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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 March 31, 2018

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, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ý   Accelerated filer o   Non-accelerated filer o
(do not check if
smaller reporting company)
  Smaller reporting company o

Emerging growth company o

        If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 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 May 3, 2018 was 59,447,537.

   


Table of Contents


TABLE OF CONTENTS

PART I
FINANCIAL INFORMATION

Item 1.

 

Consolidated Financial Statements

   

 

Consolidated Balance Sheets—March 31, 2018 (unaudited) and December 31, 2017

  1

 

Consolidated Statements of Operations (unaudited)—Three months ended March 31, 2018 and 2017

  2

 

Consolidated Statements of Changes in Net Assets (unaudited)—Three months ended March 31, 2018 and 2017

  3

 

Consolidated Statements of Cash Flows (unaudited)—Three months ended March 31, 2018 and 2017

  4

 

Consolidated Schedule of Investments (unaudited)—March 31, 2018

  5

 

Consolidated Schedule of Investments—December 31, 2017

  36

 

Notes to Consolidated Financial Statements (unaudited)

  67

 

Consolidated Schedules of Investments in and Advances to Affiliates (unaudited)—Three months ended March 31, 2018 and 2017

  111

Item 2.

 

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

  120

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

  141

Item 4.

 

Controls and Procedures

  141


PART II
OTHER INFORMATION


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Balance Sheets

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

 
  March 31,
2018
  December 31,
2017
 
 
  (Unaudited)
   
 

ASSETS

             

  

             

Investments at fair value:

             

Control investments (cost: $649,096 and $530,034 as of March 31, 2018 and December 31, 2017, respectively)

  $ 846,797   $ 750,706  

Affiliate investments (cost: $382,351 and $367,317 as of March 31, 2018 and December 31, 2017, respectively)

    359,460     338,854  

Non-Control/Non-Affiliate investments (cost: $1,126,103 and $1,107,447 as of March 31, 2018 and December 31, 2017, respectively)

    1,107,777     1,081,745  

Total investments (cost: $2,157,550 and $2,004,798 as of March 31, 2018 and December 31, 2017, respectively)

    2,314,034     2,171,305  

  

             

Cash and cash equivalents

    29,090     51,528  

Interest receivable and other assets

    40,159     36,343  

Receivable for securities sold

    14,311     2,382  

Deferred financing costs (net of accumulated amortization of $5,856 and $5,600 as of March 31, 2018 and December 31, 2017, respectively)

    3,581     3,837  

Total assets

  $ 2,401,175   $ 2,265,395  

LIABILITIES

             

Credit facility

 
$

188,000
 
$

64,000
 

SBIC debentures (par: $313,800 and $295,800 as of March 31, 2018 and December 31, 2017, respectively)

    306,182     288,483  

4.50% Notes due 2022 (par: $185,000 as of both March 31, 2018 and December 31, 2017)

    182,167     182,015  

4.50% Notes due 2019 (par: $175,000 as of both March 31, 2018 and December 31, 2017)

    173,796     173,616  

6.125% Notes (par: $90,655 as of both March 31, 2018 and December 31, 2017)

    89,133     89,057  

Accounts payable and other liabilities

    15,049     20,168  

Payable for securities purchased

    21,859     40,716  

Interest payable

    8,510     5,273  

Dividend payable

    11,192     11,146  

Deferred tax liability, net

    8,687     10,553  

Total liabilities

    1,004,575     885,027  

  

             

Commitments and contingencies (Note M)

             

NET ASSETS

   
 
   
 
 

Common stock, $0.01 par value per share (150,000,000 shares authorized; 58,987,330 and 58,660,680 shares issued and outstanding as of March 31, 2018 and December 31, 2017, respectively)

   
590
   
586
 

Additional paid-in capital

    1,325,998     1,310,780  

Accumulated net investment income, net of cumulative dividends of $696,070 and $662,563 as of March 31, 2018 and December 31, 2017, respectively                 

    10,015     7,921  

Accumulated net realized gain from investments (accumulated net realized gain from investments of $72,036 before cumulative dividends of $124,690 as of March 31, 2018 and accumulated net realized gain from investments of $64,576 before cumulative dividends of $124,690 as of December 31, 2017)

    (52,654 )   (60,114 )

Net unrealized appreciation, net of income taxes

    112,651     121,195  

Total net assets

    1,396,600     1,380,368  

Total liabilities and net assets

  $ 2,401,175   $ 2,265,395  

NET ASSET VALUE PER SHARE

  $ 23.67   $ 23.53  

   

The accompanying notes are an integral part of these consolidated 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
March 31,
 
 
  2018   2017  

INVESTMENT INCOME:

             

Interest, fee and dividend income:

             

Control investments

  $ 21,955   $ 12,988  

Affiliate investments

    9,071     9,899  

Non-Control/Non-Affiliate investments

    24,916     25,002  

Total investment income

    55,942     47,889  

EXPENSES:

             

Interest

    (10,265 )   (8,608 )

Compensation

    (5,491 )   (4,430 )

General and administrative

    (2,974 )   (2,940 )

Share-based compensation

    (2,303 )   (2,269 )

Expenses allocated to the External Investment Manager

    2,066     1,524  

Total expenses

    (18,967 )   (16,723 )

NET INVESTMENT INCOME

    36,975     31,166  

NET REALIZED GAIN (LOSS):

   
 
   
 
 

Control investments

    13,094     (682 )

Affiliate investments

        22,930  

Non-Control/Non-Affiliate investments

    (5,634 )   5,317  

SBIC debentures

    (1,374 )   (5,217 )

Total net realized gain

    6,086     22,348  

NET UNREALIZED APPRECIATION (DEPRECIATION):

             

Control investments

    (22,974 )   11,880  

Affiliate investments

    14,238     (26,121 )

Non-Control/Non-Affiliate investments

    (2,146 )   (7,850 )

SBIC debentures

    1,359     5,665  

Total net unrealized depreciation

    (9,523 )   (16,426 )

INCOME TAXES:

             

Federal and state income, excise and other taxes

    (887 )   (1,252 )

Deferred taxes

    1,866     (4,386 )

Income tax benefit (provision)

    979     (5,638 )

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

  $ 34,517   $ 31,450  

NET INVESTMENT INCOME PER SHARE—BASIC AND DILUTED

  $ 0.63   $ 0.57  

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

  $ 0.59   $ 0.57  

DIVIDENDS PAID PER SHARE:

             

Regular monthly dividends

  $ 0.570   $ 0.555  

Supplemental dividends

         

Total dividends

  $ 0.570   $ 0.555  

WEIGHTED AVERAGE SHARES OUTSTANDING—BASIC AND DILUTED

    58,852,252     55,125,170  

   

The accompanying notes are an integral part of these consolidated 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, 2016

    54,354,857   $ 543   $ 1,143,883   $ 19,033   $ (58,887 ) $ 96,909   $ 1,201,481  

Public offering of common stock, net of offering costs

   
1,035,286
   
11
   
37,700
   
   
   
   
37,711
 

Share-based compensation

            2,269                 2,269  

Purchase of vested stock for employee payroll tax withholding

    (8,964 )       (343 )               (343 )

Dividend reinvestment

    48,675         1,806                 1,806  

Amortization of directors' deferred compensation

            163                 163  

Forfeited shares of terminated employees

    (6,479 )                        

Dividends to stockholders

                (11,039 )   (19,564 )       (30,603 )

Net increase (decrease) resulting from operations

                25,949     27,565     (22,064 )   31,450  

Balances at March 31, 2017

    55,423,375   $ 554   $ 1,185,478   $ 33,943   $ (50,886 ) $ 74,845   $ 1,243,934  

Balances at December 31, 2017

    58,660,680   $ 586   $ 1,310,780   $ 7,921   $ (60,114 ) $ 121,195   $ 1,380,368  

Public offering of common stock, net of offering costs

   
309,895
   
4
   
11,332
   
   
   
   
11,336
 

Share-based compensation

            2,303                 2,303  

Purchase of vested stock for employee payroll tax withholding

    (5,392 )       (212 )               (212 )

Dividend reinvestment

    42,423         1,589                 1,589  

Amortization of directors' deferred compensation

            206                 206  

Issuance of restricted stock

    124                          

Dividends to stockholders

                (33,507 )           (33,507 )

Net increase (decrease) resulting from operations

                35,601     7,460     (8,544 )   34,517  

Balances at March 31, 2018

    59,007,730   $ 590   $ 1,325,998   $ 10,015   $ (52,654 ) $ 112,651   $ 1,396,600  

   

The accompanying notes are an integral part of these consolidated financial statements

3


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Statements of Cash Flows

(dollars in thousands)

(Unaudited)

 
  Three Months Ended
March 31,
 
 
  2018   2017  

CASH FLOWS FROM OPERATING ACTIVITIES

             

Net increase in net assets resulting from operations

  $ 34,517   $ 31,450  

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

             

Investments in portfolio companies

    (340,405 )   (186,922 )

Proceeds from sales and repayments of debt investments in portfolio companies

    133,835     184,487  

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

    32,268     37,041  

Net unrealized depreciation

    9,523     16,426  

Net realized gain

    (6,086 )   (22,348 )

Accretion of unearned income

    (3,238 )   (4,703 )

Payment-in-kind interest

    (576 )   (1,607 )

Cumulative dividends

    (562 )   (877 )

Share-based compensation expense

    2,303     2,269  

Amortization of deferred financing costs

    881     658  

Deferred tax (benefit) provision

    (1,866 )   4,386  

Changes in other assets and liabilities:

             

Interest receivable and other assets

    (3,467 )   (2,175 )

Interest payable

    3,237     (632 )

Accounts payable and other liabilities

    (4,913 )   (2,284 )

Deferred fees and other

    1,392     597  

Net cash provided by (used in) operating activities

    (143,157 )   55,766  

CASH FLOWS FROM FINANCING ACTIVITIES

   
 
   
 
 

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

    11,336     37,711  

Dividends paid

    (31,872 )   (28,593 )

Proceeds from issuance of SBIC debentures

    22,000     25,400  

Repayments of SBIC debentures

    (4,000 )   (25,200 )

Proceeds from credit facility

    194,000     83,000  

Repayments on credit facility

    (70,000 )   (138,000 )

Payment of deferred issuance costs and SBIC debenture fees

    (533 )   (616 )

Purchases of vested stock for employee payroll tax withholding

    (212 )   (343 )

Net cash provided by (used in) financing activities

    120,719     (46,641 )

Net increase (decrease) in cash and cash equivalents

    (22,438 )   9,125  

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

    51,528     24,480  

CASH AND CASH EQUIVALENTS AT END OF PERIOD

  $ 29,090   $ 33,605  

Supplemental cash flow disclosures:

             

Interest paid

  $ 6,116   $ 8,552  

Taxes paid

  $ 3,320   $ 1,677  

Non-cash financing activities:

             

Shares issued pursuant to the DRIP

  $ 1,589   $ 1,806  

   

The accompanying notes are an integral part of these consolidated financial statements

4


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments

March 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Control Investments(5)

 

 

 

 

                   

                           

Access Media Holdings, LLC(10)

 

Private Cable Operator

                       

     

10% PIK Secured Debt (Maturity—July 22, 2020)(14)(19)

  $ 23,828   $ 23,828   $ 15,120  

     

Preferred Member Units (8,550,000 units)

          8,444      

     

Member Units (45 units)

          1      

                  32,273     15,120  

                           

ASC Interests, LLC

 

Recreational and Educational Shooting Facility

                       

     

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

    1,650     1,647     1,647  

     

Member Units (1,500 units)

          1,500     1,370  

                  3,147     3,017  

                           

ATS Workholding, LLC(10)

 

Manufacturer of Machine Cutting Tools and Accessories

                       

     

5% Secured Debt (Maturity—November 16, 2021)

    4,186     3,735     3,735  

     

Preferred Member Units (3,725,862 units)

          3,726     3,726  

                  7,461     7,461  

                           

Bond-Coat, Inc.

 

Casing and Tubing Coating Services

                       

     

12% Secured Debt (Maturity—December 28, 2020)

    11,596     11,596     11,596  

     

Common Stock (57,508 shares)

          6,350     9,370  

                  17,946     20,966  

                           

Brewer Crane Holdings, LLC

 

Provider of Crane Rental and Operating Services

                       

     

LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 11.66%, Secured Debt (Maturity—January 9, 2023)(9)

    9,920     9,825     9,825  

     

Preferred Member Units (2,950 units)(8)

          4,280     4,280  

                  14,105     14,105  

                           

Café Brazil, LLC

 

Casual Restaurant Group

                       

     

Member Units (1,233 units)(8)

          1,742     4,900  

                           

5


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

March 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

California Splendor Holdings LLC

 

Processor of Frozen Fruits

                       

     

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 10.38%, Secured Debt (Maturity—March 30, 2023)(9)

    3,730     3,610     3,610  

     

LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 12.38%, Secured Debt (Maturity—March 30, 2023)(9)

    28,000     27,723     27,723  

     

Preferred Member Units (7,143 units)

          12,500     12,500  

                  43,833     43,833  

                           

CBT Nuggets, LLC

 

Produces and Sells IT Training Certification Videos

                       

     

Member Units (416 units)(8)

          1,300     67,340  

                           

Chamberlin Holding LLC

 

Roofing and Waterproofing Specialty Subcontractor

                       

     

LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 12.13%, Secured Debt (Maturity—February 26, 2023)(9)

    21,600     21,389     21,389  

     

Member Units (4,347 units)

          11,440     11,440  

                  32,829     32,829  

                           

Charps, LLC

 

Pipeline Maintenance and Construction

                       

     

12% Secured Debt (Maturity—February 3, 2022)

    16,800     16,646     16,646  

     

Preferred Member Units (1,600 units)

          400     1,190  

                  17,046     17,836  

                           

Clad-Rex Steel, LLC

 

Specialty Manufacturer of Vinyl-Clad Metal

                       

     

LIBOR Plus 9.50% (Floor 1.00%), Current Coupon 11.16%, Secured Debt (Maturity—December 20, 2021)(9)

    13,280     13,174     13,280  

     

Member Units (717 units)(8)

          7,280     9,780  

     

10% Secured Debt (Clad-Rex Steel RE Investor, LLC) (Maturity—December 20, 2036)

    1,178     1,166     1,178  

     

Member Units (Clad-Rex Steel RE Investor, LLC) (800 units)

          210     280  

                  21,830     24,518  

                           

CMS Minerals Investments

 

Oil & Gas Exploration & Production

                       

     

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

          3,294     2,385  

                           

Copper Trail Energy Fund I, LP(12)(13)

 

Investment Partnership

                       

     

LP Interests (Fully diluted 30.1%)(8)

          2,500     2,500  

                           

6


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

March 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Datacom, LLC

 

Technology and Telecommunications Provider

                       

     

8% Secured Debt (Maturity—May 30, 2018)

    1,755     1,755     1,755  

     

5.25% Current / 5.25% PIK Secured Debt (Maturity—May 30, 2019)(19)

    12,511     12,479     10,780  

     

Class A Preferred Member Units

          1,181     220  

     

Class B Preferred Member Units (6,453 units)

          6,030      

                  21,445     12,755  

                           

Direct Marketing Solutions, Inc.

 

Provider of Omni-Channel Direct Marketing Services

                       

     

LIBOR Plus 11.00% (Floor 1.00%), Current Coupon 12.75%, Secured Debt (Maturity—February 13, 2023)(9)

    18,722     18,523     18,523  

     

Preferred Stock (8,400 shares)

          8,400     8,400  

                  26,923     26,923  

                           

Gamber-Johnson Holdings, LLC

 

Manufacturer of Ruggedized Computer Mounting Systems

                       

     

LIBOR Plus 11.00% (Floor 1.00%), Current Coupon 12.66%, Secured Debt (Maturity—June 24, 2021)(9)

    22,910     22,737     22,910  

     

Member Units (8,619 units)(8)

          14,844     26,530  

                  37,581     49,440  

                           

Garreco, LLC

 

Manufacturer and Supplier of Dental Products

                       

     

LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 11.69%, Secured Debt (Maturity—March 31, 2020)(9)

    5,362     5,327     5,327  

     

Member Units (1,200 units)

          1,200     1,940  

                  6,527     7,267  

                           

GRT Rubber Technologies LLC

 

Manufacturer of Engineered Rubber Products

                       

     

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.66%, Secured Debt (Maturity—December 19, 2019)(9)

    11,393     11,347     11,393  

     

Member Units (5,879 units)(8)

          13,065     23,420  

                  24,412     34,813  

                           

Gulf Manufacturing, LLC

 

Manufacturer of Specialty Fabricated Industrial Piping Products

                       

     

Member Units (438 units)(8)

          2,980     10,830  

                           

7


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

March 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Gulf Publishing Holdings, LLC

 

Energy Industry Focused Media and Publishing

                       

     

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

    12,698     12,608     12,608  

     

Member Units (3,681 units)

          3,681     4,840  

                  16,289     17,448  

                           

Harborside Holdings, LLC

 

Real Estate Holding Company

                       

     

Member units (100 units)

          6,306     9,500  

                           

Harris Preston Fund Investments(12)(13)

 

Investment Partnership

                       

     

LP Interests (2717 MH, L.P.) (Fully diluted 49.3%)

          536     536  

                           

Harrison Hydra-Gen, Ltd.

 

Manufacturer of Hydraulic Generators

                       

     

Common Stock (107,456 shares)

          718     4,980  

                           

HW Temps LLC

 

Temporary Staffing Solutions

                       

     

LIBOR Plus 11.00% (Floor 1.00%), Current Coupon 12.66%, Secured Debt (Maturity July 2, 2020)(9)

    9,976     9,922     9,922  

     

Preferred Member Units (3,200 units)

          3,942     3,940  

                  13,864     13,862  

                           

IDX Broker, LLC

 

Provider of Marketing and CRM Tools for the Real Estate Industry

                       

     

11.5% Secured Debt (Maturity—November 15, 2020)

    14,950     14,828     14,950  

     

Preferred Member Units (5,607 units)(8)

          5,952     11,550  

                  20,780     26,500  

                           

Jensen Jewelers of Idaho, LLC

 

Retail Jewelry Store

                       

     

Prime Plus 6.75% (Floor 2.00%), Current Coupon 11.25%, Secured Debt (Maturity—November 14, 2019)(9)

    3,805     3,771     3,805  

     

Member Units (627 units)(8)

          811     5,100  

                  4,582     8,905  

                           

KBK Industries, LLC

 

Manufacturer of Specialty Oilfield and Industrial Products

                       

     

10% Secured Debt (Maturity—September 28, 2020)

    75     72     75  

     

12.5% Secured Debt (Maturity—September 28, 2020)

    5,900     5,870     5,900  

     

Member Units (325 units)(8)

          783     4,740  

                  6,725     10,715  

8


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

March 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Lamb Ventures, LLC

 

Aftermarket Automotive Services Chain

                       

     

11% Secured Debt (Maturity—July 1, 2022)

    8,339     8,298     8,339  

     

Preferred Equity (non-voting)

          400     400  

     

Member Units (742 units)

          5,273     6,730  

     

9.5% Secured Debt (Lamb's Real Estate Investment I, LLC) (Maturity—March 31, 2027)

    432     428     432  

     

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

          625     520  

                  15,024     16,421  

                           

Marine Shelters Holdings, LLC

 

Fabricator of Marine and Industrial Shelters

                       

     

12% PIK Secured Debt (Maturity—December 28, 2017)(14)

    3,131     3,078      

     

Preferred Member Units (3,810 units)

          5,352      

                  8,430      

                           

Market Force Information, LLC

 

Provider of Customer Experience Management Services

                       

     

LIBOR Plus 11.00% (Floor 1.00%), Current Coupon 13.01%, Secured Debt (Maturity—July 28, 2022)(9)

    22,880     22,676     22,676  

     

Member Units (657,113 units)

          14,700     14,700  

                  37,376     37,376  

                           

MH Corbin Holding LLC

 

Manufacturer and Distributor of Traffic Safety Products

                       

     

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

    12,425     12,238     12,238  

     

Preferred Member Units (4,000 shares)

          6,000     6,000  

                  18,238     18,238  

                           

Mid-Columbia Lumber Products, LLC

 

Manufacturer of Finger-Jointed Lumber Products

                       

     

10% Secured Debt (Maturity—January 15, 2020)

    1,750     1,743     1,743  

     

12% Secured Debt (Maturity—January 15, 2020)

    3,900     3,867     3,867  

     

Member Units (7,874 units)

          3,001     2,171  

     

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

    780     780     780  

     

Member Units (Mid-Columbia Real Estate, LLC) (500 units)(8)

          790     1,290  

                  10,181     9,851  

                           

MSC Adviser I, LLC(16)

 

Third Party Investment Advisory Services

                       

     

Member Units (Fully diluted 100.0%)(8)

              48,722  

                           

9


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

March 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Mystic Logistics Holdings, LLC

 

Logistics and Distribution Services Provider for Large Volume Mailers

                       

     

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

    7,562     7,501     7,501  

     

Common Stock (5,873 shares)

          2,720     6,050  

                  10,221     13,551  

                           

NAPCO Precast, LLC

 

Precast Concrete Manufacturing

                       

     

LIBOR Plus 8.50%, Current Coupon 10.51%, Secured Debt (Maturity—May 31, 2019)

    11,475     11,445     11,475  

     

Member Units (2,955 units)(8)

          2,975     12,180  

                  14,420     23,655  

                           

NexRev LLC

 

Provider of Energy Efficiency Products & Services

                       

     

11% Secured Debt (Maturity—February 28, 2023)

    17,440     17,268     17,268  

     

Preferred Member Units (86,400,000 units)

          6,880     6,880  

                  24,148     24,148  

                           

NRI Clinical Research, LLC

 

Clinical Research Service Provider

                       

     

LIBOR Plus 6.50% (Floor 1.50%), Current Coupon 8.19%, Secured Debt (Maturity—January 15, 2019)(9)

    400     400     400  

     

14% Secured Debt (Maturity—January 15, 2019)

    3,865     3,836     3,865  

     

Warrants (251,723 equivalent units; Expiration—January 15, 2026; Strike price—$0.01 per unit)

          252     500  

     

Member Units (1,454,167 units)

          765     2,500  

                  5,253     7,265  

                           

NRP Jones, LLC

 

Manufacturer of Hoses, Fittings and Assemblies

                       

     

12% Secured Debt (Maturity—March 20, 2023)

    6,376     6,376     6,376  

     

Member Units (65,962 units)(8)

          3,717     4,130  

                  10,093     10,506  

                           

NuStep, LLC

 

Designer, Manufacturer and Distributor of Fitness Equipment

                       

     

12% Secured Debt (Maturity—January 31, 2022)

    20,600     20,429     20,429  

     

Preferred Member Units (406 units)

          10,200     10,200  

                  30,629     30,629  

                           

OMi Holdings, Inc.

 

Manufacturer of Overhead Cranes

                       

     

Common Stock (1,500 shares)(8)

          1,080     14,290  

                           

10


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

March 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Pegasus Research Group, LLC

 

Provider of Telemarketing and Data Services

                       

     

Member Units (460 units)(8)

          1,290     10,310  

                           

PPL RVs, Inc.

 

Recreational Vehicle Dealer

                       

     

LIBOR Plus 7.00% (Floor 0.50%), Current Coupon 8.69%, Secured Debt (Maturity—November 15, 2021)(9)

    16,100     15,978     16,100  

     

Common Stock (1,962 shares)(8)

          2,150     11,660  

                  18,128     27,760  

                           

Principle Environmental, LLC (d/b/a TruHorizon Environmental Solutions)

 

Noise Abatement Service Provider

                       

     

13% Secured Debt (Maturity—April 30, 2020)

    7,477     7,359     7,477  

     

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

          4,600     13,090  

     

Warrants (1,018 equivalent units; Expiration—January 31, 2021; Strike price—$0.01 per unit)

          1,200     780  

                  13,159     21,347  

                           

Quality Lease Service, LLC

 

Provider of Rigsite Accommodation Unit Rentals and Related Services

                       

     

Zero Coupon Secured Debt (Maturity—June 8, 2020)

    7,341     7,341     6,950  

     

Member Units (1,000 units)

          3,293     5,363  

                  10,634     12,313  

                           

River Aggregates, LLC

 

Processor of Construction Aggregates

                       

     

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

    750     728     728  

     

Member Units (1,150 units)

          1,150     4,610  

     

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

          369     2,670  

                  2,247     8,008  

                           

11


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

March 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

The MPI Group, LLC

 

Manufacturer of Custom Hollow Metal Doors, Frames and Accessories

                       

     

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

    2,924     2,924     1,510  

     

Series A Preferred Units (2,500 units)

          2,500      

     

Warrants (1,424 equivalent units; Expiration—July 1, 2024; Strike price—$0.01 per unit)

          1,096      

     

Member Units (MPI Real Estate Holdings, LLC) (100 units)(8)

          2,300     2,480  

                  8,820     3,990  

                           

Uvalco Supply, LLC

 

Farm and Ranch Supply Store

                       

     

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

    184     184     184  

     

Member Units (1,867 units)(8)

          3,579     3,880  

                  3,763     4,064  

                           

Vision Interests, Inc.

 

Manufacturer / Installer of Commercial Signage

                       

     

13% Secured Debt (Maturity—December 23, 2018)

    2,814     2,801     2,801  

     

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

          3,000     3,000  

     

Common Stock (1,126,242 shares)

          3,706      

                  9,507     5,801  

                           

Ziegler's NYPD, LLC

 

Casual Restaurant Group

                       

     

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

    1,000     997     997  

     

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; Expiration—September 29, 2018; Strike price—$0.01 per unit)

          600      

     

Preferred Member Units (10,072 units)

          2,834     3,221  

                  7,481     7,268  

Subtotal Control Investments (36.6% of total investments at fair value)

  $ 649,096   $ 846,797  

12


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

March 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Affiliate Investments(6)

 

 

 

 

                   

                           

AFG Capital Group, LLC

 

Provider of Rent-to-Own Financing Solutions and Services

                       

     

Warrants (42 equivalent units; Expiration—November 7, 2024; Strike price—$0.01 per unit)

        $ 259   $ 900  

     

Preferred Member Units (186 units)(8)

          1,200     3,760  

                  1,459     4,660  

                           

Barfly Ventures, LLC(10)

 

Casual Restaurant Group

                       

     

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

    8,715     8,576     8,715  

     

Options (2 equivalent units)

          397     920  

     

Warrant (1 equivalent unit; Expiration—August 31, 2025; Strike price—$1.00 per unit)

          473     520  

                  9,446     10,155  

                           

BBB Tank Services, LLC

 

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

                       

     

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 9.66%, Secured Debt (Maturity—April 8, 2021)(9)

    720     700     700  

     

15% Secured Debt (Maturity—April 8, 2021)

    4,000     3,883     3,883  

     

Member Units (800,000 units)

          800     550  

                  5,383     5,133  

                           

Boccella Precast Products LLC

 

Manufacturer of Precast Hollow Core Concrete

                       

     

LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 11.69%, Secured Debt (Maturity—June 30, 2022)(9)

    16,582     16,426     16,582  

     

Member Units (2,160,000 units)(8)

          2,160     4,860  

                  18,586     21,442  

                           

Boss Industries, LLC

 

Manufacturer and Distributor of Air, Power and Other Industrial Equipment

                       

     

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

          2,120     4,740  

                           

13


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

March 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Bridge Capital Solutions Corporation

 

Financial Services and Cash Flow Solutions Provider

                       

     

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

    7,500     5,962     5,962  

     

Warrants (82 equivalent shares; Expiration—July 25, 2026; Strike price—$0.01 per share)

          2,132     4,020  

     

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

    1,000     993     1,000  

     

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

          1,000     1,000  

                  10,087     11,982  

                           

Buca C, LLC

 

Casual Restaurant Group

                       

     

LIBOR Plus 9.25% (Floor 1.00%), Current Coupon 10.94%, Secured Debt (Maturity—June 30, 2020)(9)

    20,004     19,904     19,904  

     

Preferred Member Units (6 units; 6% cumulative)(8)(19)

          4,238     4,233  

                  24,142     24,137  

                           

CAI Software LLC

 

Provider of Specialized Enterprise Resource Planning Software

                       

     

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

    4,083     4,063     4,083  

     

Member Units (65,356 units)(8)

          654     3,230  

                  4,717     7,313  

                           

Chandler Signs Holdings, LLC(10)

 

Sign Manufacturer

                       

     

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

    4,500     4,470     4,500  

     

Class A Units (1,500,000 units)

          1,500     2,180  

                  5,970     6,680  

                           

Charlotte Russe, Inc(11)

 

Fast-Fashion Retailer to Young Women

                       

     

8.50% Secured Debt (Maturity—February 2, 2023)

    7,992     7,992     7,912  

     

Common Stock (19,041 shares)

          3,141     3,141  

                  11,133     11,053  

                           

Condit Exhibits, LLC

 

Tradeshow Exhibits / Custom Displays Provider

                       

     

Member Units (3,936 units)(8)

          100     1,950  

                           

14


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

March 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Congruent Credit Opportunities Funds(12)(13)

 

Investment Partnership

                       

     

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

          5,210     480  

     

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

          17,869     18,754  

                  23,079     19,234  

                           

Dos Rios Partners(12)(13)

 

Investment Partnership

                       

     

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

          5,996     7,246  

     

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

          1,904     2,182  

                  7,900     9,428  

                           

Dos Rios Stone Products LLC(10)

 

Limestone and Sandstone Dimension Cut Stone Mining Quarries

                       

     

Class A Preferred Units (2,000,000 units)(8)

          2,000     1,350  

                           

East Teak Fine Hardwoods, Inc.

