, the Company is deemed to be an “Affiliated Investment” of the Company as the Company owns 5% or more of the portfolio company’s securities.
(11) As defined in the 1940 Act, the Company is deemed to “Control” this portfolio company as the Company either owns more than 25% of the portfolio company’s outstanding voting securities or has the power to exercise control over management or policies of such portfolio company.
(12) Assets or a portion thereof are pledged as collateral for the 2018-1 Issuer. See Note 6 “Debt”.
(13) $91 of the total par amount for this security is at P+ 4.75%.
(14) Non-Income Producing.
(15) Loan includes interest rate floor of 1.00%.
(16) Loan includes interest rate floor of 0.75%.
(17) Loan includes interest rate floor of 0.50%.
(18) Loan includes interest rate floor of 0.00%.
(19) Security valued using unobservable inputs (Level 3).
(20) The Company holds non-controlling, affiliate interest in an aircraft-owning special purpose vehicle through this investment.
(21) Assets or a portion thereof are pledged as collateral for the BCSF Revolving Credit Facility. See Note 6 “Debt”.
(22) The Company generally earns a higher interest rate on the “last out” tranche of debt, to the extent the debt has been allocated to “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.
(23) $127 of the total par amount for this security is at P+ 5.50%.

 

10

 

 

(24) $1,643 of the total par amount for this security is at P+ 4.00%.
(25) Security exempt from registration under the Securities Act of 1933 (the “Securities Act”), and may be deemed to be “restricted securities” under the Securities Act. As of December 31, 2019, the aggregate fair value of these securities is $123,733 or 12.15% of the Company’s net assets. The acquisition dates of the restricted securities are as follows:

 

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

 

(26) $4,606 of the total par amount for this security is at P+ 4.00%.
(27) $71 of the total par amount for this security is at P+ 4.75%.
(28) Assets or a portion thereof are pledged as collateral for the BCSF Complete Financing Solution Holdco LLC. See Note 6 “Debt”.
(29) Assets or a portion thereof are pledged as collateral for the 2019-1 Issuer. See Note 6 “Debt”.
(30) $747 of the total par amount for this security is at P+ 4.75%.
(31) $87 of the total par amount for this security is at P+ 4.00%.
(32) Loan includes interest rate floor of 1.50%.
(33) Asset has been placed on non-accrual
(34) $350 of the total par amount for this security is at P+ 3.75%.
(35) $540 of the total par amount for this security is at L+ 4.50%
(36) Cash equivalents include $31,434 of restricted cash.

 

See Notes to Consolidated Financial Statements

 

11

 

 

BAIN CAPITAL SPECIALTY FINANCE, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(in thousands, except share and per share data)

 

Note 1. Organization

 

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

 

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

 

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

 

Our operations comprise only a single reportable segment.

 

Note 2. Summary of Significant Accounting Policies

 

Basis of Presentation

 

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

 

The information included in this Form 10-Q should be read in conjunction with the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019.

 

12

 

 

Basis of Consolidation

 

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

  

Use of Estimates

 

The preparation of the consolidated financial statements in conformity with US GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates and such differences could be material.

 

Valuation of Portfolio Investments

 

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

 

With respect to unquoted portfolio investments, the Company will value each investment considering, among other measures, discounted cash flow models, comparisons of financial ratios of peer companies that are public and other factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the Company will use the pricing indicated by the external event to corroborate and/or assist us in our valuation. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material.

 

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

 

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

 

13

 

  

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.

 

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

 

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

 

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

 

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

 

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

 

Securities Transactions, Revenue Recognition and Expenses

 

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

 

14

 

 

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

 

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

 

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

 

Expenses are recorded on an accrual basis.

 

Non-Accrual Loans

 

Loans or debt securities are placed on non-accrual status when there is reasonable doubt that principal or interest will be collected. Accrued interest generally is reversed when a loan or debt security is placed on non-accrual status. Interest payments received on non-accrual loans or debt securities may be recognized as income or applied to principal depending upon management’s judgment. Non-accrual loans and debt securities are restored to accrual status when past due principal and interest are paid and, in management’s judgment, principal and interest payments are likely to remain current. The Company may make exceptions to this treatment if a loan has sufficient collateral value and is in the process of collection. As of September 30, 2020 and December 31, 2019, one and two loans have been placed on non-accrual status, respectively.

 

Distributions

 

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

 

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

 

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

 

15

 

 

Dividend Reinvestment Plan

 

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

 

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

 

Offering Costs

 

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

 

Cash, Restricted Cash, and Cash Equivalents

 

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

 

Foreign Currency Translation

 

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

 

Forward Currency Exchange Contracts

 

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

 

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

 

16

 

 

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

 

Deferred Financing Costs and Debt Issuance Costs

 

The Company records costs related to issuance of revolving debt obligations as deferred financing costs. These costs are deferred and amortized using the straight-line method over the stated maturity life of the obligation. The Company records costs related to the issuance of term debt obligations as debt issuance costs. These costs are deferred and amortized using the effective interest method. These costs are presented as a reduction to the outstanding principal amount of the term debt obligations on the consolidated statements of assets and liabilities.

 

Income Taxes

 

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

 

The Company intends to comply with the applicable provisions of the Code pertaining to RICs and to make distributions of taxable income sufficient to relieve it from substantially all federal income taxes. Accordingly, no provision for income taxes is required in the consolidated financial statements. For income tax purposes, distributions made to stockholders are reported as ordinary income, capital gains, non-taxable return of capital, or a combination thereof. The tax character of distributions paid to stockholders through September 30, 2020 may include return of capital, however, the exact amount cannot be determined at this point. The final determination of the tax character of distributions will not be made until the Company files our tax return for the tax year ending December 31, 2020. The character of income and gains that the Company distributes is determined in accordance with income tax regulations that may differ from GAAP. BCSF I, LLC, BCSF II-C, LLC, BCSF CFSH, LLC, BCSF CFS, LLC, BCC Middle Market CLO 2018-1, LLC, and BCC Middle Market CLO 2019-1, LLC are disregarded entities for tax purposes and are consolidated with the tax return of the Company.

 

The Company evaluates tax positions taken or expected to be taken in the course of preparing its consolidated financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are reversed and recorded as a tax benefit or expense in the current year. All penalties and interest associated with income taxes, if any, are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, on-going analyses of tax laws, regulations and interpretations thereof. Management has analyzed the Company’s tax positions and has concluded that no liability for unrecognized tax benefits related to uncertain tax positions on returns to be filed by the Company for all open tax years should be recorded. The Company identifies its major tax jurisdiction as the United States, and the Company is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months. As of September 30, 2020, the tax years that remain subject to examination are from 2016 forward.

 

17

 

 

Recent Accounting Pronouncements

 

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848),” which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. ASU 2020-04 is effective for all entities as of March 12, 2020 through December 31, 2022. The expedients and exceptions provided by the amendments do not apply to contract modifications and hedging relationships entered into or evaluated after December 31, 2022, except for hedging transactions as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The Company is currently evaluating the impact of adopting ASU 2020-04 on the Company’s consolidated financial statements.

 

Note 3. Investments

 

The following table shows the composition of the investment portfolio, at amortized cost and fair value as of September 30, 2020 (with corresponding percentage of total portfolio investments):

 

    As of September 30, 2020  
    Amortized Cost     Percentage of
Total Portfolio
    Fair Value     Percentage of
Total Portfolio
 
First Lien Senior Secured Loans   $  2,180,248       86.2 %   $  2,128,629       86.5 %
First Lien Last Out Loans      16,936       0.7        17,223       0.7  
Second Lien Senior Secured Loans      166,137       6.5        155,542       6.3  
Subordinated Debt      14,787       0.6        15,000       0.6  
Equity Interests      120,836       4.8        107,373       4.4  
Preferred Equity      29,722       1.2        35,890       1.5  
Warrants           0.0             0.0  
Total   $ 2,528,666       100.0 %   $ 2,459,657       100.0 %

 

The following table shows the composition of the investment portfolio, at amortized cost and fair value as of December 31, 2019 (with corresponding percentage of total portfolio investments):

 

    As of December 31, 2019  
    Amortized Cost     Percentage of
Total Portfolio
    Fair Value     Percentage of
Total Portfolio
 
First Lien Senior Secured Loans   $ 2,167,932       85.4 %   $ 2,165,844       85.7 %
First Lien Last Out Loans     28,315       1.1       29,300       1.2  
Second Lien Senior Secured Loans     187,565       7.4       175,670       7.0  
Subordinated Debt     14,752       0.6       15,000       0.5  
Corporate Bonds     22,412       0.9       17,508       0.7  
Equity Interests     96,736       3.8       99,293       3.9  
Preferred Equity     19,551       0.8       24,318       1.0  
Warrants           0.0       122       0.0  
Total   $ 2,537,263       100.0 %   $ 2,527,055       100.0 %

 

The following table shows the composition of the investment portfolio by geographic region, at amortized cost and fair value as of September 30, 2020 (with corresponding percentage of total portfolio investments):

 

    As of September 30, 2020  
    Amortized Cost     Percentage of
Total Portfolio
    Fair Value     Percentage of
Total Portfolio
 
United States   $  2,092,558       82.8 %   $  2,034,586       82.7 %
United Kingdom      124,790       4.9        123,395       5.0  
Cayman Islands      81,107       3.2        66,406       2.7  
Luxembourg      51,735       2.0        53,974       2.2  
Germany      38,726       1.6        40,895       1.7  
Israel      34,474       1.4        35,157       1.4  
Ireland      20,752       0.8        21,567       0.9  
Jersey      17,792       0.7        18,119       0.7  
Sweden      18,404       0.7        16,888       0.7  
Australia      14,069       0.6        14,455       0.6  
France      13,127       0.5        13,124       0.5  
Netherlands      11,206       0.4        11,146       0.5  
Canada     9,926       0.4        9,945       0.4  
Total   $ 2,528,666       100.0 %   $ 2,459,657       100.0 %

 

18

 

 

The following table shows the composition of the investment portfolio by geographic region, at amortized cost and fair value as of December 31, 2019 (with corresponding percentage of total portfolio investments):

 

    As of December 31, 2019  
    Amortized Cost     Percentage of
Total Portfolio
    Fair Value     Percentage of
Total Portfolio
 
United States   $ 2,160,607       85.2 %   $ 2,146,830       85.0 %
United Kingdom     123,327       4.9       126,455       5.0  
Cayman Islands     57,007       2.2       57,773       2.3  
Luxembourg     45,622       1.8       45,461       1.8  
Israel     36,193       1.4       36,175       1.4  
Germany     25,142       1.0       26,113       1.0  
Ireland     20,486       0.8       20,485       0.8  
Sweden     18,357       0.7       16,996       0.7  
Australia     14,006       0.6       14,050       0.6  
France     13,098       0.5       13,076       0.5  
Jersey     12,144       0.5       12,763       0.5  
Netherlands     11,274       0.4       10,878       0.4  
Total   $ 2,537,263       100.0 %   $ 2,527,055       100.0 %

 

The following table shows the composition of the investment portfolio by industry, at amortized cost and fair value as of September 30, 2020 (with corresponding percentage of total portfolio investments):

 

    As of September 30, 2020  
    Amortized Cost     Percentage of
Total Portfolio
    Fair Value     Percentage of
Total Portfolio
 
High Tech Industries   $  384,197       15.2 %   $  380,859       15.5 %
Aerospace & Defense      329,736       13.0        298,542       12.1  
Healthcare & Pharmaceuticals      220,682       8.6        216,723       8.9  
Consumer Goods: Non-Durable      192,532       7.5        190,042       7.8  
Capital Equipment      179,015       7.1        181,509       7.4  
Services: Business      181,525       7.2        171,961       7.0  
Transportation: Cargo      114,130       4.5        112,991       4.6  
Construction & Building      103,806       4.1        102,724       4.2  
Wholesale      80,105       3.2        77,362       3.1  
Energy: Oil & Gas      69,545       2.8        70,011       2.8  
FIRE: Insurance (1)      66,507       2.6        66,644       2.7  
Automotive      65,802       2.6        65,097       2.6  
Consumer Goods: Durable      59,498       2.4        59,033       2.4  
Transportation: Consumer      65,686       2.6        55,897       2.3  
Hotel, Gaming & Leisure      52,674       2.1        49,861       2.0  
Media: Diversified & Production      47,830       1.9        46,909       1.9  
Media: Advertising, Printing & Publishing      52,153       2.1        46,292       1.9  
Media: Broadcasting & Subscription      43,266       1.7        44,638       1.8  
Services: Consumer      30,560       1.2        30,695       1.2  
Retail      28,672       1.1        28,672       1.2  
Chemicals, Plastics & Rubber      25,734       1.0        26,182       1.1  
Telecommunications      21,774       0.9        21,524       0.9  
Energy: Electricity      22,027       0.9        21,235       0.9  
Environmental Industries      16,936       0.7        17,223       0.7  
Beverage, Food & Tobacco      12,069       0.5        15,693       0.6  
FIRE: Finance (1)      15,289       0.6        15,399       0.6  
Banking      14,081       0.6        13,364       0.5  
Containers, Packaging, & Glass      11,653       0.5        11,752       0.5  
FIRE: Real Estate (1)      10,856       0.4        10,901       0.4  
Forest Products & Paper      10,326       0.4        9,922       0.4  
Total   $ 2,528,666       100.0 %   $ 2,459,657       100.0 %

 

 

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

 

19

 

 

The following table shows the composition of the investment portfolio by industry, at amortized cost and fair value as of December 31, 2019 (with corresponding percentage of total portfolio investments):

 

    As of December 31, 2019  
    Amortized Cost     Percentage of
Total Portfolio
    Fair Value     Percentage of
Total Portfolio
 
High Tech Industries   $ 356,086       14.0 %   $ 356,073       14.1 %
Aerospace & Defense     305,111       12.0       307,863       12.2  
Healthcare & Pharmaceuticals     255,579       10.1       254,014       10.1  
Consumer Goods: Non-Durable     195,602       7.7       196,653       7.8  
Capital Equipment     183,618       7.2       186,913       7.4  
Services: Business     165,286       6.5       165,862       6.5  
Transportation: Cargo     116,074       4.6       116,237       4.6  
Construction & Building     107,413       4.2       108,176       4.3  
Wholesale     79,542       3.1       78,225       3.1  
Energy: Oil & Gas     77,264       3.0       77,979       3.1  
Automotive     66,522       2.6       67,374       2.7  
Consumer Goods: Durable     63,712       2.5       63,394       2.5  
Transportation: Consumer     62,473       2.5       61,662       2.3  
Media: Advertising, Printing & Publishing     59,419       2.3       54,765       2.2  
FIRE: Insurance (1)     52,367       2.1       54,086       2.1  
Hotel, Gaming & Leisure     52,866       2.1       53,074       2.1  
Media: Broadcasting & Subscription     43,165       1.7       44,247       1.8  
Media: Diversified & Production     35,670       1.4       36,403       1.4  
Retail     34,774       1.4       34,827       1.4  
Chemicals, Plastics & Rubber     32,288       1.3       32,446       1.3  
Services: Consumer     30,458       1.2       30,794       1.2  
Banking     25,656       1.0       25,466       1.0  
Energy: Electricity     22,172       0.9       22,134       0.9  
Telecommunications     21,323       0.8       21,343       0.8  
Beverage, Food & Tobacco     30,687       1.2       19,531       0.8  
Environmental Industries     16,814       0.7       17,612       0.7  
Containers, Packaging & Glass     11,637       0.5       11,633       0.5  
FIRE: Real Estate (1)     10,786       0.4       10,443       0.4  
Forest Products & Paper     10,301       0.4       9,700       0.4  
Utilities: Electric     12,598       0.6       8,126       0.3  
Total   $ 2,537,263       100.0 %   $ 2,527,055       100.0 %

 

 

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

  

Antares Bain Capital Complete Financing Solution

 

Prior to April 30, 2019, the Company was party to a limited liability company agreement with Antares Midco Inc. (“Antares”) pursuant to which it invested in ABC Complete Financing Solution LLC, which made investments through its subsidiary, Antares Bain Capital Complete Financing Solution LLC (together with ABC Complete Financing Solution LLC, “ABCS”). ABCS, an unconsolidated Delaware limited liability company, was formed on September 27, 2017 and commenced operations on November 29, 2017. ABCS’ principal purpose was to make investments, primarily in senior secured unitranche loans. The Company recorded its investment in ABCS at fair value. Distributions of income received from ABCS, if any, were recorded as dividend income from controlled affiliate investments in the consolidated statements of operations. Distributions received from ABCS in excess of income earned at ABCS, if any, were recorded as a return of capital and reduced the amortized cost of controlled affiliate investments. 

 

20

 

 

The Company and Antares, as members of ABCS, agreed to contribute capital up to (subject to the terms of their agreement) $950.0 million in aggregate to purchase equity interests in ABCS, with the Company and Antares contributing up to $425.0 million and $525.0 million, respectively. Funding of such commitments generally required the consent of both Antares Credit Opportunities Manager LLC and the Advisor on behalf of Antares and the Company, respectively. ABCS was capitalized with capital contributions from its members on a pro-rata basis based on their maximum capital contributions as transactions were funded after they had been approved.

 

Investment decisions of ABCS required the consent of both the Advisor and Antares Credit Opportunities Manager LLC, as representatives of the Company and Antares, respectively. Each of the Advisor and Antares sourced investments for ABCS.

 

On April 30, 2019, the Company formed BCSF Complete Financing Solution Holdco, LLC (“BCSF CFSH, LLC”) and BCSF Complete Financing Solution, LLC (“BCSF Unitranche” or “BCSF CFS, LLC”), wholly-owned, newly-formed, subsidiaries. The Company received its proportionate share of all assets which represented 44.737% of ABCS. The portfolio of investments that was distributed comprised of 25 senior secured unitranche loans with a fair value of $919.0 million and cash of $3.2 million. The Company also assumed the obligation to fund outstanding unfunded commitments of $31.4 million. In connection with the distribution, the Company recognized a realized gain of $0.3 million. The Company is no longer a member of ABCS. The assets the Company received from ABCS have been included in the Company’s consolidated financial statements and notes thereto.

 

In conjunction with the distribution from ABCS, on April 30, 2019, BCSF CFS, LLC entered into a loan and security agreement (the “JPM Credit Agreement” or the “JPM Credit Facility”) as borrower, with JPMorgan Chase Bank, National Association, as Administrative Agent, and Wells Fargo Bank, National Association as Collateral Administrator, Collateral Agent, Securities Intermediary and Bank. On the date of the ABCS distribution, the Company had $577.5 million outstanding on the JPM Credit Facility. See Note 6 for additional information on the JPM Credit Facility.

 

Below is selected statements of operations information for the three and nine months ended September 30, 2019:

 

Selected Statements of Operations Information

 

   For the
Three Months Ended
   For the
Nine Months Ended
 
   September 30, 2019   September 30, 2019 
Interest income  $   $53,494 
Fee income       217 
Total revenues       53,711 
Credit facility expenses (1)       22,008 
Other fees and expenses       6,661 
Total expenses       28,669 
Net investment income       25,042 
Net increase in members’ capital from operations  $   $25,042 

 

 

(1)       The ABCS distribution was effective April 30, 2019.

 

21

 

 

Note 4. Fair Value Measurements

 

Fair Value Disclosures

 

The following table presents fair value measurements of investments by major class, cash equivalents and derivatives as of September 30, 2020, according to the fair value hierarchy:

 

   Fair Value Measurements 
   Level 1   Level 2   Level 3   Total 
Investments:                    
First Lien Senior Secured Loans  $   $134,926   $1,993,703   $2,128,629 
First Lien Last Out Loans           17,223    17,223 
Second Lien Senior Secured Loans       39,650    115,892    155,542 
Subordinated Debt           15,000    15,000 
Equity Interests           107,373    107,373 
Preferred Equity           35,890    35,890 
Warrants                
Total Investments  $   $174,576   $2,285,081   $2,459,657 
Cash equivalents  $101,970   $   $   $101,970 
Forward currency exchange contracts (asset)  $   $23   $   $23 
Forward currency exchange contracts (liability)  $   $8,162   $   $8,162 

 

The following table presents fair value measurements of investments by major class, cash equivalents and derivatives as of December 31, 2019, according to the fair value hierarchy:

 

   Fair Value Measurements 
   Level 1   Level 2   Level 3   Total 
Investments:                    
First Lien Senior Secured Loans  $   $176,223   $1,989,621   $2,165,844 
First Lien Last Out Loans           29,300    29,300 
Second Lien Senior Secured Loans       51,643    124,027    175,670 
Subordinated Debt           15,000    15,000 
Corporate Bonds       17,508        17,508 
Equity Interests           99,293    99,293 
Preferred Equity           24,318    24,318 
Warrants           122    122 
Total Investments  $   $245,374   $2,281,681   $2,527,055 
Cash equivalents  $66,965   $   $   $66,965 
Forward currency exchange contracts (asset)       1,034        1,034 
Forward currency exchange contracts (liability)  $   $1,252   $   $1,252 

 

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

 

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

 

 

(1) Includes reorganizatons and restructuring of investments.

