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TABLE OF CONTENTS

Table of Contents

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)    

ý

 

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

For the quarterly period ended September 30, 2016

OR

o

 

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

For the transition period from:                             to                              

Commission File Number: 001-33723

Main Street Capital Corporation
(Exact name of registrant as specified in its charter)

Maryland
(State or other jurisdiction of
incorporation or organization)
  41-2230745
(I.R.S. Employer
Identification No.)

1300 Post Oak Boulevard, 8th floor
Houston, TX
(Address of principal executive offices)

 

77056
(Zip Code)

(713) 350-6000
(Registrant's telephone number including area code)

n/a
(Former name, former address and former fiscal year, if changed since last report)

        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 ý    No o

        Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes o    No o

        Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ý   Accelerated filer o   Non-accelerated filer o   Smaller reporting company o

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

        The number of shares outstanding of the issuer's common stock as of November 3, 2016 was 53,036,148.

   


Table of Contents


TABLE OF CONTENTS

PART I
FINANCIAL INFORMATION

Item 1.

 

Consolidated Financial Statements

       

 

Consolidated Balance Sheets—September 30, 2016 (unaudited) and December 31, 2015

    1  

 

Consolidated Statements of Operations (unaudited)—Three and nine months ended September 30, 2016 and 2015

    2  

 

Consolidated Statements of Changes in Net Assets (unaudited)—Nine months ended September 30, 2016 and 2015

    3  

 

Consolidated Statements of Cash Flows (unaudited)—Nine months ended September 30, 2016 and 2015

    4  

 

Consolidated Schedule of Investments (unaudited)—September 30, 2016

    5  

 

Consolidated Schedule of Investments—December 31, 2015

    33  

 

Notes to Consolidated Financial Statements (unaudited)

    60  

 

Consolidated Financial Statement Schedule

       

 

Consolidated Schedule of Investments in and Advances to Affiliates for the Nine Months Ended September 30, 2016

    104  

Item 2.

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

    109  

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

    133  

Item 4.

 

Controls and Procedures

    134  


PART II
OTHER INFORMATION


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Balance Sheets

(dollars in thousands, except shares and per share amounts)

 
  September 30,
2016
  December 31,
2015
 
 
  (Unaudited)
   
 

ASSETS

             

Portfolio investments at fair value:

   
 
   
 
 

Control investments (cost: $401,190 and $387,727 as of September 30, 2016 and December 31, 2015, respectively)

  $ 547,651   $ 555,011  

Affiliate investments (cost: $368,553 and $333,728 as of September 30, 2016 and December 31, 2015, respectively)

    352,873     350,519  

Non-Control/Non-Affiliate investments (cost: $1,046,923 and $945,187 as of September 30, 2016 and December 31, 2015, respectively)

    1,019,743     894,466  

Total portfolio investments (cost: $1,816,666 and $1,666,642 as of September 30, 2016 and December 31, 2015, respectively)

    1,920,267     1,799,996  

Marketable securities and idle funds investments (cost: $0 and $5,407 as of September 30, 2016 and December 31, 2015, respectively)

        3,693  

Total investments (cost: $1,816,666 and $1,672,049 as of September 30, 2016 and December 31, 2015, respectively)

    1,920,267     1,803,689  

Cash and cash equivalents

   
31,782
   
20,331
 

Interest receivable and other assets

    33,500     27,737  

Receivable for securities sold

    503     9,901  

Deferred financing costs (net of accumulated amortization of $10,896 and $8,965 as of September 30, 2016 and December 31, 2015, respectively)

    12,259     13,267  

Deferred tax asset, net

    9,199     4,003  

Total assets

  $ 2,007,510   $ 1,878,928  

LIABILITIES

             

Credit facility

 
$

313,000
 
$

291,000
 

SBIC debentures (par: $231,000 ($15,000 due within one year) and $225,000 as of September 30, 2016 and December 31, 2015, respectively. Par of $75,200 is recorded at a fair value of $74,680 and $73,860 as of September 30, 2016 and December 31, 2015, respectively)

    230,480     223,660  

4.50% Notes

    175,000     175,000  

6.125% Notes

    90,655     90,738  

Accounts payable and other liabilities

    11,581     12,292  

Payable for securities purchased

    29,100     2,311  

Interest payable

    3,561     3,959  

Dividend payable

    9,783     9,074  

Total liabilities

    863,160     808,034  

Commitments and contingencies (Note M)

   
 
   
 
 

NET ASSETS

   
 
   
 
 

Common stock, $0.01 par value per share (150,000,000 shares authorized; 52,901,113 and 50,413,744 shares issued and outstanding as of September 30, 2016 and December 31, 2015, respectively)

   
529
   
504
 

Additional paid-in capital

    1,090,197     1,011,467  

Accumulated net investment income, net of cumulative dividends of $471,478 and $417,347 as of September 30, 2016 and December 31, 2015, respectively

    38,421     7,181  

Accumulated net realized gain from investments (accumulated net realized gain from investments of $52,352 before cumulative dividends of $112,539 as of September 30, 2016 and accumulated net realized gain from investments of $19,005 before cumulative dividends of $68,658 as of December 31, 2015)

    (60,187 )   (49,653 )

Net unrealized appreciation, net of income taxes

    75,390     101,395  

Total net assets

    1,144,350     1,070,894  

Total liabilities and net assets

  $ 2,007,510   $ 1,878,928  

NET ASSET VALUE PER SHARE

  $ 21.62   $ 21.24  

   

The accompanying notes are an integral part of these financial statements

1


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Statements of Operations

(dollars in thousands, except shares and per share amounts)

(Unaudited)

 
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
 
 
  2016   2015   2016   2015  

INVESTMENT INCOME:

                         

Interest, fee and dividend income:

                         

Control investments

  $ 14,826   $ 13,437   $ 40,398   $ 36,264  

Affiliate investments

    9,619     6,852     27,095     19,862  

Non-Control/Non-Affiliate investments

    22,149     22,090     63,841     64,124  

Interest, fee and dividend income

    46,594     42,379     131,334     120,250  

Interest, fee and dividend income from marketable securities and idle funds investments

    5     229     174     846  

Total investment income

    46,599     42,608     131,508     121,096  

EXPENSES:

                         

Interest

    (8,573 )   (8,302 )   (25,010 )   (23,755 )

Compensation

    (4,309 )   (3,727 )   (12,081 )   (11,055 )

General and administrative

    (2,247 )   (2,212 )   (6,808 )   (6,271 )

Share-based compensation

    (2,137 )   (1,651 )   (5,977 )   (4,592 )

Expenses allocated to the External Investment Manager

    1,224     1,145     3,739     3,133  

Total expenses

    (16,042 )   (14,747 )   (46,137 )   (42,540 )

NET INVESTMENT INCOME

    30,557     27,861     85,371     78,556  

NET REALIZED GAIN (LOSS):

   
 
   
 
   
 
   
 
 

Control investments

    17,862         32,220     3,324  

Affiliate investments

    (3,447 )   5,964     25,260     5,827  

Non-Control/Non-Affiliate investments

    (10,033 )   (6,195 )   (22,452 )   (16,836 )

Marketable securities and idle funds investments

    (96 )   (1,112 )   (1,681 )   (1,352 )

Total net realized gain (loss)

    4,286     (1,343 )   33,347     (9,037 )

NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION):

                         

Portfolio investments

    8,376     (8,389 )   (29,738 )   21,716  

Marketable securities and idle funds investments

    235     (648 )   1,729     (521 )

SBIC debentures

    (801 )   (50 )   (820 )   (823 )

Total net change in unrealized appreciation (depreciation)            

    7,810     (9,087 )   (28,829 )   20,372  

INCOME TAXES:

                         

Federal and state income, excise and other taxes

    (904 )   495     (2,372 )   (1,547 )

Deferred taxes

    1,432     2,742     3,390     8,551  

Income tax benefit

    528     3,237     1,018     7,004  

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

  $ 43,181   $ 20,668   $ 90,907   $ 96,895  

NET INVESTMENT INCOME PER SHARE—BASIC AND DILUTED

  $ 0.58   $ 0.56   $ 1.66   $ 1.61  

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS PER SHARE—BASIC AND DILUTED

  $ 0.82   $ 0.41   $ 1.76   $ 1.99  

DIVIDENDS PAID PER SHARE:

                         

Regular monthly dividends

  $ 0.540   $ 0.525   $ 1.620   $ 1.560  

Supplemental dividends

            0.275     0.275  

Total dividends

  $ 0.540   $ 0.525   $ 1.895   $ 1.835  

WEIGHTED AVERAGE SHARES OUTSTANDING—BASIC AND DILUTED

    52,613,277     50,036,776     51,538,745     48,681,260  

   

The accompanying notes are an integral part of these financial statements

2


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Statements of Changes in Net Assets

(dollars in thousands, except shares)

(Unaudited)

 
  Common Stock    
   
  Accumulated
Net Realized
Gain From
Investments,
Net of Dividends
  Net Unrealized
Appreciation from
Investments,
Net of Income
Taxes
   
 
 
   
  Accumulated
Net Investment
Income, Net
of Dividends
   
 
 
  Number of
Shares
  Par
Value
  Additional
Paid-In
Capital
  Total Net
Asset Value
 

Balances at December 31, 2014

    45,079,150   $ 451   $ 853,606   $ 23,665   $ (20,456 ) $ 82,716   $ 939,982  

Public offering of common stock, net of offering costs

   
4,370,000
   
44
   
127,720
   
   
   
   
127,764
 

Share-based compensation

            4,592                 4,592  

Purchase of vested stock for employee payroll tax withholding

    (54,840 )   (1 )   (1,739 )               (1,740 )

Dividend reinvestment

    444,957     4     13,654                 13,658  

Amortization of directors' deferred compensation

            292                 292  

Issuance of restricted stock, net of forfeited shares

    239,911     2     (2 )                

Dividends to stockholders

                (88,294 )   (2,168 )       (90,462 )

Net increase (loss) resulting from operations

                78,556     (9,037 )   27,376     96,895  

Balances at September 30, 2015

    50,079,178   $ 500   $ 998,123   $ 13,927   $ (31,661 ) $ 110,092   $ 1,090,981  

Balances at December 31, 2015

    50,413,744   $ 504   $ 1,011,467   $ 7,181   $ (49,653 ) $ 101,395   $ 1,070,894  

Public offering of common stock, net of offering costs

   
1,996,793
   
20
   
64,239
   
   
   
   
64,259
 

Share-based compensation

            5,977                 5,977  

Purchase of vested stock for employee payroll tax withholding

    (80,750 )   (1 )   (2,592 )               (2,593 )

Dividend reinvestment

    339,544     3     10,645                 10,648  

Amortization of directors' deferred compensation

            464                 464  

Issuance of restricted stock, net of forfeited shares

    262,586     3     (3 )                

Dividends to stockholders

                (54,131 )   (43,881 )       (98,012 )

Cumulative-effect to retained earnings for excess tax benefit

                        1,806     1,806  

Net increase (loss) resulting from operations

                85,371     33,347     (27,811 )   90,907  

Balances at September 30, 2016

    52,931,917   $ 529   $ 1,090,197   $ 38,421   $ (60,187 ) $ 75,390   $ 1,144,350  

   

The accompanying notes are an integral part of these financial statements

3


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Statements of Cash Flows

(dollars in thousands)

(Unaudited)

 
  Nine Months Ended
September 30,
 
 
  2016   2015  

CASH FLOWS FROM OPERATING ACTIVITIES

             

Net increase in net assets resulting from operations

  $ 90,907   $ 96,895  

Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by (used in) operating activities:

             

Investments in portfolio companies

    (420,036 )   (727,099 )

Proceeds from sales and repayments of debt investments in portfolio companies               

    274,907     421,933  

Proceeds from sales and return of capital of equity investments in portfolio companies

    73,017     29,289  

Investments in marketable securities and idle funds investments

    (523 )   (4,483 )

Proceeds from sales and repayments of marketable securities and idle funds investments

    4,316     7,094  

Net change in net unrealized (appreciation) depreciation

    28,829     (20,372 )

Net realized (gain) loss

    (33,347 )   9,037  

Accretion of unearned income

    (7,073 )   (6,474 )

Payment-in-kind interest

    (4,911 )   (2,485 )

Cumulative dividends

    (1,470 )   (1,242 )

Share-based compensation expense

    5,977     4,592  

Amortization of deferred financing costs

    1,931     1,899  

Deferred tax benefit

    (3,390 )   (8,551 )

Changes in other assets and liabilities:

             

Interest receivable and other assets

    (685 )   (3,493 )

Interest payable

    (398 )   147  

Accounts payable and other liabilities

    (247 )   (1,618 )

Deferred fees and other

    1,644     1,438  

Net cash provided by (used in) operating activities

    9,448     (203,493 )

CASH FLOWS FROM FINANCING ACTIVITIES

   
 
   
 
 

Proceeds from public offering of common stock, net of offering costs

    64,259     127,764  

Dividends paid

    (86,655 )   (75,453 )

Proceeds from issuance of SBIC debentures

    6,000      

Proceeds from credit facility

    254,000     473,000  

Repayments on credit facility

    (232,000 )   (345,000 )

Payment of deferred loan costs and SBIC debenture fees

    (925 )   (132 )

Purchases of vested stock for employee payroll tax withholding

    (2,593 )   (1,740 )

Other

    (83 )   (83 )

Net cash provided by financing activities

    2,003     178,356  

Net increase (decrease) in cash and cash equivalents

    11,451     (25,137 )

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

    20,331     60,432  

CASH AND CASH EQUIVALENTS AT END OF PERIOD

  $ 31,782   $ 35,295  

Supplemental cash flow disclosures:

             

Interest paid

  $ 23,368   $ 21,708  

Taxes paid

  $ 1,762   $ 2,504  

Non-cash financing activities:

             

Shares issued pursuant to the DRIP

  $ 10,648   $ 13,658  

   

The accompanying notes are an integral part of these financial statements

4


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments

September 30, 2016

(dollars in thousands)

(Unaudited)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

Control Investments(5)

 

 

 

 

                   

                           

Access Media Holdings, LLC(10)

 

Private Cable Operator

                       

     

5% Current / 5% PIK Secured Debt (Maturity—July 22, 2020)

  $ 22,380   $ 22,380   $ 19,720  

     

Preferred Member Units (6,232,500 units; 12% cumulative)

          6,126     250  

     

Member Units (45 units)

          1      

                  28,507     19,970  

                           

AmeriTech College, LLC

 

For-Profit Nursing and Healthcare College

                       

     

10% Secured Debt (Maturity—November 30, 2019)

    1,004     1,004     1,004  

     

10% Secured Debt (Maturity—January 31, 2020)

    3,025     3,025     3,025  

     

Preferred Member Units (294 units; 5%)(8)

          2,291     2,291  

                  6,320     6,320  

                           

ASC Interests, LLC

 

Recreational and Educational Shooting Facility

                       

     

11% Secured Debt (Maturity—July 31, 2018)

    2,250     2,230     2,250  

     

Member Units (1,500 units)(8)

          1,500     2,680  

                  3,730     4,930  

                           

Bond-Coat, Inc.

 

Casing and Tubing Coating Services

                       

     

12% Secured Debt (Maturity—December 28, 2017)

    11,596     11,547     11,596  

     

Common Stock (57,508 shares)

          6,350     5,090  

                  17,897     16,686  

                           

Café Brazil, LLC

 

Casual Restaurant Group

                       

     

Member Units (1,233 units)(8)

          1,742     6,570  

                           

CBT Nuggets, LLC

 

Produces and Sells IT Training Certification Videos

                       

     

Member Units (416 units)(8)

          1,300     52,800  

                           

CMS Minerals Investments

 

Oil & Gas Exploration & Production

                       

     

Preferred Member Units (CMS Minerals LLC) (458 units)(8)

          2,207     3,371  

     

Member Units (CMS Minerals II, LLC) (100 units)(8)

          3,955     3,893  

                  6,162     7,264  

                           

5


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

September 30, 2016

(dollars in thousands)

(Unaudited)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

Datacom, LLC

 

Technology and Telecommunications Provider

                       

     

8% Secured Debt (Maturity—May 30, 2017)

    900     900     900  

     

5.25% Current / 5.25% PIK Secured Debt (Maturity—May 30, 2019)

    11,558     11,491     10,888  

     

Class A Preferred Member Units (15% cumulative)(8)

          1,181     1,318  

     

Class B Preferred Member Units (6,453 units)

          6,030     1,769  

                  19,602     14,875  

                           

Gamber-Johnson Holdings, LLC

 

Manufacturer of Ruggedized Computer Mounting Systems

                       

     

LIBOR Plus 11.00% (Floor 1.00%), Current Coupon 12.00%, Secured Debt (Maturity—June 24, 2021)(9)

    20,000     19,798     19,798  

     

Member Units (7,040 units)

          12,124     12,124  

                  31,922     31,922  

                           

Garreco, LLC

 

Manufacturer and Supplier of Dental Products

                       

     

14% Secured Debt (Maturity—January 12, 2018)

    5,550     5,511     5,511  

     

Member Units (1,200 units)(8)

          1,200     1,150  

                  6,711     6,661  

                           

GRT Rubber Technologies LLC

 

Manufacturer of Engineered Rubber Products

                       

     

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.00%, Secured Debt (Maturity—December 19, 2019)(9)

    13,484     13,390     13,484  

     

Member Units (5,879 units)(8)

          13,065     18,030  

                  26,455     31,514  

                           

Gulf Manufacturing, LLC

 

Manufacturer of Specialty Fabricated Industrial Piping Products

                       

     

9% PIK Secured Debt (Ashland Capital IX, LLC) (Maturity—June 30, 2017)

    777     777     777  

     

Member Units (438 units)

          2,980     8,770  

                  3,757     9,547  

                           

Gulf Publishing Holdings, LLC

 

Energy Focused Media and Publishing

                       

     

12.5% Secured Debt (Maturity—April 29, 2021)

    10,000     9,907     9,907  

     

Member Units (3,124 units)

          3,124     3,124  

                  13,031     13,031  

                           

Harrison Hydra-Gen, Ltd.

 

Manufacturer of Hydraulic Generators

                       

     

Common Stock (107,456 shares)(8)

          718     3,340  

                           

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Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

September 30, 2016

(dollars in thousands)

(Unaudited)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

Hawthorne Customs and Dispatch Services, LLC

 

Facilitator of Import Logistics, Brokerage, and Warehousing

                       

     

Member Units (500 units)

          589     280  

     

Member Units (Wallisville Real Estate, LLC) (588,210 units)(8)

          1,215     2,040  

                  1,804     2,320  

                           

HW Temps LLC

 

Temporary Staffing Solutions

                       

     

LIBOR Plus 9.50% (Floor 1.00%), Current Coupon 10.50%, Secured Debt (Maturity July 2, 2020)(9)

    10,376     10,296     10,296  

     

Preferred Member Units (3,200 units)(8)

          3,942     4,360  

                  14,238     14,656  

                           

Hydratec, Inc.

 

Designer and Installer of Micro-Irrigation Systems

                       

     

Common Stock (7,095 shares)(8)

          7,095     15,760  

                           

IDX Broker, LLC

 

Provider of Marketing and CRM Tools for the Real Estate Industry

                       

     

12.5% Secured Debt (Maturity—November 15, 2018)

    11,250     11,197     11,250  

     

Member Units (5,400 units)(8)

          5,606     6,690  

                  16,803     17,940  

                           

Indianapolis Aviation Partners, LLC

 

Fixed Base Operator

                       

     

15% Secured Debt (Maturity—January 15, 2017)

    3,100     3,100     3,100  

     

Warrants (1,046 equivalent units)

          1,129     2,649  

                  4,229     5,749  

                           

Jensen Jewelers of Idaho, LLC

 

Retail Jewelry Store

                       

     

Prime Plus 6.75% (Floor 2.00%), Current Coupon 10.25%, Secured Debt (Maturity—November 14, 2016)(9)

    4,205     4,200     4,205  

     

Member Units (627 units)(8)

          811     4,650  

                  5,011     8,855  

                           

Lamb Ventures, LLC

 

Aftermarket Automotive Services Chain

                       

     

LIBOR Plus 5.75%, Current Coupon 6.27%, Secured Debt (Maturity—March 3, 2017)

    139     139     139  

     

11% Secured Debt (Maturity—May 31, 2018)

    7,735     7,735     7,735  

     

Preferred Equity (non-voting)

          400     400  

     

Member Units (742 units)(8)

          5,273     5,880  

     

9.5% Secured Debt (Lamb's Real Estate Investment I, LLC) (Maturity—October 1, 2025)

    882     882     882  

     

Member Units (Lamb's Real Estate Investment I, LLC) (1,000 units)(8)

          625     1,620  

                  15,054     16,656  

                           

7


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

September 30, 2016

(dollars in thousands)

(Unaudited)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

Lighting Unlimited, LLC

 

Commercial and Residential Lighting Products and Design Services

                       

     

8% Secured Debt (Maturity—August 22, 2017)

    1,514     1,514     1,514  

     

Preferred Equity (non-voting)

          434     430  

     

Warrants (71 equivalent units)

          54     10  

     

Member Units (700 units)

          100     80  

                  2,102     2,034  

                           

Marine Shelters Holdings, LLC

 

Fabricator of Marine and Industrial Shelters

                       

     

12% PIK Secured Debt (Maturity—December 28, 2017)

    9,967     9,905     9,379  

     

Preferred Member Units (3,810 units)

          5,352     906  

                  15,257     10,285  

                           

MH Corbin Holding LLC

 

Manufacturer and Distributor of Traffic Safety Products

                       

     

10% Secured Debt (Maturity—August 31, 2020)

    13,475     13,365     13,365  

     

Preferred Member Units (4,000 shares)

          6,000     6,000  

                  19,365     19,365  

                           

Mid-Columbia Lumber Products, LLC

 

Manufacturer of Finger-Jointed Lumber Products

                       

     

10% Secured Debt (Maturity—December 18, 2017)

    1,750     1,750     1,750  

     

12% Secured Debt (Maturity—December 18, 2017)

    3,900     3,900     3,900  

     

Member Units (3,554 units)

          1,244     2,300  

     

9.5% Secured Debt (Mid—Columbia Real Estate, LLC) (Maturity—May 13, 2025)

    847     847     847  

     

Member Units (Mid—Columbia Real Estate, LLC) (250 units)(8)

          250     600  

                  7,991     9,397  

                           

MSC Adviser I, LLC(16)

 

Third Party Investment Advisory Services

                       

     

Member Units (Fully diluted 100.0%)(8)

              30,133  

                           

Mystic Logistics Holdings, LLC

 

Logistics and Distribution Services Provider for Large Volume Mailers

                       

     

12% Secured Debt (Maturity—August 15, 2019)

    9,176     9,043     9,176  

     

Common Stock (5,873 shares)

          2,720     5,150  

                  11,763     14,326  

                           

8


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

September 30, 2016

(dollars in thousands)

(Unaudited)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

NAPCO Precast, LLC

 

Precast Concrete Manufacturing

                       

     

Prime Plus 2.00% (Floor 7.00%), Current Coupon 9.00%, Secured Debt (Maturity—February 1, 2019)(9)

    2,713     2,690     2,713  

     

18% Secured Debt (Maturity—February 1, 2019)

    3,952     3,919     3,952  

     

Member Units (2,955 units)(8)

          2,975     10,670  

                  9,584     17,335  

                           

NRI Clinical Research, LLC

 

Clinical Research Service Provider

                       

     

14% Secured Debt (Maturity—September 8, 2017)

    4,510     4,464     4,510  

     

Warrants (251,723 equivalent units)

          252     650  

     

Member Units (1,454,167 units)

          765     2,321  

                  5,481     7,481  

                           

NRP Jones, LLC

 

Manufacturer of Hoses, Fittings and Assemblies

                       

     

6% Current / 6% PIK Secured Debt (Maturity—December 22, 2016)

    13,703     13,631     13,631  

     

Warrants (14,331 equivalent units)

          817     130  

     

Member Units (50,877 units)

          2,900     410  

                  17,348     14,171  

                           

OMi Holdings, Inc.

 

Manufacturer of Overhead Cranes

                       

     

Common Stock (1,500 shares)

          1,080     14,390  

                           

Pegasus Research Group, LLC

 

Provider of Telemarketing and Data Services

                       

     

Member Units (460 units)(8)

          1,290     8,620  

                           

PPL RVs, Inc.

 

Recreational Vehicle Dealer

                       

     

11.1% Secured Debt (Maturity—December 31, 2016)

    9,710     9,710     9,710  

     

Common Stock (1,962 shares)(8)

          2,150     11,780  

                  11,860     21,490  

                           

Principle Environmental, LLC

 

Noise Abatement Service Provider

                       

     

12% Secured Debt (Maturity—April 30, 2017)

    4,060     4,060     4,060  

     

12% Current / 2% PIK Secured Debt (Maturity—April 30, 2017)

    3,361     3,361     3,361  

     

Preferred Member Units (19,631 units)

          4,663     4,600  

     

Warrants (1,036 equivalent units)

          1,200     20  

                  13,284     12,041  

                           

Quality Lease Service, LLC

 

Provider of Rigsite Accommodation Unit Rentals and Related Services

                       

     

8% PIK Secured Debt (Maturity—June 8, 2020)

    6,929     6,929     6,929  

     

Member Units (1,000 units)

          818     2,888  

                  7,747     9,817  

                           

9


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

September 30, 2016

(dollars in thousands)

(Unaudited)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

River Aggregates, LLC

 

Processor of Construction Aggregates

                       

     

Zero Coupon Secured Debt (Maturity—June 30, 2018)

    750     609     609  

     

Member Units (1,150 units)(8)

          1,150     4,600  

     

Member Units (RA Properties, LLC) (1,500 units)

          369     2,510  

                  2,128     7,719  

                           

SoftTouch Medical Holdings LLC

 

Home Provider of Pediatric Durable Medical Equipment

                       

     

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.00%, Secured Debt (Maturity—October 31, 2019)(9)

    7,225     7,177     7,225  

     

Member Units (4,450 units)(8)

          4,930     8,670  

                  12,107     15,895  

                           

The MPI Group, LLC

 

Manufacturer of Custom Hollow Metal Doors, Frames and Accessories

                       

     

9% Secured Debt (Maturity—October 2, 2018)

    2,924     2,922     2,922  

     

Series A Preferred Units (2,500 units; 10% Cumulative)

          2,500     360  

     

Warrants (1,424 equivalent units)

          1,096      

     

Member Units (MPI Real Estate Holdings, LLC) (100% Fully diluted)(8)

          2,300     2,300  

                  8,818     5,582  

                           

Uvalco Supply, LLC

 

Farm and Ranch Supply Store

                       

     

9% Secured Debt (Maturity—January 1, 2019)

    986     986     986  

     

Member Units (2,011 units)(8)

          3,843     4,860  

                  4,829     5,846  

                           

Vision Interests, Inc.

 

Manufacturer / Installer of Commercial Signage

                       

     

13% Secured Debt (Maturity—December 23, 2016)

    2,889     2,885     2,885  

     

Series A Preferred Stock (3,000,000 shares)

          3,000     3,370  

     

Common Stock (1,126,242 shares)

          3,706     140  

                  9,591     6,395  

                           

Ziegler's NYPD, LLC

 

Casual Restaurant Group

                       

     

6.5% Secured Debt (Maturity—October 1, 2019)

    1,000     993     993  

     

12% Secured Debt (Maturity—October 1, 2019)

    300     300     300  

     

14% Secured Debt (Maturity—October 1, 2019)

    2,750     2,750     2,750  

     

Warrants (587 equivalent units)

          600     220  

     

Preferred Member Units (10,072 units)

          2,834     3,700  

                  7,477     7,963  

                           

Subtotal Control Investments (28.5% of total investments at fair value)

  $ 401,190   $ 547,651  

10


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

September 30, 2016

(dollars in thousands)

(Unaudited)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

Affiliate Investments(6)

 

 

 

 

                   

                           

AFG Capital Group, LLC

 

Provider of Rent-to-Own Financing Solutions and Services

                       

     

Warrants (42 equivalent units)

        $ 259   $ 620  

     

Member Units (186 units)

          1,200     2,530  

                  1,459     3,150  

                           

Barfly Ventures, LLC(10)

 

Casual Restaurant Group

                       

     

12% Secured Debt (Maturity—August 31, 2020)

    5,958     5,854     5,761  

     

Options (2 equivalent units)

          397     420  

     

Warrant (1 equivalent unit)

          473     240  

                  6,724     6,421  

                           

BBB Tank Services, LLC

 

Maintenance, Repair and Construction Services to the Above-Ground Storage Tank Market

                       

     

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 8.50%, Secured Debt (Maturity—April 8, 2021)(9)

    336     332     332  

     

12% Current / 1% PIK Secured Debt (Maturity—April 8, 2021)

    4,020     3,982     3,982  

     

Member Units (800,000 units)

          800     800  

                  5,114     5,114  

                           

Boss Industries, LLC

 

Manufacturer and Distributor of Air, Power and Other Industrial Equipment

                       

     

Preferred Member Units (2,242 units)(8)

          2,379     2,606  

                           

Bridge Capital Solutions Corporation

 

Financial Services and Cash Flow Solutions Provider

                       

     

13% Secured Debt (Maturity—July 25, 2021)

    7,500     5,550     5,550  

     

Warrants (63 equivalent shares)

          2,132     3,312  

     

13% Secured Debt (Mercury Service Group, LLC) (Maturity—July 25, 2021)

    1,000     990     990  

     

Preferred Member Units (Mercury Service Group, LLC) (17,742 units)(8)

          1,000     1,000  

                  9,672     10,852  

                           

Buca C, LLC

 

Casual Restaurant Group

                       

     

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.25%, Secured Debt (Maturity—June 30, 2020)(9)

    22,371     22,197     22,371  

     

Preferred Member Units (6 units; 6% cumulative)(8)

          3,879     5,599  

                  26,076     27,970  

                           

11


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

September 30, 2016

(dollars in thousands)

(Unaudited)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

CAI Software LLC

 

Provider of Specialized Enterprise Resource Planning Software

                       

     

12% Secured Debt (Maturity—October 10, 2019)

    3,780     3,754     3,780  

     

Member Units (65,356 units)(8)

          654     2,150  

                  4,408     5,930  

                           

CapFusion, LLC(13)

 

Non-Bank Lender to Small Businesses

                       

     

13% Secured Debt (Maturity—March 25, 2021)

    12,800     11,566     11,566  

     

Warrants (1,600 equivalent units)

          1,200     1,200  

                  12,766     12,766  

                           

Chandler Signs Holdings, LLC(10)

 

Sign Manufacturer

                       

     

12% Secured Debt (Maturity—July 4, 2021)

    4,500     4,459     4,500  

     

Class A Units (1,500,000 units)(8)

          1,500     2,950  

                  5,959     7,450  

                           

Condit Exhibits, LLC

 

Tradeshow Exhibits / Custom Displays Provider

                       

     

Member Units (3,936 units)(8)

          100     1,780  

                           

Congruent Credit Opportunities Funds(12)(13)

 

Investment Partnership

                       

     

LP Interests (Congruent Credit Opportunities Fund II, LP) (Fully diluted 19.8%)(8)

          5,778     1,439  

     

LP Interests (Congruent Credit Opportunities Fund III, LP) (Fully diluted 17.4%)(8)

          15,754     15,976  

                  21,532     17,415  

                           

Daseke, Inc.

 

Specialty Transportation Provider

                       

     

12% Current / 2.5% PIK Secured Debt (Maturity—July 31, 2018)

    21,660     21,471     21,660  

     

Common Stock (19,467 shares)

          5,213     21,640  

                  26,684     43,300  

                           

Dos Rios Partners(12)(13)

 

Investment Partnership

                       

     

LP Interests (Dos Rios Partners, LP) (Fully diluted 20.2%)

          5,237     4,121  

     

LP Interests (Dos Rios Partners—A, LP) (Fully diluted 6.4%)

          1,663     1,191  

                  6,900     5,312  

                           

Dos Rios Stone Products LLC(10)

 

Limestone and Sandstone Dimension Cut Stone Mining Quarries

                       

     

Class A Units (2,000,000 units)(8)

          2,000     2,000  

                           

East Teak Fine Hardwoods, Inc.

 

Distributor of Hardwood Products

                       

     

Common Stock (6,250 shares)(8)

          480     860  

                           

12


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

September 30, 2016

(dollars in thousands)

(Unaudited)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

East West Copolymer & Rubber, LLC

 

Manufacturer of Synthetic Rubbers

                       

     

12% Current / 2% PIK Secured Debt (Maturity—October 17, 2019)

    9,650     9,534     9,534  

     

Warrants (2,510,790 equivalent units)

          50     50  

                  9,584     9,584  

                           

EIG Fund Investments(12)(13)

 

Investment Partnership

                       

     

LP Interests (EIG Global Private Debt fund-A, L.P.) (Fully diluted 11.1%)(8)

          2,788     2,788  

                           

EIG Traverse Co-Investment, L.P.(12)(13)

 

Investment Partnership

                       

     

LP Interests (Fully diluted 22.2%)(8)

          9,805     10,027  

                           

Freeport Financial Funds(12)(13)

 

Investment Partnership

                       

     

LP Interests (Freeport Financial SBIC Fund LP) (Fully diluted 9.3%)(8)

          5,974     5,620  

     

LP Interests (Freeport First Lien Loan Fund III LP) (Fully diluted 6.0%)(8)

          3,564     3,564  

                  9,538     9,184  

                           

Gault Financial, LLC (RMB Capital, LLC)

 

Purchases and Manages Liquidation of Distressed Assets

                       

     

10% Current Secured Debt (Maturity—November 21, 2016)

    13,046     13,018     11,053  

     

Warrants (29,025 equivalent units)

          400      

                  13,418     11,053  

                           

Glowpoint, Inc.

 

Provider of Cloud Managed Video Collaboration Services

                       

     

12% Secured Debt (Maturity—October 18, 2018)

    9,000     8,943     6,639  

     

Common Stock (7,711,517 shares)

          3,958     2,160  

                  12,901     8,799  

                           

Guerdon Modular Holdings, Inc.

 

Multi-Family and Commercial Modular Construction Company

                       

     

9% Current / 4% PIK Secured Debt (Maturity—August 13, 2019)

    10,599     10,476     10,476  

     

Preferred Stock (404,998 shares)

          1,140     1,140  

     

Common Stock (212,033 shares)

          2,983     80  

                  14,599     11,696  

                           

Houston Plating and Coatings, LLC

 

Provider of Plating and Industrial Coating Services

                       

     

Member Units (265,756 units)

          1,429     4,380  

                           

I-45 SLF LLC(12)(13)

 

Investment Partnership

                       

     

Member units (Fully diluted 20.0%; 24.4% profits interest)(8)

          12,200     12,586  

                           

13


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

September 30, 2016

(dollars in thousands)

(Unaudited)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

Indianhead Pipeline Services, LLC

 

Provider of Pipeline Support Services

                       

     

12% Secured Debt (Maturity—February 6, 2017)

    5,325     5,273     5,273  

     

Preferred Member Units (33,819 units; 8% cumulative)(8)

          2,332     2,670  

     

Warrants (31,928 equivalent units)

          459      

     

Member Units (14,732 units)

          1      

                  8,065     7,943  

                           

KBK Industries, LLC

 

Manufacturer of Specialty Oilfield and Industrial Products

                       

     

10% Secured Debt (Maturity—September 28, 2017)

    700     700     700  

     

12.5% Secured Debt (Maturity—September 28, 2017)

    5,900     5,886     5,886  

     

Member Units (250 units)

          341     3,090  

                  6,927     9,676  

                           

L.F. Manufacturing Holdings, LLC(10)

 

Manufacturer of Fiberglass Products

                       

     

Member Units (2,179,001 units)(8)

          2,019     1,380  

                           

OnAsset Intelligence, Inc.

 

Provider of Transportation Monitoring / Tracking Products and Services

                       

     

12% PIK Secured Debt (Maturity—December 31, 2015)(17)

    4,384     4,384     4,384  

     

Preferred Stock (912 shares; 7% cumulative)

          1,981      

     

Warrants (5,333 equivalent shares)

          1,919      

                  8,284     4,384  

                           

OPI International Ltd.(13)

 

Provider of Man Camp and Industrial Storage Services

                       

     

10% Unsecured Debt (Maturity—April 8, 2018)

    473     473     473  

     

Common Stock (20,766,317 shares)

          1,371     3,200  

                  1,844     3,673  

                           

PCI Holding Company, Inc.

 

Manufacturer of Industrial Gas Generating Systems

                       

     

12% Secured Debt (Maturity—March 31, 2019)

    13,000     12,888     13,000  

     

Preferred Stock (1,500,000 shares; 20% cumulative)(8)

          3,212     5,040  

                  16,100     18,040  

                           

Rocaceia, LLC (Quality Lease and Rental Holdings, LLC)

 

Provider of Rigsite Accommodation Unit Rentals and Related Services

                       

     

12% Secured Debt (Maturity—January 8, 2018)(14)(18)

    30,785     30,281     250  

     

Preferred Member Units (250 units)

          2,500      

                  32,781     250  

                           

14


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

September 30, 2016

(dollars in thousands)

(Unaudited)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

Tin Roof Acquisition Company

 

Casual Restaurant Group

                       

     

12% Secured Debt (Maturity—November 13, 2018)

    13,682     13,539     13,539  

     

Class C Preferred Stock (Fully diluted 10.0%; 10% cumulative)(8)

          2,670     2,670  

                  16,209     16,209  

                           

UniTek Global Services, Inc.(11)

 

Provider of Outsourced Infrastructure Services

                       

     

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 8.50%, Secured Debt (Maturity—January 13, 2019)(9)

    2,826     2,826     2,813  

     

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.50%, Secured Debt (Maturity—January 13, 2019)(9)

    822     822     815  

     

15% PIK Unsecured Debt (Maturity—July 13, 2019)

    718     718     714  

     

Preferred Stock (4,935,377 shares; 13.5% cumulative)(8)

          5,430     6,200  

     

Common Stock (705,054 shares)

              2,580  

                  9,796     13,122  

                           

Universal Wellhead Services Holdings, LLC(10)

 

Provider of Wellhead Equipment, Designs, and Personnel to the Oil & Gas Industry

                       

     

Class A Preferred Units (4,000,000 units; 4.5% cumulative)(8)

          4,000     1,160  

                           

Valley Healthcare Group, LLC

 

Provider of Durable Medical Equipment

                       

     

LIBOR Plus 12.50% (Floor 0.50%), Current Coupon 13.02%, Secured Debt (Maturity—December 29, 2020)(9)

    10,716     10,622     10,622  

     

Preferred Member Units (Valley Healthcare Holding, LLC) (1,600 units)

          1,600     1,600  

                  12,222     12,222  

                           

Volusion, LLC

 

Provider of Online Software-as-a-Service eCommerce Solutions

                       

     

10.5% Secured Debt (Maturity—January 26, 2020)

    17,500     16,391     16,391  

     

Preferred Member Units (4,876,670 units)

          14,000     14,000  

     

Warrants (950,618 equivalent units)

          1,400     1,400  

                  31,791     31,791  

                           

Subtotal Affiliate Investments (18.4% of total investments at fair value)

  $ 368,553   $ 352,873  

15


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

September 30, 2016

(dollars in thousands)

(Unaudited)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

Non-Control/Non-Affiliate Investments(7)

             

                           

AccuMED Corp.(10)

 

Medical Device Contract Manufacturer

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity—October 29, 2020)(9)

  $ 10,306   $ 10,218   $ 10,306  

                           

Adams Publishing Group, LLC(10)

 

Local Newspaper Operator

                       

     

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.00%, Secured Debt (Maturity—November 3, 2020)(9)

    7,955     7,826     7,753  

                           

Ahead, LLC(10)

 

IT Infrastructure Value Added Reseller

                       

     

LIBOR Plus 6.50%, Current Coupon 7.34%, Secured Debt (Maturity—November 2, 2020)

    14,438     14,070     14,401  

                           

Allflex Holdings III Inc.(11)

 

Manufacturer of Livestock Identification Products

                       

     

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.00%, Secured Debt (Maturity—July 19, 2021)(9)

    14,795     14,701     14,869  

                           

American Scaffold Holdings, Inc.(10)

 

Marine Scaffolding Service Provider

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity—March 31, 2022)(9)

    7,406     7,300     7,369  

                           

American Seafoods Group, LLC(11)

 

Catcher-Processor of Alaskan Pollock

                       

     

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.00%, Secured Debt (Maturity—August 19, 2021)(9)

    9,634     9,624     9,610  

                           

American Teleconferencing Services, Ltd.(11)

 

Provider of Audio Conferencing and Video Collaboration Solutions

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity—December 8, 2021)(9)

    12,309     11,122     12,016  

                           

Anchor Hocking, LLC(11)

 

Household Products Manufacturer

                       

     

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.00%, Secured Debt (Maturity—June 4, 2018)(9)

    2,283     2,283     2,111  

     

Member Units (440,620 units)

          4,928     3,084  

                  7,211     5,195  

                           

16


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

September 30, 2016

(dollars in thousands)

(Unaudited)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

AP Gaming I, LLC(10)

 

Developer, Manufacturer, and Operator of Gaming Machines

                       

     

LIBOR Plus 8.25% (Floor 1.00%), Current Coupon 9.25%, Secured Debt (Maturity—December 20, 2020)(9)

    11,256     11,076     10,813  

                           

Apex Linen Service, Inc.

