Bain Capital Specialty Finance, Inc. - FORM 10-Q - May 4, 2020

Attached files

file filename
EX-10.25 - EXHIBIT 10.25 - Bain Capital Specialty Finance, Inc.tm2016704d1_ex10-25.htm
EX-32 - EXHIBIT 32 - Bain Capital Specialty Finance, Inc.tm2016704d1_ex32.htm
EX-31.1 - EXHIBIT 31.1 - Bain Capital Specialty Finance, Inc.tm2016704d1_ex31-1.htm
EX-31.2 - EXHIBIT 31.2 - Bain Capital Specialty Finance, Inc.tm2016704d1_ex31-2.htm
EX-10.27 - EXHIBIT 10.27 - Bain Capital Specialty Finance, Inc.tm2016704d1_ex10-27.htm
EX-10.26 - EXHIBIT 10.26 - Bain Capital Specialty Finance, Inc.tm2016704d1_ex10-26.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

 

For the quarterly period ended March 31, 2020

 

OR

 

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

 

Commission file number: 814-01175

 

BAIN CAPITAL SPECIALTY FINANCE, INC.

(Exact name of registrant as specified in its charter)

 

Delaware   81-2878769
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)
     
200 Clarendon Street, 37th Floor
Boston, MA
(Address of principal executive offices)		   02116
(Zip Code)

 

(617) 516-2000

(Registrant’s telephone number, including area code)

 

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

 

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

 

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

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes 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.

 

Large accelerated filer x Accelerated filer o
Non-accelerated filer o Smaller reporting companyo
  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 x

 

As of May 4, 2020, the registrant had 51,649,812.27 shares of common stock, $0.001 par value, outstanding.

 

 

 

 

 

 

TABLE OF CONTENTS

 

    Page
     
PART I FINANCIAL INFORMATION 4
     
Item 1. Consolidated Financial Statements 4
     
  Consolidated Statements of Assets and Liabilities as of March 31, 2020 (unaudited) and December 31, 2019 4
     
  Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019 (unaudited) 5
     
  Consolidated Statements of Changes in Net Assets for the three months ended March 31, 2020 and 2019 (unaudited) 6
     
  Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019 (unaudited) 7
     
  Consolidated Schedules of Investments as of March 31, 2020 (unaudited) and December 31, 2019 8
     
  Notes to Consolidated Financial Statements (unaudited) 12
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 44
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 68
     
Item 4. Controls and Procedures 68
     
PART II OTHER INFORMATION 69
   
Item 1. Legal Proceedings 69
     
Item 1A. Risk Factors 69
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 69
     
Item 3. Defaults Upon Senior Securities 69
     
Item 4. Mine Safety Disclosures 69
     
Item 5. Other Information 69
     
Item 6. Exhibits 70
     
Signatures 73

 

2

 

 

FORWARD-LOOKING STATEMENTS

 

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

 

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

 

3

 

 

PART I. FINANCIAL INFORMATION

 

Item 1. Consolidated Financial Statements

 

Bain Capital Specialty Finance, Inc.

Consolidated Statements of Assets and Liabilities

(in thousands, except share and per share data)

 

   As of   As of 
   March 31, 2020   December 31, 2019 
     (Unaudited)       
Assets          
Investments at fair value:          
Non-controlled/non-affiliate investments (amortized cost of $2,498,268 and $2,416,854, respectively)  $2,355,277   $2,403,250 
Non-controlled/affiliate investment (amortized cost of $6,720 and $6,720, respectively)   6,720    6,720 
Controlled affiliate investment (amortized cost of $120,246 and $113,689, respectively)   122,536    117,085 
Cash and cash equivalents   55,128    36,531 
Foreign cash (cost of $943 and $854, respectively)   632    810 
Restricted cash and cash equivalents   18,706    31,505 
Collateral on forward currency exchange contracts   392    - 
Deferred financing costs   3,891    3,182 
Interest receivable on investments   15,156    22,482 
Receivable for sales and paydowns of investments   10,595    21,994 
Unrealized appreciation on forward currency exchange contracts   12,903    1,034 
Dividend receivable   2,405    961 
Total Assets  $2,604,341   $2,645,554 
           
Liabilities          
Debt (net of unamortized debt issuance costs of $4,483 and $4,584, respectively)  $1,654,900   $1,574,635 
Interest payable   11,422    15,534 
Payable for investments purchased   367    293 
Collateral payable on forward currency exchange contracts   473    331 
Unrealized depreciation on forward currency exchange contracts   -    1,252 
Base management fee payable   15,991    7,265 
Incentive fee payable   4,513    4,513 
Accounts payable and accrued expenses   2,722    2,155 
Distributions payable   21,176    21,176 
Total Liabilities   1,711,564    1,627,154 
           
Commitments and Contingencies (See Note 10)          
           
Net Assets          
Preferred stock, $0.001 par value per share, 10,000,000,000 shares authorized, none issued and outstanding
as of March 31, 2020 and December 31, 2019, respectively		  $-   $- 
Common stock, par value $0.001 per share, 100,000,000,000 and 100,000,000,000 shares authorized,
51,649,812 and 51,649,812 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively		   52    52 
Paid in capital in excess of par value   1,038,343    1,038,343 
Total distributable earnings (loss)   (145,618)   (19,995)
Total Net Assets   892,777    1,018,400 
Total Liabilities and Total Net assets  $2,604,341   $2,645,554 
           
Net asset value per share  $17.29   $19.72 

 

See Notes to Consolidated Financial Statements 

 

4

 

 

Bain Capital Specialty Finance, Inc.

 

Consolidated Statements of Operations

(in thousands, except share and per share data)

(Unaudited)

 

   For the Three
Months Ended
March 31,		   For the Three
Months Ended
March 31,		 
   2020   2019 
Income          
Investment income from non-controlled/non-affiliate investments:          
Interest from investments  $47,871   $30,388 
Dividend income   33    15 
Other income   440    22 
Total investment income from non-controlled/non-affiliate investments   48,344    30,425 
           
Investment income from controlled affiliate investments:          
Interest from investments   772    107 
Dividend income   2,380    9,358 
Total investment income from controlled affiliate investments   3,152    9,465 
Total investment income   51,496    39,890 
           
Expenses          
Interest and debt financing expenses   17,876    10,546 
Base management fee   8,726    6,751 
Incentive fee   -    4,086 
Professional fees   970    550 
Directors fees   175    105 
Other general and administrative expenses   1,249    841 
Total expenses before fee waivers   28,996    22,879 
Base management fee waiver   -    (2,250)
Incentive fee waiver   -    (1,982)
Total expenses, net of fee waivers   28,996    18,647 
Net investment income   22,500    21,243 
           
           
Net realized and unrealized gains (losses)          
Net realized loss on non-controlled/non-affiliate investments   (10,456)   (850)
Net realized gain (loss) on foreign currency transactions   (415)   6 
Net realized gain on forward currency exchange contracts   1,505    3,633 
Net change in unrealized depreciation on foreign currency translation   (209)   (198)
Net change in unrealized appreciation (depreciation) on forward currency exchange contracts   13,121    (3,283)
Net change in unrealized appreciation (depreciation) on non-controlled/non-affiliate investments   (129,387)   14,367 
Net change in unrealized appreciation (depreciation) on controlled affiliate investments   (1,106)   4,395 
Total net gains (losses)   (126,947)   18,070 
           
Net increase (decrease) in net assets resulting from operations  $(104,447)  $39,313 
           
Per Common Share Data          
Basic and diluted net investment income per common share  $0.44   $0.41 
Basic and diluted increase (decrease) in net assets resulting from operations per common share  $(2.02)  $0.76 
Basic and diluted weighted average common shares outstanding   51,649,812    51,482,137 

 

See Notes to Consolidated Financial Statements

 

5

 

 

 

Bain Capital Specialty Finance, Inc.

 

Consolidated Statements of Changes in Net Assets

(in thousands, except share and per share data)

(Unaudited)

 

 

   For the Three Months
Ended March 31,		   For the Three Months
Ended March 31,		 
   2020   2019 
Operations:        
Net investment income  $22,500   $21,243 
Net realized gain (loss)   (9,366)   2,789 
Net change in unrealized appreciation (depreciation)   (117,581)   15,281 
Net increase (decrease) in net assets resulting from operations   (104,447)   39,313 
Stockholder distributions:          
Distributions from distributable earnings   (21,176)   (21,108)
Net decrease in net assets resulting from stockholder distributions   (21,176)   (21,108)
           
Total increase (decrease) in net assets   (125,623)   18,205 
Net assets at beginning of period   1,018,400    1,001,629 
Net assets at end of period  $892,777   $1,019,834 
           
Net asset value per common share  $17.29   $19.81 
Common stock outstanding at end of period   51,649,812    51,482,137 

 

See Notes to Consolidated Financial Statements

 

6

 

 

 

Bain Capital Specialty Finance, Inc.

 

Consolidated Statements of Cash Flows

(in thousands, except share and per share data)

(Unaudited)

 

   For the Three
Months Ended
March 31,		   For the Three
Months Ended
March 31,		 
   2020   2019 
Cash flows from operating activities          
Net increase (decrease) in net assets resulting from operations  $(104,447)  $39,313 
Adjustments to reconcile net increase in net assets from          
operations to net cash used in operating activities:          
Purchases of investments   (275,880)   (370,322)
Proceeds from principal payments and sales of investments   190,565    153,616 
Net realized loss from investments   10,456    850 
Net realized (gain) loss on foreign currency transactions   415    (6)
Net change in unrealized (appreciation) depreciation on forward currency exchange contracts   (13,121)   3,283 
Net change in unrealized (appreciation) depreciation on investments   130,493    (18,762)
Net change in unrealized depreciation on foreign currency translation   209    198 
Increase in investments due to PIK   (241)   (101)
Accretion of discounts and amortization of premiums   (1,296)   (839)
Amortization of deferred financing costs and debt issuance costs   641    311 
Changes in operating assets and liabilities:          
Collateral on forward currency exchange contracts   (392)   (400)
Interest receivable on investments   7,326    (1,723)
Prepaid insurance   -    2 
Dividend receivable   (1,444)   (441)
Other assets   -    (3,701)
Interest payable   (4,112)   261 
Collateral payable on forward currency exchange contracts   142    - 
Base management fee payable   8,726    1,551 
Incentive fee payable   -    (1,197)
Accounts payable and accrued expenses   567    1,024 
Net cash used in operating activities   (51,393)   (197,083)
           
Cash flows from financing activities          
Borrowings on debt   333,272    465,929 
Repayments on debt   (252,936)   (186,000)
Payments of financing costs   (1,250)   (124)
Payments of offering costs   -    (89)
Stockholder distributions paid   (21,176)   (21,108)
Net cash provided by financing activities   57,910    258,608 
           
Net increase in cash, foreign cash, restricted cash and cash equivalents   6,517    61,525 
Effect of foreign currency exchange rates   (897)   (167)
Cash, foreign cash, restricted cash and cash equivalents, beginning of period   68,846    33,271 
Cash, foreign cash, restricted cash and cash equivalents, end of period  $74,466   $94,629 
           
Supplemental disclosure of cash flow information:          
Cash interest paid during the period  $21,347   $9,974 
           
           

 

   As of March 31,   As of March 31, 
   2020   2019 
Cash  $55,128   $79,141 
Restricted cash   18,706    14,009 
Foreign cash   632    1,479 
Total cash, foreign cash, restricted cash, and cash equivalents shown in the consolidated statements of cash flows  $74,466   $94,629 

 

See Notes to Consolidated Financial Statements

 

7

 

 

 

Bain Capital Specialty Finance, Inc.

Consolidated Schedule of Investments

As of March 31, 2020

(In thousands)

(unaudited)

 

Control Type  Industry  Portfolio
Company		  Investment
Type		  Spread
Above Index
(1)		   Interest
Rate		   Maturity
Date		   Principal/Shares (9)   Cost   Market
Value		   % of
NAV (4)		 
Non-Controlled/Non-Affiliate Investments                                            
   Aerospace & Defense  Forming & Machining Industries Inc. (18) (19) (21)  Second Lien Senior Secured Loan    L+ 8.25%    9.32%   10/9/2026   $6,540    6,481    5,069      
      Forming & Machining Industries Inc. (12) (18) (29)  First Lien Senior Secured Loan    L+ 4.00%    5.07%   10/9/2025   $16,735    16,611    13,221      
      GSP Holdings, LLC (7) (12) (15) (19) (21) (29)  First Lien Senior Secured Loan    L+ 5.50%    6.81%   11/6/2025   $36,177    35,858    34,187      
      GSP Holdings, LLC (7) (15) (19)  First Lien Senior Secured Loan - Revolver    L+ 5.50%    6.60%   11/6/2025   $4,534    4,491    4,284      
      Kellstrom Aerospace Group, Inc (14) (19) (25)   Equity Interest   -    -    -    1    1,963    1,313      
      Kellstrom Commercial Aerospace, Inc. (2) (3) (5) (18) (19)   First Lien Senior Secured Loan - Delayed Draw   -    -    7/1/2025   $-    (34)   (96)     
      Kellstrom Commercial Aerospace, Inc. (15) (19) (21) (26)  First Lien Senior Secured Loan - Revolver    P+ 4.50%    7.49%   7/1/2025   $6,398    6,284    6,238      
      Kellstrom Commercial Aerospace, Inc. (12) (18) (19) (21) (29)  First Lien Senior Secured Loan    L+ 5.00%    6.91%   7/1/2025   $33,864    33,247    33,017      
      Novetta, LLC  (12) (15) (29)  First Lien Senior Secured Loan    L+ 5.00%    6.00%   10/17/2022   $6,564    6,487    5,852      
      Precision Ultimate Holdings, LLC (14) (19) (25)  Equity Interest   -    -    -    1,417    1,417    1,048      
      Salient CRGT, Inc. (12) (15) (19) (29)  First Lien Senior Secured Loan    L+ 6.50%    7.57%   2/28/2022   $12,633    12,665    10,422      
      WCI-HSG HOLDCO, LLC (14) (19) (25)  Preferred Equity   -    -    -    675    675    953      
      WCI-HSG Purchaser, Inc. (15) (19)  First Lien Senior Secured Loan - Revolver    L+ 4.25%    5.26%   2/24/2025   $2,687    2,654    2,546      
      WCI-HSG Purchaser, Inc. (12) (15) (19) (29)  First Lien Senior Secured Loan    L+ 4.50%    5.57%   2/24/2025   $17,734    17,518    16,803      
      Whitcraft LLC (3) (15) (19)  First Lien Senior Secured Loan - Revolver    L+ 6.00%    7.45%   4/3/2023   $1,450    1,432    1,432      
      Whitcraft LLC (12) (15) (19) (21) (29)  First Lien Senior Secured Loan    L+ 6.00%    7.45%   4/3/2023   $40,486    40,086    40,082      
      WP CPP Holdings, LLC. (12) (15) (21) (29)   Second Lien Senior Secured Loan    L+ 7.75%    9.53%   4/30/2026   $11,724    11,625    8,050      
                            Aerospace & Defense Total   $199,460   $184,421    20.7%
                                             