 

22

 

 

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

 

The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the nine months ended September 30, 2019:

 

 

 

  First Lien
Senior Secured
Loans
  First Lien
Last Out
Loans
  Second Lien
Senior Secured
Loans
  Subordinated
Debt
  Investment
Vehicles
  Equity
Interest
  Preferred
Equity
  Warrants   Total
Investments
 
Balance as of January 1, 2019   $ 439,487   $ 27,487   $ 145,555   $ 39,625   $ 279,363   $ 26,521   $ 2,807   $   $ 960,845  
Purchases of investments and other adjustments to cost   691,236   422   43,955     64,741   19,833     16,659     836,846  
Distribution to Company from ABCS   918,870         (346,329 )       572,541  
Paid-in-kind interest   19             15     34  
Net accretion of discounts (amortization of premiums)   1,618   71   205   33           1,927  
Proceeds from principal repayments and sales of investments   (328,263 ) (172 ) (41,490 ) (25,000 ) 1,432   (779 )     (394,272 )
Net change in unrealized appreciation (depreciation) on investments   (1,841 ) (500 ) (1,152)   305   528   (33 ) 1,973   129   (591 )
Net realized gains (losses) on investments   4   (1 ) 270     265   160       698  
Transfers out of Level 3   (59,955 )   (17,384 )           (77,339 )
Transfers to Level 3   103,975     6,156             110,131  
Balance as of September 30, 2019   $ 1,765,150   $ 27,307   $ 136,115   $ 14,963   $   $ 45,702   $ 21,454   $ 129   $ 2,010,820  
Change in unrealized appreciation (depreciation) attributable to investments still held at September 30, 2019   $ (2,506 ) $ (500 ) $ (2,075 ) $ 305   $   $ (33 ) $ 1,970   $ 129   $ (2,710 )

 

Transfers between levels, if any, are recognized at the beginning of the quarter in which transfers occur. For the nine months ended September 30, 2019, transfers from Level 2 to Level 3 were primarily due to decreased price transparency. For the nine months ended September 30, 2019, transfers from Level 3 to Level 2 were primarily due to increased price transparency.

 

Significant Unobservable Inputs

 

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

 

The valuation techniques and significant unobservable inputs used in Level 3 fair value measurements of assets as of September 30, 2020 were as follows:

 

   As of September 30, 2020    
   Fair Value
of Level 3 Assets (1)
   Valuation
Technique
  Significant
Unobservable
Inputs
  Range of Significant
Unobservable Inputs
(Weighted Average (2))
 
First Lien Senior Secured Loans  $1,844,361   Discounted Cash Flows  Comparative Yields   4.9%-16.1% (7.5%) 
First Lien Senior Secured Loans   63,065   Comparable Company Multiple  EBITDA Multiple   6.0x-6.2x (6.1x) 
First Lien Senior Secured Loans   18,642   Discounted Cash Flows  Discount Rate   10.0%
First Lien Senior Secured Loans   17,205   Collateral Analysis  Recovery Rate   100.0%
First Lien Last Out   17,223   Discounted Cash Flows  Comparative Yields   11.3%
Second Lien Senior Secured Loans   115,892   Discounted Cash Flows  Comparative Yields   8.4%-16.1% (10.8%) 
Subordinated Debt   15,000   Discounted Cash Flows  Comparative Yields   13.3%
Equity Interests   28,398   Comparable Company Multiple  EBITDA Multiple   7.0x-17.8x (10.3x) 
Equity Interests   78,975   Discounted Cash Flows  Discount Rate   10.0%-16.4% (15.4%) 
Preferred Equity   25,786   Comparable Company Multiple  EBITDA Multiple   7.8x-14.8x (11.1x) 
Preferred Equity   10,104   Discounted Cash Flows  Discount Rate   10.0%
Warrants   -   Comparable Company Multiple  EBITDA Multiple   7.8x
Total investments  $2,234,651            

 

 

 

 (1) Included within the Level 3 assets of $2,285,081 is an amount of $50,430 for which the Advisor did not develop the unobservable inputs for the determination of fair value (examples include single source quotation and prior or pending transactions such as investments originated in the quarter or imminent payoffs).
   
(2) Weighted average is calculated by weighing the significant unobservable input by the relative fair value of each investment in the category.

 

The Company used the income approach and market approach to determine the fair value of certain Level 3 assets as of September 30, 2020. The significant unobservable inputs used in the income approach are the comparative yield and discount rate. The comparative yield and discount rate are used to discount the estimated future cash flows expected to be received from the underlying investment. An increase/decrease in the comparative yield or discount rate would result in a decrease/increase, respectively, in the fair value. The significant unobservable inputs used in the market approach are the comparable company multiple and the recovery rate. The multiple is used to estimate the enterprise value of the underlying investment. An increase/decrease in the multiple would result in an increase/decrease, respectively, in the fair value. The recovery rate represents the extent to which proceeds can be recovered. An increase/decrease in the recovery rate would result in an increase/decrease, respectively, in the fair value.

 

23

 

 

The valuation techniques and significant unobservable inputs used in Level 3 fair value measurements of assets as of December 31, 2019 were as follows:

 

   As of December 31, 2019 
   Fair Value
of Level 3 Assets (1)
   Valuation
Technique
  Significant
Unobservable
Inputs
  Range of Significant
Unobservable Inputs
(Weighted Average(2))
 
First Lien Senior Secured Loans  $1,475,477   Discounted Cash Flows  Comparative Yields   4.4%-15.8% (7.7%) 
First Lien Senior Secured Loans   6,363   Discounted Cash Flows  Discount Rate   10.0%-10.0% (10.0%) 
First Lien Senior Secured Loans   23,181   Collateral Analysis  Recovery Rate   100%
First Lien Last Out Loans   29,300   Discounted Cash Flows  Comparative Yields   7.1%-12.5% (10.3%) 
Second Lien Senior Secured Loans   115,014   Discounted Cash Flows  Comparative Yields   6.1%-17.0% (10.4%) 
Subordinated Debt   15,000   Discounted Cash Flows  Comparative Yields   15.3%
Equity Interests   21,495   Comparable Company Multiple  EBITDA Multiple   6.8x-17.5x (9.8x) 
Equity Interests   24,514   Discounted Cash Flows  Discount Rate   10.0%-18.8% (13.4%) 
Preferred Equity   23,116   Comparable Company Multiple  EBITDA Multiple   7.3x-12.5x (11.0x) 
Warrants   122   Comparable Company Multiple  EBITDA Multiple   7.3x
Total investments  $1,733,582            

 

 

 (1) Included within the Level 3 assets of $2,281,681 is an amount of $548,099 for which the Advisor did not develop the unobservable inputs for the determination of fair value (examples include single source quotation and prior or pending transactions).

 

(2) Weighted average is calculated by weighing the significant unobservable input by the relative fair value of each investment in the category.

 

24

 

 

The Company used the income approach and market approach to determine the fair value of certain Level 3 assets as of December 31, 2019. The significant unobservable input used in the income approach is the comparative yield. The significant unobservable inputs used in the income approach are the comparative yield and discount rate. The comparative yield and discount rate are used to discount the estimated future cash flows expected to be received from the underlying investment. An increase/decrease in the comparative yield or discount rate would result in a decrease/increase, respectively, in the fair value. The significant unobservable input used in the market approach is the comparable company multiple. The multiple is used to estimate the enterprise value of the underlying investment. An increase/decrease in the multiple would result in an increase/decrease, respectively, in the fair value.

 

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

 

Note 5. Related Party Transactions

 

Investment Advisory Agreement

 

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

 

Base Management Fee

 

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

 

For the three months ended September 30, 2020 and 2019, management fees were $8.9 million and $8.9 million, respectively. For the nine months ended September 30, 2020 and 2019, management fees were $26.3 million and $23.6 million, respectively. For the three and nine months ended September 30, 2020, $0.0 million was contractually waived and $0.0 million was voluntarily waived. For the three months ended September 30, 2019, $0.0 million was contractually waived and $2.6 million was voluntarily waived. For the nine months ended September 30, 2019, $0.0 million was contractually waived and $6.4 million was voluntarily waived.

 

As of September 30, 2020 and December 31, 2019, management fees payable were $8.9 million and $7.3 million, respectively.

 

25

 

 

Incentive Fee

 

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

 

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

 

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

 

Incentive Fee on Pre-Incentive Fee Net Investment Income

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

26

 

 

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

 

  (i) No incentive fee based on income is payable to the Advisor for any calendar quarter for which there is no Excess Income Amount;

 

  (ii) 100% of the aggregate pre-incentive fee net investment income in respect of the Trailing Twelve Quarters with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the Hurdle Amount, but is less than or equal to an amount, which the Company refers to as the “Catch-up Amount,” determined as the sum of 1.8182% multiplied by our NAV at the beginning of each applicable calendar quarter comprising the relevant Trailing Twelve Quarters; and

 

  (iii) 17.5% of the aggregate pre-incentive fee net investment income in respect of the Trailing Twelve Quarters that exceeds the Catch-up Amount.

 

Incentive Fee Cap

 

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

 

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

 

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

 

For the three months ended September 30, 2020 and 2019, the Company incurred $0.0 million and $4.3 million, respectively, of income incentive fees (before waivers), which are included in incentive fees on the consolidated statements of operations. The Advisor has voluntarily waived $0.0 million and $0.8 million, respectively, of the income incentive fees earned by the Advisor during the three months ended September 30, 2020 and 2019. Such income incentive fee waiver is irrevocable and such waived income incentive fees will not be subject to recoupment in future periods. This income incentive fee waiver does not impact any income incentive fees earned by the Advisor in future periods.

 

For the nine months ended September 30, 2020 and 2019, the Company incurred $0.0 million and $12.9 million, respectively, of income incentive fees (before waivers), which are included in incentive fees on the consolidated statements of operations. The Advisor has voluntarily waived $0.0 million and $2.7 million, respectively, of the income incentive fees earned by the Advisor during the nine months ended September 30, 2020 and 2019. As a result of the income incentive fee waivers, the Company incurred $3.6 and $10.2 million of income incentive fees (after waivers) for the three and nine months ended September 30, 2019, respectively. Such income incentive fee waiver is irrevocable and such waived income incentive fees will not be subject to recoupment in future periods. This income incentive fee waiver does not impact any income incentive fees earned by the Advisor in future periods.

 

As of September 30, 2020 and December 31, 2019, there was $0.0 million and $4.5 million, respectively, related to the income incentive fee accrued in incentive fee payable on the consolidated statements of assets and liabilities.

 

27

 

 

Annual Incentive Fee Based on Capital Gains

 

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

 

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

 

There was no capital gains incentive fee payable to the Advisor under the Amended Advisory Agreement as of September 30, 2020 and December 31, 2019.

 

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

 

For the three months ended September 30, 2020 and 2019, the Company incurred $0.0 million and $0.0 million of incentive fees related to the GAAP Incentive Fee. For the nine months ended September 30, 2020 and 2019, the Company incurred $0.0 million and $0.0 million of incentive fees related to the GAAP Incentive Fee. As of September 30, 2020 and December 31, 2019, there was $0.0 million and $0.0 million related to the GAAP Incentive Fee accrued in incentive fee payable on the consolidated statements of assets and liabilities, respectively.

 

28

 

 

Administration Agreement

 

The Company has entered into an administration agreement (the “Administration Agreement”) with the advisor (in such capacity, the “Administrator”), pursuant to which the Administrator will provide the administrative services necessary for us to operate, and the Company will utilize the Administrator’s office facilities, equipment and recordkeeping services. Pursuant to the Administration Agreement, the Administrator has agreed to oversee our public reporting requirements and tax reporting and monitor our expenses and the performance of professional services rendered to us by others. The Administrator has also hired a sub-administrator to assist in the provision of administrative services. The Company will reimburse the Administrator for its costs and expenses and our allocable portion of overhead incurred by it in performing its obligations under the Administration Agreement, including certain compensation paid to or compensatory distributions received by our officers (including our Chief Compliance Officer and Chief Financial Officer) and any of their respective staff who provide services to us, operations staff who provide services to us, and internal audit staff, if any, to the extent internal audit performs a role in our Sarbanes-Oxley internal control assessment. Our allocable portion of overhead will be determined by the Administrator, which expects to use various methodologies such as allocation based on the percentage of time certain individuals devote, on an estimated basis, to the business and affairs of the Company, and will be subject to oversight by the Board. The Company incurred expenses related to the Administrator of $0.0 million and $0.2 million for the three months ended September 30, 2020 and 2019, respectively, which is included in other general and administrative expenses on the consolidated statements of operations. The Company incurred expenses related to the Administrator of $0.0 million and $0.8 million for the nine months ended September 30, 2020 and 2019, respectively, which is included in other general and administrative expenses on the consolidated statements of operations. As of September 30, 2020 and December 31, 2019, there were $0.0 and $0.0 in expenses related to the Administrator that were payable and included in “accounts payable and accrued expenses” in the consolidated statements of assets and liabilities, respectively. The sub-administrator is paid its compensation for performing its sub-administrative services under the sub-administration agreement. The Company incurred expenses related to the sub-administrator of $0.1 million and $0.2 million for the three months ended September 30, 2020 and 2019, respectively, which is included in other general and administrative expenses on the consolidated statements of operations. The Company incurred expenses related to the sub-administrator of $0.4 million and $0.5 million for the nine months ended September 30, 2020 and 2019, respectively, which is included in other general and administrative expenses on the consolidated statements of operations. The Administrator will not seek reimbursement in the event that any such reimbursements would cause any distributions to our stockholders to constitute a return of capital. In addition, the Administrator is permitted to delegate its duties under the Administration Agreement to affiliates or third parties and the Company will reimburse the expenses of these parties incurred and paid by the Advisor on our behalf.

 

Resource Sharing Agreement

 

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

 

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

 

Co-investments

 

The Company will invest alongside our affiliates, subject to compliance with applicable regulations and our allocation procedures. Certain types of negotiated co-investments will be made only in accordance with the terms of the exemptive order the Company received from the SEC initially on August 23, 2016, as amended on March 23, 2018 (the “Order”). Under the terms of the Order, a “required majority” (as defined in Section 57(o) of the 1940 Act) of our independent directors must be able to reach certain conclusions in connection with a co-investment transaction, including that (1) the terms of the proposed transaction are reasonable and fair to us and our stockholders and do not involve overreaching of us or our stockholders on the part of any person concerned, and (2) the transaction is consistent with the interests of our stockholders and is consistent with our Board’s approved criteria. In certain situations where co-investment with one or more funds managed by the Advisor or its affiliates is not covered by the Order, the personnel of the Advisor or its affiliates will need to decide which funds will proceed with the investment. Such personnel will make these determinations based on policies and procedures, which are designed to reasonably ensure that investment opportunities are allocated fairly and equitably among affiliated funds over time and in a manner that is consistent with applicable laws, rules and regulations.

 

29

 

 

Revolving Advisor Loan

 

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

 

Related Party Commitments

 

As of September 30, 2020 and December 31, 2019, the Advisor held 487,444.14 and 389,695.20 shares of the Company’s common stock, respectively. An affiliate of the Advisor is the investment manager to certain pooled investment vehicles which are investors in the Company. Collectively, these investors held 12,875,920.66 and 9,539,043.66 shares of the Company at September 30, 2020 and December 31, 2019, respectively.

 

Non-Controlled/Affiliate and Controlled Affiliate Investments

 

Transactions during the nine months ended September 30, 2020 in which the issuer was either an Affiliated Person or an Affiliated Person that the Company is deemed to Control are as follows:

 

 

Portfolio Company  Fair Value
as of
December 31,
2019
   Gross
Additions
   Gross
Reductions
   Change in
Unrealized
Gains
(Losses)
   Realized
Gains
(Losses)
   Fair Value
as of
September 30,
2020
   Dividend
and
Interest
Income
   Other
Income
 
Non-Controlled/affiliate investment                                        
ADT Pizza, LLC, Equity Interest (1)  $6,720   $   $   $4,697   $   $11,417   $   $ 
Blackbrush Oil & Gas, L.P. Equity Interest (1)                                
Blackbrush Oil & Gas, L.P. Preferred Equity (1)       10,104                10,104         
Blackbrush Oil & Gas, L.P. First Lien Senior Secured Loan (1)       12,028                12,028    56     
Total Non-Controlled/affiliate investment  $6,720   $22,132   $   $4,697   $   $33,549   $56   $ 
Controlled affiliate investment                                        
ACC Holdco, LLC, Preferred Equity  $10,828   $   $   $   $   $10,828   $921   $ 
Air Comm Corporation LLC, First Lien Senior Secured Loan   27,161    91    (206)   (564)       26,482    1,741     
BCC Jetstream Holdings Aviation (On II), LLC, Equity Interest   1,869            (1,077)       792    75     
BCC Jetstream Holdings Aviation (On II), LLC, First Lien Senior Secured Loan   6,363    251                6,614    484     
BCC Jetstream Holdings Aviation (Off I), LLC, Equity Interest   13,091            (1,314)       11,777    801     
Gale Aviation (Offshore) Co, Equity Interest   57,773    24,099        (15,466)       66,406    4,676     
Total Controlled affiliate investment  $117,085   $24,441   $(206)  $(18,421)  $   $122,899   $8,698   $ 
Total  $123,805   $46,573   $(206)  $(13,724)  $   $156,448   $8,754   $ 

 

 

(1)       Non-income producing.

 

Transactions during the year ended December 31, 2019 in which the issuer was either an Affiliated Person or an Affiliated Person that the Company is deemed to Control are as follows:

 

Portfolio Company  Fair Value
as of
December 31,
2018
   Gross
Additions
   Gross
Reductions
   Change in
Unrealized
Gains
(Losses)
   Realized
Gains
(Losses)
   Fair Value
as of
December 31,
2019
   Dividend
and
Interest
Income
   Other
Income
 
Non-Controlled/affiliate investment                                        
ADT Pizza, LLC, Equity Interest (1)  $6,720   $   $   $   $   $6,720   $   $ 
Total Non-Controlled/affiliate investment  $6,720   $   $   $   $   $6,720   $   $ 
Controlled affiliate investment                                        
ACC Holdco, LLC, Preferred Equity  $   $11,707   $(882)  $3   $   $10,828   $955   $4 
Air Comm Corporation LLC, First Lien Senior Secured Loan       26,653    (137)   645        27,161    1,266     
Antares Bain Capital Complete Financing Solution LLC, Investment Vehicle   279,363    1,432    (281,589)   529    265        13,875      
BCC Jetstream Holdings Aviation (On II), LLC, Equity Interest   1,243    384        242        1,869    107     
BCC Jetstream Holdings Aviation (On II), LLC, First Lien Senior Secured Loan   4,163    2,219    (19)           6,363    543     
BCC Jetstream Holdings Aviation (Off I), LLC, Equity Interest   13,479            (388)       13,091    1,115     
Gale Aviation (Offshore) Co, Equity Interest       57,626    (617)   764         57,773    627      
Total Controlled affiliate investment  $298,248   $100,021   $(283,244)  $1,795   $265   $117,085   $18,488   $4 
Total  $304,968   $100,021   $(283,244)  $1,795   $265   $123,805   $18,488   $4 

 

 

(1)       Non-income producing.

 

Note 6. Debt

 

In accordance with applicable SEC staff guidance and interpretations, as a BDC, with certain exceptions, effective February 2, 2019, the Company is permitted to borrow amounts such that its asset coverage ratio is at least 150% after such borrowing (if certain requirements are met), rather than 200%, as previously required. As of September 30, 2020 and December 31, 2019, the Company’s asset coverage ratio based on aggregated borrowings outstanding was 169% and 164%, respectively.

 

30

 

 

The Company’s outstanding borrowings as of September 30, 2020 and December 31, 2019 were as follows:

 

   As of September 30, 2020   As of December 31, 2019 
   Total Aggregate
Principal
Amount
Committed
   Principal
Amount
Outstanding
   Carrying
Value (1)
   Total Aggregate
Principal
Amount
Committed
   Principal
Amount
Outstanding
   Carrying
Value (1)
 
BCSF Revolving Credit Facility  $425,000   $307,774   $307,774   $500,000   $268,015   $268,015 
2018-1 Notes   365,700    365,700    363,962    365,700    365,700    363,832 
JPM Credit Facility   450,000    299,183    299,183    666,581    546,754    546,754 
2019-1 Debt   398,750    398,750    396,207    398,750    398,750    396,034 
Revolving Advisor Loan   50,000                     
2023 Notes   150,000    150,000    146,726             
Total Debt  $1,839,450   $1,521,407   $1,513,852   $1,931,031   $1,579,219   $1,574,635 

 

 

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

 

The combined weighted average interest rate (excluding deferred upfront financing costs and unused fees) of the aggregate borrowings outstanding for the nine months ended September 30, 2020 and year ended December 31, 2019 were 3.7% and 4.7%, respectively.

 

The following table shows the contractual maturities of our debt obligations as of September 30, 2020:

 

   Payments Due by Period 
   Total   Less than
1 year
   1 — 3 years   3 — 5 years   More than
5 years
 
BCSF Revolving Credit Facility  $307,774   $   $307,774   $   $ 
2018-1 Notes   365,700                365,700 
JPM Credit Facility   299,183            299,183     
2019-1 Debt   398,750                398,750 
2023 Notes   150,000        150,000         
Total Debt Obligations  $1,521,407   $   $457,774   $299,183   $764,450 

 

BCSF Revolving Credit Facility

 

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

 

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

 

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

 

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

 

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

 

Assets that are pledged as collateral for the BCSF Revolving Credit Facility are not directly available to the creditors of the Company to satisfy any obligations of the Company other than the Company’s obligations under the BCSF Revolving Credit Facility.

 

Borrowings under the BCSF Revolving Credit Facility bear interest at LIBOR plus a margin. As of September 30, 2020, the BCSF Revolving Credit Facility was accruing interest expense at a rate of LIBOR plus 3.00%. As of December 31, 2019, the BCSF Revolving Credit Facility was accruing interest expense at a rate of LIBOR plus 2.50%. The Company pays an unused commitment fee of 30 basis points (0.30%) per annum. Interest is payable quarterly in arrears. Any amounts borrowed under the BCSF Revolving Credit Facility, and all accrued and unpaid interest, will be due and payable, on the earliest of: (a) October 5, 2022 and (b) the date upon which all loans shall become due and payable in full, whether by acceleration or otherwise.