 

Industrial Launderers

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity—October 30, 2022)(9)

    2,400     2,400     2,400  

     

13% Secured Debt (Maturity—October 30, 2022)

    14,416     14,335     14,335  

                  16,735     16,735  

                           

Applied Products, Inc.(10)

 

Adhesives Distributor

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity—September 30, 2019)(9)

    3,927     3,895     3,818  

                           

Arcus Hunting LLC.(10)

 

Manufacturer of Bowhunting and Archery Products and Accessories

                       

     

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.00%, Secured Debt (Maturity—November 13, 2019)(9)

    16,922     16,760     16,760  

                           

Artel, LLC(11)

 

Provider of Secure Satellite Network and IT Solutions

                       

     

LIBOR Plus 7.00% (Floor 1.25%), Current Coupon 8.25%, Secured Debt (Maturity—November 27, 2017)(9)

    7,252     7,085     6,237  

                           

ATI Investment Sub, Inc.(11)

 

Manufacturer of Solar Tracking Systems

                       

     

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.25%, Secured Debt (Maturity—June 22, 2021)(9)

    9,750     9,560     9,726  

                           

ATS Workholding, Inc.(10)

 

Manufacturer of Machine Cutting Tools and Accessories

                       

     

LIBOR Plus 9.50% (Floor 1.00%), Current Coupon 10.50%, Secured Debt (Maturity—March 10, 2019)(9)

    6,253     6,223     6,000  

                           

ATX Networks Corp.(11)(13)

 

Provider of Radio Frequency Management Equipment

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity—June 11, 2021)(9)

    11,850     11,654     11,613  

                           

17


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

September 30, 2016

(dollars in thousands)

(Unaudited)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

Berry Aviation, Inc.(10)

 

Airline Charter Service Operator

                       

     

12.00% Current / 1.75% PIK Secured Debt (Maturity—January 30, 2020)

    5,627     5,585     5,585  

     

Common Stock (553 shares)

          400     760  

                  5,985     6,345  

                           

Bioventus LLC(10)

 

Production of Orthopedic Healing Products

                       

     

LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 11.00%, Secured Debt (Maturity—April 10, 2020)(9)

    5,000     4,929     5,013  

                           

Blackhawk Specialty Tools LLC(11)

 

Oilfield Equipment & Services

                       

     

LIBOR Plus 5.25% (Floor 1.25%), Current Coupon 6.50%, Secured Debt (Maturity—August 1, 2019)(9)

    5,643     5,622     4,233  

                           

Blue Bird Body Company(11)(13)

 

School Bus Manufacturer

                       

     

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 6.50%, Secured Debt (Maturity—June 26, 2020)(9)

    1,716     1,705     1,722  

                           

Bluestem Brands, Inc.(11)

 

Multi-Channel Retailer of General Merchandise

                       

     

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 8.50%, Secured Debt (Maturity—November 6, 2020)(9)

    13,068     12,808     11,451  

                           

Brainworks Software, LLC(10)

 

Advertising Sales and Newspaper Circulation Software

                       

     

Prime Plus 7.25% (Floor 3.25%), Current Coupon 10.75%, Secured Debt (Maturity—July 22, 2019)(9)

    626     621     621  

     

Prime Plus 7.25% (Floor 3.25%), Current Coupon 10.75%, Secured Debt (Maturity—July 22, 2019)(9)

    6,107     6,059     5,981  

                  6,680     6,602  

                           

Brightwood Capital Fund III, LP(12)(13)

 

Investment Partnership

                       

     

LP Interests (Fully diluted 1.6%)(8)

          11,250     10,596  

                           

Brundage-Bone Concrete Pumping, Inc.(11)

 

Construction Services Provider

                       

     

10.375% Secured Debt (Maturity—September 1, 2021)

    3,000     2,984     3,210  

                           

California Pizza Kitchen, Inc.(11)

 

Casual Restaurant Group

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity—August 23, 2022)(9)

    5,000     4,951     4,985  

                           

18


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

September 30, 2016

(dollars in thousands)

(Unaudited)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

Cenveo Corporation(11)

 

Provider of Commercial Printing, Envelopes, Labels, and Printed Office Products

                       

     

6% Secured Debt (Maturity—August 1, 2019)

    13,130     10,935     11,653  

                           

Charlotte Russe, Inc(11)

 

Fast-Fashion Retailer to Young Women

                       

     

LIBOR Plus 5.50% (Floor 1.25%), Current Coupon 6.75%, Secured Debt (Maturity—May 22, 2019)(9)

    14,346     14,122     7,101  

                           

Clarius BIGS, LLC(10)

 

Prints & Advertising Film Financing

                       

     

15% PIK Secured Debt (Maturity—January 5, 2015)(14)(17)

    2,999     2,999     159  

                           

Compact Power Equipment, Inc.

 

Equipment / Tool Rental

                       

     

12% Secured Debt (Maturity—October 1, 2017)

    4,100     4,094     4,100  

     

Series A Preferred Stock (4,298,435 shares)

          1,079     3,830  

                  5,173     7,930  

                           

Compuware Corporation(11)

 

Provider of Software and Supporting Services

                       

     

LIBOR Plus 5.25% (Floor 1.00%), Current Coupon 6.25%, Secured Debt (Maturity—December 15, 2019)(9)

    12,011     11,766     12,056  

                           

Covenant Surgical Partners, Inc.(11)

 

Ambulatory Surgical Centers

                       

     

8.75% Secured Debt (Maturity—August 1, 2019)

    800     800     768  

                           

CRGT Inc.(11)

 

Provider of Custom Software Development

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity—December 19, 2020)(9)

    6,903     6,810     6,920  

                           

CST Industries Inc.(11)

 

Storage Tank Manufacturer

                       

     

LIBOR Plus 6.25% (Floor 1.50%), Current Coupon 7.75%, Secured Debt (Maturity—May 22, 2017)(9)

    9,727     9,696     9,727  

                           

Darr Equipment LP(10)

 

Heavy Equipment Dealer

                       

     

12% Current / 2% PIK Secured Debt (Maturity—April 15, 2020)

    21,023     20,565     20,312  

     

Warrants (915,734 equivalent units)

          474     10  

                  21,039     20,322  

                           

Digital River, Inc.(11)

 

Provider of Outsourced e-Commerce Solutions and Services

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity—February 12, 2021)(9)

    15,184     15,081     15,156  

                           

19


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

September 30, 2016

(dollars in thousands)

(Unaudited)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

Drilling Info Holdings, Inc.

 

Information Services for the Oil and Gas Industry

                       

     

Common Stock (3,788,865 shares)

          1,335     10,410  

                           

ECP-PF Holdings Group, Inc.(10)

 

Fitness Club Operator

                       

     

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.00%, Secured Debt (Maturity—November 26, 2019)(9)

    5,625     5,587     5,590  

                           

EnCap Energy Fund Investments(12)(13)

 

Investment Partnership

                       

     

LP Interests (EnCap Energy Capital Fund VIII, L.P.) (Fully diluted 0.1%)(8)

          3,915     2,054  

     

LP Interests (EnCap Energy Capital Fund VIII Co- Investors, L.P.) (Fully diluted 0.4%)

          2,258     1,283  

     

LP Interests (EnCap Energy Capital Fund IX, L.P.) (Fully diluted 0.1%)(8)

          4,007     4,044  

     

LP Interests (Encap Energy Capital Fund X, L.P.) (Fully diluted 0.1%)

          2,654     2,654  

     

LP Interests (EnCap Flatrock Midstream Fund II, L.P.) (Fully diluted 0.8%)(8)

          8,937     9,677  

     

LP Interests (EnCap Flatrock Midstream Fund III, L.P.) (Fully diluted 0.2%)(8)

          2,474     2,496  

                  24,245     22,208  

                           

Evergreen Skills Lux S.á r.l. (d/b/a Skillsoft)(11)(13)

 

Technology-based Performance Support Solutions

                       

     

LIBOR Plus 8.25% (Floor 1.00%), Current Coupon 9.25%, Secured Debt (Maturity—April 28, 2022)(9)

    7,000     6,852     4,253  

                           

Flavors Holdings Inc.(11)

 

Global Provider of Flavoring and Sweetening Products and Solutions

                       

     

LIBOR Plus 5.75% (Floor 1.00%), Current Coupon 6.75%, Secured Debt (Maturity—April 3, 2020)(9)

    12,659     12,228     10,760  

                           

Fram Group Holdings, Inc.(11)

 

Manufacturer of Automotive Maintenance Products

                       

     

LIBOR Plus 5.50% (Floor 1.50%), Current Coupon 7.00%, Secured Debt (Maturity—July 29, 2017)(9)

    9,267     9,213     8,947  

     

LIBOR Plus 9.50% (Floor 1.50%), Current Coupon 11.00%, Secured Debt (Maturity—January 29, 2018)(9)

    700     699     608  

                  9,912     9,555  

                           

20


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

September 30, 2016

(dollars in thousands)

(Unaudited)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

GI KBS Merger Sub LLC(11)

 

Outsourced Janitorial Services to Retail/Grocery Customers

                       

     

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.00%, Secured Debt (Maturity—October 29, 2021)(9)

    3,900     3,849     3,764  

     

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.50%, Secured Debt (Maturity—April 29, 2022)(9)

    800     787     760  

                  4,636     4,524  

                           

Grace Hill, LLC(10)

 

Online Training Tools for the Multi-Family Housing Industry

                       

     

Prime Plus 5.25% (Floor 1.00%), Current Coupon 8.75%, Secured Debt (Maturity—August 15, 2019)(9)

    634     622     634  

     

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.25%, Secured Debt (Maturity—August 15, 2019)(9)

    11,580     11,494     11,580  

                  12,116     12,214  

                           

Great Circle Family Foods, LLC(10)

 

Quick Service Restaurant Franchise

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity—October 28, 2019)(9)

    7,698     7,644     7,698  

                           

Grupo Hima San Pablo, Inc.(11)

 

Tertiary Care Hospitals

                       

     

LIBOR Plus 7.00% (Floor 1.50%), Current Coupon 8.50%, Secured Debt (Maturity—January 31, 2018)(9)

    4,825     4,794     3,860  

     

13.75% Secured Debt (Maturity—July 31, 2018)

    2,000     1,957     1,200  

                  6,751     5,060  

                           

GST Autoleather, Inc.(11)

 

Automotive Leather Manufacturer

                       

     

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 6.50%, Secured Debt (Maturity—July 10, 2020)(9)

    13,317     13,209     13,067  

                           

Guitar Center, Inc.(11)

 

Musical Instruments Retailer

                       

     

6.5% Secured Debt (Maturity—April 15, 2019)

    14,625     13,820     12,870  

                           

Hojeij Branded Foods, LLC(10)

 

Multi-Airport, Multi- Concept Restaurant Operator

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity—July 27, 2021)(9)

    5,446     5,401     5,401  

                           

21


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

September 30, 2016

(dollars in thousands)

(Unaudited)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

Horizon Global Corporation(11)(13)

 

Auto Parts Manufacturer

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity—June 30, 2021)(9)

    12,375     12,200     12,499  

                           

Hostway Corporation(11)

 

Managed Services and Hosting Provider

                       

     

LIBOR Plus 4.75% (Floor 1.25%), Current Coupon 6.00%, Secured Debt (Maturity—December 13, 2019)(9)

    10,727     10,661     10,328  

                           

Hunter Defense Technologies, Inc.(11)

 

Provider of Military and Commercial Shelters and Systems

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity—August 5, 2019)(9)

    9,812     9,279     8,585  

                           

Hygea Holdings, Corp.(10)

 

Provider of Physician Services

                       

     

LIBOR Plus 9.25%, Current Coupon 10.08%, Secured Debt (Maturity—February 24, 2019)

    7,938     7,390     7,513  

     

Warrants (4,880,735 equivalent shares)

          369     490  

                  7,759     8,003  

                           

iEnergizer Limited(11)(13)

 

Provider of Business Outsourcing Solutions

                       

     

LIBOR Plus 6.00% (Floor 1.25%), Current Coupon 7.25%, Secured Debt (Maturity—May 1, 2019)(9)

    9,918     9,413     9,522  

                           

Indivior Finance LLC(11)(13)

 

Specialty Pharmaceutical Company Treating Opioid Dependence

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity—December 19, 2019)(9)

    6,844     6,558     6,861  

                           

Industrial Container Services, LLC(10)

 

Steel Drum Reconditioner

                       

     

LIBOR Plus 5.75% (Floor 1.00%), Current Coupon 6.75%, Secured Debt (Maturity—December 31, 2018)(9)

    8,962     8,942     8,942  

                           

Industrial Services Acquisition, LLC(10)

 

Industrial Cleaning Services

                       

     

11.25% Current / 0.75% PIK Unsecured Debt (Maturity—December 17, 2022)

    4,510     4,423     4,423  

     

Member Units (Industrial Services Investments, LLC) (900,000 units)

          900     900  

                  5,323     5,323  

                           

Infinity Acquisition Finance Corp.(11)

 

Application Software for Capital Markets

                       

     

7.25% Unsecured Debt (Maturity—August 1, 2022)

    5,700     5,355     4,959  

                           

22


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

September 30, 2016

(dollars in thousands)

(Unaudited)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

Inn of the Mountain Gods Resort and Casino(11)

 

Hotel & Casino Owner & Operator

                       

     

9.25% Secured Debt (Maturity—November 30, 2020)

    3,851     3,726     3,504  

                           

Insurance Technologies, LLC(10)

 

Illustration and Sales-automation Platforms

                       

     

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.00%, Secured Debt (Maturity—December 1, 2019)(9)

    3,965     3,934     3,934  

                           

Intertain Group Limited(11)(13)

 

Business-to-Consumer Online Gaming Operator

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity—April 8, 2022)(9)

    4,426     4,359     4,421  

                           

iPayment, Inc.(11)

 

Provider of Merchant Acquisition

                       

     

LIBOR Plus 5.25% (Floor 1.50%), Current Coupon 6.75%, Secured Debt (Maturity—May 8, 2017)(9)

    15,026     15,007     14,274  

                           

iQor US Inc.(11)

 

Business Process Outsourcing Services Provider

                       

     

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.00%, Secured Debt (Maturity—April 1, 2021)(9)

    9,837     9,688     8,533  

                           

irth Solutions, LLC

 

Provider of Damage Prevention Information Technology Services

                       

     

Member Units (27,893 units)

          1,441     1,790  

                           

Jackmont Hospitality, Inc.(10)

 

Franchisee of Casual Dining Restaurants

                       

     

LIBOR Plus 4.25% (Floor 1.00%), Current Coupon 5.25% / 2.50% PIK, Current Coupon Plus PIK 7.75%, Secured Debt (Maturity—May 26, 2021)(9)

    4,444     4,426     4,278  

                           

Joerns Healthcare, LLC(11)

 

Manufacturer and Distributor of Health Care Equipment & Supplies

                       

     

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.00%, Secured Debt (Maturity—May 9, 2020)(9)

    14,692     14,591     13,958  

                           

JSS Holdings, Inc.(11)

 

Aircraft Maintenance Program Provider

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity—August 31, 2021)(9)

    13,000     12,717     12,935  

                           

23


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

September 30, 2016

(dollars in thousands)

(Unaudited)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

Kendra Scott, LLC(11)

 

Jewelry Retail Stores

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity—July 17, 2020)(9)

    5,652     5,607     5,624  

                           

Keypoint Government Solutions, Inc.(11)

 

Provider of Pre-Employment Screening Services

                       

     

LIBOR Plus 6.50% (Floor 1.25%), Current Coupon 7.75%, Secured Debt (Maturity—November 13, 2017)(9)

    5,670     5,649     5,641  

                           

LaMi Products, LLC(10)

 

General Merchandise Distribution

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity—September 16, 2020)(9)

    10,735     10,653     10,735  

                           

Lansing Trade Group LLC(11)

 

Commodity Merchandiser

                       

     

9.25% Unsecured Debt (Maturity—February 15, 2019)

    6,000     6,000     6,000  

                           

Larchmont Resources, LLC(11)

 

Oil & Gas Exploration & Production

                       

     

LIBOR Plus 8.75% (Floor 1.00%), Current Coupon 9.75%, Secured Debt (Maturity—August 7, 2019)(9)(14)

    7,784     7,496     2,491  

                           

LKCM Headwater Investments I, L.P.(12)(13)

 

Investment Partnership

                       

     

LP Interests (Fully diluted 2.3%)

          2,500     4,150  

                           

Logix Acquisition Company, LLC(10)

 

Competitive Local Exchange Carrier

                       

     

LIBOR Plus 8.28% (Floor 1.00%), Current Coupon 9.28%, Secured Debt (Maturity—June 24, 2021)(9)

    8,672     8,528     8,528  

                           

Looking Glass Investments, LLC(12)(13)

 

Specialty Consumer Finance

                       

     

9% Unsecured Debt (Maturity—June 30, 2020)

    188     188     188  

     

Member Units (2.5 units)

          125     125  

     

Member Units (LGI Predictive Analytics LLC) (190,712 units)(8)

          183     183  

                  496     496  

                           

Messenger, LLC(10)

 

Supplier of Specialty Stationery and Related Products to the Funeral Industry

                       

     

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.25%, Secured Debt (Maturity—September 9, 2020)(9)

    14,497     14,416     14,497  

                           

24


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

September 30, 2016

(dollars in thousands)

(Unaudited)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

Minute Key, Inc.

 

Operator of Automated Key Duplication Kiosks

                       

     

10% Current / 2% PIK Secured Debt (Maturity—September 19, 2019)

    15,620     15,302     15,302  

     

Warrants (1,437,409 equivalent units)

          280     370  

                  15,582     15,672  

                           

Mood Media Corporation(11)(13)

 

Provider of Electronic Equipment

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity—May 1, 2019)(9)

    14,843     14,746     14,131  

                           

New Media Holdings II LLC(11)(13)

 

Local Newspaper Operator

                       

     

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.25%, Secured Debt (Maturity—June 4, 2020)(9)

    14,926     14,653     14,832  

                           

North American Lifting Holdings, Inc.(11)

 

Crane Service Provider

                       

     

LIBOR Plus 4.50% (Floor 1.00%), Current Coupon 5.50%, Secured Debt (Maturity—November 27, 2020)(9)

    2,539     2,036     2,069  

                           

North Atlantic Trading Company, Inc.(11)

 

Marketer/Distributor of Tobacco Products

                       

     

LIBOR Plus 6.50% (Floor 1.25%), Current Coupon 7.75%, Secured Debt (Maturity—January 13, 2020)(9)

    9,422     9,365     9,357  

                           

Novitex Intermediate, LLC(11)

 

Provider of Document Management Services

                       

     

LIBOR Plus 6.75% (Floor 1.25%), Current Coupon 8.00%, Secured Debt (Maturity—July 7, 2020)(9)

    8,526     8,388     8,014  

                           

NTM Acquisition Corp.(11)

 

Provider of B2B Travel Information Content

                       

     

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.25%, Secured Debt (Maturity—June 7, 2022)(9)

    4,197     4,135     4,176  

                           

Ospemifene Royalty Sub LLC (QuatRx)(10)

 

Estrogen-Deficiency Drug Manufacturer and Distributor

                       

     

11.5% Secured Debt (Maturity—November 15, 2026)(14)

    5,071     5,071     3,324  

                           

Pardus Oil and Gas, LLC(11)

 

Oil & Gas Exploration & Production

                       

     

13% PIK Secured Debt (Maturity—November 12, 2021)

    1,826     1,826     1,826  

     

5% PIK Secured Debt (Maturity—May 13, 2022)

    980     980     980  

     

Member Units (2,472 units)

          2,472     2,472  

                  5,278     5,278  

                           

25


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

September 30, 2016

(dollars in thousands)

(Unaudited)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

Paris Presents Incorporated(11)

 

Branded Cosmetic and Bath Accessories

                       

     

LIBOR Plus 8.25% (Floor 1.00%), Current Coupon 9.25%, Secured Debt (Maturity—December 31, 2021)(9)

    2,000     1,967     1,960  

                           

Parq Holdings Limited Partnership(11)(13)

 

Hotel & Casino Operator

                       

     

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 8.50%, Secured Debt (Maturity—December 17, 2020)(9)

    7,500     7,388     7,163  

                           

Permian Holdings, Inc.(11)

 

Storage Tank Manufacturer

                       

     

10.5% Secured Debt (Maturity—January 15, 2018)(14)

    2,755     2,740     785  

                           

Pernix Therapeutics Holdings, Inc.(10)

 

Pharmaceutical Royalty

                       

     

12% Secured Debt (Maturity—August 1, 2020)

    3,447     3,447     3,322  

                           

Pet Holdings ULC(11)(13)

 

Retailer of Pet Products and Supplies to Consumers

                       

     

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 6.50%, Secured Debt (Maturity—July 5, 2022)(9)

    2,500     2,476     2,506  

                           

Pike Corporation(11)

 

Construction and Maintenance Services for Electric Transmission and Distribution Infrastructure

                       

     

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.50%, Secured Debt (Maturity—June 22, 2022)(9)

    14,000     13,711     14,008  

                           

Point.360(10)

 

Fully Integrated Provider of Digital Media Services

                       

     

Warrants (65,463 equivalent shares)

          69      

     

Common Stock (163,658 shares)

          273     105  

                  342     105  

                           

Polycom, Inc.(11)

 

Provider of Audio and Video Communication Solutions

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity—September 27, 2023)(9)

    5,500     5,294     5,308  

                           

Prowler Acquisition Corp.(11)

 

Specialty Distributor to the Energy Sector

                       

     

LIBOR Plus 4.50% (Floor 1.00%), Current Coupon 5.50%, Secured Debt (Maturity—January 28, 2020)(9)

    9,543     7,821     7,301  

                           

26


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

September 30, 2016

(dollars in thousands)

(Unaudited)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

PT Network, LLC(10)

 

Provider of Outpatient Physical Therapy and Sports Medicine Services

                       

     

LIBOR Plus 7.75% (Floor 1.50%), Current Coupon 9.25%, Secured Debt (Maturity—November 1, 2018)(9)

    16,335     16,128     16,090  

                           

QBS Parent, Inc.(11)

 

Provider of Software and Services to the Oil & Gas Industry

                       

     

LIBOR Plus 4.75% (Floor 1.00%), Current Coupon 5.75%, Secured Debt (Maturity—August 7, 2021)(9)

    11,302     11,227     11,189  

                           

Raley's(11)

 

Family-Owned Supermarket Chain

                       

     

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.25%, Secured Debt (Maturity—May 18, 2022)(9)

    4,230     4,157     4,238  

                           

Redbox Automated Retail, LLC(11)

 

Operator of Home Media Entertainment Kiosks

                       

     

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 8.50%, Secured Debt (Maturity—September 27, 2021)(9)

    15,000     14,550     14,700  

                           

Renaissance Learning, Inc.(11)

 

Technology-based K-12 Learning Solutions

                       

     

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.00%, Secured Debt (Maturity—April 11, 2022)(9)

    3,000     2,977     2,957  

                           

RGL Reservoir Operations Inc.(11)(13)

 

Oil & Gas Equipment and Services

                       

     

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.00%, Secured Debt (Maturity—August 13, 2021)(9)

    3,920     3,832     882  

                           

RLJ Entertainment, Inc.(10)

 

Movie and TV Programming Licensee and Distributor

                       

     

LIBOR Plus 8.75% (Floor 0.25%), Current Coupon 9.54%, Secured Debt (Maturity—September 11, 2019)(9)

    9,009     9,009     9,009  

                           

RM Bidder, LLC(10)

 

Scripted and Unscripted TV and Digital Programming Provider

                       

     

Warrants (327,532 equivalent units)

          425     300  

     

Member Units (2,779 units)

          46     44  

                  471     344  

                           

SAExploration, Inc.(10)(13)

 

Geophysical Services Provider

                       

     

Common Stock (50 shares)

          65     27  

                           

27


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

September 30, 2016

(dollars in thousands)

(Unaudited)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

SAFETY Investment Holdings, LLC

 

Provider of Intelligent Driver Record Monitoring Software and Services

                       

     

Member Units (2,000,000 units)

          2,000     2,000  

                           

Sage Automotive Interiors, Inc(11)

 

Automotive Textiles Manufacturer

                       

     

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 9.00%, Secured Debt (Maturity—October 8, 2021)(9)

    8,138     8,095     8,056  

                           

Salient Partners L.P.(11)

 

Provider of Asset Management Services

                       

     

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.50%, Secured Debt (Maturity—June 9, 2021)(9)

    11,038     10,751     10,568  

                           

School Specialty, Inc.(11)

 

Distributor of Education Supplies and Furniture

                       

     

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.50%, Secured Debt (Maturity—June 11, 2019)(9)

    5,712     5,624     5,655  

                           

Sigma Electric Manufacturing Corporation(10)(13)

 

Manufacturer and Distributor of Electrical Fittings and Parts

                       

     

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.25%, Secured Debt (Maturity—May 13, 2019)(9)

    9,328     9,328     9,328  

                           

Sorenson Communications, Inc.(11)

 

Manufacturer of Communication Products for Hearing Impaired

                       

     

LIBOR Plus 5.75% (Floor 2.25%), Current Coupon 8.00%, Secured Debt (Maturity—April 30, 2020)(9)

    13,405     13,311     13,405  

                           

Sotera Defense Solutions, Inc.(11)

 

Defense Industry Intelligence Services

                       

     

LIBOR Plus 7.50% (Floor 1.50%), Current Coupon 9.00%, Secured Debt (Maturity—April 21, 2017)(9)

    9,436     9,339     9,059  

                           

Stardust Finance Holdings, Inc.(11)

 

Manufacturer of Diversified Building Products

                       

     

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 6.50%, Secured Debt (Maturity—March 13, 2022)(9)

    12,854     12,722     12,814  

                           

Subsea Global Solutions, LLC(10)

 

Underwater Maintenance and Repair Services

                       

     

LIBOR Plus 6.00% (Floor 1.50%), Current Coupon 7.50%, Secured Debt (Maturity—March 17, 2020)(9)

    5,629     5,586     5,512  

                           

28


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

September 30, 2016

(dollars in thousands)

(Unaudited)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

Synagro Infrastructure Company, Inc(11)

 

Waste Management Services

                       

     

LIBOR Plus 5.25% (Floor 1.00%), Current Coupon 6.25%, Secured Debt (Maturity—August 22, 2020)(9)

    4,714     4,655     3,971  

                           

Targus International, LLC(11)

 

Distributor of Protective Cases for Mobile Devices

                       

     

15% PIK Secured Debt (Maturity—December 31, 2019)

    1,099     1,099     1,099  

     

Common Stock (Targus Cayman HoldCo Limited) (249,614 shares)(13)

          2,555     2,260  

                  3,654     3,359  

                           

TeleGuam Holdings, LLC(11)

 

Cable and Telecom Services Provider

                       

     

LIBOR Plus 4.00% (Floor 1.25%), Current Coupon 5.25%, Secured Debt (Maturity—December 10, 2018)(9)

    7,642     7,632     7,603  

     

LIBOR Plus 7.50% (Floor 1.25%), Current Coupon 8.75%, Secured Debt (Maturity—June 10, 2019)(9)

    10,500     10,436     10,448  

                  18,068     18,051  

                           

Templar Energy LLC(11)

 

Oil & Gas Exploration & Production

                       

     

Member Units (97,048 units)

          970     704  

                           

The Topps Company, Inc.(11)

 

Trading Cards & Confectionary

                       

     

LIBOR Plus 6.00% (Floor 1.25%), Current Coupon 7.25%, Secured Debt (Maturity—October 2, 2020)(9)

    2,224     2,214     2,216  

                           

TOMS Shoes, LLC(11)

 

Global Designer, Distributor, and Retailer of Casual Footwear

                       

     

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 6.50%, Secured Debt (Maturity—October 30, 2020)(9)

    4,925     4,560     3,644  

                           

Travel Leaders Group, LLC(11)

 

Travel Agency Network Provider

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity—December 7, 2020)(9)

    11,155     11,091     11,114  

                           

Truck Bodies and Equipment International, Inc.(10)

 

Manufacturer of Dump Truck Bodies and Dump Trailers

                       

     

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 8.50%, Secured Debt (Maturity—March 31, 2021)(9)

    15,750     15,595     15,595  

                           

29


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

September 30, 2016

(dollars in thousands)

(Unaudited)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

UniRush, LLC

 

Provider of Prepaid Debit Card Solutions

                       

     

12% Secured Debt (Maturity—February 1, 2019)

    12,000     10,880     10,880  

     

Warrants (444,725 equivalent units)

          1,250     1,250  

                  12,130     12,130  

                           

U.S. TelePacific Corp.(10)

 

Provider of Communications and Managed Services

                       

     

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.50%, Secured Debt (Maturity—February 24, 2021)(9)

    7,500     7,371     7,371  

                           

US Joiner Holding Company(11)

 

Marine Interior Design and Installation

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity—April 16, 2020)(9)

    9,600     9,535     9,552  

                           

VCVH Holding Corp. (Verisk)(11)

 

Healthcare Technology Services Focused on Revenue Maximization

                       

     

LIBOR Plus 9.25% (Floor 1.00%), Current Coupon 10.25%, Secured Debt (Maturity—June 1, 2024)(9)

    1,500     1,463     1,493  

                           

Virtex Enterprises, LP(10)

 

Specialty, Full-Service Provider of Complex Electronic Manufacturing Services

                       

     

12% Secured Debt (Maturity—December 27, 2018)

    1,667     1,548     1,548  

     

Preferred Class A Units (14 units; 5% cumulative)(8)

          333     581  

     

Warrants (11 equivalent units)

          186     198  

                  2,067     2,327  

                           

Vivid Seats LLC(11)

 

Provider of Online Secondary Ticket Marketplace

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity—March 1, 2022)(9)

    4,938     4,619     4,956  

                           

Wellnext, LLC(10)

 

Manufacturer of Supplements and Vitamins

                       

     

LIBOR Plus 9.00% (Floor 0.50%), Current Coupon 9.85%, Secured Debt (Maturity—May 23, 2021)(9)

    10,122     10,027     10,027  

                           

Western Dental Services, Inc.(11)

 

Dental Care Services

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity—November 1, 2018)(9)

    4,904     4,902     4,898  

                           

30


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

September 30, 2016

(dollars in thousands)

(Unaudited)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

Wilton Brands LLC(11)

 

Specialty Housewares Retailer

                       

     

LIBOR Plus 7.25% (Floor 1.25%), Current Coupon 8.50%, Secured Debt (Maturity—August 30, 2018)(9)

    1,358     1,349     1,134  

                           

Worley Claims Services, LLC(10)

 

Insurance Adjustment Management and Services Provider

                       

     

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 9.00%, Secured Debt (Maturity—October 31, 2020)(9)

    6,386     6,340     6,169  

                           

YP Holdings LLC(11)

 

Online and Offline Advertising Operator

                       

     

LIBOR Plus 11.00% (Floor 1.25%), Current Coupon 12.25%, Secured Debt (Maturity—June 4, 2018)(9)

    11,182     10,621     10,847  

                           

Zilliant Incorporated

 

Price Optimization and Margin Management Solutions

                       

     

Preferred Stock (186,777 shares)

          154     260  

     

Warrants (952,500 equivalent shares)

          1,071     1,190  

                  1,225     1,450  

Subtotal Non-Control/Non-Affiliate Investments (53.1% of total investments at fair value)

  $ 1,046,923   $ 1,019,743  

Total Portfolio Investments, September 30, 2016

  $ 1,816,666   $ 1,920,267  

31


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

September 30, 2016

(dollars in thousands)

(Unaudited)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

Marketable Securities and Idle Funds Investments

             

                           

Other Marketable Securities and Idle Funds Investments(13)(15)

 

Investments in Marketable Securities and Diversified, Registered Bond Funds

                       

                $   $  

Subtotal Marketable Securities and Idle Funds Investments (0.0% of total investments at fair value)

  $   $  

Total Investments, September 30, 2016

  $ 1,816,666   $ 1,920,267  

(1)
All investments are Lower Middle Market portfolio investments, unless otherwise noted. See Note B for a description of Lower Middle Market portfolio investments. All of the Company's investments, unless otherwise noted, are encumbered either as security for the Company's Credit Agreement or in support of the SBA-guaranteed debentures issued by the Funds.

(2)
Debt investments are income producing, unless otherwise noted. Equity and warrants are non-income producing, unless otherwise noted.

(3)
See Note C for a summary of geographic location of portfolio companies.

(4)
Principal is net of repayments. Cost is net of repayments and accumulated unearned income.

(5)
Control investments are defined by the Investment Company Act of 1940, as amended ("1940 Act") as investments in which more than 25% of the voting securities are owned or where the ability to nominate greater than 50% of the board representation is maintained.

(6)
Affiliate investments are defined by the 1940 Act as investments in which between 5% and 25% of the voting securities are owned and the investments are not classified as Control investments.

(7)
Non-Control/Non-Affiliate investments are defined by the 1940 Act as investments that are neither Control investments nor Affiliate investments.

(8)
Income producing through dividends or distributions.

(9)
Index based floating interest rate is subject to contractual minimum interest rate. A majority of the variable rate loans in the Company's investment portfolio bear interest at a rate that may be determined by reference to either LIBOR or an alternate Base Rate (commonly based on the Federal Funds Rate or the Prime Rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan. For each such loan, the Company has provided the weighted average annual stated interest rate in effect at September 30, 2016. As noted in this schedule, 62% (based on the par amount of the loans) of the loans contain LIBOR floors which range between 0.25% and 2.25%.

(10)
Private Loan portfolio investment. See Note B for a description of Private Loan portfolio investments.

(11)
Middle Market portfolio investment. See Note B for a description of Middle Market portfolio investments.

(12)
Other Portfolio investment. See Note B for a description of Other Portfolio investments.

(13)
Investment is not a qualifying asset as defined under Section 55(a) of the 1940 Act. Qualifying assets must represent at least 70% of total assets at the time of acquisition of any additional non-qualifying assets.

(14)
Non-accrual and non-income producing investment.

(15)
Marketable securities and idle fund investments.

(16)
External Investment Manager. Investment is not encumbered as security for the Company's Credit Agreement or in support of the SBA-guaranteed debentures issued by the Funds.

(17)
Maturity date is under on-going negotiations with the portfolio company and other lenders, if applicable.

(18)
Portfolio company is in a bankruptcy process and, as such, the maturity date of our debt investments in this portfolio company will not be finally determined until such process is complete. As noted in footnote (14), our debt investments in this portfolio company are on non-accrual status.

32


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments

December 31, 2015

(dollars in thousands)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

Control Investments(5)

             

                           

Access Media Holdings, LLC(10)

 

Private Cable Operator

                       

     

5.00% Current / 5.00% PIK Secured Debt (Maturity—July 22, 2020)

  $ 21,554   $ 21,554   $ 20,380  

     

Preferred Member Units (4,500,000 units; 12% cumulative)

          4,394     2,000  

     

Member Units (45 units)

          1      

                  25,949     22,380  

                           

AmeriTech College, LLC

 

For-Profit Nursing and Healthcare College

                       

     

10% Secured Debt (Maturity—May 15, 2016)

    514     514     514  

     

10% Secured Debt (Maturity—November 30, 2019)

    489     489     489  

     

10% Secured Debt (Maturity—January 31, 2020)

    3,025     3,025     3,025  

     

Preferred Member Units (294 units; 5%)(8)

          2,291     2,291  

                  6,319     6,319  

                           

ASC Interests, LLC

 

Recreational and Educational Shooting Facility

                       

     

11% Secured Debt (Maturity—July 31, 2018)

    2,500     2,470     2,500  

     

Member Units (1,500 units)(8)

          1,500     2,230  

                  3,970     4,730  

                           

Bond-Coat, Inc.

 

Casing and Tubing Coating Services

                       

     

12% Secured Debt (Maturity—December 28, 2017)

    11,596     11,521     11,596  

     

Common Stock (57,508 shares)

          6,350     9,140  

                  17,871     20,736  

                           

Café Brazil, LLC

 

Casual Restaurant Group

                       

     

Member Units (1,233 units)(8)

          1,742     7,330  

                           

CBT Nuggets, LLC

 

Produces and Sells IT Training Certification Videos

                       

     

Member Units (416 units)(8)

          1,300     42,120  

                           

CMS Minerals LLC

 

Oil & Gas Exploration & Production

                       

     

Preferred Member Units (458 units)(8)

          2,967     6,914  

                           

Datacom, LLC

 

Technology and Telecommunications Provider

                       

     

10.5% Secured Debt (Maturity—May 31, 2019)

    11,205     11,122     10,970  

     

Class A Preferred Member Units (15% cumulative)(8)

          1,181     1,181  

     

Class B Preferred Member Units (6,453 units)

          6,030     5,079  

                  18,333     17,230  

                           

33


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

December 31, 2015

(dollars in thousands)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

Garreco, LLC

 

Manufacturer and Supplier of Dental Products

                       

     

14% Secured Debt (Maturity—January 12, 2018)

    5,800     5,739     5,739  

     

Member Units (1,200 units)

          1,200     1,270  

                  6,939     7,009  

                           

GRT Rubber Technologies LLC

 

Manufacturer of Engineered Rubber Products

                       

     

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.00%, Secured Debt (Maturity—December 19, 2019)(9)

    16,122     15,988     15,988  

     

Member Units (5,879 units)

          13,065     15,580  

                  29,053     31,568  

                           

Gulf Manufacturing, LLC

 

Manufacturer of Specialty Fabricated Industrial Piping Products

                       

     

9% PIK Secured Debt (Ashland Capital IX, LLC) (Maturity—June 30, 2017)

    777     777     777  

     

Member Units (438 units)(8)

          2,980     13,770  

                  3,757     14,547  

                           

Harrison Hydra-Gen, Ltd.

 

Manufacturer of Hydraulic Generators

                       

     

9% Secured Debt (Maturity—January 8, 2016)

    5,010     5,010     5,010  

     

Preferred Stock (8% cumulative)(8)

          1,361     1,361  

     

Common Stock (107,456 shares)

          718     2,600  

                  7,089     8,971  

                           

Hawthorne Customs and Dispatch Services, LLC

 

Facilitator of Import Logistics, Brokerage, and Warehousing

                       

     

Member Units (500 units)(8)

          589     460  

     

Member Units (Wallisville Real Estate, LLC) (588,210 units)(8)

          1,215     2,220  

                  1,804     2,680  

                           

HW Temps LLC

 

Temporary Staffing Solutions

                       

     

LIBOR Plus 9.50% (Floor 1.00%), Current Coupon 10.50%, Secured Debt (Maturity July 2, 2020)(9)

    9,976     9,884     9,884  

     

Preferred Member Units (3,200 units)(8)

          3,942     3,942  

                  13,826     13,826  

                           

Hydratec, Inc.

 

Designer and Installer of Micro-Irrigation Systems

                       

     

Common Stock (7,095 shares)(8)

          7,095     14,950  

                           

34


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

December 31, 2015

(dollars in thousands)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

IDX Broker, LLC

 

Provider of Marketing and CRM Tools for the Real Estate Industry

                       

     

12.5% Secured Debt (Maturity—November 15, 2018)

    11,350     11,281     11,350  

     

Member Units (5,400 units)

          5,606     6,440  

                  16,887     17,790  

                           

Indianapolis Aviation Partners, LLC

 

Fixed Base Operator

                       

     

15% Secured Debt (Maturity—January 15, 2016)

    3,100     3,095     3,100  

     

Warrants (1,046 equivalent units)

          1,129     2,540  

                  4,224     5,640  

                           

Jensen Jewelers of Idaho, LLC

 

Retail Jewelry Store

                       

     

Prime Plus 6.75% (Floor 2.00%), Current Coupon 10.25%, Secured Debt (Maturity—November 14, 2016)(9)

    4,055     4,028     4,055  

     

Member Units (627 units)(8)

          811     4,750  

                  4,839     8,805  

                           

Lamb's Venture, LLC

 

Aftermarket Automotive Services Chain

                       

     

11% Secured Debt (Maturity—May 31, 2018)

    7,962     7,961     7,962  

     

Preferred Equity (non-voting)

          328     328  

     

Member Units (742 units)

          5,273     4,690  

     

9.5% Secured Debt (Lamb's Real Estate Investment I, LLC) (Maturity—October 1, 2025)

    919     919     919  

     

Member Units (Lamb's Real Estate Investment I, LLC) (1,000 units)(8)

          625     1,240  

                  15,106     15,139  

                           

Lighting Unlimited, LLC

 

Commercial and Residential Lighting Products and Design Services

                       

     

8% Secured Debt (Maturity—August 22, 2016)

    1,514     1,514     1,514  

     

Preferred Equity (non-voting)

          434     430  

     

Warrants (71 equivalent units)

          54     40  

     

Member Units (700 units)(8)

          100     350  

                  2,102     2,334  

                           

Marine Shelters Holdings, LLC (LoneStar Marine Shelters)

 

Fabricator of Marine and Industrial Shelters

                       

     

12% PIK Secured Debt (Maturity—December 28, 2017)

    9,053     8,967     8,870  

     

Preferred Member Units (3,810 units)

          5,352     4,881  

                  14,319     13,751  

                           

MH Corbin Holding LLC

 

Manufacturer and distributor of traffic safety products

                       

     

10% Secured Debt (Maturity—August 31, 2020)

    14,000     13,869     13,869  

     

Preferred Member Units (4,000 shares)

          6,000     6,000  

                  19,869     19,869  

                           

35


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

December 31, 2015

(dollars in thousands)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

Mid-Columbia Lumber Products, LLC

 

Manufacturer of Finger-Jointed Lumber Products

                       

     

10% Secured Debt (Maturity—December 18, 2017)

    1,750     1,750     1,750  

     

12% Secured Debt (Maturity—December 18, 2017)

    3,900     3,900     3,900  

     

Member Units (2,829 units)

          1,244     2,580  

     

9.5% Secured Debt (Mid—Columbia Real Estate, LLC) (Maturity—May 13, 2025)

    881     881     881  

     

Member Units (Mid—Columbia Real Estate, LLC) (250 units)(8)

          250     550  

                  8,025     9,661  

                           

MSC Adviser I, LLC(16)

 

Third Party Investment Advisory Services

                       

     

Member Units (Fully diluted 100.0%)(8)

              27,272  

                           

Mystic Logistics Holdings, LLC

 

Logistics and Distribution Services Provider for Large Volume Mailers

                       

     

12% Secured Debt (Maturity—August 15, 2019)

    9,448     9,282     9,448  

     

Common Stock (5,873 shares)(8)

          2,720     5,970  

                  12,002     15,418  

                           

NAPCO Precast, LLC

 

Precast Concrete Manufacturing

                       

     

Prime Plus 2.00% (Floor 7.00%), Current Coupon 9.00%, Secured Debt (Maturity—January 31, 2016)(9)

    625     625     625  

     

Prime Plus 2.00% (Floor 7.00%), Current Coupon 9.00%, Secured Debt (Maturity—February 1, 2016)(9)

    3,380     3,379     3,380  

     

18% Secured Debt (Maturity—February 1, 2016)

    4,924     4,923     4,924  

     

Member Units (2,955 units)(8)

          2,975     8,590  

                  11,902     17,519  

                           

NRI Clinical Research, LLC

 

Clinical Research Service Provider

                       

     

14% Secured Debt (Maturity—September 8, 2017)

    4,617     4,539     4,539  

     

Warrants (251,723 equivalent units)

          252     340  

     

Member Units (1,454,167 units)

          765     1,342  

                  5,556     6,221  

                           

NRP Jones, LLC

 

Manufacturer of Hoses, Fittings and Assemblies

                       

     

12% Secured Debt (Maturity—December 22, 2016)

    13,224     12,948     12,948  

     

Warrants (14,331 equivalent units)

          817     450  

     

Member Units (50,877 units)

          2,900     1,480  

                  16,665     14,878  

                           

OMi Holdings, Inc.