 

Distributor of Hardwood Products

                       

     

Common Stock (6,250 shares)(8)

          480     630  

                           

EIG Fund Investments(12)(13)

 

Investment Partnership

                       

     

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

          451     403  

                           

Freeport Financial Funds(12)(13)

 

Investment Partnership

                       

     

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

          5,974     5,554  

     

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

          8,558     8,506  

                  14,532     14,060  

                           

Gault Financial, LLC (RMB Capital, LLC)

 

Purchases and Manages Collection of Healthcare and other Business Receivables

                       

     

8% Secured Debt (Maturity—January 1, 2019)

    12,483     12,483     11,532  

     

Warrants (29,032 equivalent units; Expiration—February 9, 2022; Strike price—$0.01 per unit)

          400      

                  12,883     11,532  

                           

15


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

March 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Guerdon Modular Holdings, Inc.

 

Multi-Family and Commercial Modular Construction Company

                       

     

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.19%, Secured Debt (Maturity—March 1, 2019)(9)

    400     394     394  

     

13% Secured Debt (Maturity—March 1, 2019)

    10,988     10,926     10,926  

     

Preferred Stock (404,998 shares)

          1,140      

     

Common Stock (212,033 shares)

          2,983      

                  15,443     11,320  

                           

Harris Preston Fund Investments(12)(13)

 

Investment Partnership

                       

     

LP Interests (HPEP 3, L.P.) (Fully diluted 9.9%)

          1,033     1,033  

                           

Hawk Ridge Systems, LLC(13)

 

Value-Added Reseller of Engineering Design and Manufacturing Solutions

                       

     

10.5% Secured Debt (Maturity—December 2, 2021)

    14,300     14,181     14,300  

     

Preferred Member Units (226 units)(8)

          2,850     6,223  

     

Preferred Member Units (HRS Services, ULC) (226 units)(8)

          150     328  

                  17,181     20,851  

                           

Houston Plating and Coatings, LLC

 

Provider of Plating and Industrial Coating Services

                       

     

8% Unsecured Convertible Debt (Maturity—May 1, 2022)

    3,000     3,000     3,200  

     

Member Units (315,756 units)(8)

          2,179     6,660  

                  5,179     9,860  

                           

I-45 SLF LLC(12)(13)

 

Investment Partnership

                       

     

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

          16,200     16,841  

                           

L.F. Manufacturing Holdings, LLC(10)

 

Manufacturer of Fiberglass Products

                       

     

Member Units (2,179,001 units)

          2,019     2,000  

                           

Meisler Operating LLC

 

Provider of Short-term Trailer and Container Rental

                       

     

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.20%, Secured Debt (Maturity—June 7, 2022)(9)

    18,960     18,779     18,779  

     

Member Units (Milton Meisler Holdings LLC) (48,555 units)

          4,855     5,570  

                  23,634     24,349  

                           

16


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

March 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

OnAsset Intelligence, Inc.

 

Provider of Transportation Monitoring / Tracking Products and Services

                       

     

12% PIK Secured Debt (Maturity—June 30, 2021)(19)

    5,247     5,247     5,247  

     

10% PIK Unsecured Debt (Maturity—June 30, 2021)(19)

    49     49     49  

     

Preferred Stock (912 shares)

          1,981      

     

Warrants (5,333 equivalent shares; Expiration—April 18, 2021; Strike price—$0.01 per share)

          1,919      

                  9,196     5,296  

                           

OPI International Ltd.(13)

 

Provider of Man Camp and Industrial Storage Services

                       

     

Common Stock (20,766,317 shares)

          1,371      

                           

PCI Holding Company, Inc.

 

Manufacturer of Industrial Gas Generating Systems

                       

     

12% Current / 3% PIK Secured Debt (Maturity—March 31, 2019)(19)

    12,617     12,571     12,571  

     

Preferred Stock (1,740,000 shares) (non-voting)

          1,740     3,480  

     

Preferred Stock (1,500,000 shares; 20% cumulative)(8)(19)

          3,927     290  

                  18,238     16,341  

                           

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)(15)

    30,785     30,281     250  

     

Preferred Member Units (250 units)

          2,500      

                  32,781     250  

                           

Tin Roof Acquisition Company

 

Casual Restaurant Group

                       

     

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

    12,559     12,515     12,515  

     

Class C Preferred Stock (Fully diluted 10.0%; 10% cumulative)(8)(19)

          3,102     3,102  

                  15,617     15,617  

                           

17


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

March 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

UniTek Global Services, Inc.(11)

 

Provider of Outsourced Infrastructure Services

                       

     

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.81%, Secured Debt (Maturity—January 13, 2019)(9)

    8,535     8,531     8,535  

     

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 9.81% / 1.00% PIK, Current Coupon Plus PIK 10.81%, Secured Debt (Maturity—January 13, 2019)(9)(19)

    138     138     138  

     

15% PIK Unsecured Debt (Maturity—July 13, 2019)(19)

    897     897     897  

     

Preferred Stock (2,596,567 shares; 19% cumulative)(8)(19)

          2,993     2,980  

     

Preferred Stock (4,935,377 shares; 13.5% cumulative)(8)(19)

          7,609     7,560  

     

Common Stock (1,075,992 shares)

              2,680  

                  20,168     22,790  

                           

Universal Wellhead Services Holdings, LLC(10)

 

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

                       

     

Preferred Member Units (UWS Investments, LLC) (716,949 units)

          717     860  

     

Member Units (UWS Investments, LLC) (4,000,000 units)

          4,000     2,030  

                  4,717     2,890  

                           

Valley Healthcare Group, LLC

 

Provider of Durable Medical Equipment

                       

     

LIBOR Plus 12.50% (Floor 0.50%), Current Coupon 14.16%, Secured Debt (Maturity—December 29, 2020)(9)

    11,646     11,571     11,571  

     

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

          1,600     1,740  

                  13,171     13,311  

                           

Volusion, LLC

 

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

                       

     

11.5% Secured Debt (Maturity—January 26, 2020)

    16,734     15,358     15,358  

     

Preferred Member Units (4,876,670 units)

          14,000     14,000  

     

Warrants (1,831,355 equivalent units; Expiration—January 26, 2025; Strike price—$0.01 per unit)

          2,577     1,471  

                  31,935     30,829  

Subtotal Affiliate Investments (15.5% of total investments at fair value)

        $ 382,351   $ 359,460  

18


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

March 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Non-Control/Non-Affiliate Investments(7)

             

                           

AAC Holdings, Inc.(11)(13)

 

Substance Abuse Treatment Service Provider

                       

     

LIBOR Plus 6.75% (Floor 1.00%), Current Coupon 8.52%, Secured Debt (Maturity—June 30, 2023)(9)

  $ 14,782   $ 14,489   $ 15,041  

                           

Adams Publishing Group, LLC(10)

 

Local Newspaper Operator

                       

     

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 9.30%, Secured Debt (Maturity—November 3, 2020)(9)

    9,894     9,678     9,894  

                           

ADS Tactical, Inc.(10)

 

Value-Added Logistics and Supply Chain Provider to the Defense Industry

                       

     

LIBOR Plus 7.50% (Floor 0.75%), Current Coupon 9.81%, Secured Debt (Maturity—December 31, 2022)(9)

    12,948     12,712     12,778  

                           

Aethon United BR LP(10)

 

Oil & Gas Exploration & Production

                       

     

LIBOR Plus 6.75% (Floor 1.00%), Current Coupon 8.46%, Secured Debt (Maturity—September 8, 2023)(9)

    3,438     3,390     3,390  

                           

Ahead, LLC(10)

 

IT Infrastructure Value Added Reseller

                       

     

LIBOR Plus 6.50%, Current Coupon 8.81%, Secured Debt (Maturity—November 2, 2020)

    8,434     8,283     8,487  

                           

Allflex Holdings III Inc.(11)

 

Manufacturer of Livestock Identification Products

                       

     

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.74%, Secured Debt (Maturity—July 19, 2021)(9)

    13,846     13,785     13,935  

                           

American Scaffold Holdings, Inc.(10)

 

Marine Scaffolding Service Provider

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.80%, Secured Debt (Maturity—March 31, 2022)(9)

    6,938     6,858     6,903  

                           

American Teleconferencing Services, Ltd.(11)

 

Provider of Audio Conferencing and Video Collaboration Solutions

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.29%, Secured Debt (Maturity—December 8, 2021)(9)

    15,592     14,964     15,588  

                           

Anchor Hocking, LLC(11)

 

Household Products Manufacturer

                       

     

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 11.02%, Secured Debt (Maturity—June 4, 2020)(9)

    2,248     2,209     2,226  

     

Member Units (440,620 units)

          4,928     3,718  

                  7,137     5,944  

19


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

March 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Apex Linen Service, Inc.

 

Industrial Launderers

                       

     

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.66%, Secured Debt (Maturity—October 30, 2022)(9)

    2,400     2,400     2,400  

     

16% Secured Debt (Maturity—October 30, 2022)

    14,416     14,349     14,349  

                  16,749     16,749  

                           

Arcus Hunting LLC.(10)

 

Manufacturer of Bowhunting and Archery Products and Accessories

                       

     

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.69%, Secured Debt (Maturity—November 13, 2019)(9)

    14,175     14,091     14,175  

                           

Arise Holdings, Inc.(10)

 

Tech-Enabled Business Process Outsourcing

                       

     

Preferred Stock (1,000,000 shares)

          1,000     1,000  

                           

ATI Investment Sub, Inc.(11)

 

Manufacturer of Solar Tracking Systems

                       

     

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 9.13%, Secured Debt (Maturity—June 22, 2021)(9)

    7,114     6,974     7,106  

                           

ATX Networks Corp.(11)(13)(21)

 

Provider of Radio Frequency Management Equipment

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.31% / 1.00% PIK, Current Coupon Plus PIK 8.31%, Secured Debt (Maturity—June 11, 2021)(9)(19)

    9,515     9,414     8,849  

                           

Berry Aviation, Inc.(10)

 

Airline Charter Service Operator

                       

     

Common Stock (553 shares)

          400     1,470  

                           

BigName Commerce, LLC(10)

 

Provider of Envelopes and Complimentary Stationery Products

                       

     

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.94%, Secured Debt (Maturity—May 11, 2022)(9)

    2,472     2,446     2,446  

                           

Binswanger Enterprises, LLC(10)

 

Glass Repair and Installation Service Provider

                       

     

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 10.31%, Secured Debt (Maturity—March 9, 2022)(9)

    15,267     15,016     15,148  

     

Member Units (1,050,000 units)

          1,050     1,000  

                  16,066     16,148  

                           

20


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

March 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Bluestem Brands, Inc.(11)

 

Multi-Channel Retailer of General Merchandise

                       

     

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 9.38%, Secured Debt (Maturity—November 6, 2020)(9)

    11,939     11,781     8,417  

                           

Brainworks Software, LLC(10)

 

Advertising Sales and Newspaper Circulation Software

                       

     

Prime Plus 9.25% (Floor 3.25%), Current Coupon 14.00%, Secured Debt (Maturity—July 22, 2019)(9)

    6,733     6,709     6,577  

                           

Brightwood Capital Fund Investments(12)(13)

 

Investment Partnership

                       

     

LP Interests (Brightwood Capital Fund III, LP) (Fully diluted 1.6%)(8)

          12,000     10,463  

     

LP Interests (Brightwood Capital Fund IV, LP) (Fully diluted 0.8%)(8)

          1,000     1,063  

                  13,000     11,526  

                           

Brundage-Bone Concrete Pumping, Inc.(11)

 

Construction Services Provider

                       

     

10.375% Secured Debt (Maturity—September 1, 2023)

    3,000     2,988     3,195  

                           

Cadence Aerospace LLC(10)

 

Aerostructure Manufacturing

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.33%, Secured Debt (Maturity—November 14, 2023)(9)

    14,963     14,820     14,820  

                           

California Pizza Kitchen, Inc.(11)

 

Casual Restaurant Group

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.88%, Secured Debt (Maturity—August 23, 2022)(9)

    12,837     12,799     12,606  

                           

CapFusion, LLC(13)

 

Non-Bank Lender to Small Businesses

                       

     

13% Secured Debt (Maturity—March 25, 2021)(14)

    6,266     5,206     1,432  

                           

CDHA Management, LLC(10)

 

Dental Services

                       

     

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.76%, Secured Debt (Maturity—December 5, 2021)(9)

    5,062     5,006     5,062  

                           

Central Security Group, Inc.(11)

 

Security Alarm Monitoring Service Provider

                       

     

LIBOR Plus 5.63% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity—October 6, 2021)(9)

    7,461     7,444     7,480  

                           

21


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

March 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Cenveo Corporation(11)

 

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

                       

     

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 9.79%, Secured Debt (Maturity—November 2, 2018)(9)

    6,089     6,038     6,119  

     

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

    19,130     17,126     8,609  

                  23,164     14,728  

                           

Chloe Ox Parent, LLC(11)

 

In-Home Health Risk Assessment Provider

                       

     

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 7.30%, Secured Debt (Maturity—December 23, 2024)(9)

    7,400     7,328     7,492  

                           

Clarius BIGS, LLC(10)

 

Prints & Advertising Film Financing

                       

     

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

    2,924     2,924     82  

                           

Clickbooth.com, LLC(10)

 

Provider of Digital Advertising Performance Marketing Solutions

                       

     

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.19%, Secured Debt (Maturity—December 5, 2022)(9)

    2,981     2,925     2,925  

                           

Community Care Health Network, LLC(11)

 

In-Home Health Risk Assessment Provider

                       

     

LIBOR Plus 4.75% (Floor 1.00%), Current Coupon 6.74%, Secured Debt (Maturity—February 16, 2025)(9)

    3,188     3,180     3,215  

                           

Construction Supply Investments, LLC(10)

 

Distribution Platform of Specialty Construction Materials to Professional Concrete and Masonry Contractors

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.88%, Secured Debt (Maturity—June 30, 2023)(9)

    6,938     6,905     6,920  

     

Member Units (28,000 units)

          3,723     3,723  

                  10,628     10,643  

                           

22


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

March 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

CTVSH, PLLC(10)

 

Emergency Care and Specialty Service Animal Hospital

                       

     

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 10.01%, Secured Debt (Maturity—August 3, 2022)(9)

    11,700     11,595     11,595  

                           

Darr Equipment LP(10)

 

Heavy Equipment Dealer

                       

     

11.5% Current / 1% PIK Secured Debt (Maturity—June 22, 2023)(19)

    7,247     7,247     7,247  

     

Warrants (915,734 equivalent units; Expiration—December 23, 2023; Strike price—$1.50 per unit)

          474     10  

                  7,721     7,257  

                           

Digital River, Inc.(11)

 

Provider of Outsourced e-Commerce Solutions and Services

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.61%, Secured Debt (Maturity—February 12, 2021)(9)

    10,146     10,052     10,146  

                           

Drilling Info Holdings, Inc.

 

Information Services for the Oil and Gas Industry

                       

     

Common Stock (3,788,865 shares)(8)

              9,010  

                           

EnCap Energy Fund Investments(12)(13)

 

Investment Partnership

                       

     

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

          3,487     1,623  

     

LP Interests (EnCap Energy Capital Fund VIII Co-Investors, L.P.) (Fully diluted 0.4%)(8)

          2,072     1,122  

     

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

          4,317     3,732  

     

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

          6,870     6,933  

     

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

          5,864     5,015  

     

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

          3,015     2,716  

                  25,625     21,141  

                           

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 10.13%, Secured Debt (Maturity—April 28, 2022)(9)

    6,999     6,883     6,264  

                           

23


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

March 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Extreme Reach, Inc.(11)

 

Integrated TV and Video Advertising Platform

                       

     

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 8.13%, Secured Debt (Maturity—February 7, 2020)(9)

    14,217     14,205     14,199  

                           

Felix Investments Holdings II(10)

 

Oil & Gas Exploration & Production

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.30%, Secured Debt (Maturity—August 9, 2022)(9)

    3,333     3,270     3,270  

                           

Flavors Holdings Inc.(11)

 

Global Provider of Flavoring and Sweetening Products

                       

     

LIBOR Plus 5.75% (Floor 1.00%), Current Coupon 8.05%, Secured Debt (Maturity—April 3, 2020)(9)

    12,881     12,470     11,657  

                           

GI KBS Merger Sub LLC(11)

 

Outsourced Janitorial Services to Retail/Grocery Customers

                       

     

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.98%, Secured Debt (Maturity—October 29, 2021)(9)

    9,270     9,200     9,351  

     

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.27%, Secured Debt (Maturity—April 29, 2022)(9)

    3,915     3,775     3,974  

                  12,975     13,325  

                           

GoWireless Holdings, Inc.(11)

 

Provider of Wireless Telecommunications Carrier Services

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.38%, Secured Debt (Maturity—December 22, 2024)(9)

    17,775     17,601     17,753  

                           

Great Circle Family Foods, LLC(10)

 

Quick Service Restaurant Franchise

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.69%, Secured Debt (Maturity—October 28, 2019)(9)

    7,119     7,091     7,119  

                           

Grupo Hima San Pablo, Inc.(11)

 

Tertiary Care Hospitals

                       

     

LIBOR Plus 7.00% (Floor 1.50%), Current Coupon 8.77%, Secured Debt (Maturity—January 31, 2018)(9)(17)

    4,750     4,750     3,543  

     

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

    2,055     2,040     226  

                  6,790     3,769  

                           

24


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

March 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Guitar Center, Inc.(11)

 

Musical Instruments Retailer

                       

     

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

    16,625     16,118     16,558  

                           

Hojeij Branded Foods, LLC(10)

 

Multi-Airport, Multi- Concept Restaurant Operator

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.89%, Secured Debt (Maturity—July 20, 2022)(9)

    12,107     11,999     12,107  

                           

Hoover Group, Inc.(10)(13)

 

Provider of Storage Tanks and Related Products to the Energy and Petrochemical Markets

                       

     

LIBOR Plus 6.00%, Current Coupon 7.75%, Secured Debt (Maturity—January 28, 2020)

    7,500     6,744     6,703  

     

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 9.15%, Secured Debt (Maturity—January 28, 2021)(9)

    8,438     7,995     7,805  

                  14,739     14,508  

                           

Hostway Corporation(11)

 

Managed Services and Hosting Provider

                       

     

LIBOR Plus 5.25% (Floor 1.25%), Current Coupon 6.94% / 0.50% PIK, Current Coupon Plus PIK 7.44%, Secured Debt (Maturity—December 13, 2019)(9)(19)

    30,610     29,860     29,769  

                           

Houghton Mifflin Harcourt Publishers Inc.(11)(13)

 

Provider of Educational Print and Digital Services

                       

     

LIBOR Plus 3.00% (Floor 1.00%), Current Coupon 4.88%, Secured Debt (Maturity—May 28, 2021)(9)

    15,224     14,279     13,949  

                           

Hunter Defense Technologies, Inc.(10)

 

Provider of Military and Commercial Shelters and Systems

                       

     

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 9.30%, Secured Debt (Maturity—March 29, 2023)(9)

    41,022     40,099     40,099  

                           

Hydrofarm Holdings LLC(10)

 

Wholesaler of Horticultural Products

                       

     

LIBOR Plus 7.00%, Current Coupon 8.73%, Secured Debt (Maturity—May 12, 2022)

    6,623     6,510     6,236  

                           

iEnergizer Limited(11)(13)(21)

 

Provider of Business Outsourcing Solutions

                       

     

LIBOR Plus 6.00% (Floor 1.25%), Current Coupon 7.88%, Secured Debt (Maturity—May 1, 2019)(9)

    11,758     11,571     11,773  

                           

25


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

March 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Implus Footcare, LLC(10)

 

Provider of Footwear and Related Accessories

                       

     

LIBOR Plus 6.75% (Floor 1.00%), Current Coupon 8.74%, Secured Debt (Maturity—April 30, 2021)(9)

    19,270     19,029     19,156  

                           

Industrial Services Acquisition, LLC(10)

 

Industrial Cleaning Services

                       

     

6% Current / 7% PIK Unsecured Debt (Maturity—December 17, 2022)(19)

    4,633     4,561     4,414  

     

Preferred Member Units (Industrial Services Investments, LLC) (144 units; 10% cumulative)(8)(19)

          88     86  

     

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

          900     300  

                  5,549     4,800  

                           

Inn of the Mountain Gods Resort and Casino(11)

 

Hotel & Casino Owner & Operator

                       

     

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

    6,249     6,013     5,687  

                           

iPayment, Inc.(11)

 

Provider of Merchant Acquisition

                       

     

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.62%, Secured Debt (Maturity—April 11, 2023)(9)

    11,970     11,865     12,120  

                           

irth Solutions, LLC

 

Provider of Damage Prevention Information Technology Services

                       

     

Member Units (27,893 units)

          1,441     1,970  

                           

Jacent Strategic Merchandising, LLC(10)

 

General Merchandise Distribution

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.53%, Secured Debt (Maturity—September 16, 2020)(9)

    10,982     10,931     10,982  

                           

Jackmont Hospitality, Inc.(10)

 

Franchisee of Casual Dining Restaurants

                       

     

LIBOR Plus 6.75% (Floor 1.00%), Current Coupon 8.40%, Secured Debt (Maturity—May 26, 2021)(9)

    4,275     4,265     4,275  

                           

Jacuzzi Brands LLC(11)

 

Manufacturer of Bath and Spa Products

                       

     

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 9.30%, Secured Debt (Maturity—June 28, 2023)(9)

    3,925     3,854     3,964  

                           

26


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

March 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Joerns Healthcare, LLC(11)

 

Manufacturer and Distributor of Health Care Equipment & Supplies

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.98% Secured Debt (Maturity—May 9, 2020)(9)

    13,387     13,307     12,439  

                           

Keypoint Government Solutions, Inc.(10)

 

Provider of Pre-Employment Screening Services

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.73%, Secured Debt (Maturity—April 18, 2024)(9)

    11,875     11,769     11,875  

                           

Larchmont Resources, LLC(11)

 

Oil & Gas Exploration & Production

                       

     

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.53%, PIK Secured Debt (Maturity—August 7, 2020)(9)(19)

    2,504     2,504     2,479  

     

Member Units (Larchmont Intermediate Holdco, LLC) (2,828 units)

          353     919  

                  2,857     3,398  

                           

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

 

Investment Partnership

                       

     

LP Interests (Fully diluted 2.3%)

          2,069     4,234  

                           

Logix Acquisition Company, LLC(10)

 

Competitive Local Exchange Carrier

                       

     

LIBOR Plus 5.75% (Floor 1.00%), Current Coupon 7.60%, Secured Debt (Maturity—December 22, 2024)(9)

    9,704     9,500     9,753  

                           

Looking Glass Investments, LLC(12)(13)

 

Specialty Consumer Finance

                       

     

Member Units (2.5 units)

          125     57  

     

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

          89     72  

                  214     129  

                           

LSF9 Atlantis Holdings, LLC(11)

 

Provider of Wireless Telecommunications Carrier Services

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.69%, Secured Debt (Maturity—May 1, 2023)(9)

    9,899     9,872     9,879  

                           

27


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

March 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Lulu's Fashion Lounge, LLC(10)

 

Fast Fashion E-Commerce Retailer

                       

     

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.88%, Secured Debt (Maturity—August 28, 2022)(9)

    13,125     12,753     13,519  

                           

Messenger, LLC(10)

 

Supplier of Specialty Stationery and Related Products to the Funeral Industry

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.36%, Secured Debt (Maturity—September 9, 2020)(9)

    17,283     17,208     17,283  

                           

Minute Key, Inc.

 

Operator of Automated Key Duplication Kiosks

                       

     

Warrants (1,437,409 equivalent shares; Expiration—May 20, 2025; Strike price—$0.01 per share)

          280     1,170  

                           

NBG Acquisition Inc(11)

 

Wholesaler of Home Décor Products

                       

     

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 7.95%, Secured Debt (Maturity—April 26, 2024)(9)

    4,375     4,311     4,391  

                           

New Media Holdings II LLC(11)(13)

 

Local Newspaper Operator

                       

     

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 8.13%,

    19,965     19,594     20,096  

     

Secured Debt (Maturity—July 14, 2022)(9)

                   

                           

NNE Partners, LLC(10)

 

Oil & Gas Exploration & Production

                       

     

LIBOR Plus 8.00%, Current Coupon 10.02%, Secured Debt (Maturity—March 2, 2022)

    15,458     15,326     15,326  

                           

North American Lifting Holdings, Inc.(11)

 

Crane Service Provider

                       

     

LIBOR Plus 4.50% (Floor 1.00%), Current Coupon 6.80%, Secured Debt (Maturity—November 27, 2020)(9)

    7,725     6,956     7,308  

                           

Novetta Solutions, LLC(11)

 

Provider of Advanced Analytics Solutions for Defense Agencies

                       

     

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.88%, Secured Debt (Maturity—October 17, 2022)(9)

    15,559     15,105     15,144  

                           

28


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

March 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

NTM Acquisition Corp.(11)

 

Provider of B2B Travel Information Content

                       

     

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 8.55%, Secured Debt (Maturity—June 7, 2022)(9)

    6,104     6,050     6,073  

                           

Ospemifene Royalty Sub LLC (QuatRx)(10)

 

Estrogen-Deficiency Drug Manufacturer and Distributor

                       

     

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

    5,058     5,058     1,020  

                           

Paris Presents Incorporated(11)

 

Branded Cosmetic and Bath Accessories

                       

     

LIBOR Plus 8.75% (Floor 1.00%), Current Coupon 10.63%, Secured Debt (Maturity—December 31, 2021)(9)

    4,500     4,472     4,556  

                           

Permian Holdco 2, Inc.(11)

 

Storage Tank Manufacturer

                       

     

14% PIK Unsecured Debt (Maturity—October 15, 2021)(19)

    357     357     357  

     

Preferred Stock (Permian Holdco 1, Inc.) (154,558 units)

          799     1,010  

     

Common Stock (Permian Holdco 1, Inc.) (154,558 units)

              10  

                  1,156     1,377  

                           

Pernix Therapeutics Holdings, Inc.(10)

 

Pharmaceutical Royalty

                       

     

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

    3,031     3,031     1,958  

                           

Pier 1 Imports, Inc.(11)(13)

 

Decorative Home Furnishings Retailer

                       

     

LIBOR Plus 3.50% (Floor 1.00%), Current Coupon 5.95%, Secured Debt (Maturity—April 30, 2021)(9)

    7,513     7,137     7,156  

                           

Point.360(10)

 

Fully Integrated Provider of Digital Media Services

                       

     

Warrants (65,463 equivalent shares; Expiration—July 7, 2020; Strike price—$0.75 per share)

          69      

     

Common Stock (163,658 shares)

          273     10  

                  342     10  

                           

PPC/SHIFT LLC(10)

 

Provider of Digital Solutions to Automotive Industry

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.84%, Secured Debt (Maturity—December 22, 2021)(9)

    6,781     6,667     6,781  

                           

29


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

March 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Prowler Acquisition Corp.(11)

 

Specialty Distributor to the Energy Sector

                       

     

LIBOR Plus 4.50% (Floor 1.00%), Current Coupon 6.34%, Secured Debt (Maturity—January 28, 2020)(9)

    16,872     15,432     16,493  

                           

PT Network, LLC(10)

 

Provider of Outpatient Physical Therapy and Sports Medicine Services

                       

     

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 7.21%, Secured Debt (Maturity—November 30, 2021)(9)

    8,839     8,839     8,839  

                           

QBS Parent, Inc.(11)

 

Provider of Software and Services to the Oil & Gas Industry

                       

     

LIBOR Plus 4.75% (Floor 1.00%), Current Coupon 6.52%, Secured Debt (Maturity—August 7, 2021)(9)

    14,272     14,124     14,201  

                           

Radiology Partners, Inc.(10)

 

Radiology Practice Providing Scan Interpretations

                       

     

LIBOR Plus 5.75% (Floor 1.00%), Current Coupon 7.59%, Secured Debt (Maturity—December 4, 2023)(9)

    9,731     9,635     9,749  

                           

Research Now Group, Inc. and Survey Sampling International, LLC(11)

 

Provider of Outsourced Online Surveying

                       

     

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 7.86%, Secured Debt (Maturity—December 20, 2024)(9)

    13,500     12,845     13,437  

                           

Resolute Industrial, LLC(10)

 

HVAC Equipment Rental and Remanufacturing

                       

     

LIBOR Plus 7.62% (Floor 1.00%), Current Coupon 9.31%, Secured Debt (Maturity—July 26, 2022)(9)(25)

    17,088     16,785     16,785  

     

Member Units (601 units)

          750     750  

                  17,535     17,535  

                           

RGL Reservoir Operations Inc.(11)(13)(21)

 

Oil & Gas Equipment and Services

                       

     

1% Current / 9% PIK Secured Debt (Maturity—December 21, 2024)(19)

    721     407     400  

                           

30


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

March 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

RM Bidder, LLC(10)

 

Scripted and Unscripted TV and Digital Programming Provider

                       

     

Warrants (327,532 equivalent units; Expiration—October 20, 2025; Strike price—$14.28 per unit)

          425      

     

Member Units (2,779 units)