 

As of September 30, 2020 and December 31, 2019, there were $307.8 million and $268.0 million borrowings under the BCSF Revolving Credit Facility, respectively, and the Company was in compliance with the terms of the BCSF Revolving Credit Facility.

 

For the three months ended September 30, 2020 and 2019, the components of interest expense related to the BCSF Revolving Credit Facility were as follows:

 

   For the Three Months Ended September 30, 
   2020   2019 
Borrowing interest expense  $2,823   $4,441 
Unused facility fee   106    109 
Amortization of deferred financing costs and upfront commitment fees   297    269 
Total interest and debt financing expenses  $3,226   $4,819 

 

For the nine months ended September 30, 2020 and 2019, the components of interest expense related to the BCSF Revolving Credit Facility were as follows:

 

   For the Nine Months Ended September 30, 
   2020   2019 
Borrowing interest expense  $12,428   $13,844 
Unused facility fee   270    316 
Amortization of deferred financing costs and upfront commitment fees   830    798 
Total interest and debt financing expenses  $13,528   $14,958 

 

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2018-1 Notes

 

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

 

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

  

2018-1 Notes   Principal Amount     Spread above Index   Interest rate at September 30, 2020  
Class A-1 A   $ 205,900     1.55% + 3 Month LIBOR     1.82 %
Class A-1 B     45,000     1.50% + 3 Month LIBOR (first 24 months)     1.77 %
            1.80% + 3 Month LIBOR (thereafter)        
Class A-2     55,100     2.15% + 3 Month LIBOR     2.42 %
Class B     29,300     3.00% + 3 Month LIBOR     3.27 %
Class C     30,400     4.00% + 3 Month LIBOR     4.27 %
Total 2018-1 Notes     365,700              
Membership Interests     85,450     Non-interest bearing     Not applicable  
Total   $ 451,150              

 

The Class A-1 A, A-1 B, A-2, B and C 2018-1 Notes were issued at par and are scheduled to mature on October 20, 2030. The Company received 100% of the membership interests (the “Membership Interests”) in the 2018-1 Issuer in exchange for its sale to the 2018-1 Issuer of the initial closing date loan portfolio. The Membership Interests do not bear interest. As of September 30, 2020, the Company’s Membership Interests are pledged as collateral to the BCSF Revolving Credit Facility.

 

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

 

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

 

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

 

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

 

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

 

As of September 30, 2020, there were 58 first lien and second lien senior secured loans with a total fair value of approximately $404.6 million and cash of $42.2 million securing the 2018-1 Notes. As of December 31, 2019, there were 61 first lien and second lien senior secured loans with a total fair value of approximately $435.8 million and cash of $9.1 million securing the 2018-1 Notes. Assets that are pledged as collateral for the 2018-1 Notes are not directly available to the creditors of the Company to satisfy any obligations of the Company other than the Company’s obligations under the indenture governing the 2018-1 Notes. Such assets are included in the Company’s consolidated financial statements. The creditors of the 2018-1 Issuer have received security interests in such assets and such assets are not intended to be available to the creditors of the Company (or an affiliate of the Company). The 2018-1 Portfolio must meet certain requirements, including asset mix and concentration, term, agency rating, collateral coverage, minimum coupon, minimum spread and sector diversity requirements in the indenture governing the 2018-1 Notes. As of September 30, 2020 and December 31, 2019, the Company was in compliance with its covenants related to the 2018-1 Notes.

 

33

 

 

Costs of $2.1 million were incurred in connection with debt securitization of the 2018-1 Notes by the 2018-1 Issuer which have been recorded as debt issuance costs and presented as a reduction to the outstanding principal amount of the 2018-1 Notes on the consolidated statements of assets and liabilities and are being amortized over the life of the 2018-1 Issuer using the effective interest method. The balance of the unamortized debt issuance costs related to the 2018-1 Issuer was $1.7 million and $1.9 million as of September 30, 2020 and December 31, 2019, respectively.

 

For the three months ended September 30, 2020 and 2019, the components of interest expense related to the 2018-1 Issuer were as follows:

 

   For the Three Months Ended September 30, 
   2020   2019 
Borrowing interest expense  $2,246   $4,022 
Amortization of debt issuance costs and upfront commitment fees   44    44 
Total interest and debt financing expenses  $2,290   $4,066 

 

For the nine months ended September 30, 2020 and 2019, the components of interest expense related to the 2018-1 Issuer were as follows:

 

   For the Nine Months Ended September 30, 
   2020   2019 
Borrowing interest expense  $8,752   $12,499 
Amortization of debt issuance costs and upfront commitment fees   130    130 
Total interest and debt financing expenses  $8,882   $12,629 

 

Citibank Revolving Credit Facility

 

On February 19, 2019, the Company entered into a credit and security agreement (the “Credit Agreement” or the “Citibank Revolving Credit Facility”) with the Company as equity holder and servicer, BCSF II-C, LLC as Borrower, Citibank, N.A., as Administrative Agent, and Wells Fargo Bank, National Association as Collateral Administrator, Collateral Agent and Custodian. The Credit Agreement was effective as of February 19, 2019.

 

The facility amount under the Credit Agreement is $350.0 million. Proceeds of the loans under the Credit Agreement may be used to acquire certain qualifying loans and such other uses as permitted under the Credit Agreement. The period from the closing date until February 19, 2020 is referred to as the reinvestment period and during such reinvestment period, the Borrower may request drawdowns under the Credit Agreement. The final maturity date is the earliest of: (a) the business day designated by the Borrower as the final maturity date upon not less than three business days’ prior written notice to the Administrative Agent, the Collateral Agent, the Lenders, the Custodian and the Collateral Administrator, (b) February 19, 2022 and (c) the date on which the Administrative Agent provides notice of the declaration of the final maturity date after the occurrence of an event of default. The Credit Agreement includes customary affirmative and negative covenants, including certain limitations on the incurrence of additional indebtedness and liens, as well as usual and customary events of default for revolving credit facilities of this nature.

 

Borrowings under the Citibank Revolving Credit Facility bear interest at LIBOR plus a margin. During the period prior to the last day of the reinvestment period, borrowings under the Credit Agreement will bear interest at a rate equal to the three-month LIBOR plus 1.60%. Commencing on the last day of the reinvestment period, the interest rate on borrowings under the Credit Agreement will reset to three-month LIBOR plus 2.60% for the remaining term of the Credit Agreement. We pay an unused commitment fee based on a corresponding utilization rate; (i) 0 basis points (0.00%) per annum when greater than or equal to 85.0% utilization, (ii) 25 basis points (0.25%) per annum when greater than or equal to 75.0% but less than 85.0% utilization, (iii) 50 basis points (0.50%) per annum when greater than or equal to 50.0% but less than 75.0% utilization, (iv) 75 basis points (0.75%) per annum when greater than or equal to 25.0% but less than 50% utilization, or (v) 100 basis points (1.00%) per annum when less than 25.0% utilization.

 

On August 28, 2019, the Citibank Revolving Credit Facility was terminated. The proceeds from the 2019-1 Debt were used to repay the total outstanding debt.

 

For the three months ended September 30, 2020 and 2019, the components of interest expense related to the Citibank Revolving Credit Facility were as follows:

 

34

 

 

   For the Three Months Ended September 30, 
   2020   2019 
Borrowing interest expense  $   $1,174 
Unused facility fee       134 
Amortization of deferred financing costs and upfront commitment fees       108 
Total interest and debt financing expenses  $   $1,416 

 

For the nine months ended September 30, 2020 and 2019, the components of interest expense related to the Citibank Revolving Credit Facility were as follows:

 

   For the Nine Months Ended September 30, 
   2020   2019 
Borrowing interest expense  $   $4,104 
Unused facility fee       357 
Amortization of deferred financing costs and upfront commitment fees       124 
Total interest and debt financing expenses  $   $4,585 

 

JPM Credit Facility

 

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

 

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

 

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

 

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

 

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

 

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

 

35

 

 

 

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

 

Borrowings under the JPM Credit Facility bear interest at LIBOR plus a margin. As of September 30, 2020, the JPM Credit Facility was accruing interest expense at a rate of LIBOR plus 2.375%. The Company pays an unused commitment fee of between 37.5 basis points (0.375%) and 75 basis points (0.75%) per annum depending on the size of the unused portion of the facility. Interest is payable quarterly in arrears.

 

As of September 30, 2020 and December 31, 2019, there were $299.2 million and $546.8 million of borrowings under the JPM Credit Facility, respectively, and the Company was in compliance with the terms of the JPM Credit Facility.

 

For the three months ended September 30, 2020 and 2019, the components of interest expense related to the JPM Credit Facility were as follows:

 

   For the Three Months Ended September 30, 
   2020   2019 
Borrowing interest expense  $2,444   $7,232 
Unused facility fee   94    202 
Amortization of deferred financing costs and upfront commitment fees   65    20 
Total interest and debt financing expenses  $2,603   $7,454 

 

For the nine months ended September 30, 2020 and 2019, the components of interest expense related to the JPM Credit Facility were as follows:

 

   For the Nine Months Ended September 30, 
   2020   2019 
Borrowing interest expense  $11,469   $12,387 
Unused facility fee   310    328 
Amortization of deferred financing costs and upfront commitment fees   402    33 
Total interest and debt financing expenses  $12,181   $12,748 

 

36

 

 

2019-1 Debt

 

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

 

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

 

2019-1 Debt  Principal Amount   Spread above Index  Interest rate at September 30, 2020 
Class A-1L  $50,000   1.70% + 3 Month LIBOR   1.98%
Class A-1   222,500   1.70% + 3 Month LIBOR   1.98%
Class A-2A   50,750   2.70% + 3 Month LIBOR   2.98%
Class A-2B   13,000   4.23% (Fixed)   4.23%
Class B   30,000   3.60% + 3 Month LIBOR   3.88%
Class C   32,500   4.75% + 3 Month LIBOR   5.03%
Total 2019-1 Debt   398,750         
Membership Interests   102,250   Non-interest bearing   Not applicable 
Total  $501,000         

 

The Loans and the Class A-1, A-2A, A-2B, and B Notes were issued at par. The Class C Notes were issued at a discount. The Notes are scheduled to mature on October 15, 2031. The Company received 100% of the membership interests (the “Membership Interests”) in the 2019-1 Issuer in exchange for its sale to the 2019-1 Issuer of the initial closing date loan portfolio. The Membership Interests do not bear interest. As of September 30, 2020, the Company’s Membership Interests are pledged as collateral to the BCSF Revolving Credit Facility.

 

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

 

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

 

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

 

37

 

 

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

 

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

 

As of September 30, 2020, there were 66 first lien and second lien senior secured loans with a total fair value of approximately $444.1 million and cash of $36.7 million securing the 2019-1 Debt. As of December 31, 2019, there were 65 first lien and second lien senior secured loans with a total fair value of approximately $471.3 million and cash of $22.4 million securing the 2019-1 Notes. Assets that are pledged as collateral for the 2019-1 Debt are not directly available to the creditors of the Company to satisfy any obligations of the Company other than the Company’s obligations under the indenture and loan agreement governing the 2019-1 Debt. The creditors of the 2019-1 Co-Issuers have received security interests in such assets and such assets are not intended to be available to the creditors of the Company (or an affiliate of the Company). The 2019-1 Portfolio must meet certain requirements, including asset mix and concentration, term, agency rating, collateral coverage, minimum coupon, minimum spread and sector diversity requirements in the indenture and loan agreement governing the 2019-1 Debt. As of September 30, 2020, the Company was in compliance with its covenants related to the 2019-1 Debt.

 

Costs of the offering, including the discount of the Class C Notes, of $2.8 million were incurred in connection with debt securitization of the 2019-1 Debt by the 2019-1 Co-Issuers which have been recorded as debt issuance costs and presented as a reduction to the outstanding principal amount of the 2019-1 Debt on the consolidated statements of assets and liabilities and are being amortized over the life of the 2019-1 Issuer using the effective interest method. The balance of the unamortized debt issuance costs related to the 2019-1 Issuer was $2.5 million and $2.7 million as of September 30, 2020 and December 31, 2019, respectively.

 

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

 

   For the Three Months Ended September 30, 
   2020   2019 
Borrowing interest expense  $2,755   $1,651 
Amortization of debt issuance costs and upfront commitment fees   58    21 
Total interest and debt financing expenses  $2,813   $1,672 

 

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

 

   For the Nine Months Ended September 30, 
   2020   2019 
Borrowing interest expense  $10,490   $1,651 
Amortization of debt issuance costs and upfront commitment fees   172    21 
Total interest and debt financing expenses  $10,662   $1,672 

 

38

 

 

Revolving Advisor Loan

 

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

 

For the three months ended September 30, 2020 and 2019, the components of interest expense related to the Revolving Advisor Loan were as follows:

 

    For the Three Months Ended September 30, 
    2020    2019 
Borrowing interest expense  $   $ 
Total interest and debt financing expenses  $   $ 

 

For the nine months ended September 30, 2020 and 2019, the components of interest expense related to the Revolving Advisor Loan were as follows:

 

   For the Nine Months Ended September 30, 
   2020   2019 
Borrowing interest expense  $58   $ 
Total interest and debt financing expenses  $58   $ 

 

2023 Notes

 

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

 

The Notes will mature on June 10, 2023 and may be redeemed in whole or in part at the Company’s option at any time or from time to time at the redemption prices set forth in the Note Purchase Agreement. The Notes will bear interest at a rate of 8.50% per year payable semi-annually on June 10 and December 10 of each year, commencing on December 10, 2020. As of September 30, 2020, the Company was in compliance with the terms of the Note Purchase Agreement governing the 2023 Notes.

 

39

 

 

As of September 30, 2020 and December 31, 2019, the components of the carrying value of the 2023 Notes were as follows:

 

   September 30,
2020
   December 31,
2019
 
Principal amount of debt  $150,000   $ 
Unamortized debt issuance cost   (1,969)    
Original issue discount, net of accretion   (1,305)    
Carrying value of 2023 Notes  $146,726   $ 

 

For the three months ended September 30, 2020 and 2019, the components of interest expense related to the 2023 Notes were as follows:

 

   For the Three Months Ended September 30, 
   2020   2019 
Borrowing interest expense  $3,188   $ 
Amortization of debt issuance cost   184     
Accretion of original issue discount   122     
Total interest and debt financing expenses  $3,494   $ 

 

For the nine months ended September 30, 2020 and 2019, the components of interest expense related to the 2023 Notes were as follows:

 

   For the Nine Months Ended September 30, 
   2020   2019 
Borrowing interest expense  $3,932   $ 
Amortization of debt issuance cost   222     
Accretion of original issue discount   149     
Total interest and debt financing expenses  $4,303   $ 

 

40

 

 

Note 7. Derivatives

 

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

 

The Company may enter into forward currency exchange contracts to reduce the Company’s exposure to foreign currency exchange rate fluctuations in the value of foreign currencies, as described in Note 2. The fair value of derivative contracts open as of September 30, 2020 and December 31, 2019 is included on the consolidated schedule of investments by contract. The Company had collateral receivable of $3.6 million for September 30, 2020 and collateral payable of $0.3 million for December 31, 2019 with the counterparties on foreign currency exchange contracts. Collateral amounts posted are included in collateral on forward currency exchange contracts on the consolidated statements of assets and liabilities. Collateral payable is included in collateral payable on forward currency exchange contracts on the consolidated statements of assets and liabilities.

 

For the three and nine months ended September 30, 2020, the Company’s average U.S. dollar notional exposure to forward currency exchange contracts was $276.5 million and $258.5 million, respectively. For the three and nine months ended September 30, 2019, the Company’s average U.S. dollar notional exposure to forward currency exchange contracts was $205.9 million and $172.1 million, respectively.

 

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

 

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

 

41

 

 

The following table presents both gross and net information about derivative instruments eligible for offset in the consolidated statements of assets and liabilities as of September 30, 2020:

 

Counterparty  Account in the
consolidated
statements of
assets and liabilities
  Gross amount of
assets on the
consolidated
statements of
assets and liabilities
   Gross amount of
(liabilities) on the
consolidated
statements of
assets and liabilities
   Net amount of assets or
(liabilities) presented on
the consolidated
statements of
assets and liabilities
   Cash Collateral
paid
(received) (1)
   Net
Amounts (2)
 
Bank of New York  Unrealized
appreciation on
forward currency
contracts
  $23   $   $23   $   $23 
Citibank  Unrealized
depreciation on
forward currency
contracts
  $   $(1,199)  $(1,199)  $1,199   $ 
Goldman Sachs  Unrealized
depreciation on
forward currency
contracts
  $   $(6,963)  $(6,963)  $   $(6,963)

 

 

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

 

The following table presents both gross and net information about derivative instruments eligible for offset in the consolidated statements of assets and liabilities as of December 31, 2019:

 

Counterparty  Account in the
consolidated
statements of
assets and liabilities
  Gross amount of
assets on the
consolidated
statements of
assets and liabilities
   Gross amount of
(liabilities) on the
consolidated
statements of
assets and liabilities
   Net amount of assets or
(liabilities) presented on
the consolidated
statements of
assets and liabilities
   Cash Collateral
paid
(received) (1)
   Net
Amounts (2)
 
Bank of New York  Unrealized
appreciation on
forward currency
contracts
  $1,034   $   $1,034   $(341)  $693 
Citibank  Unrealized
appreciation on
forward currency
contracts
  $   $(1)  $(1)  $1   $ 
Goldman Sachs  Unrealized
appreciation on
forward currency
contracts
  $   $(1,251)  $(1,251)  $   $(1,251)

 

 

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

 

42

 

 

  

The effect of transactions in derivative instruments to the consolidated statements of operations during the three months ended September 30, 2020 and 2019 was as follows:

 

    For the Three Months Ended September 30,  
    2020     2019  
Net realized gains (losses) on forward currency exchange contracts   $ (130   $ 346  
Net change in unrealized appreciation (depreciation) on forward currency exchange contracts     (11,177 )     9,135  
Total net realized and unrealized gains (losses) on forward currency exchange contracts   $ (11,307 )   $ 9,481  

        

Included in total net gains (losses) on the consolidated statements of operations is net gains (losses) of $11.5 million and ($8.1) million related to realized and unrealized gains and losses on investments, foreign currency holdings and non-investment assets and liabilities attributable to the changes in foreign currency exchange rates for the three months ended September 30, 2020 and 2019, respectively. Including the total net realized and unrealized gains (losses) on forward currency exchange contracts of ($11.3) million and $9.5 million, respectively, included in the above table, the net impact of foreign currency on total net gains (losses) on the consolidated statements of operations is $0.2 million and $1.4 million for the three months ended September 30, 2020 and 2019, respectively.

 

43

 

 

The effect of transactions in derivative instruments to the consolidated statements of operations during the nine months ended September 30, 2020 and 2019 was as follows:

 

    For the Nine Months Ended September 30,  
    2020     2019  
Net realized gain on forward currency exchange contracts   $ 6,472     $ 11,042  
Net change in unrealized appreciation (depreciation) on forward currency exchange contracts     (7,921     (14 )
Total net realized and unrealized gains (losses) on forward currency exchange contracts   $ (1,449   $ 11,028  

  

Included in total net gains (losses) on the consolidated statements of operations is net gains (losses) of $3.6 million and ($8.4) million related to realized and unrealized gains and losses on investments, foreign currency holdings and non-investment assets and liabilities attributable to the changes in foreign currency exchange rates for the nine months ended September 30, 2020 and 2019, respectively. Including the total net realized and unrealized gains (losses) on forward currency exchange contracts of ($1.4) million and $11.0 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 $2.2 million and $2.6 million for the nine months ended September 30, 2020 and 2019, respectively.

 

Note 8. Distributions

 

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

 

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

 

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

 

The Company’s distributions are recorded on the record date. The following table summarizes distributions declared during the nine months ended September 30, 2019:

 

Date Declared   Record Date   Payment Date   Amount
Per Share
  Total
Distributions
 
February 21, 2019   March 29, 2019   April 12, 2019   $ 0.41   $ 21,108  
May 7, 2019   June 28, 2019   July 29, 2019   $ 0.41   $ 21,176  
August 1, 2019   September 30, 2019   October 30, 2019   $ 0.41   $ 21,176  
Total distributions declared           $ 1.23   $ 63,460  

 

The distributions declared during the nine months ended September 30, 2019 were derived from investment company taxable income and net capital gain, if any.

 

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

  

 Note 9. Common Stock/Capital 

 

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

 

44

 

 

Prior to the IPO, the Company had issued 43,982,137.46 shares in the private placement of the Company’s common shares (the “Private Offering”). Each investor had entered into a separate subscription agreement relating to the Company’s common stock (the “Subscription Agreements”). Each investor had made a capital commitment to purchase shares of the Company’s common stock pursuant to the Subscription Agreements. Investors were required to make capital contributions to purchase shares of the Company’s common stock each time the Company delivered a drawdown notice, which were delivered at least 10 business days prior to the required funding date in an aggregate amount not to exceed their respective capital commitments. The number of shares to be issued to a stockholder was determined by dividing the total dollar amount of the contribution by a stockholder by the net asset value per share of the common stock as of the last day of the Company’s fiscal quarter or such other date and price per share as determined by the Board in accordance with the requirements of the 1940 Act. As of December 31, 2018, aggregate commitments relating to the Private Offering were $1.3 billion. All outstanding commitments related to these Subscription Agreements were cancelled due to the completion of the IPO on November 15, 2018. As of September 30, 2020 and December 31, 2019, BCSF Advisors, LP contributed in aggregate $8.8 million to the Company and received 487,444.14 shares of the Company and contributed $7.8 million to the Company and received 389,695.20 shares of the Company, respectively. At September 30, 2020 and December 31, 2019, BCSF Advisors, LP owned 0.75% and 0.75%, respectively, of the outstanding common stock of the Company.