   Automotive  CST Buyer Company (3) (15) (19) (21)  First Lien Senior Secured Loan - Revolver    L+ 5.00%    6.07%   10/3/2025   $1,314    1,285    1,281      
      CST Buyer Company (12) (15) (19) (21) (29)  First Lien Senior Secured Loan    L+ 5.75%    6.82%   10/3/2025   $36,797    36,210    36,245      
      JHCC Holdings, LLC (2) (3) (5) (18) (19) (28)  First Lien Senior Secured Loan - Delayed Draw   -    -    9/9/2025   $-    (39)   (266)     
      JHCC Holdings, LLC (3) (7) (18) (19)  First Lien Senior Secured Loan - Revolver    P+ 4.50%    10.00%   9/9/2025   $371    331    250      
      JHCC Holdings, LLC (7) (18) (19)  First Lien Senior Secured Loan - Delayed Draw    P+ 4.50%    7.75%   9/9/2025   $2,238    2,230    2,143      
      JHCC Holdings, LLC (7) (18) (19) (21) (29)  First Lien Senior Secured Loan    L+ 5.50%    6.36%   9/9/2025   $29,602    29,200    28,344      
                            Automotive Total   $69,217   $67,997    7.6%
                                             
   Banking  Green Street Parent, LLC (3) (18) (19)  First Lien Senior Secured Loan - Revolver    L+ 5.25%    6.45%   8/27/2025   $1,210    1,166    1,028      
      Green Street Parent, LLC (12) (18) (19) (29)  First Lien Senior Secured Loan    L+ 5.25%    6.32%   8/27/2026   $14,444    14,174    13,360      
                            Banking Total   $15,340   $14,388    1.6%
                                             
   Beverage, Food & Tobacco  NPC International, Inc. (12) (15) (21) (33)   Second Lien Senior Secured Loan    L+ 7.50%    9.28%   4/18/2025   $9,159    9,189    235      
      NPC International, Inc. (15) (33)  First Lien Senior Secured Loan    L+ 3.50%    5.28%   4/19/2024   $4,937    4,961    2,117      
      NPC International, Inc. (19) (32)  First Lien Senior Secured Loan    L+ 10.00%    11.50%   1/21/2021   $389    365    389      
                            Beverage, Food & Tobacco Total   $14,515   $2,741    0.3%
                                             
   Capital Equipment  Dorner Manufacturing Corp. (2) (3) (5) (15) (19)  First Lien Senior Secured Loan - Revolver   -    -    3/15/2022   $-    (11)   (11)     
      Dorner Manufacturing Corp. (12) (15) (19)  First Lien Senior Secured Loan    L+ 5.75%    6.75%   3/15/2023   $7,672    7,556    7,595      
      East BCC Coinvest II,LLC (14) (19) (25)  Equity Interest   -    -    -    1,419    1,419    1,030      
      Electronics For Imaging, Inc. (12) (18) (19) (21) (29)  Second Lien Senior Secured Loan    L+ 9.00%    10.45%   7/23/2027   $13,070    12,271    11,599      
      Engineered Controls International, LLC (12) (19) (21) (29) (32)  First Lien Senior Secured Loan    L+ 7.00%    8.50%   11/5/2024   $33,389    32,690    32,638      
      EXC Holdings III Corp. (12) (15) (21) (29)  Second Lien Senior Secured Loan    L+ 7.50%    9.41%   12/1/2025   $8,241    8,252    6,484      
      FCG Acquisitions, Inc. (14) (19) (25)  Preferred Equity   -    -    -    4    4,251    6,381      
      FFI Holdings I Corp (7) (15) (19) (30)  First Lien Senior Secured Loan - Revolver    L+ 5.75%    6.96%   1/24/2025   $5,432    5,365    5,310      
      FFI Holdings I Corp (7) (12) (15) (19) (21) (29)  First Lien Senior Secured Loan    L+ 5.75%    7.25%   1/24/2025   $68,927    68,383    67,376      
      Tidel Engineering, L.P. (3) (7) (15) (19)  First Lien Senior Secured Loan - Revolver    L+ 4.25%    5.25%   3/1/2023   $2,833    2,833    2,833      
      Tidel Engineering, L.P. (7) (15) (19) (29)  First Lien Senior Secured Loan    L+ 6.25%    7.70%   3/1/2024   $37,835    37,835    37,268      
      Velvet Acquisition B.V. (6) (18) (19) (21)   Second Lien Senior Secured Loan    EURIBOR+ 8.00%    8.00%   4/17/2026   €6,013    7,328    6,597      
                            Capital Equipment Total   $188,172   $185,100    20.7%
                                             
   Chemicals, Plastics & Rubber  AP Plastics Group, LLC (3) (7) (15) (19)  First Lien Senior Secured Loan - Revolver    L+ 4.00%    5.00%   8/2/2021   $7,084    7,084    7,084      
      AP Plastics Group, LLC (7) (15) (19) (21)  First Lien Senior Secured Loan    L+ 5.25%    6.83%   8/1/2022   $19,856    19,593    19,558      
      Niacet b.v. (15) (19) (21)   First Lien Senior Secured Loan    EURIBOR+ 4.50%    5.50%   2/1/2024   €3,680    3,945    3,957      
      Plaskolite, Inc. (15) (29)  First Lien Senior Secured Loan    L+ 4.25%    5.25%   12/15/2025   $3,126    3,080    2,728      
                            Chemicals, Plastics & Rubber Total   $33,702   $33,327    3.7%
                                             
   Construction & Building  Chase Industries, Inc.(15) (19) (29)  First Lien Senior Secured Loan - Delayed Draw    L+ 4.00%    4.99%   5/12/2025   $1,118    1,114    1,039      
      Chase Industries, Inc. (12) (15) (19) (29)  First Lien Senior Secured Loan    L+ 4.00% (1.5% PIK)    6.49%   5/12/2025   $11,826    11,779    10,999      
      Elk Parent Holdings, LP (14) (19) (25)  Equity Interest   -    -    -    1    12    -      
      Elk Parent Holdings, LP (14) (19) (25)  Preferred Equity   -    -    -    120    1,202    939      
      PP Ultimate Holdings B, LLC (14) (19) (25)  Equity Interest   -    -    -    1    1,352    1,539      
      Profile Products LLC (3) (7) (19) (31)  First Lien Senior Secured Loan - Revolver    P+ 4.50%    7.75%   12/20/2024   $2,683    2,623    2,549      
      Profile Products LLC (7) (12) (15) (19) (21) (29)  First Lien Senior Secured Loan    L+ 5.50%    6.95%   12/20/2024   $36,444    35,821    35,168      
      Regan Development Holdings Limited (6) (17) (19)  First Lien Senior Secured Loan    EURIBOR+ 6.50%    7.00%   4/18/2022   €2,051    2,235    2,245      
      Regan Development Holdings Limited (6) (17) (19)   First Lien Senior Secured Loan    EURIBOR+ 6.50%    7.00%   4/18/2022   €665    755    728      
      Regan Development Holdings Limited (6) (17) (19)   First Lien Senior Secured Loan    EURIBOR+ 6.50%    7.00%   4/18/2022   €6,226    6,714    6,797      
      YLG Holdings, Inc. (2) (3) (15) (19) (28)  First Lien Senior Secured Loan - Delayed Draw   -    -    10/31/2025   $-    -    (167)     
      YLG Holdings, Inc. (3) (7) (15) (19)  First Lien Senior Secured Loan - Revolver    L+ 5.75%    6.75%   10/31/2025   $7,691    7,611    7,413      
      YLG Holdings, Inc. (7) (12) (15) (19) (21) (29)  First Lien Senior Secured Loan    L+ 5.75%    7.51%   10/31/2025   $38,765    38,416    37,505      
                            Construction & Building Total   $109,634   $106,754    12.0%
                                             
   Consumer Goods: Durable  New Milani Group LLC (12) (15) (19) (29)  First Lien Senior Secured Loan    L+ 5.00%    6.45%   6/6/2024   $17,056    16,931    16,459      
      TLC Holdco LP (14) (19) (25)  Equity Interest   -    -    -    1,188    1,186    956      
      TLC Purchaser, Inc. (2) (3) (5) (19)  First Lien Senior Secured Loan - Delayed Draw   -    -    10/13/2025   $-    (66)   (303)     
      TLC Purchaser, Inc. (3) (19) (21)  First Lien Senior Secured Loan - Revolver    P+ 4.75%    8.00%   10/13/2025   $7,832    7,668    7,454      
      TLC Purchaser, Inc. (12) (19) (21) (29)  First Lien Senior Secured Loan    L+ 5.75%    6.75%   10/13/2025   $42,615    41,813    40,804      
                            Consumer Goods: Durable Total   $67,532   $65,370    7.3%
                                             
   Consumer Goods: Non-Durable  FineLine Technologies, Inc. (19) (21) (31)  First Lien Senior Secured Loan - Revolver    P+ 3.25%    6.50%   11/4/2022   $2,621    2,602    2,581      
      FineLine Technologies, Inc. (12) (15) (19) (21) (29)  First Lien Senior Secured Loan    L+ 4.25%    5.62%   11/4/2022   $31,305    31,155    30,835      
      MND Holdings III Corp (12) (15) (19) (29)  First Lien Senior Secured Loan    L+ 3.50%    4.95%   6/19/2024   $10,696    10,712    9,413      
      RoC Opco LLC  (15) (19) (21)  First Lien Senior Secured Loan - Revolver    L+ 7.25%    8.20%   2/25/2025   $10,241    10,073    10,241      
      RoC Opco LLC (12) (15) (19) (21) (29)  First Lien Senior Secured Loan    L+ 7.25%    8.70%   2/25/2025   $40,793    39,924    40,793      
      Solaray, LLC (7) (15) (19)  First Lien Senior Secured Loan - Delayed Draw    L+ 6.50%    7.98%   9/11/2023   $14,536    14,536    13,773      
      Solaray, LLC (3) (7) (15) (19) (34)  First Lien Senior Secured Loan - Revolver    L+ 4.50%    6.19%   9/9/2022   $12,127    12,086    12,127      
      Solaray, LLC (7) (15) (19) (21)  First Lien Senior Secured Loan    L+ 6.50%    8.26%   9/11/2023   $42,500    42,500    40,269      
      WU Holdco, Inc. (7) (15) (19)  First Lien Senior Secured Loan - Delayed Draw    L+ 5.50%    7.19%   3/26/2026   $5,630    5,572    5,363      
      WU Holdco, Inc. (3) (7) (18) (19)  First Lien Senior Secured Loan - Revolver    L+ 5.50%    6.72%   3/26/2025   $3,918    3,865    3,731      
      WU Holdco, Inc. (7) (15) (21) (19)  First Lien Senior Secured Loan    L+ 5.50%    6.99%   3/26/2026   $39,619    38,862    37,737      
                            Consumer Goods: Non-Durable Total   $211,887   $206,863    23.2%
                                             
   Containers, Packaging, & Glass  Automate Intermediate Holdings II S.à r.l. (6) (18) (19) (21)  Second Lien Senior Secured Loan    L+ 7.75%    8.74%   7/22/2027   $11,870    11,642    11,485      
                            Containers, Packaging, & Glass Total   $11,642   $11,485    1.3%
                                             
   Energy: Electricity  Infinite Electronics International Inc. (12) (18) (19) (21) (29)  First Lien Senior Secured Loan    L+ 4.00%    4.99%   7/2/2025   $19,702    19,690    18,471      
      Infinite Electronics International Inc. (18) (19) (21)  Second Lien Senior Secured Loan    L+ 8.00%    8.94%   7/2/2026   $2,480    2,434    2,313      
                            Energy: Electricity Total   $22,124   $20,784    2.3%
                                             
   Energy: Oil & Gas  Amspec Services, Inc. (3) (7) (15) (19)  First Lien Senior Secured Loan - Revolver    L+ 4.75%    6.20%   7/2/2024   $5,553    5,503    5,553      
      Amspec Services, Inc. (7) (15) (19) (29)  First Lien Senior Secured Loan    L+ 5.75%    7.20%   7/2/2024   $43,988    43,515    42,888      
      Blackbrush Oil & Gas, L.P. (12) (15) (21) (29) (33)  First Lien Senior Secured Loan    L+ 8.00%    9.89%   2/9/2024   $32,075    31,585    23,736      
                            Energy: Oil & Gas Total   $80,603   $72,177    8.1%
                                             
   Environmental Industries  Adler & Allan Group Limited (6) (17) (19) (21) (22)   First Lien Last Out    GBP LIBOR+ 8.25% (2% PIK)    10.92%   9/30/2022   £13,279    16,821    16,258      
                            Environmental Industries Total   $16,821   $16,258    1.8%
                                             