          46     16  

                  471     16  

                           

SAFETY Investment Holdings, LLC

 

Provider of Intelligent Driver Record Monitoring Software and Services

                       

     

Member Units (2,000,000 units)

          2,000     1,670  

                           

Salient Partners L.P.(11)

 

Provider of Asset Management Services

                       

     

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.32%, Secured Debt (Maturity—June 9, 2021)(9)

    12,002     11,770     11,852  

                           

SiTV, LLC(11)

 

Cable Networks Operator

                       

     

10.375% Secured Debt (Maturity—July 1, 2019)

    10,429     7,051     6,336  

                           

SMART Modular Technologies, Inc.(10)(13)

 

Provider of Specialty Memory Solutions

                       

     

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.66%, Secured Debt (Maturity—August 9, 2022)(9)

    14,250     13,993     14,179  

                           

Sorenson Communications, Inc.(11)

 

Manufacturer of Communication Products for Hearing Impaired

                       

     

LIBOR Plus 5.75% (Floor 2.25%), Current Coupon 8.06%, Secured Debt (Maturity—April 30, 2020)(9)

    13,199     13,142     13,257  

                           

Staples Canada ULC(10)(13)(21)

 

Office Supplies Retailer

                       

     

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.68%, Secured Debt (Maturity—September 12, 2023)(9)(22)

    20,000     19,630     18,487  

                           

Strike, LLC(11)

 

Pipeline Construction and Maintenance Services

                       

     

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 10.45%, Secured Debt (Maturity—November 30, 2022)(9)

    9,500     9,262     9,642  

     

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 10.02%, Secured Debt (Maturity—May 30, 2019)(9)

    409     392     411  

                  9,654     10,053  

                           

31


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

March 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Synagro Infrastructure Company, Inc(11)

 

Waste Management Services

                       

     

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 7.80%, Secured Debt (Maturity—August 22, 2020)(9)

    11,662     11,259     11,021  

                           

TE Holdings, LLC(11)

 

Oil & Gas Exploration & Production

                       

     

Member Units (97,048 units)

          970     121  

                           

Tectonic Holdings, LLC

 

Financial Services Organization

                       

     

Member Units (200,000 units)(8)

          2,000     2,320  

                           

TeleGuam Holdings, LLC(11)

 

Cable and Telecom Services Provider

                       

     

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.38%, Secured Debt (Maturity—April 12, 2024)(9)

    7,750     7,606     7,808  

                           

TGP Holdings III LLC(11)

 

Outdoor Cooking & Accessories

                       

     

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 7.30%, Secured Debt (Maturity—September 25, 2024)(9)

    6,881     6,806     6,935  

     

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.80%, Secured Debt (Maturity—September 25, 2025)(9)

    5,000     4,928     5,075  

                  11,734     12,010  

                           

The Container Store, Inc.(11)(13)

 

Operator of Stores Offering Storage and Organizational Products

                       

     

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 9.31%, Secured Debt (Maturity—August 18, 2021)(9)

    6,831     6,650     6,840  

                           

The Pasha Group(11)

 

Diversified Logistics and Transportation Provided

                       

     

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 9.37%, Secured Debt (Maturity—January 26, 2023)(9)

    12,109     11,756     12,230  

                           

TMC Merger Sub Corp.(11)

 

Refractory & Maintenance Services Provider

                       

     

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 8.19%, Secured Debt (Maturity—October 31, 2022)(9)(26)

    17,545     17,415     17,676  

                           

32


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

March 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

TOMS Shoes, LLC(11)

 

Global Designer, Distributor, and Retailer of Casual Footwear

                       

     

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 7.48%, Secured Debt (Maturity—October 30, 2020)(9)

    4,850     4,606     2,861  

                           

Turning Point Brands, Inc.(10)(13)

 

Marketer/Distributor of Tobacco Products

                       

     

LIBOR Plus 7.00%, Current Coupon 8.70%, Secured Debt (Maturity—March 7, 2024)

    8,500     8,415     8,670  

                           

TVG-I-E CMN ACQUISITION, LLC(10)

 

Organic Lead Generation for Online Postsecondary Schools

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.88%, Secured Debt (Maturity—November 3, 2021)(9)

    11,099     10,910     11,099  

                           

U.S. TelePacific Corp.(11)

 

Provider of Communications and Managed Services

                       

     

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 7.30%, Secured Debt (Maturity—May 2, 2023)(9)

    20,651     20,463     20,104  

                           

US Joiner Holding Company(11)

 

Marine Interior Design and Installation

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.88%, Secured Debt (Maturity—April 16, 2020)(9)

    13,430     13,341     13,363  

                           

VIP Cinema Holdings, Inc.(11)

 

Supplier of Luxury Seating to the Cinema Industry

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 8.31%, Secured Debt (Maturity—March 1, 2023)(9)

    7,600     7,567     7,688  

                           

Vistar Media, Inc.(10)

 

Operator of Digital Out-of-Home Advertising Platform

                       

     

LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 12.31%, Secured Debt (Maturity—February 16, 2022)(9)

    3,319     3,060     3,114  

     

Warrants (70,207 equivalent shares; Expiration—February 17, 2027; Strike price—$0.01 per share)

          331     600  

                  3,391     3,714  

                           

33


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

March 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Wellnext, LLC(10)

 

Manufacturer of Supplements and Vitamins

                       

     

LIBOR Plus 10.10% (Floor 1.00%), Current Coupon 11.98%, Secured Debt (Maturity—July 21, 2022)(9)(23)

    9,930     9,861     10,228  

                           

Wireless Vision Holdings, LLC(10)

 

Provider of Wireless Telecommunications Carrier Services

                       

     

LIBOR Plus 8.91% (Floor 1.00%), Current Coupon 10.80%, Secured Debt (Maturity—September 29, 2022)(9)(24)

    12,899     12,634     12,634  

                           

Zilliant Incorporated

 

Price Optimization and Margin Management Solutions

                       

     

Preferred Stock (186,777 shares)

          154     260  

     

Warrants (952,500 equivalent shares; Expiration—June 15, 2022; Strike price—$0.001 per share)

          1,071     1,190  

                  1,225     1,450  

Subtotal Non-Control/Non-Affiliate Investments (47.9% of total investments at fair value)

  $ 1,126,103   $ 1,107,777  

Total Portfolio Investments, March 31, 2018

  $ 2,157,550   $ 2,314,034  

(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 March 31, 2018. As noted in this schedule, 69% of the loans (based on the par amount) contain LIBOR floors which range between 0.50% and 2.25%, with a weighted-average LIBOR floor of approximately 1.01%.

(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.

34


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

March 31, 2018

(dollars in thousands)

(unaudited)

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

(15)
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.

(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)
Investment fair value was determined using significant unobservable inputs, unless otherwise noted. See Note C for further discussion.

(19)
PIK interest income and cumulative dividend income represent income not paid currently in cash.

(20)
All portfolio company headquarters are based in the United States, unless otherwise noted.

(21)
Portfolio company headquarters are located outside of the United States.

(22)
In connection with the Company's debt investment in Staples Canada ULC to help mitigate any potential adverse change in foreign exchange rates during the term of the Company's investment, the Company entered into a forward foreign currency contract with Cadence Bank to lend $24.2 million Canadian Dollars and receive $20.0 million U.S. Dollars with a settlement date of September 12, 2018. The unrealized appreciation on the forward foreign currency contract is $1.1 million as of March 31, 2018. This unrealized appreciation is offset by the foreign currency translation depreciation on the investment.

(23)
The Company has entered into an intercreditor agreement that entitles the Company to the "last out" tranche of the first lien secured loans, whereby the "first out" tranche will receive priority as to the "last out" tranche with respect to payments of principal, interest, and any other amounts due thereunder. Therefore, the Company receives a higher interest rate than the contractual stated interest rate of LIBOR plus 7.50% (Floor 1.00%) per the Credit Agreement and the Consolidated Schedule of Investments above reflects such higher rate.

(24)
The Company has entered into an intercreditor agreement that entitles the Company to the "last out" tranche of the first lien secured loans, whereby the "first out" tranche will receive priority as to the "last out" tranche with respect to payments of principal, interest, and any other amounts due thereunder. Therefore, the Company receives a higher interest rate than the contractual stated interest rate of LIBOR plus 8.50% (Floor 1.00%) per the Credit Agreement and the Consolidated Schedule of Investments above reflects such higher rate.

(25)
As part of the credit agreement with the portfolio company, the Company is entitled to the "last out" tranche of the first lien secured loans, whereby the "first out" tranche receives priority over the "last out" tranche with respect to payments of principal, interest, and any other amounts due thereunder. The rate the Company receives per the Credit Agreement is the same as the rate reflected in the Consolidated Schedule of Investments above.

(26)
The Company has entered into an intercreditor agreement that entitles the Company to the "first out" tranche of the first lien secured loans, whereby the "first out" tranche will receive priority as to the "last out" tranche with respect to payments of principal, interest, and any other amounts due thereunder. Therefore, the Company receives a lower interest rate than the contractual stated interest rate of LIBOR plus 6.64% (Floor 1.00%) per the Credit Agreement and the Consolidated Schedule of Investments above reflects such lower rate.

(27)
All Company's portfolio investments are generally subject to restrictions on resale as "restricted securities", unless otherwise noted.

35


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Control Investments(5)

 

 

 

 

                   

                           

Access Media Holdings, LLC(10)

 

Private Cable Operator

                       

     

5% Current / 5% PIK Secured Debt (Maturity—July 22, 2020)(19)

  $ 23,828   $ 23,828   $ 17,150  

     

Preferred Member Units (8,248,500 units)

          8,142      

     

Member Units (45 units)

          1      

                  31,971     17,150  

                           

ASC Interests, LLC

 

Recreational and Educational Shooting Facility

                       

     

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

    1,800     1,795     1,795  

     

Member Units (1,500 units)

          1,500     1,530  

                  3,295     3,325  

                           

ATS Workholding, LLC(10)

 

Manufacturer of Machine Cutting Tools and Accessories

                       

     

5% Secured Debt (Maturity—November 16, 2021)

    3,726     3,249     3,249  

     

Preferred Member Units (3,725,862 units)

          3,726     3,726  

                  6,975     6,975  

                           

Bond-Coat, Inc.

 

Casing and Tubing Coating Services

                       

     

12% Secured Debt (Maturity—December 28, 2017)(17)

    11,596     11,596     11,596  

     

Common Stock (57,508 shares)

          6,350     9,370  

                  17,946     20,966  

                           

Café Brazil, LLC

 

Casual Restaurant Group

                       

     

Member Units (1,233 units)(8)

          1,742     4,900  

                           

CBT Nuggets, LLC

 

Produces and Sells IT

                       

 

Training Certification

                       

 

Videos

                       

     

Member Units (416 units)(8)

          1,300     89,560  

                           

Charps, LLC

 

Pipeline Maintenance and Construction

                       

     

12% Secured Debt (Maturity—February 3, 2022)

    18,400     18,225     18,225  

     

Preferred Member Units (1,600 units)

          400     650  

                  18,625     18,875  

                           

36


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Clad-Rex Steel, LLC

 

Specialty Manufacturer of Vinyl-Clad Metal

                       

     

LIBOR Plus 9.50% (Floor 1.00%), Current Coupon 10.86%, Secured Debt (Maturity—December 20, 2021)(9)

    13,280     13,168     13,280  

     

Member Units (717 units)(8)

          7,280     9,500  

     

10% Secured Debt (Clad-Rex Steel RE Investor, LLC) (Maturity—December 20, 2036)

    1,183     1,171     1,183  

     

Member Units (Clad-Rex Steel RE Investor, LLC) (800 units)

          210     280  

                  21,829     24,243  

                           

CMS Minerals Investments

 

Oil & Gas Exploration & Production

                       

     

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

          3,440     2,392  

                           

Copper Trail Energy Fund I, LP(12)(13)

 

Investment Partnership

                       

     

LP Interests (Fully diluted 30.1%)

          2,500     2,500  

                           

Datacom, LLC

 

Technology and Telecommunications Provider

                       

     

8% Secured Debt (Maturity—May 30, 2018)

    1,575     1,575     1,575  

     

5.25% Current / 5.25% PIK Secured Debt (Maturity—May 30, 2019)(19)

    12,349     12,311     11,110  

     

Class A Preferred Member Units

          1,181     730  

     

Class B Preferred Member Units (6,453 units)

          6,030      

                  21,097     13,415  

                           

Gamber-Johnson Holdings, LLC

 

Manufacturer of

                       

 

Ruggedized Computer

                       

 

Mounting Systems

                       

     

LIBOR Plus 11.00% (Floor 1.00%), Current Coupon 12.36%, Secured Debt (Maturity—June 24, 2021)(9)

    23,400     23,213     23,400  

     

Member Units (8,619 units)(8)

          14,844     23,370  

                  38,057     46,770  

                           

Garreco, LLC

 

Manufacturer and Supplier of Dental Products

                       

     

LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 11.34%, Secured Debt (Maturity—March 31, 2020)(9)

    5,483     5,443     5,443  

     

Member Units (1,200 units)

          1,200     1,940  

                  6,643     7,383  

                           

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Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

GRT Rubber Technologies LLC

 

Manufacturer of Engineered Rubber Products

                       

     

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.36%, Secured Debt (Maturity—December 19, 2019)(9)

    11,603     11,550     11,603  

     

Member Units (5,879 units)(8)

          13,065     21,970  

                  24,615     33,573  

                           

Gulf Manufacturing, LLC

 

Manufacturer of Specialty Fabricated Industrial Piping Products

                       

     

Member Units (438 units)(8)

          2,980     10,060  

                           

Gulf Publishing Holdings, LLC

 

Energy Industry Focused Media and Publishing

                       

     

LIBOR Plus 9.50% (Floor 1.00%), Current Coupon 10.86%, Secured Debt (Maturity—September 30, 2020)(9)

    80     80     80  

     

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

    12,800     12,703     12,703  

     

Member Units (3,681 units)

          3,681     4,840  

                  16,464     17,623  

                           

Harborside Holdings, LLC

 

Real Estate Holding Company

                       

     

Member units (100 units)

          6,206     9,400  

                           

Harris Preston Fund Investments(12)(13)

 

Investment Partnership

                       

     

LP Interests (2717 MH, L.P.) (Fully diluted 49.3%)

          536     536  

                           

Harrison Hydra-Gen, Ltd.

 

Manufacturer of Hydraulic Generators

                       

     

Common Stock (107,456 shares)

          718     3,580  

                           

HW Temps LLC

 

Temporary Staffing Solutions

                       

     

LIBOR Plus 11.00% (Floor 1.00%), Current Coupon 12.36%, Secured Debt (Maturity July 2, 2020)(9)

    9,976     9,918     9,918  

     

Preferred Member Units (3,200 units)

          3,942     3,940  

                  13,860     13,858  

                           

Hydratec, Inc.

 

Designer and Installer of Micro-Irrigation Systems

                       

     

Common Stock (7,095 shares)(8)

          7,095     15,000  

                           

IDX Broker, LLC

 

Provider of Marketing and CRM Tools for the Real Estate Industry

                       

     

11.5% Secured Debt (Maturity—November 15, 2020)

    15,250     15,116     15,250  

     

Preferred Member Units (5,607 units)(8)

          5,952     11,660  

                  21,068     26,910  

                           

38


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Jensen Jewelers of Idaho, LLC

 

Retail Jewelry Store

                       

     

Prime Plus 6.75% (Floor 2.00%), Current Coupon 11.00%, Secured Debt (Maturity—November 14, 2019)(9)

    3,955     3,917     3,955  

     

Member Units (627 units)(8)

          811     5,100  

                  4,728     9,055  

                           

KBK Industries, LLC

 

Manufacturer of Specialty Oilfield and Industrial Products

                       

     

10% Secured Debt (Maturity—September 28, 2020)

    375     372     375  

     

12.5% Secured Debt (Maturity—September 28, 2020)

    5,900     5,867     5,900  

     

Member Units (325 units)(8)

          783     4,420  

                  7,022     10,695  

                           

Lamb Ventures, LLC

 

Aftermarket Automotive Services Chain

                       

     

11% Secured Debt (Maturity—July 1, 2022)

    9,942     9,890     9,942  

     

Preferred Equity (non-voting)

          400     400  

     

Member Units (742 units)(8)

          5,273     6,790  

     

9.5% Secured Debt (Lamb's Real Estate Investment I, LLC) (Maturity—March 31, 2027)

    432     428     432  

     

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

          625     520  

                  16,616     18,084  

                           

Marine Shelters Holdings, LLC

 

Fabricator of Marine and Industrial Shelters

                       

     

12% PIK Secured Debt (Maturity—December 28, 2017)(14)

    3,131     3,078      

     

Preferred Member Units (3,810 units)

          5,352      

                  8,430      

                           

Market Force Information, LLC

 

Provider of Customer Experience Management Services

                       

     

LIBOR Plus 11.00% (Floor 1.00%), Current Coupon 12.48%, Secured Debt (Maturity—July 28, 2022)(9)

    23,360     23,143     23,143  

     

Member Units (657,113 units)

          14,700     14,700  

                  37,843     37,843  

                           

MH Corbin Holding LLC

 

Manufacturer and Distributor of Traffic Safety Products

                       

     

13% Secured Debt (Maturity—August 31, 2020)

    12,600     12,526     12,526  

     

Preferred Member Units (4,000 shares)

          6,000     6,000  

                  18,526     18,526  

                           

39


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Mid-Columbia Lumber Products, LLC

 

Manufacturer of Finger-Jointed Lumber Products

                       

     

10% Secured Debt (Maturity—January 15, 2020)

    1,398     1,390     1,390  

     

12% Secured Debt (Maturity—January 15, 2020)

    3,900     3,863     3,863  

     

Member Units (5,714 units)

          2,405     1,575  

     

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

    791     791     791  

     

Member Units (Mid-Columbia Real Estate, LLC) (500 units)(8)

          790     1,290  

                  9,239     8,909  

                           

MSC Adviser I, LLC(16)

 

Third Party Investment Advisory Services

                       

     

Member Units (Fully diluted 100.0%)(8)

              41,768  

                           

Mystic Logistics Holdings, LLC

 

Logistics and Distribution Services Provider for Large Volume Mailers

                       

     

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

    7,768     7,696     7,696  

     

Common Stock (5,873 shares)

          2,720     6,820  

                  10,416     14,516  

                           

NAPCO Precast, LLC

 

Precast Concrete Manufacturing

                       

     

LIBOR Plus 8.50%, Current Coupon 9.98%, Secured Debt (Maturity—May 31, 2019)

    11,475     11,439     11,475  

     

Member Units (2,955 units)(8)

          2,975     11,670  

                  14,414     23,145  

                           

NRI Clinical Research, LLC

 

Clinical Research Service Provider

                       

     

LIBOR Plus 6.50% (Floor 1.50%), Current Coupon 8.00%, Secured Debt (Maturity—January 15, 2018)(9)

    400     400     400  

     

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

    3,865     3,865     3,865  

     

Warrants (251,723 equivalent units; Expiration—September 8, 2021; Strike price—$0.01 per unit)

          252     500  

     

Member Units (1,454,167 units)

          765     2,500  

                  5,282     7,265  

                           

NRP Jones, LLC

 

Manufacturer of Hoses, Fittings and Assemblies

                       

     

12% Secured Debt (Maturity—March 20, 2023)

    6,376     6,376     6,376  

     

Member Units (65,208 units)(8)

          3,717     3,250  

                  10,093     9,626  

                           

40


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

NuStep, LLC

 

Designer, Manufacturer and Distributor of Fitness Equipment

                       

     

12% Secured Debt (Maturity—January 31, 2022)

    20,600     20,420     20,420  

     

Preferred Member Units (406 units)

          10,200     10,200  

                  30,620     30,620  

                           

OMi Holdings, Inc.

 

Manufacturer of Overhead Cranes

                       

     

Common Stock (1,500 shares)(8)

          1,080     14,110  

                           

Pegasus Research Group, LLC

 

Provider of Telemarketing and Data Services

                       

     

Member Units (460 units)(8)

          1,290     10,310  

                           

PPL RVs, Inc.

 

Recreational Vehicle Dealer

                       

     

LIBOR Plus 7.00% (Floor 0.50%), Current Coupon 8.34%, Secured Debt (Maturity—November 15, 2021)(9)

    16,100     15,972     16,100  

     

Common Stock (1,962 shares)(8)

          2,150     12,440  

                  18,122     28,540  

                           

Principle Environmental, LLC (d/b/a TruHorizon Environmental Solutions)

 

Noise Abatement Service Provider

                       

     

13% Secured Debt (Maturity—April 30, 2020)

    7,477     7,347     7,477  

     

Preferred Member Units (19,631 units)

          4,600     11,490  

     

Warrants (1,018 equivalent units; Expiration—January 31, 2021; Strike price—$0.01 per unit)

          1,200     650  

                  13,147     19,617  

                           

Quality Lease Service, LLC

 

Provider of Rigsite Accommodation Unit Rentals and Related Services

                       

     

Zero Coupon Secured Debt (Maturity—June 8, 2020)

    7,341     7,341     6,950  

     

Member Units (1,000 units)

          2,868     4,938  

                  10,209     11,888  

                           

River Aggregates, LLC

 

Processor of Construction Aggregates

                       

     

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

    750     707     707  

     

Member Units (1,150 units)

          1,150     4,610  

     

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

          369     2,559  

                  2,226     7,876  

                           

41


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

SoftTouch Medical Holdings LLC

 

Provider of In-Home Pediatric Durable Medical Equipment

                       

     

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.36%, Secured Debt (Maturity—October 31, 2019)(9)

    7,140     7,110     7,140  

     

Member Units (4,450 units)(8)

          4,930     10,089  

                  12,040     17,229  

                           

The MPI Group, LLC

 

Manufacturer of Custom Hollow Metal Doors, Frames and Accessories

                       

     

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

    2,924     2,923     2,410  

     

Series A Preferred Units (2,500 units)

          2,500      

     

Warrants (1,424 equivalent units; Expiration—July 1, 2024; Strike price—$0.01 per unit)

          1,096      

     

Member Units (MPI Real Estate Holdings, LLC) (100 units)(8)

          2,300     2,389  

                  8,819     4,799  

                           

Uvalco Supply, LLC

 

Farm and Ranch Supply Store

                       

     

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

    348     348     348  

     

Member Units (1,867 units)(8)

          3,579     3,880  

                  3,927     4,228  

                           

Vision Interests, Inc.

 

Manufacturer / Installer of Commercial Signage

                       

     

13% Secured Debt (Maturity—December 23, 2018)

    2,814     2,797     2,797  

     

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

          3,000     3,000  

     

Common Stock (1,126,242 shares)

          3,706      

                  9,503     5,797  

                           

Ziegler's NYPD, LLC

 

Casual Restaurant Group

                       

     

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

    1,000     996     996  

     

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; Expiration—September 29, 2018; Strike price—$0.01 per unit)

          600      

     

Preferred Member Units (10,072 units)

          2,834     3,220  

                  7,480     7,266  

Subtotal Control Investments (34.6% of total investments at fair value)

  $ 530,034   $ 750,706  

42


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Affiliate Investments(6)

 

 

 

 

                   

                           

AFG Capital Group, LLC

 

Provider of Rent-to-Own Financing Solutions and Services

                       

     

Warrants (42 equivalent units; Expiration—November 7, 2024; Strike price—$0.01 per unit)

        $ 259   $ 860  

     

Preferred Member Units (186 units)(8)

          1,200     3,590  

                  1,459     4,450  

                           

Barfly Ventures, LLC(10)

 

Casual Restaurant Group

                       

     

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

    8,715     8,572     8,715  

     

Options (2 equivalent units)

          397     920  

     

Warrant (1 equivalent unit; Expiration—August 31, 2025; Strike price—$1.00 per unit)

          473     520  

                  9,442     10,155  

                           

BBB Tank Services, LLC

 

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

                       

     

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 9.36%, Secured Debt (Maturity—April 8, 2021)(9)

    800     778     778  

     

15% Secured Debt (Maturity—April 8, 2021)

    4,000     3,876     3,876  

     

Member Units (800,000 units)

          800     500  

                  5,454     5,154  

                           

Boccella Precast Products LLC

 

Manufacturer of Precast Hollow Core Concrete

                       

     

LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 11.34%, Secured Debt (Maturity—June 30, 2022)(9)

    16,400     16,230     16,400  

     

Member Units (2,160,000 units)

          2,160     3,440  

                  18,390     19,840  

                           

Boss Industries, LLC

 

Manufacturer and Distributor of Air, Power and Other Industrial Equipment

                       

     

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

          2,080     3,930  

                           

43


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Bridge Capital Solutions Corporation

 

Financial Services and Cash Flow Solutions Provider

                       

     

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

    7,500     5,884     5,884  

     

Warrants (63 equivalent shares; Expiration—July 25, 2026; Strike price—$0.01 per share)

          2,132     3,520  

     

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

    1,000     992     1,000  

     

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

          1,000     1,000  

                  10,008     11,404  

                           

Buca C, LLC

 

Casual Restaurant Group

                       

     

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.63%, Secured Debt (Maturity—June 30, 2020)(9)

    20,304     20,193     20,193  

     

Preferred Member Units (6 units; 6% cumulative)(8)(19)

          4,177     4,172  

                  24,370     24,365  

                           

CAI Software LLC

 

Provider of Specialized Enterprise Resource Planning Software

                       

     

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

    4,083     4,060     4,083  

     

Member Units (65,356 units)(8)

          654     3,230  

                  4,714     7,313  

                           

Chandler Signs Holdings, LLC(10)

 

Sign Manufacturer

                       

     

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

    4,500     4,468     4,500  

     

Class A Units (1,500,000 units)(8)

          1,500     2,650  

                  5,968     7,150  

                           

Condit Exhibits, LLC

 

Tradeshow Exhibits / Custom Displays Provider

                       

     

Member Units (3,936 units)(8)

          100     1,950  

                           

Congruent Credit Opportunities Funds(12)(13)

 

Investment Partnership

                       

     

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

          5,730     1,515  

     

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

          17,869     18,632  

                  23,599     20,147  

                           

44


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Dos Rios Partners(12)(13)

 

Investment Partnership

                       

     

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

          5,996     7,165  

     

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

          1,904     1,889  

                  7,900     9,054  

                           

Dos Rios Stone Products LLC(10)

 

Limestone and Sandstone Dimension Cut Stone Mining Quarries

                       

     

Class A Preferred Units (2,000,000 units)(8)

          2,000     1,790  

                           

East Teak Fine Hardwoods, Inc.

 

Distributor of Hardwood Products

                       

     

Common Stock (6,250 shares)(8)

          480     630  

                           

EIG Fund Investments(12)(13)

 

Investment Partnership

                       

     

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

          1,103     1,055  

                           

Freeport Financial Funds(12)(13)

 

Investment Partnership

                       

     

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

          5,974     5,614  

     

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

          8,558     8,506  

                  14,532     14,120  

                           

Gault Financial, LLC (RMB Capital, LLC)

 

Purchases and Manages Collection of Healthcare and other Business Receivables

                       

     

10.5% Secured Debt (Maturity—January 1, 2019)

    12,483     12,483     11,532  

     

Warrants (29,032 equivalent units; Expiration—February 9, 2022; Strike price—$0.01 per unit)

          400      

                  12,883     11,532  

                           

Guerdon Modular Holdings, Inc.

 

Multi-Family and Commercial Modular Construction Company

                       

     

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

    10,708     10,632     10,632  

     

Preferred Stock (404,998 shares)

          1,140      

     

Common Stock (212,033 shares)

          2,983      

                  14,755     10,632  

                           

Harris Preston Fund Investments(12)(13)

 

Investment Partnership

                       

     

LP Interests (HPEP 3, L.P.) (Fully diluted 9.9%)

          943     943  

                           

45


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Hawk Ridge Systems, LLC(13)

 

Value-Added Reseller of Engineering Design and Manufacturing Solutions

                       

     

11% Secured Debt (Maturity—December 2, 2021)

    14,300     14,175     14,300  

     

Preferred Member Units (226 units)(8)

          2,850     3,800  

     

Preferred Member Units (HRS Services, ULC) (226 units)(8)

          150     200  

                  17,175     18,300  

                           

Houston Plating and Coatings, LLC

 

Provider of Plating and Industrial Coating Services

                       

     

8% Unsecured Convertible Debt (Maturity—May 1, 2022)

    3,000     3,000     3,200  

     

Member Units (315,756 units)

          2,179     6,140  

                  5,179     9,340  

                           

I-45 SLF LLC(12)(13)

 

Investment Partnership

                       

     

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

          16,200     16,841  

                           

L.F. Manufacturing Holdings, LLC(10)

 

Manufacturer of Fiberglass Products

                       

     

Member Units (2,179,001 units)

          2,019     2,000  

                           

Meisler Operating LLC

 

Provider of Short-term Trailer and Container Rental

                       

     

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.84%, Secured Debt (Maturity—June 7, 2022)(9)

    16,800     16,633     16,633  

     

Member Units (Milton Meisler Holdings LLC) (31,976 units)

          3,200     3,390  

                  19,833     20,023  

                           

OnAsset Intelligence, Inc.