 

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

 

For the three months ended September 30, 2020 and 2019, there were zero shares issued pursuant to the dividend reinvestment plan. For the nine months ended September 30, 2020 and 2019, there were zero and 167,674.81 shares issued pursuant to the dividend reinvestment plan, respectively.

 

BCSF Investments, LLC and certain individuals, including Michael A. Ewald, the Company’s Chief Executive Officer and a Managing Director of Bain Capital Credit; Jonathan S. Lavine, Co-Managing Partner of Bain Capital, LP and Founder and Chief Investment Officer of Bain Capital Credit; John Connaughton, Co-Managing Partner of Bain Capital, LP; Jeffrey B. Hawkins, Chairman of the Company’s Board of Directors and a Managing Director of Bain Capital Credit; and Michael J. Boyle, the Company’s Vice President and Treasurer and a Managing Director of Bain Capital Credit, adopted the 10b5-1 Plan in accordance with Rules 10b5-1 and 10b-18 under the Exchange Act, under which such parties would buy up to $20 million in the aggregate of the Company’s common stock in the open market during the period beginning after four full calendar weeks after the closing of the IPO and ending on the earlier of the date on which the capital committed to the 10b5-1 has been exhausted or one year after the closing of the IPO. As of December 31, 2019, zero dollars remain under the 10b5-1 Plan and no further purchases are intended under the 10b5-1 Plan.

 

On May 7, 2019, the Company’s Board of Directors authorized the Company to repurchase up to $50 million of its outstanding common stock in accordance with safe harbor rules under the Securities Exchange Act of 1934. Any such repurchases will depend upon market conditions and there is no guarantee that the Company will repurchase any particular number of shares or any shares at all. As of September 30, 2020, there have been no repurchases of common stock.

 

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

 

45

 

 

Note 10. Commitments and Contingencies

  

Commitments

 

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

 

As of September 30, 2020, the Company had $153.0 million of unfunded commitments under loan and financing agreements as follows:

 

    Expiration Date (1)     Unfunded Commitments (2)  
First Lien Senior Secured Loans                
9 Story Media Group Inc. - Revolver     4/30/2026     $  71  
A&R Logistics, Inc. - Revolver     5/5/2025        6,096  
Abracon Group Holding, LLC. - Revolver     7/18/2024        2,833  
Allworth Financial Group, L.P. - Revolver     12/31/2025        1,944  
AMI US Holdings Inc. - Revolver     4/1/2024        488  
Amspec Services, Inc. - Revolver     7/2/2024        1,553  
Ansira Holdings, Inc. - Revolver     12/20/2024        3,683  
AP Plastics Group, LLC - Revolver     8/2/2021        8,500  
Appriss Holdings, Inc. - Revolver     5/30/2025        2,383  
Aramsco, Inc. - Revolver     8/28/2024        1,581  
Batteries Plus Holding Corporation - Revolver     7/6/2022        4,250  
Captain D's LLC - Revolver     12/15/2023        480  
CB Nike IntermediateCo Ltd - Revolver     10/31/2025        4,428  
CMI Marketing Inc - Revolver     5/24/2023        2,112  
CPS Group Holdings, Inc. - Revolver     3/3/2025        4,933  
Cruz Bay Publishing, Inc. - Delayed Draw     2/1/2021        1,098  
Cruz Bay Publishing, Inc. - Revolver     2/1/2021        856  
CST Buyer Company - Revolver     10/3/2025        2,190  
Dorner Manufacturing Corp - Revolver     3/15/2022        1,099  
Efficient Collaborative Retail Marketing Company, LLC - Revolver     6/15/2022        1,275  
Element Buyer, Inc. - Revolver     7/19/2024        3,400  
FFI Holdings I Corp - Revolver     1/24/2025        5,432  
Grammer Purchaser, Inc. - Revolver     9/30/2024        1,050  
Green Street Parent, LLC - Revolver     8/27/2025        2,419  
GSP Holdings, LLC - Revolver     11/6/2025        2,720  
JHCC Holdings, LLC - Delayed Draw     9/9/2025        6,262  
JHCC Holdings, LLC - Revolver     9/9/2025        1,952  
Kellstrom Commercial Aerospace, Inc. - Revolver     7/1/2025        1,066  
Margaux Acquisition Inc. - Delayed Draw     12/19/2024        1,409  
Margaux UK Finance Limited - Revolver     12/19/2024        644  
MRI Software LLC - Delayed Draw     2/10/2026        1,016  
MRI Software LLC - Revolver     2/10/2026        1,782  
NPC International, Inc. - First Lien Senior Secured Loan     1/21/2021        402  
Profile Products LLC - Revolver     12/20/2024        3,833  
Refine Intermediate, Inc. - Revolver     9/3/2026        4,806  
RoC Opco LLC - Revolver     2/25/2025        10,241  
Solaray, LLC - Revolver     9/9/2022        5,327  
Symplr Software, Inc. - Revolver     11/30/2023        4,965  
TEI Holdings Inc. - Revolver     12/23/2025        1,056  
Tidel Engineering, L.P. - Revolver     3/1/2023        4,250  
TLC Purchaser, Inc. - Delayed Draw     10/13/2025        7,119  
TLC Purchaser, Inc. - Revolver     10/13/2025        8,900  
Ventiv Holdco, Inc. - Revolver     9/3/2025        2,981  
WCI-HSG Purchaser, Inc. - Revolver     2/24/2025        2,284  
Whitcraft LLC - Revolver     4/3/2023        1,087  
WU Holdco, Inc. - Revolver     3/26/2025        3,944  
YLG Holdings, Inc. - Delayed Draw     10/31/2025        1,008  
YLG Holdings, Inc. - Revolver     10/31/2025        8,545  
Zywave, Inc. - Revolver     11/17/2022        1,279  
Total First Lien Senior Secured Loans           $ 153,032  

 

 

  (1) Commitments are generally subject to borrowers meeting certain criteria such as compliance with covenants and certain operational metrics. These amounts may remain outstanding until the commitment period of an applicable loan expires, which may be shorter than its maturity.
  (2) Unfunded commitments denominated in currencies other than U.S. dollars have been converted to U.S. dollars using the applicable foreign currency exchange rate as of September 30, 2020.

 

46

 

 

As of December 31, 2019, the Company had $215.8 million of unfunded commitments under loan and financing agreements as follows:

 

   Expiration Date (1)  Unfunded Commitments (2)  
First Lien Senior Secured Loans        
A&R Logistics, Inc. - Revolver  5/5/2025  $5,043 
Abracon Group Holding, LLC. - Revolver  7/18/2024   2,833 
AMI US Holdings Inc. - Revolver  4/1/2024   977 
Amspec Services, Inc. - Revolver  7/2/2024   3,542 
Ansira Holdings, Inc. - Delayed Draw  12/20/2022   1,509 
AP Plastics Group, LLC - Revolver  8/2/2021   8,500 
Appriss Holdings, Inc. - Revolver  5/30/2025   4,711 
Aramsco, Inc. - Revolver  8/28/2024   2,766 
Batteries Plus Holding Corporation - Revolver  7/6/2022   4,250 
Captain D’s LLC - Revolver  12/15/2023   577 
CB Nike Intermediate Co Ltd - Revolver  10/31/2025   2,878 
Clinical Innovations, LLC - Revolver  10/17/2022   380 
CMI Marketing Inc. - Revolver  5/24/2023   2,112 
CPS Group Holdings, Inc. - Revolver  3/3/2025   4,933 
Cruz Bay Publishing, Inc. - Delayed Draw  2/28/2020   1,098 
Cruz Bay Publishing, Inc. - Revolver  2/28/2020   535 
CST Buyer Company - Revolver  10/3/2025   2,190 
Datix Bidco Limited - Revolver  10/28/2024   1,290 
Direct Travel, Inc. - Delayed Draw  12/1/2021   7,030 
Direct Travel, Inc. - Revolver  12/1/2021   4,250 
Dorner Manufacturing Corp - Revolver  3/15/2022   1,099 
Efficient Collaborative Retail Marketing Company, LLC - Revolver  6/15/2022   3,542 
Element Buyer, Inc. - Delayed Draw  7/18/2025   7,933 
Element Buyer, Inc. - Revolver  7/19/2024   2,833 
FFI Holdings I Corp - Delayed Draw  1/24/2025   677 
FFI Holdings I Corp - Revolver  1/24/2025   1,994 
Fineline Technologies, Inc. - Revolver  11/4/2022   655 
Grammer Purchaser, Inc. - Revolver  9/30/2024   998 
Great Expressions Dental Center PC - Revolver  9/28/2022   150 
Green Street Parent, LLC - Revolver  8/27/2025   2,419 
GSP Holdings, LLC - Revolver  11/6/2025   4,307 
Hightower Holding, LLC - Delayed Draw  1/31/2025   6,640 
Horizon Telcom, Inc. - Delayed Draw  6/15/2023   1,256 
Horizon Telcom, Inc. - Revolver  6/15/2023   116 
Ivy Finco Limited - First Lien Senior Secured Loan  5/19/2025   5,817 
JHCC Holdings, LLC - Delayed Draw  9/9/2025   8,500 
JHCC Holdings, LLC - Revolver  9/9/2025   1,820 
Kellstrom Commercial Aerospace, Inc. - Delayed Draw  7/1/2025   3,838 
Kellstrom Commercial Aerospace, Inc. - Revolver  7/1/2025   640 
Margaux Acquisition Inc. - Delayed Draw  12/19/2024   7,139 
Margaux Acquisition Inc. - Revolver  12/19/2024   2,872 
Margaux UK Finance Limited - Revolver  12/19/2024   662 
Mertus 522. GmbH - Delayed Draw  5/28/2026   13,761 
Profile Products LLC - Revolver  12/20/2024   3,833 
RoC Opco LLC - Revolver  2/25/2025   10,241 
Solaray, LLC - Revolver  9/9/2022   1,077 
SumUp Holdings Luxembourg S.à.r.l. - First Lien Senior Secured Loan  8/1/2024   10,638 
Symplr Software, Inc. - Revolver  11/30/2023   466 
TCFI Aevex LLC - Revolver  5/13/2025   138 
TEI Holdings Inc. - Revolver  12/23/2025   3,018 
Tidel Engineering, L.P. - Revolver  3/1/2023   4,250 
TLC Purchaser, Inc. - Delayed Draw  10/13/2025   7,119 
TLC Purchaser, Inc. - Revolver  10/13/2025   4,984 
Ventiv Holdco, Inc. - Revolver  9/3/2025   3,407 
WCI-HSG Purchaser, Inc. - Revolver  2/24/2025   2,284 
WU Holdco, Inc. - Delayed Draw  3/26/2026   4,801 
WU Holdco, Inc. - Revolver  3/26/2025   3,944 
YLG Holdings, Inc. - Delayed Draw  10/31/2025   5,127 
YLG Holdings, Inc. - Revolver  10/31/2025   8,545 
Zywave, Inc. - Revolver  11/17/2022   851 
Total First Lien Senior Secured Loans     $215,795 

 

 

  (1) Commitments are generally subject to borrowers meeting certain criteria such as compliance with covenants and certain operational metrics. These amounts may remain outstanding until the commitment period of an applicable loan expires, which may be shorter than its maturity.
  (2) Unfunded commitments denominated in currencies other than U.S. dollars have been converted to U.S. dollars using the applicable foreign currency exchange rate as of December 31, 2019.

 

47

 

 

Contingencies

 

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

 

Note 11. Financial Highlights

 

The following is a schedule of financial highlights for the nine months ended September 30, 2020 and 2019:

 

    For the Nine months Ended September 30,  
    2020     2019  
Per share data:            
Net asset value at beginning of period   $ 19.72     $ 19.46  
Net investment income (1)     1.13       1.23  
Net realized gain (loss) (1) (7)     (0.50 )     0.19  
Net change in unrealized appreciation (depreciation) (1) (2) (8)     (1.18 )     0.06  
Net increase (decrease) in net assets resulting from operations (1) (9) (10)     (0.55 )     1.48  
Stockholder distributions from income (3)     (1.09 )     (1.23 )
Dilution due to issuance of common stock     (1.81 )     -  
Net asset value at end of period   $ 16.27     $ 19.71  
                 
Net assets at end of period   $ 1,050,459     $ 1,081,225  
Shares outstanding at end of period     64,562,265.27       51,649,812.27  
Per share market value at end of period   $ 10.20     $ 18.97  
Total return based on market value (12)     (42.59 )%     20.55 %
Total return based on net asset value (4)     (11.92 )%     7.72 %
Ratios:                
Ratio of net investment income to average net assets (5)(11)(13)     8.68 %     8.50 %
Ratio of total net expenses to average net assets (5)(11)(13)     11.16 %     10.37 %
Supplemental data:                
Ratio of interest and debt financing expenses to average net assets (5)(13)     6.73 %     6.14 %
Ratio of expenses (without incentive fees) to average net assets (5) (11)(13)     11.16 %     9.37 %
Ratio of incentive fees and management fees, net of contractual and voluntary waivers, to average net assets (5)(11)(13)     3.56 %     3.48 %
Average principal debt outstanding   $ 1,594,268     $ 1,225,077  
Portfolio turnover (6)     13.58 %     35.54 %

 

 

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(1) The per share data was derived by using the weighted average shares outstanding during the period.
(2) Net change in unrealized appreciation (depreciation) on investments per share may not be consistent with the consolidated statements of operations due to the timing of shareholder transactions.
(3) The per share data for distributions reflects the actual amount of distributions declared during the period.
(4) Total return based on net asset value is calculated as the change in net asset value per share during the period, assuming dividends and distributions, including those distributions that have been declared. Total return has not been annualized.
(5) The computation of average net assets during the period is based on averaging net assets for the periods reported.
(6) Portfolio turnover rate is calculated using the lesser of year-to-date sales or year-to-date purchases over the average of the invested assets at fair value for the periods reported.
(7) Net realized gain (loss) includes net realized gain (loss) on investments, net realized gain (loss) on forward currency exchange contracts and net realized gain (loss) on foreign currency transactions.
(8) Net change in unrealized appreciation (depreciation) includes net change in unrealized appreciation (depreciation) on investments, net change in unrealized appreciation (depreciation) on forward currency exchange contracts and net change in unrealized appreciation (depreciation) on foreign currency translation.
(9) The sum of quarterly per share amounts presented in previously filed financial statements on Form 10-Q may not equal earnings per share. This is due to changes in the number of weighted average shares outstanding and the effects of rounding.
(10) Net increase in net assets resulting from operations per share in these financial highlights may be different from the net increase in net assets per share on the consolidated statements of operations due to changes in the number of weighted average shares outstanding and the effects of rounding.
(11) The ratio of voluntary incentive fee waiver to average net assets was 0.00% and (0.27%) for the nine months ended September 30, 2020 and 2019, respectively (Note 5). The ratio of voluntary management fee waiver to average net assets was 0.00% and (0.64%) for the nine months ended September 30, 2020 and 2019, respectively (Note 5). The ratio of net investment income without the voluntary incentive fee waiver and voluntary management fee waiver to average net assets for the nine months ended September 30, 2020 would be 8.68%. The ratio of net investment income without the voluntary incentive fee waiver to average net assets for the nine months ended September 30, 2019 would be 7.60%. The ratio of total expenses without the voluntary incentive fee waiver and voluntary management fee waiver to average net assets for the nine months ended September 30, 2020 would be 11.16%. The ratio of total expenses without the voluntary incentive fee waiver to average net assets for the nine months ended September 30, 2019 would be 11.28%.
(12) Total return based on market value (not annualized) is calculated as the change in market value per share during the period, assuming dividends and distributions, plus the declared distributions, divided by the beginning market price for the period. Total return has not been annualized.
(13) Ratio is annualized. Incentive fees, voluntary incentive fee waivers, and voluntary management fee waivers, if any, included within the ratio are not annualized.

 

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Note 12. Subsequent Events

 

The Company’s management has evaluated the events and transactions that have occurred through November 5, 2020, the issuance date of the consolidated financial statements, and noted no items requiring disclosure in this Form 10-Q or adjustment of the consolidated financial statements.

 

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

 

You should read the following analysis of our financial condition and results of operations in conjunction with our financial statements and related notes appearing in our Annual Report on Form 10-K (the “Annual Report”) for the year ended December 31, 2019, filed with the U.S. Securities and Exchange Commission (“SEC”) on February 26, 2020. The information contained in this section should also be read in conjunction with our unaudited financial statements and related notes and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q (the “Quarterly Report”).

 

Overview

 

Bain Capital Specialty Finance, Inc. (the “Company”, “we”, “our” and “us”) is an externally managed specialty finance company focused on lending to middle market companies. We have elected to be regulated as a business development company (a “BDC”) under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the “1940 Act”). We are managed by BCSF Advisors, LP (our “Advisor” or “BCSF Advisors”), a subsidiary of Bain Capital Credit, LP (“Bain Capital Credit”). Our Advisor is registered as an investment adviser with the SEC under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). Our Advisor also provides the administrative services necessary for us to operate (in such capacity, our “Administrator” or “BCSF Advisors”). Since we commenced operations on October 13, 2016 through September 30, 2020, we have invested approximately $3.7 billion in aggregate principal amount of debt and equity investments prior to any subsequent exits or repayments. We seek to generate current income and, to a lesser extent, capital appreciation through direct originations of secured debt, including first lien, first lien/last-out, unitranche and second lien debt, investments in strategic joint ventures, equity investments and, to a lesser extent, corporate bonds.

 

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

 

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

 

Investments

 

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

 

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

 

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

 

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Revenues

 

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

 

Our debt investment portfolio consists of primarily floating rate loans. As of September 30, 2020 and December 31, 2019, 99.2% and 99.0%, respectively, of our debt investments, based on fair value, bore interest at floating rates, which may be subject to interest rate floors. Variable-rate investments subject to a floor generally reset periodically to the applicable floor, only if the floor exceeds the index. Trends in base interest rates, such as LIBOR, may affect our net investment income over the long term. In addition, our results may vary from period to period depending on the interest rates of new investments made during the period compared to investments that were sold or repaid during the period; these results reflect the characteristics of the particular portfolio companies that we invested in or exited during the period and not necessarily any trends in our business or macroeconomic trends.

 

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

 

Expenses

 

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

 

  · our operational and organizational cost;

 

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

 

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

 

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

 

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

 

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

 

  · distributions on our common stock;

 

  · transfer agent and custody fees and expenses;

 

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

 

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

 

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  · brokerage fees and commissions;

 

  · federal and state registration fees;

 

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

 

  · Independent Director fees and expenses;

 

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

 

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

 

  · costs of holding stockholder meetings;

 

  · our fidelity bond;

 

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

 

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

 

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

 

  · fees and expenses associated with marketing efforts;

 

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

 

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

 

To the extent that expenses to be borne by us are paid by BCSF Advisors, we will generally reimburse BCSF Advisors for such expenses. To the extent the Administrator outsources any of its functions, the Company will pay the fees associated with such functions on a direct basis without profit to the Administrator. We will also reimburse the Administrator for its costs and expenses and our allocable portion of overhead incurred by it in performing its obligations under the Administration Agreement, including certain rent and compensation paid to or compensatory distributions received by our officers (including our Chief Compliance Officer and Chief Financial Officer) and any of their respective staff who provide services to us, operations staff who provide services to us, internal audit staff, if any, to the extent internal audit performs a role in our Sarbanes-Oxley internal control assessment and fees paid to third-party providers for goods or services. Our allocable portion of overhead will be determined by the Administrator, which expects to use various methodologies such as allocation based on the percentage of time certain individuals devote, on an estimated basis, to our business and affairs, and will be subject to oversight by our Board of Directors (our “Board”). We incurred expenses related to the Administrator of $0.0 million and $0.2 million for the three months ended September 30, 2020 and 2019, respectively, and $0.0 million and $0.8 million for the nine months ended September 30, 2020 and 2019, 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 $0.1 million and $0.2 million for the three months ended September 30, 2020 and 2019, respectively, and $0.4 million and $0.5 million for the nine months ended September 30, 2020 and 2019, respectively, which is included in other general and administrative expenses on the consolidated statements of operations. BCSF Advisors will not be reimbursed to the extent that such reimbursements would cause any distributions to our stockholders to constitute a return of capital. All of the foregoing expenses are ultimately borne by our stockholders.

 

Leverage

 

We may borrow money from time to time. However, our ability to incur indebtedness (including by issuing preferred stock), as of September 30, 2020, is limited by applicable regulations such that our asset coverage, as defined in the 1940 Act, must equal at least 150%. In determining whether to borrow money, we will analyze the maturity, covenant package and rate structure of the proposed borrowings as well as the risks of such borrowings compared to our investment outlook. As of September 30, 2020, the Company’s asset coverage was 169%.

 

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Impact of COVID-19

 

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

 

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

 

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

 

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

 

The Company experienced a significant reduction in our net asset value as of September 30, 2020 as compared to our net asset value as of December 31, 2019. The significant decrease is primarily the result of unrealized depreciation across the fair value of the Company’s investments resulting from the COVID-19 pandemic and the dilution impact from the Company’s rights offering.

 

As of September 30, 2020, the Company was in compliance with its asset coverage requirements under the 1940 Act. In addition, the Company was in compliance with all financial covenants within its credit facilities as of September 30, 2020. However, any continued increase in realized or unrealized depreciation of our investment portfolio or further significant reductions in our net asset value as a result of the effects of the COVID-19 pandemic or otherwise increase the risk of breaching the relevant covenants and requirements. Any breach of these requirements may adversely affect the Company's access to sufficient debt and equity capital. The effects of the COVID-19 pandemic may also cause the Company to limit distributions.

 

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

 

Portfolio and Investment Activity

 

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

 

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During the three months ended September 30, 2019, we invested $274.6 million, including PIK, in 39 portfolio companies, and had $184.2 million in aggregate amount of principal repayments and sales, resulting in a net increase in investments of $90.4 million for the period.