 

Manufacturer of Overhead Cranes

                       

     

Common Stock (1,500 shares)

          1,080     13,640  

                           

36


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

December 31, 2015

(dollars in thousands)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

Pegasus Research Group, LLC (Televerde)

 

Provider of Telemarketing and Data Services

                       

     

Member Units (460 units)(8)

          1,290     6,840  

                           

PPL RVs, Inc.

 

Recreational Vehicle Dealer

                       

     

11.1% Secured Debt (Maturity—July 1, 2016)

    9,710     9,710     9,710  

     

Common Stock (1,962 shares)

          2,150     9,770  

                  11,860     19,480  

                           

Principle Environmental, LLC

 

Noise Abatement Service Provider

                       

     

12% Secured Debt (Maturity—April 30, 2017)

    4,060     4,039     4,060  

     

12% Current / 2% PIK Secured Debt (Maturity—April 30, 2017)

    3,310     3,309     3,310  

     

Preferred Member Units (19,631 units)(8)

          4,663     6,060  

     

Warrants (1,036 equivalent units)

          1,200     310  

                  13,211     13,740  

                           

Quality Lease Service, LLC

 

Provider of Rigsite Accommodation Unit Rentals and Related Services

                       

     

8% PIK Secured Debt (Maturity—June 8, 2020)

    6,538     6,538     6,538  

     

Member Units (1,000 units)

          568     2,638  

                  7,106     9,176  

                           

River Aggregates, LLC

 

Processor of Construction Aggregates

                       

     

Zero Coupon Secured Debt (Maturity—June 30, 2018)

    750     556     556  

     

Member Units (1,150 units)(8)

          1,150     3,830  

     

Member Units (RA Properties, LLC) (1,500 units)

          369     2,360  

                  2,075     6,746  

                           

SoftTouch Medical Holdings LLC

 

Home Provider of Pediatric Durable Medical Equipment

                       

     

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.00%, Secured Debt (Maturity—October 31, 2019)(9)

    8,075     8,010     8,010  

     

Member Units (4,450 units)(8)

          4,930     5,710  

                  12,940     13,720  

                           

Southern RV, LLC

 

Recreational Vehicle Dealer

                       

     

13% Secured Debt (Maturity—August 8, 2018)

    11,400     11,296     11,400  

     

Member Units (1,680 units)(8)

          1,680     15,100  

     

13% Secured Debt (Southern RV Real Estate, LLC) (Maturity—August 8, 2018)

    3,250     3,220     3,250  

     

Member Units (Southern RV Real Estate, LLC) (480 units)

          480     1,200  

                  16,676     30,950  

                           

37


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

December 31, 2015

(dollars in thousands)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

The MPI Group, LLC

 

Manufacturer of Custom Hollow Metal Doors, Frames and Accessories

                       

     

9% Secured Debt (Maturity—October 2, 2018)

    2,924     2,921     2,921  

     

Series A Preferred Units (2,500 units; 10% Cumulative)

          2,500     690  

     

Warrants (1,424 equivalent units)

          1,096      

     

Member Units (MPI Real Estate Holdings, LLC) (100% Fully diluted)(8)

          2,300     2,230  

                  8,817     5,841  

                           

Travis Acquisition LLC

 

Manufacturer of Aluminum Trailers

                       

     

12% Secured Debt (Maturity—August 30, 2018)

    3,513     3,471     3,513  

     

Member Units (7,282 units)

          7,100     14,480  

                  10,571     17,993  

                           

Uvalco Supply, LLC

 

Farm and Ranch Supply Store

                       

     

9% Secured Debt (Maturity—January 1, 2019)

    1,314     1,314     1,314  

     

Member Units (2,011 units)(8)

          3,843     5,460  

                  5,157     6,774  

                           

Vision Interests, Inc.

 

Manufacturer / Installer of Commercial Signage

                       

     

13% Secured Debt (Maturity—December 23, 2016)

    3,071     3,052     3,052  

     

Series A Preferred Stock (3,000,000 shares)

          3,000     3,550  

     

Common Stock (1,126,242 shares)

          3,706     210  

                  9,758     6,812  

                           

Ziegler's NYPD, LLC

 

Casual Restaurant Group

                       

     

6.5% Secured Debt (Maturity—October 1, 2019)

    1,000     992     992  

     

12% Secured Debt (Maturity—October 1, 2019)

    500     500     500  

     

14% Secured Debt (Maturity—October 1, 2019)

    2,750     2,750     2,750  

     

Warrants (587 equivalent units)

          600     50  

     

Preferred Member Units (10,072 units)

          2,834     3,400  

                  7,676     7,692  

                           

Subtotal Control Investments (30.8% of total investments at fair value)

  $ 387,727   $ 555,011  

                           

38


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

December 31, 2015

(dollars in thousands)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

Affiliate Investments(6)

 

 

 

 

                   

                           

AFG Capital Group, LLC

 

Provider of Rent-to-Own Financing Solutions and Services

                       

     

11% Secured Debt (Maturity—November 7, 2019)

  $ 12,960   $ 12,611   $ 12,790  

     

Warrants (42 equivalent units)

          259     490  

     

Member Units (186 units)

          1,200     2,020  

                  14,070     15,300  

                           

Boss Industries, LLC

 

Manufacturer and Distributor of Air, Power and Other Industrial Equipment

                       

     

Preferred Member Units (2,242 units)(8)

          2,246     2,586  

                           

Bridge Capital Solutions Corporation

 

Financial Services and Cash Flow Solutions Provider

                       

     

13% Secured Debt (Maturity—April 18, 2017)

    7,000     6,890     6,890  

     

Warrants (22 equivalent shares)

          200     1,300  

                  7,090     8,190  

                           

Buca C, LLC

 

Casual Restaurant Group

                       

     

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.25%, Secured Debt (Maturity—June 30, 2020)(9)

    25,530     25,299     25,299  

     

Preferred Member Units (6 units; 6% cumulative)(8)

          3,711     3,711  

                  29,010     29,010  

                           

CAI Software LLC

 

Provider of Specialized Enterprise Resource Planning Software

                       

     

12% Secured Debt (Maturity—October 10, 2019)

    4,661     4,624     4,661  

     

Member Units (65,356 units)

          654     1,000  

                  5,278     5,661  

                           

Condit Exhibits, LLC

 

Tradeshow Exhibits / Custom Displays Provider

                       

     

Member Units (3,936 units)(8)

          100     1,010  

                           

Congruent Credit Opportunities Funds(12)(13)

 

Investment Partnership

                       

     

LP Interests (Congruent Credit Opportunities Fund II, LP) (Fully diluted 19.8%)(8)

          6,612     2,834  

     

LP Interests (Congruent Credit Opportunities Fund III, LP) (Fully diluted 17.4%)(8)

          12,020     12,024  

                  18,632     14,858  

                           

Daseke, Inc.

 

Specialty Transportation Provider

                       

     

12% Current / 2.5% PIK Secured Debt (Maturity—July 31, 2018)

    21,253     21,003     21,253  

     

Common Stock (19,467 shares)

          5,213     22,660  

                  26,216     43,913  

                           

39


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

December 31, 2015

(dollars in thousands)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

Dos Rios Partners(12)(13)

 

Investment Partnership

                       

     

LP Interests (Dos Rios Partners, LP) (Fully diluted 20.2%)

          3,104     2,031  

     

LP Interests (Dos Rios Partners—A, LP) (Fully diluted 6.4%)

          986     648  

                  4,090     2,679  

                           

East Teak Fine Hardwoods, Inc.

 

Distributor of Hardwood Products

                       

     

Common Stock (6,250 shares)(8)

          480     860  

                           

East West Copolymer & Rubber, LLC

 

Manufacturer of Synthetic Rubbers

                       

     

12% Secured Debt (Maturity—October 17, 2019)

    9,600     9,463     9,463  

     

Warrants (2,510,790 equivalent units)

          50     50  

                  9,513     9,513  

                           

EIG Traverse Co-Investment, L.P.(12)(13)

 

Investment Partnership

                       

     

LP Interests (Fully diluted 6.6%)(8)

          4,755     4,755  

                           

Freeport Financial Funds(12)(13)

 

Investment Partnership

                       

     

LP Interests (Freeport Financial SBIC Fund LP) (Fully diluted 9.9%)(8)

          5,974     6,045  

     

LP Interests (Freeport First Lien Loan Fund III LP) (Fully diluted 6.4%)

          2,077     2,077  

                  8,051     8,122  

                           

Gault Financial, LLC (RMB Capital, LLC)

 

Purchases and Manages Liquidation of Distressed Assets

                       

     

10% Secured Debt (Maturity—November 21, 2016)

    13,046     12,896     10,930  

     

Warrants (29,025 equivalent units)

          400      

                  13,296     10,930  

                           

Glowpoint, Inc.

 

Provider of Cloud Managed Video Collaboration Services

                       

     

8% Secured Debt (Maturity—October 18, 2018)

    400     397     397  

     

12% Secured Debt (Maturity—October 18, 2018)

    9,000     8,929     8,929  

     

Common Stock (7,711,517 shares)

          3,958     3,840  

                  13,284     13,166  

                           

Guerdon Modular Holdings, Inc.

 

Multi-Family and Commercial Modular Construction Company

                       

     

13% Secured Debt (Maturity—August 13, 2019)

    10,400     10,280     10,280  

     

Common Stock (170,577 shares)

          2,983     1,990  

                  13,263     12,270  

                           

Houston Plating and Coatings, LLC

 

Provider of Plating and Industrial Coating Services

                       

     

Member Units (248,082 units)(8)

          996     8,440  

                           

40


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

December 31, 2015

(dollars in thousands)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

I-45 SLF LLC(12)(13)

 

Investment Partnership

                       

     

Member units (Fully diluted 20.0%; 24.4% profits interest)

          7,200     7,200  

                           

Indianhead Pipeline Services, LLC

 

Provider of Pipeline Support Services

                       

     

12% Secured Debt (Maturity—February 6, 2017)

    6,000     5,853     5,853  

     

Preferred Member Units (33,819 units; 8% cumulative)

          2,302     2,302  

     

Warrants (31,928 equivalent units)

          459      

     

Member Units (14,732 units)

          1      

                  8,615     8,155  

                           

KBK Industries, LLC

 

Manufacturer of Specialty Oilfield and Industrial Products

                       

     

12.5% Secured Debt (Maturity—September 28, 2017)

    5,900     5,875     5,900  

     

Member Units (250 units)(8)

          341     3,680  

                  6,216     9,580  

                           

L.F. Manufacturing Holdings, LLC(10)

 

Manufacturer of Fiberglass Products

                       

     

Member Units (2,179,001 units)(8)

          2,019     1,485  

                           

MPS Denver, LLC

 

Specialty Card Printing

                       

     

Member Units (13,800 units)

          1,130     1,130  

                           

OnAsset Intelligence, Inc.

 

Provider of Transportation Monitoring / Tracking Products and Services

                       

     

12% PIK Secured Debt (Maturity—December 31, 2015)(17)

    4,006     4,006     4,006  

     

Preferred Stock (912 shares; 7% cumulative)(8)

          1,981     1,380  

     

Warrants (5,333 equivalent shares)

          1,919      

                  7,906     5,386  

                           

OPI International Ltd.(13)

 

Provider of Man Camp and Industrial Storage Services

                       

     

10% Unsecured Debt (Maturity—April 8, 2018)

    473     473     473  

     

Common Stock (20,766,317 shares)

          1,371     3,200  

                  1,844     3,673  

                           

PCI Holding Company, Inc.

 

Manufacturer of Industrial Gas Generating Systems

                       

     

Preferred Stock (1,500,000 shares; 20% cumulative)(8)

          2,762     4,887  

                           

Radial Drilling Services Inc.

 

Oil and Gas Lateral Drilling Technology Provider

                       

     

12% Secured Debt (Maturity—November 22, 2016)(14)

    4,200     3,941     1,500  

     

Warrants (316 equivalent shares)

          758      

                  4,699     1,500  

                           

41


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

December 31, 2015

(dollars in thousands)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

Rocaceia, LLC (Quality Lease and Rental Holdings, LLC)

 

Provider of Rigsite Accommodation Unit Rentals and Related Services

                       

     

12% Secured Debt (Maturity—January 8, 2018)(14)(18)

    30,785     30,281     250  

     

Preferred Member Units (250 units)

          2,500      

                  32,781     250  

                           

Samba Holdings, Inc.

 

Provider of Intelligent Driver Record Monitoring Software and Services

                       

     

12.5% Secured Debt (Maturity—November 17, 2016)

    24,662     24,553     24,662  

     

Common Stock (170,963 shares)

          2,087     30,220  

                  26,640     54,882  

                           

Tin Roof Acquisition Company

 

Casual Restaurant Group

                       

     

12% Secured Debt (Maturity—November 13, 2018)

    13,994     13,807     13,807  

     

Class C Preferred Stock (Fully diluted 10.0%; 10% cumulative)(8)

          2,477     2,477  

                  16,284     16,284  

                           

UniTek Global Services, Inc.(11)

 

Provider of Outsourced Infrastructure Services

                       

     

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 8.50%, Secured Debt (Maturity—January 13, 2019)(9)

    2,826     2,826     2,812  

     

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.50% / 1.00% PIK, Current Coupon Plus PIK 10.50%, Secured Debt (Maturity—January 13, 2019)(9)

    1,261     1,261     1,255  

     

15% PIK Unsecured Debt (Maturity—July 13, 2019)

    641     641     638  

     

Preferred Stock (4,935,377 shares)

          4,935     5,540  

     

Common Stock (705,054 shares)

               

                  9,663     10,245  

                           

Universal Wellhead Services Holdings, LLC(10)

 

Provider of Wellhead Equipment, Designs, and Personnel to the Oil & Gas Industry

                       

     

Class A Preferred Units (4,000,000 units; 4.5% cumulative)(8)

          4,000     3,000  

                           

Volusion, LLC

 

Provider of Online Software-as-a-Service eCommerce Solutions

                       

     

10.5% Secured Debt (Maturity—January 26, 2020)

    17,500     16,199     16,199  

     

Preferred Member Units (4,876,670 units)

          14,000     14,000  

     

Warrants (950,618 equivalent units)

          1,400     1,400  

                  31,599     31,599  

                           

Subtotal Affiliate Investments (19.4% of total investments at fair value)

  $ 333,728   $ 350,519  

42


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

December 31, 2015

(dollars in thousands)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

Non-Control/Non-Affiliate Investments(7)

             

                           

AccuMED, Corp.(10)

 

Medical Device Contract Manufacturer

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity—October 29, 2020)(9)

  $ 9,750   $ 9,648   $ 9,648  

                           

Adams Publishing Group, LLC(10)

 

Local Newspaper Operator

                       

     

LIBOR Plus 6.75% (Floor 1.00%), Current Coupon 7.75%, Secured Debt (Maturity—November 3, 2020)(9)

    9,506     9,329     9,328  

                           

Ahead, LLC(10)

 

IT Infrastructure Value Added Reseller

                       

     

LIBOR Plus 6.50%, Current Coupon 6.76%, Secured Debt (Maturity—November 2, 2020)

    15,000     14,562     14,625  

                           

Allflex Holdings III Inc.(11)

 

Manufacturer of Livestock Identification Products

                       

     

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.00%, Secured Debt (Maturity—July 19, 2021)(9)

    10,150     10,080     10,008  

                           

AM General LLC(11)

 

Specialty Vehicle Manufacturer

                       

     

LIBOR Plus 9.00% (Floor 1.25%), Current Coupon 10.25%, Secured Debt (Maturity—March 22, 2018)(9)

    2,256     2,221     1,867  

                           

AM3 Pinnacle Corporation(10)

 

Provider of Comprehensive Internet, TV and Voice Services for Multi- Dwelling Unit Properties

                       

     

Common Stock (60,240 shares)

          2,000      

                           

American Seafoods Group, LLC(11)

 

Catcher-Processor of Alaskan Pollock

                       

     

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.00%, Secured Debt (Maturity—August 19, 2021)(9)

    9,975     9,963     9,892  

                           

AMF Bowling Centers, Inc.(11)

 

Bowling Alley Operator

                       

     

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.25%, Secured Debt (Maturity—September 18, 2021)(9)

    7,907     7,802     7,835  

                           

Anchor Hocking, LLC(11)

 

Household Products Manufacturer

                       

     

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.00%, Secured Debt (Maturity—June 4, 2018)(9)

    2,306     2,306     2,179  

     

Member Units (440,620 units)

          4,928     3,250  

                  7,234     5,429  

                           

43


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

December 31, 2015

(dollars in thousands)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

AP Gaming I, LLC(10)

 

Developer, Manufacturer, and Operator of Gaming Machines

                       

     

LIBOR Plus 8.25% (Floor 1.00%), Current Coupon 9.25%, Secured Debt (Maturity—December 20, 2020)(9)

    11,314     11,108     10,946  

                           

Apex Linen Service, Inc.

 

Industrial Launderers

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity—October 30, 2022)(9)

    1,600     1,600     1,600  

     

13% Secured Debt (Maturity—October 30, 2022)

    12,000     11,926     11,926  

                  13,526     13,526  

                           

Applied Products, Inc.(10)

 

Adhesives Distributor

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity—September 30, 2019)(9)

    5,813     5,759     5,683  

                           

Arcus Hunting LLC.(10)

 

Manufacturer of Bowhunting and Archery Products and Accessories

                       

     

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.00%, Secured Debt (Maturity—November 13, 2019)(9)

    9,540     9,429     9,429  

                           

Artel, LLC(11)

 

Provider of Secure Satellite Network and IT Solutions

                       

     

LIBOR Plus 7.00% (Floor 1.25%), Current Coupon 8.25%, Secured Debt (Maturity—November 27, 2017)(9)

    7,854     7,585     6,716  

                           

ATS Workholding, Inc.(10)

 

Manufacturer of Machine Cutting Tools and Accessories

                       

     

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 8.50%, Secured Debt (Maturity—March 10, 2019)(9)

    6,492     6,452     6,230  

                           

ATX Networks Corp.(11)(13)

 

Provider of Radio Frequency Management Equipment

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity—June 14, 2021)(9)

    14,925     14,647     14,701  

                           

Barfly Ventures, LLC(10)

 

Casual Restaurant Group

                       

     

12% Secured Debt (Maturity—August 31, 2020)

    4,121     4,042     4,042  

     

Warrant (1 equivalent unit)

          473     473  

                  4,515     4,515  

                           

44


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

December 31, 2015

(dollars in thousands)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

Berry Aviation, Inc.(10)

 

Airline Charter Service Operator

                       

     

12.00% Current / 1.75% PIK Secured Debt (Maturity—January 30, 2020)

    5,627     5,578     5,578  

     

Common Stock (553 shares)

          400     400  

                  5,978     5,978  

                           

Bioventus LLC(10)

 

Production of Orthopedic Healing Products

                       

     

LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 11.00%, Secured Debt (Maturity—April 10, 2020)(9)

    5,000     4,917     4,925  

                           

Blackbrush Oil and Gas LP(11)

 

Oil & Gas Exploration

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity—July 30, 2021)(9)

    4,000     3,975     3,230  

                           

Blackhawk Specialty Tools LLC(11)

 

Oilfield Equipment & Services

                       

     

LIBOR Plus 5.25% (Floor 1.25%), Current Coupon 6.50%, Secured Debt (Maturity—August 1, 2019)(9)

    5,892     5,866     5,450  

                           

Blue Bird Body Company(11)

 

School Bus Manufacturer

                       

     

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 6.50%, Secured Debt (Maturity—June 26, 2020)(9)

    4,702     4,646     4,669  

                           

Bluestem Brands, Inc.(11)(13)

 

Multi-Channel Retailer of General Merchandise

                       

     

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 8.50%, Secured Debt (Maturity—November 6, 2020)(9)

    13,632     13,358     12,780  

                           

Brainworks Software, LLC(10)

 

Advertising Sales and Newspaper Circulation Software

                       

     

Prime Plus 7.25% (Floor 3.25%), Current Coupon 10.75%, Secured Debt (Maturity—July 22, 2019)(9)

    626     620     620  

     

LIBOR Plus 8.25% (Floor 1.00%), Current Coupon 9.25%, Secured Debt (Maturity—July 22, 2019)(9)

    6,185     6,126     6,012  

                  6,746     6,632  

                           

Brightwood Capital Fund III, LP(12)(13)

 

Investment Partnership

                       

     

LP Interests (Fully diluted 1.6%)(8)

          11,250     11,125  

                           

Brundage-Bone Concrete Pumping, Inc.(11)

 

Construction Services Provider

                       

     

10.375% Secured Debt (Maturity—September 1, 2021)

    2,500     2,500     2,438  

                           

Calloway Laboratories, Inc.(10)

 

Health Care Testing Facilities

                       

     

17% PIK Secured Debt (Maturity—September 30, 2016)(14)

    7,324     7,275      

     

Warrants (125,000 equivalent shares)

          17      

                  7,292      

                           

45


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

December 31, 2015

(dollars in thousands)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

Cengage Learning Acquisitions, Inc.(11)

 

Provider of Educational Print and Digital Services

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity—March 31, 2020)(9)

    9,720     9,672     9,502  

                           

Cenveo Corporation(11)

 

Provider of Commercial Printing, Envelopes, Labels, and Printed Office Products

                       

     

6% Secured Debt (Maturity—August 1, 2019)

    5,230     4,544     3,687  

                           

CGSC of Delaware Holdings Corp.(11)(13)

 

Insurance Brokerage Firm

                       

     

LIBOR Plus 7.00% (Floor 1.25%), Current Coupon 8.25%, Secured Debt (Maturity—October 16, 2020)(9)

    2,000     1,979     1,900  

                           

Charlotte Russe, Inc(11)

 

Fast-Fashion Retailer to Young Women

                       

     

LIBOR Plus 5.50% (Floor 1.25%), Current Coupon 6.75%, Secured Debt (Maturity—May 22, 2019)(9)

    14,346     14,065     10,031  

                           

Clarius ASIG, LLC(10)

 

Prints & Advertising Film Financing

                       

     

15% PIK Secured Debt (Maturity—September 14, 2014)(17)

    620     620     620  

                           

Clarius BIGS, LLC(10)

 

Prints & Advertising Film Financing

                       

     

15% PIK Secured Debt (Maturity—January 5, 2015)(14)(17)

    3,386     3,386     563  

                           

Compact Power Equipment, Inc.

 

Equipment / Tool Rental

                       

     

12% Secured Debt (Maturity—October 1, 2017)

    4,100     4,090     4,100  

     

Series A Preferred Stock (4,298,435 shares)

          1,079     2,930  

                  5,169     7,030  

                           

Compuware Corporation(11)

 

Provider of Software and Supporting Services

                       

     

LIBOR Plus 5.25% (Floor 1.00%), Current Coupon 6.25%, Secured Debt (Maturity—December 15, 2019)(9)

    14,751     14,395     13,998  

                           

Covenant Surgical Partners, Inc.(11)

 

Ambulatory Surgical Centers

                       

     

8.75% Secured Debt (Maturity—August 1, 2019)

    800     800     780  

                           

CRGT Inc.(11)

 

Provider of Custom Software Development

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity—December 19, 2020)(9)

    10,168     10,009     10,118  

                           

46


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

December 31, 2015

(dollars in thousands)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

CST Industries Inc.(11)

 

Storage Tank Manufacturer

                       

     

LIBOR Plus 6.25% (Floor 1.50%), Current Coupon 7.75%, Secured Debt (Maturity—May 22, 2017)(9)

    8,227     8,197     8,145  

                           

Darr Equipment LP(10)

 

Heavy Equipment Dealer

                       

     

11.75% Current / 2% PIK Secured Debt (Maturity—April 15, 2020)

    20,706     20,178     19,688  

     

Warrants (915,734 equivalent units)

          474     410  

                  20,652     20,098  

                           

Digital River, Inc.(11)

 

Provider of Outsourced e-Commerce Solutions and Services

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity—February 12, 2021)(9)

    8,667     8,588     8,580  

                           

Digity Media LLC(11)

 

Radio Station Operator

                       

     

LIBOR Plus 4.75% (Floor 1.25%), Current Coupon 6.00%, Secured Debt (Maturity—February 8, 2019)(9)

    6,588     6,539     6,506  

                           

Drilling Info Holdings, Inc.

 

Information Services for the Oil and Gas Industry

                       

     

Common Stock (3,788,865 shares)

          1,335     9,920  

                           

ECP-PF Holdings Group, Inc.(10)

 

Fitness Club Operator

                       

     

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.00%, Secured Debt (Maturity—November 26, 2019)(9)

    5,625     5,579     5,492  

                           

EIG Fund Investments(12)(13)

 

Investment Partnership

                       

     

LP Interests (EIG Global Private Debt fund-A, L.P.) (Fully diluted 0.5%)

          718     718  

                           

EnCap Energy Fund Investments(12)(13)

 

Investment Partnership

                       

     

LP Interests (EnCap Energy Capital Fund VIII, L.P.) (Fully diluted 0.1%)(8)

          3,762     2,765  

     

LP Interests (EnCap Energy Capital Fund VIII Co- Investors, L.P.) (Fully diluted 0.4%)

          2,194     1,056  

     

LP Interests (EnCap Energy Capital Fund IX, L.P.) (Fully diluted 0.1%)(8)

          3,075     3,826  

     

LP Interests (Encap Energy Capital Fund X, L.P.) (Fully diluted 0.1%)

          692     692  

     

LP Interests (EnCap Flatrock Midstream Fund II, L.P.) (Fully diluted 0.8%)(8)

          7,350     10,738  

     

LP Interests (EnCap Flatrock Midstream Fund III, L.P.) (Fully diluted 0.2%)

          464     892  

                  17,537     19,969  

                           

47


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

December 31, 2015

(dollars in thousands)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

Energy and Exploration Partners, LLC(11)

 

Oil & Gas Exploration & Production

                       

     

8.75% Secured Debt (Maturity—January 23, 2016)(14)

    221     221     221  

     

LIBOR Plus 6.75% (Floor 1.00%), Current Coupon 7.75%, Secured Debt (Maturity—January 22, 2019)(9)(14)

    9,390     9,048     2,371  

                  9,269     2,592  

                           

Evergreen Skills Lux S.á r.l. (d/b/a Skillsoft)(11)(13)

 

Technology-based Performance Support Solutions

                       

     

LIBOR Plus 8.25% (Floor 1.00%), Current Coupon 9.25%, Secured Debt (Maturity—April 28, 2022)(9)

    7,000     6,838     4,673  

                           

Extreme Reach, Inc.(11)

 

Integrated TV and Video Advertising Platform

                       

     

LIBOR Plus 5.75% (Floor 1.00%), Current Coupon 6.75%, Secured Debt (Maturity—February 7, 2020)(9)

    8,875     8,866     8,731  

                           

Flavors Holdings Inc.(11)

 

Global Provider of Flavoring and Sweetening Products and Solutions

                       

     

LIBOR Plus 5.75% (Floor 1.00%), Current Coupon 6.75%, Secured Debt (Maturity—April 3, 2020)(9)

    11,333     11,004     10,086  

                           

Fram Group Holdings, Inc.(11)

 

Manufacturer of Automotive Maintenance Products

                       

     

LIBOR Plus 5.50% (Floor 1.50%), Current Coupon 7.00%, Secured Debt (Maturity—July 29, 2017)(9)

    9,652     9,547     7,275  

     

LIBOR Plus 9.50% (Floor 1.50%), Current Coupon 11.00%, Secured Debt (Maturity—January 29, 2018)(9)

    700     699     350  

                  10,246     7,625  

                           

GI KBS Merger Sub LLC(11)

 

Outsourced Janitorial Services to Retail/Grocery Customers

                       

     

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.00%, Secured Debt (Maturity—October 29, 2021)(9)

    3,960     3,901     3,742  

     

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.50%, Secured Debt (Maturity—April 29, 2022)(9)

    800     786     792  

                  4,687     4,534  

                           

48


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

December 31, 2015

(dollars in thousands)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

Grace Hill, LLC(10)

 

Online Training Tools for the Multi-Family Housing Industry

                       

     

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.25%, Secured Debt (Maturity—August 15, 2019)(9)

    9,450     9,361     9,450  

                           

Great Circle Family Foods, LLC(10)

 

Quick Service Restaurant Franchise

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity—October 28, 2019)(9)

    7,849     7,783     7,783  

                           

Grupo Hima San Pablo, Inc.(11)

 

Tertiary Care Hospitals

                       

     

LIBOR Plus 7.00% (Floor 1.50%), Current Coupon 8.50%, Secured Debt (Maturity—January 31, 2018)(9)

    4,863     4,816     4,668  

     

13.75% Secured Debt (Maturity—July 31, 2018)

    2,000     1,942     1,860  

                  6,758     6,528  

                           

GST Autoleather, Inc.(11)

 

Automotive Leather Manufacturer

                       

     

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 6.50%, Secured Debt (Maturity—July 10, 2020)(9)

    9,875     9,797     9,529  

                           

Guitar Center, Inc.(11)

 

Musical Instruments Retailer

                       

     

6.5% Secured Debt (Maturity—April 15, 2019)

    11,000     10,442     9,240  

                           

Halcon Resources Corporation(11)

 

Oil & Gas Exploration & Production

                       

     

9.75% Unsecured Debt (Maturity—July 15, 2020)

    6,925     6,382     2,008  

                           

Hojeij Branded Foods, LLC(10)

 

Multi-Airport, Multi- Concept Restaurant Operator

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity—July 27, 2021)(9)

    5,344     5,294     5,294  

                           

Horizon Global Corporation(11)

 

Auto Parts Manufacturer

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity—June 30, 2021)(9)

    9,750     9,568     9,677  

                           

Hostway Corporation(11)

 

Managed Services and Hosting Provider

                       

     

LIBOR Plus 4.75% (Floor 1.25%), Current Coupon 6.00%, Secured Debt (Maturity—December 13, 2019)(9)

    11,179     11,105     11,067  

                           

Hunter Defense Technologies, Inc.(11)

 

Provider of Military and Commercial Shelters and Systems

                       

     

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 6.50%, Secured Debt (Maturity—August 5, 2019)(9)

    6,414     6,366     6,350  

                           

49


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

December 31, 2015

(dollars in thousands)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

ICON Health & Fitness, Inc.(11)

 

Producer of Fitness Products

                       

     

11.875% Secured Debt (Maturity—October 15, 2016)

    6,956     6,907     6,608  

                           

iEnergizer Limited(11)(13)

 

Provider of Business Outsourcing Solutions

                       

     

LIBOR Plus 6.00% (Floor 1.25%), Current Coupon 7.25%, Secured Debt (Maturity—May 1, 2019)(9)

    8,110     8,030     7,502  

                           

Indivior Finance LLC(11)(13)

 

Specialty Pharmaceutical Company Treating Opioid Dependence

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity—December 19, 2019)(9)

    7,125     6,759     6,697  

                           

Industrial Container Services, LLC(10)

 

Steel Drum Reconditioner

                       

     

LIBOR Plus 5.75% (Floor 1.00%), Current Coupon 6.75%, Secured Debt (Maturity—December 31, 2018)(9)

    5,000     5,000     5,000  

                           

Infinity Acquisition Finance Corp.(11)

 

Application Software for Capital Markets

                       

     

7.25% Unsecured Debt (Maturity—August 1, 2022)

    4,000     4,000     3,440  

                           

Inn of the Mountain Gods Resort and Casino(11)

 

Hotel & Casino Owner & Operator

                       

     

9.25% Secured Debt (Maturity—November 30, 2020)

    3,851     3,708     3,562  

                           

Insurance Technologies, LLC(10)

 

Illustration and Sales-automation Platforms

                       

     

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.00%, Secured Debt (Maturity—December 1, 2019)(9)

    4,804     4,759     4,759  

                           

Intertain Group Limited(11)(13)

 

Business-to-Consumer Online Gaming Operator

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity—April 8, 2022)(9)

    9,938     9,782     9,883  

                           

iPayment, Inc.(11)

 

Provider of Merchant Acquisition

                       

     

LIBOR Plus 5.25% (Floor 1.50%), Current Coupon 6.75%, Secured Debt (Maturity—May 8, 2017)(9)

    15,026     14,986     14,446  

                           

iQor US Inc.(11)

 

Business Process Outsourcing Services Provider

                       

     

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.00%, Secured Debt (Maturity—April 1, 2021)(9)

    9,887     9,718     7,942  

                           

50


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

December 31, 2015

(dollars in thousands)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

irth Solutions, LLC

 

Provider of Damage Prevention Information Technology Services

                       

     

Member Units (27,893 units)

          1,441     1,441  

                           

Jackmont Hospitality, Inc.(10)

 

Franchisee of Casual Dining Restaurants

                       

     

LIBOR Plus 4.25% (Floor 1.00%), Current Coupon 5.25% / 2.50% PIK, Current Coupon Plus PIK 7.75%, Secured Debt (Maturity—May 26, 2021)(9)

    4,357     4,337     4,188  

                           

Joerns Healthcare, LLC(11)

 

Manufacturer and Distributor of Health Care Equipment & Supplies

                       

     

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.00%, Secured Debt (Maturity—May 9, 2020)(9)

    14,805     14,711     14,703  

                           

JSS Holdings, Inc.(11)

 

Aircraft Maintenance Program Provider

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity—August 31, 2021)(9)

    14,566     14,230     13,765  

                           

Kendra Scott, LLC(11)

 

Jewelry Retail Stores

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity—July 17, 2020)(9)

    5,875     5,821     5,831  

                           

Keypoint Government Solutions, Inc.(11)

 

Provider of Pre-Employment Screening Services

                       

     

LIBOR Plus 6.50% (Floor 1.25%), Current Coupon 7.75%, Secured Debt (Maturity—November 13, 2017)(9)

    6,303     6,268     6,271  

                           

LaMi Products, LLC(10)

 

General Merchandise Distribution

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity—September 16, 2020)(9)

    4,729     4,699     4,699  

                           

Lansing Trade Group LLC(11)

 

Commodity Merchandiser

                       

     

9.25% Unsecured Debt (Maturity—February 15, 2019)

    6,000     6,000     5,625  

                           

Larchmont Resources, LLC(11)

 

Oil & Gas Exploration & Production

                       

     

LIBOR Plus 8.75% (Floor 1.00%), Current Coupon 9.75%, Secured Debt (Maturity—August 7, 2019)(9)

    7,807     7,508     5,543  

                           

Leadrock Properties, LLC

 

Real Estate Investment

                       

     

10% Secured Debt (Maturity—May 4, 2026)

    1,440     1,416     1,416  

                           

51


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

December 31, 2015

(dollars in thousands)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

Legendary Pictures Funding, LLC(10)

 

Producer of TV, Film, and Comic Content

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity—April 22, 2020)(9)

    7,500     7,372     7,425  

                           

LKCM Headwater Investments I, L.P.(12)(13)

 

Investment Partnership

                       

     

LP Interests (Fully diluted 2.3%)

          2,500     4,875  

                           

Looking Glass Investments, LLC(12)(13)

 

Specialty Consumer Finance

                       

     

9% Unsecured Debt (Maturity—June 30, 2020)

    188     188     188  

     

Member Units (2.5 units)

          125     125  

     

Member Units (LGI Predictive Analytics LLC) (190,712 units)(8)

          188     188  

                  501     501  

                           

MediMedia USA, Inc.(11)

 

Provider of Healthcare Media and Marketing

                       

     

LIBOR Plus 6.75% (Floor 1.25%), Current Coupon 8.00%, Secured Debt (Maturity—November 20, 2018)(9)

    7,772     7,714     7,422  

                           

Messenger, LLC(10)

 

Supplier of Specialty Stationery and Related Products to the Funeral Industry

                       

     

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.25%, Secured Debt (Maturity—September 9, 2020)(9)

    15,583     15,483     15,583  

                           

Milk Specialties Company(11)

 

Processor of Nutrition Products

                       

     

LIBOR Plus 7.00% (Floor 1.25%), Current Coupon 8.25%, Secured Debt (Maturity—November 9, 2018)(9)

    792     789     792  

                           

Minute Key, Inc.