 

Provider of Transportation Monitoring / Tracking Products and Services

                       

     

12% PIK Secured Debt (Maturity—June 30, 2021)(19)

    5,094     5,094     5,094  

     

10% PIK Unsecured Debt (Maturity—June 30, 2021)(19)

    48     48     48  

     

Preferred Stock (912 shares)

          1,981      

     

Warrants (5,333 equivalent shares; Expiration—April 18, 2021; Strike price—$0.01 per share)

          1,919      

                  9,042     5,142  

                           

OPI International Ltd.(13)

 

Provider of Man Camp and Industrial Storage Services

                       

     

Common Stock (20,766,317 shares)

          1,371      

                           

46


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

PCI Holding Company, Inc.

 

Manufacturer of Industrial Gas Generating Systems

                       

     

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

    12,650     12,593     12,593  

     

Preferred Stock (1,740,000 shares) (non-voting)

          1,740     2,610  

     

Preferred Stock (1,500,000 shares; 20% cumulative)(8)(19)

          3,927     890  

                  18,260     16,093  

                           

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)(15)

    30,785     30,281     250  

     

Preferred Member Units (250 units)

          2,500      

                  32,781     250  

                           

Tin Roof Acquisition Company

 

Casual Restaurant Group

                       

     

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

    12,783     12,722     12,722  

     

Class C Preferred Stock (Fully diluted 10.0%; 10% cumulative)(8)(19)

          3,027     3,027  

                  15,749     15,749  

                           

UniTek Global Services, Inc.(11)

 

Provider of Outsourced Infrastructure Services

                       

     

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.20%, Secured Debt (Maturity—January 13, 2019)(9)

    8,535     8,529     8,535  

     

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 9.20% / 1.00% PIK, Current Coupon Plus PIK 10.20%, Secured Debt (Maturity—January 13, 2019)(9)(19)

    137     137     137  

     

15% PIK Unsecured Debt (Maturity—July 13, 2019)(19)

    865     865     865  

     

Preferred Stock (2,596,567 shares; 19% cumulative)(8)(19)

          2,858     2,850  

     

Preferred Stock (4,935,377 shares; 13.5% cumulative)(8)(19)

          7,361     7,320  

     

Common Stock (1,075,992 shares)

              2,490  

                  19,750     22,197  

                           

47


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Universal Wellhead Services Holdings, LLC(10)

 

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

                       

     

Preferred Member Units (UWS Investments, LLC) (716,949 units)

          717     830  

     

Member Units (UWS Investments, LLC) (4,000,000 units)

          4,000     1,910  

                  4,717     2,740  

                           

Valley Healthcare Group, LLC

 

Provider of Durable Medical Equipment

                       

     

LIBOR Plus 12.50% (Floor 0.50%), Current Coupon 13.86%, Secured Debt (Maturity—December 29, 2020)(9)

    11,766     11,685     11,685  

     

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

          1,600     1,600  

                  13,285     13,285  

                           

Volusion, LLC

 

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

                       

     

11.5% Secured Debt (Maturity—January 26, 2020)

    16,734     15,200     15,200  

     

Preferred Member Units (4,876,670 units)

          14,000     14,000  

     

Warrants (1,831,355 equivalent units; Expiration—January 26, 2025; Strike price—$0.01 per unit)

          2,576     2,080  

                  31,776     31,280  

Subtotal Affiliate Investments (15.6% of total investments at fair value)

  $ 367,317   $ 338,854  

48


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Non-Control/Non-Affiliate Investments(7)

             

                           

AAC Holdings, Inc.(11)

 

Substance Abuse Treatment Service Provider

                       

     

LIBOR Plus 6.75% (Floor 1.00%), Current Coupon 8.13%, Secured Debt (Maturity—June 30, 2023)(9)

  $ 11,751   $ 11,475   $ 11,810  

                           

Adams Publishing Group, LLC(10)

 

Local Newspaper Operator

                       

     

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.69%, Secured Debt (Maturity—November 3, 2020)(9)

    10,341     10,116     10,147  

                           

ADS Tactical, Inc.(10)

 

Value-Added Logistics and Supply Chain Provider to the Defense Industry

                       

     

LIBOR Plus 7.50% (Floor 0.75%), Current Coupon 9.19%, Secured Debt (Maturity—December 31, 2022)(9)

    13,014     12,767     12,833  

                           

Aethon United BR LP(10)

 

Oil & Gas Exploration & Production

                       

     

LIBOR Plus 6.75% (Floor 1.00%), Current Coupon 8.15%, Secured Debt (Maturity—September 8, 2023)(9)

    3,438     3,388     3,388  

                           

Ahead, LLC(10)

 

IT Infrastructure Value Added Reseller

                       

     

LIBOR Plus 6.50%, Current Coupon 8.20%, Secured Debt (Maturity—November 2, 2020)

    11,061     10,848     11,130  

                           

Allflex Holdings III Inc.(11)

 

Manufacturer of Livestock Identification Products

                       

     

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.36%, Secured Debt (Maturity—July 19, 2021)(9)

    13,846     13,781     13,955  

                           

American Scaffold Holdings, Inc.(10)

 

Marine Scaffolding Service Provider

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.19%, Secured Debt (Maturity—March 31, 2022)(9)

    7,031     6,947     6,996  

                           

49


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

American Teleconferencing Services, Ltd.(11)

 

Provider of Audio Conferencing and Video Collaboration Solutions

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.90%, Secured Debt (Maturity—December 8, 2021)(9)

    10,582     9,934     10,443  

     

LIBOR Plus 9.50% (Floor 1.00%), Current Coupon 10.85%, Secured Debt (Maturity—June 6, 2022)(9)

    3,714     3,589     3,507  

                  13,523     13,950  

                           

Anchor Hocking, LLC(11)

 

Household Products Manufacturer

                       

     

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.49%, Secured Debt (Maturity—June 4, 2020)(9)

    2,254     2,211     2,248  

     

Member Units (440,620 units)

          4,928     3,745  

                  7,139     5,993  

                           

Apex Linen Service, Inc.

 

Industrial Launderers

                       

     

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.36%, Secured Debt (Maturity—October 30, 2022)(9)

    2,400     2,400     2,400  

     

16% Secured Debt (Maturity—October 30, 2022)

    14,416     14,347     14,347  

                  16,747     16,747  

                           

Arcus Hunting LLC.(10)

 

Manufacturer of Bowhunting and Archery Products and Accessories

                       

     

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.34%, Secured Debt (Maturity—November 13, 2019)(9)

    15,391     15,294     15,391  

                           

ATI Investment Sub, Inc.(11)

 

Manufacturer of Solar Tracking Systems

                       

     

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.82%, Secured Debt (Maturity—June 22, 2021)(9)

    7,364     7,215     7,346  

                           

ATX Networks Corp.(11)(13)(21)

 

Provider of Radio Frequency Management Equipment

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.33% / 1.00% PIK, Current Coupon Plus PIK 8.33%, Secured Debt (Maturity—June 11, 2021)(9)(19)

    9,567     9,454     9,507  

                           

50


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Berry Aviation, Inc.(10)

 

Airline Charter Service Operator

                       

     

13.75% Secured Debt (Maturity—January 30, 2020)

    5,627     5,598     5,627  

     

Common Stock (553 shares)

          400     1,010  

                  5,998     6,637  

                           

BigName Commerce, LLC(10)

 

Provider of Envelopes and Complimentary Stationery Products

                       

     

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.59%, Secured Debt (Maturity—May 11, 2022)(9)

    2,488     2,461     2,461  

                           

Binswanger Enterprises, LLC(10)

 

Glass Repair and Installation Service Provider

                       

     

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 9.69%, Secured Debt (Maturity—March 9, 2022)(9)

    15,325     15,060     15,192  

     

Member Units (1,050,000 units)

          1,050     1,000  

                  16,110     16,192  

                           

Bluestem Brands, Inc.(11)

 

Multi-Channel Retailer of General Merchandise

                       

     

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 9.07%, Secured Debt (Maturity—November 6, 2020)(9)

    12,127     11,955     8,540  

                           

Brainworks Software, LLC(10)

 

Advertising Sales and Newspaper Circulation Software

                       

     

Prime Plus 9.25% (Floor 3.25%), Current Coupon 13.75%, Secured Debt (Maturity—July 22, 2019)(9)

    6,733     6,705     6,573  

                           

Brightwood Capital Fund Investments(12)(13)

 

Investment Partnership

                       

     

LP Interests (Brightwood Capital Fund III, LP) (Fully diluted 1.6%)(8)

          12,000     10,328  

     

LP Interests (Brightwood Capital Fund IV, LP) (Fully diluted 0.8%)(8)

          1,000     1,063  

                  13,000     11,391  

                           

Brundage-Bone Concrete Pumping, Inc.(11)

 

Construction Services Provider

                       

     

10.375% Secured Debt (Maturity—September 1, 2023)

    3,000     2,987     3,180  

                           

Cadence Aerospace LLC(10)

 

Aerostructure Manufacturing

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.91%, Secured Debt (Maturity—November 14, 2023)(9)

    15,000     14,853     14,853  

                           

51


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

CapFusion, LLC(13)

 

Non-Bank Lender to Small Businesses

                       

     

13% Secured Debt (Maturity—March 25, 2021)(14)

    6,705     5,645     1,871  

                           

California Pizza Kitchen, Inc.(11)

 

Casual Restaurant Group

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.57%, Secured Debt (Maturity—August 23, 2022)(9)

    12,902     12,862     12,677  

                           

CDHA Management, LLC(10)

 

Dental Services

                       

     

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.76%, Secured Debt (Maturity—December 5, 2021)(9)

    5,365     5,303     5,365  

                           

Central Security Group, Inc.(11)

 

Security Alarm Monitoring Service Provider

                       

     

LIBOR Plus 5.63% (Floor 1.00%), Current Coupon 7.19%, Secured Debt (Maturity—October 6, 2021)(9)

    7,481     7,462     7,518  

                           

Cenveo Corporation(11)

 

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

                       

     

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

    19,130     17,126     13,582  

                           

Charlotte Russe, Inc(11)

 

Fast-Fashion Retailer to Young Women

                       

     

LIBOR Plus 5.50% (Floor 1.25%), Current Coupon 6.89%, Secured Debt (Maturity—May 22, 2019)(9)

    19,041     16,473     7,807  

                           

Clarius BIGS, LLC(10)

 

Prints & Advertising Film Financing

                       

     

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

    2,924     2,924     85  

                           

Clickbooth.com, LLC(10)

 

Provider of Digital Advertising Performance Marketing Solutions

                       

     

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.01%, Secured Debt (Maturity—December 5, 2022)(9)

    3,000     2,941     2,941  

                           

52


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Construction Supply Investments, LLC(10)

 

Distribution Platform of Specialty Construction Materials to Professional Concrete and Masonry Contractors

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.57%, Secured Debt (Maturity—June 30, 2023)(9)

    7,125     7,090     7,090  

     

Member Units (28,000 units)

          3,723     3,723  

                  10,813     10,813  

                           

CTVSH, PLLC(10)

 

Emergency Care and Specialty Service Animal Hospital

                       

     

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 9.48%, Secured Debt (Maturity—August 3, 2022)(9)

    11,850     11,739     11,739  

                           

Darr Equipment LP(10)

 

Heavy Equipment Dealer

                       

     

11.5% Current / 1% PIK Secured Debt (Maturity—June 22, 2023)(19)

    7,229     7,229     7,229  

     

Warrants (915,734 equivalent units; Expiration—December 23, 2023; Strike price—$1.50 per unit)

          474     10  

                  7,703     7,239  

                           

Digital River, Inc.(11)

 

Provider of Outsourced e-Commerce Solutions and Services

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.08%, Secured Debt (Maturity—February 12, 2021)(9)

    9,313     9,266     9,337  

                           

Drilling Info Holdings, Inc.

 

Information Services for the Oil and Gas Industry

                       

     

Common Stock (3,788,865 shares)(8)

              8,610  

                           

53


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

EnCap Energy Fund Investments(12)(13)

 

Investment Partnership

                       

     

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

          3,906     2,202  

     

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

          2,227     1,549  

     

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

          4,305     3,720  

     

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

          6,277     6,225  

     

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

          6,138     6,116  

     

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

          3,458     3,828  

                  26,311     23,640  

                           

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 9.82%, Secured Debt (Maturity—April 28, 2022)(9)

    6,999     6,878     6,244  

                           

Extreme Reach, Inc.(11)

 

Integrated TV and Video Advertising Platform

                       

     

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.95%, Secured Debt (Maturity—February 7, 2020)(9)

    10,411     10,397     10,398  

                           

Felix Investments Holdings II(10)

 

Oil & Gas Exploration & Production

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.90%, Secured Debt (Maturity—August 9, 2022)(9)

    3,333     3,267     3,267  

                           

Flavors Holdings Inc.(11)

 

Global Provider of Flavoring and Sweetening Products

                       

     

LIBOR Plus 5.75% (Floor 1.00%), Current Coupon 7.44%, Secured Debt (Maturity—April 3, 2020)(9)

    13,076     12,616     12,128  

                           

54


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

GI KBS Merger Sub LLC(11)

 

Outsourced Janitorial Services to Retail/Grocery Customers

                       

     

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.48%, Secured Debt (Maturity—October 29, 2021)(9)

    6,807     6,733     6,833  

     

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.88%, Secured Debt (Maturity—April 29, 2022)(9)

    3,915     3,769     3,793  

                  10,502     10,626  

                           

GoWireless Holdings, Inc.(11)

 

Provider of Wireless Telecommunications Carrier Services

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.16%, Secured Debt (Maturity—December 22, 2024)(9)

    18,000     17,820     17,865  

                           

Grace Hill, LLC(10)

 

Online Training Tools for the Multi-Family Housing Industry

                       

     

Prime Plus 5.25% (Floor 1.00%), Current Coupon 9.75%, Secured Debt (Maturity—August 15, 2019)(9)

    1,215     1,208     1,215  

     

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.58%, Secured Debt (Maturity—August 15, 2019)(9)

    11,407     11,356     11,407  

                  12,564     12,622  

                           

Great Circle Family Foods, LLC(10)

 

Quick Service Restaurant Franchise

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.34%, Secured Debt (Maturity—October 28, 2019)(9)

    7,219     7,187     7,219  

                           

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)

    4,750     4,748     3,541  

     

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

    2,055     2,040     226  

                  6,788     3,767  

                           

GST Autoleather, Inc.(11)

 

Automotive Leather Manufacturer

                       

     

PRIME Plus 6.50% (Floor 2.25%), Current Coupon 11.00%, Secured Debt (Maturity—April 5, 2018)(9)

    7,578     7,500     7,500  

     

PRIME Plus 6.50% (Floor 2.00%), Current Coupon 11.00%, Secured Debt (Maturity—July 10, 2020)(9)

    15,619     15,120     11,813  

                  22,620     19,313  

                           

55


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Guitar Center, Inc.(11)

 

Musical Instruments Retailer

                       

     

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

    16,625     16,009     15,378  

                           

Hojeij Branded Foods, LLC(10)

 

Multi-Airport, Multi-Concept Restaurant Operator

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.57%, Secured Debt (Maturity—July 20, 2022)(9)

    12,137     12,022     12,137  

                           

Hoover Group, Inc.(10)(13)

 

Provider of Storage Tanks and Related Products to the Energy and Petrochemical Markets

                       

     

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.70%, Secured Debt (Maturity—January 28, 2021)(9)

    8,460     7,986     7,783  

                           

Hostway Corporation(11)

 

Managed Services and Hosting Provider

                       

     

LIBOR Plus 6.75% (Floor 1.25%), Current Coupon 8.44%, Secured Debt (Maturity—December 13, 2019)(9)

    20,150     19,796     19,621  

     

LIBOR Plus 6.75% (Floor 1.25%), Current Coupon 8.44%, Secured Debt (Maturity—December 13, 2018)(9)

    12,406     11,575     11,692  

                  31,371     31,313  

                           

Hunter Defense Technologies, Inc.(11)

 

Provider of Military and Commercial Shelters and Systems

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.70%, Secured Debt (Maturity—August 5, 2019)(9)

    20,224     19,851     19,997  

                           

Hydrofarm Holdings LLC(10)

 

Wholesaler of Horticultural Products

                       

     

LIBOR Plus 7.00%, Current Coupon 8.49%, Secured Debt (Maturity—May 12, 2022)

    6,708     6,588     6,699  

                           

iEnergizer Limited(11)(13)(21)

 

Provider of Business Outsourcing Solutions

                       

     

LIBOR Plus 6.00% (Floor 1.25%), Current Coupon 7.57%, Secured Debt (Maturity—May 1, 2019)(9)

    11,005     10,764     10,977  

                           

Implus Footcare, LLC(10)

 

Provider of Footwear and Related Accessories

                       

     

LIBOR Plus 6.75% (Floor 1.00%), Current Coupon 8.44%, Secured Debt (Maturity—April 30, 2021)(9)

    19,372     19,115     19,243  

                           

56


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Indivior Finance LLC(11)(13)

 

Specialty Pharmaceutical Company Treating Opioid Dependence

                       

     

LIBOR Plus 4.50% (Floor 1.00%), Current Coupon 5.50%, Secured Debt (Maturity—December 18, 2022)(9)

    1,176     1,171     1,182  

                           

Industrial Services Acquisition, LLC(10)

 

Industrial Cleaning Services

                       

     

11.25% Current / 0.75% PIK Unsecured Debt (Maturity—December 17, 2022)(19)

    4,553     4,478     4,553  

     

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

          900     810  

                  5,378     5,363  

                           

Inn of the Mountain Gods Resort and Casino(11)

 

Hotel & Casino Owner & Operator

                       

     

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

    6,249     5,994     5,687  

                           

iPayment, Inc.(11)

 

Provider of Merchant Acquisition

                       

     

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.62%, Secured Debt (Maturity—April 11, 2023)(9)

    11,970     11,861     12,090  

                           

iQor US Inc.(11)

 

Business Process Outsourcing Services Provider

                       

     

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.69%, Secured Debt (Maturity—April 1, 2021)(9)

    990     983     986  

                           

irth Solutions, LLC

 

Provider of Damage Prevention Information Technology Services

                       

     

Member Units (27,893 units)

          1,441     1,920  

                           

Jacent Strategic Merchandising, LLC(10)

 

General Merchandise Distribution

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.01%, Secured Debt (Maturity—September 16, 2020)(9)

    11,110     11,054     11,110  

                           

Jackmont Hospitality, Inc.(10)

 

Franchisee of Casual Dining Restaurants

                       

     

LIBOR Plus 6.75% (Floor 1.00%), Current Coupon 8.32%, Secured Debt (Maturity—May 26, 2021)(9)

    4,390     4,379     4,390  

                           

57


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Jacuzzi Brands LLC(11)

 

Manufacturer of Bath and Spa Products

                       

     

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.69%, Secured Debt (Maturity—June 28, 2023)(9)

    3,950     3,876     3,980  

                           

Joerns Healthcare, LLC(11)

 

Manufacturer and Distributor of Health Care Equipment & Supplies

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.48% Secured Debt (Maturity—May 9, 2020)(9)

    13,387     13,299     12,472  

                           

Keypoint Government Solutions, Inc.(10)

 

Provider of Pre-Employment Screening Services

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.35%, Secured Debt (Maturity—April 18, 2024)(9)

    12,031     11,921     12,031  

                           

Larchmont Resources, LLC(11)

 

Oil & Gas Exploration & Production

                       

     

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.53%, PIK Secured Debt (Maturity—August 7, 2020)(9)(19)

    2,418     2,418     2,394  

     

Member Units (Larchmont Intermediate Holdco, LLC) (2,828 units)

          353     976  

                  2,771     3,370  

                           

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

 

Investment Partnership

                       

     

LP Interests (Fully diluted 2.3%)

          2,500     4,234  

                           

Logix Acquisition Company, LLC(10)

 

Competitive Local Exchange Carrier

                       

     

LIBOR Plus 5.75% (Floor 1.00%), Current Coupon 7.28%, Secured Debt (Maturity—August 9, 2024)(9)

    10,135     9,921     9,921  

                           

Looking Glass Investments, LLC(12)(13)

 

Specialty Consumer Finance

                       

     

Member Units (2.5 units)

          125     57  

     

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

          108     92  

                  233     149  

                           

LSF9 Atlantis Holdings, LLC(11)

 

Provider of Wireless Telecommunications Carrier Services

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.57%, Secured Debt (Maturity—May 1, 2023)(9)

    2,963     2,931     2,978  

                           

58


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Lulu's Fashion Lounge, LLC(10)

 

Fast Fashion E-Commerce Retailer

                       

     

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.57%, Secured Debt (Maturity—August 28, 2022)(9)

    13,381     12,993     13,531  

                           

Messenger, LLC(10)

 

Supplier of Specialty Stationery and Related Products to the Funeral Industry

                       

     

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.74%, Secured Debt (Maturity—September 9, 2020)(9)

    17,331     17,249     17,331  

                           

Minute Key, Inc.

 

Operator of Automated Key Duplication Kiosks

                       

     

Warrants (1,437,409 equivalent shares; Expiration—May 20, 2025; Strike price—$0.01 per share)

          280     1,170  

                           

NBG Acquisition Inc(11)

 

Wholesaler of Home Décor Products

                       

     

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 7.19%, Secured Debt (Maturity—April 26, 2024)(9)

    4,402     4,336     4,452  

                           

New Media Holdings II LLC(11)(13)

 

Local Newspaper Operator

                       

     

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.82%, Secured Debt (Maturity—July 14, 2022)(9)

    17,715     17,342     17,864  

                           

NNE Partners, LLC(10)

 

Oil & Gas Exploration & Production

                       

     

LIBOR Plus 8.00%, Current Coupon 9.49%, Secured Debt (Maturity—March 2, 2022)

    11,958     11,854     11,854  

                           

North American Lifting Holdings, Inc.(11)

 

Crane Service Provider

                       

     

LIBOR Plus 4.50% (Floor 1.00%), Current Coupon 6.19%, Secured Debt (Maturity—November 27, 2020)(9)

    7,745     6,913     7,256  

                           

Novetta Solutions, LLC(11)

 

Provider of Advanced Analytics Solutions for Defense Agencies

                       

     

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.70%, Secured Debt (Maturity—October 17, 2022)(9)

    14,636     14,189     14,239  

                           

59


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

NTM Acquisition Corp.(11)

 

Provider of B2B Travel Information Content

                       

     

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.94%, Secured Debt (Maturity—June 7, 2022)(9)

    6,186     6,126     6,155  

                           

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     1,198  

                           

P.F. Chang's China Bistro, Inc.(11)

 

Casual Restaurant Group

                       

     

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.51%, Secured Debt (Maturity—September 1, 2022)(9)

    4,988     4,846     4,715  

                           

Paris Presents Incorporated(11)

 

Branded Cosmetic and Bath Accessories

                       

     

LIBOR Plus 8.75% (Floor 1.00%), Current Coupon 10.32%, Secured Debt (Maturity—December 31, 2021)(9)

    4,500     4,471     4,477  

                           

Parq Holdings Limited Partnership(11)(13)(21)

 

Hotel & Casino Operator

                       

     

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 9.19%, Secured Debt (Maturity—December 17, 2020)(9)

    7,481     7,399     7,528  

                           

Permian Holdco 2, Inc.(11)

 

Storage Tank Manufacturer

                       

     

14% PIK Unsecured Debt (Maturity—October 15, 2021)(19)

    306     306     306  

     

Preferred Stock (Permian Holdco 1, Inc.) (154,558 units)

          799     980  

     

Common Stock (Permian Holdco 1, Inc.) (154,558 units)

              140  

                  1,105     1,426  

                           

Pernix Therapeutics Holdings, Inc.(10)

 

Pharmaceutical Royalty

                       

     

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

    3,129     3,129     1,971  

                           

Point.360(10)

 

Fully Integrated Provider of Digital Media Services

                       

     

Warrants (65,463 equivalent shares; Expiration—July 7, 2020; Strike price—$0.75 per share)

          69      

     

Common Stock (163,658 shares)

          273     11  

                  342     11  

                           

60


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

PPC/SHIFT LLC(10)

 

Provider of Digital Solutions to Automotive Industry

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.69%, Secured Debt (Maturity—December 22, 2021)(9)

    6,869     6,748     6,869  

                           

Prowler Acquisition Corp.(11)

 

Specialty Distributor to the Energy Sector

                       

     

LIBOR Plus 4.50% (Floor 1.00%), Current Coupon 6.19%, Secured Debt (Maturity—January 28, 2020)(9)

    12,830     11,332     12,253  

                           

PT Network, LLC(10)

 

Provider of Outpatient Physical Therapy and Sports Medicine Services

                       

     

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 6.86%, Secured Debt (Maturity—November 30, 2021)(9)

    8,553     8,553     8,553  

                           

QBS Parent, Inc.(11)

 

Provider of Software and Services to the Oil & Gas Industry

                       

     

LIBOR Plus 4.75% (Floor 1.00%), Current Coupon 6.13%, Secured Debt (Maturity—August 7, 2021)(9)

    14,272     14,114     14,165  

                           

Research Now Group, Inc. and Survey Sampling International, LLC(11)

 

Provider of Outsourced Online Surveying

                       

     

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 7.13%, Secured Debt (Maturity—December 20, 2024)(9)

    13,500     12,826     12,826  

                           

Resolute Industrial, LLC(10)

 

HVAC Equipment Rental and Remanufacturing

                       

     

LIBOR Plus 7.62% (Floor 1.00%), Current Coupon 8.95%, Secured Debt (Maturity—July 26, 2022)(9)(25)

    17,088     16,770     16,770  

     

Member Units (601 units)

          750     750  

                  17,520     17,520  

                           

RGL Reservoir Operations Inc.(11)(13)(21)

 

Oil & Gas Equipment and Services

                       

     

1% Current / 9% PIK Secured Debt (Maturity—December 21, 2024)(19)

    721     407     407  

                           

61


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

RM Bidder, LLC(10)

 

Scripted and Unscripted TV and Digital Programming Provider

                       

     

Warrants (327,532 equivalent units; Expiration—October 20, 2025; Strike price—$14.28 per unit)

          425      

     

Member Units (2,779 units)

          46     20  

                  471     20  

                           

SAFETY Investment Holdings, LLC

 

Provider of Intelligent Driver Record Monitoring Software and Services

                       

     

Member Units (2,000,000 units)

          2,000     1,670  

                           

Salient Partners L.P.(11)

 

Provider of Asset Management Services

                       

     

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.85%, Secured Debt (Maturity—June 9, 2021)(9)

    10,081     9,870     9,778  

                           

SiTV, LLC(11)

 

Cable Networks Operator

                       

     

10.375% Secured Debt (Maturity—July 1, 2019)

    10,429     7,006     7,040  

                           

SMART Modular Technologies, Inc.(10)(13)

 

Provider of Specialty Memory Solutions

                       

     

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.66%, Secured Debt (Maturity—August 9, 2022)(9)

    14,625     14,351     14,552  

                           

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)

    13,234     13,170     13,341  

                           

Staples Canada ULC(10)(13)(21)

 

Office Supplies Retailer

                       

     

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.43%, Secured Debt (Maturity—September 12, 2023)(9)(22)

    20,000     19,617     18,891  

                           

Strike, LLC(11)

 

Pipeline Construction and Maintenance Services

                       

     

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 9.50%, Secured Debt (Maturity—November 30, 2022)(9)

    9,500     9,250     9,643  

     

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 9.45%, Secured Debt (Maturity—May 30, 2019)(9)

    2,500     2,479     2,513  

                  11,729     12,156  

                           

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MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

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)

    7,687     7,637     7,687  

                           

Synagro Infrastructure Company, Inc(11)

 

Waste Management Services

                       

     

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 7.19%, Secured Debt (Maturity—August 22, 2020)(9)

    9,161     8,933     8,608  

                           

Tectonic Holdings, LLC

 

Financial Services Organization

                       

     

Member Units (200,000 units)(8)

          2,000     2,320  

                           

TE Holdings, LLC(11)

 

Oil & Gas Exploration & Production

                       

     

Member Units (97,048 units)

          970     158  

                           

TeleGuam Holdings, LLC(11)

 

Cable and Telecom Services Provider

                       

     

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.07%, Secured Debt (Maturity—April 12, 2024)(9)

    7,750     7,602     7,808  

                           

TGP Holdings III LLC(11)

 

Outdoor Cooking & Accessories

                       

     

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.69%, Secured Debt (Maturity—September 25, 2024)(9)

    6,898     6,820     6,969  

     

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.19%, Secured Debt (Maturity—September 25, 2025)(9)

    5,000     4,927     5,075  

                  11,747     12,044  

                           

The Container Store, Inc.(11)

 

Operator of Stores Offering Storage and Organizational Products

                       

     

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.69%, Secured Debt (Maturity—August 15, 2021)(9)

    9,938     9,660     9,652  

                           

TMC Merger Sub Corp.(11)

 

Refractory & Maintenance Services Provider

                       

     

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.88%, Secured Debt (Maturity—October 31, 2022)(9)(26)

    17,653     17,516     17,741  

                           

TOMS Shoes, LLC(11)

 

Global Designer, Distributor, and Retailer of Casual Footwear

                       

     

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 6.98%, Secured Debt (Maturity—October 30, 2020)(9)

    4,875     4,610     2,901  

                           

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MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Turning Point Brands, Inc.(10)(13)

 

Marketer/Distributor of Tobacco Products

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.61%, Secured Debt (Maturity—May 17, 2022)(9)(25)

    8,436     8,364     8,605  

                           

TVG-I-E CMN ACQUISITION, LLC(10)

 

Organic Lead Generation for Online Postsecondary Schools

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.56%, Secured Debt (Maturity—November 3, 2021)(9)

    8,170     8,031     8,170  

                           

Tweddle Group, Inc.(11)

 

Provider of Technical Information Services to Automotive OEMs

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.38%, Secured Debt (Maturity—October 21, 2022)(9)

    6,114     6,011     6,023  

                           

U.S. TelePacific Corp.(11)

 

Provider of Communications and Managed Services

                       

     

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.69%, Secured Debt (Maturity—May 2, 2023)(9)

    20,703     20,507     19,862  

                           

US Joiner Holding Company(11)

 

Marine Interior Design and Installation

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.70%, Secured Debt (Maturity—April 16, 2020)(9)

    13,465     13,366     13,398  

                           

VIP Cinema Holdings, Inc.(11)

 

Supplier of Luxury Seating to the Cinema Industry

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.70%, Secured Debt (Maturity—March 1, 2023)(9)

    7,700     7,666     7,777  

                           

Vistar Media, Inc.(10)

 

Operator of Digital Out-of-Home Advertising Platform

                       

     

LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 11.69%, Secured Debt (Maturity—February 16, 2022)(9)

    3,319     3,048     3,102  

     

Warrants (70,207 equivalent shares; Expiration—February 17, 2027; Strike price—$0.01 per share)

          331     499  

                  3,379     3,601  

                           

Wellnext, LLC(10)

 

Manufacturer of Supplements and Vitamins

                       

     

LIBOR Plus 10.10% (Floor 1.00%), Current Coupon 11.67%, Secured Debt (Maturity—July 21, 2022)(9)(23)

    9,930     9,857     9,930  

                           

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MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Wireless Vision Holdings, LLC(10)

 

Provider of Wireless Telecommunications Carrier Services

                       

     

LIBOR Plus 8.91% (Floor 1.00%), Current Coupon 10.27%, Secured Debt (Maturity—September 29, 2022)(9)(24)

    12,932     12,654     12,654  

                           

Wirepath LLC(11)

 

E-Commerce Provider into Connected Home Market

                       

     

LIBOR Plus 5.25% (Floor 1.00%), Current Coupon 6.87%, Secured Debt (Maturity—August 5, 2024)(9)

    4,988     4,964     5,055  

                           

Zilliant Incorporated

 

Price Optimization and Margin Management Solutions

                       

     

Preferred Stock (186,777 shares)

          154     260  

     

Warrants (952,500 equivalent shares; Expiration—June 15, 2022; Strike price—$0.001 per share)

          1,071     1,189  

                  1,225     1,449  

Subtotal Non-Control/Non-Affiliate Investments (49.8% of total investments at fair value)

        $ 1,107,447   $ 1,081,745  

Total Portfolio Investments, December 31, 2017

        $ 2,004,798   $ 2,171,305  

(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, 2017. As noted in this schedule, 67% of the loans (based on the par amount) contain LIBOR floors which range between 0.50% and 2.25%, with a weighted-average LIBOR floor of approximately 1.02%.