 

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

 

During the nine months ended September 30, 2019, we invested $953.3 million, including PIK, in 80 portfolio companies, including ABCS as a single portfolio company, and had $754.5 million in aggregate amount of principal repayments and sales, resulting in a net increase in investments of $198.8 million for the period. These amounts exclude the ABCS distribution transaction on April 30, 2019. On April 30, 2019, the Company received a distribution from ABCS. The portfolio of investments that were distributed comprised of 25 senior secured unitranche loans with a fair value of $919.0 million.

 

The following table shows the composition of the investment portfolio and associated yield data as of September 30, 2020 (dollars in thousands):

 

   As of September 30, 2020 
                   Weighted Average Yield (1)
at
 
   Amortized Cost   Percentage of
Total Portfolio
   Fair Value   Percentage of
Total Portfolio
   Amortized
Cost
   Market
Value
 
First Lien Senior Secured Loans  $2,180,248    86.2%  $2,128,629    86.5%   6.6%   6.8%
First Lien Last Out Loans   16,936    0.7    17,223    0.7    10.9    10.8 
Second Lien Senior Secured Loans   166,137    6.5    155,542    6.3    8.6    9.2 
Subordinated Debt   14,787    0.6    15,000    0.6    12.7    12.5 
Equity Interests   120,836    4.8    107,373    4.4    7.8    8.3 
Preferred Equity   29,722    1.2    35,890    1.5    15.0    15.0 
Warrants       0.0        0.0    N/A    N/A 
Total  $2,528,666    100.0%  $2,459,657    100.0%   6.9%   7.1%

 

 

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

 

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The following table shows the composition of the investment portfolio and associated yield data as of December 31, 2019 (dollars in thousands):

 

   As of December 31, 2019 
                   Weighted Average Yield (1)
at
 
   Amortized Cost   Percentage of
Total Portfolio
   Fair Value   Percentage of
Total Portfolio
   Amortized
Cost
   Market
Value
 
First Lien Senior Secured Loans  $2,167,932    85.4%  $2,165,844    85.7%   7.5%   7.5%
First Lien Last Out Loans   28,315    1.1    29,300    1.2    9.9    9.5 
Second Lien Senior Secured Loans   187,565    7.4    175,670    7.0    9.7    10.0 
Subordinated Debt   14,752    0.6    15,000    0.5    13.5    13.3 
Corporate Bonds   22,412    0.9    17,508    0.7    8.5    10.8 
Equity Interests   96,736    3.8    99,293    3.9    7.7    7.5 
Preferred Equity   19,551    0.8    24,318    1.0    15.1    15.1 
Warrants       0.0    122    0.0    N/A    N/A 
Total  $2,537,263    100.0%  $2,527,055    100.0%   7.8%   7.8%

 

 

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

 

The following table presents certain selected information regarding our investment portfolio as of September 30, 2020:

 

   As of 
   September 30, 2020 
Number of portfolio companies   107 
Percentage of debt bearing a floating rate (1)   99.2%
Percentage of debt bearing a fixed rate (1)   0.8%

 

 

  (1) Measured on a fair value basis.

 

The following table presents certain selected information regarding our investment portfolio as of December 31, 2019:

 

   As of 
   December 31, 2019 
Number of portfolio companies   114 
Percentage of debt bearing a floating rate (1)   99.0%
Percentage of debt bearing a fixed rate (1)   1.0%

 

 

  (1) Measured on a fair value basis.

 

The following table shows the amortized cost and fair value of our performing and non-accrual investments as of September 30, 2020 (dollars in thousands):

 

   As of September 30, 2020 
   Amortized Cost   Percentage at
Amortized Cost
   Fair Value   Percentage at
Fair Value
 
Performing  $2,523,708    99.8%  $2,455,792    99.8%
Non-accrual   4,958    0.2    3,865    0.2 
Total  $2,528,666    100%  $2,459,657    100%

 

The following table shows the amortized cost and fair value of our performing and non-accrual investments as of December 31, 2019 (dollars in thousands):

55

 

 

   As of December 31, 2019 
   Amortized Cost   Percentage at
Amortized Cost
   Fair Value   Percentage at
Fair Value
 
Performing  $2,523,110    99.4%  $2,523,626    99.9%
Non-accrual   14,153    0.6    3,429    0.1 
Total  $2,537,263    100.0%  $2,527,055    100.0%

 

Loans or debt securities are placed on non-accrual status when there is reasonable doubt that principal or interest will be collected. Accrued interest generally is reversed when a loan or debt security is placed on non-accrual status. Interest payments received on non-accrual loans or debt securities may be recognized as income or applied to principal depending upon management’s judgment. Non-accrual loans and debt securities are restored to accrual status when past due principal and interest is paid and, in management’s judgment, are likely to remain current. We may make exceptions to this treatment if the loan has sufficient collateral value and is in the process of collection. As of September 30, 2020, there had been one loan placed on non-accrual in the Company's portfolio, comprising 0.2% of the Company's portfolio, based on fair value. This is compared to two loans on non-accrual as of December 31, 2019, comprising 0.1% of the Company's portfolio, based on fair value.

 

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The following table shows the amortized cost and fair value of the investment portfolio, cash and cash equivalents and foreign cash as of September 30, 2020 (dollars in thousands):

 

   As of September 30, 2020 
   Amortized Cost   Percentage of
Total
   Fair Value   Percentage of
Total
 
Cash and cash equivalents  $43,020    1.6%  $43,020    1.7%
Foreign cash   2,029    0.1    2,009    0.1 
Restricted cash   78,895    3.0    78,895    3.1 
First Lien Senior Secured Loans   2,180,248    82.1    2,128,629    82.3 
First Lien Last Out Loans   16,936    0.6    17,223    0.7 
Second Lien Senior Secured Loans   166,137    6.3    155,542    5.9 
Subordinated Debt   14,787    0.6    15,000    0.6 
Equity Interests   120,836    4.6    107,373    4.2 
Preferred Equity   29,722    1.1    35,890    1.4 
Warrants       0.0        0.0 
Total  $2,652,610    100.0%  $2,583,581    100.0%

 

The following table shows the amortized cost and fair value of the investment portfolio, cash and cash equivalents and foreign cash as of December 31, 2019 (dollars in thousands):

 

   As of December 31, 2019 
   Amortized Cost   Percentage of
Total
   Fair Value   Percentage of
Total
 
Cash and cash equivalents  $36,531    1.4%  $36,531    1.4%
Foreign cash   854    0.0    810    0.0 
Restricted cash and cash equivalents   31,505    1.2    31,505    1.3 
First Lien Senior Secured Loans   2,167,932    83.2    2,165,844    83.4 
First Lien Last Out Loans   28,315    1.1    29,300    1.1 
Second Lien Senior Secured Loans   187,565    7.2    175,670    6.8 
Subordinated Debt   14,752    0.5    15,000    0.6 
Corporate Bonds   22,412    0.9    17,508    0.7 
Equity Interests   96,736    3.7    99,293    3.8 
Preferred Equity   19,551    0.8    24,318    0.9 
Warrants       0.0    122    0.0 
Total  $2,606,153    100.0%  $2,595,901    100.0%

 

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The following table shows the composition of the investment portfolio by industry, at amortized cost and fair value as of September 30, 2020 (with corresponding percentage of total portfolio investments) (dollars in thousands):

 

    As of September 30, 2020  
    Amortized Cost     Percentage of
Total Portfolio
    Fair Value     Percentage of
Total Portfolio
 
High Tech Industries   $  384,197       15.2 %   $  380,859       15.5 %
Aerospace & Defense      329,736       13.0        298,542       12.1  
Healthcare & Pharmaceuticals      220,682       8.6        216,723       8.9  
Consumer Goods: Non-Durable      192,532       7.5        190,042       7.8  
Capital Equipment      179,015       7.1        181,509       7.4  
Services: Business      181,525       7.2        171,961       7.0  
Transportation: Cargo      114,130       4.5        112,991       4.6  
Construction & Building      103,806       4.1        102,724       4.2  
Wholesale      80,105       3.2        77,362       3.1  
Energy: Oil & Gas      69,545       2.8        70,011       2.8  
FIRE: Insurance (1)      66,507       2.6        66,644       2.7  
Automotive      65,802       2.6        65,097       2.6  
Consumer Goods: Durable      59,498       2.4        59,033       2.4  
Transportation: Consumer      65,686       2.6        55,897       2.3  
Hotel, Gaming & Leisure      52,674       2.1        49,861       2.0  
Media: Diversified & Production      47,830       1.9        46,909       1.9  
Media: Advertising, Printing & Publishing      52,153       2.1        46,292       1.9  
Media: Broadcasting & Subscription      43,266       1.7        44,638       1.8  
Services: Consumer      30,560       1.2        30,695       1.2  
Retail      28,672       1.1        28,672       1.2  
Chemicals, Plastics & Rubber      25,734       1.0        26,182       1.1  
Telecommunications      21,774       0.9        21,524       0.9  
Energy: Electricity      22,027       0.9        21,235       0.9  
Environmental Industries      16,936       0.7        17,223       0.7  
Beverage, Food & Tobacco      12,069       0.5        15,693       0.6  
FIRE: Finance (1)      15,289       0.6        15,399       0.6  
Banking      14,081       0.6        13,364       0.5  
Containers, Packaging, & Glass      11,653       0.5        11,752       0.5  
FIRE: Real Estate (1)      10,856       0.4        10,901       0.4  
Forest Products & Paper      10,326       0.4        9,922       0.4  
Total   $ 2,528,666       100.0 %   $ 2,459,657       100.0 %

 

 

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

 

The following table shows the composition of the investment portfolio by industry, at amortized cost and fair value as of December 31, 2019 (with corresponding percentage of total portfolio investments) (dollars in thousands):

 

   As of December 31, 2019 
   Amortized Cost   Percentage of
Total Portfolio
   Fair Value   Percentage of
Total Portfolio
 
High Tech Industries  $356,086    14.0%  $356,073    14.1%
Aerospace & Defense   305,111    12.0    307,863    12.2 
Healthcare & Pharmaceuticals   255,579    10.1    254,014    10.1 
Consumer Goods: Non-Durable   195,602    7.7    196,653    7.8 
Capital Equipment   183,618    7.2    186,913    7.4 
Services: Business   165,286    6.5    165,862    6.5 
Transportation: Cargo   116,074    4.6    116,237    4.6 
Construction & Building   107,413    4.2    108,176    4.3 
Wholesale   79,542    3.1    78,225    3.1 
Energy: Oil & Gas   77,264    3.0    77,979    3.1 
Automotive   66,522    2.6    67,374    2.7 
Consumer Goods: Durable   63,712    2.5    63,394    2.5 
Transportation: Consumer     62,473       2.5       61,662       2.3  
Media: Advertising, Printing & Publishing     59,419       2.3       54,765       2.2  
FIRE: Insurance (1)     52,367       2.1       54,086       2.1  
Hotel, Gaming & Leisure     52,866       2.1       53,074       2.1  
Media: Broadcasting & Subscription     43,165       1.7       44,247       1.8  
Media: Diversified & Production     35,670       1.4       36,403       1.4  
Retail     34,774       1.4       34,827       1.4  
Chemicals, Plastics & Rubber     32,288       1.3       32,446       1.3  
Services: Consumer     30,458       1.2       30,794       1.2  
Banking     25,656       1.0       25,466       1.0  
Energy: Electricity     22,172       0.9       22,134       0.9  
Telecommunications     21,323       0.8       21,343       0.8  
Beverage, Food & Tobacco     30,687       1.2       19,531       0.8  
Environmental Industries     16,814       0.7       17,612       0.7  
Containers, Packaging & Glass     11,637       0.5       11,633       0.5  
FIRE: Real Estate (1)     10,786       0.4       10,443       0.4  
Forest Products & Paper     10,301       0.4       9,700       0.4  
Utilities: Electric     12,598       0.6       8,126       0.3  
Total   $ 2,537,263       100.0 %   $ 2,527,055       100.0 %

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

The following table shows the composition of our portfolio on the 1 to 4 rating scale as of September 30, 2020 (dollars in thousands):

 

   As of September 30, 2020 
Investment Performance Rating  Fair
Value
   Percentage of
Total
   Number of
Companies(1)
   Percentage of
Total
 
1  $47,427    1.9%   3    2.8%
2   2,086,072    84.8    87    81.3 
3   321,882    13.1    16    15.0 
4   4,276    0.2    1    0.9 
Total  $2,459,657    100.0%   107    100.0%

 

 

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

 

The following table shows the composition of our portfolio on the 1 to 4 rating scale as of December 31, 2019 (dollars in thousands):

 

   As of December 31, 2019 
Investment Performance Rating  Fair
Value
   Percentage of
Total
   Number of
Companies
   Percentage of
Total
 
1  $140,892    5.6%   4    3.5%
2   2,355,401    93.2    106    93.0 
3   27,333    1.1    3    2.6 
4   3,429    0.1    1    0.9 
Total  $2,527,055    100.0%   114    100.0%

 

Antares Bain Capital Complete Financing Solution

 

Prior to April 30, 2019, the Company was party to a limited liability company agreement with Antares Midco Inc. (“Antares”) pursuant to which it invested in ABC Complete Financing Solution LLC, which made investments through its subsidiary, Antares Bain Capital Complete Financing Solution LLC (together with ABC Complete Financing Solution LLC, “ABCS”). ABCS, an unconsolidated Delaware limited liability company, was formed on September 27, 2017 and commenced operations on November 29, 2017. ABCS’ principal purpose was to make investments, primarily in senior secured unitranche loans. The Company recorded its investment in ABCS at fair value. Distributions of income received from ABCS, if any, were recorded as dividend income from controlled affiliate investments in the consolidated statements of operations. Distributions received from ABCS in excess of income earned at ABCS, if any, were recorded as a return of capital and reduced the amortized cost of controlled affiliate investments.

 

We and Antares, as members of ABCS, agreed to contribute capital up to (subject to the terms of their agreement) $950.0 million in aggregate to purchase equity interests in ABCS, with us and Antares contributing up to $425.0 million and $525.0 million, respectively. Funding of such commitments generally required the consent of both Antares Credit Opportunities Manager LLC and the Advisor on behalf of Antares and us, respectively. ABCS was capitalized with capital contributions from its members on a pro-rata basis based on their maximum capital contributions as transactions were funded after they had been approved.

 

Investment decisions of ABCS required the consent of both the Advisor and Antares Credit Opportunities Manager LLC, as representatives of us and Antares, respectively. Each of the Advisor and Antares sourced investments for ABCS.

 

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On April 30, 2019, we formed BCSF Complete Financing Solution Holdco, LLC (“BCSF CFSH, LLC”) and BCSF Complete Financing Solution, LLC (“BCSF Unitranche” or “BCSF CFS, LLC”), wholly-owned, newly-formed, subsidiaries. We received our proportionate share of all assets which represented 44.737% of ABCS. The portfolio of investments that was distributed to us comprised of 25 senior secured unitranche loans with a fair value of $919.0 million and cash of $3.2 million. We also assumed the obligation to fund outstanding unfunded commitments of $31.4 million. In connection with the distribution, we recognized a realized gain of $0.3 million. We are no longer a member of ABCS. The assets we received from ABCS have been included in the Company’s consolidated financial statements and notes thereto.

 

In conjunction with the distribution from ABCS, on April 30, 2019, BCSF CFS, LLC entered into a loan and security agreement (the “JPM Credit Agreement” or the “JPM Credit Facility”) as borrower, with JPMorgan Chase Bank, National Association, as Administrative Agent, and Wells Fargo Bank, National Association as Collateral Administrator, Collateral Agent, Securities Intermediary and Bank. On the date of the ABCS distribution, the Company had $577.5 million outstanding on the JPM Credit Facility.

 

Below is selected statements of operations information for the three and nine months ended September 30, 2019 (dollars in thousands):

 

Selected Statements of Operations Information

 

   For the Three Months Ended   For the Nine Months Ended 
   September 30, 2019   September 30, 2019 
Interest income  $   $53,494 
Fee income       217 
Total revenues       53,711 
Credit facility expenses (1)       22,008 
Other fees and expenses       6,661 
Total expenses       28,669 
Net investment income       25,042 
Net increase in members’ capital from operations  $          —   $25,042 

 

 

(1) The ABCS distribution was effective April 30, 2019.

 

Results of Operations

 

Our operating results for the three months ended September 30, 2020 and 2019 were as follows (dollars in thousands):

 

   For the Three Months Ended September 30, 
   2020   2019 
Total investment income  $46, 817   $52,688 
Total expenses, net of fee waivers   25,361    31,513 
Net investment income   21,456    21,175 
Net realized gain (loss)   (24,412)   495 
Net change in unrealized appreciation (depreciation)   54,413    (3,471)
Net increase in net assets resulting from operations  $51,457   $18,199 

 

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Our operating results for the nine months ended September 30, 2020 and 2019 were as follows (dollars in thousands):

 

   For the Nine Months Ended September 30, 
   2020   2019 
Total investment income  $146,184   $143,178 
Total expenses, net of fee waivers   82,206    79,603 
Net investment income   63,978    63,575 
Net realized gain (loss)   (28,563)   9,723 
Net change in unrealized appreciation (depreciation)   (66,633)   3,436 
Net increase (decrease) in net assets resulting from operations  $(31,218)  $76,734 

 

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 the three months ended September 30, 2020 and 2019 was as follows (dollars in thousands):

 

   For the Three Months Ended September 30, 
   2020   2019 
Interest income  $44,329   $51,491 
Dividend income   1,881    961 
Other income   607    236 
Total investment income  $46,817   $52,688 

 

Interest income from investments, which includes interest and accretion of discounts and fees, decreased to $44.3 million for the three months ended September 30, 2020 from $51.5 million for the three months ended September 30, 2019, primarily due to the decrease in LIBOR between the periods. Our investment portfolio at amortized cost stayed relatively flat at $2,528.7 million as of September 30, 2020 compared to $2,529.1 million as of September 30, 2019. Accelerated unamortized discounts from paydowns decreased to $0.1 million for the three months ended September 30, 2020 from $0.4 million for the three months ended September 30, 2019. Dividend income increased to $1.9 million for the three months ended September 30, 2020 from $1.0 million for the three months ended September 30, 2019, primarily due to the growth of our equity investment in Gale Aviation (Offshore) Co. Other income increased to approximately $0.6 million for the three months ended September 30, 2020 from $0.2 million for the three months ended September 30, 2019, primarily due to an increase in amendment fees earned on certain investments. As of September 30, 2020, the weighted average yield of our investment portfolio at amortized cost decreased to 6.9% from 7.7% as of September 30, 2019.

 

The composition of our investment income for the nine months ended September 30, 2020 and 2019 was as follows (dollars in thousands):

 

   For the Nine Months Ended September 30, 
   2020   2019 
Interest income  $137,857   $127,060 
Dividend income   7,221    15,487 
Other income   1,106    631 
Total investment income  $146,184   $143,178 

 

Interest income from investments, which includes interest and accretion of discounts and fees, increased to $137.9 million for the nine months ended September 30, 2020 from $127.1 million for the nine months ended September 30, 2019, primarily due to the closing of the ABCS distribution transaction. Our investment portfolio at amortized cost stayed relatively flat at $2,528.7 million as of September 30, 2020 compared to $2,529.1 million as of September 30, 2019. Accelerated unamortized discounts from paydowns decreased to $1.8 million for the nine months ended September 30, 2020 from $3.5 million for the nine months ended September 30, 2019. Dividend income decreased to $7.2 million for the nine months ended September 30, 2020 from $15.5 million for the nine months ended September 30, 2019, primarily due to the closing of the ABCS distribution transaction. Other income increased to $1.1 million for the nine months ended September 30, 2020 from $0.6 million for the nine months ended September 30, 2019, primarily due to an increase in amendment fees earned on certain investments and prepayment fees.

 

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Operating Expenses

 

The composition of our operating expenses for the three months ended September 30, 2020 and 2019 was as follows (dollars in thousands):

 

   For the Three Months Ended September 30, 
   2020   2019 
Interest and debt financing expenses  $14,426   $19,427 
Base management fee   8,885    8,910 
Incentive fee       4,330 
Professional fees   296    789 
Directors fees   209    159 
Other general and administrative expenses   1,545    1,243 
Total expenses, before fee waivers  $25,361   $34,858 
Base management fee waiver       (2,582)
Incentive fee waiver       (763)
Total expenses, net of fee waivers  $25,361   $31,513 

 

The composition of our operating expenses for the nine months ended September 30, 2020 and 2019 was as follows (dollars in thousands):

 

   For the Nine Months Ended September 30, 
   2020   2019 
Interest and debt financing expenses  $49,614   $46,592 
Base management fee   26,250    23,644 
Incentive fee       12,905 
Professional fees   1,909    1,615 
Directors fees   555    370 
Other general and administrative expenses   3,878    3,672 
Total expenses, before fee waivers  $82,206   $88,798 
Base management fee waiver       (6,450)
Incentive fee waiver       (2,745)
Total expenses, net of fee waivers  $82,206   $79,603 

 

Interest and Debt Financing Expenses

 

Interest and debt financing expenses on our borrowings totaled approximately $14.4 million and $19.4 million for the three months ended September 30, 2020 and 2019, respectively. Interest and debt financing expense for the three months ended September 30, 2020 as compared to September 30, 2019 decreased primarily due to a decrease in LIBOR between periods, since 89% of our debt outstanding is floating rate. Interest and debt financing expenses on our borrowings totaled approximately $49.6 million and $46.6 million for the nine months ended September 30, 2020 and 2019, respectively. Interest and debt financing expense for the nine months ended September 30, 2020 as compared to September 30, 2019 increased primarily due to the issuance of our 2019-1 Debt in August 2019 and the issuance of our 2023 Notes in June 2020. The weighted average principal debt balance outstanding for the three months ended September 30, 2020 was $1,552.4 million compared to $1,547.8 million for the three months ended September 30, 2019. The weighted average principal debt balance outstanding for the nine months ended September 30, 2020 was $1,594.3 million compared to $1,225.1 million for the nine months ended September 30, 2019.