 

Operator of Automated Key Duplication Kiosks

                       

     

10% Current / 2% PIK Secured Debt (Maturity—September 19, 2019)

    14,186     13,817     13,817  

     

Warrants (1,437,409 equivalent units)

          280     280  

                  14,097     14,097  

                           

Miramax Film NY, LLC(11)

 

Motion Picture Producer and Distributor

                       

     

Member Units (500,000 units)(8)

          864     864  

                           

Mood Media Corporation(11)(13)

 

Provider of Electronic Equipment

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity—May 1, 2019)(9)

    14,957     14,827     14,266  

                           

New Media Holdings II LLC(11)(13)

 

Local Newspaper Operator

                       

     

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.25%, Secured Debt (Maturity—June 4, 2020)(9)

    9,788     9,635     9,703  

                           

52


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

December 31, 2015

(dollars in thousands)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

North American Lifting Holdings, Inc.(11)

 

Crane Service Provider

                       

     

LIBOR Plus 4.50% (Floor 1.00%), Current Coupon 5.50%, Secured Debt (Maturity—November 27, 2020)(9)

    997     835     733  

                           

North Atlantic Trading Company, Inc.(11)

 

Marketer/Distributor of Tobacco Products

                       

     

LIBOR Plus 6.50% (Floor 1.25%), Current Coupon 7.75%, Secured Debt (Maturity—January 13, 2020)(9)

    9,676     9,607     9,603  

                           

Novitex Intermediate, LLC(11)

 

Provider of Document Management Services

                       

     

LIBOR Plus 6.25% (Floor 1.25%), Current Coupon 7.50%, Secured Debt (Maturity—July 7, 2020)(9)

    8,692     8,532     8,192  

                           

Ospemifene Royalty Sub LLC (QuatRx)(10)

 

Estrogen-Deficiency Drug Manufacturer and Distributor

                       

     

11.5% Secured Debt (Maturity—November 15, 2026)

    5,071     5,071     3,780  

                           

Panolam Industries International, Inc.(11)

 

Decorative Laminate Manufacturer

                       

     

LIBOR Plus 6.00% (Floor 1.25%), Current Coupon 7.25%, Secured Debt (Maturity—August 23, 2017)(9)

    9,472     9,429     9,424  

                           

Paris Presents Incorporated(11)

 

Branded Cosmetic and Bath Accessories

                       

     

LIBOR Plus 8.25% (Floor 1.00%), Current Coupon 9.25%, Secured Debt (Maturity—December 31, 2021)(9)

    2,000     1,965     1,960  

                           

Parq Holdings Limited Partnership(11)(13)

 

Hotel & Casino Operator

                       

     

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 8.50%, Secured Debt (Maturity—December 17, 2020)(9)

    7,500     7,369     7,200  

                           

Permian Holdings, Inc.(11)

 

Storage Tank Manufacturer

                       

     

10.5% Secured Debt (Maturity—January 15, 2018)

    2,755     2,738     1,047  

                           

Pernix Therapeutics Holdings, Inc.(10)

 

Pharmaceutical Royalty

                       

     

12% Secured Debt (Maturity—August 1, 2020)

    3,818     3,818     3,777  

                           

53


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

December 31, 2015

(dollars in thousands)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

Pike Corporation(11)

 

Construction and Maintenance Services for Electric Transmission and Distribution Infrastructure

                       

     

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.50%, Secured Debt (Maturity—June 22, 2022)(9)

    15,000     14,663     14,712  

                           

Point.360(10)

 

Fully Integrated Provider of Digital Media Services

                       

     

Warrants (65,463 equivalent shares)

          69     9  

     

Common Stock (163,658 shares)

          273     144  

                  342     153  

                           

Prowler Acquisition Corp.(11)

 

Specialty Distributor to the Energy Sector

                       

     

LIBOR Plus 4.50% (Floor 1.00%), Current Coupon 5.50%, Secured Debt (Maturity—January 28, 2020)(9)

    4,411     3,734     3,749  

                           

PT Network, LLC(10)

 

Provider of Outpatient Physical Therapy and Sports Medicine Services

                       

     

LIBOR Plus 7.75% (Floor 1.50%), Current Coupon 9.25%, Secured Debt (Maturity—November 1, 2018)(9)

    12,047     11,954     11,771  

                           

QBS Parent, Inc.(11)

 

Provider of Software and Services to the Oil & Gas Industry

                       

     

LIBOR Plus 4.75% (Floor 1.00%), Current Coupon 5.75%, Secured Debt (Maturity—August 7, 2021)(9)

    11,389     11,303     11,332  

                           

Raley's(11)

 

Family-owned supermarket chain in California

                       

     

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.25%, Secured Debt (Maturity—May 18, 2022)(9)

    5,094     4,999     5,069  

                           

RCHP, Inc.(11)

 

Regional Non-Urban Hospital Owner/Operator

                       

     

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.00%, Secured Debt (Maturity—April 23, 2019)(9)

    5,448     5,426     5,448  

     

LIBOR Plus 10.25% (Floor 1.00%), Current Coupon 11.25%, Secured Debt (Maturity—October 23, 2019)(9)

    4,000     3,954     3,953  

                  9,380     9,401  

                           

Renaissance Learning, Inc.(11)

 

Technology-based K-12 Learning Solutions

                       

     

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.00%, Secured Debt (Maturity—April 11, 2022)(9)

    3,000     2,975     2,835  

                           

54


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

December 31, 2015

(dollars in thousands)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

RGL Reservoir Operations Inc.(11)(13)

 

Oil & Gas Equipment and Services

                       

     

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.00%, Secured Debt (Maturity—August 13, 2021)(9)

    3,950     3,851     1,534  

                           

RLJ Entertainment, Inc.(10)

 

Movie and TV Programming Licensee and Distributor

                       

     

LIBOR Plus 8.75% (Floor 0.25%), Current Coupon 9.16%, Secured Debt (Maturity—September 11, 2019)(9)

    9,354     9,353     9,203  

                           

RM Bidder, LLC(10)

 

Scripted and Unscripted TV and Digital Programming Provider

                       

     

Warrants (327,532 equivalent units)

          425     363  

     

Member Units (2,779 units)

          46     45  

                  471     408  

                           

SAExploration, Inc.(10)(13)

 

Geophysical Services Provider

                       

     

Common Stock (6,472 shares)

          65     27  

                           

Sage Automotive Interiors, Inc(11)

 

Automotive Textiles Manufacturer

                       

     

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 9.00%, Secured Debt (Maturity—October 8, 2021)(9)

    3,000     2,974     2,970  

                           

Salient Partners L.P.(11)

 

Provider of Asset Management Services

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity—June 9, 2021)(9)

    7,388     7,251     7,240  

                           

Sotera Defense Solutions, Inc.(11)

 

Defense Industry Intelligence Services

                       

     

LIBOR Plus 7.50% (Floor 1.50%), Current Coupon 9.00%, Secured Debt (Maturity—April 21, 2017)(9)

    10,119     9,886     9,360  

                           

Stardust Finance Holdings, Inc.(11)

 

Manufacturer of Diversified Building Products

                       

     

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 6.50%, Secured Debt (Maturity—March 13, 2022)(9)

    12,406     12,239     12,065  

                           

Subsea Global Solutions, LLC(10)

 

Underwater Maintenance and Repair Services

                       

     

LIBOR Plus 6.00% (Floor 1.50%), Current Coupon 7.50%, Secured Debt (Maturity—March 17, 2020)(9)

    4,887     4,836     4,762  

                           

55


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

December 31, 2015

(dollars in thousands)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

Synagro Infrastructure Company, Inc(11)

 

Waste Management Services

                       

     

LIBOR Plus 5.25% (Floor 1.00%), Current Coupon 6.25%, Secured Debt (Maturity—August 22, 2020)(9)

    4,714     4,647     4,124  

                           

Targus Group International(11)

 

Distributor of Protective Cases for Mobile Devices

                       

     

LIBOR Plus 9.50% (Floor 1.50%), Current Coupon 11.00% / 1.00% PIK, Current Coupon Plus PIK 12.00%, Secured Debt (Maturity—May 24, 2016)(9)(14)

    4,258     4,263     3,119  

                           

TeleGuam Holdings, LLC(11)

 

Cable and Telecom Services Provider

                       

     

LIBOR Plus 4.00% (Floor 1.25%), Current Coupon 5.25%, Secured Debt (Maturity—December 10, 2018)(9)

    7,975     7,961     7,935  

     

LIBOR Plus 7.50% (Floor 1.25%), Current Coupon 8.75%, Secured Debt (Maturity—June 10, 2019)(9)

    2,500     2,484     2,487  

                  10,445     10,422  

                           

Templar Energy LLC(11)

 

Oil & Gas Exploration & Production

                       

     

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 8.50%, Secured Debt (Maturity—November 25, 2020)(9)

    4,000     3,962     485  

                           

The Tennis Channel, Inc.(10)

 

Television-Based Sports Broadcasting

                       

     

Warrants (114,316 equivalent shares)

          235     301  

                           

The Topps Company, Inc.(11)

 

Trading Cards & Confectionary

                       

     

LIBOR Plus 6.00% (Floor 1.25%), Current Coupon 7.25%, Secured Debt (Maturity—October 2, 2018)(9)

    1,960     1,948     1,923  

                           

TOMS Shoes, LLC(11)

 

Global Designer, Distributor, and Retailer of Casual Footwear

                       

     

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 6.50%, Secured Debt (Maturity—October 30, 2020)(9)

    4,963     4,545     3,387  

                           

Travel Leaders Group, LLC(11)

 

Travel Agency Network Provider

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity—December 7, 2020)(9)

    8,700     8,638     8,613  

                           

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MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

December 31, 2015

(dollars in thousands)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

US Joiner Holding Company(11)

 

Marine Interior Design and Installation

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity—April 16, 2020)(9)

    7,369     7,341     7,295  

                           

Valley Healthcare Group, LLC

 

Provider of Durable Medical Equipment

                       

     

LIBOR Plus 12.50% (Floor 0.50%), Current Coupon 13.00%, Secured Debt (Maturity—December 29, 2020)(9)

    10,400     10,297     10,297  

                           

Vantage Oncology, LLC(11)

 

Outpatient Radiation Oncology Treatment Centers

                       

     

9.5% Secured Debt (Maturity—June 15, 2017)

    12,050     11,938     10,182  

                           

Virtex Enterprises, LP(10)

 

Specialty, Full-Service Provider of Complex Electronic Manufacturing Services

                       

     

12% Secured Debt (Maturity—December 27, 2018)

    1,667     1,516     1,516  

     

Preferred Class A Units (14 units; 5% cumulative)(8)

          333     512  

     

Warrants (11 equivalent units)

          186     135  

                  2,035     2,163  

                           

Vision Solutions, Inc.(11)

 

Provider of Information Availability Software

                       

     

LIBOR Plus 8.00% (Floor 1.50%), Current Coupon 9.50%, Secured Debt (Maturity—July 23, 2017)(9)

    5,000     4,987     4,750  

                           

Western Dental Services, Inc.(11)

 

Dental Care Services

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity—November 1, 2018)(9)

    4,904     4,901     4,303  

                           

Wilton Brands LLC(11)

 

Specialty Housewares Retailer

                       

     

LIBOR Plus 7.25% (Floor 1.25%), Current Coupon 8.50%, Secured Debt (Maturity—August 30, 2018)(9)

    1,540     1,524     1,475  

                           

Worley Claims Services, LLC(10)

 

Insurance Adjustment Management and Services Provider

                       

     

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 9.00%, Secured Debt (Maturity—October 31, 2020)(9)

    6,435     6,381     6,210  

                           

YP Holdings LLC(11)

 

Online and Offline Advertising Operator

                       

     

LIBOR Plus 6.75% (Floor 1.25%), Current Coupon 8.00%, Secured Debt (Maturity—June 4, 2018)(9)

    2,455     2,435     2,382  

                           

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MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

December 31, 2015

(dollars in thousands)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

Zilliant Incorporated

 

Price Optimization and Margin Management Solutions

                       

     

Preferred Stock (186,777 shares)

          154     260  

     

Warrants (952,500 equivalent shares)

          1,071     1,190  

                  1,225     1,450  

Subtotal Non-Control/Non-Affiliate Investments (49.6% of total investments at fair value)

  $ 945,187   $ 894,466  

Total Portfolio Investments, December 31, 2015

  $ 1,666,642   $ 1,799,996  

                           

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MAIN STREET CAPITAL CORPORATION

Consolidated Schedule Of Investments (Continued)

December 31, 2015

(dollars in thousands)

Portfolio Company(1)
  Business Description   Type of Investment(2)(3)   Principal(4)   Cost(4)   Fair Value  

Marketable Securities and Idle Funds Investments

             

                           

PennantPark Investment Corporation(13)(15)

 

Business Development Company

                       

     

Common Stock (343,149 shares)(8)

        $ 3,629   $ 2,121  

                           

Other Marketable Securities and Idle Funds Investments(13)(15)

 

Investments in Marketable Securities and Diversified, Registered Bond Funds

                       

                  1,778     1,572  

Subtotal Marketable Securities and Idle Funds Investments (0.2% of total investments at fair value)

  $ 5,407   $ 3,693  

Total Investments, December 31, 2015

  $ 1,672,049   $ 1,803,689  

(1)
All investments are Lower Middle Market portfolio investments, unless otherwise noted. See Note B for a description of Lower Middle Market portfolio investments. All of the Company's investments, unless otherwise noted, are encumbered either as security for the Company's Credit Agreement or in support of the SBA-guaranteed debentures issued by the Funds.

(2)
Debt investments are income producing, unless otherwise noted. Equity and warrants are non-income producing, unless otherwise noted.

(3)
See Note C for a summary of geographic location of portfolio companies.

(4)
Principal is net of repayments. Cost is net of repayments and accumulated unearned income.

(5)
Control investments are defined by the Investment Company Act of 1940, as amended ("1940 Act") as investments in which more than 25% of the voting securities are owned or where the ability to nominate greater than 50% of the board representation is maintained.

(6)
Affiliate investments are defined by the 1940 Act as investments in which between 5% and 25% of the voting securities are owned and the investments are not classified as Control investments.

(7)
Non-Control/Non-Affiliate investments are defined by the 1940 Act as investments that are neither Control investments nor Affiliate investments.

(8)
Income producing through dividends or distributions.

(9)
Index based floating interest rate is subject to contractual minimum interest rate. A majority of the variable rate loans in the Company's investment portfolio bear interest at a rate that may be determined by reference to either LIBOR or an alternate Base Rate (commonly based on the Federal Funds Rate or the Prime Rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan. For each such loan, the Company has provided the weighted average annual stated interest rate in effect at December 31, 2015. As noted in this schedule, 59% (based on the par amount of the loans) of the loans contain LIBOR floors which range between 0.25% and 1.50%.

(10)
Private Loan portfolio investment. See Note B for a description of Private Loan portfolio investments.

(11)
Middle Market portfolio investment. See Note B for a description of Middle Market portfolio investments.

(12)
Other Portfolio investment. See Note B for a description of Other Portfolio investments.

(13)
Investment is not a qualifying asset as defined under Section 55(a) of the 1940 Act. Qualifying assets must represent at least 70% of total assets at the time of acquisition of any additional non-qualifying assets.

(14)
Non-accrual and non-income producing investment.

(15)
Marketable securities and idle fund investments.

(16)
External Investment Manager. Investment is not encumbered as security for the Company's Credit Agreement or in support of the SBA-guaranteed debentures issued by the Funds.

(17)
Maturity date is under on-going negotiations with the portfolio company and other lenders, if applicable.

(18)
Portfolio company is in a bankruptcy process and, as such, the maturity date of our debt investments in this portfolio company will not be finally determined until such process is complete. As noted in footnote (14), our debt investments in this portfolio company are on non-accrual status.

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements

(Unaudited)

NOTE A—ORGANIZATION AND BASIS OF PRESENTATION

1.     Organization

        Main Street Capital Corporation ("MSCC") is a principal investment firm primarily focused on providing customized debt and equity financing to lower middle market ("LMM") companies and debt capital to middle market ("Middle Market") companies. The portfolio investments of MSCC and its consolidated subsidiaries are typically made to support management buyouts, recapitalizations, growth financings, refinancings and acquisitions of companies that operate in diverse industry sectors. MSCC seeks to partner with entrepreneurs, business owners and management teams and generally provides "one stop" financing alternatives within its LMM portfolio. MSCC and its consolidated subsidiaries invest primarily in secured debt investments, equity investments, warrants and other securities of LMM companies based in the United States and in secured debt investments of Middle Market companies generally headquartered in the United States.

        MSCC was formed in March 2007 to operate as an internally managed business development company ("BDC") under the Investment Company Act of 1940, as amended (the "1940 Act"). MSCC wholly owns several investment funds, including Main Street Mezzanine Fund, LP ("MSMF"), Main Street Capital II, LP ("MSC II") and Main Street Capital III, LP ("MSC III" and, collectively with MSMF and MSC II, the "Funds"), and each of their general partners. The Funds are each licensed as a Small Business Investment Company ("SBIC") by the United States Small Business Administration ("SBA"). Because MSCC is internally managed, all of the executive officers and other employees are employed by MSCC. Therefore, MSCC does not pay any external investment advisory fees but instead directly incurs the operating costs associated with employing investment and portfolio management professionals.

        MSC Adviser I, LLC (the "External Investment Manager") was formed in November 2013 as a wholly owned subsidiary of MSCC to provide investment management and other services to parties other than MSCC and its subsidiaries or their portfolio companies ("External Parties") and receives fee income for such services. MSCC has been granted no-action relief by the Securities and Exchange Commission ("SEC") to allow the External Investment Manager to register as a registered investment adviser ("RIA") under Investment Advisers Act of 1940, as amended (the "Advisers Act"). Since the External Investment Manager conducts all of its investment management activities for External Parties, it is accounted for as a portfolio investment of MSCC and is not included as a consolidated subsidiary of MSCC in MSCC's consolidated financial statements.

        MSCC has elected to be treated for U.S. federal income tax purposes as a regulated investment company ("RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). As a result, MSCC generally will not pay corporate-level U.S. federal income taxes on any net ordinary income or capital gains that it distributes to its stockholders.

        MSCC has certain direct and indirect wholly owned subsidiaries that have elected to be taxable entities (the "Taxable Subsidiaries"). The primary purpose of the Taxable Subsidiaries is to permit MSCC to hold equity investments in portfolio companies which are "pass-through" entities for tax purposes. The External Investment Manager is also a direct wholly owned subsidiary that has elected to be a taxable entity. The Taxable Subsidiaries and the External Investment Manager are each taxed at their normal corporate tax rates based on their taxable income.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

        Unless otherwise noted or the context otherwise indicates, the terms "we," "us," "our," the "Company" and "Main Street" refer to MSCC and its consolidated subsidiaries, which include the Funds and the Taxable Subsidiaries.

2.     Basis of Presentation

        Main Street's financial statements are prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP"). For each of the periods presented herein, Main Street's consolidated financial statements include the accounts of MSCC and its consolidated subsidiaries. The Investment Portfolio, as used herein, refers to all of Main Street's investments in LMM portfolio companies, investments in Middle Market portfolio companies, Private Loan portfolio investments, Other Portfolio investments, and the investment in the External Investment Manager, but excludes all "Marketable securities and idle funds investments" (see Note C—Fair Value Hierarchy for Investments and Debentures—Portfolio Composition—Investment Portfolio Composition for additional discussion of Main Street's Investment Portfolio and definitions for the terms Private Loan and Other Portfolio). "Marketable securities and idle funds investments" are classified as financial instruments and are reported separately on Main Street's consolidated balance sheets and consolidated schedules of investments due to the nature of such investments (see Note B.11.). Main Street's results of operations for the three and nine months ended September 30, 2016 and 2015, cash flows for the nine months ended September 30, 2016 and 2015, and financial position as of September 30, 2016 and December 31, 2015, are presented on a consolidated basis. The effects of all intercompany transactions between Main Street and its consolidated subsidiaries have been eliminated in consolidation.

        The accompanying unaudited consolidated financial statements of Main Street are presented in conformity with U.S. GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain disclosures accompanying annual financial statements prepared in accordance with U.S. GAAP are omitted. In the opinion of management, the unaudited consolidated financial results included herein contain all adjustments, consisting solely of normal recurring accruals, considered necessary for the fair presentation of financial statements for the interim periods included herein. The results of operations for the three and nine months ended September 30, 2016 and 2015 are not necessarily indicative of the operating results to be expected for the full year. Also, the unaudited financial statements and notes should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2015. Financial statements prepared on a U.S. GAAP basis require management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein.

        Under regulations pursuant to Article 6 of Regulation S-X applicable to BDCs and Accounting Standards Codification ("Codification" or "ASC") 946, Financial Services—Investment Companies ("ASC 946"), Main Street is precluded from consolidating other entities in which Main Street has equity investments, including those in which it has a controlling interest, unless the other entity is another investment company. An exception to this general principle in ASC 946 occurs if Main Street holds a controlling interest in an operating company that provides all or substantially all of its services directly to Main Street or to its portfolio companies. Accordingly, as noted above, MSCC's consolidated financial statements include the financial position and operating results for the Funds and the Taxable Subsidiaries. MSCC's consolidated financial statements also include the financial position and operating results for MSCC's wholly owned operating subsidiary, Main Street Capital Partners, LLC ("MSCP"),

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

as MSCP provides all of its services directly or indirectly to Main Street or its portfolio companies. Main Street has determined that all of its portfolio investments do not qualify for this exception, including the investment in the External Investment Manager. Therefore, Main Street's Investment Portfolio is carried on the consolidated balance sheet at fair value, as discussed further in Note B, with any adjustments to fair value recognized as "Net Change in Unrealized Appreciation (Depreciation)" on the consolidated statements of operations until the investment is realized, usually upon exit, resulting in any gain or loss being recognized as a "Net Realized Gain (Loss)."

    Portfolio Investment Classification

        Main Street classifies its Investment Portfolio in accordance with the requirements of the 1940 Act. Under the 1940 Act, (a) "Control Investments" are defined as investments in which Main Street owns more than 25% of the voting securities or has rights to maintain greater than 50% of the board representation, (b) "Affiliate Investments" are defined as investments in which Main Street owns between 5% and 25% of the voting securities and does not have rights to maintain greater than 50% of the board representation and (c) "Non-Control/Non-Affiliate Investments" are defined as investments that are neither Control Investments nor Affiliate Investments.

NOTE B—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1.     Valuation of the Investment Portfolio

        Main Street accounts for its Investment Portfolio at fair value. As a result, Main Street follows the provisions of the Financial Accounting Standards Board ("FASB") ASC 820, Fair Value Measurements and Disclosures ("ASC 820"). ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value and enhances disclosure requirements for fair value measurements. ASC 820 requires Main Street to assume that the portfolio investment is to be sold in the principal market to independent market participants, which may be a hypothetical market. Market participants are defined as buyers and sellers in the principal market that are independent, knowledgeable and willing and able to transact.

        Main Street's portfolio strategy calls for it to invest primarily in illiquid debt and equity securities issued by private, LMM companies and more liquid debt securities issued by Middle Market companies that are generally larger in size than the LMM companies. Main Street categorizes some of its investments in LMM companies and Middle Market companies as Private Loan portfolio investments, which are primarily debt securities in privately held companies which have been originated through strategic relationships with other investment funds on a collaborative basis, and are often referred to in the debt markets as "club deals." Private Loan investments are typically similar in size, structure, terms and conditions to investments Main Street holds in its LMM portfolio and Middle Market portfolio. Main Street's portfolio also includes Other Portfolio investments which primarily consist of investments that are not consistent with the typical profiles for its LMM portfolio investments, Middle Market portfolio investments or Private Loan portfolio investments, including investments which may be managed by third parties. Main Street's portfolio investments may be subject to restrictions on resale.

        LMM investments and Other Portfolio investments generally have no established trading market while Middle Market securities generally have established markets that are not active. Private Loan investments may include investments which have no established trading market or have established markets that are not active. Main Street determines in good faith the fair value of its Investment Portfolio pursuant to a valuation policy in accordance with ASC 820 and a valuation process approved

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

by its Board of Directors and in accordance with the 1940 Act. Main Street's valuation policies and processes are intended to provide a consistent basis for determining the fair value of Main Street's Investment Portfolio.

        For LMM portfolio investments, Main Street generally reviews external events, including private mergers, sales and acquisitions involving comparable companies, and includes these events in the valuation process by using an enterprise value waterfall methodology ("Waterfall") for its LMM equity investments and an income approach using a yield-to-maturity model ("Yield-to-Maturity") for its LMM debt investments. For Middle Market portfolio investments, Main Street primarily uses quoted prices in the valuation process. Main Street determines the appropriateness of the use of third-party broker quotes, if any, in determining fair value based on its understanding of the level of actual transactions used by the broker to develop the quote and whether the quote was an indicative price or binding offer, the depth and consistency of broker quotes and the correlation of changes in broker quotes with underlying performance of the portfolio company and other market indices. For Middle Market and Private Loan portfolio investments in debt securities for which it has determined that third-party quotes or other independent pricing are not available or appropriate, Main Street generally estimates the fair value based on the assumptions that it believes hypothetical market participants would use to value the investment in a current hypothetical sale using the Yield-to-Maturity valuation method. For its Other Portfolio equity investments, Main Street generally calculates the fair value of the investment primarily based on the net asset value ("NAV") of the fund and adjusts the fair value for other factors that would affect the fair value of the investment. All of the valuation approaches for Main Street's portfolio investments estimate the value of the investment as if Main Street were to sell, or exit, the investment as of the measurement date.

        These valuation approaches consider the value associated with Main Street's ability to control the capital structure of the portfolio company, as well as the timing of a potential exit. For valuation purposes, "control" portfolio investments are composed of debt and equity securities in companies for which Main Street has a controlling interest in the equity ownership of the portfolio company or the ability to nominate a majority of the portfolio company's board of directors. For valuation purposes, "non-control" portfolio investments are generally composed of debt and equity securities in companies for which Main Street does not have a controlling interest in the equity ownership of the portfolio company or the ability to nominate a majority of the portfolio company's board of directors.

        Under the Waterfall valuation method, Main Street estimates the enterprise value of a portfolio company using a combination of market and income approaches or other appropriate valuation methods, such as considering recent transactions in the equity securities of the portfolio company or third-party valuations of the portfolio company, and then performs a waterfall calculation by allocating the enterprise value over the portfolio company's securities in order of their preference relative to one another. The enterprise value is the fair value at which an enterprise could be sold in a transaction between two willing parties, other than through a forced or liquidation sale. Typically, private companies are bought and sold based on multiples of earnings before interest, taxes, depreciation and amortization ("EBITDA"), cash flows, net income, revenues, or in limited cases, book value. There is no single methodology for estimating enterprise value. For any one portfolio company, enterprise value is generally described as a range of values from which a single estimate of enterprise value is derived. In estimating the enterprise value of a portfolio company, Main Street analyzes various factors including the portfolio company's historical and projected financial results. Due to SEC deadlines for Main Street's quarterly and annual financial reporting, the operating results of a portfolio company used in the current period valuation are generally the results from the period ended three months prior

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

to such valuation date and may include unaudited, projected, budgeted or pro forma financial information and may require adjustments for non-recurring items or to normalize the operating results that may require significant judgment in its determination. In addition, projecting future financial results requires significant judgment regarding future growth assumptions. In evaluating the operating results, Main Street also analyzes the impact of exposure to litigation, loss of customers or other contingencies. After determining the appropriate enterprise value, Main Street allocates the enterprise value to investments in order of the legal priority of the various components of the portfolio company's capital structure. In applying the Waterfall valuation method, Main Street assumes the loans are paid off at the principal amount in a change in control transaction and are not assumed by the buyer, which Main Street believes is consistent with its past transaction history and standard industry practices.

        Under the Yield-to-Maturity valuation method, Main Street also uses the income approach to determine the fair value of debt securities based on projections of the discounted future free cash flows that the debt security will likely generate, including analyzing the discounted cash flows of interest and principal amounts for the debt security, as set forth in the associated loan agreements, as well as the financial position and credit risk of the portfolio company. Main Street's estimate of the expected repayment date of its debt securities is generally the maturity date of the instrument, as Main Street generally intends to hold its loans and debt securities to maturity. The Yield-to-Maturity analysis also considers changes in leverage levels, credit quality, portfolio company performance and other factors. Main Street will generally use the value determined by the Yield-to-Maturity analysis as the fair value for that security; however, because of Main Street's general intent to hold its loans to maturity, the fair value will not exceed the principal amount of the debt security valued using the Yield-to-Maturity valuation method. A change in the assumptions that Main Street uses to estimate the fair value of its debt securities using the Yield-to-Maturity valuation method could have a material impact on the determination of fair value. If there is deterioration in credit quality or if a debt security is in workout status, Main Street may consider other factors in determining the fair value of the debt security, including the value attributable to the debt security from the enterprise value of the portfolio company or the proceeds that would most likely be received in a liquidation analysis.

        Under the NAV valuation method, for an investment in an investment fund that does not have a readily determinable fair value, Main Street measures the fair value of the investment predominately based on the NAV of the investment fund as of the measurement date and adjusts the investment's fair value for factors known to Main Street that would affect that fund's NAV, including, but not limited to, fair values for individual investments held by the fund if Main Street holds the same investment or for a publicly traded investment. In addition, in determining the fair value of the investment, Main Street considers whether adjustments to the NAV are necessary in certain circumstances, based on the analysis of any restrictions on redemption of Main Street's investment as of the measurement date, recent actual sales or redemptions of interests in the investment fund, and expected future cash flows available to equity holders, including the rate of return on those cash flows compared to an implied market return on equity required by market participants, or other uncertainties surrounding Main Street's ability to realize the full NAV of its interests in the investment fund.

        Pursuant to its internal valuation process and the requirements under the 1940 Act, Main Street performs valuation procedures on each of its portfolio investments quarterly. In addition to its internal valuation process, in arriving at estimates of fair value for its investments in its LMM portfolio companies, Main Street, among other things, consults with a nationally recognized independent financial advisory services firm. The nationally recognized independent financial advisory services firm analyzes and provides observations, recommendations and an assurance certification regarding the

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Company's determinations of the fair value of its LMM portfolio company investments. The nationally recognized independent financial advisory services firm is generally consulted relative to Main Street's investments in each LMM portfolio company at least once every calendar year, and for Main Street's investments in new LMM portfolio companies, at least once in the twelve-month period subsequent to the initial investment. In certain instances, Main Street may determine that it is not cost-effective, and as a result is not in its stockholders' best interest, to consult with the nationally recognized independent financial advisory services firm on its investments in one or more LMM portfolio companies. Such instances include, but are not limited to, situations where the fair value of Main Street's investment in a LMM portfolio company is determined to be insignificant relative to the total Investment Portfolio. Main Street consulted with and received an assurance certification from its independent financial advisory services firm in arriving at Main Street's determination of fair value on its investments in a total of 46 LMM portfolio companies for the nine months ended September 30, 2016, representing approximately 75% of the total LMM portfolio at fair value as of September 30, 2016, and on a total of 44 LMM portfolio companies for the nine months ended September 30, 2015, representing approximately 75% of the total LMM portfolio at fair value as of September 30, 2015. Excluding investments in new LMM portfolio companies which have not been in the Investment Portfolio for at least twelve months subsequent to the initial investment as of September 30, 2016 and 2015, as applicable, and investments in the LMM portfolio companies that were not reviewed because their equity is publicly traded, the percentage of the LMM portfolio reviewed and certified by the independent financial advisory services firm for the nine months ended September 30, 2016 and 2015 was 80% and 82% of the total LMM portfolio at fair value as of September 30, 2016 and 2015, respectively.

        For valuation purposes, all of Main Street's Middle Market portfolio investments are non-control investments. To the extent sufficient observable inputs are available to determine fair value, Main Street uses observable inputs to determine the fair value of these investments through obtaining third-party quotes or other independent pricing. For Middle Market portfolio investments for which it has determined that third-party quotes or other independent pricing are not available or appropriate, Main Street generally estimates the fair value based on the assumptions that it believes hypothetical market participants would use to value such Middle Market debt investments in a current hypothetical sale using the Yield-to-Maturity valuation method and such Middle Market equity investments in a current hypothetical sale using the Waterfall valuation method. Because almost all of the Middle Market portfolio investments are typically valued using third party quotes or other independent pricing services (including 97% and 99% of the Middle Market portfolio investments as of September 30, 2016 and December 31, 2015, respectively), Main Street does not generally consult with any financial advisory services firms in connection with determining the fair value of its Middle Market investments.

        For valuation purposes, all of Main Street's Private Loan portfolio investments are non-control investments. For Private Loan portfolio investments for which it has determined that third-party quotes or other independent pricing are not available or appropriate, Main Street generally estimates the fair value based on the assumptions that it believes hypothetical market participants would use to value such Private Loan debt investments in a current hypothetical sale using the Yield-to-Maturity valuation method and such Private Loan equity investments in a current hypothetical sale using the Waterfall valuation method.

        In addition to its internal valuation process, in arriving at estimates of fair value for its investments in its Private Loan portfolio companies, Main Street, among other things, consults with a nationally recognized independent financial advisory services firm. The nationally recognized independent

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

financial advisory services firm analyzes and provides observations and recommendations and an assurance certification regarding the Company's determinations of the fair value of its Private Loan portfolio company investments. The nationally recognized independent financial advisory services firm is generally consulted relative to Main Street's investments in each Private Loan portfolio company at least once every calendar year, and for Main Street's investments in new Private Loan portfolio companies, at least once in the twelve-month period subsequent to the initial investment. In certain instances, Main Street may determine that it is not cost-effective, and as a result is not in its stockholders' best interest, to consult with the nationally recognized independent financial advisory services firm on its investments in one or more Private Loan portfolio companies. Such instances include, but are not limited to, situations where the fair value of Main Street's investment in a Private Loan portfolio company is determined to be insignificant relative to the total Investment Portfolio. Main Street consulted with and received an assurance certification from its independent financial advisory services firm in arriving at its determination of fair value on its investments in a total of 20 Private Loan portfolio companies for the nine months ended September 30, 2016, representing approximately 56% of the total Private Loan portfolio at fair value as of September 30, 2016, and on a total of 11 Private Loan portfolio companies for the nine months ended September 30, 2015, representing approximately 37% of the total Private Loan portfolio at fair value as of September 30, 2015. Excluding its investments in new Private Loan portfolio companies which have not been in the Investment Portfolio for at least twelve months subsequent to the initial investment decision as of September 30, 2016 and its investments in the Private Loan portfolio companies that were not reviewed because the investment is publicly traded or quoted by banks, the percentage of the Private Loan portfolio reviewed and certified by its independent financial advisory services firm for the nine months ended September 30, 2016 and 2015 was 80% and 84% of the total Private Loan portfolio at fair value as of September 30, 2016 and 2015, respectively.

        For valuation purposes, all of Main Street's Other Portfolio investments are non-control investments. Main Street's Other Portfolio investments comprised 4.9% and 4.2%, respectively, of Main Street's Investment Portfolio at fair value as of September 30, 2016 and December 31, 2015. Similar to the LMM investment portfolio, market quotations for Other Portfolio equity investments are generally not readily available. For its Other Portfolio equity investments, Main Street generally determines the fair value of its investments using the NAV valuation method. For Other Portfolio debt investments for which it has determined that third-party quotes or other independent pricing are not available or appropriate, Main Street generally estimates the fair value based on the assumptions that it believes hypothetical market participants would use to value such Other Portfolio debt investments in a current hypothetical sale using the Yield-to-Maturity valuation method. For Other Portfolio debt investments for which third-party quotes or other independent pricing are available and appropriate, Main Street determines the fair value of these investments through obtaining third party quotes or other independent pricing to the extent that these inputs are available and appropriate to determine fair value.

        For valuation purposes, Main Street's investment in the External Investment Manager is a control investment. Market quotations are not readily available for this investment, and as a result, Main Street determines the fair value of the External Investment Manager using the Waterfall valuation method under the market approach. In estimating the enterprise value, Main Street analyzes various factors, including the entity's historical and projected financial results, as well as its size, marketability and performance relative to the population of market comparables. This valuation approach estimates the value of the investment as if Main Street were to sell, or exit, the investment. In addition, Main Street

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considers its ability to control the capital structure of the company, as well as the timing of a potential exit, in connection with determining the fair value of the External Investment Manager.

        Due to the inherent uncertainty in the valuation process, Main Street's determination of fair value for its Investment Portfolio may differ materially from the values that would have been determined had a ready market for the securities existed. In addition, changes in the market environment, portfolio company performance and other events that may occur over the lives of the investments may cause the gains or losses ultimately realized on these investments to be materially different than the valuations currently assigned. Main Street determines the fair value of each individual investment and records changes in fair value as unrealized appreciation or depreciation.

        Main Street uses an internally developed portfolio investment rating system in connection with its investment oversight, portfolio management and analysis and investment valuation procedures for its LMM portfolio companies. This system takes into account both quantitative and qualitative factors of the LMM portfolio company and the investments held therein.

        The Board of Directors of Main Street has the final responsibility for overseeing, reviewing and approving, in good faith, Main Street's determination of the fair value for its Investment Portfolio, as well as its valuation procedures, consistent with 1940 Act requirements. Main Street believes its Investment Portfolio as of September 30, 2016 and December 31, 2015 approximates fair value as of those dates based on the markets in which Main Street operates and other conditions in existence on those reporting dates.

2.     Use of Estimates

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management 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 financial statements and the reported amounts of revenue and expenses during the period. Actual results may differ from these estimates under different conditions or assumptions. Additionally, as explained in Note B.1., the financial statements include investments in the Investment Portfolio whose values have been estimated by Main Street with the oversight, review and approval by Main Street's Board of Directors in the absence of readily ascertainable market values. Because of the inherent uncertainty of the Investment Portfolio valuations, those estimated values may differ materially from the values that would have been determined had a ready market for the securities existed.

3.     Cash and Cash Equivalents

        Cash and cash equivalents consist of cash and highly liquid investments with an original maturity of three months or less at the date of purchase. Cash and cash equivalents are carried at cost, which approximates fair value.

        At September 30, 2016, cash balances totaling $29.0 million exceeded Federal Deposit Insurance Corporation insurance protection levels, subjecting the Company to risk related to the uninsured balance. All of the Company's cash deposits are held at large, established, high credit quality financial institutions and management believes that the risk of loss associated with any uninsured balances is remote.

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4.     Marketable Securities and Idle Funds Investments

        Marketable securities and idle funds investments include intermediate-term secured debt investments, independently rated debt investments and publicly traded debt and equity investments. See the consolidated schedule of investments for more information on Marketable securities and idle funds investments.

5.     Interest, Dividend and Fee Income (Structuring and Advisory Services)

        Main Street records interest and dividend income on the accrual basis to the extent amounts are expected to be collected. Dividend income is recorded as dividends are declared by the portfolio company or at the point an obligation exists for the portfolio company to make a distribution. In accordance with Main Street's valuation policies, Main Street evaluates accrued interest and dividend income periodically for collectability. When a loan or debt security becomes 90 days or more past due, and if Main Street otherwise does not expect the debtor to be able to service all of its debt or other obligations, Main Street will generally place the loan or debt security on non-accrual status and cease recognizing interest income on that loan or debt security until the borrower has demonstrated the ability and intent to pay contractual amounts due. If a loan or debt security's status significantly improves regarding the debtor's ability to service the debt or other obligations, or if a loan or debt security is fully impaired, sold or written off, Main Street removes it from non-accrual status.

        Main Street holds certain debt and preferred equity instruments in its Investment Portfolio that contain payment-in-kind ("PIK") interest and cumulative dividend provisions. The PIK interest, computed at the contractual rate specified in each debt agreement, is periodically added to the principal balance of the debt and is recorded as interest income. Thus, the actual collection of this interest may be deferred until the time of debt principal repayment. Cumulative dividends are recorded as dividend income, and any dividends in arrears are added to the balance of the preferred equity investment. The actual collection of these dividends in arrears may be deferred until such time as the preferred equity is redeemed or sold. To maintain RIC tax treatment (as discussed in Note B.9. below), these non-cash sources of income may need to be paid out to stockholders in the form of distributions, even though Main Street may not have collected the PIK interest and cumulative dividends in cash. Main Street stops accruing PIK interest and cumulative dividends and writes off any accrued and uncollected interest and dividends in arrears when it determines that such PIK interest and dividends in arrears are no longer collectible. For the three months ended September 30, 2016 and 2015, (i) approximately 4.0% and 2.2%, respectively, of Main Street's total investment income was attributable to PIK interest income not paid currently in cash and (ii) approximately 1.8% and 1.2%, respectively, of Main Street's total investment income was attributable to cumulative dividend income not paid currently in cash. For the nine months ended September 30, 2016 and 2015, (i) approximately 3.7% and 2.1%, respectively, of Main Street's total investment income was attributable to PIK interest income not paid currently in cash and (ii) approximately 1.1% and 1.0%, respectively, of Main Street's total investment income was attributable to cumulative dividend income not paid currently in cash.

        As of September 30, 2016, Main Street's total Investment Portfolio had five investments on non-accrual status, which comprised approximately 0.4% of its fair value and 2.8% of its cost. As of December 31, 2015, Main Street's total Investment Portfolio had six investments on non-accrual status, which comprised approximately 0.4% of its fair value and 3.7% of its cost.

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        Main Street may periodically provide services, including structuring and advisory services, to its portfolio companies or other third parties. For services that are separately identifiable and evidence exists to substantiate fair value, fee income is recognized as earned, which is generally when the investment or other applicable transaction closes. Fees received in connection with debt financing transactions for services that do not meet these criteria are treated as debt origination fees and are deferred and accreted into income over the life of the financing.

        A presentation of the investment income Main Street received from its Investment Portfolio in each of the periods presented is as follows:

 
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
 
 
  2016   2015   2016   2015  
 
  (dollars in thousands)
 

Interest, fee and dividend income:

                         

Interest income

  $ 35,580   $ 34,167   $ 101,181   $ 97,010  

Dividend income

    9,730     6,939     25,094     17,353  

Fee income

    1,284     1,273     5,059     5,887  

Total interest, fee and dividend income

  $ 46,594   $ 42,379   $ 131,334   $ 120,250  

6.     Deferred Financing Costs

        Deferred financing costs include SBIC debenture commitment fees and SBIC debenture leverage fees on the SBIC debentures which are not accounted for under the fair value option under ASC 825 (as discussed further in Note B.11.). These fees are approximately 3.4% of the total commitment and drawn amounts, as applicable. These deferred financing costs have been capitalized and are being amortized into interest expense over the ten year term of each debenture agreement.

        Deferred financing costs also include commitment fees and other costs related to Main Street's multi-year revolving credit facility (the "Credit Facility," as discussed further in Note F) and its notes (as discussed further in Note G). These costs have been capitalized and are amortized into interest expense over the term of the individual instrument.

7.     Unearned Income—Debt Origination Fees and Original Issue Discount and Discounts / Premiums to Par Value

        Main Street capitalizes debt origination fees received in connection with financings and reflects such fees as unearned income netted against the applicable debt investments. The unearned income from the fees is accreted into interest income based on the effective interest method over the life of the financing.

        In connection with its portfolio debt investments, Main Street sometimes receives nominal cost warrants or warrants with an exercise price below the fair value of the underlying equity (together, "nominal cost equity") that are valued as part of the negotiation process with the particular portfolio company. When Main Street receives nominal cost equity, Main Street allocates its cost basis in its investment between its debt security and its nominal cost equity at the time of origination based on amounts negotiated with the particular portfolio company. The allocated amounts are based upon the fair value of the nominal cost equity, which is then used to determine the allocation of cost to the debt security. Any discount recorded on a debt investment resulting from this allocation is reflected as

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unearned income, which is netted against the applicable debt investment, and accreted into interest income based on the effective interest method over the life of the debt investment. The actual collection of this interest is deferred until the time of debt principal repayment.

        Main Street may also purchase debt securities at a discount or at a premium to the par value of the debt security. In the case of a purchase at a discount, Main Street records the investment at the par value of the debt security net of the discount, and the discount is accreted into interest income based on the effective interest method over the life of the debt investment. In the case of a purchase at a premium, Main Street records the investment at the par value of the debt security plus the premium, and the premium is amortized as a reduction to interest income based on the effective interest method over the life of the debt investment.

        To maintain RIC tax treatment (as discussed in Note B.9. below), these non-cash sources of income may need to be paid out to stockholders in the form of distributions, even though Main Street may not have collected the interest income. For the three months ended September 30, 2016 and 2015, approximately 3.2% and 2.3%, respectively, of Main Street's total investment income was attributable to interest income for the accretion of discounts associated with debt investments, net of any premium reduction. For the nine months ended September 30, 2016 and 2015, approximately 3.0% and 2.7%, respectively, of Main Street's total investment income was attributable to interest income for the accretion of discounts associated with debt investments, net of any premium reduction.

8.     Share-Based Compensation

        Main Street accounts for its share-based compensation plans using the fair value method, as prescribed by ASC 718, Compensation—Stock Compensation. Accordingly, for restricted stock awards, Main Street measures the grant date fair value based upon the market price of its common stock on the date of the grant and amortizes the fair value of the awards as share-based compensation expense over the requisite service period, which is generally the vesting term.

        Effective January 1, 2016, Main Street elected early adoption of ASU 2016-09, Compensation—Stock Compensation: Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09," as discussed further below in Note B.13.). ASU 2016-09 requires that all excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) should be recognized as income tax expense or benefit in the income statement and no longer delay recognition of a tax benefit until the tax benefit is realized through a reduction to taxes payable. The tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur. Additionally, ASU 2016-09 allows an entity to make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest, net of forfeitures, (current GAAP) or account for forfeitures when they occur. Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures and intrinsic value should be applied using a modified retrospective transition method by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is adopted. As such, Main Street has recorded a $1.8 million adjustment to "Net Unrealized Appreciation, Net of Income Taxes" on the consolidated balance sheet to capture the cumulative tax effect as of January 1, 2016. The company has elected to account for forfeitures as they occur and this change had no impact on its consolidated financial statements. The additional amendments (cash flows classification, minimum statutory tax withholding requirements and classification of awards as either a liability or equity) did not have an effect on Main Street's consolidated financial statements.