   FIRE: Finance  Allworth Financial Group, L.P. (2) (3) (5) (7) (18) (19)  First Lien Senior Secured Loan - Revolver   -    -    12/31/2025   $-    (23)   (24)     
      Allworth Financial Group, L.P. (7) (15) (19) (21) (29)  First Lien Senior Secured Loan    L+ 5.50%    6.95%   12/31/2025   $15,032    14,888    14,881      
                            FIRE: Finance Total   $14,865   $14,857    1.7%
                                             
                                             
   FIRE: Insurance  Ivy Finco Limited (6) (18) (19) (21)   First Lien Senior Secured Loan    GBP LIBOR+ 5.00%    5.27%   5/19/2025   £7,217    8,957    8,769      
      Ivy Finco Limited (3) (6) (18) (19)   First Lien Senior Secured Loan    GBP LIBOR+ 5.00%    5.47%   5/19/2025   £4,862    5,985    5,852      
      Margaux Acquisition Inc. (3) (7) (15) (19)   First Lien Senior Secured Loan - Delayed Draw    L+ 6.00%    7.41%   12/19/2024   $2,180    2,023    1,691      
      Margaux Acquisition, Inc. (7) (15) (19)  First Lien Senior Secured Loan - Revolver    L+ 5.50%    6.50%   12/19/2024   $2,873    2,816    2,722      
      Margaux Acquisition Inc. (7) (12) (15) (19) (29)  First Lien Senior Secured Loan    L+ 5.50%    7.41%   12/19/2024   $28,844    28,342    27,329      
      Margaux UK Finance Limited (3) (6) (7) (15) (19)  First Lien Senior Secured Loan - Revolver    GBP LIBOR+ 5.50%    6.50%   12/19/2024   £495    567    596      
      Margaux UK Finance Limited (6) (15) (19) (21)  First Lien Senior Secured Loan    GBP LIBOR+ 5.50%    6.50%   12/19/2024   £7,687    9,850    9,244      
                            FIRE: Insurance Total   $58,540   $56,203    6.3%
                                             
   FIRE: Real Estate  Spectre (Carrisbrook House) Limited (6) (15) (19)  First Lien Senior Secured Loan    EURIBOR+ 7.50%    8.50%   8/9/2021    €9,300    10,805    10,024      
                            FIRE: Real Estate Total   $10,805   $10,024    1.1%
                                             
   Forest Products & Paper  Solenis International LLC (18) (21)   Second Lien Senior Secured Loan    L+ 8.50%    10.11%   6/26/2026   $10,601    10,309    7,367      
                            Forest Products & Paper Total   $10,309   $7,367    0.8%
                                             
   Healthcare & Pharmaceuticals  CB Titan Holdings, Inc. (14) (19) (25)  Preferred Equity   -    -    -    1,953    1,953    1,738      
      CPS Group Holdings, Inc. (7) (15) (19)  First Lien Senior Secured Loan - Revolver    P+ 4.50%    7.75%   3/3/2025   $4,934    4,861    4,847      
      CPS Group Holdings, Inc. (7) (15) (19) (21) (29)  First Lien Senior Secured Loan    L+ 5.50%    6.95%   3/3/2025   $55,765    55,269    54,790      
      Datix Bidco Limited (6) (18) (19) (21)  First Lien Senior Secured Loan - Revolver    GBP LIBOR+ 4.50%    5.22%   10/28/2024   £973    1,152    1,182      
      Datix Bidco Limited (6) (18) (19) (21)  Second Lien Senior Secured Loan    GBP LIBOR+ 7.75%    8.63%   4/27/2026   £12,134    16,317    14,705      
      Datix Bidco Limited (6) (18) (19) (21)  First Lien Senior Secured Loan    BBSW+ 4.50%    5.50%   4/28/2025     AUD                                                     4,212    3,206    2,519      
      Golden State Buyer, Inc. (12) (18) (19) (29)  First Lien Senior Secured Loan    L+ 4.75%    5.74%   6/22/2026   $15,191    15,052    14,432      
      Great Expressions Dental Centers PC (15) (19)  First Lien Senior Secured Loan - Revolver    L+ 4.75% (0.5% PIK)    6.32%   9/28/2022   $1,173    1,160    939      
      Great Expressions Dental Centers PC (12) (15) (19)  First Lien Senior Secured Loan    L+ 5.25%    7.17%   9/28/2023   $7,662    7,544    6,125      
      Island Medical Management Holdings, LLC  (15) (19) (29)  First Lien Senior Secured Loan    L+ 6.50%    7.95%   9/1/2022   $9,134    9,053    8,220      
      Medical Depot Holdings, Inc. (12) (15) (21)  First Lien Senior Secured Loan    L+ 7.50%    8.95%   1/3/2023   $16,271    15,105    9,971      
      Mendel Bidco, Inc. (18) (19) (21)   First Lien Senior Secured Loan    EURIBOR+ 4.50%    4.50%   6/17/2027   €10,033    11,141    10,732      
      Mendel Bidco, Inc. (12) (18) (19) (29)  First Lien Senior Secured Loan    L+ 4.50%    5.77%   6/17/2027   $19,966    19,505    19,467      
      Mertus 522. GmbH (6) (18) (19)  First Lien Senior Secured Loan - Delayed Draw    EURIBOR+ 5.75%    5.75%   5/28/2026   €13,131    14,092    14,118      
      Mertus 522. GmbH (6) (18) (19) (21)   First Lien Senior Secured Loan    EURIBOR+ 5.75%    5.75%   5/28/2026   €22,468    24,559    24,157      
      TecoStar Holdings, Inc. (12) (15) (19) (21) (29)  Second Lien Senior Secured Loan    P+ 7.50%    10.75%   11/1/2024   $9,472    9,293    9,188      
      U.S. Anesthesia Partners, Inc. (12) (15) (19) (21)  Second Lien Senior Secured Loan    L+ 7.25%    8.24%   6/23/2025   $16,520    16,344    12,473      
                            Healthcare & Pharmaceuticals Total   $225,606   $209,603    23.5%
                                             
   High Tech Industries  AMI US Holdings Inc. (3) (6) (12) (15) (19)  First Lien Senior Secured Loan - Revolver    L+ 5.25%    6.45%   4/1/2024   $1,605    1,576    1,561      
      AMI US Holdings Inc. (6) (12) (15) (19) (21) (29)  First Lien Senior Secured Loan    L+ 5.25%    6.83%   4/1/2025   $13,124    12,894    12,796      
      Appriss Holdings, Inc. (3) (7) (18) (19)  First Lien Senior Secured Loan - Revolver    L+ 5.50%    6.49%   5/30/2025   $2,329    2,271    2,164      
      Appriss Holdings, Inc. (7) (18) (19) (21)  First Lien Senior Secured Loan    L+ 5.50%    6.49%   5/29/2026   $48,753    48,171    47,047      
      CB Nike IntermediateCo Ltd (6) (15) (19) (21)  First Lien Senior Secured Loan - Revolver    L+ 5.00%    6.45%   10/31/2025   $4,428    4,345    4,328      
      CB Nike IntermediateCo Ltd (6) (12) (15) (19) (21) (29)  First Lien Senior Secured Loan    L+ 5.00%    6.78%   10/31/2025   $35,334    34,672    34,539      
      CMI Marketing Inc (3) (15) (19) (29)  First Lien Senior Secured Loan - Revolver    L+ 4.50%    5.50%   5/24/2023   $1,408    1,395    1,408      
      CMI Marketing Inc (12) (15) (19) (29)  First Lien Senior Secured Loan    L+ 4.50%    5.50%   5/24/2024   $15,217    15,104    15,217      
      Drilling Info Holdings, Inc (12) (18) (19) (21) (29)  First Lien Senior Secured Loan    L+ 4.25%    5.24%   7/30/2025   $22,552    22,479    20,748      
      Element Buyer, Inc. (3) (7) (19) (27)(31)  First Lien Senior Secured Loan - Delayed Draw    P+ 4.25%    8.45%   7/18/2025   $9,010    9,057    8,785      
      Element Buyer, Inc. (7) (15) (19)  First Lien Senior Secured Loan - Revolver    L+ 5.25%    6.25%   7/19/2024   $4,250    4,189    4,165      
      Element Buyer, Inc. (7) (15) (19) (21)  First Lien Senior Secured Loan    L+ 5.25%    6.25%   7/18/2025   $37,677    37,992    36,923      
      Everest Bidco (6) (15) (19) (21)   Second Lien Senior Secured Loan    GBP LIBOR+ 7.50%    8.10%   7/3/2026   £10,216    13,105    12,223      
      MeridianLink, Inc. (15) (19) (29)  First Lien Senior Secured Loan    L+ 4.00%    5.07%   5/30/2025   $1,820    1,801    1,711      
      MRI Software LLC (7) (15) (19)  First Lien Senior Secured Loan    L+ 5.50%    6.57%   2/10/2026   $22,469    22,364    22,132      
      MRI Software LLC (2) (3) (5) (15) (19) (28)  First Lien Senior Secured Loan - Delayed Draw   -    -    2/10/2026   $-    (44)   (39)     
      MRI Software LLC (3) (7) (15) (19)  First Lien Senior Secured Loan - Revolver    L+ 5.50%    6.57%   2/10/2026   $891    932    864      
      Netsmart Technologies, Inc. (15) (21)  Second Lien Senior Secured Loan    L+ 7.50%    8.95%   10/19/2023   $2,749    2,749    2,234      
      nThrive, Inc. (15) (19) (21)  Second Lien Senior Secured Loan    L+ 9.75%    10.75%   4/20/2023   $8,000    7,987    6,940      
      Park Place Technologies (15) (21)  Second Lien Senior Secured Loan    L+ 8.00%    9.00%   3/30/2026   $6,733    6,686    6,607      
      Symplr Software, Inc. (7) (18) (19)   First Lien Senior Secured Loan - Revolver    L+ 5.50%    6.60%   11/30/2023   $4,965    4,913    4,679      
      Symplr Software, Inc. (7) (18) (19) (21)  First Lien Senior Secured Loan    L+ 5.50%    6.57%   11/28/2025   $60,906    60,087    57,404      
      Utimaco, Inc. (6) (18) (19) (21) (29)  First Lien Senior Secured Loan    L+ 4.50%    6.42%   8/9/2027   $14,850    14,504    14,478      
      Ventiv Topco, Inc. (14) (19) (25)  Equity Interest   -    -    -    28    2,833    2,633      
      Ventiv Holdco, Inc. (3) (7) (18) (19)  First Lien Senior Secured Loan - Revolver    L+ 5.50%    6.25%   9/3/2025   $426    378    255      
      Ventiv Holdco, Inc. (7) (15) (19) (21)  First Lien Senior Secured Loan    L+ 5.50%    6.57%   9/3/2025   $24,238    23,899    23,027      
      VPARK BIDCO AB (6) (16)(19) (21)   First Lien Senior Secured Loan    CIBOR+ 4.00%    4.75%   3/10/2025     DKK                                                    56,999    9,166    8,274      
      VPARK BIDCO AB (6) (16) (19) (21)   First Lien Senior Secured Loan    NIBOR+ 4.00%    4.99%   3/10/2025     NOK                                                   74,020    9,198    6,971      
      Zywave, Inc. (15) (19)  First Lien Senior Secured Loan - Revolver    L+ 5.00%    6.00%   11/17/2022   $1,279    1,271    1,269      
      Zywave, Inc. (12) (15) (19) (29)  First Lien Senior Secured Loan    L+ 5.00%    6.78%   11/17/2022   $17,326    17,245    17,196      
                            High Tech Industries Total   $393,219   $378,539    42.4%
                                             
   Hotel, Gaming & Leisure  Aimbridge Acquisition Co., Inc. (12) (18) (19) (21) (29)  Second Lien Senior Secured Loan    L+ 7.50%    9.08%   2/1/2027   $20,193    19,665    17,467      
      Captain D's LLC (3) (19) (31)  First Lien Senior Secured Loan - Revolver    P+ 3.50%    6.75%   12/15/2023   $1,393    1,376    1,186      
      Captain D's LLC (12) (15) (19) (29)  First Lien Senior Secured Loan    L+ 4.50%    5.50%   12/15/2023   $13,114    13,022    11,704      
      Quidditch Acquisition, Inc. (12) (15) (19) (29)  First Lien Senior Secured Loan    L+ 7.00%    8.45%   3/21/2025   $18,977    18,959    16,510      
                            Hotel, Gaming & Leisure Total   $53,022   $46,867    5.3%
                                             
   Media: Advertising, Printing & Publishing  A-L Parent LLC (12) (15) (19) (21)  Second Lien Senior Secured Loan    L+ 7.25%    8.25%   12/2/2024   $4,050    4,021    2,633      
      Ansira Holdings, Inc. (3) (7) (15) (19)   First Lien Senior Secured Loan - Delayed Draw    L+ 5.75%    6.98%   12/20/2022   $2,929    2,920    2,296      
      Ansira Holdings, Inc. (15) (19) (24)  First Lien Senior Secured Loan - Revolver    L+ 5.75%    7.27%   12/20/2022   $7,084    7,084    7,084      
      Ansira Holdings, Inc. (7) (15) (19)   First Lien Senior Secured Loan    L+ 5.75%    7.36%   12/20/2022   $35,785    35,704    30,686      
      Cruz Bay Publishing, Inc. (3) (15) (19)  First Lien Senior Secured Loan - Delayed Draw    P+ 5.00%    8.25%   5/4/2020   $864    860    864      
      Cruz Bay Publishing (15) (19)  First Lien Senior Secured Loan - Revolver    P+ 3.00%    6.25%   5/4/2020   $2,833    2,833    2,833      
      Cruz Bay Publishing, Inc. (7) (15) (19)  First Lien Senior Secured Loan    P+ 4.75%    8.00%   5/4/2020   $4,753    4,753    4,753      
      Cruz Bay Publishing, Inc. (7) (15) (19)  First Lien Senior Secured Loan    P+ 5.75%    9.00%   5/4/2020   $1,587    1,587    1,587      
                            Media: Advertising, Printing & Publishing Total   $59,762   $52,736    5.9%
                                             