 

The weighted average interest rate (excluding deferred upfront financing costs and unused fees) on our debt outstanding was 3.7% and 4.7% as of September 30, 2020 and December 31, 2019, respectively.

 

Management Fees

 

Management fees (net of waivers) increased to $8.9 million for the three months ended September 30, 2020 from $6.3 million for the three months ended September 30, 2019. Management fees (gross of waivers) stayed flat at $8.9 million for the three months ended September 30, 2020 and 2019, respectively. Management fees waived for the three months ended September 30, 2020 and 2019 were $0.0 million and $2.6 million, respectively. As of December 31, 2019, the voluntary management fee waiver related to ABCS expired.

 

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Management fees (net of waivers) increased to $26.3 million for the nine months ended September 30, 2020 from $17.2 million for the nine months ended September 30, 2019. Management fees (gross of waivers) increased to $26.3 million for the nine months ended September 30, 2020 from $23.6 million for the nine months ended September 30, 2019, primarily due to an increase in assets. Management fees waived for the nine months ended September 30, 2020 and 2019 were $0.0 million and $6.4 million, respectively. As of December 31, 2019, the voluntary management fee waiver related to ABCS expired.

 

Incentive Fees

 

Incentive fee (net of waivers) decreased to $0.0 million for the three months ended September 30, 2020 from $3.6 million for the three months ended September 30, 2019. The Company did not incur an incentive fee for the three months ended September 30, 2020 due to the Incentive Fee Cap. Incentive fee waivers related to pre-incentive fee net investment income consisted of voluntary waivers of $0.0 million for the three months ended September 30, 2020 and $0.8 million for the three months ended September 30, 2019. For the three months ended September 30, 2020 there were no incentive fees related to the GAAP Incentive Fee.

 

Incentive fee (net of waivers) decreased to $0.0 million for the nine months ended September 30, 2020 from $10.2 million for the nine months ended September 30, 2019. The Company did not incur an incentive fee for the nine months ended September 30, 2020 due to the Incentive Fee Cap. Incentive fee waivers related to pre-incentive fee net investment income consisted of voluntary waivers of $0.0 million for the nine months ended September 30, 2020 and $2.7 million for the nine months ended September 30, 2019. For the nine months ended September 30, 2020 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 decreased to $1.8 million for the three months ended September 30, 2020 from $2.0 million for the three months ended September 30, 2019, primarily due to a decrease in costs associated with servicing our investment portfolio and legal fees related to deferred financing and debt issuance costs.

 

Professional fees and other general and administrative expenses increased to $5.8 million for the nine months ended September 30, 2020 from $5.3 million for the nine months ended September 30, 2019, primarily due to an increase in costs associated with servicing our investment portfolio.

 

Net Realized and Unrealized Gains and Losses

 

The following table summarizes our net realized and unrealized gains (losses) for the three months ended September 30, 2020 and 2019 (dollars in thousands):

 

   For the Three Months Ended September 30, 
   2020   2019 
Net realized gain on investments  $407   $218 
Net realized loss on investments   (24,670)   (191)
Net realized gain on foreign currency transactions   28    127 
Net realized loss on foreign currency transactions   (47)   (5)
Net realized gain on forward currency exchange contracts   342    346 
Net realized loss on forward currency exchange contracts   (472)    
Net realized gains (losses)  $(24,412)  $495 
           
Change in unrealized appreciation on investments  $84,532   $11,255 
Change in unrealized depreciation on investments   (19,136)   (24,023)
Net change in unrealized appreciation (depreciation) on investments   65,396    (12,768)
Unrealized appreciation on foreign currency translation   194    162 
Unrealized depreciation on forward currency exchange contracts   (11,177)   9,135 
Net change in unrealized appreciation (depreciation) on foreign currency and forward currency exchange contracts   (10,983)   9,297 
Net change in unrealized appreciation (depreciation)  $54,413   $(3,471)

 

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For the three months ended September 30, 2020, and 2019, we had net realized gains (losses) on investments of ($24.3) million and $0.0 million, respectively. During the three months ended September 30, 2020, we recorded gross realized losses of $24.7 million primarily from the sale of debt investments in four portfolio companies. For the three months ended September 30, 2020 and 2019, we had net realized gains (losses) on foreign currency transactions of ($0.0) million and $0.1 million, respectively. For the three months ended September 30, 2020 and 2019, we had net realized gains (losses) on forward currency contracts of ($0.1) million and $0.3 million, respectively, primarily as a result of settling GBP and NOK forward contracts.

 

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

 

For the three months ended September 30, 2019, we had $11.3 million in unrealized appreciation on 46 portfolio company investments, which was offset by $24.0 million in unrealized depreciation on 82 portfolio company investments. Net unrealized depreciation for the three months ended September 30, 2019 resulted from a decrease in fair value, primarily due to negative valuation adjustments.

 

For the three months ended September 30, 2020 and 2019, we had unrealized depreciation on forward currency exchange contracts of ($11.2) million and $9.1 million, respectively. For the three months ended September 30, 2020, unrealized depreciation on forward currency exchange contracts was due to EUR, GBP, DKK, NOK, AUD and CAD forward contracts. For the three months ended September 30, 2019, unrealized depreciation on forward currency exchange contracts was due to EUR, GBP, DKK, NOK and AUD forward contracts.

 

The following table summarizes our net realized and unrealized gains (losses) for the nine months ended September 30, 2020 and 2019 (dollars in thousands):

 

   For the Nine Months Ended September 30, 
   2020   2019 
Net realized gain on investments  $772   $1,610 
Net realized loss on investments   (35,439)   (2,739)
Net realized gain on foreign currency transactions   134    60 
Net realized loss on foreign currency transactions   (502)   (250)
Net realized gain on forward currency exchange contracts   6,545    11,042 
Net realized loss on forward currency exchange contracts   (73)    
Net realized gains (losses)  $(28,563)  $9,723 
           
Change in unrealized appreciation on investments  $32,391   $31,462 
Change in unrealized depreciation on investments   (91,192)   (28,473)
Net change in unrealized appreciation (depreciation) on investments   (58,801)   2,989 
Unrealized appreciation on foreign currency translation   89    461 
Unrealized depreciation on forward currency exchange contracts   (7,921)   (14)
Net change in unrealized appreciation (depreciation) on foreign currency and forward currency exchange contracts   (7,832)   447 
Net change in unrealized appreciation (depreciation)  $(66,633)  $3,436 

 

For the nine months ended September 30, 2020, and 2019, we had net realized gains (losses) on investments of ($34.7) million and ($1.1) million, respectively. During the nine months ended September 30, 2020, we recorded gross realized losses of $35.4 million primarily from the sale or liquidation of debt investments in seven portfolio companies. For the nine months ended September 30, 2020 and 2019, we had net realized gains (losses) on foreign currency transactions of ($0.4) million and ($0.2) million, respectively. For the nine months ended September 30, 2020 and 2019, we had net realized gains (losses) on forward currency contracts of $6.5 million and $11.0 million, respectively, primarily as a result of settling GBP, DKK, EUR and NOK forward contracts.

 

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

 

For the nine months ended September 30, 2019, we had $31.5 million in unrealized appreciation on 88 portfolio company investments, which was offset by $28.5 million in unrealized depreciation on 62 portfolio company investments. Net unrealized appreciation for the nine months ended September 30, 2019 resulted from an increase in fair value, primarily due to positive valuation adjustments.

 

For the nine months ended September 30, 2020 and 2019, we had unrealized appreciation (depreciation) on forward currency exchange contracts of ($7.9) million and $0.0 million, respectively. For the nine months ended September 30, 2020, unrealized depreciation on forward currency exchange contracts was due to EUR, GBP, DKK, NOK, AUD and CAD forward contracts. For the nine months ended September 30, 2019, unrealized depreciation on forward currency exchange contracts was due to EUR, GBP, DKK, NOK and AUD forward contracts.

 

The following table summarizes the impact of foreign currency for the three months ended September 30, 2020 and 2019 (dollars in thousands):

 

   For the Three months ended September 30, 
   2020   2019 
Net change in unrealized appreciation (depreciation) on investments due to foreign currency  $10,911   $(8,349)
Net realized gain (loss) on investments due to foreign currency   396    (2)
Net change in unrealized appreciation on foreign currency translation   194    162 
Net realized gain (loss) on foreign currency transactions   (19)   122 
Net change in unrealized appreciation (depreciation) on forward currency exchange contracts   (11,177)   9,135 
Net realized gain (loss) on forward currency exchange contracts   (130)   346 
Foreign currency impact to net increase in net assets resulting from operations  $175   $1,414 

 

Included in total net gains (losses) on the consolidated statements of operations is net gains (losses) of $11.5 million and ($8.1) million related to realized and unrealized gains and losses on investments, foreign currency holdings and non-investment assets and liabilities attributable to the changes in foreign currency exchange rates for the three months ended September 30, 2020 and 2019, respectively. Including the total net realized and unrealized gains (losses) on forward currency exchange contracts of ($11.3) million and $9.5 million, respectively, included in the above table, the net impact of foreign currency on total net gains (losses) on the consolidated statements of operations is $0.2 million and $1.4 million for the three months ended September 30, 2020 and 2019, respectively.

 

The following table summarizes the impact of foreign currency for the nine months ended September 30, 2020 and 2019 (dollars in thousands):

 

   For the Nine months ended September 30, 
   2020   2019 
Net change in unrealized appreciation (depreciation) on investments due to foreign currency  $3,521   $(8,773)
Net realized gain on investments due to foreign currency   396    64 
Net change in unrealized appreciation on foreign currency translation   89    461 
Net realized loss on foreign currency transactions   (368)   (190)
Net change in unrealized depreciation on forward currency exchange contracts   (7,921)   (14)
Net realized gain on forward currency exchange contracts   6,472    11,042 
Foreign currency impact to net increase in net assets resulting from operations  $2,189   $2,590 

 

Included in total net gains (losses) on the consolidated statements of operations is net gains (losses) of $3.6 million and ($8.4) million related to realized and unrealized gains and losses on investments, foreign currency holdings and non-investment assets and liabilities attributable to the changes in foreign currency exchange rates for the nine months ended September 30, 2020 and 2019, respectively. Including the total net realized and unrealized gains (losses) on forward currency exchange contracts of ($1.4) million and $11.0 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 $2.2 million and $2.6 million for the nine months ended September 30, 2020 and 2019, respectively.

 

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Net Increase (Decrease) in Net Assets Resulting from Operations

 

For the three months ended September 30, 2020 and 2019, the net increase in net assets resulting from operations was $51.5 million and $18.2 million, respectively. Based on the weighted average shares of common stock outstanding for the three months ended September 30, 2020 and 2019, our per share net increase in net assets resulting from operations was $0.80 and $0.35, respectively.

 

For the nine months ended September 30, 2020 and 2019, the net increase (decrease) in net assets resulting from operations was ($31.2) million and a net increase in net assets resulting from operations of $76.7 million, respectively. Based on the weighted average shares of common stock outstanding for the nine months ended September 30, 2020 and 2019, our per share net increase (decrease) in net assets resulting from operations was ($0.55) and $1.49, respectively.

 

Financial Condition, Liquidity and Capital Resources

 

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

 

We intend to continue to generate cash primarily from cash flows from operations, future borrowings and future offerings of securities. We may from time to time raise additional equity or debt capital through registered offerings, enter into additional debt facilities, or increase the size of existing facilities or issue debt securities. Any such incurrence or issuance would be subject to prevailing market conditions, our liquidity requirements, contractual and regulatory restrictions and other factors. We are required to meet an asset coverage ratio, defined under the 1940 Act as the ratio of our total assets (less all liabilities and indebtedness not represented by senior securities) to our outstanding senior securities, of at least 150% after each issuance of senior securities. As of September 30, 2020 and December 31, 2019, our asset coverage ratio was 169% and 164%, respectively.

 

At September 30, 2020 and December 31, 2019, we had $123.9 million and $68.8 million in cash, foreign cash, restricted cash and cash equivalents, respectively.

 

At September 30, 2020, we had approximately $117.2 million of availability on our BCSF Revolving Credit Facility, $150.8 million of availability on our JPM Credit Facility and $50.0 million of availability on our Revolving Advisor Loan, subject to existing terms and regulatory requirements. At December 31, 2019, we had approximately $232.0 million of availability on our BCSF Revolving Credit Facility and $119.8 million of availability on our JPM Credit Facility, subject to existing terms and regulatory requirements.

 

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

 

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

 

For the nine months ended September 30, 2019, cash, foreign cash, restricted cash, and cash equivalents increased by $124.8 million. During the nine months ended September 30, 2019, we used $259.3 million in cash for operating activities, primarily to purchase investments of $1,068.9 million, which was offset by proceeds from principal payments and sales of investments of $730.3 million, and a net increase in net assets resulting from operations of $76.7 million.

 

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During the nine months ended September 30, 2019, we generated $385.0 million from financing activities, primarily from borrowings on our debt from BCSF Revolving Credit Facility, Citibank Revolving Credit Facility, JPM Credit Facility, and the issuance of our 2019-1 Debt, offset by repayments on debt of $700.9 million and distributions paid during the period of $60.1 million.

 

Equity

 

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

 

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

 

During the nine months ended September 30, 2020, we did not issue shares of our common stock to investors who have opted into our dividend reinvestment plan. During the nine months ended September 30, 2019, we issued 167,674.81 shares of our common stock to investors who have opted into our dividend reinvestment plan.

 

On May 7, 2019, the Company’s Board of Directors authorized the Company to repurchase up to $50 million of its outstanding common stock in accordance with safe harbor rules under the Exchange Act. Any such repurchases will depend upon market conditions and there is no guarantee that the Company will repurchase any particular number of shares or any shares at all. As of September 30, 2020, there have been no repurchases of common stock.

 

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

 

Debt

 

Debt consisted of the following as of September 30, 2020 and December 31, 2019 (dollars in thousands):

 

   As of September 30, 2020   As of December 31, 2019 
   Total Aggregate
Principal
Amount
Committed
   Principal
Amount
Outstanding
   Carrying
Value (1)
   Total Aggregate
Principal
Amount
Committed
   Principal
Amount
Outstanding
   Carrying
Value (1)
 
BCSF Revolving Credit Facility  $425,000   $307,774   $307,774   $500,000   $268,015   $268,015 
2018-1 Notes   365,700    365,700    363,962    365,700    365,700    363,832 
JPM Credit Facility   450,000    299,183    299,183    666,581    546,754    546,754 
2019-1 Debt   398,750    398,750    396,207    398,750    398,750    396,034 
Revolving Advisor Loan   50,000                     
2023 Notes   150,000    150,000    146,726             
Total Debt  $1,839,450   $1,521,407   $1,513,852   $1,931,031   $1,579,219   $1,574,635 

 

 

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

 

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BCSF Revolving Credit Facility

 

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

 

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

 

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

 

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

 

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

 

Assets that are pledged as collateral for the BCSF Revolving Credit Facility are not directly available to the creditors of the Company to satisfy any obligations of the Company other than the Company’s obligations under the BCSF Revolving Credit Facility.

 

Borrowings under the BCSF Revolving Credit Facility bear interest at LIBOR plus a margin. As of September 30, 2020, the BCSF Revolving Credit Facility was accruing interest expense at a rate of LIBOR plus 3.00%. As of December 31, 2019, the BCSF Revolving Credit Facility was accruing interest expense at a rate of LIBOR plus 2.50%. The Company pays an unused commitment fee of 30 basis points (0.30%) per annum. Interest is payable quarterly in arrears. Any amounts borrowed under the BCSF Revolving Credit Facility, and all accrued and unpaid interest, will be due and payable, on the earliest of: (a) October 5, 2022 and (b) the date upon which all loans shall become due and payable in full, whether by acceleration or otherwise.

 

As of September 30, 2020 and December 31, 2019, there were $307.8 million and $268.0 million borrowings under the BCSF Revolving Credit Facility, respectively, and we were in compliance with the terms of the BCSF Revolving Credit Facility.

 

For the three months ended September 30, 2020 and 2019, the components of interest expense related to the BCSF Revolving Credit Facility were as follows (dollars in thousands):

 

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   For the Three Months Ended September 30, 
   2020   2019 
Borrowing interest expense  $2,823   $4,441 
Unused facility fee   106    109 
Amortization of deferred financing costs and upfront commitment fees   297    269 
Total interest and debt financing expenses  $3,226   $4,819 

 

For the nine months ended September 30, 2020 and 2019, the components of interest expense related to the BCSF Revolving Credit Facility were as follows (dollars in thousands):

 

   For the Nine Months Ended September 30, 
   2020   2019 
Borrowing interest expense  $12,428   $13,844 
Unused facility fee   270    316 
Amortization of deferred financing costs and upfront commitment fees   830    798 
Total interest and debt financing expenses  $13,528   $14,958 

 

2018-1 Notes

 

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

 

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

 

2018-1 Notes   Principal Amount     Spread above Index   Interest rate at September 30, 2020  
Class A-1 A   $ 205,900     1.55% + 3 Month LIBOR     1.82 %
Class A-1 B     45,000     1.50% + 3 Month LIBOR (first 24 months)     1.77 %
            1.80% + 3 Month LIBOR (thereafter)        
Class A-2     55,100     2.15% + 3 Month LIBOR     2.42 %
Class B     29,300     3.00% + 3 Month LIBOR     3.27 %
Class C     30,400     4.00% + 3 Month LIBOR     4.27 %
Total 2018-1 Notes     365,700              
Membership Interests     85,450     Non-interest bearing     Not applicable  
Total   $ 451,150              

 

The Class A-1 A, A-1 B, A-2, B and C 2018-1 Notes were issued at par and are scheduled to mature on October 20, 2030. The Company received 100% of the membership interests (the “Membership Interests”) in the 2018-1 Issuer in exchange for its sale to the 2018-1 Issuer of the initial closing date loan portfolio. The Membership Interests do not bear interest. As of September 30, 2020, the Company’s Membership Interests are pledged as collateral to the BCSF Revolving Credit Facility.

 

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

 

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

 

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

 

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

 

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

 

As of September 30, 2020, there were 58 first lien and second lien senior secured loans with a total fair value of approximately $404.6 million and cash of $42.2 million securing the 2018-1 Notes. As of December 31, 2019, there were 61 first lien and second lien senior secured loans with a total fair value of approximately $435.8 million and cash of $9.1 million securing the 2018-1 Notes. Assets that are pledged as collateral for the 2018-1 Notes are not directly available to the creditors of the Company to satisfy any obligations of the Company other than the Company’s obligations under the indenture governing the 2018-1 Notes. Such assets are included in the Company’s consolidated financial statements. The creditors of the 2018-1 Issuer have received security interests in such assets and such assets are not intended to be available to the creditors of the Company (or an affiliate of the Company). The 2018-1 Portfolio must meet certain requirements, including asset mix and concentration, term, agency rating, collateral coverage, minimum coupon, minimum spread and sector diversity requirements in the indenture governing the 2018-1 Notes. As of September 30, 2020 and December 31, 2019, the Company was in compliance with its covenants related to the 2018-1 Notes.

 

Costs of $2.1 million were incurred in connection with debt securitization of the 2018-1 Notes by the 2018-1 Issuer which have been recorded as debt issuance costs and presented as a reduction to the outstanding principal amount of the 2018-1 Notes on the consolidated statements of assets and liabilities and are being amortized over the life of the 2018-1 Issuer using the effective interest method. The balance of the unamortized debt issuance costs related to the 2018-1 Issuer was $1.7 million and $1.9 million as of September 30, 2020 and December 31, 2019, respectively.

 

For the three months ended September 30, 2020 and 2019, the components of interest expense related to the 2018-1 Issuer were as follows (dollars in thousands):

 

   For the Three Months Ended September 30, 
   2020   2019 
Borrowing interest expense  $2,246   $4,022 
Amortization of debt issuance costs and upfront commitment fees   44    44 
Total interest and debt financing expenses  $2,290   $4,066 

 

For the nine months ended September 30, 2020 and 2019, the components of interest expense related to the 2018-1 Issuer were as follows (dollars in thousands):

 

   For the Nine Months Ended September 30, 
   2020   2019 
Borrowing interest expense  $8,752   $12,499 
Amortization of debt issuance costs and upfront commitment fees   130    130 
Total interest and debt financing expenses  $8,882   $12,629 

 

Citibank Revolving Credit Facility

 

On February 19, 2019, the Company entered into a credit and security agreement (the “Credit Agreement” or the “Citibank Revolving Credit Facility”) with the Company as equity holder and servicer, BCSF II-C, LLC as Borrower, Citibank, N.A., as Administrative Agent, and Wells Fargo Bank, National Association as Collateral Administrator, Collateral Agent and Custodian. The Credit Agreement was effective as of February 19, 2019.

 

The facility amount under the Credit Agreement is $350.0 million. Proceeds of the loans under the Credit Agreement may be used to acquire certain qualifying loans and such other uses as permitted under the Credit Agreement. The period from the closing date until February 19, 2020 is referred to as the reinvestment period and during such reinvestment period, the Borrower may request drawdowns under the Credit Agreement. The final maturity date is the earliest of: (a) the business day designated by the Borrower as the final maturity date upon not less than three business days’ prior written notice to the Administrative Agent, the Collateral Agent, the Lenders, the Custodian and the Collateral Administrator, (b) February 19, 2022 and (c) the date on which the Administrative Agent provides notice of the declaration of the final maturity date after the occurrence of an event of default. The 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.