(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.

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MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

(15)
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.

(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)
Investment fair value was determined using significant unobservable inputs, unless otherwise noted. See Note C for further discussion.

(19)
PIK interest income and cumulative dividend income represent income not paid currently in cash.

(20)
All portfolio company headquarters are based in the United States, unless otherwise noted.

(21)
Portfolio company headquarters are located outside of the United States.

(22)
In connection with the Company's debt investment in Staples Canada ULC to help mitigate any potential adverse change in foreign exchange rates during the term of the Company's investment, the Company entered into a forward foreign currency contract with Cadence Bank to lend $24.2 million Canadian Dollars and receive $20.0 million U.S. Dollars with a settlement date of September 12, 2018. The unrealized appreciation on the forward foreign currency contract is $0.7 million as of December 31, 2017. This unrealized appreciation is offset by the foreign currency translation depreciation on the investment.

(23)
The Company has entered into an intercreditor agreement that entitles the Company to the "last out" tranche of the first lien secured loans, whereby the "first out" tranche will receive priority as to the "last out" tranche with respect to payments of principal, interest, and any other amounts due thereunder. Therefore, the Company receives a higher interest rate than the contractual stated interest rate of LIBOR plus 7.50% (Floor 1.00%) per the Credit Agreement and the Consolidated Schedule of Investments above reflects such higher rate.

(24)
The Company has entered into an intercreditor agreement that entitles the Company to the "last out" tranche of the first lien secured loans, whereby the "first out" tranche will receive priority as to the "last out" tranche with respect to payments of principal, interest, and any other amounts due thereunder. Therefore, the Company receives a higher interest rate than the contractual stated interest rate of LIBOR plus 8.50% (Floor 1.00%) per the Credit Agreement and the Consolidated Schedule of Investments above reflects such higher rate.

(25)
As part of the credit agreement with the portfolio company, the Company is entitled to the "last out" tranche of the first lien secured loans, whereby the "first out" tranche receives priority over the "last out" tranche with respect to payments of principal, interest, and any other amounts due thereunder. The rate the Company receives per the Credit Agreement is the same as the rate reflected in the Consolidated Schedule of Investments above.

(26)
The Company has entered into an intercreditor agreement that entitles the Company to the "first out" tranche of the first lien secured loans, whereby the "first out" tranche will receive priority as to the "last out" tranche with respect to payments of principal, interest, and any other amounts due thereunder. Therefore, the Company receives a lower interest rate than the contractual stated interest rate of LIBOR plus 6.64% (Floor 1.00%) per the Credit Agreement and the Consolidated Schedule of Investments above reflects such lower rate.

(27)
All Company's portfolio investments are generally subject to restrictions on resale as "restricted securities", unless otherwise noted.

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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 a variety of 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 under the Investment Advisers Act of 1940, as amended. 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 taxable 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.

        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.

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

2.     Basis of Presentation

        Main Street's consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP"). The Company is an investment company following accounting and reporting guidance in Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 946, Financial Services—Investment Companies ("ASC 946"). 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 (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). Main Street's results of operations and cash flows for the three months ended March 31, 2018 and 2017, and financial position as of March 31, 2018 and December 31, 2017, are presented on a consolidated basis. The effects of all intercompany transactions between Main Street and its consolidated subsidiaries have been eliminated in consolidation. Certain reclassifications have been made to prior period balances to conform with the current presentation.

        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 months ended March 31, 2018 and 2017 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, 2017. 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 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. 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 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)."

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

    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 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 privately held, 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 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

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

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, privately held 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 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

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

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 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

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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 13 LMM portfolio companies for the three months ended March 31, 2018, representing approximately 17% of the total LMM portfolio at fair value as of March 31, 2018, and on a total of 12 LMM portfolio companies for the three months ended March 31, 2017, representing approximately 16% of the total LMM portfolio at fair value as of March 31, 2017. Excluding its investments in new LMM portfolio companies which have not been in the Investment Portfolio for at least twelve months subsequent to the initial investment decision as of March 31, 2018 and 2017, as applicable, and its investments in the LMM portfolio companies that were not reviewed because their equity is publicly traded, which represented one LMM portfolio company as of March 31, 2017, or they hold real estate for which a third-party appraisal is obtained on at least an annual basis, the percentage of the LMM portfolio reviewed and certified by its independent financial advisory services firm for the three months ended March 31, 2018 and 2017 was 20% and 18% of the total LMM portfolio at fair value as of March 31, 2018 and 2017, 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 the vast majority of the Middle Market portfolio investments are typically valued using third-party quotes or other independent pricing services (including 95% of the Middle Market portfolio investments as of both March 31, 2018 and December 31, 2017), 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 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

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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 six Private Loan portfolio companies for the three months ended March 31, 2018, representing approximately 16% of the total Private Loan portfolio at fair value as of March 31, 2018, and on a total of nine Private Loan portfolio companies for the three months ended March 31, 2017, representing approximately 27% of the total Private Loan portfolio at fair value as of March 31, 2017. 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 March 31, 2018 and 2017, as applicable, and its investments in its Private Loan portfolio companies that were not reviewed because the investment is valued based upon third-party quotes or other independent pricing, the percentage of the Private Loan portfolio reviewed and certified by its independent financial advisory services firm for the three months ended March 31, 2018 and 2017 was 27% and 44% of the total Private Loan portfolio at fair value as of March 31, 2018 and 2017, respectively.

        For valuation purposes, all of Main Street's Other Portfolio investments are non-control investments. Main Street's Other Portfolio investments comprised 4.4% and 4.8% of Main Street's Investment Portfolio at fair value as of March 31, 2018 and December 31, 2017, respectively. 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 these investments using the NAV valuation method. For its 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 its 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 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

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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 March 31, 2018 and December 31, 2017 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 U.S. GAAP 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 consolidated 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 March 31, 2018, cash balances totaling $25.1 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.

4.     Interest, Dividend and Fee Income

        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

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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 sold or written off, Main Street removes it from non-accrual status.

        As of March 31, 2018, Main Street's total Investment Portfolio had six investments on non-accrual status, which comprised approximately 0.8% of its fair value and 3.3% of its cost. As of December 31, 2017, Main Street's total Investment Portfolio had five investments on non-accrual status, which comprised approximately 0.2% of its fair value and 2.3% of its cost.

        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 March 31, 2018 and 2017, (i) approximately 1.0% and 3.4%, respectively, of Main Street's total investment income was attributable to PIK interest income not paid currently in cash and (ii) approximately 1.0% and 1.8%, respectively, of Main Street's total investment income was attributable to cumulative dividend income not paid currently in cash.

        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.

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        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
March 31,
 
 
  2018   2017  
 
  (dollars in
thousands)

 

Interest, fee and dividend income:

             

Interest income

  $ 39,612   $ 38,463  

Dividend income

    13,831     6,982  

Fee income

    2,499     2,444  

Total interest, fee and dividend income

  $ 55,942   $ 47,889  

5.     Deferred Financing Costs

        Deferred financing costs 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), as well as the commitment fees and leverage fees (approximately 3.4% of the total commitment and draw amounts, as applicable) on the SBIC debentures (as discussed further in Note E) which are not accounted for under the fair value option under ASC 825 (as discussed further in Note B.11.). Deferred financing costs in connection with the Credit Facility are capitalized as an asset. Deferred financing costs in connection with all other debt arrangements not using the fair value option are a direct deduction from the related debt liability.

6.     Equity Offering Costs

        The Company's offering costs are charged against the proceeds from equity offerings when the proceeds are received.

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 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 unearned income, which is netted against the applicable debt investment, and accreted into interest

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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 March 31, 2018 and 2017, approximately 2.9% and 3.5%, respectively, of Main Street's total investment income was attributable to interest income from 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.

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 taxable 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 primarily 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-of-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

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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. The Taxable Subsidiaries are each taxed at their normal corporate tax rates based on their taxable income. The income tax expense, or benefit, if any, and the related tax assets and liabilities, of the Taxable Subsidiaries are reflected in Main Street's consolidated financial statements.

        The External Investment Manager is an indirect wholly owned subsidiary of MSCC owned through a Taxable Subsidiary and is a disregarded entity for tax purposes. The External Investment Manager has entered into a tax sharing agreement with its Taxable Subsidiary owner. Since the External Investment Manager 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, and as a result of the tax sharing agreement with its Taxable Subsidiary owner, for its stand-alone financial reporting purposes the External Investment Manager is treated as if it 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 income tax expense, or benefit, if any, and the related tax assets and liabilities, of the External Investment Manager are reflected in the External Investment Manager's separate financial statements.

        In December 2017, the "Tax Cuts and Jobs Act" legislation was enacted. The Tax Cuts and Jobs Act includes significant changes to the U.S. corporate tax system, including a U.S. federal corporate income tax rate reduction from 35% to 21% and other changes. ASC 740, Income Taxes, requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation was enacted. As such, Main Street has accounted for the tax effects as a result of the enactment of the Tax Cuts and Jobs Act beginning with the period ended December 31, 2017.

        The Taxable Subsidiaries and the External Investment Manager 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 consolidated 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.

10.   Net Realized Gains or Losses and Net 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 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.

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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.

        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 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 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 ASU 2014-09, Revenue from Contracts with Customers (Topic 606)). ASU 2014-09 supersedes the revenue recognition requirements under ASC 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 March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which clarified the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which clarified the implementation guidance regarding performance

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obligations and licensing arrangements. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606)—Narrow-Scope Improvements and Practical Expedients, which clarified guidance on assessing collectability, presenting sales tax, measuring noncash consideration, and certain transition matters. In December 2016, the FASB issued ASU No. 2016-20, Revenue from Contracts with Customers (Topic 606)—Technical Corrections and Improvements, which provided disclosure relief, and clarified the scope and application of the new revenue standard and related cost guidance. The guidance is effective for the annual reporting period beginning after December 15, 2017, including interim periods within that reporting period. Substantially all of Main Street's income is not within the scope of ASU 2014-09. For those income items that are within the scope (primarily fee income), Main Street has similar performance obligations as compared with deliverables and separate units of account previously identified. As a result, Main Street's timing of its income recognition remains the same and the adoption of the standard was not material.

        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. While Main Street continues to assess the effect of adoption, Main Street currently believes the most significant change relates to the recognition of a new right-of-use asset and lease liability on its consolidated balance sheet for its office space operating lease. Main Street currently has one operating lease for office space and does not expect a significant change in the leasing activity between now and adoption. See further discussion of the operating lease obligation in Note M.

        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 was not 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 consolidated 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.

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    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

      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 privately held 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.

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

        As of March 31, 2018 and December 31, 2017, all of Main Street's LMM portfolio investments consisted of illiquid securities issued by privately held companies. As a result, the fair value determination for all of Main Street's LMM portfolio investments primarily consisted of unobservable inputs. As a result, all of Main Street's LMM portfolio investments were categorized as Level 3 as of March 31, 2018 and December 31, 2017.

        As of March 31, 2018 and December 31, 2017, 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 March 31, 2018 and December 31, 2017.

        As of March 31, 2018 and December 31, 2017, 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 March 31, 2018 and December 31, 2017.

        As of March 31, 2018 and December 31, 2017, Main Street's Other Portfolio investments consisted of illiquid securities issued by privately held 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 March 31, 2018 and December 31, 2017.

        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;

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

    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 ("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 fair value Main Street's Level 3 portfolio investments as of March 31, 2018 and December 31, 2017:

Type of Investment
  Fair Value
as of
March 31, 2018
(in thousands)
  Valuation Technique   Significant Unobservable Inputs   Range(3)   Weighted
Average(3)
  Median(3)  

Equity investments

  $ 675,229   Discounted cash flow   WACC   11.3% - 23.6%     13.9%     14.3%  

        Market comparable / Enterprise Value   EBITDA multiple(1)   4.5x - 8.5x(2)     7.3x     6.0x  

Debt investments

  $ 943,653   Discounted cash flow   Risk adjusted discount factor   7.1% - 16.8%(2)     11.3%     11.3%  

            Expected principal recovery percentage   2.9% - 100.0%     99.7%     100.0%  

Debt investments

  $ 695,152   Market approach   Third-party quote   11.0 - 106.5              

Total Level 3 investments

  $ 2,314,034                          

(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 - 17.5x and the range for risk adjusted discount factor is 4.3% - 35.0%.

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Notes to Consolidated Financial Statements (Continued)

(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, 2017
(in thousands)
  Valuation Technique   Significant Unobservable Inputs   Range(3)   Weighted
Average(3)
  Median(3)  

Equity investments

  $ 653,008   Discounted cash flow   WACC   11.1% - 23.2%     13.7%     14.0%  

        Market comparable / Enterprise Value   EBITDA multiple(1)   4.3x - 8.5x(2)     7.3x     6.0x  

Debt investments

  $ 858,816   Discounted cash flow   Risk adjusted discount factor   6.7% - 16.1%(2)     11.2%     11.0%  

            Expected principal recovery percentage   2.9% - 100.0%     99.8%     100.0%  

Debt investments

  $ 659,481   Market approach   Third-party quote   11.0 - 106.0              

Total Level 3 investments

  $ 2,171,305                          

(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 - 17.5x and the range for risk adjusted discount factor is 4.3% - 30.0%.

(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 three month periods ended March 31, 2018 and 2017 (amounts in thousands):

Type of Investment
  Fair Value
as of
December 31,
2017
  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
March 31,
2018
 

Debt

  $ 1,518,297   $   $ (154,935 ) $ 270,617   $ 11,615   $ (3,648 ) $ (3,141 ) $ 1,638,805  

Equity

    641,493         (17,191 )   51,027     (19,069 )   4,153     3,141     663,554  

Equity Warrant

    11,515                     160         11,675  

  $ 2,171,305   $   $ (172,126 ) $ 321,644   $ (7,454 ) $ 665   $   $ 2,314,034  

(1)
Includes the impact of non-cash conversions. These transactions represent non-cash investing activities. See additional cash flow information at the consolidated statements of cash flows.
Type of Investment
  Fair Value
as of
December 31,
2016
  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
March 31,
2017
 

Debt

  $ 1,427,823   $   $ (190,366 ) $ 175,026   $ 1,340   $ (10,108 ) $ (6,056 ) $ 1,397,659  

Equity

    549,453         (9,119 )   25,691     (19,775 )   11,876     6,056     564,182  

Equity Warrant

    17,550         (1,673 )   331     (1,107 )   166         15,267  

  $ 1,994,826   $   $ (201,158 ) $ 201,048   $ (19,542 ) $ 1,934   $   $ 1,977,108  

(1)
Includes the impact of non-cash conversions. These transactions represent non-cash investing activities. See additional cash flow information at the consolidated statements of cash flows.

        As of March 31, 2018 and December 31, 2017, 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 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

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

value is the legal 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 estimated market interest rates 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 March 31, 2018 and December 31, 2017 (amounts in thousands):

Type of Instrument
  Fair Value as of
March 31, 2018
  Valuation Technique   Significant Unobservable Inputs   Range   Weighted
Average
 

SBIC debentures

  $ 44,623   Discounted cash flow   Estimated market interest rates   4.9% - 5.7%     5.1%  

 

Type of Instrument
  Fair Value as of
December 31, 2017
  Valuation Technique   Significant Unobservable Inputs   Range   Weighted
Average
 

SBIC debentures

  $ 48,608   Discounted cash flow   Estimated market interest rates     4.9% - 5.5%     5.1%  

        The following tables provide a summary of changes for the Level 3 SBIC debentures recorded at fair value for the three month periods ended March 31, 2018 and 2017 (amounts in thousands):

Type of Instrument
  Fair Value as of
December 31, 2017
  Repayments   Net
Realized
Loss
  New SBIC
Debentures
  Net
Unrealized
(Appreciation)
Depreciation
  Fair Value as of
March 31, 2018
 

SBIC debentures at fair value

  $ 48,608   $ (4,000 ) $ 1,374   $   $ (1,359 ) $ 44,623  

 

Type of Instrument
  Fair Value as of
December 31, 2016
  Repayments   Net
Realized
Loss
  New SBIC
Debentures
  Net
Unrealized
(Appreciation)
Depreciation
  Fair Value as of
March 31, 2017
 

SBIC debentures at fair value

  $ 74,803   $ (25,200 ) $ 5,217   $   $ (5,665 ) $ 49,155  

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

        At March 31, 2018 and December 31, 2017, 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 March 31, 2018
  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

  $ 1,049,772   $   $   $ 1,049,772  

Middle Market portfolio investments

    617,941             617,941  

Private Loan portfolio investments

    496,533             496,533  

Other Portfolio investments

    101,066             101,066  

External Investment Manager

    48,722             48,722  

Total investments

  $ 2,314,034   $   $   $ 2,314,034  

SBIC debentures at fair value

  $ 44,623   $   $   $ 44,623  

 

 
   
  Fair Value Measurements  
 
   
  (in thousands)
 
At December 31, 2017
  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

  $ 948,196   $   $   $ 948,196  

Middle Market portfolio investments

    609,256             609,256  

Private Loan portfolio investments

    467,475             467,475  

Other Portfolio investments

    104,610             104,610  

External Investment Manager

    41,768             41,768  

Total investments

  $ 2,171,305   $   $   $ 2,171,305  

SBIC debentures at fair value

  $ 48,608   $   $   $ 48,608  

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 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

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

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 $20 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. Main Street allocates the related expenses to the External Investment Manager pursuant to the sharing agreement. Main Street's total expenses for the three months ended March 31, 2018 and 2017 are net of expenses allocated to the External Investment Manager of $2.1 million and $1.5 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 months ended March 31, 2018, Main Street recorded investment income from one portfolio company in excess of 10% of total investment income. For the three months ended March 31, 2017, Main 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 March 31, 2018 and December 31, 2017 (this information excludes

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

the Other Portfolio investments and the External Investment Manager which are discussed further below):

 
  As of March 31, 2018  
 
  LMM(a)   Middle Market   Private Loan  
 
  (dollars in millions)
 

Number of portfolio companies

    73     59     55  

Fair value

  $ 1,049.8   $ 617.9   $ 496.5  

Cost

  $ 898.9   $ 629.9   $ 521.6  

% of portfolio at cost—debt

    67.7%     96.7%     93.7%  

% of portfolio at cost—equity

    32.3%     3.3%     6.3%  

% of debt investments at cost secured by first priority lien

    98.4%     91.0%     94.3%  

Weighted-average annual effective yield(b)

    12.1%     9.2%     9.4%  

Average EBITDA(c)

  $ 4.8   $ 86.3   $ 43.0  

(a)
At March 31, 2018, Main Street had equity ownership in approximately 97% of its LMM portfolio companies, and the average fully diluted equity ownership in those portfolio companies was approximately 38%.

(b)
The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of March 31, 2018, 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. The 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 six LMM 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, and those portfolio companies whose primary purpose is to own real estate.
 
  As of December 31, 2017  
 
  LMM(a)   Middle Market   Private Loan  
 
  (dollars in millions)
 

Number of portfolio companies

    70     62     54  

Fair value

  $ 948.2   $ 609.3   $ 467.5  

Cost

  $ 776.5   $ 629.7   $ 489.2  

% of portfolio at cost—debt

    67.1%     97.3%     93.6%  

% of portfolio at cost—equity

    32.9%     2.7%     6.4%  

% of debt investments at cost secured by first priority lien

    98.1%     90.5%     94.5%  

Weighted-average annual effective yield(b)

    12.0%     9.0%     9.2%  

Average EBITDA(c)

  $ 4.4   $ 78.3   $ 39.6  

(a)
At December 31, 2017, Main Street had equity ownership in approximately 97% of its LMM portfolio companies, and the average fully diluted equity ownership in those portfolio companies was approximately 39%.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

(b)
The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of December 31, 2017, 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. The 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 six LMM portfolio companies, one Middle Market portfolio company and three 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 March 31, 2018, Main Street had Other Portfolio investments in eleven companies, collectively totaling approximately $101.1 million in fair value and approximately $107.1 million in cost basis and which comprised approximately 4.4% of Main Street's Investment Portfolio at fair value. As of December 31, 2017, Main Street had Other Portfolio investments in eleven companies, collectively totaling approximately $104.6 million in fair value and approximately $109.4 million in cost basis and which comprised approximately 4.8% 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 March 31, 2018, there was no cost basis in this investment and the investment had a fair value of approximately $48.7 million, which comprised approximately 2.1% of Main Street's Investment Portfolio at fair value. As of December 31, 2017, there was no cost basis in this investment and the investment had a fair value of approximately $41.8 million, which comprised approximately 1.9% 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 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 March 31, 2018 and December 31, 2017 (this information excludes the Other Portfolio investments and the External Investment Manager).

Cost:
  March 31, 2018   December 31, 2017  

First lien debt

    78.7%     79.0%  

Equity

    16.1%     15.3%  

Second lien debt

    4.1%     4.5%  

Equity warrants

    0.7%     0.7%  

Other

    0.4%     0.5%  

    100.0%     100.0%  

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)


Fair Value:
  March 31, 2018   December 31, 2017  

First lien debt

    71.5%     70.5%  

Equity

    23.7%     24.4%  

Second lien debt

    3.8%     4.1%  

Equity warrants

    0.6%     0.6%  

Other

    0.4%     0.4%  

    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 March 31, 2018 and December 31, 2017 (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:
  March 31, 2018   December 31, 2017  

Southwest

    27.4%     26.1%  

West

    24.1%     20.7%  

Midwest

    20.4%     22.3%  

Northeast

    15.6%     15.2%  

Southeast

    10.2%     12.8%  

Canada

    1.4%     1.9%  

Other Non-United States

    0.9%     1.0%  

    100.0%     100.0%  

 

Fair Value:
  March 31, 2018   December 31, 2017  

Southwest

    28.4%     26.8%  

West

    26.0%     23.7%  

Midwest

    19.1%     20.3%  

Northeast

    14.9%     14.6%  

Southeast

    9.4%     11.9%  

Canada

    1.3%     1.8%  

Other Non-United States

    0.9%     0.9%  

    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 March 31, 2018 and December 31, 2017 (this information excludes the Other Portfolio investments and the External Investment Manager).

Cost:
  March 31, 2018   December 31, 2017  

Construction & Engineering

    8.2%     6.4%  

Energy Equipment & Services

    7.0%     6.9%  

Commercial Services & Supplies

    5.4%     4.5%  

Media

    5.4%     4.4%  

Hotels, Restaurants & Leisure

    5.1%     6.2%  

Specialty Retail

    4.8%     5.3%  

Machinery

    4.8%     5.2%  

Diversified Telecommunication Services

    4.1%     4.1%  

Aerospace & Defense

    4.0%     3.3%  

Food Products

    3.9%     1.9%  

Health Care Providers & Services

    3.8%     2.9%  

IT Services

    3.7%     3.9%  

Professional Services

    3.4%     3.7%  

Internet Software & Services

    3.3%     3.4%  

Electronic Equipment, Instruments & Components

    2.8%     3.4%  

Leisure Equipment & Products

    2.7%     3.0%  

Computers & Peripherals

    2.5%     2.8%  

Software

    2.4%     2.5%  

Communications Equipment

    2.2%     2.3%  

Diversified Consumer Services

    2.2%     1.6%  

Distributors

    1.8%     1.9%  

Building Products

    1.8%     1.9%  

Oil, Gas & Consumable Fuels

    1.7%     1.6%  

Construction Materials

    1.5%     1.7%  

Diversified Financial Services

    1.5%     1.6%  

Health Care Equipment & Supplies

    1.3%     2.0%  

Internet & Catalog Retail

    1.2%     1.3%  

Road & Rail

    1.2%     1.0%  

Auto Components

    0.3%     1.9%  

Real Estate Management & Development

    0.3%     1.0%  

Other(1)

    5.7%     6.4%  

    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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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Fair Value:
  March 31, 2018   December 31, 2017  

Construction & Engineering

    7.8%     6.3%  

Energy Equipment & Services

    6.4%     6.2%  

Machinery

    6.3%     6.4%  

Specialty Retail

    5.2%     5.3%  

Diversified Consumer Services

    5.1%     5.9%  

Hotels, Restaurants & Leisure

    4.9%     5.9%  

Commercial Services & Supplies

    4.7%     4.1%  

Media

    4.7%     3.8%  

IT Services

    3.8%     4.0%  

Aerospace & Defense

    3.8%     3.1%  

Health Care Providers & Services

    3.7%     2.8%  

Food Products

    3.7%     1.8%  

Diversified Telecommunication Services

    3.5%     3.4%  

Professional Services

    3.2%     3.5%  

Internet Software & Services

    3.2%     3.2%  

Computers & Peripherals

    2.9%     3.0%  

Leisure Equipment & Products

    2.6%     2.9%  

Software

    2.5%     2.5%  

Electronic Equipment, Instruments & Components

    2.3%     2.8%  

Communications Equipment

    2.1%     2.2%  

Construction Materials

    1.9%     1.9%  

Distributors

    1.7%     1.8%  

Building Products

    1.6%     1.8%  

Diversified Financial Services

    1.5%     1.6%  

Oil, Gas & Consumable Fuels

    1.5%     1.5%  

Health Care Equipment & Supplies

    1.2%     2.1%  

Road & Rail

    1.1%     1.0%  

Internet & Catalog Retail

    1.0%     1.1%  

Air Freight & Logistics

    0.7%     1.0%  

Real Estate Management & Development

    0.4%     1.1%  

Auto Components

    0.3%     1.6%  

Other(1)

    4.7%     4.4%  

    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 March 31, 2018 and December 31, 2017, Main Street had no portfolio investment that was greater than 10% of the Investment Portfolio at fair value.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

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 determine if any of Main Street's Control Investments (as defined in Note A, including those unconsolidated portfolio companies defined as Control Investments 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 March 31, 2018 and December 31, 2017, Main Street had no single 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. The income test is measured by dividing the absolute value of the combined total of total investment income, net realized gain (loss) and net unrealized appreciation (depreciation) of each Control Investment for the period being tested by the absolute value of Main Street's pre-tax income for the same period. After performing the income test for the three months ended March 31, 2018, Main Street determined that the absolute value of its income from two of its Control Investments individually generated more than 20% of its total income, primarily due to the unrealized appreciation that was recognized on one of the investments and to the unrealized depreciation that was recognized on the other investment. As such, the External Investment Manager was considered a significant subsidiary. The summarized financial information for the External Investment Manager is included in Note D. CBT Nuggets, LLC, an unconsolidated portfolio company that was a Control Investment, but for which Main Street was not the majority owner and did not have rights to maintain greater than 50% of the board representation, was also considered a significant subsidiary at the 20% income level as of March 31, 2018. After performing the income test for the three months ended March 31, 2017, Main Street determined that the income from no single investment generated more than 20% of Main Street's total income.