   Media: Broadcasting & Subscription  Vital Holdco Limited (6) (12) (15) (19) (21) (29)  First Lien Senior Secured Loan    L+ 5.25%    7.03%   5/29/2026   $35,357    34,579    34,650      
      Vital Holdco Limited (6) (18) (19) (21)   First Lien Senior Secured Loan    EURIBOR+ 5.25%    5.25%   5/29/2026   €7,917    8,620    8,512      
                            Media: Broadcasting & Subscription Total   $43,199   $43,162    4.8%
                                             
   Media: Diversified & Production  Efficient Collaborative Retail Marketing Company, LLC (3) (15) (19)  First Lien Senior Secured Loan - Revolver    L+ 5.25%    6.25%   6/15/2022   $2,267    2,267    2,267      
      Efficient Collaborative Retail Marketing Company, LLC (7) (15) (19) (21)  First Lien Senior Secured Loan    L+ 6.75%    7.82%   6/15/2022   $15,095    15,176    14,566      
      Efficient Collaborative Retail Marketing Company, LLC (7) (15) (19)   First Lien Senior Secured Loan    L+ 6.75%    7.82%   6/15/2022   $9,788    9,840    9,445      
      International Entertainment Investments Limited (6) (18) (19) (21)  First Lien Senior Secured Loan    GBP LIBOR+ 4.25%    5.11%   5/31/2023   £8,686    10,637    10,499      
                            Media: Diversified & Production Total   $37,920   $36,777    4.1%
                                             
   Retail  Batteries Plus Holding Corporation (3) (7) (19) (31)  First Lien Senior Secured Loan - Revolver    P+ 5.75%    9.00%   7/6/2022   $3,540    3,540    3,519      
      Batteries Plus Holding Corporation (7) (15) (19)   First Lien Senior Secured Loan    L+ 6.75%    7.75%   7/6/2022   $28,749    28,749    28,606      
                            Retail Total   $32,289   $32,125    3.6%
                                             
   Services: Business  AMCP Clean Acquisition Company, LLC (12) (18) (19) (29)  First Lien Senior Secured Loan - Delayed Draw    L+ 4.25%    5.32%   6/16/2025   $3,884    3,877    2,884      
      AMCP Clean Acquisition Company, LLC (12) (18) (19) (29)  First Lien Senior Secured Loan    L+ 4.25%    5.32%   6/16/2025   $16,052    16,023    11,919      
      Comet Bidco Limited (6) (18) (21)  First Lien Senior Secured Loan    GBP LIBOR+ 5.00%    5.73%   9/30/2024   £7,362    9,482    6,594      
      Elevator Holdco Inc. (14) (19) (25)  Equity Interest   -    -    -   3    2,448    1,910      
      Hightower Holding, LLC (2) (3) (5) (15) (19)  First Lien Senior Secured Loan - Delayed Draw   -    -    1/31/2025   $-    (14)   (266)     
      Hightower Holding, LLC (12) (15) (19) (21) (29)  First Lien Senior Secured Loan    L+ 5.00%    6.00%   1/31/2025   $34,503    34,355    33,123      
      Refine Intermediate, Inc. (3) (19)  First Lien Senior Secured Loan - Revolver    L+ 4.75%    5.41%   9/3/2026   $1,019    758    756      
      Refine Intermediate, Inc. (15) (19) (21)  First Lien Senior Secured Loan    L+ 4.75%    5.61%   3/3/2027   $21,894    21,350    21,347      
      SumUp Holdings Luxembourg S.à.r.l. (6) (15) (19) (21)  First Lien Senior Secured Loan    EURIBOR+ 8.00%    9.00%   8/1/2024   €15,957    17,673    17,200      
      SumUp Holdings Luxembourg S.à.r.l. (6) (15) (19) (21)  First Lien Senior Secured Loan    EURIBOR+ 8.00%    9.00%   8/1/2024   €16,954    18,464    18,275      
      TEI Holdings Inc. (7) (19) (31)  First Lien Senior Secured Loan - Revolver    L+ 6.00%    7.00%   12/23/2025   $4,528    4,482    4,211      
      TEI Holdings Inc. (7) (12) (15) (19) (21) (29)  First Lien Senior Secured Loan    L+ 6.00%    7.20%   12/23/2026   $48,927    48,255    45,502      
      Valet Waste Holdings, Inc (12) (18) (19) (21) (29)  First Lien Senior Secured Loan    L+ 3.75%    4.74%   9/29/2025   $21,322    21,285    19,190      
                            Services: Business Total   $198,438   $182,645    20.5%
                                             
   Services: Consumer  Pearl Intermediate Parent LLC (18) (19) (29)  Second Lien Senior Secured Loan    L+ 6.25%    7.24%   2/13/2026   $2,571    2,586    2,147      
      Surrey Bidco Limited (6) (17) (19) (21)   First Lien Senior Secured Loan    GBP LIBOR+ 6.00%    6.69%   5/11/2026   £5,000    6,142    5,781      
      Trafalgar Bidco Limited (6) (18) (19) (21)  First Lien Senior Secured Loan    GBP LIBOR+ 5.00%    5.24%   9/11/2024   £6,011    7,733    7,192      
      Zeppelin BidCo Pty Limited (6) (18) (19) (21)  First Lien Senior Secured Loan    BBSY+ 5.00%    5.94%   6/28/2024     AUD                                                   20,621    14,018    12,048      
                            Services: Consumer Total   $30,479   $27,168    3.0%
                                             
   Telecommunications  Conterra Ultra Broadband Holdings, Inc. (18) (19) (29)  First Lien Senior Secured Loan    L+ 4.50%    5.49%   4/30/2026   $6,434    6,405    5,662      
      Horizon Telcom, Inc. (3) (12) (15) (19) (29)  First Lien Senior Secured Loan - Delayed Draw    L+ 4.75%    6.22%   6/15/2023   $930    916    904      
      Horizon Telcom, Inc. (15) (19)  First Lien Senior Secured Loan - Revolver    L+ 4.75%    5.75%   6/15/2023   $116    114    114      
      Horizon Telcom, Inc. (12) (15) (19) (29)  First Lien Senior Secured Loan    L+ 4.75%    6.33%   6/15/2023   $13,695    13,553    13,489      
      Masergy Holdings, Inc. (15) (29)  Second Lien Senior Secured Loan    L+ 7.50%    8.56%   12/16/2024   $857    862    710      
                            Telecommunications Total   $21,850   $20,879    2.3%
                                             
   Transportation: Cargo  A&R Logistics, Inc. (3) (7) (15) (19)  First Lien Senior Secured Loan - Revolver    L+ 5.75%    6.75%   5/5/2025   $4,941    4,834    4,743      
      A&R Logistics, Inc. (7) (12) (15) (19) (21) (29)  First Lien Senior Secured Loan    L+ 5.75%    7.66%   5/5/2025   $43,865    43,059    42,440      
      A&R Logistics, Inc. (7) (15) (19)   First Lien Senior Secured Loan    L+ 5.75%    7.66%   5/5/2025   $2,467    2,420    2,387      
      A&R Logistics, Inc. (7) (15) (19)  First Lien Senior Secured Loan    L+ 5.75%    7.45%   5/5/2025   $6,080    5,995    5,883      
      ARL Holdings, LLC. (14) (19) (25)  Equity Interest   -    -    -   -    446    485      
      ARL Holdings, LLC. (14) (19) (25)  Equity Interest   -    -    -   9    9    6      
      ENC Holding Corporation (12) (18) (19) (29)  First Lien Senior Secured Loan    L+ 4.00%    5.45%   5/30/2025   $10,247    10,235    9,325      
      Grammer Investment Holdings LLC (14) (19) (25)  Equity Interest   -    -    -   1,011    1,011    596      
      Grammer Investment Holdings LLC (19) (25)  Preferred Equity    10% PIK    10.00%   -   7    679    694      
      Grammer Investment Holdings LLC (14) (19) (25)  Warrants   -    -    -   122    -    -      
      Grammer Purchaser, Inc. (3) (15) (19)  First Lien Senior Secured Loan - Revolver    L+ 4.50%    5.75%   9/30/2024   $368    371    357      
      Grammer Purchaser, Inc. (12) (15) (19) (29)  First Lien Senior Secured Loan - Revolver    L+ 4.50%    6.12%   9/30/2024   $10,180    10,017    10,078      
      Omni Logistics, LLC (15) (19)  Subordinated Debt    L+ 11.50%    12.50%   1/19/2024   $15,000    14,763    15,000      
      PS HoldCo, LLC (12) (15) (29)  First Lien Senior Secured Loan    L+ 4.75%    5.75%   3/13/2025   $23,218    23,206    21,477      
                            Transportation: Cargo Total   $117,045   $113,471    12.7%
                                             
   Transportation: Consumer  Direct Travel, Inc. (7) (15) (19)  First Lien Senior Secured Loan - Delayed Draw    L+ 6.50%    7.95%   12/1/2021   $1,467    1,389    893      
      Direct Travel, Inc. (3) (7) (15) (19)   First Lien Senior Secured Loan - Delayed Draw    L+ 6.50%    8.08%   12/1/2021   $2,913    2,913    2,716      
      Direct Travel, Inc. (15) (21) (19)  First Lien Senior Secured Loan - Revolver    L+ 4.50%    5.55%   12/1/2021   $4,250    4,250    3,963      
      Direct Travel, Inc. (7) (15) (19) (21)  First Lien Senior Secured Loan    L+ 6.50%    7.50%   12/1/2021   $49,540    49,540    46,196      
      Toro Private Holdings III, Ltd (6) (12) (18) (19) (29)  Second Lien Senior Secured Loan    L+ 9.00%    10.07%   5/28/2027   $8,998    8,514    6,524      
      Toro Private Investments II, L.P. (6) (14) (19) (25)  Equity Interest   -    -    -   3,090    3,090    1,051      
                            Transportation: Consumer Total   $69,696   $61,343    6.9%
                                             
                                             
   Wholesale  Abracon Group Holding, LLC. (14) (19) (25)  Equity Interest   -    -    -   2    1,833    770      
      Abracon Group Holding, LLC. (2) (3) (5) (7) (15) (19)   First Lien Senior Secured Loan - Revolver   -    -    7/18/2024   $-    (31)   (163)     
      Abracon Group Holding, LLC. (7) (13) (15) (19) (21)  First Lien Senior Secured Loan    L+ 6.00%    7.45%   7/18/2024   $36,002    35,844    33,932      
      Aramsco, Inc. (3) (7) (18) (19) (23)  First Lien Senior Secured Loan - Revolver    L+ 5.25%    6.84%   8/28/2024   $1,806    1,766    1,603      
      Aramsco, Inc. (7) (18) (19) (21)  First Lien Senior Secured Loan    L+ 5.25%    6.25%   8/28/2024   $24,226    23,856    22,773      
      Armor Group, LP (14) (19) (25)  Equity Interest   -    -    -   10    1,012    1,081      
      PetroChoice Holdings, Inc. (12) (15) (29)  First Lien Senior Secured Loan    L+ 5.00%    6.78%   8/19/2022   $9,922    9,849    8,335      
      PetroChoice Holdings, Inc. (12) (15) (29)  First Lien Senior Secured Loan    L+ 5.00%    6.78%   8/19/2022   $6,565    6,446    5,515      
                            Wholesale Total   $80,575   $73,846    8.3%
                            Non-Controlled/Non-Affiliate Investments Total   $2,498,268   $2,355,277    263.8%
                                             
Non-Controlled/Affiliate Investments                                            
   Beverage, Food & Tobacco  ADT Pizza, LLC (10) (14) (19) (25)  Equity Interest   -    -    -   6,720    6,720    6,720      
                            Beverage, Food & Tobacco Total   $6,720   $6,720    0.8%
                            Non-Controlled/Affiliate Investments Total   $6,720   $6,720    0.8%
                                             
Controlled Affiliate Investments                                            
   Aerospace & Defense  ACC Holdco, LLC (10) (11) (19) (25)  Preferred Equity   -    16.00%   -   10,828    10,824    10,828      
      Air Comm Corporation LLC (10) (11) (12) (18) (19) (21) (29)  First Lien Senior Secured Loan    L+ 6.50%    7.95%   6/30/2025   $27,229    26,478    26,616      
      BCC Jetstream Holdings Aviation (Off I), LLC (6) (10) (11) (19) (20) (21) (25)  Equity Interest   -    -    -   11,863    11,863    12,724      
      BCC Jetstream Holdings Aviation (On II), LLC (10) (11) (19) (20) (21) (25)  Equity Interest   -    -    -   1,116    1,116    1,638      
      BCC Jetstream Holdings Aviation (On II), LLC (10) (11) (19) (20)(21)  First Lien Senior Secured Loan   -    10.00%   6/2/2022   $6,363    6,363    6,363      
      Gale Aviation (Offshore) Co (6) (10) (11) (19) (21) (25)  Equity Interest   -    -    -   $63,602    63,602    64,367      
                            Aerospace & Defense Total   $120,246   $122,536    13.7%
                            Controlled Affiliate Investments Total   $120,246   $122,536    13.7%
                            Investments Total   $2,625,234   $2,484,533    278.3%
                                             
Cash Equivalents                                            
   Cash Equivalents  Goldman Sachs Financial Square Government Fund Institutional Share Class (35)  Cash Equivalents   -    0.33%   -   $41,168    41,168    41,168      
                            Cash Equivalents Total   $41,168   $41,168    4.6%
                            Investments and Cash Equivalents Total   $2,666,402   $2,525,701    282.9%
                                             

 

Forward Foreign Currency Exchange Contracts 

 

Currency Purchased  Currency Sold  Counterparty  Settlement Date  Unrealized Appreciation
(Depreciation) (8)		 
US DOLLARS 11,874  EURO 10,300  Bank of New York Mellon  6/15/2020  $535 
US DOLLARS 14,394  POUND STERLING 10,740  Bank of New York Mellon  9/21/2020   1,067 
POUND STERLING 10,740  US DOLLARS 8,192  Bank of New York Mellon  9/21/2020   (474)
US DOLLARS 2,705  EURO 2,410  Citibank  6/10/2020   52 
US DOLLARS 9,338  EURO 8,320  Citibank  6/15/2020   179 
US DOLLARS 3,710  EURO 3,400  Citibank  6/15/2020   (33)
US DOLLARS 412  POUND STERLING 310  Citibank  9/23/2020   28 
US DOLLARS 7,609  EURO 6,840  Citibank  3/26/2021   14 
US DOLLARS 7,214  NORWEGIAN KRONE 74,020  Goldman Sachs  6/10/2020   151 
US DOLLARS 16,897  AUSTRALIAN DOLLARS 24,180  Goldman Sachs  6/15/2020   2,093 
US DOLLARS 8,885  DANISH KRONE 57,000  Goldman Sachs  6/15/2020   478 
US DOLLARS 83,784  EURO 72,370  Goldman Sachs  6/15/2020   4,111 
US DOLLARS 103,311  POUND STERLING 79,785  Goldman Sachs  6/15/2020   4,365 
US DOLLARS 3,777  POUND STERLING 2,910  Goldman Sachs  6/15/2020   (168)
US DOLLARS 11,793  EURO 10,170  Goldman Sachs  3/9/2021   505 
            $12,903 

 

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

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

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

(4) Percentages are based on the Company’s net assets of $892,777 as of March 31, 2020.