 

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Borrowings under the Citibank Revolving Credit Facility bear interest at LIBOR plus a margin. During the period prior to the last day of the reinvestment period, borrowings under the Credit Agreement will bear interest at a rate equal to the three-month LIBOR plus 1.60%. Commencing on the last day of the reinvestment period, the interest rate on borrowings under the Credit Agreement will reset to three-month LIBOR plus 2.60% for the remaining term of the Credit Agreement. We pay an unused commitment fee based on a corresponding utilization rate; (i) 0 basis points (0.00%) per annum when greater than or equal to 85.0% utilization, (ii) 25 basis points (0.25%) per annum when greater than or equal to 75.0% but less than 85.0% utilization, (iii) 50 basis points (0.50%) per annum when greater than or equal to 50.0% but less than 75.0% utilization, (iv) 75 basis points (0.75%) per annum when greater than or equal to 25.0% but less than 50% utilization, or (v) 100 basis points (1.00%) per annum when less than 25.0% utilization.

 

On August 28, 2019, the Citibank Revolving Credit Facility was terminated. The proceeds from the 2019-1 Debt were used to repay the total outstanding debt.

 

For the three months ended September 30, 2020 and 2019, the components of interest expense related to the Citibank Revolving Credit Facility were as follows (dollars in thousands):

 

   For the Three Months Ended September 30, 
   2020   2019 
Borrowing interest expense  $   $1,174 
Unused facility fee       134 
Amortization of deferred financing costs and upfront commitment fees       108 
Total interest and debt financing expenses  $   $1,416 

 

For the nine months ended September 30, 2020 and 2019, the components of interest expense related to the Citibank Revolving Credit Facility were as follows (dollars in thousands):

 

   For the Nine Months Ended September 30, 
   2020   2019 
Borrowing interest expense  $   $4,104 
Unused facility fee       357 
Amortization of deferred financing costs and upfront commitment fees       124 
Total interest and debt financing expenses  $   $4,585 

 

JPM Credit Facility

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Borrowings under the JPM Credit Facility bear interest at LIBOR plus a margin. As of September 30, 2020, the JPM Credit Facility was accruing interest expense at a rate of LIBOR plus 2.375%. The Company pays an unused commitment fee of between 37.5 basis points (0.375%) and 75 basis points (0.75%) per annum depending on the size of the unused portion of the facility. Interest is payable quarterly in arrears.

 

As of September 30, 2020 and December 31, 2019, there were $299.2 million and $546.8 million of borrowings under the JPM Credit Facility, respectively, and we were in compliance with the terms of the JPM Credit Facility.

 

For the three months ended September 30, 2020 and 2019, the components of interest expense related to the JPM Credit Facility were as follows (dollars in thousands):

 

   For the Three Months Ended September 30, 
   2020   2019 
Borrowing interest expense  $2,444   $7,232 
Unused facility fee   94    202 
Amortization of deferred financing costs and upfront commitment fees   65    20 
Total interest and debt financing expenses  $2,603   $7,454 

 

For the nine months ended September 30, 2020 and 2019, the components of interest expense related to the JPM Credit Facility were as follows (dollars in thousands):

 

   For the Nine Months Ended September 30, 
   2020   2019 
Borrowing interest expense  $11,469   $12,387 
Unused facility fee   310    328 
Amortization of deferred financing costs and upfront commitment fees   402    33 
Total interest and debt financing expenses  $12,181   $12,748 

 

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2019-1 Debt

 

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

 

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

 

2019-1 Debt   Principal Amount     Spread above Index   Interest rate at September 30, 2020  
Class A-1L   $ 50,000     1.70% + 3 Month LIBOR     1.98 %
Class A-1     222,500     1.70% + 3 Month LIBOR     1.98 %
Class A-2A     50,750     2.70% + 3 Month LIBOR     2.98 %
Class A-2B     13,000     4.23% (Fixed)     4.23 %
Class B     30,000     3.60% + 3 Month LIBOR     3.88 %
Class C     32,500     4.75% + 3 Month LIBOR     5.03 %
Total 2019-1 Debt     398,750              
Membership Interests     102,250     Non-interest bearing     Not applicable  
Total   $ 501,000              

 

The Loans and the Class A-1, A-2A, A-2B, and B Notes were issued at par. The Class C Notes were issued at a discount. The Notes are scheduled to mature on October 15, 2031. The Company received 100% of the membership interests (the “Membership Interests”) in the 2019-1 Issuer in exchange for its sale to the 2019-1 Issuer of the initial closing date loan portfolio. The Membership Interests do not bear interest. As of September 30, 2020, the Company’s Membership Interests are pledged as collateral to the BCSF Revolving Credit Facility.

 

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

 

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

 

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

 

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

 

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

 

As of September 30, 2020, there were 66 first lien and second lien senior secured loans with a total fair value of approximately $444.1 million and cash of $36.7 million securing the 2019-1 Debt. As of December 31, 2019, there were 65 first lien and second lien senior secured loans with a total fair value of approximately $471.3 million and cash of $22.4 million securing the 2019-1 Notes. Assets that are pledged as collateral for the 2019-1 Debt are not directly available to the creditors of the Company to satisfy any obligations of the Company other than the Company’s obligations under the indenture and loan agreement governing the 2019-1 Debt. The creditors of the 2019-1 Co-Issuers have received security interests in such assets and such assets are not intended to be available to the creditors of the Company (or an affiliate of the Company). The 2019-1 Portfolio must meet certain requirements, including asset mix and concentration, term, agency rating, collateral coverage, minimum coupon, minimum spread and sector diversity requirements in the indenture and loan agreement governing the 2019-1 Debt. As of September 30, 2020, the Company was in compliance with its covenants related to the 2019-1 Debt.

 

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Costs of the offering, including the discount of the Class C Notes, of $2.8 million were incurred in connection with debt securitization of the 2019-1 Debt by the 2019-1 Co-Issuers which have been recorded as debt issuance costs and presented as a reduction to the outstanding principal amount of the 2019-1 Debt on the consolidated statements of assets and liabilities and are being amortized over the life of the 2019-1 Issuer using the effective interest method. The balance of the unamortized debt issuance costs related to the 2019-1 Issuer was $2.5 million and $2.7 million as of September 30, 2020 and December 31, 2019, respectively.

 

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

 

   For the Three Months Ended September 30, 
   2020   2019 
Borrowing interest expense  $2,755   $1,651 
Amortization of debt issuance costs and upfront commitment fees   58    21 
Total interest and debt financing expenses  $2,813   $1,672 

 

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

 

   For the Nine Months Ended September 30, 
   2020   2019 
Borrowing interest expense  $10,490   $1,651 
Amortization of debt issuance costs and upfront commitment fees   172    21 
Total interest and debt financing expenses  $10,662   $1,672 

 

Revolving Advisor Loan

 

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

 

For the three months ended September 30, 2020 and 2019, the components of interest expense related to the Revolving Advisor Loan were as follows (dollars in thousands):

 

   For the Three Months Ended September 30, 
   2020   2019 
Borrowing interest expense  $         —   $      — 
Total interest and debt financing expenses  $   $ 

 

For the nine months ended September 30, 2020 and 2019, the components of interest expense related to the Revolving Advisor Loan were as follows (dollars in thousands):

 

   For the Nine Months Ended September 30, 
   2020   2019 
Borrowing interest expense  $58   $    — 
Total interest and debt financing expenses  $58   $ 

 

2023 Notes

 

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

 

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The Notes will mature on June 10, 2023 and may be redeemed in whole or in part at the Company’s option at any time or from time to time at the redemption prices set forth in the Note Purchase Agreement. The Notes will bear interest at a rate of 8.50% per year payable semi-annually on June 10 and December 10 of each year, commencing on December 10, 2020. As of September 30, 2020, the Company was in compliance with the terms of the Note Purchase Agreement governing the 2023 Notes.

 

As of September 30, 2020 and December 31, 2019, the components of the carrying value of the 2023 Notes were as follows (dollars in thousands):

 

   September 30, 2020   December 31, 2019 
Principal amount of debt  $150,000   $ 
Unamortized debt issuance cost   (1,969)    
Original issue discount, net of accretion   (1,305)    
Carrying value of 2023 Notes  $146,726   $ 

 

For the three months ended September 30, 2020 and 2019, the components of interest expense related to the 2023 Notes were as follows (dollars in thousands):

 

   For the Three Months Ended September 30, 
   2020   2019 
Borrowing interest expense  $3,188   $ 
Amortization of debt issuance cost   184     
Amortization of original issue discount   122     
Total interest and debt financing expenses  $3,494   $ 

 

For the nine months ended September 30, 2020 and 2019, the components of interest expense related to the 2023 Notes were as follows (dollars in thousands):

 

   For the Nine Months Ended September 30, 
   2020   2019 
Borrowing interest expense  $3,932   $ 
Amortization of debt issuance cost   222     
Amortization of original issue discount   149     
Total interest and debt financing expenses  $4,303   $ 

 

Distribution Policy

 

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

 

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

 

The following table summarizes distributions declared during the nine months ended September 30, 2019 (dollars in thousands, except per share data):

 

Date Declared  Record Date  Payment Date  Amount
Per Share
   Total
Distributions
 
February 21, 2019  March 29, 2019  April 12, 2019  $0.41   $21,108 
May 7, 2019  June 28, 2019  July 29, 2019  $0.41   $21,176 
August 1, 2019  September 30, 2019  October 30, 2019  $0.41   $21,176 
Total distributions declared        $1.23   $63,460 

 

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

 

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

 

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

 

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

 

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

 

Commitments and Off-Balance Sheet Arrangements

 

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

 

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As of September 30, 2020, the Company had $153.0 million of unfunded commitments under loan and financing agreements as follows (dollars in thousands):

 

   Expiration Date (1)  Unfunded Commitments (2) 
First Lien Senior Secured Loans        
9 Story Media Group Inc. - Revolver  4/30/2026  $71 
A&R Logistics, Inc. - Revolver  5/5/2025   6,096 
Abracon Group Holding, LLC. - Revolver  7/18/2024   2,833 
Allworth Financial Group, L.P. - Revolver  12/31/2025   1,944 
AMI US Holdings Inc. - Revolver  4/1/2024   488 
Amspec Services, Inc. - Revolver  7/2/2024   1,553 
Ansira Holdings, Inc. - Revolver  12/20/2024   3,683 
AP Plastics Group, LLC - Revolver  8/2/2021   8,500 
Appriss Holdings, Inc. - Revolver  5/30/2025   2,383 
Aramsco, Inc. - Revolver  8/28/2024   1,581 
Batteries Plus Holding Corporation - Revolver  7/6/2022   4,250 
Captain D's LLC - Revolver  12/15/2023   480 
CB Nike IntermediateCo Ltd - Revolver  10/31/2025   4,428 
CMI Marketing Inc - Revolver  5/24/2023   2,112 
CPS Group Holdings, Inc. - Revolver  3/3/2025   4,933 
Cruz Bay Publishing, Inc. - Delayed Draw  2/1/2021   1,098 
Cruz Bay Publishing, Inc. - Revolver  2/1/2021   856 
CST Buyer Company - Revolver  10/3/2025   2,190 
Dorner Manufacturing Corp - Revolver  3/15/2022   1,099 
Efficient Collaborative Retail Marketing Company, LLC - Revolver  6/15/2022   1,275 
Element Buyer, Inc. - Revolver  7/19/2024   3,400 
FFI Holdings I Corp - Revolver  1/24/2025   5,432 
Grammer Purchaser, Inc. - Revolver  9/30/2024   1,050 
Green Street Parent, LLC - Revolver  8/27/2025   2,419 
GSP Holdings, LLC - Revolver  11/6/2025   2,720 
JHCC Holdings, LLC - Delayed Draw  9/9/2025   6,262 
JHCC Holdings, LLC - Revolver  9/9/2025   1,952 
Kellstrom Commercial Aerospace, Inc. - Revolver  7/1/2025   1,066 
Margaux Acquisition Inc. - Delayed Draw  12/19/2024   1,409 
Margaux UK Finance Limited - Revolver  12/19/2024   644 
MRI Software LLC - Delayed Draw  2/10/2026   1,016 
MRI Software LLC - Revolver  2/10/2026   1,782 
NPC International, Inc. - First Lien Senior Secured Loan  1/21/2021   402 
Profile Products LLC - Revolver  12/20/2024   3,833 
Refine Intermediate, Inc. - Revolver  9/3/2026   4,806 
RoC Opco LLC - Revolver  2/25/2025   10,241 
Solaray, LLC - Revolver  9/9/2022   5,327 
Symplr Software, Inc. - Revolver  11/30/2023   4,965 
TEI Holdings Inc. - Revolver  12/23/2025   1,056 
Tidel Engineering, L.P. - Revolver  3/1/2023   4,250 
TLC Purchaser, Inc. - Delayed Draw  10/13/2025   7,119 
TLC Purchaser, Inc. - Revolver  10/13/2025   8,900 
Ventiv Holdco, Inc. - Revolver  9/3/2025   2,981 
WCI-HSG Purchaser, Inc. - Revolver  2/24/2025   2,284 
Whitcraft LLC - Revolver  4/3/2023   1,087 
WU Holdco, Inc. - Revolver  3/26/2025   3,944 
YLG Holdings, Inc. - Delayed Draw  10/31/2025   1,008 
YLG Holdings, Inc. - Revolver  10/31/2025   8,545 
Zywave, Inc. - Revolver  11/17/2022   1,279 
Total First Lien Senior Secured Loans     $153,032 

 

 

  (1) Commitments are generally subject to borrowers meeting certain criteria such as compliance with covenants and certain operational metrics. These amounts may remain outstanding until the commitment period of an applicable loan expires, which may be shorter than its maturity.
  (2) Unfunded commitments denominated in currencies other than U.S. dollars have been converted to U.S. dollars using the applicable foreign currency exchange rate as of September 30, 2020.

 

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As of December 31, 2019, the Company had $215.8 million of unfunded commitments under loan and financing agreements as follows:

 

   Expiration Date (1)    Unfunded Commitments (2)  
First Lien Senior Secured Loans          
A&R Logistics, Inc. - Revolver  5/5/2025    $5,043 
Abracon Group Holding, LLC. - Revolver  7/18/2024     2,833 
AMI US Holdings Inc. - Revolver  4/1/2024     977 
Amspec Services, Inc. - Revolver  7/2/2024     3,542 
Ansira Holdings, Inc. - Delayed Draw  12/20/2022     1,509 
AP Plastics Group, LLC - Revolver  8/2/2021     8,500 
Appriss Holdings, Inc. - Revolver  5/30/2025     4,711 
Aramsco, Inc. - Revolver  8/28/2024     2,766 
Batteries Plus Holding Corporation - Revolver  7/6/2022     4,250 
Captain D’s LLC - Revolver  12/15/2023     577 
CB Nike Intermediate Co Ltd - Revolver  10/31/2025     2,878 
Clinical Innovations, LLC - Revolver  10/17/2022     380 
CMI Marketing Inc. - Revolver  5/24/2023     2,112 
CPS Group Holdings, Inc. - Revolver  3/3/2025     4,933 
Cruz Bay Publishing, Inc. - Delayed Draw  2/28/2020     1,098 
Cruz Bay Publishing, Inc. - Revolver  2/28/2020     535 
CST Buyer Company - Revolver  10/3/2025     2,190 
Datix Bidco Limited - Revolver  10/28/2024     1,290 
Direct Travel, Inc. - Delayed Draw  12/1/2021     7,030 
Direct Travel, Inc. - Revolver  12/1/2021     4,250 
Dorner Manufacturing Corp - Revolver  3/15/2022     1,099 
Efficient Collaborative Retail Marketing Company, LLC - Revolver  6/15/2022     3,542 
Element Buyer, Inc. - Delayed Draw  7/18/2025     7,933 
Element Buyer, Inc. - Revolver  7/19/2024     2,833 
FFI Holdings I Corp - Delayed Draw  1/24/2025     677 
FFI Holdings I Corp - Revolver  1/24/2025     1,994 
Fineline Technologies, Inc. - Revolver  11/4/2022     655 
Grammer Purchaser, Inc. - Revolver  9/30/2024     998 
Great Expressions Dental Center PC - Revolver  9/28/2022     150 
Green Street Parent, LLC - Revolver  8/27/2025     2,419 
GSP Holdings, LLC - Revolver  11/6/2025     4,307 
Hightower Holding, LLC - Delayed Draw  1/31/2025     6,640 
Horizon Telcom, Inc. - Delayed Draw  6/15/2023     1,256 
Horizon Telcom, Inc. - Revolver  6/15/2023     116 
Ivy Finco Limited - First Lien Senior Secured Loan  5/19/2025     5,817 
JHCC Holdings, LLC - Delayed Draw  9/9/2025     8,500 
JHCC Holdings, LLC - Revolver  9/9/2025     1,820 
Kellstrom Commercial Aerospace, Inc. - Delayed Draw  7/1/2025     3,838 
Kellstrom Commercial Aerospace, Inc. - Revolver  7/1/2025     640 
Margaux Acquisition Inc. - Delayed Draw  12/19/2024     7,139 
Margaux Acquisition Inc. - Revolver  12/19/2024     2,872 
Margaux UK Finance Limited - Revolver  12/19/2024     662 
Mertus 522. GmbH - Delayed Draw  5/28/2026     13,761 
Profile Products LLC - Revolver  12/20/2024     3,833 
RoC Opco LLC - Revolver  2/25/2025     10,241 
Solaray, LLC - Revolver  9/9/2022     1,077 
SumUp Holdings Luxembourg S.à.r.l. - First Lien Senior Secured Loan  8/1/2024     10,638 
Symplr Software, Inc. - Revolver  11/30/2023     466 
TCFI Aevex LLC - Revolver  5/13/2025     138 
TEI Holdings Inc. - Revolver  12/23/2025     3,018 
Tidel Engineering, L.P. - Revolver  3/1/2023     4,250 
TLC Purchaser, Inc. - Delayed Draw  10/13/2025     7,119 
TLC Purchaser, Inc. - Revolver  10/13/2025     4,984 
Ventiv Holdco, Inc. - Revolver  9/3/2025     3,407 
WCI-HSG Purchaser, Inc. - Revolver  2/24/2025     2,284 
WU Holdco, Inc. - Delayed Draw  3/26/2026     4,801 
WU Holdco, Inc. - Revolver  3/26/2025     3,944 
YLG Holdings, Inc. - Delayed Draw  10/31/2025     5,127 
YLG Holdings, Inc. - Revolver  10/31/2025     8,545 
Zywave, Inc. - Revolver  11/17/2022     851 
Total First Lien Senior Secured Loans       $215,795 

 

 

 

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

 

  (2) Unfunded commitments denominated in currencies other than U.S. dollars have been converted to U.S. dollars using the applicable foreign currency exchange rate as of December 31, 2019.

 

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Significant Accounting Estimates and Critical Accounting Policies

 

Basis of Presentation

 

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

 

Use of Estimates

 

The preparation of the consolidated financial statements in conformity with US GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates and such differences could be material.

 

Revenue Recognition

 

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

 

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

 

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

 

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

 

Valuation of Portfolio Investments

 

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

 

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With respect to unquoted securities, we value each investment considering, among other measures, discounted cash flow models, comparisons of financial ratios of peer companies that are public and other factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, we use the pricing indicated by the external event to corroborate and/or assist us in our valuation. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Contractual Obligations

 

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

 

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

 

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

 

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

 

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

 

A summary of the maturities of our principal amounts of debt and other contractual payment obligations as of September 30, 2020 are as follows (dollars in thousands):

 

   Payments Due by Period 
   Total   Less than
1 year
   1 — 3 years   3 — 5 years   More than
5 years
 
BCSF Revolving Credit Facility  $307,774   $   $307,774   $   $ 
2018-1 Notes   365,700                365,700 
JPM Credit Facility   299,183            299,183     
2019-1 Debt   398,750                398,750 
2023 Notes   150,000        150,000         
Total Debt Obligations  $1,521,407   $   $457,774   $299,183   $764,450 

 

Subsequent Events

 

We have evaluated the events and transactions that have occurred through November 5, 2020, the issuance date of the consolidated financial statements, and noted no items requiring disclosure in this Form 10-Q or adjustment of the consolidated financial statements.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

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

 

Assuming that the statement of financial condition as of September 30, 2020 were to remain constant and that we took no actions to alter our existing interest rate sensitivity, the following table shows the annualized impact of hypothetical base rate changes in interest rates (dollars in thousands):

 

.           Net Increase  
    Increase (Decrease) in   Increase (Decrease) in   (Decrease) in  
Change in Interest Rates   Interest Income   Interest Expense   Net Investment Income  
Down 25 basis points   $ (1,027 ) $ (3,177 ) $ 2,150  
Up 100 basis points   9,615   13,584   (3,969 )
Up 200 basis points   33,181   27,168   6,013  
Up 300 basis points   57,107   40,752   16,355  

 

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

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

As of September 30, 2020 (the end of the period covered by this report), our management has carried out an evaluation, under the supervision of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15 under the Exchange Act). Based on that evaluation our Chief Executive Officer and Chief Financial Officer have concluded that our current disclosure controls and procedures are effective in timely alerting management, including the Chief Executive Officer and Chief Financial Officer, to material information relating to us that is required to be disclosed by us in the reports we file or submit under the Exchange Act. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

 

Changes in Internal Controls Over Financial Reporting

 

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

 

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PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

 

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

 

Item 1A. Risk Factors

 

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, which could materially affect our business, financial condition and/or operating results. The risks described in our Annual Report on Form 10-K are not the only risks we face. Additional risks and uncertainties are not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. During the nine months ended September 30, 2020, other than as set forth below, there have been no material changes from the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2019.