        The following table shows the summarized financial information for CBT Nuggets, LLC:

 
  As of
March 31,
  As of
December 31,
 
 
  2018   2017  
 
  (dollars in thousands)
 

Balance Sheet Data

             

Current Assets

  $ 11,174   $ 14,585  

Noncurrent Assets

    11,601     11,769  

Current Liabilities

    16,853     17,570  

Noncurrent Liabilities

         

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)


 
  Three Months
Ended March 31,
 
 
  2018   2017  
 
  (dollars
in thousands)

 

Summary of Operations

             

Total Revenue

  $ 9,903   $ 10,356  

Gross Profit

    8,951     9,218  

Income from Operations

    1,820     3,524  

Net Income

    2,741     3,853  

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-listed 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. The External Investment Manager has conditionally agreed to waive a limited amount of the historical incentive fees otherwise earned. During the three months ended March 31, 2018 and 2017, the External Investment Manager earned $2.8 million and $2.6 million, respectively, of management fees (net of fees waived, if any) under the sub-advisory agreement with HMS Adviser.

        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 statements of operations in "Net Unrealized Appreciation (Depreciation)—Portfolio investments."

        The External Investment Manager is an indirect wholly owned subsidiary of MSCC owned through a Taxable Subsidiary and is a disregarded entity for tax purposes. The External Investment Manager has entered into a tax sharing agreement with its Taxable Subsidiary owner. Since the External Investment Manager 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, and as a result of the tax sharing agreement with its Taxable Subsidiary owner, for financial reporting purposes the External Investment Manager is treated as if it 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. Main Street owns the External Investment Manager through the Taxable Subsidiary to allow MSCC to continue to comply with the

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

"source-of-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. As a result of the above described financial reporting and tax treatment, 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 March 31, 2018 and 2017, Main Street allocated $2.1 million and $1.5 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 the dividend income received from the External Investment Manager. For the three months ended March 31, 2018 and 2017, the total contribution to Main Street's net investment income was $2.6 million and $2.2 million, respectively.

        Summarized financial information from the separate financial statements of the External Investment Manager as of March 31, 2018 and December 31, 2017 and for the three months ended March 31, 2018 and 2017 is as follows:

 
  As of
March 31,
  As of
December 31,
 
 
  2018   2017  
 
  (dollars in thousands)
 

Cash

  $   $  

Accounts receivable—HMS Income

    2,838     2,863  

Total assets

  $ 2,838   $ 2,863  

Accounts payable to MSCC and its subsidiaries

  $ 2,265   $ 1,963  

Dividend payable to MSCC and its subsidiaries

    573     900  

Equity

         

Total liabilities and equity

  $ 2,838   $ 2,863  

 

 
  Three Months
Ended March 31,
 
 
  2018   2017  

Management fee income

  $ 2,816   $ 2,620  

Expenses allocated from MSCC or its subsidiaries:

             

Salaries, share-based compensation and other personnel costs

    (1,353 )   (919 )

Other G&A expenses

    (713 )   (605 )

Total allocated expenses

    (2,066 )   (1,524 )

Pre-tax income

    750     1,096  

Tax expense

    (177 )   (402 )

Net income

  $ 573   $ 694  

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

NOTE E—SBIC DEBENTURES

        Under existing SBIC regulations, SBA approved SBICs under common control have the ability to issue debentures guaranteed by the SBA up to a regulatory maximum amount of $350.0 million. Main Street, through the funds, has an effective maximum amount of $346.0 million following the prepayment of $4.0 million of existing SBIC debentures as discussed below. SBIC debentures payable were $313.8 million and $295.8 million at March 31, 2018 and December 31, 2017, respectively. SBIC debentures provide for interest to be paid semiannually, with principal due at the applicable 10-year maturity date of each debenture. During the three months ended March 31, 2018, Main Street issued $22.0 million of SBIC debentures and opportunistically prepaid $4.0 million of existing SBIC debentures as part of an effort to manage the maturity dates of the oldest SBIC debentures, leaving $32.2 million of remaining capacity under Main Street's SBIC licenses. As a result of this prepayment, Main Street recognized a realized loss of $1.4 million due to the previously recognized gain recorded as a result of recording the MSC II debentures at fair value on the date of the acquisition of the majority interests of MSC II. The effect of the realized loss is offset by the reversal of all previously recognized unrealized depreciation due to fair value adjustments since the date of the acquisition. Main Street expects to issue new SBIC debentures under the SBIC program in the future in an amount up to the regulatory maximum amount for affiliated SBIC funds. The weighted-average annual interest rate on the SBIC debentures was 3.7% and 3.6% as of March 31, 2018 and December 31, 2017, respectively. The first principal maturity due under the existing SBIC debentures is in 2019, and the weighted-average remaining duration as of March 31, 2018 was approximately 5.9 years. For the three months ended March 31, 2018 and 2017, Main Street recognized interest expense attributable to the SBIC debentures of $2.9 million and $2.5 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.

        As of March 31, 2018, the recorded value of the SBIC debentures was $306.2 million which consisted of (i) $44.6 million recorded at fair value, or $1.4 million less than the $46.0 million par value of the SBIC debentures issued in MSC II, (ii) $149.8 million par value of SBIC debentures outstanding held in MSMF, with a recorded value of $147.6 million that was net of unamortized debt issuance costs of $2.2 million and (iii) $118.0 million par value of SBIC debentures held in MSC III with a recorded value of $113.9 million that was net of unamortized debt issuance costs of $4.1 million. As of March 31, 2018, 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 $281.6 million, or $32.2 million less than the $313.8 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 $585.0 million from a diversified group of fifteen lenders. The Credit Facility matures in September 2021 and 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 (1.88% as of March 31, 2018) plus

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

(i) 1.875% (or the applicable base rate (Prime Rate of 4.75% as of March 31, 2018) 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 2021, 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 March 31, 2018, Main Street had $188.0 million in borrowings outstanding under the Credit Facility. As of March 31, 2018, 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 issuance costs, of $1.5 million and $2.5 million, respectively, for the three months ended March 31, 2018 and 2017. As of March 31, 2018, the interest rate on the Credit Facility was 3.5%. The average interest rate for the three months ended March 31, 2018 was 3.5%. As of March 31, 2018, 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. On March 1, 2018, Main Street announced its intent to redeem the 6.125% Notes on 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, were approximately $89.0 million. Main Street listed the 6.125% Notes on the New York Stock Exchange under the trading symbol "MSCA." Main Street maintained the right from time to time repurchase the 6.125% Notes in accordance with the 1940 Act and the rules promulgated thereunder. As of March 31, 2018, the outstanding balance of the 6.125% Notes was $90.7 million and the recorded value of $89.1 million was net of unamortized debt issuance costs of $1.5 million. As of March 31,

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

2018, 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 $91.5 million. Main Street recognized interest expense related to the 6.125% Notes, including amortization of unamortized deferred issuance costs, of $1.5 million for each of the three months ended March 31, 2018 and 2017.

        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 March 31, 2018, Main Street was in compliance with these covenants.

    4.50% Notes due 2019

        In November 2014, Main Street issued $175.0 million in aggregate principal amount of 4.50% unsecured notes due 2019 (the "4.50% Notes due 2019") at an issue price of 99.53%. The 4.50% Notes due 2019 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 due 2019; 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 4.50% Notes due 2019 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 due 2019 bear interest at a rate of 4.50% per year payable semiannually on June 1 and December 1 of each year. The total net proceeds from the 4.50% Notes due 2019, resulting from the issue price and after underwriting discounts and estimated offering expenses payable, were approximately $171.2 million. Main Street may from time to time repurchase the 4.50% Notes due 2019 in accordance with the 1940 Act and the rules promulgated thereunder. As of March 31, 2018, the outstanding balance of the 4.50% Notes due 2019 was $175.0 million and the recorded value of $173.8 million was net of unamortized debt issuance costs of $1.2 million. As of March 31, 2018, if Main Street had adopted the fair value option under ASC 825 for the 4.50% Notes due 2019, Main Street estimates its fair value would be approximately $176.6 million. Main Street recognized interest expense related to the 4.50% Notes due 2019, including amortization of unamortized deferred issuance costs, of $2.1 million for each of the three months ended March 31, 2018 and 2017.

        The indenture governing the 4.50% Notes due 2019 (the "4.50% Notes due 2019 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 due 2019 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 due 2019 Indenture. As of March 31, 2018, Main Street was in compliance with these covenants.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

    4.50% Notes due 2022

        In November 2017, Main Street issued $185.0 million in aggregate principal amount of 4.50% unsecured notes due 2022 (the "4.50% Notes due 2022") at an issue price of 99.16%. The 4.50% Notes due 2022 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 due 2022; 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 4.50% Notes due 2022 mature on December 1, 2022, 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 due 2022 bear interest at a rate of 4.50% per year payable semiannually on June 1 and December 1 of each year. The total net proceeds from the 4.50% Notes due 2022, resulting from the issue price and after underwriting discounts and estimated offering expenses payable, were approximately $182.2 million. Main Street may from time to time repurchase the 4.50% Notes due 2022 in accordance with the 1940 Act and the rules promulgated thereunder. As of March 31, 2018, the outstanding balance of the 4.50% Notes due 2022 was $185.0 million and the recorded value of $182.2 million was net of unamortized debt issuance costs of $2.8 million. As of March 31, 2018, if Main Street had adopted the fair value option under ASC 825 for the 4.50% Notes due 2022, Main Street estimates its fair value would be approximately $184.1 million. Main Street recognized interest expense related to the 4.50% Notes due 2022, including amortization of unamortized deferred issuance costs, of $2.2 million for the three months ended March 31, 2018.

        The indenture governing the 4.50% Notes due 2022 (the "4.50% Notes due 2022 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 due 2022 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 due 2022 Indenture. As of March 31, 2018, Main Street was in compliance with these covenants.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

NOTE H—FINANCIAL HIGHLIGHTS

 
  Three Months
Ended March 31,
 
 
  2018   2017  

Per Share Data:

             

NAV at the beginning of the period

  $ 23.53   $ 22.10  

Net investment income(1)

    0.63     0.57  

Net realized gain(1)(2)

    0.10     0.41  

Net unrealized depreciation(1)(2)

    (0.16 )   (0.30 )

Income tax benefit (provision)(1)(2)

    0.02     (0.11 )

Net increase in net assets resulting from operations(1)

    0.59     0.57  

Dividends paid from net investment income

    (0.57 )   (0.21 )

Distributions from capital gains

        (0.35 )

Total dividends paid

    (0.57 )   (0.56 )

Accretive effect of stock offerings (issuing shares above NAV per share)

    0.07     0.26  

Accretive effect of DRIP issuance (issuing shares above NAV per share)

    0.01     0.01  

Other(3)

    0.04     0.06  

NAV at the end of the period

  $ 23.67   $ 22.44  

Market value at the end of the period

  $ 36.90   $ 38.27  

Shares outstanding at the end of the period

    59,007,730     55,423,375  

(1)
Based on weighted-average number of common shares outstanding for the period.

(2)
Net realized gains or losses, net 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

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

    certain per share data based on the shares outstanding as of a period end or transaction date.

 
  Three Months
Ended March 31,
 
 
  2018   2017  
 
  (dollars in thousands)
 

NAV at end of period

  $ 1,396,600   $ 1,243,934  

Average NAV

  $ 1,388,484   $ 1,222,708  

Average outstanding debt

  $ 871,205   $ 825,155  

Ratio of total expenses, including income tax expense, to average NAV(1)(2)

    1.30%     1.83%  

Ratio of operating expenses to average NAV(2)(3)

    1.37%     1.37%  

Ratio of operating expenses, excluding interest expense, to average NAV(2)(3)

    0.63%     0.66%  

Ratio of net investment income to average NAV(2)

    2.66%     2.55%  

Portfolio turnover ratio(2)

    7.11%     8.97%  

Total investment return(2)(4)

    –5.70%     5.64%  

Total return based on change in NAV(2)(5)

    2.50%     2.62%  

(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)
Unless otherwise noted, 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 is based on the 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 is 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. Non-operating changes include any items that affect net asset value other than the net increase in net assets resulting from operations, such as the effects of stock offerings, shares issued under the DRIP and equity incentive plans and other miscellaneous items.

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

NOTE I—DIVIDENDS, DISTRIBUTIONS AND TAXABLE INCOME

        Main Street paid regular monthly dividends of $0.19 per share for each month of January through March 2018, totaling $33.5 million, or $0.57 per share, for the three months ended March 31, 2018. The first quarter 2018 regular monthly dividends represent a 2.7% increase from the regular monthly dividends paid for the first quarter of 2017. The regular monthly dividends equaled a total of approximately $30.4 million, or $0.555 per share, for the three months ended March 31, 2017.

        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 taxable 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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MAIN STREET CAPITAL CORPORATION

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 three months ended March 31, 2018 and 2017.

 
  Three Months Ended
March 31,
 
 
  2018   2017  
 
  (estimated, dollars
in thousands)

 

Net increase in net assets resulting from operations

  $ 34,517   $ 31,450  

Book tax difference from share-based compensation expense

    1,819     1,265  

Net unrealized depreciation

    9,523     16,426  

Income tax provision (benefit)

    (979 )   5,638  

Pre-tax book income not consolidated for tax purposes

    (13,350 )   (6,468 )

Book income and tax income differences, including debt origination, structuring fees, dividends, realized gains and changes in estimates

    12,367     4,373  

Estimated taxable income(1)

    43,897     52,684  

Taxable income earned in prior year and carried forward for distribution in current year

    42,357     42,362  

Taxable income earned prior to period end and carried forward for distribution next period

    (63,938 )   (74,695 )

Dividend payable as of period end and paid in the following period

    11,191     10,252  

Total distributions accrued or paid to common stockholders

  $ 33,507   $ 30,603  

(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 primarily 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-of-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. The Taxable Subsidiaries are each taxed at their normal corporate tax rates based on their taxable income. The income tax expense, or benefit, if any, and the related tax assets and liabilities, of the Taxable Subsidiaries are reflected in Main Street's consolidated financial statements.

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

        For the three months ended March 31, 2018, Main Street recognized a net income tax benefit of $1.0 million, principally consisting of a deferred tax benefit of $1.9 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, and a $0.9 million current tax expense, which is primarily related to a $0.4 million accrual for excise tax on Main Street's estimated undistributed taxable income and $0.5 million provision for current U.S. federal income and state taxes. For the three months ended March 31, 2017, Main Street recognized a net income tax provision of $5.6 million, principally consisting of a deferred tax provision of $4.4 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, and a $1.3 million current tax expense, which is primarily related to a $0.9 million accrual for excise tax on Main Street's estimated undistributed taxable income, and $0.4 million provision for current U.S. federal income and state taxes.

        The net deferred tax liability at March 31, 2018 was $8.7 million compared to $10.6 million at December 31, 2017, 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. The net deferred tax liability as of December 31, 2017 equal to $10.6 million reflects a reduction of $2.8 million resulting from the decrease in the U.S. federal corporate income tax rate from 35% to 21% as enacted by the Tax Cuts and Jobs Act (See further discussion in Note B.9.). At March 31, 2018, for U.S. federal income tax purposes, the Taxable Subsidiaries had a net operating loss carryforward from prior years which, if unused, will expire in various taxable years from 2029 through 2037. Under the Tax Cuts and Jobs Act, any net operating losses generated in 2018 and future periods will have an indefinite carryforward. The timing and manner in which Main Street will utilize any loss carryforwards generated before December 31, 2017 may be limited in the future under the provisions of the Code.

NOTE J—COMMON STOCK

        Main Street maintains a program with certain 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 three months ended March 31, 2018, Main Street sold 308,678 shares of its common stock at a weighted-average price of $37.27 per share and raised $11.5 million of gross proceeds under the ATM Program. Net proceeds were $11.3 million after commissions to the selling agents on shares sold and offering costs. As of March 31, 2018, sales transactions representing 20,400 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 in the consolidated statement of operations and in the shares used to calculate net asset value per share. As of March 31, 2018, there were 1,602,678 shares available for sale under the ATM Program.

        During the year ended December 31, 2017, Main Street sold 3,944,972 shares of its common stock at a weighted-average price of $38.72 per share and raised $152.8 million of gross proceeds under the ATM Program. Net proceeds were $150.9 million after commissions to the selling agents on shares sold and offering costs. As of December 31, 2017, 1,911,356 shares remained available for sale under the ATM Program.

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

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 three months ended March 31, 2018, $1.6 million of the total $33.5 million in dividends paid to stockholders represented DRIP participation. During this period, the DRIP participation requirements were satisfied with the issuance of 42,423 newly issued shares. For the three months ended March 31, 2017, $1.8 million of the total $30.4 million in dividends paid to stockholders represented DRIP participation. During this period, the DRIP participation requirements were satisfied with the issuance of 48,675 newly issued shares. The shares disclosed above relate only to Main Street's DRIP and exclude any activity related to broker-managed dividend reinvestment plans.

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 March 31, 2018.

Restricted stock authorized under the plan

    3,000,000  

Less net restricted stock granted during:

       

Year ended December 31, 2015

    (900 )

Year ended December 31, 2016

    (260,514 )

Year ended December 31, 2017

    (223,812 )

Restricted stock available for issuance as of March 31, 2018

    2,514,774  

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

        As of March 31, 2018, 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 )

Year ended December 31, 2016

    (6,748 )

Year ended December 31, 2017

    (5,948 )

Restricted stock available for issuance as of March 31, 2018

    280,498  

        For each of the three months ended March 31, 2018 and 2017, Main Street recognized total share-based compensation expense of $2.3 million, related to the restricted stock issued to Main Street employees and non-employee directors.

        As of March 31, 2018, there was $8.5 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 1.6 years as of March 31, 2018.

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

NOTE M—COMMITMENTS AND CONTINGENCIES

        At March 31, 2018, Main Street had the following outstanding commitments (in thousands):

 
  Amount  

Investments with equity capital commitments that have not yet funded:

       

Congruent Credit Opportunities Funds

       

Congruent Credit Opportunities Fund II, LP

  $ 8,488  

Congruent Credit Opportunities Fund III, LP

    12,131  

  $ 20,619  

Encap Energy Fund Investments

   
 
 

EnCap Energy Capital Fund VIII, L.P. 

  $ 469  

EnCap Energy Capital Fund IX, L.P. 

    556  

EnCap Energy Capital Fund X, L.P. 

    3,254  

EnCap Flatrock Midstream Fund II, L.P. 

    6,470  

EnCap Flatrock Midstream Fund III, L.P. 

    4,516  

  $ 15,265  

Brightwood Capital Fund Investments

   
 
 

Brightwood Capital Fund III, LP

  $ 3,000  

Brightwood Capital Fund IV, LP

    4,000  

  $ 7,000  

Freeport Fund Investments

   
 
 

Freeport First Lien Loan Fund III LP

  $ 3,942  

Freeport Financial SBIC Fund LP

    1,375  

  $ 5,317  

EIG Fund Investments

 
$

4,649
 

Harris Preston Fund Investments

   
 
 

HPEP 3, L.P. 

  $ 3,967  

LKCM Headwater Investments I, L.P. 

 
$

2,931
 

Copper Trail Energy Fund I, LP

 
$

2,500
 

Dos Rios Partners

   
 
 

Dos Rios Partners, LP

  $ 1,594  

Dos Rios Partners—A, LP

    506  

  $ 2,100  

I-45 SLF LLC

 
$

800
 

Access Media Holdings, LLC

 
$

675
 

Total equity commitments

  $ 65,823  

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

 
  Amount  

Investments with commitments to fund revolving loans that have not been fully drawn or term loans with additional commitments not yet funded:

       

California Splendor Holdings LLC

 
$

8,270
 

Resolute Industrial, LLC

    5,750  

Hunter Defense Technologies, Inc. 

    5,168  

Radiology Partners, Inc. 

    5,254  

NexRev LLC

    4,000  

PT Network, LLC

    3,618  

Hojeij Branded Foods, LLC

    3,422  

Arcus Hunting LLC

    3,132  

CDHA Management, LLC

    2,343  

Wireless Vision Holdings, LLC

    2,068  

NNE Partners, LLC

    2,042  

Barfly Ventures, LLC

    1,838  

Felix Investments Holdings II

    1,667  

Hawk Ridge Systems, LLC

    1,600  

Meisler Operating LLC

    1,600  

Market Force Information, LLC

    1,600  

Chamberlin Holding LLC

    1,600  

Direct Marketing Solutions, Inc. 

    1,600  

Aethon United BR LP

    1,563  

IDX Broker, LLC

    1,500  

Lamb Ventures, LLC

    1,500  

Messenger, LLC

    1,417  

TGP Holdings III LLC

    1,255  

Gamber-Johnson Holdings, LLC

    1,200  

NuStep, LLC

    1,200  

Boccella Precast Products LLC

    1,142  

KBK Industries, LLC

    925  

CTVSH, PLLC

    800  

NRI Clinical Research, LLC

    600  

ATS Workholding, LLC

    523  

PPC/SHIFT LLC

    500  

UniTek Global Services, Inc. 

    483  

Clad-Rex Steel, LLC

    400  

Gulf Publishing Holdings, LLC

    400  

Jensen Jewelers of Idaho, LLC

    350  

OnAsset Intelligence, Inc. 

    225  

BigName Commerce, LLC

    101  

BBB Tank Services, LLC

    80  

Total loan commitments

  $ 72,736  

Total commitments

  $ 138,559  

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

        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 and borrowings under the Credit Facility). 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 March 31, 2018.

        Main Street has an operating lease for office space. Total rent expense incurred by Main Street for the three months ended March 31, 2018 and 2017 was $0.2 million and $0.1 million, respectively.

        The following table shows future minimum payments under Main Street's operating lease as of March 31, 2018:

For the Years Ended December 31,
  Amount  

2018

  $ 346  

2019

    749  

2020

    763  

2021

    777  

2022

    791  

Thereafter

    4,239  

Total

  $ 7,665  

        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.

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 March 31, 2018, Main Street had a receivable of approximately $2.8 million due from the External Investment Manager which included (i) approximately $2.3 million related primarily to operating expenses incurred by MSCC or its subsidiaries as required to support the External Investment Manager's business and amounts due from the External Investment Manager to Main Street under a tax sharing agreement (see further discussion in Note D) and (ii) approximately $0.6 million of dividends declared but not paid by the External Investment Manager.

        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

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

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 March 31, 2018, $4.8 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, $2.5 million was deferred into phantom Main Street stock units, representing 74,503 shares of Main Street's common stock. Including phantom stock units issued through dividend reinvestment, the phantom stock units outstanding as of March 31, 2018 represented 90,411 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 statements 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 in Main Street's consolidated statements of operations as earned.

NOTE O—SUBSEQUENT EVENTS

        In April 2018, Main Street made a new portfolio investment to facilitate the minority recapitalization of DPI, Inc. ("DPI"), a leading designer, developer, and distributor of a broad assortment of consumer electronics to national retailers under several proprietary brands. Main Street, along with a co-investor, partnered with DPI's management team to facilitate the transaction, with Main Street funding $35.2 million in a combination of first-lien, senior secured term debt and a direct equity investment. Headquartered in St. Louis, Missouri, DPI offers consumer electronics products designed for value-conscious consumers.

        In April 2018, Main Street redeemed the entire principal amount of the issued and outstanding 6.125% Notes effective April 1, 2018 (the "Redemption Date"). The 6.125% Notes were redeemed at par value, plus the accrued and unpaid interest thereon from January 1, 2018, through, but excluding, the Redemption Date. As part of the redemption, Main Street recognized a realized loss of $1.5 million in the second quarter related to the write-off of any remaining unamortized deferred financing costs.

        During April 2018, Main Street declared a semi-annual supplemental cash dividend of $0.275 per share payable in June 2018. This supplemental cash dividend is in addition to the previously announced regular monthly cash dividends that Main Street declared for the second quarter of 2018 of $0.19 per share for each of April, May and June 2018.

        During May 2018, Main Street declared regular monthly dividends of $0.19 per share for each month of July, August and September of 2018. These regular monthly dividends equal a total of $0.57 per share for the third quarter of 2018 and represent a 2.7% increase from the regular monthly dividends declared for the third quarter of 2017. Including the semi-annual supplemental dividend declared for June 2018 and the regular monthly dividends declared for the second and third quarters of 2018, Main Street will have paid $23.375 per share in cumulative dividends since its October 2007 initial public offering.

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Schedule 12-14

MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments in and Advances to Affiliates
March 31, 2018
(dollars in thousands)
(unaudited)

Company
 
Investment(1)(5)
  Amount of
Realized
Gain/(Loss)
  Amount of
Unrealized
Gain/(Loss)
  Amount of
Interest,
Fees or
Dividends
Credited to
Income(2)
  December 31,
2017
Fair Value
  Gross
Additions(3)
  Gross
Reductions(4)
  March 31,
2018
Fair Value
 

Majority-owned investments

                                               

Café Brazil, LLC

 

Member Units

 
$

 
$

 
$

87
 
$

4,900
 
$

 
$

 
$

4,900
 

California Splendor Holdings LLC

  LIBOR Plus 8.00% (Floor 1.00%)             122         3,610         3,610  

  LIBOR Plus 10.00% (Floor 1.00%)             303         27,723         27,723  

  Preferred Member Units                     12,500         12,500  

Clad-Rex Steel, LLC

  LIBOR Plus 9.50% (Floor 1.00)         (6 )   375     13,280     6     6     13,280  

  Member Units         280     94     9,500     280         9,780  

  10% Secured Debt             30     1,183         5     1,178  

  Member Units                 280             280  

CMS Minerals Investments

  Member Units         139     9     2,392     139     146     2,385  

Direct Marketing Solutions, Inc.

  LIBOR Plus 11.00% (Floor 1.00%)             624         18,602     79     18,523  

  Preferred Stock                     8,400         8,400  

Gamber-Johnson Holdings, LLC

  LIBOR Plus 11.00% (Floor 1.00%)         (15 )   744     23,400     15     505     22,910  

  Member Units         3,160     292     23,370     3,160         26,530  

GRT Rubber Technologies LLC

  LIBOR Plus 9.00% (Floor 1.00%)         (7 )   309     11,603     7     217     11,393  

  Member Units         1,450     308     21,970     1,450         23,420  

Harborside Holdings, LLC

  Member Units                 9,400     100         9,500  

Harris Preston Fund Investments

  LP Interests                 536             536  

Hydratec, Inc.

  Common Stock     7,922     (7,905 )   332     15,000     160     15,160      

IDX Broker, LLC

  11.5% Secured Debt         (12 )   446     15,250     12     312     14,950  

  Preferred Member Units         (110 )   68     11,660         110     11,550  

Jensen Jewelers of Idaho, LLC

  Prime Plus 6.75% (Floor 2.00%)         (4 )   50     3,955     4     154     3,805  

  Member Units             113     5,100             5,100  

Lamb Ventures, LLC

  11% Secured Debt         (10 )   267     9,942     210     1,813     8,339  

  Preferred Equity                 400             400  

  Member Units         (60 )       6,790         60     6,730  

  9.5% Secured Debt             10     432             432  

  Member Units                 520             520  

Mid-Columbia Lumber Products, LLC

  10% Secured Debt             46     1,390     353         1,743  

  12% Secured Debt             121     3,863     4         3,867  

  Member Units             2     1,575     596         2,171  

  9.5% Secured Debt             19     791         11     780  

  Member Units             15     1,290             1,290  

MSC Adviser I, LLC

  Member Units         6,954     573     41,768     6,954         48,722  

Mystic Logistics Holdings, LLC

  12% Secured Debt             241     7,696     11     206     7,501  

  Common Stock         (770 )   2     6,820         770     6,050  

NexRev LLC

  11% Secured Debt             387         17,268         17,268  

  Preferred Equity                     6,880         6,880  

NRP Jones, LLC

  12% Secured Debt             191     6,376             6,376  

  Member Units         880         3,250     880         4,130  

PPL RVs, Inc.

  LIBOR Plus 7.00% (Floor 0.50%)         (7 )   357     16,100     7     7     16,100  

  Common Stock         (780 )   28     12,440         780     11,660  

Principle Environmental, LLC (d/b.a

  13% Secured Debt         (13 )   256     7,477     13     13     7,477  

TruHorizon Environmental Solutions)

  Preferred Member Units         1,600     746     11,490     1,600         13,090  

  Warrants         130         650     130         780  

Quality Lease Service, LLC

  Zero Coupon Secured Debt                 6,950             6,950  

  Member Units                 4,938     425         5,363  

The MPI Group, LLC

  9% Secured Debt         (900 )   66     2,410         900     1,510  

  Series A Preferred Units                              

  Warrants                              

  Member Units         90     11     2,389     91         2,480  

Uvalco Supply, LLC

  9% Secured Debt             5     348         164     184  

  Member Units             80     3,880             3,880  

111


Table of Contents

Company
 
Investment(1)(5)
  Amount of
Realized
Gain/(Loss)
  Amount of
Unrealized
Gain/(Loss)
  Amount of
Interest,
Fees or
Dividends
Credited to
Income(2)
  December 31,
2017
Fair Value
  Gross
Additions(3)
  Gross
Reductions(4)
  March 31,
2018
Fair Value
 

Vision Interests, Inc.