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

(6) The investment is not a qualifying asset under Section 55(a) of the Investment Company Act of 1940. The Company may not acquire any non-qualifying asset unless, at the time of acquisition, qualifying assets represent at least 70% of the Company’s total assets. As of March 31, 2020, non-qualifying assets totaled 16.4% of the Company’s total assets.

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

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

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

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

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

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

(13) $91 of the total par amount for this security is at P+ 5.00%.

(14) Non-Income Producing.

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

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

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

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

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

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

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

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

(23) $847 of the total par amount for this security is at P+ 4.25%.

(24) $1,643 of the total par amount for this security is at P+ 4.75%.

(25) Security exempt from registration under the Securities Act of 1933 (the “Securities Act”), and may be deemed to be “restricted securities” under the Securities Act. As of March 31, 2019, the aggregate fair value of these

 

securities is $121,400 or 13.60% of the Company’s net assets. The acquisition dates of the restricted securities are as follows:

 

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

 

(26) $1,152 of the total par amount for this security is at L+5.50%.

(27) $3,343 of the total par amount for this security is at L+ 5.25%.

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

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

(30) $136 of the total par amount for this security is at P+ 4.75%.

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

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

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

(34) $850 of the total par amount for this security is at P+ 3.50%.

(35) Cash equivalents include $18,706 of restricted cash.

 

8

 

 

Bain Capital Specialty Finance, Inc.

Consolidated Schedule of Investments

As of December 31, 2019

(In thousands)

  

Control Type

 

Industry 

 

Portfolio Company

 

Investment Type 

 

Spread
Above
Index (1) 

  

Interest Rate

  

Maturity Date 

  

Principal/Shares (9)

  

Cost

  

Market
Value

  

% of
NAV (4)

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

 

 

9

 

 

Forward Foreign Currency Exchange Contracts

 

Currency Purchased

 

Currency Sold

 

Counterparty

 

Settlement Date

 

Unrealized
Appreciation
(Depreciation) (8)

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

 

(1) The investments bear interest at a rate that may be determined by reference to the London Interbank Offered Rate (“LIBOR” or “L”), the Euro Interbank Offered Rate (“EURIBOR” or “E”), British Pound Sterling LIBOR Rate (“GBP LIBOR”), the Norwegian Interbank Offered Rate (“NIBOR” or “N”), the Copenhagen Interbank Offered Rate (“CIBOR” or “C”), the Bank Bill Swap Rate (“BBSW”), the Bank Bill Swap Bid Rate (“BBSY”), or the Prime Rate (“Prime” or “P”) and which reset daily, monthly, quarterly or semiannually. Investments or a portion thereof may bear Payment-in-Kind (“PIK”). For each, the Company has provided the PIK or the spread over LIBOR, EURIBOR, GBP LIBOR, NIBOR, CIBOR, BBSW, BBSY, or Prime and the current weighted average interest rate in effect at December 31, 2019. Certain investments are subject to a LIBOR, EURIBOR, GBP LIBOR, NIBOR, CIBOR, BBSW, or Prime interest rate floor.
(2) The negative fair value is the result of the capitalized discount on the loan or the unfunded commitment being valued below par.
(3) Position or portion thereof is an unfunded loan commitment, and no interest is being earned on the unfunded portion. The investment may be subject to an unused/letter of credit facility fee.
(4) Percentages are based on the Company’s net assets of $1,018,400 as of December 31, 2019.
(5) The negative amortized cost is the result of the capitalized discount being greater than the principal amount outstanding on the loan.
(6) The investment is not a qualifying asset under Section 55(a) of the Investment Company Act of 1940. The Company may not acquire any non-qualifying asset unless, at the time of acquisition, qualifying assets represent at least 70% of the Company’s total assets. As of December 31, 2019, non-qualifying assets totaled 15.6% of the Company’s total assets.
(7) Assets or a portion thereof are pledged as collateral for the BCSF Complete Financing Solution LLC. See Note 6 “Debt”.
(8) Unrealized appreciation/(depreciation) on forward currency exchange contracts.
(9) The principal amount (par amount) for all debt securities is denominated in U.S. dollars, unless otherwise noted. £ represents Pound Sterling, € represents Euro, NOK represents Norwegian krone, AUD represents Australian and DKK represents Kroner.
(10) As defined in the 1940 Act, the Company is deemed to be an “Affiliated Investment” of the Company as the Company owns 5% or more of the portfolio company’s securities.
(11) As defined in the 1940 Act, the Company is deemed to “Control” this portfolio company as the Company either owns more than 25% of the portfolio company’s outstanding voting securities or has the power to exercise control over management or policies of such portfolio company.
(12) Assets or a portion thereof are pledged as collateral for the 2018-1 Issuer. See Note 6 “Debt”.
(13) $91 of the total par amount for this security is at P+ 4.75%.
(14) Non-Income Producing.
(15) Loan includes interest rate floor of 1.00%.
(16) Loan includes interest rate floor of 0.75%.
(17) Loan includes interest rate floor of 0.50%.
(18) Loan includes interest rate floor of 0.00%.
(19) Security valued using unobservable inputs (Level 3).
(20) The Company holds non-controlling, affiliate interest in an aircraft-owning special purpose vehicle through this investment.
(21) Assets or a portion thereof are pledged as collateral for the BCSF Revolving Credit Facility. See Note 6 “Debt”.
(22) The Company generally earns a higher interest rate on the “last out” tranche of debt, to the extent the debt has been allocated to “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.
(23) $127 of the total par amount for this security is at P+ 5.50%.
(24) $1,643 of the total par amount for this security is at P+ 4.00%.
(25) Security exempt from registration under the Securities Act of 1933 (the “Securities Act”), and may be deemed to be “restricted securities” under the Securities Act. As of December 31, 2019, the aggregate fair value of these securities is $123,733 or 12.15% of the Company’s net assets. The acquisition dates of the restricted securities are as follows:

 

10

 

 

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

 

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

 

11

 

 

 

BAIN CAPITAL SPECIALTY FINANCE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(in thousands, except share and per share data)

 

Note 1. Organization

 

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

 

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

 

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

 

Our operations comprise only a single reportable segment.

 

Note 2. Summary of Significant Accounting Policies

 

Basis of Presentation

 

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

 

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

 

Basis of Consolidation

 

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

 

12

 

 

Use of Estimates

 

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

 

Valuation of Portfolio Investments

 

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

 

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

 

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

 

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

 

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

 

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

 

·The Board will discuss valuations and determine the fair value of each investment in good faith based upon, among other things, the input of the Advisor, independent valuation firms, where applicable, and the Audit Committee.

 

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

 

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

 

13

 

 

·Level 1 — Valuations based on quoted prices (unadjusted) in active markets for identical assets or liabilities at the measurement date.

 

·Level 2 — Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

 

·Level 3 — Valuations based on inputs that are unobservable and significant to the fair value measurement.

 

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

 

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

 

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

 

Securities Transactions, Revenue Recognition and Expenses

 

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

 

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

 

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

 

14

 

 

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

 

Expenses are recorded on an accrual basis.

 

Non-Accrual Loans

 

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

 

Distributions

 

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

 

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

 

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

 

Dividend Reinvestment Plan

 

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

 

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

 

Offering Costs

 

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

 

15

 

 

Cash, Restricted Cash, and Cash Equivalents

 

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

 

Foreign Currency Translation

 

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

 

Forward Currency Exchange Contracts

 

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

 

Changes in net unrealized appreciation (depreciation) are recorded on the consolidated statements of operations in net change in unrealized appreciation (depreciation) on forward currency exchange contracts. Net realized gains and losses are recorded on the consolidated statements of operations in net realized gain (loss) on forward currency exchange contracts. Realized gains and losses on forward currency exchange contracts are determined using the difference between the fair market value of the forward currency exchange contract at the time it was opened and the fair market value at the time it was closed or covered. Additionally, losses, up to the fair value, may arise if the counterparties do not perform under the contract terms.

 

Deferred Financing Costs and Debt Issuance Costs

 

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

 

Income Taxes

 

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

 

16

 

 

 

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

 

The Company evaluates tax positions taken or expected to be taken in the course of preparing its consolidated financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are reversed and recorded as a tax benefit or expense in the current year. All penalties and interest associated with income taxes, if any, are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, on-going analyses of tax laws, regulations and interpretations thereof. Management has analyzed the Company’s tax positions and has concluded that no liability for unrecognized tax benefits related to uncertain tax positions on returns to be filed by the Company for all open tax years should be recorded. The Company identifies its major tax jurisdiction as the United States, and the Company is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months. As of March 31, 2020, the tax years that remain subject to examination are from 2016 forward.

 

Recent Accounting Pronouncements

 

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 is part of the disclosure framework project and eliminates certain disclosure requirements for fair value measurements, requires entities to disclose new information, and modifies existing disclosure requirements. The new guidance is effective after December 15, 2019. We do not believe this change has a material effect on our consolidated financial statements and disclosures.

 

17

 

 

Note 3. Investments

 

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

 

   As of March 31, 2020 
   Amortized Cost   Percentage of
Total Portfolio		   Fair Value   Percentage of
Total Portfolio		 
First Lien Senior Secured Loans  $2,283,074    87.0%  $2,178,825    87.7%
First Lien Last Out Loans   16,821    0.6    16,258    0.6 
Second Lien Senior Secured Loans   187,660    7.2    153,050    6.2 
Subordinated Debt   14,763    0.6    15,000    0.6 
Equity Interests   103,332    3.9    99,867    4.0 
Preferred Equity   19,584    0.7    21,533    0.9 
Warrants   —    0.0    —    0.0 
Total  $2,625,234    100.0%  $2,484,533    100.0%

 

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

 

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

 

 

 

18

 

 

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

 

   As of March 31, 2020 
   Amortized Cost   Percentage of
Total Portfolio		   Fair Value   Percentage of
Total Portfolio		 
United States  $2,210,354    84.2%  $2,087,323    84.0%
United Kingdom   125,106    4.8    117,732    4.7 
Cayman Islands   63,602    2.4    64,367    2.6 
Luxembourg   56,293    2.1    53,484    2.2 
Israel   39,017    1.5    38,867    1.6 
Germany   38,651    1.5    38,275    1.5 
Ireland   20,509    0.8    19,794    0.8 
Sweden   18,364    0.7    15,245    0.6 
Jersey   14,942    0.6    14,621    0.6 
France   13,105    0.5    12,223    0.5 
Australia   14,018    0.5    12,048    0.5 
Netherlands   11,273    0.4    10,554    0.4 
Total  $2,625,234    100.0%  $2,484,533    100.0%

 

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

 

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

 

19

 

 

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

 

   As of March 31, 2020 
   Amortized Cost   Percentage of
Total Portfolio		   Fair Value   Percentage of
Total Portfolio		 
High Tech Industries  $393,219    15.0%  $378,539    15.2%
Aerospace & Defense   319,706    12.2    306,957    12.4 
Healthcare & Pharmaceuticals   225,606    8.6    209,603    8.4 
Consumer Goods: Non-Durable   211,887    8.1    206,863    8.3 
Capital Equipment   188,172    7.2    185,100    7.5 
Services: Business   198,438    7.6    182,645    7.4 
Transportation: Cargo   117,045    4.5    113,471    4.6 
Construction & Building   109,634    4.2    106,754    4.3 
Wholesale   80,575    3.1    73,846    3.0 
Energy: Oil & Gas   80,603    3.1    72,177    2.9 
Automotive   69,217    2.6    67,997    2.7 
Consumer Goods: Durable   67,532    2.6    65,370    2.6 
Transportation: Consumer   69,696    2.6    61,343    2.4 
FIRE: Insurance (1)   58,540    2.2    56,203    2.3 
Media: Advertising, Printing & Publishing   59,762    2.3    52,736    2.1 
Hotel, Gaming & Leisure   53,022    2.0    46,867    1.9 
Media: Broadcasting & Subscription   43,199    1.6    43,162    1.7 
Media: Diversified & Production   37,920    1.4    36,777    1.5 
Chemicals, Plastics & Rubber   33,702    1.3    33,327    1.3 
Retail   32,289    1.2    32,125    1.3 
Services: Consumer   30,479    1.2    27,168    1.1 
Telecommunications   21,850    0.8    20,879    0.8 
Energy: Electricity   22,124    0.8    20,784    0.8 
Environmental Industries   16,821    0.6    16,258    0.7 
FIRE: Finance (1)   14,865    0.6    14,857    0.6 
Banking   15,340    0.6    14,388    0.6 
Containers, Packaging & Glass   11,642    0.4    11,485    0.5 
FIRE: Real Estate (1)   10,805    0.4    10,024    0.4 
Beverage, Food & Tobacco   21,235    0.8    9,461    0.4 
Forest Products & Paper   10,309    0.4    7,367    0.3 
Total  $2,625,234    100.0%  $2,484,533    100.0%

 

 

 

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

 

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

 

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

 

 

 

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

 

20

 

 

Antares Bain Capital Complete Financing Solution

 

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

 

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

 

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

 

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

 

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

 

Below is selected statements of operations information for the three months ended March 31, 2019:

 

Selected Statements of Operations Information

 

  For the Three Months Ended 
    March 31, 2019 
Interest Income   $38,911 
Fee income    188 
Total revenues    39,099 
Credit facility expenses (1)    16,260 
Other fees and expenses    5,066 
Total expenses    21,326 
Net investment income    17,773 
Net increase in members’ capital from operations   $17,773 

 

 

(1)   As of March 31, 2019 the ABCS Facility had $1,243.4 million of outstanding debt.