 

The outbreak of COVID-19 has caused, and for an unknown period of time, will continue to cause, disruptions in global debt and equity markets and economies in regions in which we operate

 

In late 2019 and early 2020, COVID-19 emerged in China and spread rapidly to across the world, including to the U.S. This outbreak has led and for an unknown period of time will continue to lead to disruptions in local, regional, national and global markets and economies affected thereby.  With respect to the U.S. credit markets (in particular for middle market loans), this outbreak has resulted in, and until fully resolved is likely to continue to result in, the following among other things: (i)  government imposition of various forms of “stay at home” orders and the closing of “non-essential” businesses, resulting in significant disruption to the businesses of many middle-market loan borrowers including supply chains, demand and practical aspects of their operations, as well as in lay-offs of employees, and, while these effects are hoped to be temporary, some effects could be persistent or even permanent; (ii) increased draws by borrowers on revolving lines of credit and other financing instruments; (iii) increased requests by borrowers for amendments and waivers of their credit agreements to avoid default, increased defaults by such borrowers and/or increased difficulty in obtaining refinancing at the maturity dates of their loans; (iv) volatility and disruption of these  markets including greater volatility in pricing and spreads and difficulty in valuing loans during periods of increased volatility, and liquidity issues; and (v) rapidly evolving proposals and/or actions by state and federal governments to address problems being experienced by the markets and by businesses and the economy in general which will not necessarily adequately address the problems facing the loan market and middle market businesses. This outbreak is having, and any future outbreaks could have, an adverse impact on the markets and the economy in general, which could have a material adverse impact on, among other things, the ability of lenders to originate loans, the volume and type of loans originated, the ability of borrowers to make payments and the volume and type of amendments and waivers granted to borrowers and remedial actions taken in the event of a borrower default, each of which could negatively impact the amount and quality of loans available for investment by the Company and returns to the Company, among other things. Itis impossible to determine the scope of this outbreak, or any future outbreaks, how long any such outbreak, market disruption or uncertainties may last, the effect any governmental actions will have or the full potential impact on the Company, the Adviser and portfolio companies. Any potential impact to our results of operations will depend to a large extent on future developments and new information that could emerge regarding the duration and severity of COVID-19 and the actions taken by authorities and other entities to contain the coronavirus or treat its impact, all of which are beyond our control. These potential impacts, while uncertain, could adversely affect our and our portfolio companies’ operating results.

 

Although it is impossible to predict the precise nature and consequences of these events, or of any political or policy decisions and regulatory changes occasioned by emerging events or uncertainty on applicable laws or regulations that impact the Company, our portfolio companies and our investments, it is clear that these types of events are negatively impacting and will, for at least some time, continue to negatively impact the Company and portfolio companies and in many instances the impact will be profound.  For example, many of the smaller and middle market companies in which we may invest are being significantly negatively impacted by these emerging events and the uncertainty caused by these events.  With respect to loans to such companies, the Company will be impacted if, among other things, (i) amendments and waivers are granted (or are required to be granted) to borrowers permitting deferral of loan payments or allowing for payment-in-kind (“PIK”) interest payments, (ii) borrowers default on their loans, are unable to refinance their loans at maturity, or go out of business permanently, and/or (iii) the value of loans held by the Company decreases as a result of such events and the uncertainty they cause. Such emerging events, to the extent experienced, will cause the Company to suffer a loss on its investments or interest thereon. The Company will also be negatively affected if the operations and effectiveness of the Adviser or a portfolio company (or any of the key personnel or service providers of the foregoing) is compromised or if necessary or beneficial systems and processes are disrupted as a result of stay-at-home orders or other related interruptions to regular business operations. The Company has limited exposure to cyclical industries, including those currently experiencing significant distress, such as the energy, hospitality, and airline industries. The Company has no direct investments in commercial aviation companies and has focused on identifying portfolio companies in defensive industries such as technology, aerospace & defense and healthcare & pharmaceuticals with an emphasis on the durability of a portfolio company’s cash flow profile. For more information regarding the impact of current events and market conditions on the Company and our portfolio companies, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

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Uncertainty can result in or coincide with, among other things: increased volatility in the financial markets for securities, derivatives, loans, credit and currency; a decrease in the reliability of market prices and difficulty in valuing assets (including portfolio company assets); greater fluctuations in spreads on debt investments and currency exchange rates; increased risk of default (by both government and private obligors and issuers); further social, economic, and political instability; nationalization of private enterprise; greater governmental involvement in the economy or in social factors that impact the economy; changes to governmental regulation and supervision of the loan, securities, derivatives and currency markets and market participants and decreased or revised monitoring of such markets by governments or self-regulatory organizations and reduced enforcement of regulations; limitations on the activities of investors in such markets; controls or restrictions on foreign investment, capital controls and limitations on repatriation of invested capital; the significant loss of liquidity and the inability to purchase, sell and otherwise fund investments or settle transactions (including, but not limited to, a market freeze); unavailability of currency hedging techniques; substantial, and in some periods extremely high, rates of inflation, which can last many years and have substantial negative effects on credit and securities markets as well as the economy as a whole; recessions; and difficulties in obtaining and/or enforcing legal judgments.   

 

We currently are operating in a period of capital markets disruption, significant volatility and economic uncertainty.

 

The global capital markets are experiencing a period of disruption and instability resulting in increasing spreads between the yields realized on riskier debt securities and those realized on risk-free securities, lack of liquidity in parts of the debt capital markets, significant write-offs in the financial services sector and the re-pricing of credit risk in the broadly syndicated market. Highly disruptive market conditions have resulted in increasing volatility and illiquidity in the global credit, debt and equity markets generally. The duration and ultimate effect of such market conditions cannot be accurately forecasted. Extreme uncertainty regarding economic markets is resulting in declines in the market values of potential investments and declines in the market values of investments after they are made or acquired by us and affecting the potential for liquidity events involving such investments or portfolio companies. During periods of market disruption, portfolio companies may be more likely to seek to draw on unfunded commitments we have made, and the risk of being unable to fund such commitments is heightened during such periods. Applicable accounting standards require us to determine the fair value of our investments as the amount that would be received in an orderly transaction between market participants at the measurement date. While most of our investments are not publicly traded, as part of our valuation process we consider a number of measures, including comparison to publicly traded securities. As a result, volatility in the public capital markets can adversely affect our investment valuations.

 

During any such periods of market disruption and instability, we and other companies in the financial services sector may have limited access, if any, to alternative markets for debt and equity capital. Equity capital may be difficult to raise because, subject to some limited exceptions that will apply to us as a BDC, we will generally not be able to issue additional shares of our common stock at a price less than NAV without first obtaining approval for such issuance from our stockholders and our Independent Directors. In addition, 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% immediately after each time we incur indebtedness. The debt capital that will be available, if any, may be at a higher cost and on less favorable terms and conditions in the future. Any inability to raise capital could have a negative effect on our business, financial condition and results of operations.

 

A prolonged period of market illiquidity may cause us to reduce the volume of loans and debt securities we originate and/or fund and adversely affect the value of our portfolio investments, which could have a material and adverse effect on our business, financial condition, results of operations and cash flows.

 

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Adverse developments in the credit markets may impair our ability to enter into new debt financing arrangements and otherwise negatively impact our current debt financing arrangements.

 

In past economic downturns, such as the financial crisis in the United States that began in mid-2007 and during other times of extreme market volatility, many commercial banks and other financial institutions stopped lending or significantly curtailed their lending activity. In addition, in an effort to stem losses and reduce their exposure to segments of the economy deemed to be high risk, some financial institutions limited refinancing and loan modification transactions and reviewed the terms of existing facilities to identify bases for accelerating the maturity of existing lending facilities. If these conditions recur, for example as a result of the COVID-19 outbreak, it may be difficult for us to enter into a new credit or other borrowing facility, obtain other financing to finance the growth of our investments, or refinance any outstanding indebtedness on acceptable economic terms, or at all.

 

So far, the COVID-19 outbreak has resulted in, and until fully resolved is likely to continue to result in, among other things, increased draws by borrowers on revolving lines of credit and increased requests by borrowers for amendments, modifications and waivers of their credit agreements to avoid default or change payment terms, increased defaults by such borrowers and/or increased difficulty in obtaining refinancing at the maturity dates of their loans. In addition, the duration and effectiveness of responsive measures implemented by governments and central banks cannot be predicted. The commencement, continuation, or cessation of government and central bank policies and economic stimulus programs, including changes in monetary policy involving interest rate adjustments or governmental policies, may contribute to the development of or result in an increase in market volatility, illiquidity and other adverse effects that could negatively impact the credit markets and the Company.

 

The expected discontinuation of LIBOR could have a significant impact on our business.

 

In July 2017, the head of the United Kingdom Financial Conduct Authority announced the intention to phase out the use of LIBOR by the end of 2021. Such announcement indicates that the continuation of LIBOR and other Reference Rates on the current basis cannot and will not be guaranteed after 2021. This announcement and any additional regulatory or market changes may have an adverse impact on our portfolio companies, our performance or our financial condition. Any replacement rate that is chosen may be less favorable than the current rates. Until the announcement of the replacement rate, our portfolio companies may continue to invest in instruments that reference LIBOR or otherwise use LIBOR due to favorable liquidity or pricing.

 

The expected discontinuation of LIBOR could have a significant impact on our business. We anticipate significant operational challenges for the transition away from LIBOR including, amending existing loan agreements with borrowers on investments that may have not been modified with fallback language and adding effective fallback language to new agreements in the event that LIBOR is discontinued before maturity. There may also be additional issues associated with our current processes and information systems that will need to be identified and evaluated by us. Due to the uncertainty of the replacement for LIBOR, the potential effect of any such event on our cost of capital and net investment income cannot yet be determined. Further changes or reforms to the determination or supervision of LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR, which could have an adverse impact on the market value for or value of any LIBOR-linked securities, loans, and other financial obligations or extensions of credit held by or due to us and could have a material adverse effect on our business, financial condition and results of operations.

 

In advance of 2021, regulators and market participants will seek to work together to identify or develop successor reference rates and how the calculation of associated spreads (if any) should be adjusted. The Federal Reserve Board, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, is considering replacing U.S. dollar LIBOR with a new index calculated by short term repurchase agreements, backed by U.S. Treasury securities, called the Secured Overnight Financing Rate (“SOFR”). The first publication of SOFR was released in April 2018. Whether or not SOFR attains market traction as a LIBOR replacement remains a question and the future of LIBOR at this time is uncertain. Additionally, prior to 2021, it is expected that industry trade associations and participants will focus on the transition mechanisms by which the reference rates and spreads (if any) in existing contracts or instruments may be amended, whether through marketwide protocols, fallback contractual provisions, bespoke negotiations or amendments or otherwise. Nonetheless, the termination of LIBOR presents risks to us and our portfolio companies. At this time, it is not possible to exhaustively identify or predict the effect of any such changes, any establishment of alternative reference rates or any other reforms that may be enacted in the United Kingdom or elsewhere.

 

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

 

None.

 

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Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None.

 

Item 6. Exhibits, Financial Statement Schedules

 

The following exhibits are included, or incorporated by reference, in this Quarterly Report on Form 10-Q for the nine months ended September 30, 2020 (and are numbered in accordance with Item 601 of Regulation S-K under the Securities Act).

 

Exhibit
Number
  Description of Document
3.1   Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form 10 (File No. 000-55528) filed on October 6, 2016).
3.2   Bylaws (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form 10 (File No. 000-55528) filed on October 6, 2016).
4.1   Dividend Reinvestment Plan (incorporated by reference to Exhibit 10.5 to the Company’s Registration Statement on Form 10 (File No. 000-55528) filed on October 6, 2016).
10.1   Investment Advisory Agreement, dated October 6, 2016, by and between the Company and the Advisor (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement on Form 10 (File No. 000-55528) filed on October 6, 2016).
10.2   Administration Agreement, dated October 6, 2016, by and between the Company and the Administrator (incorporated by reference to Exhibit 10.2 to the Company’s Registration Statement on Form 10 (File No. 000-55528) filed on October 6, 2016).
10.3   Form of Advisory Fee Waiver Agreement by and between the Company and the Advisor (incorporated by reference to Exhibit 10.3 to the Company’s Registration Statement on Form 10 (File No. 000-55528) filed on October 6, 2016).
10.4   Form of Subscription Agreement (incorporated by reference to Exhibit 10.4 to the Company’s Registration Statement on Form 10 (File No. 000-55528) filed on October 6, 2016).
10.5   Form of Custodian Agreement by and between the Company and U.S. Bank National Association (incorporated by reference to Exhibit 10.6 to the Company’s Registration Statement on Form 10 (File No. 000-55528) filed on October 6, 2016).
10.6   Revolving Credit Agreement, dated December 22, 2016, among the Company, as Borrower, BCSF Holdings, L.P., as the Feeder Fund, and BCSF Holdings Investors, L.P., as the Feeder Fund General Partner and Sumitomo Mitsui Banking Corporation, as Sole Lead Arranger, Administrative Agent, Letter of Credit Issuer and Lender. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 814-01175), filed on December 23, 2016).
10.7   Revolving Credit Agreement, dated October 4, 2017, among the Company as Equity Holder, BCSF I, LLC as Borrower, and Goldman Sachs Bank USA, as Sole Lead Arranger, Syndication Agent and Administrative Agent, and U.S. Bank National Association as Collateral Administrator, Collateral Agent and Collateral Custodian (incorporated by reference to Exhibit 10.7. to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on November 13, 2017).
10.8   Omnibus Amendment No. 1, dated May 15, 2018, to Revolving Credit Agreement, dated October 4, 2017, among the Company as Equity Holder, BCSF I, LLC as Borrower, and Goldman Sachs Bank USA, as Sole Lead Arranger, Syndication Agent and Administrative Agent, and U.S. Bank National Association as Collateral Administrator, Collateral Agent and Collateral Custodian (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 814-01175), filed on May 17, 2018).

 

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Exhibit
Number
  Description of Document
10.9   Indenture, dated as of September 28, 2018, between BCC Middle Market CLO 2018-1, LLC, as issuer, and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on October 17, 2018).
10.10   Portfolio Management Agreement, dated as of September 28, 2018, by and between BCC Middle Market CLO 2018-1, LLC, as issuer, and Bain Capital Specialty Finance, Inc., as portfolio manager (incorporated by reference to Exhibit 10.10 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on October 17, 2018).
10.11   Loan Sale Agreement, dated as of September 28, 2018, by and between BCC Middle Market CLO 2018-1, LLC, as issuer, and Bain Capital Specialty Finance, Inc., as the transferor (incorporated by reference to Exhibit 10.11 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on October 17, 2018).
10.12   Collateral Administration Agreement, dated as of September 28, 2018, by and between BCC Middle Market CLO 2018-1, LLC, as issuer, Bain Capital Specialty Finance, Inc., as portfolio manager, and Wells Fargo Bank, National Association, as collateral administrator (incorporated by reference to Exhibit 10.12 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on October 17, 2018).
10.13   Master Participation Agreement, dated as of September 28, 2018, by and between BCSF I, LLC, as financing subsidiary, and BCC Middle Market CLO 2018-1, LLC, as issuer (incorporated by reference to Exhibit 10.13 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on October 17, 2018).
10.14   Credit and Security Agreement, dated February 19, 2019, by and among the Company as Equityholder and Servicer, BCSF II-C, LLC as Borrower, Citibank, N.A., as Administrative Agent, and Wells Fargo Bank, National Association as Collateral Administrator, Collateral Agent and Custodian (incorporated by reference to Exhibit 10.9 to the Company’s Annual Report on Form 10-K (File No. 814-01175), filed on February 28, 2019).
10.15   Loan and Security Agreement, dated April 30, 2019, by and among BCSF Complete Financing Solution LLC, as Borrower, JPMorgan Chase Bank, National Association, as Administrative Agent and Wells Fargo Bank, National Association as Collateral Administrator, Collateral Agent, Securities Intermediary and Bank (incorporated by reference to Exhibit 10.10 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on August 7, 2019).
10.16   Indenture, dated as of August 28, 2019, between BCC Middle Market CLO 2019-1, LLC, as issuer, BCC Middle Market CLO 2019-1 Co-Issuer, LLC, as co-issuer and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 10.16  to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on November 6, 2019).
10.17   Class A-1L Credit Agreement, dated as of August 28, 2019, among BCC Middle Market CLO 2019-1, LLC, as borrower, BCC Middle Market CLO 2019-1 Co-Issuer, LLC, as co-borrower, Capital One, National Association, as lender, Wells Fargo Bank, National Association, as loan agent, and Wells Fargo, National Association, as collateral trustee (incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K (File No. 814-01175), filed on February 26, 2020).
10.18   Portfolio Management Agreement, dated as of August 28, 2019, by and between BCC Middle Market CLO 2019-1, LLC, as issuer, and Bain Capital Specialty Finance, Inc., as portfolio manager (incorporated by reference to Exhibit 10.16  to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on November 6, 2019).
10.19   Loan Sale Agreement, dated as of August 28, 2019, by and between BCC Middle Market CLO 2019-1, LLC, as issuer, and Bain Capital Specialty Finance, Inc., as the transferor (incorporated by reference to Exhibit 10.16  to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on November 6, 2019).
10.20   Collateral Administration Agreement, dated as of August 28, 2019, by and between BCC Middle Market CLO 2019-1, LLC, as issuer, Bain Capital Specialty Finance, Inc., as portfolio manager, and Wells Fargo Bank, National Association, as collateral administrator (incorporated by reference to Exhibit 10.16  to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on November 6, 2019).

 

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Exhibit
Number
  Description of Document
10.21   Master Participation Agreement, dated as of August 28, 2019, by and between BCSF I, LLC, as financing subsidiary, and BCC Middle Market CLO 2019-1, LLC, as issuer (incorporated by reference to Exhibit 10.16  to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on November 6, 2019).
10.22   Master Participation Agreement, dated as of August 28, 2019, by and between BCSF II-C, LLC, as financing subsidiary, and BCC Middle Market CLO 2019-1, LLC, as issuer (incorporated by reference to Exhibit 10.16  to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on November 6, 2019).
10.23   Amended and Restated Credit Agreement, dated January 8, 2020, among the Company as Equity Holder, BCSF I, LLC as Borrower, and Goldman Sachs Bank USA, as Sole Lead Arranger, Syndication Agent and Administrative Agent, and U.S. Bank National Association as Collateral Administrator, Collateral Agent and Collateral Custodian (incorporated by reference to Exhibit 10.23 to the Company’s Annual Report on Form 10-K (File No. 814-01175), filed on February 26, 2020).
10.24   First Amendment to Loan and Security Agreement, dated January 29, 2020, by and among BCSF Complete Financing Solution LLC, as Borrower, JPMorgan Chase Bank, National Association, as Administrative Agent and Wells Fargo Bank, National Association as Collateral Administrator, Collateral Agent, Securities Intermediary and Bank (incorporated by reference to Exhibit 10.24 to the Company’s Annual Report on Form 10-K (File No. 814-01175), filed on February 26, 2020).
10.25   Second Amendment to Loan and Security Agreement, dated March 20, 2020, by and among BCSF Complete Financing Solution LLC, as Borrower, JPMorgan Chase Bank, National Association, as Administrative Agent and Wells Fargo Bank, National Association as Collateral Administrator, Collateral Agent, Securities Intermediary and Bank (incorporated by reference to Exhibit 10.25 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on May 4, 2020).
10.26   Revolving Loan Agreement, dated March 27, 2020, by and between the Company, as Borrower, and BCSF Advisors, LP, as Lender (incorporated by reference to Exhibit 10.26 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on May 4, 2020).
10.27   Omnibus Amendment No. 1 to Amended and Restated Credit Agreement, dated March 31, 2020, among the Company as Equity Holder, BCSF I, LLC as Borrower, and Goldman Sachs Bank USA, as Sole Lead Arranger, Syndication Agent and Administrative Agent, and U.S. Bank National Association as Collateral Administrator, Collateral Agent and Collateral Custodian (incorporated by reference to Exhibit 10.27 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on May 4, 2020).
10.28   Master Note Purchase Agreement, dated June 10, 2020, of the Company (incorporated by reference to Exhibit 10.28 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on August 5, 2020).
10.29   Third Amendment to Loan and Security Agreement, dated July 2, 2020, by and among BCSF Complete Financing Solution LLC, as Borrower, JPMorgan Chase Bank, National Association, as Administrative Agent and Wells Fargo Bank, National Association as Collateral Administrator, Collateral Agent, Securities Intermediary and Bank (incorporated by reference to Exhibit 10.29 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on August 5, 2020).
10.30*   Second Amended and Restated Credit Agreement, dated August 14, 2020, among the Company as Equity Holder, BCSF I, LLC as Borrower, and Goldman Sachs Bank USA, as Sole Lead Arranger, Syndication Agent and Administrative Agent, and U.S. Bank National Association as Collateral Administrator, Collateral Agent and Collateral Custodian.
14.1   Code of Conduct (incorporated by reference to Exhibit 14.1 to the Company’s Current Report on Form 8-K (File No. 814-01175), filed on November 15, 2018).
24.1   Powers of Attorney (incorporated by reference to Exhibit 24.1 to the Company’s Annual Report on Form 10-K (File No. 814-01175), filed on March 29, 2017).
31.1*   Certification of Chief Executive Officer pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended.

 

88

 

 

Exhibit
Number
  Description of Document
31.2*   Certification of Chief Financial Officer pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended.
32*   Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended.

 

 

* Filed herewith.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Bain Capital Specialty Finance, Inc.    
     
Date: November 5, 2020 By: /s/ Michael A. Ewald
  Name: Michael A. Ewald
  Title: Chief Executive Officer
     
Date: November 5, 2020 By: /s/ Sally F. Dornaus
  Name: Sally F. Dornaus
  Title: Chief Financial Officer

 

90