  13% Secured Debt             95     2,797     4         2,801  

  Series A Preferred Stock                 3,000             3,000  

  Common Stock                              

Ziegler's NYPD, LLC

  6.5% Secured Debt             17     996     1         997  

  12% Secured Debt             9     300             300  

  14% Secured Debt             96     2,750             2,750  

  Warrants                              

  Preferred Member Units                 3,220     1         3,221  

Other controlled investments

                                               

Access Media Holdings, LLC

 

10% PIK Secured Debt

   
   
(2,030

)
 
   
17,150
   
   
2,030
   
15,120
 

  Preferred Member Units         (302 )           302     302      

  Member Units                              

ASC Interests, LLC

  11% Secured Debt         (160 )   51     1,795     3     151     1,647  

  Member Units                 1,530         160     1,370  

ATS Workholding, LLC

  5% Secured Debt             75     3,249     486         3,735  

  Preferred Member Units                 3,726             3,726  

Bond-Coat, Inc.

  12% Secured Debt             348     11,596             11,596  

  Common Stock                 9,370             9,370  

Brewer Crane Holdings, LLC

  LIBOR Plus 10.00% (Floor 1.00%)             366         9,825         9,825  

  Preferred Member Units             30         4,280         4,280  

CBT Nuggets, LLC

  Member Units         (22,219 )   6,042     89,560         22,220     67,340  

Chamberlin Holding LLC

  LIBOR Plus 10.00% (Floor 1.00%)             577         21,389         21,389  

  Member Units                     11,440         11,440  

Charps, LLC

  12% Secured Debt             550     18,225     22     1,601     16,646  

  Preferred Member Units         540         650     540         1,190  

Copper Trail Energy Fund I, LP

  LP Interests             33     2,500             2,500  

Datacom, LLC

  8% Secured Debt             33     1,575     180         1,755  

  5.25% Current / 5.25% PIK Secured Debt             330     11,110     168     498     10,780  

  Class A Preferred Member Units         (510 )       730         510     220  

  Class B Preferred Member Units         (498 )                    

Garreco, LLC

  LIBOR Plus 10.00% (Floor 1.00%)             162     5,443     5     121     5,327  

  Member Units                 1,940             1,940  

Gulf Manufacturing, LLC

  Member Units         770     414     10,060     770         10,830  

Gulf Publishing Holdings, LLC

  LIBOR Plus 9.50% (Floor 1.00%)             1     80         80      

  12.5% Secured Debt             405     12,703     7     102     12,608  

  Member Units                 4,840             4,840  

Harrison Hydra-Gen, Ltd.

  Common Stock         1,400         3,580     1,400         4,980  

HW Temps LLC

  LIBOR Plus 11.00% (Floor 1.00%)             320     9,918     4         9,922  

  Preferred Member Units             35     3,940             3,940  

KBK Industries, LLC

  10% Secured Debt             7     375         300     75  

  12.5% Secured Debt         (3 )   187     5,900     3     3     5,900  

  Member Units         320     153     4,420     320         4,740  

Marine Shelters Holdings, LLC

  12% PIK Secured Debt                              

  Preferred Member Units                              

Market Force Information, LLC

  LIBOR Plus 11.00% (Floor 1.00%)             757     23,143     13     480     22,676  

  Member Units             2     14,700             14,700  

MH Corbin Holding LLC

  10% Secured Debt             357     12,526         288     12,238  

  Preferred Member Units             35     6,000             6,000  

NAPCO Precast, LLC

  LIBOR Plus 8.50%         (6 )   302     11,475     6     6     11,475  

  Member Units         510     293     11,670     510         12,180  

NRI Clinical Research, LLC

  LIBOR Plus 6.50% (Floor 1.50%)             9     400             400  

  14% Secured Debt         30     141     3,865             3,865  

  Warrants                 500             500  

  Member Units                 2,500             2,500  

NuStep, LLC

  12% Secured Debt             628     20,420     9         20,429  

  Preferred Member Units                 10,200             10,200  

OMi Holdings, Inc.

  Common Stock         180     360     14,110     180         14,290  

Pegasus Research Group, LLC

  Member Units                 10,310             10,310  

River Aggregates, LLC

  Zero Coupon Secured Debt             21     707     21         728  

  Member Units                 4,610             4,610  

  Member Units         110         2,559     111         2,670  

112


Table of Contents

Company
 
Investment(1)(5)
  Amount of
Realized
Gain/(Loss)
  Amount of
Unrealized
Gain/(Loss)
  Amount of
Interest,
Fees or
Dividends
Credited to
Income(2)
  December 31,
2017
Fair Value
  Gross
Additions(3)
  Gross
Reductions(4)
  March 31,
2018
Fair Value
 

SoftTouch Medical Holdings LLC

  LIBOR Plus 9.00% (Floor 1.00%)         (30 )   120     7,140     30     7,170      

  Member Units     5,172     (5,160 )   865     10,089     1,262     11,351      

Other

                                               

Amounts related to investments transferred to or from other 1940 Act classification during the period

                                 

Total Control investments

      $ 13,094   $ (22,974 ) $ 21,955   $ 750,706   $ 164,882   $ 68,791   $ 846,797  

Affiliate Investments

                                               

AFG Capital Group, LLC

 

Warrants

 
$

 
$

40
 
$

 
$

860
 
$

40
 
$

 
$

900
 

  Preferred Member Units         170     10     3,590     170         3,760  

Barfly Ventures, LLC

  12% Secured Debt         (4 )   267     8,715     4     4     8,715  

  Options                 920             920  

  Warrants                 520             520  

BBB Tank Services, LLC

  LIBOR Plus 8.00% (Floor 1.00%)             20     778     414     492     700  

  15% Secured Debt             157     3,876     7         3,883  

  Member Units         50         500     50         550  

Boccella Precast Products LLC

  LIBOR Plus 10.0% (Floor 1.00%)         (13 )   496     16,400     1,213     1,031     16,582  

  Member Units         1,419     463     3,440     1,420         4,860  

Boss Industries, LLC

  Preferred Member Units         770     90     3,930     810         4,740  

Bridge Capital Solutions Corporation

  13% Secured Debt             347     5,884     78         5,962  

  Warrants         500         3,520     500         4,020  

  13% Secured Debt             33     1,000             1,000  

  Preferred Member Units             33     1,000             1,000  

Buca C, LLC

  LIBOR Plus 9.25% (Floor 1.00%)             560     20,193     11     300     19,904  

  Preferred Member Units             61     4,172     61         4,233  

CAI Software LLC

  12% Secured Debt         (3 )   125     4,083     3     3     4,083  

  Member Units             10     3,230             3,230  

Chandler Signs Holdings, LLC

  12% Secured Debt         (2 )   137     4,500     2     2     4,500  

  Class A Units         (470 )       2,650         470     2,180  

Charlotte Russe, Inc

  8.50% Secured Debt         (80 )   113     7,807     16,658     16,553     7,912  

  Common Stock                     3,141         3,141  

Condit Exhibits, LLC

  Member Units             66     1,950             1,950  

Congruent Credit Opportunities Funds

  LP Interests (Fund II)         (515 )       1,515         1,035     480  

  LP Interests (Fund III)         122     361     18,632     122         18,754  

Dos Rios Partners

  LP Interests (Dos Rios Partners, LP)         81         7,165     81         7,246  

  LP Interests (Dos Rios Partners—A, LP)         293         1,889     293         2,182  

Dos Rios Stone Products LLC

  Class A Preferred Units         (440 )   23     1,790         440     1,350  

East Teak Fine Hardwoods, Inc.

  Common Stock             4     630             630  

EIG Fund Investments

  LP Interests (EIG Global Private Debt fund-A, L.P.)                 1,055     377     1,029     403  

Freeport Financial Funds

  LP Interests (Freeport Financial SBIC Fund LP)         (60 )   102     5,614         60     5,554  

  LP Interests (Freeport First Lien Loan Fund III LP)             248     8,506             8,506  

Gault Financial, LLC (RMB

  8% Current Secured Debt             243     11,532             11,532  

Capital, LLC)

  Warrants                              

Guerdon Modular Holdings, Inc.

  LIBOR Plus 8.50% (Floor 1.00%)             2         394         394  

  13% Secured Debt             363     10,632     294         10,926  

  Preferred Stock                              

  Common Stock                              

Harris Preston Fund Investments

  LP Interests   $   $   $   $ 943   $ 90   $   $ 1,033  

Hawk Ridge Systems, LLC

  10.5% Secured Debt         (6 )   389     14,300     6     6     14,300  

  Preferred Member Units         2,422     55     3,800     2,423         6,223  

  Preferred Member Units         128         200     128         328  

Houston Plating and Coatings, LLC

  8% Unsecured Convertible Debt             60     3,200             3,200  

  Member Units         520     48     6,140     520         6,660  

I-45 SLF LLC

  Member Units             705     16,841             16,841  

L.F. Manufacturing Holdings, LLC

  Member Units                 2,000             2,000  

Meisler Operating LLC

  LIBOR Plus 8.50% (Floor 1.00%)             472     16,633     2,146         18,779  

  Member Units         525         3,390     2,180         5,570  

113


Table of Contents

Company
 
Investment(1)(5)
  Amount of
Realized
Gain/(Loss)
  Amount of
Unrealized
Gain/(Loss)
  Amount of
Interest,
Fees or
Dividends
Credited to
Income(2)
  December 31,
2017
Fair Value
  Gross
Additions(3)
  Gross
Reductions(4)
  March 31,
2018
Fair Value
 

OnAsset Intelligence, Inc.

  12% PIK Secured Debt             153     5,094     153         5,247  

  10% PIK Secured Debt             1     48     1         49  

  Preferred Stock                              

  Warrants                              

OPI International Ltd.

  Common Stock                              

PCI Holding Company, Inc.

  12% Current/3% PIK Secured Debt             685     12,593     304     326     12,571  

  Preferred Stock         (600 )       890         600     290  

  Preferred Stock         870         2,610     870         3,480  

Rocaceia, LLC (Quality Lease and Rental

  12% Secured Debt                 250             250  

Holdings, LLC)

  Preferred Member Units                              

Tin Roof Acquisition Company

  12% Secured Debt             393     12,722     17     224     12,515  

  Class C Preferred Stock             76     3,027     75         3,102  

UniTek Global Services, Inc.

  LIBOR Plus 8.50% (Floor 1.00%)         (1 )   220     8,535     1     1     8,535  

  LIBOR Plus 7.50% (Floor 1.00%)/1.00% PIK             4     137     1         138  

  15% PIK Unsecured Debt             34     865     32         897  

  Preferred Stock         (8 )   248     7,320     248     8     7,560  

  Preferred Stock         (6 )   136     2,850     136     6     2,980  

  Common Stock         190         2,490     190         2,680  

Universal Wellhead Services

  Preferred Member Units         30         830     30         860  

Holdings, LLC

  Member Units         120         1,910     120         2,030  

Valley Healthcare Group, LLC

  LIBOR Plus 12.50% (Floor 0.50%)             419     11,685     6     120     11,571  

  Preferred Member Units         140         1,600     140         1,740  

Volusion, LLC

  11.5% Secured Debt             639     15,200     158         15,358  

  Preferred Member Units                 14,000             14,000  

  Warrants         (610 )       2,080         609     1,471  

Other

                                               

Amounts related to investments

                                               

transferred to or from other 1940 Act

                                               

classification during the period

            8,666         (7,807 )            

Total Affiliate investments

      $   $ 14,238   $ 9,071   $ 338,854   $ 36,118   $ 23,319   $ 359,460  

(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 or investment balances 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.

(5)
This schedule should be read in conjunction with the consolidated schedule of investments and notes to the consolidated financial statements. Supplemental information can located within the schedule of investments including end of period interest rate, preferred dividend rate, maturity date, investments not paid currently in cash and investments whose value was determined using significant unobservable inputs.

114


Table of Contents


Schedule 12-14

MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments In and Advances to Affiliates
March 31, 2017
(dollars in thousands)
(unaudited)

Company
  Investment(1)(5)   Amount of
Realized
Gain/(Loss)
  Amount of
Unrealized
Gain/(Loss)
  Amount of
Interest, Fees or
Dividends
Credited to
Income(2)
  December 31,
2016
Fair Value
  Gross
Additions(3)
  Gross
Reductions(4)
  March 31,
2017
Fair Value
 

Majority-owned investments

                                               

Café Brazil, LLC

 

Member Units

 
$

 
$

(140

)

$

52
 
$

6,040
 
$

 
$

140
 
$

5,900
 

Clad-Rex Steel, LLC

  LIBOR Plus 9.50% (Floor 1.00%)             11     396     1         397  

  LIBOR Plus 9.50% (Floor 1.00%)             375     13,941     5         13,946  

  Member Units                 7,280             7,280  

  10% Secured Debt             30     1,190         4     1,186  

  Member Units                 210             210  

CMS Minerals

  Preferred Member Units         (316 )   51     3,682         411     3,271  

Investments

  Member Units         (148 )   63     3,381         261     3,120  

Gamber-Johnson

  LIBOR Plus 11.00% (Floor 1.00%)         224     735     23,846     234         24,080  

Holdings, LLC

  Member Units         3,160     170     18,920     3,160         22,080  

GRT Rubber

  LIBOR Plus 9.00% (Floor 1.00%)         (8 )   334     13,274     8     217     13,065  

Technologies LLC

  Member Units             127     20,310             20,310  

Harborside Holdings, LLC

  Member Units         3,344             9,400         9,400  

Hydratec, Inc.

  Common Stock             480     15,640             15,640  

IDX Broker, LLC

  12.5% Secured Debt         (7 )   344     10,950     7     307     10,650  

  Member Units         1,160     68     7,040     1,160         8,200  

Jensen Jewelers of

  Prime Plus 6.75% (Floor 2.00%)         (4 )   108     4,055     4     154     3,905  

Idaho, LLC

  Member Units             37     4,460             4,460  

Lamb Ventures, LLC

  LIBOR Plus 5.75%             7         350     45     305  

  11% Secured Debt             209     7,657         78     7,579  

  Preferred Equity                 400             400  

  Member Units         200     40     5,990     200         6,190  

  9.5% Secured Debt             32     1,170     428     1,170     428  

  Member Units         (380 )   407     1,340         380     960  

Lighting

  8% Secured Debt             29     1,514         1,514      

Unlimited, LLC

  Preferred Equity     (434 )   24         410     24     434      

  Warrants     (54 )   54             54     54      

  Member Units     (100 )   100             100     100      

Mid-Columbia Lumber

  10% Secured Debt             44     1,750             1,750  

Products, LLC

  12% Secured Debt             117     3,900             3,900  

  Member Units         (500 )   2     2,480         500     1,980  

  9.5% Secured Debt             20     836         11     825  

  Member Units         80     9     600     620         1,220  

MSC Adviser I, LLC

  Member Units         2,855     695     30,617     2,855         33,472  

Mystic Logistics

  12% Secured Debt         (10 )   286     9,176     11     23     9,164  

Holdings, LLC

  Common Stock         390         5,780     390         6,170  

NRP Jones, LLC

  8% Current / 4% PIK Secured Debt             419     13,915     139         14,054  

  Warrants                 130             130  

  Member Units                 410             410  

PPL RVs, Inc.

  LIBOR Plus 7.00% (Floor 0.50%)             370     17,826     8         17,834  

  Common Stock             100     11,780             11,780  

Principle

  12% Secured Debt             122     4,060             4,060  

Environmental, LLC

  12% Current / 2% PIK Secured Debt             118     3,378     16         3,394  

  Preferred Member Units     (63 )   953         5,370     953     63     6,260  

  Warrants         50         270     50         320  

Quality Lease

  8% PIK Secured Debt             136     7,068     136         7,204  

Service, LLC

  Member Units                 3,188     1,051         4,239  

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Table of Contents

Company
  Investment(1)(5)   Amount of
Realized
Gain/(Loss)
  Amount of
Unrealized
Gain/(Loss)
  Amount of
Interest, Fees or
Dividends
Credited to
Income(2)
  December 31,
2016
Fair Value
  Gross
Additions(3)
  Gross
Reductions(4)
  March 31,
2017
Fair Value
 

The MPI Group, LLC

  9% Secured Debt             66     2,922             2,922  

  Series A Preferred Units                              

  Warrants                              

  Member Units         90     35     2,300     90         2,390  

Uvalco Supply, LLC

  9% Secured Debt             18     872         116     756  

  Member Units     69     (69 )   8     4,640         333     4,307  

Vision Interests, Inc.

  13% Secured Debt             91     2,814             2,814  

  Series A Preferred Stock                 3,000             3,000  

  Common Stock                              

Ziegler's NYPD, LLC

  6.5% Secured Debt             17     994             994  

  12% Secured Debt             9     300             300  

  14% Secured Debt             96     2,750             2,750  

  Warrants                 240             240  

  Preferred Member Units                 4,100             4,100  

Other controlled investments

                                               

Access Media

  5% Current / 5% PIK Secured Debt         (512 )   563     19,700     282     512     19,470  

Holdings, LLC

  Preferred Member Units         (189 )       240     169     189     220  

  Member Units                              

Ameritech College

  10% Secured Debt             13     514             514  

Operations, LLC

  13% Secured Debt             16     489             489  

  13% Secured Debt             98     3,025             3,025  

  Preferred Member Units         (3,381 )       2,291     3,900     3,381     2,810  

ASC Interests, LLC

  11% Secured Debt         (3 )   60     2,100     3     53     2,050  

  Member Units         60         2,680     60         2,740  

Bond-Coat, Inc.

  12% Secured Debt         (9 )   357     11,596     9     9     11,596  

  Common Stock         940         6,660     940         7,600  

CBT Nuggets, LLC

  Member Units         5,141     1,000     55,480     5,140         60,620  

Charps, LLC

  LIBOR Plus 7.00% (Floor 1.00%)             14         781         781  

  12% Secured Debt             630         18,220         18,220  

  Preferred Member Units                     400         400  

Datacom, LLC

  8% Secured Debt             20     900     180         1,080  

  5.25% Current / 5.25% PIK Secured Debt         282     313     11,049     441         11,490  

  Class A Preferred Member Units         51         1,368     51         1,419  

  Class B Preferred Member Units         332         1,529     332         1,861  

Garreco, LLC

  LIBOR Plus 12.00% (Floor 1.00%)             189     5,219     975     225     5,969  

  Member Units         320         1,150     320         1,470  

Gulf

  9% PIK Secured Debt             17     777             777  

Manufacturing, LLC

  Member Units         420     139     8,770     420         9,190  

Gulf Publishing

  12.5% Secured Debt             316     9,911     4         9,915  

Holdings, LLC

  Member Units         336         3,124     336         3,460  

Harrison Hydra-Gen, Ltd.

  Common Stock         (320 )       3,120         320     2,800  

Hawthorne Customs

                                               

and Dispatch

  Member Units                 280             280  

Services, LLC

  Member Units             48     2,040             2,040  

HW Temps LLC

  LIBOR Plus 13.00% (Floor 1.00%)             368     10,500     4     600     9,904  

  Preferred Member Units             35     3,940             3,940  

Indianapolis Aviation

  15% Secured Debt             156     3,100             3,100  

Partners, LLC

  Warrants         61         2,649     61         2,710  

Marine Shelters

  12% PIK Secured Debt         (2,551 )       9,387         9,387      

Holdings, LLC

  Preferred Member Units     (100 )               100     100      

MH Corbin

  10% Secured Debt             335     13,197     8     175     13,030  

Holding LLC

  Preferred Member Units             35     6,000             6,000  

NAPCO Precast, LLC

  Prime Plus 2.00% (Floor 7.00%)         (2 )   63     2,713     2     2     2,713  

  18% Secured Debt         (3 )   181     3,952     3     3     3,952  

  Member Units             29     10,920             10,920  

NRI Clinical

  LIBOR Plus 6.50% (Floor 1.50%)             10     200     200         400  

Research, LLC

  14% Secured Debt         (11 )   160     4,261     11     11     4,261  

  Warrants                 680             680  

  Member Units                 2,462             2,462  

NuStep, LLC

  12% Secured Debt             728         20,394         20,394  

  Preferred Member Units                     10,200         10,200  

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Company
  Investment(1)(5)   Amount of
Realized
Gain/(Loss)
  Amount of
Unrealized
Gain/(Loss)
  Amount of
Interest, Fees or
Dividends
Credited to
Income(2)
  December 31,
2016
Fair Value
  Gross
Additions(3)
  Gross
Reductions(4)
  March 31,
2017
Fair Value
 

OMi Holdings, Inc.

  Common Stock             192     13,080             13,080  

Pegasus Research Group, LLC

  Member Units         (180 )   60     8,620         180     8,440  

River Aggregates, LLC

  Zero Coupon Secured Debt             19     627     19         646  

  Member Units                 4,600             4,600  

  Member Units                 2,510             2,510  

SoftTouch Medical

  LIBOR Plus 9.00% (Floor 1.00%)         (4 )   182     7,140     4     4     7,140  

Holdings LLC

  Member Units             155     9,170             9,170  

Other

                                               

Amounts related to investments transferred to or from other 1940 Act classification during the period

                                 

Total Control investments

      $ (682 ) $ 11,880   $ 12,988   $ 594,282   $ 85,423   $ 21,466   $ 658,239  

Affiliate Investments

                                               

AFG Capital

  Warrants   $   $ 20   $   $ 670   $ 20   $   $ 690  

Group, LLC

  Preferred Member Units         100     7     2,750     100         2,850  

Barfly Ventures, LLC

  12% Secured Debt             235     5,827     1,808         7,635  

  Options                 490             490  

  Warrants                 280             280  

BBB Tank

  LIBOR Plus 9.50% (Floor 1.00%)             21     797             797  

Services, LLC

  15% Secured Debt             152     3,991     1         3,992  

  Member Units                 800             800  

Boss Industries, LLC

  Preferred Member Units         73     89     2,800     120         2,920  

Bridge Capital

  13% Secured Debt             307     5,610     63         5,673  

Solutions

  Warrants                 3,370             3,370  

Corporation

  13% Secured Debt             33     1,000             1,000  

  Preferred Member Units             25     1,000             1,000  

Buca C, LLC

  LIBOR Plus 7.25% (Floor 1.00%)         (167 )   494     22,671     21     1,634     21,058  

  Preferred Member Units         (728 )   57     4,660     58     728     3,990  

CAI Software LLC

  12% Secured Debt         (3 )   110     3,683     3     203     3,483  

  Member Units         100     30     2,480     100         2,580  

CapFusion, LLC

  13% Secured Debt             518     13,202     50         13,252  

  Warrants                 1,200             1,200  

Chandler Signs

  12% Secured Debt         (2 )   137     4,500     2     2     4,500  

Holdings, LLC

  Class A Units             63     3,240             3,240  

Condit Exhibits, LLC

  Member Units             11     1,840             1,840  

Congruent Credit

  LP Interests (Fund II)         (141 )       1,518         141     1,377  

Opportunities Funds

  LP Interests (Fund III)         281     320     16,181     2,396         18,577  

Daseke, Inc.

  12% Current / 2.5% PIK Secured Debt         (167 )   676     21,799     255     22,054      

  Common Stock     22,859     (18,849 )       24,063         24,063      

Dos Rios Partners

  LP Interests (Dos Rios Partners, LP)         704         4,925     704         5,629  

  LP Interests (Dos Rios Partners—A, LP)         207         1,444     207         1,651  

Dos Rios Stone Products LLC

  Class A Preferred Units                 2,070             2,070  

East Teak Fine Hardwoods, Inc.

  Common Stock         (110 )   29     860         110     750  

East West

                                               

Copolymer &

  12% Current / 2% PIK Secured Debt         (6,390 )       8,630         6,390     2,240  

Rubber, LLC

  Warrants                              

EIG Fund Investments

  LP Interests (EIG Global Private Debt fund-A, L.P.)     71     (99 )   45     2,804     352     1,690     1,466  

  LP Interests (EIG Traverse Co-Investment, L.P.)         68     263     9,905     68         9,973  

Freeport Financial

  LP Interests (Freeport Financial                                            

Fund Investments

  SBIC Fund LP)         55     102     5,620     55         5,675  

  LP Interests (Freeport First Lien Loan Fund III LP)         (52 )   195     4,763     2,796     52     7,507  

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Company
  Investment(1)(5)   Amount of
Realized
Gain/(Loss)
  Amount of
Unrealized
Gain/(Loss)
  Amount of
Interest, Fees or
Dividends
Credited to
Income(2)
  December 31,
2016
Fair Value
  Gross
Additions(3)
  Gross
Reductions(4)
  March 31,
2017
Fair Value
 

Gault Financial, LLC

  10.5% Secured Debt         1,016     326     11,079     1,017     146     11,950  

(RMB Capital, LLC)

  Warrants                              

Glowpoint, Inc.

  12% Secured Debt         (996 )   274     3,997     9     996     3,010  

  Common Stock         190         2,080     190         2,270  

Guerdon Modular

  13% Secured Debt             357     10,594     9         10,603  

Holdings, Inc.

  Preferred Stock                 1,140             1,140  

  Common Stock                 80             80  

Hawk Ridge

  10% Secured Debt             255     9,901     4         9,905  

Systems, LLC

  Preferred Member Units             150     2,850             2,850  

  Preferred Member Units                 150             150  

Houston Plating and Coatings, LLC

  Member Units         230     1     4,000     230         4,230  

I-45 SLF LLC

  Member Units         321     691     14,586     1,321         15,907  

Indianhead Pipeline

  12% Secured Debt             727     5,079     563     225     5,417  

Services, LLC

  Preferred Member Units             98     2,677     98         2,775  

  Warrants                              

  Member Units                              

KBK Industries, LLC

  10% Secured Debt             31     1,250     100     175     1,175  

  12.5% Secured Debt             188     5,889     3         5,892  

  Member Units                 2,780             2,780  

L.F. Manufacturing Holdings, LLC

  Member Units                 1,380             1,380  

OnAsset

  12% PIK Secured Debt             136     4,519     135         4,654  

Intelligence, Inc.

  Preferred Stock                              

  Warrants                              

OPI International Ltd.

  10% Unsecured Debt             12     473             473  

  Common Stock         (1,220 )       1,600         1,220     380  

PCI Holding

  12% Secured Debt         (10 )   400     13,000     10     10     13,000  

Company, Inc.

  Preferred Stock             172     5,370     170         5,540  

Rocaceia, LLC

                                               

(Quality Lease and

                                               

Rental

  12% Secured Debt                 250             250  

Holdings, LLC)

  Preferred Member Units                              

Tin Roof Acquisition

  12% Secured Debt             417     13,385     16     169     13,232  

Company

  Class C Preferred Stock             68     2,738     69         2,807  

UniTek Global

  LIBOR Plus 7.50% (Floor 1.00%)         (1 )   113     5,021     1     1     5,021  

Services, Inc.

  LIBOR Plus 8.50% (Floor 1.00%)             22     824     2         826  

  15% PIK Unsecured Debt             30     745     28         773  

  Preferred Stock         (224 )   434     6,410     434     224     6,620  

  Common Stock         (200 )       3,010         200     2,810  

Universal Wellhead

                                               

Services

  Preferred Member Units                 720             720  

Holdings, LLC

  Member Units                 610             610  

Valley Healthcare

  LIBOR Plus 12.50% (Floor 0.50%)             433     12,844     6     100     12,750  

Group, LLC

  Preferred Member Units                 1,600             1,600  

Volusion, LLC

  11.5% Secured Debt             645     15,298     141         15,439  

  Preferred Member Units                 14,000             14,000  

  Warrants         (127 )       2,576         126     2,450  

Other

                                               

Amounts related to investments transferred to or from other 1940 Act classification during the period

                                 

Total Affiliate investments

      $ 22,930   $ (26,121 ) $ 9,899   $ 375,948   $ 13,735   $ 60,659   $ 329,024  

(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.

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    For investments transferred between Control and Affiliate categories during the period, any income or investment balances 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.

(5)
This schedule should be read in conjunction with the consolidated schedule of investments and notes to the consolidated financial statements. Supplemental information can located within the schedule of investments including end of period interest rate, preferred dividend rate, maturity date, investments not paid currently in cash and investments whose value was determined using significant unobservable inputs.

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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, 2017, filed with the Securities and Exchange Commission (the "SEC") on February 23, 2018, 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 elsewhere in this Quarterly Report and in the Annual Report on Form 10-K for the year ended December 31, 2017.

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 a variety of 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 under the Investment Advisers Act of 1940, as amended. 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 taxable 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.

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        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 $20 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 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.

        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

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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 March 31, 2018 and December 31, 2017 (this information excludes the Other Portfolio investments and the External Investment Manager which are discussed further below):

 
  As of March 31, 2018  
 
  LMM(a)   Middle
Market
  Private Loan  
 
  (dollars in millions)
 

Number of portfolio companies

    73     59     55  

Fair value

  $ 1,049.8   $ 617.9   $ 496.5  

Cost

  $ 898.9   $ 629.9   $ 521.6  

% of portfolio at cost—debt

    67.7%     96.7%     93.7%  

% of portfolio at cost—equity

    32.3%     3.3%     6.3%  

% of debt investments at cost secured by first priority lien

    98.4%     91.0%     94.3%  

Weighted-average annual effective yield(b)

    12.1%     9.2%     9.4%  

Average EBITDA(c)

  $ 4.8   $ 86.3   $ 43.0  

(a)
At March 31, 2018, we had equity ownership in approximately 97% of our LMM portfolio companies, and the average fully diluted equity ownership in those portfolio companies was approximately 38%.