 

21

 

 

 

Note 4. Fair Value Measurements

 

Fair Value Disclosures

 

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

 

   Fair Value Measurements 
   Level 1   Level 2   Level 3   Total 
Investments:                    
First Lien Senior Secured Loans  $—   $99,546   $2,079,279   $2,178,825 
First Lien Last Out Loans   —    —    16,258    16,258 
Second Lien Senior Secured Loans   —    31,687    121,363    153,050 
Subordinated Debt   —    —    15,000    15,000 
Equity Interests   —    —    99,867    99,867 
Preferred Equity   —    —    21,533    21,533 
Warrants   —    —    —    — 
Total Investments  $—   $131,233   $2,353,300   $2,484,533 
Cash equivalents  $41,168   $—   $—   $41,168 
Forward currency exchange contracts (asset)  $—   $12,903   $—   $12,903 

 

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

 

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

 

 

 

The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the three months ended March 31, 2020:

 

   First Lien
Senior Secured
Loans		   First Lien
Last Out
Loans		   Second Lien
Senior Secured
Loans		   Subordinated
Debt		   Equity
Interest		   Preferred
Equity		   Warrants   Total
Investments		 
Balance as of January 1, 2020  $1,989,621   $29,300   $124,027   $15,000   $99,293   $24,318   $122   $2,281,681 
Purchases of investments and other adjustments to cost   269,337    116    —    —    6,594    —    –     276,047 
Paid-in-kind interest   126    —    —    —    —    33    —    159 
Net accretion of discounts (amortization of premiums)   1,019    11    90    11    —    —    —    1,131 
Proceeds from principal repayments and sales of investments   (130,432)   (11,622)   —    —    —    —    —    (142,054)
Net change in unrealized depreciation on investments   (81,952)   (1,547)   (13,762)   (11)   (6,020)   (2,818)   (122)   (106,232)
Net realized losses on investments   (571)   —    —    —    —    —    —    (571)
Transfers out of Level 3   (63,815)   —    (2,735)   —    —    —    —    (66,550)
Transfers to Level 3   95,946    —    13,743    —    —    —    —    109,689 
Balance as of March 31, 2020  $2,079,279   $16,258   $121,363   $15,000   $99,867   $21,533   $—   $2,353,300 
Change in unrealized depreciation attributable to investments still held at March 31, 2020  $(80,065)  $(1,361)  $(13,762)  $(11)  $(6,020)  $(2,818)  $(122)  $(104,159)

 

22

 

 

Transfers between levels, if any, are recognized at the beginning of the quarter in which transfers occur. For the three months ended March 31, 2020, transfers from Level 2 to Level 3 were primarily due to decreased price transparency. For the three months ended March 31, 2020, transfers from Level 3 to Level 2 were primarily due to increased price transparency.

 

The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the three months ended March 31, 2019:

 

   First Lien
Senior Secured
Loans		   First Lien
Last Out
Loans		   Second Lien
Senior Secured
Loans		   Subordinated
Debt		   Investment
Vehicles (1)		   Equity
Interest		   Preferred
Equity		   Warrants   Total
Investments		 
Balance as of January 1, 2019  $439,487   $27,487   $145,555   $39,625   $279,363   $26,521   $2,807   $—   $960,845 
Purchases of investments and other adjustments to cost   112,743    307    20,096    —    51,467    —    4,722         189,335 
Paid-in-kind interest   —    86    —    —    —    —    15    —    101 
Net accretion of discounts (amortization of premiums)   371    27    87    17    —    —    —    —    502 
Proceeds from principal repayments and sales of investments   (63,507)   (56)   (32,659)   —    —    —    —    —    (96,222)
Net change in unrealized appreciation (depreciation) on investments   (474)   515    1,047    (17)   4,521    9    152    120    5,873 
Net realized gains (losses) on investments   (137)   —    270    —    —    —    —    —    133 
Transfers out of Level 3   (71,418)   —    (17,384)   —    —    —    —    —    (88,802)
Transfers to Level 3   114,580    —    2,544    —    —    —    —    —    117,124 
Balance as of March 31, 2019  $531,645   $28,366   $119,556   $39,625   $335,351   $26,530   $7,696   $120   $1,088,889 
Change in unrealized appreciation (depreciation) attributable to investments still held at March 31, 2019  $(839)  $515   $1,047   $(17)  $4,521   $9    $152,   $120   $5,508 

 

 

(1)       Represents equity investment in ABCS.

 

Transfers between levels, if any, are recognized at the beginning of the quarter in which transfers occur. For the three months ended March 31, 2019, transfers from Level 2 to Level 3 were primarily due to decreased price transparency. For the three months ended March 31, 2019, transfers from Level 3 to Level 2 was primarily due to increased price transparency.

 

Significant Unobservable Inputs

 

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

 

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

 

   As of March 31, 2020 
   Fair Value
of Level 3 Assets (1)		   Valuation
Technique		  Significant
Unobservable
Inputs		  Range of Significant
Unobservable Inputs
(Weighted Average (2))		 
First Lien Senior Secured Loans  $1,926,143   Discounted Cash Flows  Comparative Yields   5.6%-14.2% (8.2%) 
First Lien Senior Secured Loans   36,937   Collateral Analysis  Recovery Rate   100.0%
First Lien Last Out   16,258   Discounted Cash Flows  Comparative Yields   13.0%
Second Lien Senior Secured Loans   114,147   Discounted Cash Flows  Comparative Yields   8.4%-21.6% (13.5%) 
Subordinated Debt   15,000   Discounted Cash Flows  Comparative Yields   13.4%
Equity Interest   21,138   Comparable Company Multiple  EBITDA Multiple   6.0x-19.0x (10.0x) 
Equity Interest   78,729   Discounted Cash Flows  Discount Rate   10.0%-15.8% (14.7%) 
Preferred Equity   21,533   Comparable Company Multiple  EBITDA Multiple   6.0x-11.8x (9.3x) 
Warrants   –    Comparable Company Multiple  EBITDA Multiple   6.0x  
Total investments  $2,229,885            
                 

 

(1)Included within the Level 3 assets of $2,353,300 is an amount of $123,415 for which the Advisor did not develop the unobservable inputs for the determination of fair value (examples include single source quotation and prior or pending transactions).
(2)Weighted average is calculated by weighing the significant unobservable input by the relative fair value of each investment in the category.

 

23

 

 

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

 

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

 

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

 

(1)Included within the Level 3 assets of $2,281,681 is an amount of $548,099 for which the Advisor did not develop the unobservable inputs for the determination of fair value (examples include single source quotation and prior or pending transactions).
(2)Weighted average is calculated by weighing the significant unobservable input by the relative fair value of each investment in the category.

 

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

 

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

 

24

 

 

 

Note 5. Related Party Transactions

 

Investment Advisory Agreement

 

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

 

Base Management Fee

 

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

 

The Advisor, however, contractually waived its right to receive the Base Management Fee in excess of 0.75% of the aggregate gross assets excluding cash (including capital drawn to pay the Company’s expenses) during any period prior to the IPO. Additionally, for the period from the date of the IPO through December 31, 2019, the Advisor voluntarily waived its right to receive the Base Management Fee in excess of 0.75%. The Advisor was not permitted to recoup any waived amounts. In certain previous filings, management fees were presented on a net basis.

 

For the three months ended March 31, 2020 and 2019 management fees were $8.7 million and $6.8 million, respectively. For the three months ended March 31, 2020, $0.0 million was contractually waived and $0.0 million was voluntarily waived. For the three months ended March 31, 2019, $0.0 million was contractually waived and $2.3 million was voluntarily waived.

 

As of March 31, 2020 and December 31, 2019, $16.0 million and $7.3 million remained payable, respectively.

 

Incentive Fee

 

For the periods ended March 31, 2020 and 2019, the incentive fee consists of two parts that are determined independently of each other such that one component may be payable even if the other is not.

 

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

 

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

 

Incentive Fee on Pre-Incentive Fee Net Investment Income

 

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

 

25

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Incentive Fee Cap

 

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

 

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

 

26

 

 

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

 

For the three months ended March 31, 2020 and 2019, the Company incurred $0.0 million and $4.1 million, respectively, of income incentive fees (before waivers), which are included in incentive fees on the consolidated statements of operations. The Advisor has voluntarily waived $0.0 million and $2.0 million, respectively, of the income incentive fees earned by the Advisor during the three months ended March 31, 2020 and 2019. Such income incentive fee waiver is irrevocable and such waived income incentive fees will not be subject to recoupment in future periods. This income incentive fee waiver does not impact any income incentive fees earned by the Advisor in future periods.

 

There was no income incentive or income incentive fee waivers for the three months ended March 31, 2020. As a result of the income incentive fee waivers, the Company incurred $2.1 million of income incentive fees (after waivers) for the three months ended March 31, 2019.

 

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

 

Annual Incentive Fee Based on Capital Gains

 

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

 

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

 

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

 

27

 

 

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

 

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

 

Administration Agreement

 

The Company has entered into an administration agreement (the “Administration Agreement”) with the advisor (in such capacity, the “Administrator”), pursuant to which the Administrator will provide the administrative services necessary for us to operate, and the Company will utilize the Administrator’s office facilities, equipment and recordkeeping services. Pursuant to the Administration Agreement, the Administrator has agreed to oversee our public reporting requirements and tax reporting and monitor our expenses and the performance of professional services rendered to us by others. The Administrator has also hired a sub-administrator to assist in the provision of administrative services. The Company will reimburse the Administrator for its costs and expenses and our allocable portion of overhead incurred by it in performing its obligations under the Administration Agreement, including certain compensation paid to or compensatory distributions received by our officers (including our Chief Compliance Officer and Chief Financial Officer) and any of their respective staff who provide services to us, operations staff who provide services to us, and internal audit staff, if any, to the extent internal audit performs a role in our Sarbanes-Oxley internal control assessment. Our allocable portion of overhead will be determined by the Administrator, which expects to use various methodologies such as allocation based on the percentage of time certain individuals devote, on an estimated basis, to the business and affairs of the Company, and will be subject to oversight by the Board. The Company incurred expenses related to the Administrator of $0.0 million and $0.1 million for the three months ended March 31, 2020 and 2019, respectively, which is included in other general and administrative expenses on the consolidated statements of operations. As of March 31, 2020 and December 31, 2019, there were no outstanding expenses related to the Administrator that were payable and included in “accounts payable and accrued expenses” in the consolidated statements of assets and liabilities. The sub-administrator is paid its compensation for performing its sub-administrative services under the sub-administration agreement. The Company incurred expenses related to the sub-administrator of $0.1 million and $0.2 million for the three months ended March 31, 2020 and 2019, respectively, which is included in other general and administrative expenses on the consolidated statements of operations. The Administrator will not seek reimbursement in the event that any such reimbursements would cause any distributions to our stockholders to constitute a return of capital. In addition, the Administrator is permitted to delegate its duties under the Administration Agreement to affiliates or third parties and the Company will reimburse the expenses of these parties incurred and paid by the Advisor on our behalf.

 

Resource Sharing Agreement

 

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

 

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

 

28

 

 

Co-investments

 

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

 

Revolving Advisor Loan

 

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

 

Related Party Commitments

 

As of March 31, 2020 and December 31, 2019, the Advisor held 389,749.51 and 389,695.20 shares of the Company’s common stock, respectively. An affiliate of the Advisor is the investment manager to certain pooled investment vehicles which are investors in the Company. Collectively, these investors held 9,539,043.66 and 9,539,043.66 shares of the Company at March 31, 2020 and December 31, 2019, respectively.

 

Non-Controlled/Affiliate and Controlled Affiliate Investments

 

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

 

Portfolio Company  Principal/
Par Amount		   Fair Value
as of
December 31,
2019		   Gross
Addition		   Gross
Reductions		   Change in
Unrealized
Gains
(Losses)		   Realized
Gains
(Losses)		   Fair Value
as of
March 31,
2020		   Dividend
and
Interest
Income		   Other
Income		 
Non-Controlled/affiliate investment                                             
ADT Pizza, LLC, Equity Interest (1)  $6,720   $6,720   $—   $—   $—   $—    $6,720   $—   $— 
Total Non-Controlled/affiliate investment  $6,720   $6,720   $—   $—   $—   $—    $6,720   $—   $— 
Controlled affiliate investment                                             
ACC Holdco, LLC, Preferred Equity  $10,828    $10,828   $—   $—   $—   $—    $10,828   $438   $— 
Air Comm Corporation LLC, First Lien Senior Secured Loan   27,229    27,161    32    (69)   (508)   —    26,616    613    — 
BCC Jetstream Holdings Aviation (On II), LLC, Equity Interest   1,116    1,869    —    —    (231)   —    1,638    25    — 
BCC Jetstream Holdings Aviation (On II), LLC, First Lien Senior Secured Loan   6,363    6,363    —    —    —    —    6,363    159    — 
BCC Jetstream Holdings Aviation (Off I), LLC, Equity Interest   11,863    13,091    —    —    (367)   —    12,724    267    — 
Gale Aviation (Offshore) Co, Equity Interest   63,602    57,773    6,594    —    —    —    64,367    1,650    — 
Total Controlled affiliate investment  $121,001   $117,085   $6,626   $(69)  $(1,106)  $—    $122,536   $3,152   $— 
Total  $127,721   $123,805   $6,626   $(69)  $(1,106)  $—    $129,256   $3,152   $— 

 

 

(1)       Non-income producing.