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9.     Income Taxes

        MSCC has elected to be treated for U.S. federal income tax purposes as a RIC. MSCC's taxable income includes the taxable income generated by MSCC and certain of its subsidiaries, including the Funds, which are treated as disregarded entities for tax purposes. As a RIC, MSCC generally will not pay corporate-level U.S. federal income taxes on any net ordinary income or capital gains that MSCC distributes to its stockholders. MSCC must generally distribute at least 90% of its "investment company taxable income" (which is generally its net ordinary taxable income and realized net short-term capital gains in excess of realized net long-term capital losses) and 90% of its tax-exempt income to maintain its RIC status (pass-through tax treatment for amounts distributed). As part of maintaining RIC status, undistributed taxable income (subject to a 4% non-deductible U.S Federal excise tax) pertaining to a given fiscal year may be distributed up to 12 months subsequent to the end of that fiscal year, provided such dividends are declared on or prior to the later of (i) the filing of the U.S federal income tax return for the applicable fiscal year or (ii) the fifteenth day of the ninth month following the close of the year in which such taxable income was generated.

        The Taxable Subsidiaries hold certain portfolio investments for Main Street. The Taxable Subsidiaries permit Main Street to hold equity investments in portfolio companies which are "pass-through" entities for tax purposes and to continue to comply with the "source-income" requirements contained in the RIC tax provisions of the Code. The Taxable Subsidiaries are consolidated with Main Street for U.S. GAAP financial reporting purposes, and the portfolio investments held by the Taxable Subsidiaries are included in Main Street's consolidated financial statements as portfolio investments and recorded at fair value. The Taxable Subsidiaries are not consolidated with MSCC for income tax purposes and may generate income tax expense, or benefit, and tax assets and liabilities, as a result of their ownership of certain portfolio investments. The taxable income, or loss, of the Taxable Subsidiaries may differ from its book income, or loss, due to temporary book and tax timing differences and permanent differences. This income tax expense, or benefit, if any, and the related tax assets and liabilities, are reflected in Main Street's consolidated financial statements.

        MSCP is included in Main Street's consolidated financial statements for financial reporting purposes. For tax purposes, MSCP has elected to be treated as a taxable entity, and therefore is not consolidated with MSCC for income tax purposes and is taxed at normal corporate tax rates based on its taxable income and, as a result of its activities, may generate income tax expense or benefit. The taxable income, or loss, of MSCP may differ from its book income, or loss, due to temporary book and tax timing differences and permanent differences. This income tax expense, or benefit, if any, and the related tax assets and liabilities, are reflected in Main Street's consolidated financial statements.

        The Taxable Subsidiaries and MSCP use the liability method in accounting for income taxes. Deferred tax assets and liabilities are recorded for temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, using statutory tax rates in effect for the year in which the temporary differences are expected to reverse. A valuation allowance is provided, if necessary, against deferred tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized.

        Taxable income generally differs from net income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses. Taxable income generally excludes net unrealized appreciation or depreciation, as investment gains or losses are not included in taxable income until they are realized.

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10.   Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation

        Realized gains or losses are measured by the difference between the net proceeds from the sale or redemption of an investment or a financial instrument and the cost basis of the investment or financial instrument, without regard to unrealized appreciation or depreciation previously recognized, and includes investments written-off during the period net of recoveries and realized gains or losses from in-kind redemptions. Net change in unrealized appreciation or depreciation reflects the net change in the fair value of the Investment Portfolio and financial instruments and the reclassification of any prior period unrealized appreciation or depreciation on exited investments and financial instruments to realized gains or losses.

11.   Fair Value of Financial Instruments

        Fair value estimates are made at discrete points in time based on relevant information. These estimates may be subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Main Street believes that the carrying amounts of its financial instruments, consisting of cash and cash equivalents, receivables, payables and other liabilities approximate the fair values of such items due to the short term nature of these instruments. Marketable securities and idle funds investments may include investments in certificates of deposit, U.S. government agency securities, independently rated debt investments, diversified bond funds and publicly traded debt and equity investments, and the fair value determination for these investments under the provisions of ASC 820 generally consists of Level 1 and 2 observable inputs, similar in nature to those discussed further in Note C.

        As part of Main Street's acquisition of the majority of the equity interests of MSC II in January 2010 (the "MSC II Acquisition"), Main Street elected the fair value option under ASC 825, Financial Instruments ("ASC 825") relating to accounting for debt obligations at their fair value, for the MSC II SBIC debentures acquired (the "Acquired Debentures") as part of the acquisition accounting related to the MSC II Acquisition and values those obligations as discussed further in Note C. In order to provide for a more consistent basis of presentation, Main Street has continued to elect the fair value option for SBIC debentures issued by MSC II subsequent to the MSC II Acquisition. When the fair value option is elected for a given SBIC debenture, the deferred loan costs associated with the debenture are fully expensed in the current period to "Net Change in Unrealized Appreciation (Depreciation)—SBIC debentures" as part of the fair value adjustment. Interest incurred in connection with SBIC debentures which are valued at fair value is included in interest expense.

12.   Earnings per Share

        Basic and diluted per share calculations are computed utilizing the weighted-average number of shares of common stock outstanding for the period. In accordance with ASC 260, Earnings Per Share, the unvested shares of restricted stock awarded pursuant to Main Street's equity compensation plans are participating securities and, therefore, are included in the basic earnings per share calculation. As a result, for all periods presented, there is no difference between diluted earnings per share and basic earnings per share amounts.

13.   Recently Issued or Adopted Accounting Standards

        In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-9 supersedes the revenue recognition requirements under ASC Topic

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605, Revenue Recognition, and most industry-specific guidance throughout the Industry Topics of the ASC. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. Under the new guidance, an entity is required to perform the following five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The new guidance will significantly enhance comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets. Additionally, the guidance requires improved disclosures as to the nature, amount, timing and uncertainty of revenue that is recognized. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606)—Narrow-Scope Improvements and Practical Expedients. This ASU clarified guidance on assessing collectability, presenting sales tax, measuring noncash consideration, and certain transition matters. The FASB tentatively decided to defer the effective date of the new revenue standard for public entities under U.S. GAAP for one year. If finalized, the new guidance will be effective for the annual reporting period beginning after December 15, 2017, including interim periods within that reporting period. Early adoption would be permitted for annual reporting periods beginning after December 15, 2016. Main Street is currently evaluating the impact the adoption of this new accounting standard will have on its financial statements.

        In May 2015, the FASB issued ASU 2015-07, Fair Value Measurements—Disclosures for Certain Entities that Calculate Net Asset Value per Share. This amendment updates guidance intended to eliminate the diversity in practice surrounding how investments measured at net asset value under the practical expedient with future redemption dates have been categorized in the fair value hierarchy. Under the updated guidance, investments for which fair value is measured at net asset value per share using the practical expedient should no longer be categorized in the fair value hierarchy, while investments for which fair value is measured at net asset value per share but the practical expedient is not applied should continue to be categorized in the fair value hierarchy. The updated guidance requires retrospective adoption for all periods presented and is effective for interim and annual reporting periods beginning after December 15, 2015, with early adoption permitted. The Company adopted this standard during the three months ended March 31, 2016. There was no impact of the adoption of this new accounting standard on Main Street's consolidated financial statements as none of its investments are measured through the use of the practical expedient.

        In February 2016, the FASB issued ASU 2016-02, Leases, which requires lessees to recognize on the balance sheet a right-of-use asset, representing its right to use the underlying asset for the lease term, and a lease liability for all leases with terms greater than 12 months. The guidance also requires qualitative and quantitative disclosures designed to assess the amount, timing, and uncertainty of cash flows arising from leases. The standard requires the use of a modified retrospective transition approach, which includes a number of optional practical expedients that entities may elect to apply. The new guidance is effective for annual periods beginning after December 15, 2018, and interim periods therein. Early application is permitted. The impact of the adoption of this new accounting standard on Main Street's consolidated financial statements is currently being evaluated.

        In March 2016, the FASB issued ASU 2016-09, which is intended to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The new

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guidance is effective for annual periods beginning after December 15, 2016, and interim periods therein. Early application is permitted. The Company elected to early adopt this standard during the three months ended March 31, 2016. See further discussion of the impact of the adoption of this standard in Note B.8.

        In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), which is intended to reduce the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The guidance is effective for annual periods beginning after December 15, 2017, and interim periods therein. Early application is permitted. The impact of the adoption of this new accounting standard on Main Street's consolidated financial statements is not expected to be material.

        From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that are adopted by Main Street as of the specified effective date. Main Street believes that the impact of recently issued standards and any that are not yet effective will not have a material impact on its financial statements upon adoption.

NOTE C—FAIR VALUE HIERARCHY FOR INVESTMENTS AND DEBENTURES—PORTFOLIO COMPOSITION

        ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value, and enhances disclosure requirements for fair value measurements. Main Street accounts for its investments at fair value.

    Fair Value Hierarchy

        In accordance with ASC 820, Main Street has categorized its investments based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical investments (Level 1) and the lowest priority to unobservable inputs (Level 3).

        Investments recorded on Main Street's balance sheet are categorized based on the inputs to the valuation techniques as follows:

            Level 1—Investments whose values are based on unadjusted quoted prices for identical assets in an active market that Main Street has the ability to access (examples include investments in active exchange-traded equity securities and investments in most U.S. government and agency securities).

            Level 2—Investments whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the investment. Level 2 inputs include the following:

      Quoted prices for similar assets in active markets (for example, investments in restricted stock);

      Quoted prices for identical or similar assets in non-active markets (for example, investments in thinly traded public companies);

      Pricing models whose inputs are observable for substantially the full term of the investment (for example, market interest rate indices); and

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      Pricing models whose inputs are derived principally from, or corroborated by, observable market data through correlation or other means for substantially the full term of the investment.

            Level 3—Investments whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement (for example, investments in illiquid securities issued by private companies). These inputs reflect management's own assumptions about the assumptions a market participant would use in pricing the investment.

        As required by ASC 820, when the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. For example, a Level 3 fair value measurement may include inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Therefore, unrealized appreciation and depreciation related to such investments categorized within the Level 3 tables below may include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3). Main Street conducts reviews of fair value hierarchy classifications on a quarterly basis. During the classification process, Main Street may determine that it is appropriate to transfer investments between fair value hierarchy Levels. These transfers occur when Main Street has concluded that it is appropriate for the classification of an individual asset to be changed due to a change in the factors used to determine the selection of the Level. Any such changes are deemed to be effective during the quarter in which the transfer occurs.

        As of September 30, 2016 and December 31, 2015, all of Main Street's LMM portfolio investments except for the debt and equity investments in one portfolio company consisted of illiquid securities issued by private companies. Those investments which were the exceptions were in a company with publicly traded equity. As a result, the fair value determination for the LMM portfolio investments primarily consisted of unobservable inputs. The fair value determination for the publicly traded equity security consisted of observable inputs in non-active markets for which sufficient observable inputs were available to determine the fair value. As a result, all of Main Street's LMM portfolio investments were categorized as Level 3 as of September 30, 2016 and December 31, 2015, except for the one publicly traded equity security which was categorized as Level 2.

        As of September 30, 2016 and December 31, 2015, Main Street's Middle Market portfolio investments consisted primarily of investments in secured and unsecured debt investments and independently rated debt investments. The fair value determination for these investments consisted of a combination of observable inputs in non-active markets for which sufficient observable inputs were not available to determine the fair value of these investments and unobservable inputs. As a result, all of Main Street's Middle Market portfolio investments were categorized as Level 3 as of September 30, 2016 and December 31, 2015.

        As of September 30, 2016 and December 31, 2015, Main Street's Private Loan portfolio investments primarily consisted of investments in interest-bearing secured debt investments. The fair value determination for these investments consisted of a combination of observable inputs in non-active markets for which sufficient observable inputs were not available to determine the fair value of these investments and unobservable inputs. As a result, all of Main Street's Private Loan portfolio investments were categorized as Level 3 as of September 30, 2016 and December 31, 2015.

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        As of September 30, 2016 and December 31, 2015, Main Street's Other Portfolio investments consisted of illiquid securities issued by private companies. The fair value determination for these investments primarily consisted of unobservable inputs. As a result, all of Main Street's Other Portfolio investments were categorized as Level 3 as of September 30, 2016 and December 31, 2015.

        As of December 31, 2015, Main Street's Marketable securities and idle funds investments consisted primarily of investments in publicly traded debt and equity investments. The fair value determination for these investments consisted of a combination of observable inputs in active markets for which sufficient observable inputs were available to determine the fair value of these investments. As a result, all of Main Street's Marketable securities and idle funds investments were categorized as Level 1 as of December 31, 2015.

        The fair value determination of each portfolio investment categorized as Level 3 required one or more of the following unobservable inputs:

    Financial information obtained from each portfolio company, including unaudited statements of operations and balance sheets for the most recent period available as compared to budgeted numbers;

    Current and projected financial condition of the portfolio company;

    Current and projected ability of the portfolio company to service its debt obligations;

    Type and amount of collateral, if any, underlying the investment;

    Current financial ratios (e.g., fixed charge coverage ratio, interest coverage ratio and net debt/EBITDA ratio) applicable to the investment;

    Current liquidity of the investment and related financial ratios (e.g., current ratio and quick ratio);

    Pending debt or capital restructuring of the portfolio company;

    Projected operating results of the portfolio company;

    Current information regarding any offers to purchase the investment;

    Current ability of the portfolio company to raise any additional financing as needed;

    Changes in the economic environment which may have a material impact on the operating results of the portfolio company;

    Internal occurrences that may have an impact (both positive and negative) on the operating performance of the portfolio company;

    Qualitative assessment of key management;

    Contractual rights, obligations or restrictions associated with the investment; and

    Other factors deemed relevant.

        The significant unobservable inputs used in the fair value measurement of Main Street's LMM equity securities, which are generally valued through an average of the discounted cash flow technique and the market comparable/enterprise value technique (unless one of these approaches is determined to not be appropriate), are (i) EBITDA multiples and (ii) the weighted-average cost of capital

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(Unaudited)

("WACC"). Significant increases (decreases) in EBITDA multiple inputs in isolation would result in a significantly higher (lower) fair value measurement. On the contrary, significant increases (decreases) in WACC inputs in isolation would result in a significantly lower (higher) fair value measurement. The significant unobservable inputs used in the fair value measurement of Main Street's LMM, Middle Market, Private Loan and Other Portfolio debt securities are (i) risk adjusted discount rates used in the Yield-to-Maturity valuation technique (described in "Note B.1.—Valuation of the Investment Portfolio") and (ii) the percentage of expected principal recovery. Significant increases (decreases) in any of these discount rates in isolation would result in a significantly lower (higher) fair value measurement. Significant increases (decreases) in any of these expected principal recovery percentages in isolation would result in a significantly higher (lower) fair value measurement. However, due to the nature of certain investments, fair value measurements may be based on other criteria, such as third-party appraisals of collateral and fair values as determined by independent third parties, which are not presented in the tables below.

        The following tables provide a summary of the significant unobservable inputs used to measure the fair value of Main Street's Level 3 portfolio investments as of September 30, 2016 and December 31, 2015:

Type of Investment
  Fair Value
as of
September 30,
2016
(in thousands)
  Valuation Technique   Significant Unobservable Inputs   Range(3)   Weighted
Average(3)
  Median(3)  

Equity investments

  $ 531,672   Discounted cash flow   Weighted-average cost of capital   10.2% - 22.6%     12.9%     13.6%  

        Market comparable / Enterprise Value   EBITDA multiple(1)   4.5x - 8.0x(2)     6.9x     5.9x  

Debt investments

 
$

734,110
 

Discounted cash flow

 

Risk adjusted discount factor

 

7.7% - 15.4%(2)

   
12.0%
   
11.0%
 

            Expected principal recovery percentage   5.3% - 100.0%     100.0%     100.0%  

Debt investments

 
$

652,325
 

Market approach

 

Third party quote

 

22.5 - 107.0

             

Total Level 3 investments

  $ 1,918,107                          

(1)
EBITDA may include proforma adjustments and/or other addbacks based on specific circumstances related to each investment.

(2)
Range excludes outliers that are greater than one standard deviation from the mean. Including these outliers, the range for EBITDA multiple is 4.5x - 17.5x and the range for risk adjusted discount factor is 5.0% - 33.8%.

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(Unaudited)

(3)
Does not include investments for which the valuation technique does not include the use of the applicable fair value input.
Type of Investment
  Fair Value
as of
December 31,
2015
(in thousands)
  Valuation Technique   Significant Unobservable Inputs   Range(3)   Weighted
Average(3)
  Median(3)  

Equity investments

  $ 530,612   Discounted cash flow   Weighted-average cost of capital   10.5% - 25.1%     13.4%     13.9%  

        Market comparable / Enterprise Value   EBITDA multiple(1)   4.0x - 8.5x(2)     7.0x     5.5x  

Debt investments

 
$

628,492
 

Discounted cash flow

 

Risk adjusted discount factor

 

8.1% - 15.3%(2)

   
11.9%
   
11.9%
 

            Expected principal recovery percentage   16.6% - 100.0%     99.7%     100.0%  

Debt investments

 
$

637,052
 

Market approach

 

Third party quote

 

12.1 - 100.1

             

Total Level 3 investments

  $ 1,796,156                          

(1)
EBITDA may include proforma adjustments and/or other addbacks based on specific circumstances related to each investment.

(2)
Range excludes outliers that are greater than one standard deviation from the mean. Including these outliers, the range for EBITDA multiple is 4.0x - 18.8x and the range for risk adjusted discount factor is 6.7% - 29.6%.

(3)
Does not include investments for which the valuation technique does not include the use of the applicable fair value input.

        The following tables provide a summary of changes in fair value of Main Street's Level 3 portfolio investments for the nine month periods ended September 30, 2016 and 2015 (amounts in thousands). Net unrealized appreciation (depreciation) is included in the net change in unrealized appreciation (depreciation)—portfolio investments on the consolidated statements of operations.

Type of Investment
  Fair Value
as of
December 31,
2015
  Transfers
Into Level 3
Hierarchy
  Redemptions/
Repayments
  New
Investments
  Net Changes
from
Unrealized
to Realized
  Net
Unrealized
Appreciation
(Depreciation)
  Other(1)   Fair Value
as of
September 30,
2016
 

Debt

    1,265,544         (289,261 )   385,476     34,567     (3,893 )   (5,998 )   1,386,435  

Equity

    519,966         (14,797 )   61,543     (59,681 )   3,821     5,998     516,850  

Equity Warrant

    10,646         (1,011 )   4,750     1,011     (574 )       14,822  

    1,796,156         (305,069 )   451,769     (24,103 )   (646 )       1,918,107  

(1)
Includes the impact of non-cash conversions.
Type of Investment
  Fair Value
as of
December 31,
2014
  Transfers
Into Level 3
Hierarchy
  Redemptions/
Repayments
  New
Investments
  Net Changes
from
Unrealized
to Realized
  Net
Unrealized
Appreciation
(Depreciation)
  Other(1)   Fair Value
as of
September 30,
2015
 

Debt

    1,147,281         (439,158 )   672,305     19,844     (32,804 )   (10,779 )   1,356,689  

Equity

    391,933         (16,475 )   58,728     (8,250 )   55,865     10,376     492,177  

Equity Warrant

    15,636         (1,723 )   2,153     (1,687 )   (271 )       14,108  

    1,554,850         (457,356 )   733,186     9,907     22,790     (403 )   1,862,974  

(1)
Includes the impact of non-cash conversions.

        As of September 30, 2016 and December 31, 2015, the fair value determination for the SBIC debentures recorded at fair value primarily consisted of unobservable inputs. As a result, the SBIC debentures which are recorded at fair value were categorized as Level 3. Main Street determines the

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(Unaudited)

fair value of these instruments primarily using a Yield-to-Maturity approach that analyzes the discounted cash flows of interest and principal for each SBIC debenture recorded at fair value based on estimated market interest rates for debt instruments of similar structure, terms, and maturity. Main Street's estimate of the expected repayment date of principal for each SBIC debenture recorded at fair value is the maturity date of the instrument. The significant unobservable inputs used in the fair value measurement of Main Street's SBIC debentures recorded at fair value are the estimated market interest rates used to fair value each debenture using the yield valuation technique described above. Significant increases (decreases) in the Yield-to-Maturity valuation inputs in isolation would result in a significantly lower (higher) fair value measurement.

        The following tables provide a summary of the significant unobservable inputs used to fair value Main Street's Level 3 SBIC debentures as of September 30, 2016 and December 31, 2015 (amounts in thousands):

Type of Instrument
  Fair Value as of
September 30, 2016
  Valuation Technique   Significant Unobservable Inputs   Range   Weighted
Average
 

SBIC debentures

  $ 74,680   Discounted cash flow   Estimated market interest rates   3.8% - 5.3%     4.4 %

 

Type of Instrument
  Fair Value as of
December 31, 2015
  Valuation Technique   Significant Unobservable Inputs   Range   Weighted
Average
 

SBIC debentures

  $ 73,860   Discounted cash flow   Estimated market interest rates   4.1% - 5.8%     4.9 %

        The following tables provide a summary of changes for the Level 3 SBIC debentures recorded at fair value for the nine month periods ended September 30, 2016 and 2015 (amounts in thousands):

Type of Instrument
  Fair Value as of
December 31, 2015
  Repayments   New SBIC
Debentures
  Net
Unrealized
(Appreciation)
Depreciation
  Fair Value as of
September 30,
2016
 

SBIC debentures at fair value

  $ 73,860   $   $   $ 820   $ 74,680  

 

Type of Instrument
  Fair Value as of
December 31, 2014
  Repayments   New SBIC
Debentures
  Net
Unrealized
(Appreciation)
Depreciation
  Fair Value as of
September 30,
2015
 

SBIC debentures at fair value

  $ 72,981   $   $   $ 823   $ 73,804  

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(Unaudited)

        At September 30, 2016 and December 31, 2015, Main Street's investments and SBIC debentures at fair value were categorized as follows in the fair value hierarchy for ASC 820 purposes:

 
   
  Fair Value Measurements  
 
   
  (in thousands)
 
At September 30, 2016
  Fair Value   Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
  Significant Other
Observable Inputs
(Level 2)
  Significant
Unobservable Inputs
(Level 3)
 

LMM portfolio investments

  $ 829,692   $   $ 2,160   $ 827,532  

Middle Market portfolio investments

    627,944             627,944  

Private Loan portfolio investments

    337,735             337,735  

Other Portfolio investments

    94,763             94,763  

External Investment Manager

    30,133             30,133  

Total portfolio investments

    1,920,267         2,160     1,918,107  

Marketable securities and idle funds investments

                 

Total investments

  $ 1,920,267   $   $ 2,160   $ 1,918,107  

SBIC debentures at fair value

  $ 74,680   $   $   $ 74,680  

 

 
   
  Fair Value Measurements  
 
   
  (in thousands)
 
At December 31, 2015
  Fair Value   Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
  Significant Other
Observable Inputs
(Level 2)
  Significant
Unobservable Inputs
(Level 3)
 

LMM portfolio investments

  $ 862,710   $   $ 3,840   $ 858,870  

Middle Market portfolio investments

    586,900             586,900  

Private Loan portfolio investments

    248,313             248,313  

Other Portfolio investments

    74,801             74,801  

External Investment Manager

    27,272             27,272  

Total portfolio investments

    1,799,996         3,840     1,796,156  

Marketable securities and idle funds investments

    3,693     3,693          

Total investments

  $ 1,803,689   $ 3,693   $ 3,840   $ 1,796,156  

SBIC debentures at fair value

  $ 73,860   $   $   $ 73,860  

Investment Portfolio Composition

        Main Street's LMM portfolio investments primarily consist of secured debt, equity warrants and direct equity investments in privately held, LMM companies based in the United States. Main Street's LMM portfolio companies generally have annual revenues between $10 million and $150 million, and its LMM investments generally range in size from $5 million to $50 million. The LMM debt investments are typically secured by either a first or second priority lien on the assets of the portfolio

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(Unaudited)

company, generally bear interest at fixed rates, and generally have a term of between five and seven years from the original investment date. In most LMM portfolio investments, Main Street receives nominally priced equity warrants and/or makes direct equity investments in connection with a debt investment.

        Main Street's Middle Market portfolio investments primarily consist of direct investments in or secondary purchases of interest-bearing debt securities in privately held companies based in the United States that are generally larger in size than the companies included in Main Street's LMM portfolio. Main Street's Middle Market portfolio companies generally have annual revenues between $150 million and $1.5 billion, and its Middle Market investments generally range in size from $3 million to $15 million. Main Street's Middle Market portfolio debt investments are generally secured by either a first or second priority lien on the assets of the portfolio company and typically have a term of between three and seven years from the original investment date.

        Main Street's private loan ("Private Loan") portfolio investments are primarily debt securities in privately held companies which have been originated through strategic relationships with other investment funds on a collaborative basis, and are often referred to in the debt markets as "club deals." Private Loan investments are typically similar in size, structure, terms and conditions to investments Main Street holds in its LMM portfolio and Middle Market portfolio. Main Street's Private Loan portfolio debt investments are generally secured by either a first or second priority lien on the assets of the portfolio company and typically have a term of between three and seven years from the original investment date.

        Main Street's other portfolio ("Other Portfolio") investments primarily consist of investments which are not consistent with the typical profiles for LMM, Middle Market and Private Loan portfolio investments, including investments which may be managed by third parties. In the Other Portfolio, Main Street may incur indirect fees and expenses in connection with investments managed by third parties, such as investments in other investment companies or private funds. For Other Portfolio investments, Main Street generally receives distributions related to the assets held by the portfolio company. Those assets are typically expected to be liquidated over a five to ten year period.

        Main Street's external asset management business is conducted through its External Investment Manager. The External Investment Manager earns management fees based on the assets of the funds under management and may earn incentive fees, or a carried interest, based on the performance of the funds managed. Main Street entered into an agreement with the External Investment Manager to share employees in connection with its asset management business generally, and specifically for its relationship with HMS Income Fund, Inc. ("HMS Income"). Through this agreement, Main Street shares employees with the External Investment Manager, including their related infrastructure, business relationships, management expertise and capital raising capabilities. In the first quarter of 2014, Main Street began allocating cost to the External Investment Manager pursuant to the sharing agreement. Main Street's total expenses for the three months ended September 30, 2016 and 2015 are net of the costs allocated to the External Investment Manager of $1.2 million and $1.1 million, respectively. Main Street's total expenses for the nine months ended September 30, 2016 and 2015 are net of the costs allocated to the External Investment Manager of $3.7 million and $3.1 million, respectively.

        Investment income, consisting of interest, dividends and fees, can fluctuate dramatically due to various factors, including the level of new investment activity, repayments of debt investments or sales of equity interests. Investment income in any given year could also be highly concentrated among several portfolio companies. For the three and nine months ended September 30, 2016 and 2015, Main

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Street did not record investment income from any single portfolio company in excess of 10% of total investment income.

        The following tables provide a summary of Main Street's investments in the LMM, Middle Market and Private Loan portfolios as of September 30, 2016 and December 31, 2015 (this information excludes the Other Portfolio investments and the External Investment Manager which are discussed further below):

 
  As of September 30, 2016  
 
  LMM(a)   Middle
Market
  Private
Loan
 
 
  (dollars in millions)
 

Number of portfolio companies

    71     81     45  

Fair value

  $ 829.7   $ 627.9   $ 337.7  

Cost

  $ 703.6   $ 658.0   $ 353.8  

% of portfolio at cost—debt

    68.8%     97.5%     94.3%  

% of portfolio at cost—equity

    31.2%     2.5%     5.7%  

% of debt investments at cost secured by first priority lien

    91.5%     87.6%     87.6%  

Weighted-average annual effective yield(b)

    12.5%     8.4%     9.6%  

Average EBITDA(c)

  $ 6.2   $ 101.6   $ 21.1  

(a)
At September 30, 2016, Main Street had equity ownership in approximately 99% of its LMM portfolio companies, and the average fully diluted equity ownership in those portfolio companies was approximately 36%.

(b)
The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of September 30, 2016, including amortization of deferred debt origination fees and accretion of original issue discount but excluding fees payable upon repayment of the debt instruments and any debt investments on non-accrual status. Weighted-average annual effective yield is higher than what an investor in shares of Main Street's common stock will realize on its investment because it does not reflect Main Street's expenses or any sales load paid by an investor.

(c)
The average EBITDA is calculated using a simple average for the LMM portfolio and a weighted average for the Middle Market and Private Loan portfolios. These calculations exclude certain portfolio companies, including five LMM portfolio companies, three Middle Market portfolio companies and three Private Loan portfolio companies, as EBITDA is not a meaningful valuation metric for Main Street's investments in these portfolio companies.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

 
  As of December 31, 2015  
 
  LMM(a)   Middle
Market
  Private
Loan
 
 
  (dollars in millions)
 

Number of portfolio companies

    71     86     40  

Fair value

  $ 862.7   $ 586.9   $ 248.3  

Cost

  $ 685.6   $ 637.2   $ 268.6  

% of total investments at cost—debt

    70.4%     98.3%     94.3%  

% of total investments at cost—equity

    29.6%     1.7%     5.7%  

% of debt investments at cost secured by first priority lien

    91.8%     86.6%     87.3%  

Weighted-average annual effective yield(b)

    12.2%     8.0%     9.5%  

Average EBITDA(c)

  $ 6.0   $ 98.8   $ 13.1  

(a)
At December 31, 2015, Main Street had equity ownership in approximately 96% of its LMM portfolio companies, and the average fully diluted equity ownership in those portfolio companies was approximately 36%.

(b)
The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of December 31, 2015, including amortization of deferred debt origination fees and accretion of original issue discount but excluding fees payable upon repayment of the debt instruments and any debt investments on non-accrual status. Weighted-average annual effective yield is higher than what an investor in shares of Main Street's common stock will realize on its investment because it does not reflect Main Street's expenses or any sales load paid by an investor.

(c)
The average EBITDA is calculated using a simple average for the LMM portfolio and a weighted average for the Middle Market and Private Loan portfolios. These calculations exclude certain portfolio companies, including five LMM portfolio companies, three Middle Market portfolio companies and six Private Loan portfolio companies as EBITDA is not a meaningful valuation metric for Main Street's investments in these portfolio companies, and those portfolio companies whose primary purpose is to own real estate.

        As of September 30, 2016, Main Street had Other Portfolio investments in ten companies, collectively totaling approximately $94.8 million in fair value and approximately $101.3 million in cost basis and which comprised 4.9% of Main Street's Investment Portfolio at fair value. As of December 31, 2015, Main Street had Other Portfolio investments in ten companies, collectively totaling approximately $74.8 million in fair value and approximately $75.2 million in cost basis and which comprised approximately 4.2% of Main Street's Investment Portfolio at fair value.

        As discussed further in Note A.1., Main Street holds an investment in the External Investment Manager, a wholly owned subsidiary that is treated as a portfolio investment. As of September 30, 2016, there was no cost basis in this investment and the investment had a fair value of $30.1 million, which comprised 1.6% of Main Street's Investment Portfolio at fair value. As of December 31, 2015, there was no cost basis in this investment and the investment had a fair value of $27.3 million, which comprised 1.5% of Main Street's Investment Portfolio at fair value.

        The following tables summarize the composition of Main Street's total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments at cost and

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

fair value by type of investment as a percentage of the total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments, as of September 30, 2016 and December 31, 2015 (this information excludes the Other Portfolio investments and the External Investment Manager).

Cost:
  September 30,
2016
  December 31,
2015
 

First lien debt

    75.6%     75.8%  

Equity

    13.9%     13.5%  

Second lien debt

    8.5%     8.7%  

Equity warrants

    1.0%     0.9%  

Other

    1.0%     1.1%  

    100.0%     100.0%  

 

Fair Value:
  September 30,
2016
  December 31,
2015
 

First lien debt

    68.3%     66.1%  

Equity

    22.0%     24.9%  

Second lien debt

    8.0%     7.7%  

Equity warrants

    0.8%     0.6%  

Other

    0.9%     0.7%  

    100.0%     100.0%  

        The following tables summarize the composition of Main Street's total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments by geographic region of the United States and other countries at cost and fair value as a percentage of the total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments, as of September 30, 2016 and December 31, 2015 (this information excludes the Other Portfolio investments and the External Investment Manager). The geographic composition is determined by the location of the corporate headquarters of the portfolio company.

Cost:
  September 30,
2016
  December 31,
2015
 

Southwest

    29.5%     33.4%  

Midwest

    21.5%     16.7%  

Northeast

    15.4%     18.3%  

Southeast

    15.6%     13.5%  

West

    14.7%     14.6%  

Canada

    1.7%     2.2%  

Other Non-United States

    1.6%     1.3%  

    100.0%     100.0%  

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(Unaudited)


Fair Value:
  September 30,
2016
  December 31,
2015
 

Southwest

    30.4%     36.7%  

Midwest

    19.8%     15.1%  

West

    17.0%     16.1%  

Southeast

    15.2%     12.6%  

Northeast

    14.6%     16.3%  

Canada

    1.5%     2.0%  

Other Non-United States

    1.5%     1.2%  

    100.0%     100.0%  

        Main Street's LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments are in companies conducting business in a variety of industries. The following tables summarize the composition of Main Street's total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments by industry at cost and fair value

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

as of September 30, 2016 and December 31, 2015 (this information excludes the Other Portfolio investments and the External Investment Manager).

Cost:
  September 30,
2016
  December 31,
2015
 

Energy Equipment & Services

    7.6%     7.3%  

Hotels, Restaurants & Leisure

    6.8%     7.9%  

Media

    5.8%     5.6%  

Machinery

    5.7%     5.7%  

Construction & Engineering

    4.7%     4.6%  

Electronic Equipment, Instruments & Components

    4.5%     4.3%  

IT Services

    4.2%     5.1%  

Specialty Retail

    4.1%     5.1%  

Commercial Services & Supplies

    4.0%     3.3%  

Internet Software & Services

    3.6%     3.1%  

Diversified Telecommunication Services

    3.4%     2.9%  

Auto Components

    3.4%     2.7%  

Food Products

    3.1%     2.4%  

Diversified Consumer Services

    2.9%     3.7%  

Health Care Equipment & Supplies

    2.9%     3.1%  

Health Care Providers & Services

    2.8%     4.1%  

Diversified Financial Services

    2.3%     2.3%  

Software

    2.2%     4.5%  

Computers & Peripherals

    1.9%     0.0%  

Professional Services

    1.9%     1.9%  

Communications Equipment

    1.9%     0.0%  

Pharmaceuticals

    1.7%     1.9%  

Road & Rail

    1.6%     1.6%  

Building Products

    1.6%     1.9%  

Oil, Gas & Consumable Fuels

    1.5%     2.1%  

Consumer Finance

    1.5%     0.8%  

Distributors

    1.2%     0.7%  

Leisure Equipment & Products

    1.1%     1.1%  

Air Freight & Logistics

    1.0%     1.1%  

Aerospace & Defense

    1.0%     1.0%  

Other(1)

    8.1%     8.2%  

    100.0%     100.0%  

(1)
Includes various industries with each industry individually less than 1.0% of the total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments at each date.

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(Unaudited)

Fair Value:
  September 30,
2016
  December 31,
2015
 

Hotels, Restaurants & Leisure

    6.9%     7.8%  

Machinery

    6.8%     7.0%  

Energy Equipment & Services

    5.8%     6.0%  

Diversified Consumer Services

    5.5%     5.7%  

Media

    5.4%     5.1%  

Construction & Engineering

    5.2%     5.1%  

Specialty Retail

    4.3%     6.0%  

IT Services

    4.0%     4.6%  

Commercial Services & Supplies

    4.0%     3.1%  

Electronic Equipment, Instruments & Components

    3.9%     3.7%  

Internet Software & Services

    3.5%     2.9%  

Auto Components

    3.3%     2.8%  

Health Care Equipment & Supplies

    2.9%     2.9%  

Food Products

    2.9%     2.1%  

Diversified Telecommunication Services

    2.7%     2.7%  

Health Care Providers & Services

    2.7%     3.3%  

Road & Rail

    2.4%     2.6%  

Diversified Financial Services

    2.3%     2.2%  

Software

    2.2%     5.9%  

Professional Services

    1.9%     1.7%  

Communications Equipment

    1.9%     0.0%  

Computers & Peripherals

    1.8%     0.0%  

Pharmaceuticals

    1.5%     1.7%  

Building Products

    1.4%     1.6%  

Consumer Finance

    1.3%     0.6%  

Oil, Gas & Consumable Fuels

    1.2%     1.2%  

Air Freight & Logistics

    1.2%     1.3%  

Leisure Equipment & Products

    1.1%     1.1%  

Distributors

    1.1%     0.6%  

Other(1)

    8.9%     8.7%  

    100.0%     100.0%  

(1)
Includes various industries with each industry individually less than 1.0% of the total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments at each date.

        At September 30, 2016 and December 31, 2015, Main Street had no portfolio investment that was greater than 10% of the Investment Portfolio at fair value.

Unconsolidated Significant Subsidiaries

        In accordance with Rules 3-09 and 4-08(g) of Regulation S-X, Main Street must determine which of its unconsolidated controlled portfolio companies, if any, are considered "significant subsidiaries". In evaluating these unconsolidated controlled portfolio companies, there are three tests utilized to

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

determine if any of Main Street's Control Investments (as defined in Note A, including those unconsolidated controlled portfolio companies in which Main Street does not own greater than 50% of the voting securities) are considered significant subsidiaries: the investment test, the asset test and the income test. Rule 3-09 of Regulation S-X, as interpreted by the SEC, requires Main Street to include separate audited financial statements of an unconsolidated majority-owned subsidiary (Control Investments in which Main Street owns greater than 50% of the voting securities) in an annual report if any of the three tests exceed 20% of Main Street's total investments at fair value, total assets or total income, respectively. Rule 4-08(g) of Regulation S-X requires summarized financial information of a Control Investment in an annual report if any of the three tests exceeds 10% of Main Street's annual total amounts and Rule 10-01(b)(1) of Regulation S-X requires summarized financial information in a quarterly report if any of the three tests exceeds 20% of Main Street's year-to-date total amounts.

        As of September 30, 2016 and December 31, 2015, Main Street had no single Control Investment that represented greater than 20% of its total Investment Portfolio at fair value and no single investment whose total assets represented greater than 20% of its total assets. For each of the nine months ended September 30, 2016 and 2015, Main Street had no single Control Investment whose income represented greater than 20% of its total income, except for the External Investment Manager for the nine months ended September 30, 2015. The summarized financial information for the External Investment Manager is included in Note D.

NOTE D—EXTERNAL INVESTMENT MANAGER

        As discussed further in Note A.1., the External Investment Manager provides investment management and other services to External Parties. The External Investment Manager is accounted for as a portfolio investment of MSCC since the External Investment Manager conducts all of its investment management activities for External Parties.

        During May 2012, Main Street entered into an investment sub-advisory agreement with HMS Adviser, LP ("HMS Adviser"), which is the investment advisor to HMS Income, a non-publicly traded BDC, to provide certain investment advisory services to HMS Adviser. In December 2013, after obtaining required no-action relief from the SEC to allow it to own a registered investment adviser, Main Street assigned the sub-advisory agreement to the External Investment Manager since the fees received from such arrangement could otherwise have negative consequences on MSCC's ability to meet the source-of-income requirement necessary for it to maintain its RIC tax treatment. Under the investment sub-advisory agreement, the External Investment Manager is entitled to 50% of the base management fee and the incentive fees earned by HMS Adviser under its advisory agreement with HMS Income. Based upon several fee waiver agreements with HMS Income and HMS Adviser, the External Investment Manager did not begin accruing the base management fee and incentive fees, if any, until January 1, 2014. The External Investment Manager has conditionally agreed to waive a limited amount of the incentive fees otherwise earned. During the three months ended September 30, 2016 and 2015, the External Investment Manager earned $2.5 million and $2.1 million, respectively, of management fees (net of fees waived, if any) under the sub-advisory agreement with HMS Adviser. During the nine months ended September 30, 2016 and 2015, the External Investment Manager earned $7.1 million and $5.5 million, respectively, of management fees (net of fees waived, if any) under the sub-advisory agreement with HMS Adviser.

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(Unaudited)

        The investment in the External Investment Manager is accounted for using fair value accounting, with the fair value determined by Main Street and approved, in good faith, by Main Street's Board of Directors. Main Street determines the fair value of the External Investment Manager using the Waterfall valuation method under the market approach (see further discussion in Note B.1.). Any change in fair value of the investment in the External Investment Manager is recognized on Main Street's consolidated statement of operations in "Net Change in Unrealized Appreciation (Depreciation)—Portfolio investments".

        The External Investment Manager has elected, for tax purposes, to be treated as a taxable entity, is not consolidated with Main Street for income tax purposes and is taxed at normal corporate tax rates based on its taxable income and, as a result of its activities, may generate income tax expense or benefit. The External Investment Manager has elected to be treated as a taxable entity to enable it to receive fee income and to allow MSCC to continue to comply with the "source-income" requirements contained in the RIC tax provisions of the Code. The taxable income, or loss, of the External Investment Manager may differ from its book income, or loss, due to temporary book and tax timing differences and permanent differences. The External Investment Manager provides for any income tax expense, or benefit, and any tax assets or liabilities in its separate financial statements.

        Main Street shares employees with the External Investment Manager and allocates costs related to such shared employees to the External Investment Manager generally based on a combination of the direct time spent, new investment origination activity and assets under management, depending on the nature of the expense. For the three months ended September 30, 2016 and 2015, Main Street allocated $1.2 million and $1.1 million of total expenses, respectively, to the External Investment Manager. For the nine months ended September 30, 2016 and 2015, Main Street allocated $3.7 million and $3.1 million of total expenses, respectively, to the External Investment Manager. The total contribution of the External Investment Manager to Main Street's net investment income consists of the combination of the expenses allocated to the External Investment Manager and dividend income from the External Investment Manager. For the three months ended September 30, 2016 and 2015, the total contribution to net investment income was $2.0 million and $1.8 million, respectively. For the nine months ended September 30, 2016 and 2015, the total contribution to net investment income was $5.8 million and $4.7 million, respectively.