(b)
The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of March 31, 2018, 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 six LMM portfolio companies and three Private Loan portfolio companies, as EBITDA is not a meaningful valuation metric for

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    our investments in these portfolio companies, and those portfolio companies whose primary purpose is to own real estate.

 
  As of December 31, 2017  
 
  LMM(a)   Middle
Market
  Private Loan  
 
  (dollars in millions)
 

Number of portfolio companies

    70     62     54  

Fair value

  $ 948.2   $ 609.3   $ 467.5  

Cost

  $ 776.5   $ 629.7   $ 489.2  

% of portfolio at cost—debt

    67.1%     97.3%     93.6%  

% of portfolio at cost—equity

    32.9%     2.7%     6.4%  

% of debt investments at cost secured by first priority lien

    98.1%     90.5%     94.5%  

Weighted-average annual effective yield(b)

    12.0%     9.0%     9.2%  

Average EBITDA(c)

  $ 4.4   $ 78.3   $ 39.6  

(a)
At December 31, 2017, we had equity ownership in approximately 97% of our LMM portfolio companies, and the average fully diluted equity ownership in those portfolio companies was approximately 39%.

(b)
The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of December 31, 2017, 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 six LMM portfolio companies, one Middle Market portfolio company and three 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 March 31, 2018, we had Other Portfolio investments in eleven companies, collectively totaling approximately $101.1 million in fair value and approximately $107.1 million in cost basis and which comprised approximately 4.4% of our Investment Portfolio (as defined in "—Critical Accounting Policies—Basis of Presentation" below) at fair value. As of December 31, 2017, we had Other Portfolio investments in eleven companies, collectively totaling approximately $104.6 million in fair value and approximately $109.4 million in cost basis and which comprised approximately 4.8% 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 March 31, 2018, there was no cost basis in this investment and the investment had a fair value of approximately $48.7 million, which comprised approximately 2.1% of our Investment Portfolio at fair value. As of December 31, 2017, there was no cost basis in this investment and the investment had a fair value of approximately $41.8 million, which comprised approximately 1.9% 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

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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 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 March 31, 2018 and 2017, the ratio of our total operating expenses, excluding interest expense, as a percentage of our quarterly average total assets was 1.5% and 1.6%, respectively, on an annualized basis and 1.5% for the year ended December 31, 2017, excluding certain non-recurring professional fees and other expenses. Including those expenses, the ratio for the year ended December 31, 2017 was 1.6%.

        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-listed 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. The External Investment Manager has conditionally agreed to waive a limited amount of the historical incentive fees otherwise earned. During the three months ended March 31, 2018 and 2017, the External Investment Manager earned $2.8 million and $2.6 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 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.

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CRITICAL ACCOUNTING POLICIES

    Basis of Presentation

        Our consolidated 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. Our results of operations and cash flows for the three months ended March 31, 2018 and 2017 and financial position as of March 31, 2018 and December 31, 2017, are presented on a consolidated basis. The effects of all intercompany transactions between us and our consolidated subsidiaries have been eliminated in consolidation. Certain reclassifications have been made to prior period balances to conform with the current presentation.

        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 months ended March 31, 2018 and 2017 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, 2017. 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.

        We are an investment company following the accounting and reporting guidance in Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 946, Financial Services—Investment Companies ("ASC 946"). Under regulations pursuant to Article 6 of Regulation S-X applicable to BDCs and 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. 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 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)."

    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 March 31, 2018 and December 31, 2017, our Investment Portfolio valued at fair value represented approximately 96% of our total assets. We are required to

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report our investments at fair value. We follow the provisions of 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 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 March 31, 2018 and December 31, 2017 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 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 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.

    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

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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 March 31, 2018 and 2017, (i) approximately 1.0% and 3.4%, respectively, of our total investment income was attributable to PIK interest income not paid currently in cash and (ii) approximately 1.0% and 1.8%, 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 taxable 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 primarily 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-of-income" requirements contained in the RIC tax provisions 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. The Taxable Subsidiaries are each taxed at their normal corporate tax rates based on their taxable income. The income tax expense, or benefit, if any, and the related tax assets and liabilities, of the Taxable Subsidiaries are reflected in our consolidated financial statements.

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        The External Investment Manager is an indirect wholly owned subsidiary of MSCC owned through a Taxable Subsidiary and is a disregarded entity for tax purposes. The External Investment Manager has entered into a tax sharing agreement with its Taxable Subsidiary owner. Since the External Investment Manager 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, and as a result of the tax sharing agreement with its Taxable Subsidiary owner, for its stand-alone financial reporting purposes the External Investment Manager is treated as if it 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 income tax expense, or benefit, if any, and the related tax assets and liabilities, of the External Investment Manager are reflected in the External Investment Manager's separate financial statements.

        In December 2017, the "Tax Cuts and Jobs Act" legislation was enacted. The Tax Cuts and Jobs Act includes significant changes to the U.S. corporate tax system, including a U.S. Federal corporate income tax rate reduction from 35% to 21% and other changes. ASC 740, Income Taxes, requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation was enacted. As such, we have accounted for the tax effects as a result of the enactment of the Tax Cuts and Jobs Act beginning with the period ended December 31, 2017.

        The Taxable Subsidiaries and the External Investment Manager 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 consolidated 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.

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 $20 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.

        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

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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, and we allocate the related expenses to the External Investment Manager pursuant to the sharing agreement. Our total expenses for the three months ended March 31, 2018 and 2017 are net of expenses allocated to the External Investment Manager of $2.1 million and $1.5 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 the dividend income received from the External Investment Manager. For the three months ended March 31, 2018 and 2017, the total contribution to our net investment income was $2.6 million and $2.2 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 March 31, 2018 and December 31, 2017 (this information excludes the Other Portfolio investments and the External Investment Manager).

Cost:
  March 31,
2018
  December 31,
2017
 

First lien debt

    78.7%     79.0%  

Equity

    16.1%     15.3%  

Second lien debt

    4.1%     4.5%  

Equity warrants

    0.7%     0.7%  

Other

    0.4%     0.5%  

    100.0%     100.0%  

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Fair Value:
  March 31,
2018
  December 31,
2017
 

First lien debt

    71.5%     70.5%  

Equity

    23.7%     24.4%  

Second lien debt

    3.8%     4.1%  

Equity warrants

    0.6%     0.6%  

Other

    0.4%     0.4%  

    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, 2017 and "Risk Factors" below for a more complete discussion of the risks involved with investing in our Investment Portfolio.

PORTFOLIO ASSET QUALITY

        As of March 31, 2018, our total Investment Portfolio had six investments on non-accrual status, which comprised approximately 0.8% of its fair value and 3.3% of its cost. As of December 31, 2017, our total Investment Portfolio had five investments on non-accrual status, which comprised approximately 0.2% of its fair value and 2.3% 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, to an increase in defaults on our debt investments or in realized losses on our investments and to difficulty in maintaining historical dividend payment rates and unrealized appreciation 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.

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DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS

    Comparison of the three months ended March 31, 2018 and March 31, 2017

 
  Three Months Ended
March 31,
  Net Change  
 
  2018   2017   Amount   %  
 
  (dollars in thousands)
 

Total investment income

  $ 55,942   $ 47,889   $ 8,053     17%  

Total expenses

    (18,967 )   (16,723 )   (2,244 )   13%  

Net investment income

    36,975     31,166     5,809     19%  

Net realized gain from investments

    7,460     27,565     (20,105 )      

Net realized loss from SBIC debentures

    (1,374 )   (5,217 )   3,843        

Net unrealized appreciation (depreciation) from:

                         

Portfolio investments

    (10,882 )   (22,091 )   11,209        

SBIC debentures

    1,359     5,665     (4,306 )      

Total net unrealized appreciation (depreciation)

    (9,523 )   (16,426 )   6,903        

Income tax benefit (provision)

    979     (5,638 )   6,617        

Net increase in net assets resulting from operations

  $ 34,517   $ 31,450   $ 3,067     10%  

 

 
  Three Months Ended March 31,   Net Change  
 
  2018   2017   Amount   %  
 
  (dollars in thousands, except
per share amounts)

 

Net investment income

  $ 36,975   $ 31,166   $ 5,809     19%  

Share-based compensation expense

    2,303     2,269     34     1%  

Distributable net investment income(a)

  $ 39,278   $ 33,435   $ 5,843     17%  

Net investment income per share—Basic and diluted

  $ 0.63   $ 0.57   $ 0.06     11%  

Distributable net investment income per share—Basic and diluted(a)

  $ 0.67   $ 0.61   $ 0.06     10%  

(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 March 31, 2018, total investment income was $55.9 million, a 17% increase over the $47.9 million of total investment income for the corresponding period of 2017. This comparable period increase was principally attributable to a $6.8 million increase in dividend income from Investment Portfolio equity investments and $1.1 million net increase in interest income primarily

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related to higher average levels of Investment Portfolio debt investments, partially offset by a decrease in interest income associated with decreased repricing and other activities involving existing Investment Portfolio debt investments when compared to prior year. The $8.1 million increase in total investment income in the three months ended March 31, 2018 includes elevated levels of dividend income activity from certain Investment Portfolio equity investments, partially offset by a decrease of $1.8 million related to lower accelerated prepayment, repricing and other activity for certain Investment Portfolio debt investments when compared to the same period in 2017.

    Expenses

        For the three months ended March 31, 2018, total expenses increased to $19.0 million from $16.7 million for the corresponding period of 2017. This comparable period increase in operating expenses was principally attributable to (i) a $1.7 million increase in interest expense, primarily due to (a) a $2.2 million increase as a result of the issuance of our 4.50% Notes due 2022 in November 2017 and (b) a $0.4 million increase from the SBIC debentures due to the higher average balance as compared to the same period in 2017, with these increases partially offset by a decrease of $1.0 million related to the Credit Facility due to the lower average balance during 2018 and (ii) a $1.1 million increase in compensation expense related to increases in the number of personnel, base compensation levels and incentive compensation accruals, with these increases partially offset by a $0.5 million increase in the expenses allocated to the External Investment Manager as a result of elevated non-recurring strategic activities at the External Investment Manager during the three months ended March 31, 2018, in each case when compared to the same period in the prior year. The ratio of our total operating expenses, excluding interest expense, as a percentage of our quarterly average total assets for the three months ended March 31, 2018 was 1.5% on an annualized basis compared to 1.6% for the three months ended March 31, 2017 and 1.5% for the year ended December 31, 2017, excluding certain non-recurring professional fees and other expenses incurred in 2017. Including the effect of those non-recurring expenses, the ratio for the year ended December 31, 2017 was 1.6%.

    Net Investment Income

        Net investment income for the three months ended March 31, 2018 was $37.0 million, or a 19% increase, compared to net investment income of $31.2 million for the corresponding period of 2017. The increase in net investment income was principally attributable to the increase in total investment income, partially offset by higher operating expenses both as discussed above.

    Distributable Net Investment Income

        For the three months ended March 31, 2018, distributable net investment income increased 17% to $39.3 million, or $0.67 per share, compared with $33.4 million, or $0.61 per share in the corresponding period of 2017. 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 three months ended March 31, 2018 reflects (i) elevated levels of dividend income activity from certain Investment Portfolio equity investments, (ii) a decrease of approximately $0.03 per share from the comparable period in 2017 attributable to the net decrease in the comparable levels of accelerated prepayment, repricing and other unusual activity for certain Investment Portfolio debt investments and (iii) a greater number of average shares outstanding compared to the corresponding period in 2017 primarily due to shares issued through the ATM Program (as defined in "—Liquidity and Capital Resources—Capital Resources" below), shares issued pursuant to our equity incentive plans and shares issued pursuant to our dividend reinvestment plan.

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    Net Increase in Net Assets Resulting from Operations

        The net increase in net assets resulting from operations during the three months ended March 31, 2018 was $34.5 million, or $0.59 per share, compared with $31.5 million, or $0.57 per share, during the three months ended March 31, 2017. This $3.1 million improvement from the prior year was primarily the result of (i) a $6.9 million improvement in net unrealized appreciation (depreciation) from portfolio investments and SBIC debentures, including the impact of accounting reversals relating to realized gains/income (losses), (ii) a $6.6 million change in the income tax benefit (provision) from an income tax provision of $5.6 million for the three months ended March 31, 2017 to an income tax benefit of $1.0 million for the three months ended March 31, 2018, (iii) a $5.8 million increase in net investment income as discussed above and (iv) a $3.8 million improvement in the net realized loss from SBIC debentures outstanding at MSC II which had previously been accounted for on the fair value method of accounting, with these increases partially offset by a $20.1 million decrease in the net realized gain from investments to a total net realized gain from investments of $7.5 million for the three months ended March 31, 2018. The net realized gain from investments of $7.5 million for the three months ended March 31, 2018 was primarily the result of (i) the realized gain of $13.1 million resulting from gains on the exits of two LMM investments and (ii) realized gains of $3.2 million due to activity in our Other Portfolio, with these gains partially offset by the net realized loss of $8.6 million in our Middle Market portfolio, which is primarily the result of (a) the realized loss of $3.3 million on the exit of a Middle Market investment and (b) the realized loss of $5.3 million on the restructure of a Middle Market investment. The realized loss of $1.4 million on the repayment of SBIC debentures is related to the previously recognized bargain purchase gain resulting from recording the MSC II debentures at fair value on the date of the acquisition of the majority of the equity interests of MSC II in 2010. The effect of the realized loss is offset by the reversal of all previously recognized unrealized depreciation on these SBIC debentures due to fair value adjustments since the date of the acquisition in 2010.

        The following table provides a summary of the total net unrealized depreciation of $9.5 million for the three months ended March 31, 2018:

 
  Three Months Ended March 31, 2018  
 
  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)/(income) losses recognized during the current period

  $ (18.8 ) $ 8.8   $ (0.3 ) $ (0.4 ) $ (10.7 )

Net unrealized appreciation (depreciation) relating to portfolio investments

    (3.3 )   (0.3 )   (2.6 )   6.0     (0.2 )

Total net unrealized appreciation (depreciation) relating to portfolio investments

  $ (22.1 ) $ 8.5   $ (2.9 ) $ 5.6   $ (10.9 )

Unrealized appreciation relating to SBIC debentures(c)

                            1.4  

Total net unrealized depreciation

                          $ (9.5 )

(a)
LMM includes unrealized appreciation on 26 LMM portfolio investments and unrealized depreciation on 9 LMM portfolio investments.

(b)
Other includes $7.0 million of unrealized appreciation relating to the External Investment Manager, partially offset by $1.0 million of net unrealized depreciation relating to the Other Portfolio.

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(c)
The $1.4 million of unrealized appreciation on the SBIC debentures held by MSC II which are accounted for on a fair value basis is due to the accounting reversals of previously recognized unrealized depreciation recorded due to fair value adjustments since the date of acquisition of MSC II on the debentures repaid.

        The income tax benefit for the three months ended March 31, 2018 of $1.0 million principally consisted of a deferred tax benefit of $1.9 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, and other current tax expense of $0.9 million related to (i) a $0.4 million accrual for excise tax on our estimated undistributed taxable income and (ii) current tax expense of $0.5 million related to accruals for U.S. federal and state income taxes.

    Liquidity and Capital Resources

    Cash Flows

        For the three months ended March 31, 2018, we experienced a net decrease in cash and cash equivalents in the amount of approximately $22.4 million, which is the net result of approximately $143.2 million of cash used in our operating activities and approximately $120.7 million of cash provided by our financing activities.

        During the period, $143.2 million of cash was used in our operating activities, which resulted primarily from (i) cash flows we generated from the operating profits earned through our operating activities totaling $35.8 million, which is our $39.3 million of distributable net investment income, excluding the non-cash effects of the accretion of unearned income of $3.2 million, payment-in-kind interest income of $0.6 million, cumulative dividends of $0.6 million and the amortization expense for deferred financing costs of $0.9 million, (ii) cash uses totaling $345.0 million consisting of (a) $340.4 million for the funding of new portfolio company investments and settlement of accruals for portfolio investments existing as of December 31, 2017, (b) $2.5 million related to increases in other assets and (c) $2.1 million related to decreases in payables and accruals and (iii) cash proceeds totaling $166.1 million which resulted from the sales and repayments of debt investments and sales of and return on capital of equity investments.

        During the three months ended March 31, 2018, $120.7 million in cash was provided by our financing activities, which principally consisted of (i) $11.3 million in net cash proceeds from the ATM Program (described below), (ii) $124.0 million in cash proceeds from the Credit Facility and (iii) $22.0 million in cash proceeds from issuance of SBIC debentures, partially offset by (i) $31.9 million in cash dividends paid to stockholders, (ii) $4.0 million in repayment of SBIC debentures, (iii) $0.2 million for purchases of vested restricted stock from employees to satisfy their tax withholding requirements upon the vesting of such restricted stock and (iv) $0.5 million for payment of deferred debt issuance costs, SBIC debenture fees and other costs.

    Capital Resources

        As of March 31, 2018, we had $29.1 million in cash and cash equivalents and $397.0 million of unused capacity under the Credit Facility, which we maintain to support our investment and operating activities. As of March 31, 2018, our net asset value totaled $1,396.6 million, or $23.67 per share.

        The Credit Facility, which provides additional liquidity to support our investment and operational activities, provides for total commitments of $585.0 million from a diversified group of fifteen lenders. The Credit Facility matures in September 2021 and 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.

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        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 (1.88% as of March 31, 2018) plus (i) 1.875% (or the applicable base rate (Prime Rate of 4.75% as of March 31, 2018) 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, 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 2021, 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 March 31, 2018, we had $188.0 million in borrowings outstanding under the Credit Facility, the interest rate on the Credit Facility was 3.5% and we were in compliance with all financial covenants of the Credit Facility.

        Through the Funds, we have the ability to issue SBIC debentures guaranteed by the SBA at favorable interest rates and favorable terms and conditions. Under existing SBIC regulations, SBA approved SBICs under common control have the ability to issue debentures guaranteed by the SBA up to a regulatory maximum amount of $350.0 million. Through the Funds, we have an effective maximum amount of $346.0 million following the prepayment of $4.0 million of existing SBIC debentures as discussed below. During the three months ended March 31, 2018, we issued $22.0 million of SBIC debentures and opportunistically prepaid $4.0 million of our existing SBIC debentures as part of an effort to manage the maturity dates of our oldest SBIC debentures, leaving $32.2 million of remaining capacity under our SBIC licenses. 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 semiannually. 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. We expect to issue new SBIC debentures under the SBIC program in the future in an amount up to the regulatory maximum amount for affiliated SBIC funds. As of March 31, 2018, through our three wholly owned SBICs, we had $313.8 million of outstanding SBIC debentures guaranteed by the SBA, which bear a weighted-average annual fixed interest rate of approximately 3.7%, paid semiannually, and mature ten years from issuance. The first maturity related to our SBIC debentures occurs in 2019, and the weighted-average remaining duration is approximately 5.9 years as of March 31, 2018.

        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"). 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 maintained the right from time to time repurchase 6.125% Notes in accordance with the 1940 Act and the rules promulgated thereunder. On March 1, 2018, we announced our intent to redeem the 6.125% Notes on April 1, 2018. As of March 31, 2018, the outstanding balance of the 6.125% Notes was $90.7 million.

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        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.

        In November 2014, we issued $175.0 million in aggregate principal amount of 4.50% Notes (the "4.50% Notes due 2019") at an issue price of 99.53%. The 4.50% Notes due 2019 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 due 2019; 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 due 2019 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 due 2019 bear interest at a rate of 4.50% per year payable semiannually on June 1 and December 1 of each year, beginning June 1, 2015. We may from time to time repurchase 4.50% Notes due 2019 in accordance with the 1940 Act and the rules promulgated thereunder. As of March 31, 2018, the outstanding balance of the 4.50% Notes due 2019 was $175.0 million.

        The indenture governing the 4.50% Notes due 2019 (the "4.50% Notes due 2019 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 due 2019 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 due 2019 Indenture.

        In November 2017, we issued $185.0 million in aggregate principal amount of 4.50% Notes (the "4.50% Notes due 2022") at an issue price of 99.16%. The 4.50% Notes due 2022 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 due 2022; 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 due 2022 mature on December 1, 2022, 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 due 2022 bear interest at a rate of 4.50% per year payable semiannually on June 1 and December 1 of each year, beginning June 1, 2018. We may from time to time repurchase 4.50% Notes due 2022 in accordance with the 1940 Act and the rules promulgated thereunder. As of March 31, 2018, the outstanding balance of the 4.50% Notes due 2022 was $185.0 million.

        The indenture governing the 4.50% Notes due 2022 (the "4.50% Notes due 2022 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 due 2022 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 due 2022 Indenture.

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        We maintain a program with certain 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 March 31, 2018, we sold 308,678 shares of our common stock at a weighted-average price of $37.27 per share and raised $11.5 million of gross proceeds under the ATM Program. Net proceeds were $11.3 million after commissions to the selling agents on shares sold and offering costs. As of March 31, 2018, sales transactions representing 20,400 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 in the consolidated statement of operations and in the shares used to calculate net asset value per share. As of March 31, 2018, there were 1,602,678 shares available for sale under the ATM Program.

        During the year ended December 31, 2017, we sold 3,944,972 shares of our common stock at a weighted-average price of $38.72 per share and raised $152.8 million of gross proceeds under the ATM Program. Net proceeds were $150.9 million after commissions to the selling agents on shares sold and offering costs. As of December 31, 2017, 1,911,356 shares remained available for sale under the ATM Program.

        We anticipate that we will continue to fund our investment activities through existing cash and cash equivalents, cash flows generated through our ongoing operating activities, utilization of available borrowings under our Credit Facility, 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 deposit with financial institutions, diversified bond funds and publicly traded debt and equity investments.

        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 2018 annual meeting of stockholders because our common stock price per share had been trading significantly above the 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 through the Credit Facility, public debt issuances, leverage available through the SBIC program and equity offerings, there

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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 Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 supersedes the revenue recognition requirements under ASC 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 March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which clarified the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which clarified the implementation guidance regarding performance obligations and licensing arrangements. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606)—Narrow-Scope Improvements and Practical Expedients, which clarified guidance on assessing collectability, presenting sales tax, measuring noncash consideration, and certain transition matters. In December 2016, the FASB issued ASU No. 2016-20, Revenue from Contracts with Customers (Topic 606)—Technical Corrections and Improvements, which provided disclosure relief, and clarified the scope and application of the new revenue standard and related cost guidance. The guidance is effective for the annual reporting period beginning after December 15, 2017, including interim periods within that reporting period. Substantially all of our income is not within the scope of ASU 2014-09. For those income items that are within the scope (primarily fee income), we have similar performance obligations as compared with deliverables and separate units of account previously identified. As a result, our timing of income recognition remains the same and the adoption of the standard was not material.

        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. While we continue to assess the effect of adoption, we currently believe the most significant change relates to the recognition of a new right-of-use asset and lease liability on our consolidated balance sheet for our office space operating lease. We currently have one operating lease for office space and do not expect a significant change in our leasing activity between now and adoption. See further discussion of our operating lease obligation in "Note M—Commitments and Contingences" in the notes to the 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

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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 was not 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 consolidated 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 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 March 31, 2018, we had a total of $138.6 million in outstanding commitments comprised of (i) 37 investments with commitments to fund revolving loans that had not been fully drawn or term loans with additional commitments not yet funded and (ii) 11 investments with equity capital commitments that had not been fully called.

    Contractual Obligations

        As of March 31, 2018, the future fixed commitments for cash payments in connection with our SBIC debentures, the 4.50% Notes due 2019, the 4.50% Notes due 2022 and the 6.125% Notes and rent obligations under our office lease for each of the next five years and thereafter are as follows:

 
  2018   2019   2020   2021   2022   Thereafter   Total  

SBIC debentures

  $   $ 16,000   $ 55,000   $ 40,000   $ 5,000   $ 197,800   $ 313,800  

Interest due on SBIC debentures

    5,862     11,798     10,610     8,054     7,042     23,939     67,305  

6.125% Notes

                        90,655     90,655  

Interest due on 6.125% Notes

    5,553     5,553     5,553     5,553     5,553     1,386     29,151  

4.50% Notes due 2019

        175,000                     175,000  

Interest due on 4.50% Notes due 2019

    7,875     7,875                     15,750  

4.50% Notes due 2022

                    185,000         185,000  

Interest due on 4.50% Notes due 2022

    8,533     8,325     8,325     8,325     8,325         41,833  

Operating Lease Obligation(1)

    346     749     763     777     791     4,239     7,665  

Total

  $ 28,169   $ 225,300   $ 80,251   $ 62,709   $ 211,711   $ 318,019   $ 926,159  

(1)
Operating Lease Obligation means a rent payment obligation under a lease classified as an operating lease and disclosed pursuant to FASB ASC 840, as may be modified or supplemented.

        As of March 31, 2018, we had $188.0 million in borrowings outstanding under our Credit Facility, and the Credit Facility is currently scheduled to mature in September 2021. The Credit Facility contains

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two, one-year extension options which could extend the maturity to September 2023, subject to lender approval. 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 March 31, 2018, we had a receivable of approximately $2.8 million due from the External Investment Manager which included approximately $2.3 million primarily related to operating expenses incurred by us as required to support the External Investment Manager's business and amounts due from the External Investment Manager to Main Street under a tax sharing agreement (see further discussion above in "—Critical Accounting Policies—Income Taxes") and approximately $0.6 million of dividends declared but not paid by the External Investment Manager.

        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 March 31, 2018, $4.8 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, $2.5 million was deferred into phantom Main Street stock units, representing 74,503 shares of our common stock. Including phantom stock units issued through dividend reinvestment, the phantom stock units outstanding as of March 31, 2018 represented 90,411 shares of our 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 statements 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 in our consolidated statements of operations as earned.

    Recent Developments

        In April 2018, we made a new portfolio investment to facilitate the minority recapitalization of DPI, Inc. ("DPI"), a leading designer, developer, and distributor of a broad assortment of consumer electronics to national retailers under several proprietary brands. We, along with a co-investor, partnered with DPI's management team to facilitate the transaction, with us funding $35.2 million in a combination of first-lien, senior secured term debt and a direct equity investment. Headquartered in St. Louis, Missouri, DPI offers consumer electronics products designed for value-conscious consumers.

        In April 2018, we redeemed the entire principal amount of the issued and outstanding 6.125% Notes effective April 1, 2018 (the "Redemption Date"). The 6.125% Notes were redeemed at par value, plus the accrued and unpaid interest thereon from January 1, 2018, through, but excluding, the Redemption Date. As part of the redemption, we recognized a realized loss of $1.5 million in the second quarter related to the write-off of any remaining unamortized deferred financing costs.

        During April 2018, we declared a semi-annual supplemental cash dividend of $0.275 per share payable in June 2018. This supplemental cash dividend is in addition to the previously announced

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regular monthly cash dividends that we declared for the second quarter of 2018 of $0.19 per share for each of April, May and June 2018.

        During May 2018, we declared regular monthly dividends of $0.19 per share for each month of July, August and September of 2018. These regular monthly dividends equal a total of $0.57 per share for the third quarter of 2018 and represent a 2.7% increase from the regular monthly dividends declared for the third quarter of 2017. Including the semi-annual supplemental dividend declared for June 2018 and the regular monthly dividends declared for the second and third quarters of 2018, we will have paid $23.375 per share in cumulative dividends since our October 2007 initial public offering.

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. 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 March 31, 2018, approximately 73% of our debt investment portfolio (at cost) bore interest at floating rates, 95% of which were subject to contractual minimum interest rates. Our interest expense 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 due 2019, 4.50% Notes due 2022 and 6.125% Notes, which comprise the majority of our outstanding debt, are fixed for the life of such debt. As of March 31, 2018, 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 March 31, 2018.

Basis Point Change
  Increase
(Decrease)
in Interest
Income
  (Increase)
Decrease
in Interest
Expense
  Increase
(Decrease) in Net
Investment
Income
  Increase
(Decrease) in Net
Investment
Income per
Share
 
 
  (dollars in thousands)
   
 

(50)

  $ (6,312 ) $ 940   $ (5,372 ) $ (0.09 )

(25)

    (3,156 )   470     (2,686 )   (0.05 )

25

    3,156     (470 )   2,686     0.05  

50

    6,312     (940 )   5,372     0.09  

100

    12,625     (1,880 )   10,745     0.18  

200

    25,250     (3,760 )   21,490     0.36  

300

    37,874     (5,640 )   32,234     0.55  

400

    50,499     (7,520 )   42,979     0.73  

        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

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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 March 31, 2018 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 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, 2017 that we filed with the SEC on February 23, 2018, and as updated in our registration statement on Form N-2 filed on April 24, 2018.

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

        During the three months ended March 31, 2018, we issued 42,423 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 March 31, 2018 under the dividend reinvestment plan was approximately $1.6 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):

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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: May 4, 2018

 

/s/ VINCENT D. FOSTER

Vincent D. Foster
Chairman and Chief Executive Officer
(principal executive officer)

Date: May 4, 2018

 

/s/ BRENT D. SMITH

Brent D. Smith
Chief Financial Officer and Treasurer
(principal financial officer)

Date: May 4, 2018

 

/s/ SHANNON D. MARTIN

Shannon D. Martin
Vice President and Chief Accounting Officer
(principal accounting officer)

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