 

29

 

 

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

 

Portfolio Company  Principal/
Par Amount		   Fair Value
as of
December 31,
2018		   Gross
Addition		   Gross
Reductions		   Change in
Unrealized
Gains
(Losses)		   Realized
Gains
(Losses)		   Fair Value
as of
December 31,
2019		   Dividend
and
Interest
Income		   Other
Income		 
Non-Controlled/affiliate investment                                             
ADT Pizza, LLC, Equity Interest (1)  $6,720   $6,720   $—   $—   $—   $—   $6,720   $—   $— 
Total Non-Controlled/affiliate investment  $6,720   $6,720   $—   $—   $—   $—   $6,720   $—   $— 
Controlled affiliate investment                                             
ACC Holdco, LLC, Preferred Equity  $10,828   $—   $11,707   $(882)  $3   $—   $10,828   $955   $4 
Air Comm Corporation LLC, First Lien Senior Secured Loan   27,298    —    26,653    (137)   645    —    27,161    1,266    — 
Antares Bain Capital Complete Financing Solution LLC, Investment Vehicle   —    279,363    1,432    (281,589)   529    265    —    13,875    — 
BCC Jetstream Holdings Aviation (On II), LLC, Equity Interest   1,116    1,243    384    —    242    —    1,869    107    — 
BCC Jetstream Holdings Aviation (On II), LLC, First Lien Senior Secured Loan   6,363    4,163    2,219    (19)   —    —    6,363    543    — 
BCC Jetstream Holdings Aviation (Off I), LLC, Equity Interest   11,863    13,479    —    —    (388)   —    13,091    1,115    — 
Gale Aviation (Offshore) Co, Equity Interest   57,007    —    57,626    (617)   764    —    57,773    627      
Total Controlled affiliate investment  $114,475   $298,248   $100,021   $(283,244)  $1,795   $265   $117,085   $18,488   $4 
Total  $121,195   $304,968   $100,021   $(283,244)  $1,795   $265   $123,805   $18,488   $4 

 

 

(1)       Non-income producing.

 

Note 6. Debt

 

In accordance with applicable SEC staff guidance and interpretations, as a BDC, with certain exceptions, effective February 2, 2019, the Company is permitted to borrow amounts such that its asset coverage ratio is at least 150% after such borrowing (if certain requirements are met), rather than 200%, as previously required. As of March 31, 2020 and December 31, 2019, the Company’s asset coverage ratio based on aggregated borrowings outstanding was 154% and 164%, respectively.

 

30

 

 

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

 

   As of March 31, 2020   As of December 31, 2019 
   Total Aggregate
Principal Amount
Committed		   Principal
Amount
Outstanding		   Carrying
Value (1)		   Total Aggregate
Principal Amount
Committed		   Principal
Amount
Outstanding		   Carrying
Value (1)		 
BCSF Revolving Credit Facility  $500,000   $427,015   $427,015   $500,000   $268,015   $268,015 
2018-1 Notes   365,700    365,700    363,876    365,700    365,700    363,832 
JPM Credit Facility   500,000    449,593    449,593    666,581    546,754    546,754 
2019-1 Debt   398,750    398,750    396,091    398,750    398,750    396,034 
Revolving Advisor Loan   50,000    18,325    18,325    —    —    — 
Total Debt  $1,814,450   $1,659,383   $1,654,900   $1,931,031   $1,579,219   $1,574,635 

 

 

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

 

The combined weighted average interest rate (excluding deferred upfront financing costs and unused fees) of the aggregate borrowings outstanding for the three months ended March 31, 2020 and year ended December 31, 2019 were 4.1% and 4.7%, respectively.

 

The following table shows the contractual maturities of our debt obligations as of March 31, 2020:

 

   Payments Due by Period 
   Total   Less than
1 year		   1 — 3 years   3 — 5 years   More than
5 years		 
BCSF Revolving Credit Facility  $427,015   $50,000   $377,015   $—   $— 
2018-1 Notes   365,700    —    —    —    365,700 
JPM Credit Facility   449,593    50,000    —    399,593    — 
2019-1 Debt   398,750    —    —    —    398,750 
Revolving Advisor Loan   18,325    —    18,325    —    — 
Total Debt Obligations  $1,659,383   $100,000   $395,340   $399,593   $764,450 

 

BCSF Revolving Credit Facility

 

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

 

31

 

 

 

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

 

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

 

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

 

Borrowings under the BCSF Revolving Credit Facility bear interest at LIBOR plus a margin. As of March 31, 2020, the BCSF Revolving Credit Facility was accruing interest expense at a rate of LIBOR plus 3.25%. As of December 31, 2019, the BCSF Revolving Credit Facility was accruing interest expense at a rate of LIBOR plus 2.50%. The Company pays an unused commitment fee of 30 basis points (0.30%) per annum. Interest is payable quarterly in arrears. Any amounts borrowed under the BCSF Revolving Credit Facility, and all accrued and unpaid interest, will be due and payable, on the earliest of: (a) October 5, 2022 and (b) the date upon which all loans shall become due and payable in full, whether by acceleration or otherwise.

 

As of March 31, 2020 and December 31, 2019, there were $427.0 million and $268.0 million borrowings under the BCSF Revolving Credit Facility, respectively, and the Company was in compliance with the terms of the BCSF Revolving Credit Facility.

 

For the three months ended March 31, 2020 and 2019, the components of interest expense related to the BCSF Revolving Credit Facility were as follows:

 

   For the Three Months Ended March 31, 
   2020   2019 
Borrowing interest expense  $4,398   $4,988 
Unused facility fee   94    87 
Amortization of deferred financing costs and upfront commitment fees   266    264 
Total interest and debt financing expenses  $4,758   $5,339 

 

2018-1 Notes

 

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

 

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

 

2018-1 Notes  Principal Amount   Spread above Index  Interest rate at March 31, 2020 
Class A-1 A  $205,900   1.55% + 3 Month LIBOR   3.37%
Class A-1 B   45,000   1.50% + 3 Month LIBOR (first 24 months)   3.32%
        1.80% + 3 Month LIBOR (thereafter)     
Class A-2   55,100   2.15% + 3 Month LIBOR   3.97%
Class B   29,300   3.00% + 3 Month LIBOR   4.82%
Class C   30,400   4.00% + 3 Month LIBOR   5.82%
Total 2018-1 Notes   365,700         
Membership Interests   85,450   Non-interest bearing   Not applicable 
Total  $451,150         

 

32

 

 

The Class A-1 A, A-1 B, A-2, B and C 2018-1 Notes were issued at par and are scheduled to mature on October 20, 2030. The Company received 100% of the membership interests (the “Membership Interests”) in the 2018-1 Issuer in exchange for its sale to the 2018-1 Issuer of the initial closing date loan portfolio. The Membership Interests do not bear interest. As of March 31, 2020, the Company’s Membership Interests are pledged as collateral to the BCSF Revolving Credit Facility.

 

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

 

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

 

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

 

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

 

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

 

As of March 31, 2020, there were 59 first lien and second lien senior secured loans with a total fair value of approximately $415.7 million and cash of $8.9 million securing the 2018-1 Notes. As of December 31, 2019, there were 61 first lien and second lien senior secured loans with a total fair value of approximately $435.8 million and cash of $9.1 million securing the 2018-1 Notes. Assets that are pledged as collateral for the 2018-1 Notes are not directly available to the creditors of the Company to satisfy any obligations of the Company other than the Company’s obligations under the indenture governing the 2018-1 Notes. Such assets are included in the Company’s consolidated financial statements. The creditors of the 2018-1 Issuer have received security interests in such assets and such assets are not intended to be available to the creditors of the Company (or an affiliate of the Company). The 2018-1 Portfolio must meet certain requirements, including asset mix and concentration, term, agency rating, collateral coverage, minimum coupon, minimum spread and sector diversity requirements in the indenture governing the 2018-1 Notes. As of March 31, 2020 and December 31, 2019, the Company was in compliance with its covenants related to the 2018-1 Notes.

 

Costs of $2.1 million were incurred in connection with debt securitization of the 2018-1 Notes by the 2018-1 Issuer which have been recorded as debt issuance costs and presented as a reduction to the outstanding principal amount of the 2018-1 Notes on the consolidated statements of assets and liabilities and are being amortized over the life of the 2018-1 Issuer using the effective interest method. The balance of the unamortized deferred financing costs related to the 2018-1 Issuer was $1.8 million and $1.9 million as of March 31, 2020 and December 31, 2019, respectively.

 

For the three months ended March 31, 2020 and 2019, the components of interest expense related to the 2018-1 Issuer were as follows:

 

   For the Three Months Ended March 31, 
   2020   2019 
Borrowing interest expense  $3,518   $4,238 
Amortization of deferred financing costs and upfront commitment fees   43    43 
Total interest and debt financing expenses  $3,561   $4,281 

 

Citibank Revolving Credit Facility

 

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

 

33

 

 

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

 

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

 

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

 

For the three months ended March 31, 2020 and 2019, the components of interest expense related to the Citibank Revolving Credit Facility were as follows:

 

   For the Three Months Ended March 31, 
   2020   2019 
Borrowing interest expense  $—   $906 
Unused facility fee   —    14 
Amortization of deferred financing costs and upfront commitment fees   —    6 
Total interest and debt financing expenses  $—   $926 

 

JPM Credit Facility

 

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

 

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

 

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

 

34

 

 

The facility amount under the JPM Credit Agreement is $500.0 million. Proceeds of the loans under the JPM Credit Facility may be used to acquire certain qualifying loans and such other uses as permitted under the JPM Credit Agreement. The period from the effective date of the amendment until January 29, 2023 is referred to as the reinvestment period and during such reinvestment period, the Borrower may request drawdowns under the JPM Credit Facility.

 

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

 

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

 

Borrowings under the JPM Credit Facility bear interest at LIBOR plus a margin. As of March 31, 2020, the JPM Credit Facility was accruing interest expense at a rate of LIBOR plus 2.375%. The Company pays an unused commitment fee of between 37.5 basis points (0.375%) and 75 basis points (0.75%) per annum depending on the size of the unused portion of the facility. Interest is payable quarterly in arrears.

 

As of March 31, 2020, there were $449.6 million borrowings under the JPM Credit Facility and we were in compliance with the terms of the JPM Credit Facility.

 

For the three months ended March 31, 2020 and 2019, the components of interest expense related to the JPM Credit Facility were as follows:

 

   For the Three Months Ended March 31, 
   2020   2019 
Borrowing interest expense  $4,924   $— 
Unused facility fee   162    — 
Amortization of deferred financing costs and upfront commitment fees   275    — 
Total interest and debt financing expenses  $5,361   $— 

 

2019-1 Debt

 

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

 

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

 

2019-1 Debt  Principal Amount   Spread above Index  Interest rate at March 31, 2020 
Class A-1L  $50,000   1.70% + 3 Month LIBOR   3.53%
Class A-1   222,500   1.70% + 3 Month LIBOR   3.53%
Class A-2A   50,750   2.70% + 3 Month LIBOR   4.53%
Class A-2B   13,000   4.23% (Fixed)   4.23%
Class B   30,000   3.60% + 3 Month LIBOR   5.43%
Class C   32,500   4.75% + 3 Month LIBOR   6.58%
Total 2019-1 Debt   398,750         
Membership Interests   102,250   Non-interest bearing   Not applicable 
Total  $501,000         

 

The Loans and the Class A-1, A-2A, A-2B, and B Notes were issued at par. The Class C Notes were issued at a discount. The Notes are scheduled to mature on October 15, 2031. The Company received 100% of the membership interests (the “Membership Interests”) in the 2019-1 Issuer in exchange for its sale to the 2019-1 Issuer of the initial closing date loan portfolio. The Membership Interests do not bear interest. As of March 31, 2020, the Company’s Membership Interests are pledged as collateral to the BCSF Revolving Credit Facility.

 

35

 

 

 

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

 

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

 

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

 

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

 

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

 

As of March 31, 2020, there were 66 first lien and second lien senior secured loans with a total fair value of approximately $458.7 million and cash of $9.8 million securing the 2019-1 Debt. As of December 31, 2019, there were 65 first lien and second lien senior secured loans with a total fair value of approximately $471.3 million and cash of $22.4 million securing the 2019-1 Notes. Assets that are pledged as collateral for the 2019-1 Debt are not directly available to the creditors of the Company to satisfy any obligations of the Company other than the Company’s obligations under the indenture and loan agreement governing the 2019-1 Debt. The creditors of the 2019-1 Co-Issuers have received security interests in such assets and such assets are not intended to be available to the creditors of the Company (or an affiliate of the Company). The 2019-1 Portfolio must meet certain requirements, including asset mix and concentration, term, agency rating, collateral coverage, minimum coupon, minimum spread and sector diversity requirements in the indenture and loan agreement governing the 2019-1 Debt. As of March 31, 2020, the Company was in compliance with its covenants related to the 2019-1 Debt.

 

Costs of the offering, including the discount of the Class C Notes, of $2.8 million were incurred in connection with debt securitization of the 2019-1 Debt by the 2019-1 Co-Issuers which have been recorded as debt issuance costs and presented as a reduction to the outstanding principal amount of the 2019-1 Debt on the consolidated statements of assets and liabilities and are being amortized over the life of the 2019-1 Issuer using the effective interest method. The balance of the unamortized deferred financing costs related to the 2019-1 Issuer was $2.7 million as of March 31, 2020. The 2019-1 issuer was not in existence as of March 31, 2019 and the 2019-1 Debt were not outstanding.