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(Unaudited)

        Summarized financial information from the separate financial statements of the External Investment Manager as of September 30, 2016 and December 31, 2015 and for the three and nine months ended September 30, 2016 and 2015 is as follows:

 
  As of
September 30,
  As of
December 31,
 
 
  2016   2015  
 
  (dollars in thousands)
 

Cash

  $ 30   $ 31  

Accounts receivable—HMS Income

    2,466     2,262  

Total assets

  $ 2,496   $ 2,293  

Accounts payable to MSCC and its subsidiaries

  $ 1,424   $ 1,333  

Dividend payable to MSCC

    793     677  

Taxes payable

    279     283  

Equity

         

Total liabilities and equity

  $ 2,496   $ 2,293  

 

 
  Three Months
Ended
September 30
  Nine Months
Ended
September 30,
 
 
  2016   2015   2016   2015  
 
  (dollars in thousands)
 

Management fee income

  $ 2,471   $ 2,105   $ 7,058   $ 5,500  

Expenses allocated from MSCC or its subsidiaries:

   
 
   
 
   
 
   
 
 

Salaries, share-based compensation and other personnel costs

    (833 )   (764 )   (2,522 )   (2,146 )

Other G&A expenses

    (391 )   (381 )   (1,217 )   (987 )

Total allocated expenses

    (1,224 )   (1,145 )   (3,739 )   (3,133 )

Pre-tax income

    1,247     960     3,319     2,367  

Tax expense

    (454 )   (350 )   (1,210 )   (847 )

Net income

  $ 793   $ 610   $ 2,109   $ 1,520  

NOTE E—SBIC DEBENTURES

        SBIC debentures payable were $231.0 million and $225.0 million at September 30, 2016 and December 31, 2015, respectively. SBIC debentures provide for interest to be paid semi-annually, with principal due at the applicable 10-year maturity date of each debenture. In August 2016, Main Street received a license from the SBA to operate a third SBIC, which at the time provided Main Street with up to $125.0 million of additional long-term, fixed interest rate debt capital through the issuance of SBA-guaranteed debentures. During September 2016, Main Street issued $6.0 million of SBIC debentures, leaving $119.0 million of additional capacity. The weighted-average annual interest rate on the SBIC debentures was 4.1% as of September 30, 2016 and 4.2% as of December 31, 2015. The first principal maturity due under the existing SBIC debentures is in 2017, and the weighted-average remaining duration as of September 30, 2016 was approximately 5.0 years. For the three months ended September 30, 2016 and 2015, Main Street recognized interest expense attributable to the SBIC debentures of $2.5 million in each period. For the nine months ended September 30, 2016 and 2015,

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Main Street recognized interest expense attributable to the SBIC debentures of $7.5 million and $7.4 million, respectively. Main Street has incurred upfront leverage and other miscellaneous fees of approximately 3.4% of the debenture principal amount. In accordance with SBA regulations, the Funds are precluded from incurring additional non-SBIC debt without the prior approval of the SBA. The Funds are subject to annual compliance examinations by the SBA. There have been no historical findings resulting from these examinations.

        As of September 30, 2016, the recorded value of the SBIC debentures was $230.5 million which consisted of (i) $74.7 million recorded at fair value, or $0.5 million less than the $75.2 million par value of the SBIC debentures issued in MSC II (ii) $149.8 million recorded at par value and held in MSMF and (iii) $6.0 million recorded at par value and held in MSC III. As of September 30, 2016, if Main Street had adopted the fair value option under ASC 825 for all of its SBIC debentures, Main Street estimates the fair value of its SBIC debentures would be approximately $223.8 million, or $7.2 million less than the $231.0 million face value of the SBIC debentures.

NOTE F—CREDIT FACILITY

        Main Street maintains the Credit Facility to provide additional liquidity to support its investment and operational activities. The Credit Facility includes total commitments of $555.0 million from a diversified group of fourteen lenders and matures in September 2020. The Credit Facility also contains an accordion feature which allows Main Street to increase the total commitments under the facility to up to $750.0 million from new and existing lenders on the same terms and conditions as the existing commitments.

        Borrowings under the Credit Facility bear interest, subject to Main Street's election, on a per annum basis at a rate equal to the applicable LIBOR rate (0.53% as of September 30, 2016) plus (i) 1.875% (or the applicable base rate (Prime Rate of 3.50% as of September 30, 2016) plus 0.875%) as long as Main Street maintains an investment grade rating and meets certain agreed upon excess collateral and maximum leverage requirements, (ii) 2.0% (or the applicable base rate plus 1.0%) if Main Street maintains an investment grade rating but, does not meet certain excess collateral and maximum leverage requirements or (iii) 2.25% (or the applicable base rate plus 1.25%) if Main Street does not maintain an investment grade rating. Main Street pays unused commitment fees of 0.25% per annum on the unused lender commitments under the Credit Facility. The Credit Facility is secured by a first lien on the assets of MSCC and its subsidiaries, excluding the equity ownership or assets of the Funds and the External Investment Manager. The Credit Facility contains certain affirmative and negative covenants, including but not limited to: (i) maintaining a minimum availability of at least 10% of the borrowing base, (ii) maintaining an interest coverage ratio of at least 2.0 to 1.0, (iii) maintaining an asset coverage ratio of at least 1.5 to 1.0 and (iv) maintaining a minimum tangible net worth. The Credit Facility is provided on a revolving basis through its final maturity date in September 2020, and contains two, one-year extension options which could extend the final maturity by up to two years, subject to certain conditions, including lender approval.

        At September 30, 2016, Main Street had $313.0 million in borrowings outstanding under the Credit Facility. As of September 30, 2016, if Main Street had adopted the fair value option under ASC 825 for its Credit Facility, Main Street estimates its fair value would approximate its recorded value. Main Street recognized interest expense related to the Credit Facility, including unused commitment fees and amortization of deferred loan costs, of $2.5 million and $2.2 million for the three months ended September 30, 2016 and 2015, respectively, and $6.7 million and $5.5 million for the nine month

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(Unaudited)

periods ended September 30, 2016 and 2015, respectively. As of September 30, 2016, the interest rate on the Credit Facility was 2.4%. The average interest rate was 2.4% and 2.3% for the three and nine months ended September 30, 2016, respectively. As of September 30, 2016, Main Street was in compliance with all financial covenants of the Credit Facility.

NOTE G—NOTES

    6.125% Notes

        In April 2013, Main Street issued $92.0 million, including the underwriters full exercise of their option to purchase additional principal amounts to cover over-allotments, in aggregate principal amount of 6.125% Notes due 2023 (the "6.125% Notes"). The 6.125% Notes are unsecured obligations and rank pari passu with Main Street's current and future unsecured indebtedness; senior to any of its future indebtedness that expressly provides it is subordinated to the 6.125% Notes; effectively subordinated to all of its existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness, including borrowings under its Credit Facility; and structurally subordinated to all existing and future indebtedness and other obligations of any of its subsidiaries, including without limitation, the indebtedness of the Funds. The 6.125% Notes mature on April 1, 2023, and may be redeemed in whole or in part at any time or from time to time at Main Street's option on or after April 1, 2018. The 6.125% Notes bear interest at a rate of 6.125% per year payable quarterly on January 1, April 1, July 1 and October 1 of each year. The total net proceeds to Main Street from the 6.125% Notes, after underwriting discounts and estimated offering expenses payable by Main Street, were approximately $89.0 million. Main Street has listed the 6.125% Notes on the New York Stock Exchange under the trading symbol "MSCA". Main Street may from time to time repurchase the 6.125% Notes in accordance with the 1940 Act and the rules promulgated thereunder. As of September 30, 2016, the outstanding balance of the 6.125% Notes was $90.7 million. As of September 30, 2016, if Main Street had adopted the fair value option under ASC 825 for the 6.125% Notes, Main Street estimates the fair value would be approximately $94.1 million. Main Street recognized interest expense related to the 6.125% Notes, including amortization of deferred loan costs, of $1.5 million for each of the three months ended September 30, 2016 and 2015, and $4.4 million for each of the nine months ended September 30, 2016 and 2015.

        The indenture governing the 6.125% Notes (the "6.125% Notes Indenture") contains certain covenants, including covenants requiring Main Street's compliance with (regardless of whether Main Street is subject to) the asset coverage requirements set forth in Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act, as well as covenants requiring Main Street to provide financial information to the holders of the 6.125% Notes and the Trustee if Main Street ceases to be subject to the reporting requirements of the Securities Exchange Act of 1934. These covenants are subject to limitations and exceptions that are described in the 6.125% Notes Indenture. As of September 30, 2016, Main Street was in compliance with these covenants.

    4.50% Notes

        In November 2014, Main Street issued $175.0 million in aggregate principal amount of 4.50% unsecured notes due 2019 (the "4.50% Notes") at an issue price of 99.53%. The 4.50% Notes are unsecured obligations and rank pari passu with Main Street's current and future unsecured indebtedness; senior to any of its future indebtedness that expressly provides it is subordinated to the 4.50% Notes; effectively subordinated to all of its existing and future secured indebtedness, to the

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(Unaudited)

extent of the value of the assets securing such indebtedness, including borrowings under its Credit Facility; and structurally subordinated to all existing and future indebtedness and other obligations of any of its subsidiaries, including without limitation, the indebtedness of the Funds. The 4.50% Notes mature on December 1, 2019, and may be redeemed in whole or in part at any time at Main Street's option subject to certain make-whole provisions. The 4.50% Notes bear interest at a rate of 4.50% per year payable semi-annually on June 1 and December 1 of each year. The total net proceeds from the 4.50% Notes, resulting from the issue price and after underwriting discounts and estimated offering expenses payable by us, were approximately $171.2 million. Main Street may from time to time repurchase the 4.50% Notes in accordance with the 1940 Act and the rules promulgated thereunder. As of September 30, 2016, the outstanding balance of the 4.50% Notes was $175.0 million. As of September 30, 2016, if Main Street had adopted the fair value option under ASC 825 for the 4.50% Notes, Main Street estimates its fair value would be approximately $179.9 million. Main Street recognized interest expense related to the 4.50% Notes, including amortization of deferred loan costs, of $2.1 million for each of the three months ended September 30, 2016 and 2015, and $6.4 million for each of the nine months ended September 30, 2016 and 2015.

        The indenture governing the 4.50% Notes (the "4.50% Notes Indenture") contains certain covenants, including covenants requiring Main Street's compliance with (regardless of whether Main Street is subject to) the asset coverage requirements set forth in Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act, as well as covenants requiring Main Street to provide financial information to the holders of the 4.50% Notes and the Trustee if Main Street ceases to be subject to the reporting requirements of the Securities Exchange Act of 1934. These covenants are subject to limitations and exceptions that are described in the 4.50% Notes Indenture. As of September 30, 2016, Main Street was in compliance with these covenants.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

NOTE H—FINANCIAL HIGHLIGHTS

 
  Nine Months Ended
September 30,
 
 
  2016   2015  

Per Share Data:

             

NAV at the beginning of the period

  $ 21.24   $ 20.85  

Net investment income(1)

    1.66     1.61  

Net realized gain (loss)(1)(2)

    0.65     (0.19 )

Net change in net unrealized appreciation (depreciation)(1)(2)

    (0.56 )   0.42  

Income tax benefit(1)(2)

    0.01     0.15  

Net increase in net assets resulting from operations(1)

    1.76     1.99  

Dividends paid from net investment income

    (1.06 )   (1.79 )

Distributions from capital gains

    (0.84 )   (0.05 )

Total dividends paid

    (1.90 )   (1.84 )

Impact of the net change in monthly dividends declared prior to the end of the period and paid in the subsequent period

    (0.01 )   (0.01 )

Accretive effect of stock offerings (issuing shares above NAV per share)

    0.42     0.71  

Accretive effect of DRIP issuance (issuing shares above NAV per share)

    0.06     0.08  

Other(3)

    0.05     0.01  

NAV at the end of the period

  $ 21.62   $ 21.79  

Market value at the end of the period

  $ 34.33   $ 26.66  

Shares outstanding at the end of the period

    52,931,917     50,079,178  

(1)
Based on weighted average number of common shares outstanding for the period.

(2)
Net realized gains or losses, net change in unrealized appreciation or depreciation, and income taxes can fluctuate significantly from period to period.

(3)
Includes the impact of the different share amounts as a result of calculating certain per share data based on the weighted average basic shares outstanding during the period and certain per share data based on the shares outstanding as of a period end or transaction date and the impact of the early adoption of the accounting standard ASU 2016-09 in the three months ended March 31, 2016 relating to the accounting for share-based payment transactions (see further discussion in Note B.8.).

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

 
  Nine Months Ended
September 30,
 
 
  2016   2015  
 
  (dollars in thousands)
 

NAV at end of period

  $ 1,144,350   $ 1,090,981  

Average NAV

  $ 1,097,839   $ 1,051,418  

Average outstanding debt

  $ 792,966   $ 742,993  

Ratio of total expenses, including income tax expense, to average NAV(1)(2)

    4.11%     3.38%  

Ratio of operating expenses to average NAV(2)(3)

    4.20%     4.05%  

Ratio of operating expenses, excluding interest expense, to average NAV(2)(3)

    1.92%     1.79%  

Ratio of net investment income to average NAV(2)

    7.78%     7.47%  

Portfolio turnover ratio(2)

    18.11%     16.68%  

Total investment return(2)(4)

    25.35%     –6.74%  

Total return based on change in NAV(2)(5)

    8.49%     10.31%  

(1)
Total expenses are the sum of operating expenses and net income tax provision/benefit. Net income tax provision/benefit includes the accrual of net deferred tax provision/benefit relating to the net unrealized appreciation/depreciation on portfolio investments held in Taxable Subsidiaries and due to the change in the loss carryforwards, which are non-cash in nature and may vary significantly from period to period. Main Street is required to include net deferred tax provision/benefit in calculating its total expenses even though these net deferred taxes are not currently payable/receivable.

(2)
Not annualized.

(3)
Operating expenses include interest, compensation, general and administrative and share-based compensation expenses, net of expenses allocated to the External Investment Manager.

(4)
Total investment return based on purchase of stock at the current market price on the first day and a sale at the current market price on the last day of each period reported on the table and assumes reinvestment of dividends at prices obtained by Main Street's dividend reinvestment plan during the period. The return does not reflect any sales load that may be paid by an investor.

(5)
Total return based on change in net asset value was calculated using the sum of ending net asset value plus dividends to stockholders and other non-operating changes during the period, as divided by the beginning net asset value.

NOTE I—DIVIDENDS, DISTRIBUTIONS AND TAXABLE INCOME

        Main Street paid regular monthly dividends of $0.180 per share for each month of January through September 2016, totaling approximately $28.3 million, or $0.540 per share, for the three months ended September 30, 2016, and $83.1 million, or $1.620 per share, for the nine months ended September 30,

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(Unaudited)

2016. The third quarter 2016 regular monthly dividends represent a 2.9% increase from the regular monthly dividends paid for the third quarter of 2015. Additionally, Main Street paid a $0.275 per share supplemental semi-annual dividend, totaling $14.2 million, in June 2016 compared to a $13.7 million, or $0.275 per share, paid in June 2015. The regular monthly dividends equaled a total of approximately $26.2 million, or $0.525 per share, for the three months ended September 30, 2015, and $75.4 million, or $1.560 per share, for the nine months ended September 30, 2015.

        MSCC has elected to be treated for U.S. federal income tax purposes as a RIC. MSCC's taxable income includes the taxable income generated by MSCC and certain of its subsidiaries, including the Funds, which are treated as disregarded entities for tax purposes. As a RIC, MSCC generally will not pay corporate level U.S. federal income taxes on any net ordinary income or capital gains that MSCC distributes to its stockholders. MSCC must generally distribute at least 90% of its "investment company taxable income" (which is generally its net ordinary taxable income and realized net short-term capital gains in excess of realized net long-term capital losses) and 90% of its tax exempt income to maintain its RIC status (pass-through tax treatment for amounts distributed). As part of maintaining RIC status, undistributed taxable income (subject to a 4% non-deductible U.S Federal excise tax) pertaining to a given fiscal year may be distributed up to 12 months subsequent to the end of that fiscal year, provided such dividends are declared on or prior to the later of (i) filing of the U.S federal income tax return for the applicable fiscal year or (ii) the fifteenth day of the ninth month following the close of the year in which such taxable income was generated.

        The determination of the tax attributes for Main Street's distributions is made annually, based upon its taxable income for the full year and distributions paid for the full year. Therefore, a determination made on an interim basis may not be representative of the actual tax attributes of distributions for a full year. Ordinary dividend distributions from a RIC do not qualify for the 20% maximum tax rate (plus a 3.8% Medicare surtax, if applicable) on dividend income from domestic corporations and qualified foreign corporations, except to the extent that the RIC received the income in the form of qualifying dividends from domestic corporations and qualified foreign corporations. The tax attributes for distributions will generally include both ordinary income and capital gains, but may also include qualified dividends or return of capital.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

        Listed below is a reconciliation of "Net increase in net assets resulting from operations" to taxable income and to total distributions declared to common stockholders for the nine months ended September 30, 2016 and 2015.

 
  Nine Months Ended
September 30,
 
 
  2016   2015  
 
  (estimated, dollars in
thousands)

 

Net increase in net assets resulting from operations

  $ 90,907   $ 96,895  

Book tax difference from share-based compensation expense

    (708 )   (662 )

Net change in net unrealized (appreciation) depreciation

    28,829     (20,372 )

Income tax benefit

    (1,018 )   (7,004 )

Pre-tax book loss not consolidated for tax purposes

    16,771     15,240  

Book income and tax income differences, including debt origination, structuring fees, dividends, realized gains (losses) and changes in estimates

    (4,141 )   992  

Estimated taxable income(1)

    130,640     85,089  

Taxable income earned in prior year and carried forward for distribution in current year

    29,683     38,638  

Taxable income earned prior to period end and carried forward for distribution next period

    (72,094 )   (42,279 )

Dividend payable as of period end and paid in the following period

    9,783     9,014  

Total distributions accrued or paid to common stockholders

  $ 98,012   $ 90,462  

(1)
Main Street's taxable income for each period is an estimate and will not be finally determined until the company files its tax return for each year. Therefore, the final taxable income, and the taxable income earned in each period and carried forward for distribution in the following period, may be different than this estimate.

        The Taxable Subsidiaries hold certain portfolio investments for Main Street. The Taxable Subsidiaries permit Main Street to hold equity investments in portfolio companies which are "pass-through" entities for tax purposes and to continue to comply with the "source-income" requirements contained in the RIC tax provisions of the Code. The Taxable Subsidiaries are consolidated with Main Street for U.S. GAAP financial reporting purposes, and the portfolio investments held by the Taxable Subsidiaries are included in Main Street's consolidated financial statements as portfolio investments and recorded at fair value. The Taxable Subsidiaries are not consolidated with MSCC for income tax purposes and may generate income tax expense, or benefit, and tax assets and liabilities, as a result of their ownership of certain portfolio investments. The taxable income, or loss, of the Taxable Subsidiaries may differ from its book income, or loss, due to temporary book and tax timing differences and permanent differences. This income tax expense, or benefit, if any, and the related tax assets and liabilities, are reflected in Main Street's consolidated financial statements.

        MSCC's wholly owned subsidiary MSCP is included in Main Street's consolidated financial statements for financial reporting purposes. For tax purposes, MSCP has elected to be treated as a

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

taxable entity, and therefore is not consolidated with MSCC for income tax purposes and is taxed at normal corporate tax rates based on its taxable income and, as a result of its activities, may generate income tax expense or benefit. The taxable income, or loss, of MSCP may differ from its book income, or loss, due to temporary book and tax timing differences and permanent differences. This income tax expense, or benefit, if any, and the related tax assets and liabilities, are reflected in Main Street's consolidated financial statements.

        The income tax expense, or benefit, and the related tax assets and liabilities, generated by the Taxable Subsidiaries and MSCP, if any, are reflected in Main Street's consolidated financial statements. For the three months ended September 30, 2016, Main Street recognized a net income tax benefit of $0.5 million, principally consisting of a deferred tax benefit of $1.4 million which is primarily the result of the net activity relating to the portfolio investments held in the Taxable Subsidiaries including changes in the loss carryforwards, changes in net unrealized appreciation or depreciation and other temporary book-tax differences, partially offset by a $0.9 million current tax expense which is primarily related to a $1.0 million accrual for excise tax on Main Street's estimated undistributed taxable income. For the nine months ended September 30, 2016, Main Street recognized a net income tax benefit of $1.0 million, principally consisting of a deferred tax benefit of $3.4 million which is primarily the result of the net activity relating to the portfolio investments held in the Taxable Subsidiaries including changes in the loss carryforwards, changes in net unrealized appreciation or depreciation and temporary book-tax differences, partially offset by $2.4 million in current tax expense which is composed of a (i) $2.1 million accrual for excise tax on its estimated undistributed taxable income and (ii) $0.3 million of accruals for current U.S. federal income and state taxes. For the three months ended September 30, 2015, Main Street recognized a net income tax benefit of $3.2 million, which principally consisted of a deferred tax benefit of $2.7 million which was primarily the result of the net activity relating to the portfolio investments held in the Taxable Subsidiaries including changes in the loss carryforwards, changes in net unrealized appreciation or depreciation and other temporary book tax differences and a $0.5 million benefit for other current taxes, which was primarily related to a $0.7 million benefit for current U.S. federal income and state taxes, partially offset by $0.2 million accrual for excise tax on its estimated undistributed taxable income. For the nine months ended September 30, 2015, Main Street recognized a net income tax benefit of $7.0 million, which principally consisted of a deferred tax benefit of $8.5 million primarily the result of the net activity relating to the portfolio investments held in the Taxable Subsidiaries including changes in the loss carryforwards, changes in net unrealized appreciation or depreciation and temporary book tax differences, partially offset by $1.5 million in other current taxes, which principally consisted of $0.8 million of accruals for current U.S. federal income and state taxes, and a $0.7 million accrual for excise tax on its estimated undistributed taxable income.

        The net deferred tax asset at September 30, 2016 and December 31, 2015 was $9.2 million and $4.0 million, respectively, primarily related to loss carryforwards, timing differences in net unrealized appreciation or depreciation and other temporary book-tax differences relating to portfolio investments held by the Taxable Subsidiaries. In addition, during the three months ended March 31, 2016, Main Street recorded a one-time $1.8 million increase to deferred tax assets for previously unrecognized excess tax benefits associated with share-based compensation due to the early adoption of the new accounting standard ASU 2016-09 (See further discussion in Note B.8.). As of September 30, 2016, the Taxable Subsidiaries had a capital loss carryforward of $15.6 million. For federal income tax purposes, the capital loss carryforward will expire in taxable years 2020 and 2021. The timing and manner in which Main Street will utilize any net loss carryforwards in any year, or in total, may be limited in the future under the provisions of the Code.

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

NOTE J—COMMON STOCK

        During November 2015, Main Street commenced a program with selling agents through which it can sell shares of its common stock by means of at-the-market offerings from time to time (the "ATM Program"). During the nine months ended September 30, 2016, Main Street sold 1,996,793 shares of its common stock at a weighted-average price of $32.67 per share and raised $65.2 million of gross proceeds under the ATM Program. Net proceeds were $64.3 million after commissions to the selling agents on shares sold and offering costs. As of September 30, 2016, sales transactions representing 30,804 shares had not settled and are not included in shares issued and outstanding on the face of the consolidated balance sheet, but are included in the weighted average shares outstanding on the consolidated statement of operations and in the shares used to calculate net asset value per share. As of September 30, 2016, 362,639 shares were available for sale under the ATM Program.

        During November and December 2015, Main Street sold 140,568 shares of its common stock at a weighted-average price of $31.98 per share and raised $4.5 million of gross proceeds under the ATM Program. Net proceeds were $4.3 million after commissions to the selling agents on shares sold and offering costs.

        During March 2015, Main Street completed a follow-on public equity offering of 4,370,000 shares of common stock, including the underwriters' full exercise of their option to purchase 570,000 additional shares, resulting in total net proceeds, including exercise of the underwriters' option to purchase additional shares and after deducting underwriting discounts and estimated offering expenses payable by Main Street, of approximately $127.8 million.

NOTE K—DIVIDEND REINVESTMENT PLAN ("DRIP")

        Main Street's DRIP provides for the reinvestment of dividends on behalf of its stockholders, unless a stockholder has elected to receive dividends in cash. As a result, if Main Street declares a cash dividend, the company's stockholders who have not "opted out" of the DRIP by the dividend record date will have their cash dividend automatically reinvested into additional shares of MSCC common stock. The share requirements of the DRIP may be satisfied through the issuance of shares of common stock or through open market purchases of common stock. Newly issued shares will be valued based upon the final closing price of MSCC's common stock on the valuation date determined for each dividend by Main Street's Board of Directors. Shares purchased in the open market to satisfy the DRIP requirements will be valued based upon the average price of the applicable shares purchased, before any associated brokerage or other costs. Main Street's DRIP is administered by its transfer agent on behalf of Main Street's record holders and participating brokerage firms. Brokerage firms and other financial intermediaries may decide not to participate in Main Street's DRIP but may provide a similar dividend reinvestment plan for their clients.

        For the nine months ended September 30, 2016, $10.6 million of the total $97.3 million in dividends paid to stockholders represented DRIP participation. During this period, the DRIP participation requirements were satisfied with the issuance of 339,544 newly issued shares. For the nine months ended September 30, 2015, $13.7 million of the total $89.1 million in dividends paid to stockholders represented DRIP participation. During this period, the DRIP participation requirements were satisfied with the issuance of 444,957 newly issued shares and with the purchase of 3,131 shares of common stock in the open market. The shares disclosed above relate only to Main Street's DRIP and exclude any activity related to broker-managed dividend reinvestment plans.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

NOTE L—SHARE-BASED COMPENSATION

        Main Street accounts for its share-based compensation plans using the fair value method, as prescribed by ASC 718, Compensation—Stock Compensation. Accordingly, for restricted stock awards, Main Street measured the grant date fair value based upon the market price of its common stock on the date of the grant and amortizes the fair value of the awards as share-based compensation expense over the requisite service period, which is generally the vesting term.

        Main Street's Board of Directors approves the issuance of shares of restricted stock to Main Street employees pursuant to the Main Street Capital Corporation 2015 Equity and Incentive Plan (the "Equity and Incentive Plan"). These shares generally vest over a three-year period from the grant date. The fair value is expensed over the service period, starting on the grant date. The following table summarizes the restricted stock issuances approved by Main Street's Board of Directors under the Equity and Incentive Plan, net of shares forfeited, if any, and the remaining shares of restricted stock available for issuance as of September 30, 2016.

Restricted stock authorized under the plan

    3,000,000  

Less net restricted stock granted during:

       

Year ended December 31, 2015

    (900 )

Nine months ended September 30, 2016

    (260,514 )

Restricted stock available for issuance as of September 30, 2016

    2,738,586  

        As of September 30, 2016, the following table summarizes the restricted stock issued to Main Street's non-employee directors and the remaining shares of restricted stock available for issuance pursuant to the Main Street Capital Corporation 2015 Non-Employee Director Restricted Stock Plan. These shares are granted upon appointment or election to the board and vest on the day immediately preceding the annual meeting of stockholders following the respective grant date and are expensed over such service period.

Restricted stock authorized under the plan

    300,000  

Less net restricted stock granted during:

       

Year ended December 31, 2015

    (6,806 )

Nine months ended September 30, 2016

    (6,748 )

Restricted stock available for issuance as of September 30, 2016

    286,446  

        For the three months ended September 30, 2016 and 2015, Main Street recognized total share-based compensation expense of $2.1 million and $1.7 million, respectively, related to the restricted stock issued to Main Street employees and non-employee directors, and, for the nine months ended September 30, 2016 and 2015, Main Street recognized total share-based compensation expense of $6.0 million and $4.6 million, respectively, related to the restricted stock issued to Main Street employees and non-employee directors.

        As of September 30, 2016, there was $14.4 million of total unrecognized compensation expense related to Main Street's non-vested restricted shares. This compensation expense is expected to be recognized over a remaining weighted-average period of approximately 2.0 years as of September 30, 2016.

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

NOTE M—COMMITMENTS AND CONTINGENCIES

        At September 30, 2016, Main Street had the following outstanding commitments (in thousands):

Category / Company
  Amount  

Investments with equity capital commitments that have not yet funded:

       

Encap Energy Fund Investments

   
 
 

EnCap Energy Capital Fund VIII, L.P. 

  $ 686  

EnCap Energy Capital Fund VIII Co-Investors, L.P. 

    96  

EnCap Energy Capital Fund IX, L.P. 

    958  

EnCap Energy Capital Fund X, L.P. 

    7,346  

EnCap Flatrock Midstream Fund II, L.P. 

    5,589  

EnCap Flatrock Midstream Fund III, L.P. 

    5,026  

  $ 19,701  

Congruent Credit Opportunities Funds

   
 
 

Congruent Credit Opportunities Fund II, LP

  $ 8,488  

Congruent Credit Opportunities Fund III, LP

    14,246  

  $ 22,734  

Freeport Fund Investments

   
 
 

Freeport First Lien Loan Fund III LP

  $ 8,936  

Freeport Financial SBIC Fund LP

    1,375  

  $ 10,311  

I-45 SLF LLC

  $ 4,800  

Dos Rios Partners

   
 
 

Dos Rios Partners, LP

  $ 2,353  

Dos Rios Partners—A, LP

    747  

  $ 3,100  

Brightwood Capital Fund III, LP

 
$

3,750
 

EIG Fund Investments

 
$

2,334
 

LKCM Headwater Investments I, L.P. 

 
$

2,500
 

Access Media Holdings, LLC

 
$

518
 

Total equity commitments

  $ 69,748  

Investments with commitments to fund revolving loans that have not been fully drawn or term loans with additional commitments not yet funded:

   
 
 

UniRush, LLC

 
$

4,000
 

CapFusion, LLC

    3,200  

Barfly Ventures, LLC

    2,756  

Buca C, LLC

    2,670  

PT Network, LLC

    2,621  

Truck Bodies and Equipment International, Inc. 

    2,208  

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Category / Company
  Amount  

Hojeij Branded Foods, LLC

    2,028  

Applied Products, Inc. 

    2,000  

Mid-Columbia Lumber Products, LLC

    2,000  

LaMi Products, LLC

    1,765  

Arcus Hunting LLC

    1,396  

Messenger, LLC

    1,323  

Gamber-Johnson Holdings, LLC

    1,200  

Grace Hill, LLC

    1,025  

NRI Clinical Research, LLC

    1,000  

Lamb's Venture, LLC

    861  

Apex Linen Service, Inc. 

    800  

Minute Key, Inc. 

    800  

Mystic Logistics, Inc. 

    800  

Energy & Exploration Partners, LLC

    663  

Jackmont Hospitality, Inc. 

    593  

Vision Interests, Inc. 

    525  

Insurance Technologies, LLC

    522  

UniTek Global Services, Inc. 

    483  

BBB Tank Services, LLC

    464  

HW Temps LLC

    400  

Subsea Global Solutions, LLC

    285  

AccuMED Corp. 

    250  

Garreco, LLC

    200  

Jensen Jewelers of Idaho, LLC

    200  

Total loan commitments

  $ 39,038  

Total commitments

  $ 108,786  

        Main Street will fund its unfunded commitments from the same sources it uses to fund its investment commitments that are funded at the time they are made (which are typically through existing cash and cash equivalents, the liquidation of Marketable securities and idle funds investments, and a combination of future debt and equity capital). Main Street follows a process to manage its liquidity and ensure that it has available capital to fund its unfunded commitments as necessary. The Company had total unrealized depreciation of $0.1 million on the outstanding unfunded commitments as of September 30, 2016.

        Main Street may, from time to time, be involved in litigation arising out of its operations in the normal course of business or otherwise. Furthermore, third parties may try to impose liability on Main Street in connection with the activities of its portfolio companies. While the outcome of any current legal proceedings cannot at this time be predicted with certainty, Main Street does not expect any current matters will materially affect its financial condition or results of operations; however, there can be no assurance whether any pending legal proceedings will have a material adverse effect on Main Street's financial condition or results of operations in any future reporting period.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

NOTE N—RELATED PARTY TRANSACTIONS

        As discussed further in Note D, the External Investment Manager is treated as a wholly owned portfolio company of MSCC and is included as part of Main Street's Investment Portfolio. At September 30, 2016, Main Street had a receivable of approximately $2.2 million due from the External Investment Manager which included approximately $1.4 million related primarily to operating expenses incurred by MSCC or its subsidiaries required to support the External Investment Manager's business, along with dividends declared but not paid by the External Investment Manager of approximately $0.8 million.

        In November 2015, Main Street's board of directors approved and adopted the Main Street Capital Corporation Deferred Compensation Plan (the "2015 Deferred Compensation Plan"). The 2015 Deferred Compensation Plan became effective on January 1, 2016 and replaced the Deferred Compensation Plan for Non-Employee Directors previously adopted by the board of directors in June 2013 (the "2013 Deferred Compensation Plan"). Under the 2015 Deferred Compensation Plan, non-employee directors and certain key employees may defer receipt of some or all of their cash compensation and directors' fees, subject to certain limitations. Individuals participating in the 2015 Deferred Compensation Plan receive distributions of their respective balances based on predetermined payout schedules or other events as defined by the plan and are also able to direct investments made on their behalf among investment alternatives permitted from time to time under the plan, including phantom Main Street stock units. As of September 30, 2016, $2.0 million of compensation and directors' fees had been deferred under the 2015 Deferred Compensation Plan (including amounts previously deferred under the 2013 Deferred Compensation Plan). Of this amount, $1.7 million was deferred into phantom Main Street stock units, representing 55,753 shares of Main Street's common stock. Including phantom stock units issued through dividend reinvestment, the phantom stock units outstanding as of September 30, 2016 represented 63,257 shares of Main Street's common stock. Any amounts deferred under the plan represented by phantom Main Street stock units will not be issued or included as outstanding on the consolidated statement of changes in net assets until such shares are actually distributed to the participant in accordance with the plan, but are included in operating expenses and weighted average shares outstanding on Main Street's consolidated statement of operations as earned.

NOTE O—SUBSEQUENT EVENTS

        In October 2016, Main Street declared a semi-annual supplemental cash dividend of $0.275 per share payable in December 2016. This supplemental cash dividend is in addition to the previously announced regular monthly cash dividends that Main Street declared for the fourth quarter of 2016 of $0.185 per share for each of October, November and December 2016.

        In November 2016, Main Street declared regular monthly dividends of $0.185 per share for each month of January, February and March of 2017. These regular monthly dividends equal a total of $0.555 per share for the first quarter of 2017 and represent a 2.8% increase from the regular monthly dividends declared for the first quarter of 2016. Including the semi-annual supplemental dividend declared for December 2016 and the regular monthly dividends declared for the first quarter of 2017, Main Street will have paid $19.160 per share in cumulative dividends since its October 2007 initial public offering.

        In October 2016, Main Street amended its Credit Facility to extend the maturity by one year to September 2021. The Credit Facility includes total commitments of $555.0 million from a diversified group of fourteen lenders and also contains an accordion feature which allows Main Street to increase the total commitments under the facility to up to $750.0 million from new and existing lenders on the same terms and conditions as the existing commitments.

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Schedule 12-14

MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments In and Advances to Affiliates
Nine Months Ended September 30, 2016
(dollars in thousands)
(Unaudited)

Company
 
Investment(1)
  Amount of
Interest, Fees or
Dividends
Credited to
Income(2)
  December 31,
2015
Fair Value
  Gross
Additions(3)
  Gross
Reductions(4)
  September 30,
2016
Fair Value
 

Control Investments

                                   

Majority-owned investments

 

 

   
 
   
 
   
 
   
 
   
 
 

Café Brazil, LLC

 

Member Units

   
416
   
7,330
   
   
760
   
6,570
 

CMS Minerals LLC

  Member Units     101         4,083     190     3,893  

  Preferred Member Units     1,172     6,914         3,543     3,371  

Gamber-Johnson Holdings, LLC

  LIBOR Plus 11.00% (Floor 1.00%)     884         19,798         19,798  

  Member Units     354         12,124         12,124  

GRT Rubber Technologies LLC

  LIBOR Plus 9.00% (Floor 1.00%)     1,118     15,988     134     2,638     13,484  

  Member Units     335     15,580     2,450         18,030  

Hydratec, Inc.

  Common Stock     1,270     14,950     810         15,760  

IDX Broker, LLC

  12.5% Secured Debt     1,099     11,350     16     116     11,250  

  Member Units     68     6,440     250         6,690  

Jensen Jewelers of Idaho, LLC

  Prime Plus 6.75% (Floor 2.00%)     359     4,055     522     372     4,205  

  Member Units     159     4,750         100     4,650  

Lamb's Venture, LLC

  LIBOR Plus 5.75%     7         352     213     139  

  11% Secured Debt     653     7,962         227     7,735  

  Preferred Equity         328     72         400  

  Member Units     50     4,690     1,190         5,880  

  9.5% Secured Debt     65     919         37     882  

  Member Units     45     1,240     380         1,620  

Lighting Unlimited, LLC

  8% Secured Debt     92     1,514             1,514  

  Preferred Equity         430             430  

  Warrants         40         30     10  

  Member Units     (81 )   350         270     80  

Mid-Columbia Lumber

  10% Secured Debt     133     1,750             1,750  

Products, LLC

  12% Secured Debt     356     3,900             3,900  

  Member Units     4     2,580         280     2,300  

  9.5% Secured Debt     62     881         34     847  

  Member Units     16     550     50         600  

MSC Adviser I, LLC

  Member Units     2,110     27,272     2,861         30,133  

Mystic Logistics Holdings, LLC

  12% Secured Debt     892     9,448     32     304     9,176  

  Common Stock         5,970         820     5,150  

NRP Jones, LLC

  6% Current / 6% PIK Secured Debt     1,426     12,948     683         13,631  

  Warrants         450         320     130  

  Member Units         1,480         1,070     410  

PPL RVs, Inc.

  11.1% Secured Debt     820     9,710             9,710  

  Common Stock     261     9,770     2,010         11,780  

Principle Environmental, LLC

  12% Secured Debt     392     4,060     21     21     4,060  

  12% Current / 2% PIK Secured Debt     354     3,310     52     1     3,361  

  Preferred Member Units         6,060         1,460     4,600  

  Warrants         310         290     20  

Quality Lease Service, LLC

  8% PIK Secured Debt     392     6,538     391         6,929  

  Member Units         2,638     250         2,888  

Southern RV, LLC

  13% Secured Debt     157     11,400     104     11,504      

  Member Units     957     15,100         15,100      

  13% Secured Debt     45     3,250     30     3,280      

  Member Units         1,200         1,200      

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Company
 
Investment(1)
  Amount of
Interest, Fees or
Dividends
Credited to
Income(2)
  December 31,
2015
Fair Value
  Gross
Additions(3)
  Gross
Reductions(4)
  September 30,
2016
Fair Value
 

The MPI Group, LLC

  9% Secured Debt     202     2,921     1         2,922  

  Series A Preferred Units         690         330     360  

  Warrants                      

  Member Units     95     2,230     70         2,300  

Travis Acquisition LLC

  12% Secured Debt     340     3,513     43     3,556      

  Member Units     2,812     14,480         14,480      

Uvalco Supply, LLC

  9% Secured Debt     77     1,314         328     986  

  Member Units     140     5,460         600     4,860  

Vision Interests, Inc.

  13% Secured Debt     312     3,052     15     182     2,885  

  Series A Preferred Stock         3,550         180     3,370  

  Common Stock         210         70     140  

Ziegler's NYPD, LLC

  6.5% Secured Debt     51     992     1         993  

  12% Secured Debt     37     500         200     300  

  14% Secured Debt     293     2,750             2,750  

  Warrants         50     170         220  

  Preferred Member Units         3,400     300         3,700  

Other controlled investments

                                   

Access Media Holdings, LLC

 

5.00% Current / 5.00% PIK Secured Debt

 
$

1,689
   
20,380
 
$

826
 
$

1,486
 
$

19,720
 

  Preferred Member Units         2,000     1,732     3,482     250  

  Member Units                      

AmeriTech College, LLC

  10% Secured Debt     76     1,003     1         1,004  

  10% Secured Debt     230     3,025             3,025  

  Preferred Member Units     86     2,291             2,291  

ASC Interests, LLC

  11% Secured Debt     205     2,500     10     260     2,250  

  Member Units     65     2,230     450         2,680  

Bond-Coat, Inc.

  12% Secured Debt     1,085     11,596     17     17     11,596  

  Common Stock         9,140         4,050     5,090  

CBT Nuggets, LLC

  Member Units     6,225     42,120     10,680         52,800  

Datacom, LLC

  8% Secured Debt     33         900         900  

  5.25% Current / 5.25% PIK Secured Debt     878     10,970     369     451     10,888  

  Class A Preferred Member Units         1,181     137         1,318  

  Class B Preferred Member Units         5,079         3,310     1,769  

Garreco, LLC

  14% Secured Debt     636     5,739     22     250     5,511  

  Member Units     5     1,270         120     1,150  

Gulf Manufacturing, LLC

  9% PIK Secured Debt     53     777             777  

  Member Units         13,770         5,000     8,770  

Gulf Publishing Holdings, LLC

  12.5% Secured Debt     645         9,907         9,907  

  Member Units     62         3,124         3,124  

Harrison Hydra-Gen, Ltd.

  9% Secured Debt     9     5,010         5,010      

  Preferred Stock     2     1,361     2     1,363      

  Common Stock     137     2,600     740         3,340  

Hawthorne Customs and

  Member Units         460         180     280  

Dispatch Services, LLC

  Member Units     141     2,220         180     2,040  

HW Temps LLC

  LIBOR Plus 9.50% (Floor 1.00%)     814     9,884     412         10,296  

  Preferred Member Units     354     3,942     418         4,360  

Indianapolis Aviation

  15% Secured Debt     417     3,100     5     5     3,100  

Partners, LLC

  Warrants         2,540     109         2,649  

Marine Shelters Holdings, LLC

  12% PIK Secured Debt     886     8,870     939     430     9,379  

(LoneStar Marine Shelters)

  Preferred Member Units         4,881         3,975     906  

MH Corbin Holding LLC

  10% Secured Debt     1,062     13,869     21     525     13,365  

  Preferred Member Units     105     6,000             6,000  

NAPCO Precast, LLC

  Prime Plus 2.00% (Floor 7.00%)     219     4,005         1,292     2,713  

  18% Secured Debt     609     4,924         972     3,952  

  Member Units     645     8,590     2,080         10,670  

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Company
 
Investment(1)
  Amount of
Interest, Fees or
Dividends
Credited to
Income(2)
  December 31,
2015
Fair Value
  Gross
Additions(3)
  Gross
Reductions(4)
  September 30,
2016
Fair Value
 

NRI Clinical Research, LLC

  14% Secured Debt     519     4,539     79     108     4,510  

  Warrants         340     310         650  

  Member Units         1,342     979         2,321  

OMi Holdings, Inc.

  Common Stock         13,640     750         14,390  

Pegasus Research Group, LLC (Televerde)

  Member Units     339     6,840     1,780         8,620  

River Aggregates, LLC

  Zero Coupon Secured Debt     52     556     53         609  

  Member Units     345     3,830     770         4,600  

  Member Units         2,360     150         2,510  

SoftTouch Medical

  LIBOR Plus 9.00% (Floor 1.00%)     606     8,010     65     850     7,225  

Holdings LLC

  Member Units     262     5,710     2,960         8,670  

Other

                                   

Amounts related to investments transferred to or from other 1940 Act classification during the period

                         

      $ 40,398     555,011   $ 90,062   $ 97,422   $ 547,651  

Affiliate Investments

                                   

AFG Capital Group, LLC

 

11% Secured Debt

 
$

1,313
 
$

12,790
 
$

349
 
$

13,139
 
$

 

  Warrants         490     130         620  

  Member Units         2,020     510         2,530  

Barfly Ventures, LLC

  12% Secured Debt     862     4,042     1,813     94     5,761  

  Options             420         420  

  Warrants         473         233     240  

BBB Tank Services, LLC

  LIBOR Plus 7.50% (Floor 1.00%)     6         332         332  

  12% Current / 1% PIK Secured Debt     298         3,982         3,982  

  Member Units             800         800  

Boss Industries, LLC

  Preferred Member Units     199     2,586     133     113     2,606  

Bridge Capital Solutions

  13% Secured Debt     984     6,890     5,660     7,000     5,550  

Corporation

  Warrants         1,300     2,012         3,312  

  13% Secured Debt     40         990         990  

  Preferred Member Units     19         1,000         1,000  

Buca C, LLC

  LIBOR Plus 7.25% (Floor 1.00%)     1,595     25,299     231     3,159     22,371  

  Preferred Member Units     168     3,711     1,888         5,599  

CAI Software LLC

  12% Secured Debt     391     4,661     12     893     3,780  

  Member Units     69     1,000     1,150         2,150  

CapFusion, LLC

  13% Secured Debt     1,003         11,566         11,566  

  Warrants             1,200         1,200  

Chandler Signs Holdings, LLC

  12% Secured Debt     456         4,500         4,500  

  Class A Units     82         2,950         2,950  

Condit Exhibits, LLC

  Member Units     130     1,010     770         1,780  

Congruent Credit Opportunities

  LP Interests (Fund II)     400     2,834         1,395     1,439  

Funds

  LP Interests (Fund III)     730     12,024     3,952         15,976  

Daseke, Inc.

  12% Current / 2.5% PIK Secured Debt     2,427     21,253     468     61     21,660  

  Common Stock         22,660         1,020     21,640  

Dos Rios Partners

  LP Interests (Fund)         2,031     2,133     43     4,121  

  LP Interests (Fund A)         648     677     134     1,191  

Dos Rios Stone Products LLC

  Class A Units     51         2,000         2,000  

East Teak Fine Hardwoods, Inc.

  Common Stock     37     860             860  

East West Copolymer &

  12% Secured Debt     949     9,463     71         9,534  

Rubber, LLC

  Warrants         50             50  

EIG Fund Investments

  LP Interests     225     718     2,070         2,788  

EIG Traverse Co-Investment, L.P.

  LP Interests     895     4,755     5,272         10,027  

Freeport Financial Funds

  LP Interests (Fund)     296     6,045         425     5,620  

  LP Interests (Fund III)     357     2,077     1,487         3,564  

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Company
 
Investment(1)
  Amount of
Interest, Fees or
Dividends
Credited to
Income(2)
  December 31,
2015
Fair Value
  Gross
Additions(3)
  Gross
Reductions(4)
  September 30,
2016
Fair Value
 

Gault Financial, LLC (RMB

  10% Secured Debt     1,156     10,930     123         11,053  

Capital, LLC)

  Warrants                      

Glowpoint, Inc.

  8% Secured Debt     17     397     1     398      

  12% Secured Debt     843     8,929     17     2,307     6,639  

  Common Stock         3,840         1,680     2,160  

Guerdon Modular Holdings, Inc.

  LIBOR Plus 8.50% (Floor 1.00%)     20     (15 )   975     960      

  9% Current / 4% PIK Secured Debt     1,080     10,295     181         10,476  

  Preferred Stock             1,140         1,140  

  Common Stock         1,990         1,910     80  

Houston Plating and Coatings, LLC

  Member Units     (23 )   8,440     433     4,493     4,380  

I-45 SLF LLC

  Member units     1,196     7,200     5,386         12,586  

Indianhead Pipeline

  12% Secured Debt     609     5,853     95     675     5,273  

Services, LLC

  Preferred Member Units     31     2,302     368         2,670  

  Warrants                      

  Member Units                      

KBK Industries, LLC

  10% Secured Debt     23         1,000     300     700  

  12.5% Secured Debt     572     5,900     11     25     5,886  

  Member Units     (8 )   3,680         590     3,090  

L.F. Manufacturing Holdings, LLC

  Member Units         1,485         105     1,380  

MPS Denver, LLC

  Member Units         1,130     124     1,254      

OnAsset Intelligence, Inc.

  12% PIK Secured Debt     378     4,006     378         4,384  

  Preferred Stock         1,380         1,380      

  Warrants                      

OPI International Ltd.

  10% Unsecured Debt     36     473             473  

  Common Stock         3,200             3,200  

PCI Holding Company, Inc.

  12% Secured Debt     946         13,000         13,000  

  Preferred Stock     450     4,887     450     297     5,040  

Radial Drilling Services Inc.

  12% Secured Debt     20     1,500     2,461     3,961      

  Warrants             758     758      

Rocaceia, LLC (Quality Lease

  12% Secured Debt         250             250  

and Rental Holdings, LLC)

  Preferred Member Units                      

Samba Holdings, Inc.

  12.5% Secured Debt     1,100     24,662     110     24,772      

  Common Stock         30,220         30,220      

Tin Roof Acquisition Company

  12% Secured Debt     1,304     13,807     45     313     13,539  

  Class C Preferred Stock     193     2,477     193         2,670  

UniTek Global Services, Inc.

  LIBOR Plus 7.50% (Floor 1.00%)     192     2,812     1         2,813  

  LIBOR Plus 8.50% (Floor 1.00%)     86     1,255     7     447     815  

  15% PIK Unsecured Debt     82     638     76         714  

  Preferred Stock     495     5,540     660         6,200  

  Common Stock             2,580         2,580  

Universal Wellhead Services Holdings, LLC

  Class A Preferred Units         3,000         1,840     1,160  

Valley Healthcare Group, LLC

  LIBOR Plus 12.50% (Floor 0.50%)     1,069     10,297     425     100     10,622  

  Preferred Member Units             1,600         1,600  

Volusion, LLC

  10.5% Secured Debt     1,591     16,199     192         16,391  

  Preferred Member Units         14,000             14,000  

  Warrants         1,400             1,400  

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Company
 
Investment(1)
  Amount of
Interest, Fees or
Dividends
Credited to
Income(2)
  December 31,
2015
Fair Value
  Gross
Additions(3)
  Gross
Reductions(4)
  September 30,
2016
Fair Value
 

Other

                                   

Amounts related to investments transferred to or from other 1940 Act classification during the period

        (345 )   (15,530 )            

      $ 27,095   $ 350,519   $ 93,318   $ 106,494   $ 352,873  

    This schedule should be read in conjunction with Main Street's consolidated financial statements, including the consolidated schedule of investments and notes to the consolidated financial statements.

(1)
The principal amount, the ownership detail for equity investments and if the investment is income producing is included in the consolidated schedule of investments.

(2)
Represents the total amount of interest, fees and dividends credited to income for the portion of the period for which an investment was included in Control or Affiliate categories, respectively. For investments transferred between Control and Affiliate categories during the period, any income related to the time period it was in the category other than the one shown at period-end is included in "Amounts from investments transferred from other 1940 Act classifications during the period".

(3)
Gross additions include increases in the cost basis of investments resulting from new portfolio investments, follow-on investments and accrued PIK interest, and the exchange of one or more existing securities for one or more new securities. Gross additions also include net increases in unrealized appreciation or net decreases in net unrealized depreciation as well as the movement of an existing portfolio company into this category and out of a different category.

(4)
Gross reductions include decreases in the cost basis of investments resulting from principal repayments or sales and the exchange of one or more existing securities for one or more new securities. Gross reductions also include net increases in net unrealized depreciation or net decreases in unrealized appreciation as well as the movement of an existing portfolio company out of this category and into a different category.

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Item 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        The information in this section contains forward-looking statements that involve risks and uncertainties. Please see "Risk Factors" and "Cautionary Statement Concerning Forward-Looking Statements" in our Annual Report on Form 10-K for the year ended December 31, 2015, filed with the Securities and Exchange Commission (the "SEC") on February 26, 2016, for a discussion of the uncertainties, risks and assumptions associated with these statements. You should read the following discussion in conjunction with the consolidated financial statements and related notes and other financial information included in the Annual Report on Form 10-K for the year ended December 31, 2015.

ORGANIZATION

        Main Street Capital Corporation ("MSCC") is a principal investment firm primarily focused on providing customized debt and equity financing to lower middle market ("LMM") companies and debt capital to middle market ("Middle Market") companies. The portfolio investments of MSCC and its consolidated subsidiaries are typically made to support management buyouts, recapitalizations, growth financings, refinancings and acquisitions of companies that operate in diverse industry sectors. MSCC seeks to partner with entrepreneurs, business owners and management teams and generally provides "one stop" financing alternatives within its LMM portfolio. MSCC and its consolidated subsidiaries invest primarily in secured debt investments, equity investments, warrants and other securities of LMM companies based in the United States and in secured debt investments of Middle Market companies generally headquartered in the United States.

        MSCC was formed in March 2007 to operate as an internally managed business development company ("BDC") under the Investment Company Act of 1940, as amended (the "1940 Act"). MSCC wholly owns several investment funds, including Main Street Mezzanine Fund, LP ("MSMF"), Main Street Capital II, LP ("MSC II") and Main Street Capital III, LP ("MSC III" and, collectively with MSMF and MSC II, the "Funds"), and each of their general partners. The Funds are each licensed as a Small Business Investment Company ("SBIC") by the United States Small Business Administration ("SBA"). Because MSCC is internally managed, all of the executive officers and other employees are employed by MSCC. Therefore, MSCC does not pay any external investment advisory fees but instead directly incurs the operating costs associated with employing investment and portfolio management professionals.

        MSC Adviser I, LLC (the "External Investment Manager") was formed in November 2013 as a wholly owned subsidiary of MSCC to provide investment management and other services to parties other than MSCC and its subsidiaries or their portfolio companies ("External Parties") and receive fee income for such services. MSCC has been granted no-action relief by the Securities and Exchange Commission ("SEC") to allow the External Investment Manager to register as a registered investment adviser ("RIA") under Investment Advisers Act of 1940, as amended (the "Advisers Act"). Since the External Investment Manager conducts all of its investment management activities for External Parties, it is accounted for as a portfolio investment of MSCC and is not included as a consolidated subsidiary of MSCC in MSCC's consolidated financial statements.

        MSCC has elected to be treated for U.S. federal income tax purposes as a regulated investment company ("RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). As a result, MSCC generally will not pay corporate-level U.S. federal income taxes on any net ordinary income or capital gains that it distributes to its stockholders.

        MSCC has certain direct and indirect wholly owned subsidiaries that have elected to be taxable entities (the "Taxable Subsidiaries"). The primary purpose of the Taxable Subsidiaries is to permit MSCC to hold equity investments in portfolio companies which are "pass-through" entities for tax purposes. The External Investment Manager is also a direct wholly owned subsidiary that has elected to

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be a taxable entity. The Taxable Subsidiaries and the External Investment Manager are each taxed at their normal corporate tax rates based on their taxable income.

        Unless otherwise noted or the context otherwise indicates, the terms "we," "us," "our," the "Company" and "Main Street" refer to MSCC and its consolidated subsidiaries, which include the Funds and the Taxable Subsidiaries.

OVERVIEW

        Our principal investment objective is to maximize our portfolio's total return by generating current income from our debt investments and capital appreciation from our equity and equity related investments, including warrants, convertible securities and other rights to acquire equity securities in a portfolio company. Our LMM companies generally have annual revenues between $10 million and $150 million, and our LMM portfolio investments generally range in size from $5 million to $50 million. Our Middle Market investments are made in businesses that are generally larger in size than our LMM portfolio companies, with annual revenues typically between $150 million and $1.5 billion, and our Middle Market investments generally range in size from $3 million to $15 million. Our private loan ("Private Loan") portfolio investments are primarily debt securities in privately held companies which have been originated through strategic relationships with other investment funds on a collaborative basis. Private Loan investments are typically similar in size, structure, terms and conditions to investments we hold in our LMM portfolio and Middle Market portfolio.

        We seek to fill the financing gap for LMM businesses, which, historically, have had more limited access to financing from commercial banks and other traditional sources. The underserved nature of the LMM creates the opportunity for us to meet the financing needs of LMM companies while also negotiating favorable transaction terms and equity participations. Our ability to invest across a company's capital structure, from secured loans to equity securities, allows us to offer portfolio companies a comprehensive suite of financing options, or a "one stop" financing solution. Providing customized, "one stop" financing solutions is important to LMM portfolio companies. We generally seek to partner directly with entrepreneurs, management teams and business owners in making our investments. Our LMM portfolio debt investments are generally secured by a first lien on the assets of the portfolio company and typically have a term of between five and seven years from the original investment date.

        Our Middle Market portfolio investments primarily consist of direct investments in or secondary purchases of interest bearing debt securities in privately held companies that are generally larger in size than the companies included in our LMM portfolio. Our Middle Market portfolio debt investments are generally secured by either a first or second priority lien on the assets of the portfolio company and typically have an expected duration of between three and seven years from the original investment date.

        Our Private Loan portfolio investments are primarily debt securities in privately held companies which have been originated through strategic relationships with other investment funds on a collaborative basis, and are often referred to in the debt markets as "club deals." Private Loan investments are typically similar in size, structure, terms and conditions to investments we hold in our LMM portfolio and Middle Market portfolio. Our Private Loan portfolio debt investments are generally secured by either a first or second priority lien on the assets of the portfolio company and typically have a term of between three and seven years from the original investment date.

        Our other portfolio ("Other Portfolio") investments primarily consist of investments which are not consistent with the typical profiles for our LMM, Middle Market or Private Loan portfolio investments, including investments which may be managed by third parties. In our Other Portfolio, we may incur indirect fees and expenses in connection with investments managed by third parties, such as investments in other investment companies or private funds.

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        Our external asset management business is conducted through the External Investment Manager. The External Investment Manager earns management fees based on the assets of the funds under management and may earn incentive fees, or a carried interest, based on the performance of the funds managed. We have entered into an agreement with the External Investment Manager to share employees in connection with its asset management business generally, and specifically for its relationship with HMS Income Fund, Inc. ("HMS Income"). Through this agreement, we share employees with the External Investment Manager, including their related infrastructure, business relationships, management expertise and capital raising capabilities.

        The following tables provide a summary of our investments in the LMM, Middle Market and Private Loan portfolios as of September 30, 2016 and December 31, 2015 (this information excludes the Other Portfolio investments and the External Investment Manager which are discussed further below):

 
  As of September 30, 2016  
 
  LMM(a)   Middle
Market
  Private
Loan
 
 
  (dollars in millions)
 

Number of portfolio companies

    71     81     45  

Fair value

  $ 829.7   $ 627.9   $ 337.7  

Cost

  $ 703.6   $ 658.0   $ 353.8  

% of portfolio at cost—debt

    68.8%     97.5%     94.3%  

% of portfolio at cost—equity

    31.2%     2.5%     5.7%  

% of debt investments at cost secured by first priority lien

    91.5%     87.6%     87.6%  

Weighted-average annual effective yield(b)

    12.5%     8.4%     9.6%  

Average EBITDA(c)

  $ 6.2   $ 101.6   $ 21.1  

(a)
At September 30, 2016, we had equity ownership in approximately 99% of our LMM portfolio companies, and the average fully diluted equity ownership in those portfolio companies was approximately 36%.

(b)
The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of September 30, 2016, including amortization of deferred debt origination fees and accretion of original issue discount but excluding fees payable upon repayment of the debt instruments and any debt investments on non-accrual status. Weighted-average annual effective yield is higher than what an investor in shares of our common stock will realize on its investment because it does not reflect our expenses or any sales load paid by an investor.

(c)
The average EBITDA is calculated using a simple average for the LMM portfolio and a weighted average for the Middle Market and Private Loan portfolios. These calculations exclude certain portfolio companies, including five LMM portfolio companies, three Middle Market portfolio companies and three Private Loan portfolio companies, as EBITDA is not a meaningful valuation metric for our investments in these portfolio companies.

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  As of December 31, 2015  
 
  LMM(a)   Middle
Market
  Private
Loan
 
 
  (dollars in millions)
 

Number of portfolio companies

    71     86     40  

Fair value

  $ 862.7   $ 586.9   $ 248.3  

Cost

  $ 685.6   $ 637.2   $ 268.6  

% of total investments at cost—debt

    70.4%     98.3%     94.3%  

% of total investments at cost—equity

    29.6%     1.7%     5.7%  

% of debt investments at cost secured by first priority lien

    91.8%     86.6%     87.3%  

Weighted-average annual effective yield(b)

    12.2%     8.0%     9.5%  

Average EBITDA(c)

  $ 6.0   $ 98.8   $ 13.1  

(a)
At December 31, 2015, we had equity ownership in approximately 96% of our LMM portfolio companies, and the average fully diluted equity ownership in those portfolio companies was approximately 36%.

(b)
The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of December 31, 2015, including amortization of deferred debt origination fees and accretion of original issue discount but excluding fees payable upon repayment of the debt instruments and any debt investments on non-accrual status. Weighted-average annual effective yield is higher than what an investor in shares of our common stock will realize on its investment because it does not reflect our expenses or any sales load paid by an investor.

(c)
The average EBITDA is calculated using a simple average for the LMM portfolio and a weighted average for the Middle Market and Private Loan portfolios. These calculations exclude certain portfolio companies, including five LMM portfolio companies, three Middle Market portfolio companies and six Private Loan portfolio companies, as EBITDA is not a meaningful valuation metric for our investments in these portfolio companies, and those portfolio companies whose primary purpose is to own real estate.

        As of September 30, 2016, we had Other Portfolio investments in ten companies, collectively totaling approximately $94.8 million in fair value and approximately $101.3 million in cost basis and which comprised 4.9% of our Investment Portfolio (as defined in "—Critical Accounting Policies—Basis of Presentation" below) at fair value. As of December 31, 2015, we had Other Portfolio investments in ten companies, collectively totaling approximately $74.8 million in fair value and approximately $75.2 million in cost basis and which comprised approximately 4.2% of our Investment Portfolio at fair value.

        As previously discussed, the External Investment Manager is a wholly owned subsidiary that is treated as a portfolio investment. As of September 30, 2016, there was no cost basis in this investment and the investment had a fair value of $30.1 million, which comprised 1.6% of our Investment Portfolio at fair value. As of December 31, 2015, there was no cost basis in this investment and the investment had a fair value of $27.3 million, which comprised 1.5% of our Investment Portfolio at fair value.

        Our portfolio investments are generally made through MSCC and the Funds. MSCC and the Funds share the same investment strategies and criteria, although they are subject to different regulatory regimes. An investor's return in MSCC will depend, in part, on the Funds' investment returns as they are wholly owned subsidiaries of MSCC.

        The level of new portfolio investment activity will fluctuate from period to period based upon our view of the current economic fundamentals, our ability to identify new investment opportunities that

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meet our investment criteria, and our ability to consummate the identified opportunities. The level of new investment activity, and associated interest and fee income, will directly impact future investment income. In addition, the level of dividends paid by portfolio companies and the portion of our portfolio debt investments on non-accrual status will directly impact future investment income. While we intend to grow our portfolio and our investment income over the long term, our growth and our operating results may be more limited during depressed economic periods. However, we intend to appropriately manage our cost structure and liquidity position based on applicable economic conditions and our investment outlook. The level of realized gains or losses and unrealized appreciation or depreciation on our investments will also fluctuate depending upon portfolio activity, economic conditions and the performance of our individual portfolio companies. The changes in realized gains and losses and unrealized appreciation or depreciation could have a material impact on our operating results.

        Because we are internally managed, we do not pay any external investment advisory fees, but instead directly incur the operating costs associated with employing investment and portfolio management professionals. We believe that our internally managed structure provides us with a beneficial operating expense structure when compared to other publicly traded and privately held investment firms which are externally managed, and our internally managed structure allows us the opportunity to leverage our non-interest operating expenses as we grow our Investment Portfolio. For the three months ended September 30, 2016, the ratio of our total operating expenses, excluding interest expense, as a percentage of our quarterly average total assets was 1.5% on an annualized basis, compared to 1.3% on an annualized basis for the three months ended September 30, 2015. For the nine months ended September 30, 2016, the ratio of our total operating expenses, excluding interest expense, as a percentage of our quarterly average total assets was 1.4% on an annualized basis, which is consistent with the ratio on an annualized basis for the nine months ended September 30, 2015 and for the year ended December 31, 2015.

        During May 2012, we entered into an investment sub-advisory agreement with HMS Adviser, LP ("HMS Adviser"), which is the investment advisor to HMS Income, a non-publicly traded BDC, to provide certain investment advisory services to HMS Adviser. In December 2013, after obtaining required no-action relief from the SEC to allow us to own a registered investment adviser, we assigned the sub-advisory agreement to the External Investment Manager since the fees received from such arrangement could otherwise have negative consequences on our ability to meet the source-of-income requirement necessary for us to maintain our RIC tax treatment. Under the investment sub-advisory agreement, the External Investment Manager is entitled to 50% of the base management fee and the incentive fees earned by HMS Adviser under its advisory agreement with HMS Income. Based upon several fee waiver agreements with HMS Income and HMS Adviser, the External Investment Manager did not begin accruing the base management fee and incentive fees, if any, until January 1, 2014. The External Investment Manager has conditionally agreed to waive a limited amount of the incentive fees otherwise earned. During the three months ended September 30, 2016 and 2015, the External Investment Manager earned $2.5 million and $2.1 million, respectively, of management fees (net of fees waived, if any) under the sub-advisory agreement with HMS Adviser. During the nine months ended September 30, 2016 and 2015, the External Investment Manager earned $7.1 million and $5.5 million, respectively, of management fees (net of fees waived, if any) under the sub-advisory agreement with HMS Adviser.

        During April 2014, we received an exemptive order from the SEC permitting co-investments by us and HMS Income in certain negotiated transactions where co-investing would otherwise be prohibited under the 1940 Act. We have made, and in the future intend to continue to make, such co-investments with HMS Income in accordance with the conditions of the order. The order requires, among other things, that we and the External Investment Manager consider whether each such investment opportunity is appropriate for HMS Income and, if it is appropriate, to propose an allocation of the investment opportunity between us and HMS Income. Because the External Investment Manager may

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receive performance-based fee compensation from HMS Income, this may provide it an incentive to allocate opportunities to HMS Income instead of us. However, both we and the External Investment Manager have policies and procedures in place to manage this conflict.

CRITICAL ACCOUNTING POLICIES

    Basis of Presentation

        Our financial statements are prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP"). For each of the periods presented herein, our consolidated financial statements include the accounts of MSCC and its consolidated subsidiaries. The Investment Portfolio, as used herein, refers to all of our investments in LMM portfolio companies, investments in Middle Market portfolio companies, Private Loan portfolio investments, Other Portfolio investments, and the investment in the External Investment Manager, but excludes all "Marketable securities and idle funds investments". "Marketable securities and idle funds investments" are classified as financial instruments and are reported separately on our consolidated balance sheets and consolidated schedules of investments due to the nature of such investments. Our results of operations for the three and nine months ended September 30, 2016 and 2015, cash flows for the nine months ended September 30, 2016 and 2015, and financial position as of September 30, 2016 and December 31, 2015, are presented on a consolidated basis. The effects of all intercompany transactions between us and our consolidated subsidiaries have been eliminated in consolidation.

        Our accompanying unaudited consolidated financial statements are presented in conformity with U.S. GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain disclosures accompanying annual financial statements prepared in accordance with U.S. GAAP are omitted. In the opinion of management, the unaudited consolidated financial results included herein contain all adjustments, consisting solely of normal recurring accruals, considered necessary for the fair presentation of financial statements for the interim periods included herein. The results of operations for the three and nine months ended September 30, 2016 and 2015 are not necessarily indicative of the operating results to be expected for the full year. Also, the unaudited financial statements and notes should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2015. Financial statements prepared on a U.S. GAAP basis require management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein.

        Under regulations pursuant to Article 6 of Regulation S-X applicable to BDCs and Accounting Standards Codification ("Codification" or "ASC") 946, Financial Services—Investment Companies ("ASC 946"), we are precluded from consolidating other entities in which we have equity investments, including those in which we have a controlling interest, unless the other entity is another investment company. An exception to this general principle in ASC 946 occurs if we hold a controlling interest in an operating company that provides all or substantially all of its services directly to us or to any of our portfolio companies. Accordingly, as noted above, our consolidated financial statements include the financial position and operating results for the Funds and the Taxable Subsidiaries. Our consolidated financial statements also include the financial position and operating results for our wholly owned operating subsidiary, Main Street Capital Partners, LLC, ("MSCP"), as the wholly owned subsidiary provides all of its services directly or indirectly to Main Street or our portfolio companies. We have determined that all of our portfolio investments do not qualify for this exception, including the investment in the External Investment Manager. Therefore, our Investment Portfolio is carried on the consolidated balance sheet at fair value with any adjustments to fair value recognized as "Net Change in Unrealized Appreciation (Depreciation)" on the consolidated statements of operations until the

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investment is realized, usually upon exit, resulting in any gain or loss being recognized as a "Net Realized Gain (Loss)."

    Investment Portfolio Valuation

        The most significant determination inherent in the preparation of our consolidated financial statements is the valuation of our Investment Portfolio and the related amounts of unrealized appreciation and depreciation. As of both September 30, 2016 and December 31, 2015, our Investment Portfolio valued at fair value represented approximately 96% of our total assets. We are required to report our investments at fair value. We follow the provisions of FASB ASC 820, Fair Value Measurements and Disclosures ("ASC 820"). ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value, and enhances disclosure requirements for fair value measurements. ASC 820 requires us to assume that the portfolio investment is to be sold in the principal market to independent market participants, which may be a hypothetical market. Market participants are defined as buyers and sellers in the principal market that are independent, knowledgeable and willing and able to transact. See "Note B.1.—Valuation of the Investment Portfolio" in the notes to consolidated financial statements for a detailed discussion of our investment portfolio valuation process and procedures.

        Due to the inherent uncertainty in the valuation process, our determination of fair value for our Investment Portfolio may differ materially from the values that would have been determined had a ready market for the securities existed. In addition, changes in the market environment, portfolio company performance and other events that may occur over the lives of the investments may cause the gains or losses ultimately realized on these investments to be materially different than the valuations currently assigned. We determine the fair value of each individual investment and record changes in fair value as unrealized appreciation or depreciation.

        Our Board of Directors has the final responsibility for overseeing, reviewing and approving, in good faith, our determination of the fair value for our Investment Portfolio and our valuation procedures, consistent with 1940 Act requirements. We believe our Investment Portfolio as of September 30, 2016 and December 31, 2015 approximates fair value as of those dates based on the markets in which we operate and other conditions in existence on those reporting dates.

    Revenue Recognition

    Interest and Dividend Income

        We record interest and dividend income on the accrual basis to the extent amounts are expected to be collected. Dividend income is recorded as dividends are declared by the portfolio company or at the point an obligation exists for the portfolio company to make a distribution. In accordance with our valuation policies, we evaluate accrued interest and dividend income periodically for collectability. When a loan or debt security becomes 90 days or more past due, and if we otherwise do not expect the debtor to be able to service all of its debt or other obligations, we will generally place the loan or debt security on non-accrual status and cease recognizing interest income on that loan or debt security until the borrower has demonstrated the ability and intent to pay contractual amounts due. If a loan or debt security's status significantly improves regarding the debtor's ability to service the debt or other obligations, or if a loan or debt security is fully impaired, sold or written off, we remove it from non-accrual status.

    Fee Income

        We may periodically provide services, including structuring and advisory services, to our portfolio companies or other third parties. For services that are separately identifiable and evidence exists to substantiate fair value, fee income is recognized as earned, which is generally when the investment or

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other applicable transaction closes. Fees received in connection with debt financing transactions for services that do not meet these criteria are treated as debt origination fees and are deferred and accreted into interest income over the life of the financing.

    Payment-in-Kind ("PIK") Interest and Cumulative Dividends

        We hold certain debt and preferred equity instruments in our Investment Portfolio that contain PIK interest and cumulative dividend provisions. The PIK interest, computed at the contractual rate specified in each debt agreement, is periodically added to the principal balance of the debt and is recorded as interest income. Thus, the actual collection of this interest may be deferred until the time of debt principal repayment. Cumulative dividends are recorded as dividend income, and any dividends in arrears are added to the balance of the preferred equity investment. The actual collection of these dividends in arrears may be deferred until such time as the preferred equity is redeemed or sold. To maintain RIC tax treatment (as discussed below), these non-cash sources of income may need to be paid out to stockholders in the form of distributions, even though we may not have collected the PIK interest and cumulative dividends in cash. We stop accruing PIK interest and cumulative dividends and write off any accrued and uncollected interest and dividends in arrears when we determine that such PIK interest and dividends in arrears are no longer collectible. For the three months ended September 30, 2016 and 2015, (i) approximately 4.0% and 2.2%, respectively, of our total investment income was attributable to PIK interest income not paid currently in cash and (ii) approximately 1.8% and 1.2%, respectively, of our total investment income was attributable to cumulative dividend income not paid currently in cash. For the nine months ended September 30, 2016 and 2015, (i) approximately 3.7% and 2.1%, respectively, of our total investment income was attributable to PIK interest income not paid currently in cash and (ii) approximately 1.1% and 1.0%, respectively, of our total investment income was attributable to cumulative dividend income not paid currently in cash.

    Share-Based Compensation

        We account for our share-based compensation plans using the fair value method, as prescribed by ASC 718, Compensation—Stock Compensation. Accordingly, for restricted stock awards, we measure the grant date fair value based upon the market price of our common stock on the date of the grant and amortize the fair value of the awards as share-based compensation expense over the requisite service period, which is generally the vesting term.

    Income Taxes

        MSCC has elected to be treated for U.S. federal income tax purposes as a RIC. MSCC's taxable income includes the taxable income generated by MSCC and certain of its subsidiaries, including the Funds, which are treated as disregarded entities for tax purposes. As a RIC, MSCC generally will not pay corporate-level U.S. federal income taxes on any net ordinary income or capital gains that MSCC distributes to its stockholders. MSCC must generally distribute at least 90% of its "investment company taxable income" (which is generally its net ordinary taxable income and realized net short-term capital gains in excess of realized net long-term capital losses) and 90% of its tax exempt income to maintain its RIC status (pass-through tax treatment for amounts distributed). As part of maintaining RIC status, undistributed taxable income (subject to a 4% non-deductible U.S Federal excise tax) pertaining to a given fiscal year may be distributed up to 12 months subsequent to the end of that fiscal year, provided such dividends are declared on or prior to the later of (i) filing of the U.S federal income tax return for the applicable fiscal year or (ii) the fifteenth day of the ninth month following the close of the year in which such taxable income was generated.

        The Taxable Subsidiaries hold certain portfolio investments for us. The Taxable Subsidiaries permit us to hold equity investments in portfolio companies which are "pass-through" entities for tax purposes and to continue to comply with the "source-income" requirements contained in the RIC tax provisions

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of the Code. The Taxable Subsidiaries are consolidated with us for U.S. GAAP financial reporting purposes, and the portfolio investments held by the Taxable Subsidiaries are included in our consolidated financial statements as portfolio investments and recorded at fair value. The Taxable Subsidiaries are not consolidated with MSCC for income tax purposes and may generate income tax expense, or benefit, and tax assets and liabilities, as a result of their ownership of certain portfolio investments. The taxable income, or loss, of the Taxable Subsidiaries may differ from their book income, or loss, due to temporary book and tax timing differences and permanent differences. This income tax expense, or benefit, if any, and the related tax assets and liabilities, are reflected in our consolidated financial statements.

        MSCP is included in our consolidated financial statements for financial reporting purposes. For tax purposes, MSCP has elected to be treated as a taxable entity, and therefore is not consolidated with MSCC for income tax purposes and is taxed at normal corporate tax rates based on its taxable income and, as a result of its activities, may generate income tax expense or benefit. The taxable income, or loss, of MSCP may differ from its book income, or loss, due to temporary book and tax timing differences and permanent differences. This income tax expense, or benefit, if any, and the related tax assets and liabilities, are reflected in our consolidated financial statements.

        The Taxable Subsidiaries and MSCP use the liability method in accounting for income taxes. Deferred tax assets and liabilities are recorded for temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, using statutory tax rates in effect for the year in which the temporary differences are expected to reverse. A valuation allowance is provided against deferred tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized.

        Taxable income generally differs from net income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses. Taxable income generally excludes net unrealized appreciation or depreciation, as investment gains or losses are not included in taxable income until they are realized.

INVESTMENT PORTFOLIO COMPOSITION

        Our LMM portfolio investments primarily consist of secured debt, equity warrants and direct equity investments in privately held, LMM companies based in the United States. Our LMM portfolio companies generally have annual revenues between $10 million and $150 million, and our LMM investments generally range in size from $5 million to $50 million. The LMM debt investments are typically secured by either a first or second priority lien on the assets of the portfolio company, generally bear interest at fixed rates, and generally have a term of between five and seven years from the original investment date. In most LMM portfolio companies, we receive nominally priced equity warrants and/or make direct equity investments in connection with a debt investment.

        Our Middle Market portfolio investments primarily consist of direct investments in or secondary purchases of interest-bearing debt securities in privately held companies based in the United States that are generally larger in size than the companies included in our LMM portfolio. Our Middle Market portfolio companies generally have annual revenues between $150 million and $1.5 billion, and our Middle Market investments generally range in size from $3 million to $15 million. Our Middle Market portfolio debt investments are generally secured by either a first or second priority lien on the assets of the portfolio company and typically have a term of between three and seven years from the original investment date.

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        Our Private Loan portfolio investments are primarily debt securities in privately held companies which have been originated through strategic relationships with other investment funds on a collaborative basis, and are often referred to in the debt markets as "club deals." Private Loan investments are typically similar in size, structure, terms and conditions to investments we hold in our LMM portfolio and Middle Market portfolio. Our Private Loan portfolio debt investments are generally secured by either a first or second priority lien on the assets of the portfolio company and typically have a term of between three and seven years from the original investment date.

        Our Other Portfolio investments primarily consist of investments which are not consistent with the typical profiles for LMM, Middle Market and Private Loan portfolio investments, including investments which may be managed by third parties. In the Other Portfolio, we may incur indirect fees and expenses in connection with investments managed by third parties, such as investments in other investment companies or private funds.

        Our external asset management business is conducted through the External Investment Manager. The External Investment Manager earns management fees based on the assets of the funds under management and may earn incentive fees, or a carried interest, based on the performance of the funds managed. We have entered into an agreement with the External Investment Manager to share employees in connection with its asset management business generally, and specifically for its relationship with HMS Income. Through this agreement, we share employees with the External Investment Manager, including their related infrastructure, business relationships, management expertise and capital raising capabilities. In the first quarter of 2014, we began allocating costs to the External Investment Manager pursuant to the sharing agreement. Our total expenses for the three months ended September 30, 2016 and 2015 are net of expenses allocated to the External Investment Manager of $1.2 million and $1.1 million, respectively. Our total expenses for the nine months ended September 30, 2016 and 2015 are net of expenses allocated to the External Investment Manager of $3.7 million and $3.1 million, respectively. The External Investment Manager earns management fees based on the assets of the funds under management and may earn incentive fees, or a carried interest, based on the performance of the funds managed. The total contribution of the External Investment Manager to our net investment income consists of the combination of the expenses allocated to the External Investment Manager and dividend income from the External Investment Manager. For the three months ended September 30, 2016 and 2015, the total contribution to our net investment income was $2.0 million and $1.8 million, respectively. For the nine months ended September 30, 2016 and 2015, the total contribution to our net investment income was $5.8 million and $4.7 million, respectively.

        The following tables summarize the composition of our total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments at cost and fair value by type of investment as a percentage of the total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments as of September 30, 2016 and December 31, 2015 (this information excludes the Other Portfolio investments and the External Investment Manager).

Cost:
  September 30,
2016
  December 31,
2015
 

First lien debt

    75.6%     75.8%  

Equity

    13.9%     13.5%  

Second lien debt

    8.5%     8.7%  

Equity warrants

    1.0%     0.9%  

Other

    1.0%     1.1%  

    100.0%     100.0%  

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Fair Value:
  September 30,
2016
  December 31,
2015
 

First lien debt

    68.3%     66.1%  

Equity

    22.0%     24.9%  

Second lien debt

    8.0%     7.7%  

Equity warrants

    0.8%     0.6%  

Other

    0.9%     0.7%  

    100.0%     100.0%  

        Our LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments carry a number of risks including: (1) investing in companies which may have limited operating histories and financial resources; (2) holding investments that generally are not publicly traded and which may be subject to legal and other restrictions on resale; and (3) other risks common to investing in below investment grade debt and equity investments in our Investment Portfolio. Please see "Risk Factors—Risks Related to Our Investments" contained in our Form 10-K for the fiscal year ended December 31, 2015 and "Risk Factors" below for a more complete discussion of the risks involved with investing in our Investment Portfolio.

PORTFOLIO ASSET QUALITY

        We utilize an internally developed investment rating system to rate the performance of each LMM portfolio company and to monitor our expected level of returns on each of our LMM investments in relation to our expectations for the portfolio company. The investment rating system takes into consideration various factors, including each investment's expected level of returns, the collectability of our debt investments and the ability to receive a return of the invested capital in our equity investments, comparisons to competitors and other industry participants, the portfolio company's future outlook and other factors that are deemed to be significant to the portfolio company.

    Investment Rating 1 represents a LMM portfolio company that is performing in a manner which significantly exceeds expectations.

    Investment Rating 2 represents a LMM portfolio company that, in general, is performing above expectations.

    Investment Rating 3 represents a LMM portfolio company that is generally performing in accordance with expectations.

    Investment Rating 4 represents a LMM portfolio company that is underperforming expectations. Investments with such a rating require increased monitoring and scrutiny by us.

    Investment Rating 5 represents a LMM portfolio company that is significantly underperforming. Investments with such a rating require heightened levels of monitoring and scrutiny by us and involve the recognition of significant unrealized depreciation on such investment.

    All new LMM portfolio investments receive an initial Investment Rating of 3.

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        The following table shows the distribution of our LMM portfolio investments on the 1 to 5 investment rating scale at fair value as of September 30, 2016 and December 31, 2015:

 
  As of September 30, 2016   As of December 31, 2015  
Investment Rating
  Investments
at Fair Value
  Percentage of
Total Portfolio
  Investments
at Fair Value
  Percentage of
Total Portfolio
 
 
   
  (dollars in thousands)
   
 

1

  $ 247,888     29.8%   $ 332,606     38.6%  

2

    192,089     23.2%     143,268     16.6%  

3

    294,020     35.4%     277,160     32.1%  

4

    91,061     11.0%     107,926     12.5%  

5

    4,634     0.6%     1,750     0.2%  

Total

  $ 829,692     100.0%   $ 862,710     100.0%  

        Based upon our investment rating system, the weighted-average rating of our LMM portfolio was approximately 2.3 as of September 30, 2016 and 2.2 as of December 31, 2015.

        As of September 30, 2016, our total Investment Portfolio had five investments on non-accrual status, which comprised approximately 0.4% of its fair value and 2.8% of its cost. As of December 31, 2015, our total Investment Portfolio had six investments on non-accrual status, which comprised approximately 0.4% of its fair value and 3.7% of its cost.

        The operating results of our portfolio companies are impacted by changes in the broader fundamentals of the United States economy. In the event that the United States economy contracts, it is likely that the financial results of small-to mid-sized companies, like those in which we invest, could experience deterioration or limited growth from current levels, which could ultimately lead to difficulty in meeting their debt service requirements and to an increase in defaults on our debt investments and to difficulty in maintaining historical dividend payment rates on our equity investments. Consequently, we can provide no assurance that the performance of certain portfolio companies will not be negatively impacted by economic cycles or other conditions, which could also have a negative impact on our future results.

DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS

    Comparison of the three months ended September 30, 2016 and September 30, 2015

 
  Three Months Ended
September 30,
  Net Change  
 
  2016   2015   Amount   %  
 
  (dollars in thousands)
 

Total investment income

  $ 46,599   $ 42,608   $ 3,991     9%  

Total expenses

    (16,042 )   (14,747 )   (1,295 )   9%  

Net investment income

    30,557     27,861     2,696     10%  

Net realized gain (loss) from investments

    4,286     (1,343 )   5,629        

Net change in net unrealized appreciation (depreciation) from:

                         

Portfolio investments

    8,376     (8,389 )   16,765        

SBIC debentures and marketable securities and idle funds

    (566 )   (698 )   132        

Total net change in net unrealized appreciation (depreciation)

    7,810     (9,087 )   16,897        

Income tax benefit

    528     3,237     (2,709 )      

Net increase in net assets resulting from operations

  $ 43,181   $ 20,668   $ 22,513     109%  

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  Three Months Ended
September 30,
  Net Change  
 
  2016   2015   Amount   %  
 
  (dollars in thousands, except per share
amounts)

 

Net investment income

  $ 30,557   $ 27,861   $ 2,696     10%  

Share-based compensation expense

    2,137     1,651     486     29%  

Distributable net investment income(a)

  $ 32,694   $ 29,512   $ 3,182     11%  

Distributable net investment income per share—Basic and diluted(a)

  $ 0.62   $ 0.59   $ 0.03     5%  

(a)
Distributable net investment income is net investment income as determined in accordance with U.S. GAAP, excluding the impact of share-based compensation expense which is non-cash in nature. We believe presenting distributable net investment income and related per share amounts is useful and appropriate supplemental disclosure of information for analyzing our financial performance since share-based compensation does not require settlement in cash. However, distributable net investment income is a non-U.S. GAAP measure and should not be considered as a replacement to net investment income and other earnings measures presented in accordance with U.S. GAAP. Instead, distributable net investment income should be reviewed only in connection with such U.S. GAAP measures in analyzing our financial performance. A reconciliation of net investment income in accordance with U.S. GAAP to distributable net investment income is presented in the table above.

    Investment Income

        For the three months ended September 30, 2016, total investment income was $46.6 million, a 9% increase over the $42.6 million of total investment income for the corresponding period of 2015. This comparable period increase was principally attributable to (i) a $1.4 million increase in interest income primarily related to higher average levels of portfolio debt investments and (ii) a $2.8 million increase in dividend income from Investment Portfolio equity investments. The $4.0 million increase in total investment income in the three months ended September 30, 2016 includes the impact of an increase of $0.3 million primarily related to higher accelerated prepayment and repricing activity for certain Investment Portfolio debt investments when compared to the same period in 2015 and an increase of $1.7 million related to dividend income activity from portfolio companies that is considered to be less consistent on a recurring basis or non-recurring during the period when compared to the same period in 2015.

    Expenses

        For the three months ended September 30, 2016, total expenses increased to $16.0 million from $14.7 million for the corresponding period of 2015. This comparable period increase in operating expenses was principally attributable to (i) a $0.6 million increase in compensation expense related to increases in the number of personnel, base compensation levels and incentive compensation accruals, (ii) a $0.5 million increase in share-based compensation expense and (iii) a $0.3 million increase in interest expense, primarily due to an increase in interest expense on the Credit Facility in the three months ended September 30, 2016, with these increases partially offset by a $0.1 million increase in the expenses allocated to the External Investment Manager (see further discussion in "Overview"), in each case when compared to the same period in the prior year. For the three months ended September 30, 2016, the ratio of our total operating expenses, excluding interest expense, as a percentage of our quarterly average total assets was 1.5% on an annualized basis, compared to 1.3% on an annualized basis for the three months ended September 30, 2015 and 1.4% for the year ended December 31, 2015.

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    Net Investment Income

        Net investment income for the three months ended September 30, 2016 was $30.6 million, or a 10% increase, compared to net investment income of $27.9 million for the corresponding period of 2015. The increase in net investment income was principally attributable to the increase in total investment income, partially offset by higher operating expenses as discussed above.

    Distributable Net Investment Income

        For the three months ended September 30, 2016, distributable net investment income increased 11% to $32.7 million, or $0.62 per share, compared with $29.5 million, or $0.59 per share, in the corresponding period of 2015. The increase in distributable net investment income was primarily due to the higher level of total investment income, partially offset by higher operating expenses as discussed above. Distributable net investment income on a per share basis for the three months ended September 30, 2016 reflects (i) an increase of approximately $0.01 per share from the comparable period in 2015 attributable to the net increase in the comparable levels of accelerated prepayment and repricing activity for certain Investment Portfolio debt investments, (ii) an increase of approximately $0.03 per share from the comparable period in 2015 attributable to the increase in dividend income that is considered to be less consistent on a recurring basis or non-recurring and (iii) a greater number of average shares outstanding compared to the corresponding period in 2015 primarily due to shares issued through the ATM Program (as defined in "—Liquidity and Capital Resources—Capital Resources" below) and shares issued pursuant to our restricted stock plan and dividend reinvestment plan.

    Net Increase in Net Assets Resulting from Operations

        The net increase in net assets resulting from operations during the three months ended September 30, 2016 was $43.2 million, or $0.82 per share, compared with $20.7 million, or $0.41 per share, during the three months ended September 30, 2015. This $22.5 million increase from the same period in the prior year period was primarily the result of (i) a $16.9 million increase in net change in unrealized appreciation (depreciation) from net unrealized depreciation of $9.1 million for the three months ended September 30, 2015 to net unrealized appreciation of $7.8 million for the three months ended September 30, 2016, (ii) a $5.6 million increase in the net realized gain (loss) from investments from a net realized loss of $1.3 million during the three months ended September 30, 2015 to a net realized gain of $4.3 million for the three months ended September 30, 2016 and (iii) a $2.7 million increase in net investment income as discussed above, partially offset by a $2.7 million decrease in the income tax benefit for the three months ended September 30, 2016. The net realized gain of $4.3 million for the three months ended September 30, 2016 was primarily the result of (i) the net realized gain on the exit of three LMM investments totaling $13.2 million and (ii) the net realized gain of $1.2 million due to activity in our Other Portfolio, partially offset by (i) the realized loss of $7.3 million on the exit of a Private Loan investment and (ii) the realized loss of $2.6 million related to the restructuring of a Middle Market investment.

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        The following table provides a summary of the total net unrealized appreciation of $7.8 million for the three months ended September 30, 2016:

 
  Three Months Ended September 30, 2016  
 
  LMM(a)   Middle Market   Private Loan   Other(b)   Total  
 
  (dollars in millions)
 

Accounting reversals of net unrealized (appreciation) depreciation recognized in prior periods due to net realized (gains)/losses recognized during period

  $ (10.2 ) $ 2.6   $ 7.3   $ (1.2 ) $ (1.5 )

Net unrealized appreciation (depreciation) relating to portfolio investments

    (3.3 )   6.7     0.5     6.0     9.9  

Total net change in unrealized appreciation (depreciation) relating to portfolio investments

  $ (13.5 ) $ 9.3   $ 7.8   $ 4.8   $ 8.4  

Net unrealized appreciation relating to marketable securities

                            0.2  

Unrealized depreciation relating to SBIC debentures(c)

                            (0.8 )

Total net change in unrealized appreciation (depreciation)

                          $ 7.8  

(a)
LMM includes unrealized appreciation on 20 LMM portfolio investments and unrealized depreciation on 18 LMM portfolio investments.

(b)
Other includes $3.2 million of unrealized appreciation relating to the External Investment Manager and $2.8 million of net unrealized appreciation relating to the Other Portfolio.

(c)
Relates to unrealized appreciation on the SBIC debentures issued by our wholly-owned subsidiary MSC II which are accounted for on a fair value basis.

        The income tax benefit for the three months ended September 30, 2016 of $0.5 million consisted of a deferred tax benefit of $1.4 million, which is primarily the result of the net activity relating to our portfolio investments held in our Taxable Subsidiaries, including changes in loss carryforwards, changes in net unrealized appreciation/depreciation and other temporary book-tax differences, partially offset by $0.9 million of other current tax expense primarily related to an accrual for excise tax on our estimated undistributed taxable income.

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    Comparison of the nine months ended September 30, 2016 and September 30, 2015

 
  Nine Months Ended
September 30,
  Net Change  
 
  2016   2015   Amount   %  
 
  (dollars in thousands)
 

Total investment income

  $ 131,508   $ 121,096   $ 10,412     9%  

Total expenses

    (46,137 )   (42,540 )   (3,597 )   8%  

Net investment income

    85,371     78,556     6,815     9%  

Net realized gain (loss) from investments

    33,347     (9,037 )   42,384        

Net change in net unrealized appreciation (depreciation) from:

                         

Portfolio investments

    (29,738 )   21,716     (51,454 )      

SBIC debentures and marketable securities and idle funds

    909     (1,344 )   2,253        

Total net change in net unrealized appreciation (depreciation)

    (28,829 )   20,372     (49,201 )      

Income tax benefit

    1,018     7,004     (5,986 )      

Net increase in net assets resulting from operations

  $ 90,907   $ 96,895   $ (5,988 )   (6 )%

 

 
  Nine Months Ended
September 30,
  Net Change  
 
  2016   2015   Amount   %  
 
  (dollars in thousands, except per share
amounts)

 

Net investment income

  $ 85,371   $ 78,556   $ 6,815     9%  

Share-based compensation expense

    5,977     4,592     1,385     30%  

Distributable net investment income(a)

  $ 91,348   $ 83,148   $ 8,200     10%  

Distributable net investment income per share—Basic and diluted(a)

  $ 1.77   $ 1.71   $ 0.06     4%  

(a)
Distributable net investment income is net investment income as determined in accordance with U.S. GAAP, excluding the impact of share-based compensation expense which is non-cash in nature. We believe presenting distributable net investment income and related per share amounts is useful and appropriate supplemental disclosure of information for analyzing our financial performance since share-based compensation does not require settlement in cash. However, distributable net investment income is a non-U.S. GAAP measure and should not be considered as a replacement to net investment income and other earnings measures presented in accordance with U.S. GAAP. Instead, distributable net investment income should be reviewed only in connection with such U.S. GAAP measures in analyzing our financial performance. A reconciliation of net investment income in accordance with U.S. GAAP to distributable net investment income is presented in the table above.

    Investment Income

        For the nine months ended September 30, 2016, total investment income was $131.5 million, a 9% increase over the $121.1 million of total investment income for the corresponding period of 2015. This comparable period increase was principally attributable to (i) a $4.2 million increase in interest income primarily related to higher average levels of portfolio debt investments and (ii) a $7.7 million increase in dividend income from Investment Portfolio equity investments, partially offset by (i) a $0.8 million decrease in fee income and (ii) a $0.7 million decrease in investment income from Marketable securities and idle funds investments. The $10.4 million increase in total investment income in the nine

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months ended September 30, 2016 includes an increase of $1.7 million related to dividend income activity from portfolio companies that is considered to be less consistent on a recurring basis or non-recurring during the period when compared to the same period in 2015 and the impact of a decrease of $0.9 million primarily related to lower accelerated prepayment and repricing activity for certain Investment Portfolio debt investments when compared to the same period in 2015.

    Expenses

        For the nine months ended September 30, 2016, total expenses increased to $46.1 million from $42.5 million for the corresponding period of 2015. This comparable period increase in operating expenses was principally attributable to (i) a $1.4 million increase in share-based compensation expense, (ii) a $1.3 million increase in interest expense, primarily due to an increase in interest expense on the Credit Facility generally due to the higher average balance outstanding in the nine months ended September 30, 2016, (iii) a $1.0 million increase in compensation expense related to increases in the number of personnel, base compensation levels and incentive compensation accruals and (iv) a $0.5 million increase in general and administrative expenses, with these increases partially offset by a $0.6 million increase in the expenses allocated to the External Investment Manager, in each case when compared to the same period in the prior year. For the nine months ended September 30, 2016, the ratio of our total operating expenses, excluding interest expense, as a percentage of our quarterly average total assets was 1.4% on an annualized basis, which is consistent with the ratio on an annualized basis for the nine months ended September 30, 2015 and for the year ended December 31, 2015.

    Net Investment Income

        Net investment income for the nine months ended September 30, 2016 was $85.4 million, or a 9% increase, compared to net investment income of $78.6 million for the corresponding period of 2015. The increase in net investment income was principally attributable to the increase in total investment income, partially offset by higher operating expenses as discussed above.

    Distributable Net Investment Income

        For the nine months ended September 30, 2016, distributable net investment income increased 10% to $91.3 million, or $1.77 per share, compared with $83.1 million, or $1.71 per share, in the corresponding period of 2015. The increase in distributable net investment income was primarily due to the higher level of total investment income, partially offset by higher operating expenses both as discussed above. Distributable net investment income on a per share basis for the nine months ended September 30, 2016 reflects (i) a decrease of approximately $0.02 per share from the comparable period in 2015 attributable to the net decrease in the comparable levels of accelerated prepayment and repricing activity for certain Investment Portfolio debt investments, (ii) an increase of approximately $0.03 per share from the comparable period in 2015 attributable to the increase in dividend income that is considered to be less consistent on a recurring basis or non-recurring and (iii) a greater number of average shares outstanding compared to the corresponding period in 2015 primarily due to the March 2015 equity offering, shares issued through the ATM Program and shares issued pursuant to our restricted stock plan and dividend reinvestment plan.

    Net Increase in Net Assets Resulting from Operations

        The net increase in net assets resulting from operations during the nine months ended September 30, 2016 was $90.9 million, or $1.76 per share, compared with $96.9 million, or $1.99 per share, during the nine months ended September 30, 2015. This $6.0 million decrease from the same period in the prior year period was primarily the result of (i) a $49.2 million decrease in net change in unrealized appreciation (depreciation) from net unrealized appreciation of $20.4 million for the nine

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months ended September 30, 2015 to net unrealized depreciation of $28.8 million for the nine months ended September 30, 2016 and (ii) a $6.0 million decrease in the income tax benefit from the same period in the prior year, partially offset by (i) a $6.8 million increase in net investment income as discussed above and (ii) a $42.4 million increase in the net realized gain (loss) from investments from a net realized loss of $9.0 million during the nine months ended September 30, 2015 to a net realized gain of $33.3 million for the nine months ended September 30, 2016. The net realized gain of $33.3 million for the nine months ended September 30, 2016 was primarily the result of (i) the net realized gain of $56.3 million on the exit five LMM investments and (ii) the net realized gain of $2.8 million due to activity in our Other Portfolio, partially offset by (i) the net realized loss of $9.6 million on the exit of three Private Loan investments, (ii) the net realized loss of $10.0 million related to the restructuring of three Middle Market investments, (iii) the net realized loss of $4.7 million on the exit of two Middle Market investments and (iv) the net realized loss of $1.6 million on the exit of a Marketable securities and idle funds investment.

        The following table provides a summary of the total net unrealized depreciation of $28.8 million for the nine months ended September 30, 2016:

 
  Nine Months Ended September 30, 2016  
 
  LMM(a)   Middle Market   Private Loan   Other(b)   Total  
 
  (dollars in millions)
 

Accounting reversals of net unrealized (appreciation) depreciation recognized in prior periods due to net realized (gains)/losses recognized during period

  $ (52.9 ) $ 18.7   $ 9.5   $ (2.7 ) $ (27.4 )

Net change in unrealized appreciation (depreciation) relating to portfolio investments

    1.9     1.5     (5.3 )   (0.4 )   (2.3 )

Total net change in unrealized appreciation (depreciation) relating to portfolio investments

  $ (51.0 ) $ 20.2   $ 4.2   $ (3.1 ) $ (29.7 )

Net change in unrealized appreciation relating to marketable securities

                            1.7  

Unrealized depreciation relating to SBIC debentures(c)

                            (0.8 )

Total net change in unrealized appreciation (depreciation)

                          $ (28.8 )

(a)
LMM includes unrealized appreciation on 29 LMM portfolio investments and unrealized depreciation on 26 LMM portfolio investments.

(b)
Other includes $3.3 million of net unrealized depreciation relating to the Other Portfolio offset by $2.9 million of unrealized appreciation relating to the External Investment Manager.

(c)
Relates to unrealized depreciation on the SBIC debentures held by MSC II which are accounted for on a fair value basis.

        The income tax benefit for the nine months ended September 30, 2016 of $1.0 million principally consisted of a deferred tax benefit of $3.4 million, which is primarily the result of the net activity relating to our portfolio investments held in our Taxable Subsidiaries, including changes in loss carryforwards, changes in net unrealized appreciation/depreciation and other temporary book-tax differences, partially offset by other current tax expense related to (i) a $2.1 million accrual for excise

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tax on our estimated undistributed taxable income and (ii) other current tax expense of $0.3 million related to accruals for U.S. federal and state income taxes.

    Liquidity and Capital Resources

    Cash Flows

        For the nine months ended September 30, 2016, we experienced a net increase in cash and cash equivalents in the amount of $11.5 million, which is the result of $9.4 million of cash provided by our operating activities and $2.0 million of cash provided by financing activities.

        During the period, we generated $9.4 million of cash from our operating activities, which resulted primarily from (i) cash flows we generated from the operating profits earned through our operating activities totaling $79.7 million, which is our $91.3 million of distributable net investment income, excluding the non-cash effects of the accretion of unearned income of $7.1 million, payment-in-kind interest income of $4.9 million, cumulative dividends of $1.5 million and the amortization expense for deferred financing costs of $1.9 million, (ii) cash uses totaling $423.5 million which primarily resulted from (a) the funding of new portfolio company investments and settlement of accruals for portfolio investments existing as of December 31, 2015, which collectively total $420.0 million, (b) $3.0 million related to decreases in payables and accruals and (c) $0.5 million from the purchase of Marketable securities and idle funds investments and (iii) cash proceeds totaling $353.2 million from (a) $347.9 million in cash proceeds from the sales and repayments of debt investments and sales of and return on capital of equity investments and (b) $4.3 million of cash proceeds from the sale of Marketable securities and idle funds investments and (c) decreases in other assets of $1.0 million.

        During the nine months ended September 30, 2016, $2.0 million in cash was provided by financing activities, which principally consisted of (i) $64.3 million in net cash proceeds from the ATM Program (described below), (ii) $22.0 million in net cash proceeds from the Credit Facility and (iii) $6.0 million in cash proceeds from issuance of SBIC debentures, partially offset by (i) $86.7 million in cash dividends paid to stockholders, (ii) $2.6 million for purchases of vested restricted stock from employees to satisfy their tax withholding requirements upon the vesting of such restricted stock and (iii) $1.0 million for payment of deferred loan costs, SBIC debenture fees and other costs.

    Capital Resources

        As of September 30, 2016, we had $31.8 million in cash and cash equivalents and $242.0 million of unused capacity under the Credit Facility, which we maintain to support our investment and operating activities. As of September 30, 2016, our net asset value totaled $1,144.4 million, or $21.62 per share.

        The Credit Facility, which provides additional liquidity to support our investment and operational activities, includes total commitments of $555.0 million from a diversified group of fourteen lenders and matures in September 2020. The Credit Facility also contains an accordion feature which allows us to increase the total commitments under the facility to up to $750.0 million from new and existing lenders on the same terms and conditions as the existing commitments.

        Borrowings under the Credit Facility bear interest, subject to our election, on a per annum basis at a rate equal to the applicable LIBOR rate (0.53% as of September 30, 2016) plus (i) 1.875% (or the applicable base rate (Prime Rate of 3.50% as of September 30, 2016) plus 0.875%) as long as we maintain an investment grade rating and meet certain agreed upon excess collateral and maximum leverage requirements, (ii) 2.0% (or the applicable base rate plus 1.0%) if we maintain an investment grade rating but, do not meet certain excess collateral and maximum leverage requirements or (iii) 2.25% (or the applicable base rate plus 1.25%) if we do not maintain an investment grade rating. We pay unused commitment fees of 0.25% per annum on the unused lender commitments under the Credit Facility. The Credit Facility is secured by a first lien on the assets of MSCC and its subsidiaries,

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excluding the equity ownership or assets of the Funds and the External Investment Manager. The Credit Facility contains certain affirmative and negative covenants, including but not limited to: (i) maintaining a minimum availability of at least 10% of the borrowing base, (ii) maintaining an interest coverage ratio of at least 2.0 to 1.0, (iii) maintaining an asset coverage ratio of at least 1.5 to 1.0 and (iv) maintaining a minimum tangible net worth. The Credit Facility is provided on a revolving basis through its final maturity date in September 2020, and contains two, one-year extension options which could extend the final maturity by up to two years, subject to certain conditions, including lender approval. As of September 30, 2016, we had $313.0 million in borrowings outstanding under the Credit Facility, the interest rate on the Credit Facility was 2.4% and we were in compliance with all financial covenants of the Credit Facility.

        Due to each of the Funds' status as a licensed SBIC, we have the ability to issue, through the Funds, debentures guaranteed by the SBA at favorable interest rates and favorable terms and conditions. In addition, in December 2015, the 2016 omnibus spending bill approved by Congress and signed into law by the President increased the amount of SBA-guaranteed debentures that affiliated SBIC funds can have outstanding from $225.0 million to $350.0 million. This new legislation allows us to issue additional SBIC debentures, subject to SBA approval, above the $225.0 million that we had outstanding prior to the legislation. In August 2016, we received a license from the SBA to form and operate a third SBIC, which at the time provided us with up to an additional $125.0 million of additional long-term, fixed interest rate debt capital through the issuance of SBA-guaranteed debentures. During September 2016, we issued $6.0 million of SBIC debentures, leaving $119.0 million of remaining capacity. Debentures guaranteed by the SBA have fixed interest rates that equal prevailing 10-year Treasury Note rates plus a market spread and have a maturity of ten years with interest payable semi-annually. The principal amount of the debentures is not required to be paid before maturity, but may be pre-paid at any time with no prepayment penalty. On September 30, 2016, through our three wholly owned SBICs, we had $231.0 million of outstanding SBIC debentures guaranteed by the SBA, which bear a weighted-average annual fixed interest rate of approximately 4.1%, paid semi-annually, and mature ten years from issuance. The first maturity related to our SBIC debentures does not occur until 2017, and the weighted-average remaining duration is approximately 5.0 years as of September 30, 2016.

        In April 2013, we issued $92.0 million, including the underwriters' full exercise of their over-allotment option, in aggregate principal amount of the 6.125% Notes. The 6.125% Notes are unsecured obligations and rank pari passu with our current and future unsecured indebtedness; senior to any of our future indebtedness that expressly provides it is subordinated to the 6.125% Notes; effectively subordinated to all of our existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness, including borrowings under our Credit Facility; and structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries, including without limitation, the indebtedness of the Funds. The 6.125% Notes mature on April 1, 2023, and may be redeemed in whole or in part at any time or from time to time at our option on or after April 1, 2018. We may from time to time repurchase 6.125% Notes in accordance with the 1940 Act and the rules promulgated thereunder. As of September 30, 2016, the outstanding balance of the 6.125% Notes was $90.7 million.

        The indenture governing the 6.125% Notes (the "6.125% Notes Indenture") contains certain covenants, including covenants requiring our compliance with (regardless of whether we are subject to) the asset coverage requirements set forth in Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act, as well as covenants requiring us to provide financial information to the holders of the 6.125% Notes and the Trustee if we cease to be subject to the reporting requirements of the Securities Exchange Act of 1934. These covenants are subject to limitations and exceptions that are described in the 6.125% Notes Indenture.

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        In November 2014, we issued $175.0 million in aggregate principal amount of the 4.50% Notes at an issue price of 99.53%. The 4.50% Notes are unsecured obligations and rank pari passu with our current and future unsecured indebtedness; senior to any of our future indebtedness that expressly provides it is subordinated to the 4.50% Notes; effectively subordinated to all of our existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness, including borrowings under our Credit Facility; and structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries, including without limitation, the indebtedness of the Funds. The 4.50% Notes mature on December 1, 2019, and may be redeemed in whole or in part at any time at our option subject to certain make-whole provisions. The 4.50% Notes bear interest at a rate of 4.50% per year payable semi-annually on June 1 and December 1 of each year, beginning June 1, 2015. We may from time to time repurchase 4.50% Notes in accordance with the 1940 Act and the rules promulgated thereunder. As of September 30, 2016, the outstanding balance of the 4.50% Notes was $175.0 million.

        The indenture governing the 4.50% Notes (the "4.50% Notes Indenture") contains certain covenants, including covenants requiring our compliance with (regardless of whether we are subject to) the asset coverage requirements set forth in Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act, as well as covenants requiring us to provide financial information to the holders of the 4.50% Notes and the Trustee if we cease to be subject to the reporting requirements of the Securities Exchange Act of 1934. These covenants are subject to limitations and exceptions that are described in the 4.50% Notes Indenture.

        During March 2015, we completed a follow-on public equity offering of 4,370,000 shares of common stock, including the underwriters' full exercise of their option to purchase 570,000 additional shares, resulting in total net proceeds, including exercise of the underwriters' option to purchase additional shares and after deducting underwriting discounts and estimated offering expenses payable by us, of approximately $127.8 million.

        During November 2015, we commenced a program with selling agents through which we can sell shares of our common stock by means of at-the-market offerings from time to time (the "ATM Program"). During the three months ended December 31, 2015, we sold 140,568 shares of our common stock at a weighted-average price of $31.98 per share and raised $4.5 million of gross proceeds under the ATM Program. Net proceeds were $4.3 million after commissions to the selling agents on shares sold and offering costs.

        During the nine months ended September 30, 2016, we sold 1,996,793 shares of our common stock at a weighted-average price of $32.67 per share and raised $65.2 million of gross proceeds under the ATM Program. Net proceeds were $64.3 million after commissions to the selling agents on shares sold and offering costs. As of September 30, 2016, sales transactions representing 30,804 shares had not settled and are not included in shares issued and outstanding on the face of the consolidated balance sheet, but are included in the weighted average shares outstanding on the consolidated statement of operations and in the shares used to calculate our net asset value per share. As of September 30, 2016, 362,639 shares were available for sale under the ATM Program.

        We anticipate that we will continue to fund our investment activities through existing cash and cash equivalents, the liquidation of Marketable securities and idle funds investments, and a combination of future issuances of debt and equity capital. Our primary uses of funds will be investments in portfolio companies, operating expenses and cash distributions to holders of our common stock.

        We periodically invest excess cash balances into Marketable securities and idle funds investments. The primary investment objective of Marketable securities and idle funds investments is to generate incremental cash returns on excess cash balances prior to utilizing those funds for investment in our LMM, Middle Market and Private Loan portfolio investments. Marketable securities and idle funds investments generally consist of debt investments, independently rated debt investments, certificates of

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deposit with financial institutions, diversified bond funds and publicly traded debt and equity investments. The composition of Marketable securities and idle funds investments will vary in a given period based upon, among other things, changes in market conditions, the underlying fundamentals in our Marketable securities and idle funds investments, our outlook regarding future LMM, Middle Market and Private Loan portfolio investment needs, and any regulatory requirements applicable to us.

        If our common stock trades below our net asset value per share, we will generally not be able to issue additional common stock at the market price unless our stockholders approve such a sale and our Board of Directors makes certain determinations. We did not seek stockholder authorization to sell shares of our common stock below the then current net asset value per share of our common stock at our 2016 annual meeting of stockholders because our common stock price per share had been trading significantly above the current net asset value per share of our common stock since 2011. We would therefore need future approval from our stockholders to issue shares below the then current net asset value per share.

        In order to satisfy the Code requirements applicable to a RIC, we intend to distribute to our stockholders, after consideration and application of our ability under the Code to carry forward certain excess undistributed taxable income from one tax year into the next tax year, substantially all of our taxable income. In addition, as a BDC, we generally are required to meet a coverage ratio of total assets to total senior securities, which include borrowings and any preferred stock we may issue in the future, of at least 200%. This requirement limits the amount that we may borrow. In January 2008, we received an exemptive order from the SEC to exclude SBA guaranteed debt securities issued by MSMF and any other wholly owned subsidiaries of ours which operate as SBICs from the asset coverage requirements of the 1940 Act as applicable to us, which, in turn, enables us to fund more investments with debt capital.

        Although we have been able to secure access to additional liquidity, including recent public equity and historical debt offerings, our $555.0 million Credit Facility, and the available leverage through the SBIC program, there is no assurance that debt or equity capital will be available to us in the future on favorable terms, or at all.

    Recently Issued or Adopted Accounting Standards

        In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-9 supersedes the revenue recognition requirements under ASC Topic 605, Revenue Recognition, and most industry-specific guidance throughout the Industry Topics of the ASC. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. Under the new guidance, an entity is required to perform the following five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The new guidance will significantly enhance comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets. Additionally, the guidance requires improved disclosures as to the nature, amount, timing and uncertainty of revenue that is recognized. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606)—Narrow-Scope Improvements and Practical Expedients. This ASU clarified guidance on assessing collectability, presenting sales tax, measuring noncash consideration, and certain transition matters. The FASB tentatively decided to defer the effective date of the new revenue standard for public entities under U.S. GAAP for one year. If finalized, the new guidance will be effective for the annual reporting period beginning after December 15, 2017, including interim periods within that reporting period. Early adoption would be permitted for annual reporting periods beginning

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after December 15, 2016. We are currently evaluating the impact the adoption of this new accounting standard will have on our consolidated financial statements.

        In May 2015, the FASB issued ASU 2015-07, Fair Value Measurements—Disclosures for Certain Entities that Calculate Net Asset Value per Share. This amendment updates guidance intended to eliminate the diversity in practice surrounding how investments measured at net asset value under the practical expedient with future redemption dates have been categorized in the fair value hierarchy. Under the updated guidance, investments for which fair value is measured at net asset value per share using the practical expedient should no longer be categorized in the fair value hierarchy, while investments for which fair value is measured at net asset value per share but the practical expedient is not applied should continue to be categorized in the fair value hierarchy. The updated guidance requires retrospective adoption for all periods presented and is effective for interim and annual reporting periods beginning after December 15, 2015, with early adoption permitted. The Company adopted this standard during the three months ended March 31, 2016. There was no impact of the adoption of this new accounting standard on our consolidated financial statements as none of our investments are measured through the use of the practical expedient.

        In February 2016, the FASB issued ASU 2016-02, Leases, which requires lessees to recognize on the balance sheet a right-of-use asset, representing its right to use the underlying asset for the lease term, and a lease liability for all leases with terms greater than 12 months. The guidance also requires qualitative and quantitative disclosures designed to assess the amount, timing, and uncertainty of cash flows arising from leases. The standard requires the use of a modified retrospective transition approach, which includes a number of optional practical expedients that entities may elect to apply. The new guidance is effective for annual periods beginning after December 15, 2018, and interim periods therein. Early application is permitted. The impact of the adoption of this new accounting standard on our consolidated financial statements is currently being evaluated.

        In March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation: Improvements to Employee Share-Based Payment Accounting, which is intended to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The guidance is effective for annual periods beginning after December 15, 2016, and interim periods therein. Early application is permitted. The Company elected to early adopt this standard during the three months ended March 31, 2016. See further discussion of the impact of the adoption of this standard in "Note B.8.—Summary of Significant Accounting Policies—Share-based Compensation" in the notes to consolidated financial statements

        In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), which is intended to reduce the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The guidance is effective for annual periods beginning after December 15, 2017, and interim periods therein. Early application is permitted. The impact of the adoption of this new accounting standard on our consolidated financial statements is not expected to be material.

        From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that are adopted by us as of the specified effective date. We believe that the impact of recently issued standards and any that are not yet effective will not have a material impact on our financial statements upon adoption.

    Inflation

        Inflation has not had a significant effect on our results of operations in any of the reporting periods presented herein. However, our portfolio companies have experienced, and may in the future

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experience, the impacts of inflation on their operating results, including periodic escalations in their costs for labor, raw materials and third party services and required energy consumption.

    Off-Balance Sheet Arrangements

        We may be a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of our portfolio companies. These instruments include commitments to extend credit and fund equity capital and involve, to varying degrees, elements of liquidity and credit risk in excess of the amount recognized in the balance sheet. At September 30, 2016, we had a total of $108.8 million in outstanding commitments comprised of (i) 30 investments with commitments to fund revolving loans that had not been fully drawn or term loans with additional commitments not yet funded and (ii) nine investments with equity capital commitments that had not been fully called.

    Contractual Obligations

        As of September 30, 2016, the future fixed commitments for cash payments in connection with our SBIC debentures, the 4.50% Notes and the 6.125% Notes for each of the next five years and thereafter are as follows:

 
  2016   2017   2018   2019   2020   2021 and
thereafter
  Total  

SBIC debentures

  $   $ 15,000   $ 10,200   $ 20,000   $ 55,000   $ 130,800   $ 231,000  

Interest due on SBIC debentures(1)

        9,569     8,293     7,970     6,772     11,155     43,759  

Notes 6.125%

                        90,655     90,655  

Interest due on 6.125% Notes

    1,388     5,553     5,553     5,553     5,553     12,492     36,092  

4.50% Notes

                175,000             175,000  

Interest due on 4.50% Notes

    3,938     7,875     7,875     7,875             27,563  

Total

  $ 5,326   $ 37,997   $ 31,921   $ 216,398   $ 67,325   $ 245,102   $ 604,069  

(1)
The interest due on the $6.0 million of SBIC debentures drawn in September 2016 does not have a final rate that has been fixed by the SBA as of September 30, 2016. In March 2017, the final rate for this tranche of SBIC debentures will be determined and, thereafter, the rate will be fixed for the ensuing 10 years. The table above assumes that the interim rate being charged as of September 30, 2016 will be used until the final maturity. This rate will be adjusted once the final rate is determined.

        As of September 30, 2016, we had $313.0 million in borrowings outstanding under our Credit Facility, and the Credit Facility is currently scheduled to mature in September 2020. The Credit Facility contains two, one-year extension options which could extend the maturity to September 2022. See further discussion of the Credit Facility terms in "—Liquidity and Capital Resources—Capital Resources".

    Related Party Transactions

        As discussed further above, the External Investment Manager is treated as a wholly owned portfolio company of MSCC and is included as part of our Investment Portfolio. At September 30, 2016, we had a receivable of $2.2 million due from the External Investment Manager which included approximately $1.4 million primarily related to operating expenses incurred by us required to support the External Investment Manager's business, along with dividends declared but not paid by the External Investment Manager of approximately $0.8 million.

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        In November 2015, our board of directors approved and adopted the Main Street Capital Corporation Deferred Compensation Plan (the "2015 Deferred Compensation Plan"). The 2015 Deferred Compensation Plan became effective on January 1, 2016 and replaced the Deferred Compensation Plan for Non-Employee Directors previously adopted by the board of directors in June 2013 (the "2013 Deferred Compensation Plan"). Under the 2015 Deferred Compensation Plan, non-employee directors and certain key employees may defer receipt of some or all of their cash compensation and directors' fees, subject to certain limitations. Individuals participating in the 2015 Deferred Compensation Plan receive distributions of their respective balances based on predetermined payout schedules or other events as defined by the plan and are also able to direct investments made on their behalf among investment alternatives permitted from time to time under the plan, including phantom Main Street stock units. As of September 30, 2016, $2.0 million of compensation and directors' fees had been deferred under the 2015 Deferred Compensation Plan (including amounts previously deferred under the 2013 Deferred Compensation Plan). Of this amount, $1.7 million was deferred into phantom Main Street stock units, representing 55,753 shares of our common stock. Including phantom stock units issued through dividend reinvestment, the phantom stock units outstanding as of September 30, 2016 represented 63,257 shares of our common stock. Any amounts deferred under the plan represented by phantom stock units will not be issued or included as outstanding on the consolidated statement of changes in net assets until such shares are actually distributed to the participant in accordance with the plan, but are included in operating expenses and weighted average shares outstanding on our consolidated statement of operations as earned.

    Recent Developments

        During October 2016, we declared a semi-annual supplemental cash dividend of $0.275 per share payable in December 2016. This supplemental cash dividend is in addition to the previously announced regular monthly cash dividends that we declared for the fourth quarter of 2016 of $0.185 per share for each of October, November and December 2016.

        In November 2016, we declared regular monthly dividends of $0.185 per share for each month of January, February and March of 2017. These regular monthly dividends equal a total of $0.555 per share for the first quarter of 2017 and represent a 2.8% increase from the regular monthly dividends declared for the first quarter of 2016. Including the semi-annual supplemental dividend declared for December 2016 and the regular monthly dividends declared for the first quarter of 2017, we will have paid $19.160 per share in cumulative dividends since its October 2007 initial public offering.

        In October 2016, we amended our Credit Facility to extend the maturity by one year to September 2021. The Credit Facility includes total commitments of $555.0 million from a diversified group of fourteen lenders and also contains an accordion feature which allows us to increase the total commitments under the facility to up to $750.0 million from new and existing lenders on the same terms and conditions as the existing commitments.

Item 3.    Quantitative and Qualitative Disclosures about Market Risk

        We are subject to financial market risks, including changes in interest rates. Changes in interest rates may affect both our cost of funding and our interest income from portfolio investments and Marketable securities and idle funds investments. Our risk management systems and procedures are designed to identify and analyze our risk, to set appropriate policies and limits and to continually monitor these risks. Our investment income will be affected by changes in various interest rates, including LIBOR and prime rates, to the extent that any debt investments include floating interest rates. The majority of our debt investments are made with either fixed interest rates or floating rates that are subject to contractual minimum interest rates for the term of the investment. As of September 30, 2016, approximately 64% of our debt investment portfolio (at cost) bore interest at floating rates, 98% of which were subject to contractual minimum interest rates. Our interest expense

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will be affected by changes in the published LIBOR rate in connection with our Credit Facility; however, the interest rates on our outstanding SBIC debentures, 4.50% Notes and 6.125% Notes, which comprise the majority of our outstanding debt, are fixed for the life of such debt. As of September 30, 2016, we had not entered into any interest rate hedging arrangements. The following table shows the approximate annualized increase or decrease in the components of net investment income due to hypothetical base rate changes in interest rates, assuming no changes in our investments and borrowings as of September 30, 2016.

Basis Point Change
  Increase in
Interest
Income
  Increase in
Interest
Expense
  Increase
(Decrease) in
Net Investment
Income
  Increase
(Decrease) in
Net Investment
Income per Share
 
 
   
  (dollars in thousands)
   
   
 

50

  $ 2,905   $ (1,565 ) $ 1,340   $ 0.03  

100

    7,501     (3,130 )   4,371     0.08  

150

    12,214     (4,695 )   7,519     0.14  

200

    16,980     (6,260 )   10,720     0.20  

300

    26,512     (9,390 )   17,122     0.32  

400

    36,058     (12,520 )   23,538     0.44  

500

    45,617     (15,650 )   29,967     0.57  

Basis Point Change

        The hypothetical results would also be impacted by the changes in the amount of debt outstanding under our Credit Facility (with an increase (decrease) in the debt outstanding under the Credit Facility resulting in an (increase) decrease in the hypothetical interest expense).

Item 4.    Controls and Procedures

        As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chairman and Chief Executive Officer, our President, our Chief Financial Officer, our Chief Compliance Officer and our Chief Accounting Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15 of the Securities Exchange Act of 1934). Based on that evaluation, our Chairman and Chief Executive Officer, our President, our Chief Financial Officer, our Chief Compliance Officer and our Chief Accounting Officer, have concluded that our current disclosure controls and procedures are effective in timely alerting them of material information relating to us that is required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934. There have been no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2016 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 may, from time to time, be involved in litigation arising out of our operations in the normal course of business or otherwise. Furthermore, third parties may try to seek to impose liability on us in connection with the activities of our portfolio companies. While the outcome of any current legal proceedings cannot at this time be predicted with certainty, we do not expect any current matters will materially affect our financial condition or results of operations; however, there can be no assurance whether any pending legal proceedings will have a material adverse effect on our financial condition or results of operations in any future reporting period.

Item 1A.    Risk Factors

        There have been no material changes to the risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2015 that we filed with the SEC on February 26, 2016, and as updated in our Form N-2 filed on May 16, 2016.

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

        During the three months ended September 30, 2016, we issued 84,153 shares of our common stock under our dividend reinvestment plan. These issuances were not subject to the registration requirements of the Securities Act of 1933, as amended. The aggregate value of the shares of common stock issued during the three months ended September 30, 2016 under the dividend reinvestment plan was approximately $2.8 million.

Item 6.    Exhibits

        Listed below are the exhibits which are filed as part of this report (according to the number assigned to them in Item 601 of Regulation S-K):

Exhibit
Number
  Description of Exhibit
  10.1   Sixth Amendment to Second Amended and Restated Credit Agreement dated October 31, 2016 (previously filed as Exhibit 10.1 to Main Street Capital Corporation's Current Report on Form 8-K filed on November 1, 2016 (File No. 1-33723)).

 

14.1

 

Code of Business Conduct and Ethics.

 

31.1

 

Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

 

31.2

 

Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

 

32.1

 

Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

 

32.2

 

Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

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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.

    Main Street Capital Corporation

Date: November 4, 2016

 

/s/ VINCENT D. FOSTER

Vincent D. Foster
Chairman and Chief Executive Officer
(principal executive officer)

Date: November 4, 2016

 

/s/ BRENT D. SMITH

Brent D. Smith
Chief Financial Officer and Treasurer
(principal financial officer)

Date: November 4, 2016

 

/s/ SHANNON D. MARTIN

Shannon D. Martin
Vice President and Chief Accounting Officer
(principal accounting officer)

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EXHIBIT INDEX

Exhibit
Number
  Description of Exhibit
  14.1   Code of Business Conduct and Ethics.

 

31.1

 

Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

 

31.2

 

Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

 

32.1

 

Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

 

32.2

 

Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

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