 

36

 

 

For the three months ended March 31, 2020 and 2019, the components of interest expense related to the 2019-1 Co-Issuers were as follows:

 

   For the Three Months Ended March 31, 
   2020   2019 
Borrowing interest expense  $4,137   $— 
Amortization of deferred financing costs and upfront commitment fees   57    — 
Total interest and debt financing expenses  $4,194   $— 

 

Revolving Advisor Loan

 

On March 27, 2020, the Company entered into an unsecured revolving loan agreement (the “Revolving Advisor Loan”) with BCSF Advisors, LP, the investment adviser of the Company. The Revolving Advisor Loan has a maximum credit limit of $50.0 million and a maturity date of March 27, 2023. The Revolving Advisor Loan accrues interest at the Applicable Federal Rate from the date of such loan until the loan is repaid in full. The Applicable Federal Rate as of March 31, 2020 was 1.59%. As of March 31, 2020, there were $18.3 million borrowings under the Revolving Advisor Loan.

 

For the three months ended March 31, 2020 and 2019, the components of interest expense related to the Revolving Advisor Loan were as follows:

 

   For the Three Months Ended March 31, 
   2020   2019 
Borrowing interest expense  $2   $— 
           
Total interest and debt financing expenses  $2   $— 

 

Note 7. Derivatives

 

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

 

The Company may enter into forward currency exchange contracts to reduce the Company’s exposure to foreign currency exchange rate fluctuations in the value of foreign currencies, as described in Note 2. The fair value of derivative contracts open as of March 31, 2020 and December 31, 2019 is included on the consolidated schedule of investments by contract. The Company had collateral receivable of $0.4 million and collateral payable of $0.5 million for March 31, 2020 and collateral payable of $0.3 million for December 31, 2019 with the counterparties on foreign currency exchange contracts. Collateral amounts posted are included in collateral on forward currency exchange contracts on the consolidated statements of assets and liabilities. Collateral payable is included in collateral payable on forward currency exchange contracts on the consolidated statements of assets and liabilities.

 

37

 

 

For the three months ended March 31, 2020, the Company’s average U.S. dollar notional exposure to forward currency exchange contracts was $245.4 million. For the three months ended March 31, 2019, the Company’s average U.S. dollar notional exposure to forward currency exchange contracts was $128.0 million.

 

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

 

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

 

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

 

Counterparty  Account in the
consolidated
statements of
assets and liabilities		  Gross amount of
assets on the
consolidated
statements of
assets and liabilities		   Gross amount of
(liabilities) on the
consolidated
statements of
assets and liabilities		   Net amount of assets or
(liabilities) presented on
the consolidated
statements of
assets and liabilities		   Cash Collateral
paid
(received) (1)		   Net
Amounts (2)		 
Bank of
New York		  Unrealized appreciation on forward currency contracts  $1,128   $—   $1,128   $(471)  $657 
Citibank  Unrealized appreciation on forward currency contracts  $240   $—   $240   $—   $240 
Goldman
Sachs		  Unrealized appreciation on forward currency contracts  $11,535   $—   $11,535   $—   $11,535 

 

 

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

 

38

 

 

 

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

 

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

 

 

 

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

 

The effect of transactions in derivative instruments to the consolidated statements of operations during the three months ended March 31, 2020 and 2019 was as follows:

 

   For the Three Months Ended March 31, 
   2020   2019 
Net realized gain on forward currency exchange contracts  $1,505   $3,633 
Net change in unrealized appreciation on forward currency exchange contracts   13,121    (3,283)
Total net realized and unrealized gains on forward currency exchange contracts  $14,626   $350 

 

Included in total net gains (losses) on the consolidated statements of operations is net gains (losses) of ($13.6) million and $0.5 million related to realized and unrealized gains and losses on investments, foreign currency holdings and non-investment assets and liabilities attributable to the changes in foreign currency exchange rates for the three months ended March 31, 2020 and 2019, respectively. Including the total net realized and unrealized gains (losses) on forward currency exchange contracts of $14.6 million and $0.3 million, respectively, included in the above table, the net impact of foreign currency on total net gains (losses) on the consolidated statements of operations is $1.0 million and $0.8 million for the three months ended March 31, 2020 and 2019, respectively.

 

Note 8. Distributions

 

The Company’s distributions are recorded on the record date. The following table summarizes distributions declared during the three months ended March 31, 2020:

 

Date Declared  Record Date  Payment Date  Amount
Per Share		   Total
Distributions		 
February 20, 2020  March 31, 2020  April 30, 2020  $0.41   $21,176 
Total distributions declared        $0.41   $21,176 

 

The distributions declared during the three months ended March 31, 2020 were derived from investment company taxable income and net capital gain, if any.

 

The Company’s distributions are recorded on the record date. The following table summarizes distributions declared during the three months ended March 31, 2019:

 

39

 

 

Date Declared  Record Date  Payment Date  Amount
Per Share		   Total
Distributions		 
February 21, 2019  March 29, 2019  April 12, 2019  $0.41   $21,108 
Total distributions declared        $0.41   $21,108 

 

The distributions declared during the three months ended March 31, 2019 were derived from investment company taxable income and net capital gain, if any.

 

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

 

Note 9. Common Stock/Capital

 

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

 

Prior to the IPO, the Company had issued 43,982,137.46 shares in the private placement of the Company’s common shares (the “Private Offering”). Each investor had entered into a separate subscription agreement relating to the Company’s common stock (the “Subscription Agreements”). Each investor had made a capital commitment to purchase shares of the Company’s common stock pursuant to the Subscription Agreements. Investors were required to make capital contributions to purchase shares of the Company’s common stock each time the Company delivered a drawdown notice, which were delivered at least 10 business days prior to the required funding date in an aggregate amount not to exceed their respective capital commitments. The number of shares to be issued to a stockholder was determined by dividing the total dollar amount of the contribution by a stockholder by the net asset value per share of the common stock as of the last day of the Company’s fiscal quarter or such other date and price per share as determined by the Board in accordance with the requirements of the 1940 Act. As of December 31, 2018, aggregate commitments relating to the Private Offering were $1.3 billion. All outstanding commitments related to these Subscription Agreements were cancelled due to the completion of the IPO on November 15, 2018. As of March 31, 2020 and December 31, 2019, BCSF Advisors, LP contributed in aggregate $7.8 million to the Company and received 389,749.51 shares of the Company and contributed $7.8 million to the Company and received 389,695.20 shares of the Company, respectively. At March 31, 2020 and December 31, 2019, BCSF Advisors, LP owned 0.75% and 0.75%, respectively, of the outstanding common stock of the Company.

 

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

 

For the three months ended March 31, 2020 and 2019, there were no shares issued or shares issued pursuant to the dividend reinvestment plan.

 

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

 

On May 7, 2019, the Company’s Board of Directors authorized the Company to repurchase up to $50 million of its outstanding common stock in accordance with safe harbor rules under the Securities Exchange Act of 1934. Any such repurchases will depend upon market conditions and there is no guarantee that the Company will repurchase any particular number of shares or any shares at all. As of March 31, 2020, there have been no repurchases of common stock.

 

40

 

 

 

Note 10. Commitments and Contingencies

 

Commitments

 

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

 

As of March 31, 2020, the Company had $90.9 million of unfunded commitments under loan and financing agreements as follows:

 

   Expiration Date (1)   Unfunded Commitments (2) 
First Lien Senior Secured Loans          
A&R Logistics, Inc. - Revolver   5/5/2025   $1,155 
Abracon Group Holding, LLC. - Revolver   7/18/2024    2,833 
Allworth Financial Group, L.P. - Revolver   12/31/2025    2,431 
AMI US Holdings Inc. - Revolver   4/1/2024    140 
Amspec Services, Inc. - Revolver   7/2/2024    113 
Ansira Holdings, Inc. - Delayed Draw   12/20/2022    1,509 
AP Plastics Group, LLC - Revolver   8/2/2021    1,417 
Appriss Holdings, Inc. - Revolver   5/30/2025    2,383 
Aramsco, Inc. - Revolver   8/28/2024    1,581 
Batteries Plus Holding Corporation - Revolver   7/6/2022    710 
Captain D's LLC - Revolver   12/15/2023    485 
CMI Marketing Inc. - Revolver   5/24/2023    704 
Cruz Bay Publishing, Inc. - Delayed Draw   5/4/2020    1,098 
CST Buyer Company - Revolver   10/3/2025    876 
Direct Travel, Inc. - Delayed Draw   12/1/2021    7,030 
Dorner Manufacturing Corp - Revolver   3/15/2022    1,099 
Efficient Collaborative Retail Marketing Company, LLC - Revolver   6/15/2022    1,275 
Element Buyer, Inc. - Delayed Draw   7/18/2025    2,267 
Grammer Purchaser, Inc. - Revolver   9/30/2024    683 
Green Street Parent, LLC - Revolver   8/27/2025    1,210 
Hightower Holding, LLC - Delayed Draw   1/31/2025    6,640 
Horizon Telcom, Inc. - Delayed Draw   6/15/2023    806 
Ivy Finco Limited - First Lien Senior Secured Loan   5/19/2025    2,746 
JHCC Holdings, LLC - Delayed Draw   9/9/2025    6,262 
JHCC Holdings, LLC - Revolver   9/9/2025    2,463 
Kellstrom Commercial Aerospace, Inc. - Delayed Draw   7/1/2025    3,838 
Margaux Acquisition Inc. - Delayed Draw   12/19/2024    7,139 
Margaux UK Finance Limited - Revolver   12/19/2024    4 
MRI Software LLC - Delayed Draw   2/10/2026    3,906 
MRI Software LLC - Revolver   2/10/2026    891 
Profile Products LLC - Revolver   12/20/2024    1,150 
Refine Intermediate, Inc. - Revolver   9/3/2026    4,450 
Solaray, LLC - Revolver   9/9/2022    623 
Tidel Engineering, L.P. - Revolver   3/1/2023    1,417 
TLC Purchaser, Inc. - Delayed Draw   10/13/2025    7,119 
TLC Purchaser, Inc. - Revolver   10/13/2025    1,068 
Ventiv Holdco, Inc. - Revolver   9/3/2025    2,981 
Whitcraft LLC - Revolver   4/3/2023    362 
WU Holdco, Inc. - Revolver   3/26/2025    26 
YLG Holdings, Inc. - Delayed Draw   10/31/2025    5,127 
YLG Holdings, Inc. - Revolver   10/31/2025    855 
Total First Lien Senior Secured Loans       $90,872 

 

 

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

 

41

 

 

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

 

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

 

 

 

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

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

 

42

 

 

Contingencies

 

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

 

Note 11. Financial Highlights

 

The following is a schedule of financial highlights for the three months ended March 31, 2020 and 2019:

 

   For The Three Months Ended March 31, 
   2020   2019 
Per share data:          
Net asset value at beginning of period  $19.72   $19.46 
Net investment income (1)   0.44    0.41 
Net realized gain (loss) (1)(7)   (0.18)   0.05 
Net change in unrealized appreciation (depreciation)  (1)(2)(8)   (2.28)   0.30 
Net increase (decrease) in net assets resulting from operations (1)(9)(10)   (2.02)   0.76 
Stockholder distributions from income (3)   (0.41)   (0.41)
Net asset value at end of period  $17.29   $19.81 
           
Net assets at end of period  $892,777   $1,019,834 
Shares outstanding at end of period   51,649,812.27    51,482,137.46 
Per share market value at end of period  $9.27   $19.30 
Total return based on market value (12)   (51.01)%   17.47%
Total return based on net asset value (4)   (10.24)%   3.91%
Ratios:          
Ratio of net investment income to average net assets (5)(11)(13)   8.90%   8.55%
Ratio of total net expenses to average net assets (5)(11)(13)   11.47%   7.59%
Supplemental data:          
Ratio of interest and debt financing expenses to average net assets (5)(13)   7.07%   4.27%
Ratio of expenses (without incentive fees) to average net assets (5)(11)(13)   11.47%   7.38%
Ratio of incentive fees and management fees, net of contractual and voluntary waivers, to average net assets (5)(11)(13)   3.45%   2.72%
Average principal debt outstanding  $1,581,868   $833,999 
Portfolio turnover (6)   7.21%   10.81%

 

 

 

(1)The per share data was derived by using the weighted average shares outstanding during the period.
(2)Net change in unrealized appreciation (depreciation) on investments per share may not be consistent with the consolidated statements of operations due to the timing of shareholder transactions.
(3)The per share data for distributions reflects the actual amount of distributions declared during the period.
(4)Total return based on net asset value is calculated as the change in net asset value per share during the period, assuming dividends and distributions, including those distributions that have been declared. Total return has not been annualized.
(5)The computation of average net assets during the period is based on averaging net assets for the periods reported.
(6)Portfolio turnover rate is calculated using the lesser of year-to-date sales or year-to-date purchases over the average of the invested assets at fair value for the periods reported.
(7)Net realized gain (loss) includes net realized gain (loss) on investments, net realized gain (loss) on forward currency exchange contracts and net realized gain (loss) on foreign currency transactions.
(8)Net change in unrealized appreciation (depreciation) includes net change in unrealized appreciation (depreciation) on investments, net change in unrealized appreciation (depreciation) on forward currency exchange contracts and net change in unrealized appreciation (depreciation) on foreign currency translation.
(9)The sum of quarterly per share amounts presented in previously filed financial statements on Form 10-Q may not equal earnings per share. This is due to changes in the number of weighted average shares outstanding and the effects of rounding.
(10)Net increase in net assets resulting from operations per share in these financial highlights may be different from the net increase in net assets per share on the consolidated statements of operations due to changes in the number of weighted average shares outstanding and the effects of rounding.
(11)The ratio of voluntary incentive fee waiver to average net assets was 0.00% and (0.20%) for the three months ended March 31, 2020 and 2019, respectively (Note 5). The ratio of voluntary management fee waiver to average net assets was 0.00% and (0.22%) for the three months ended March 31, 2020 and 2019, respectively (Note 5). The ratio of net investment income without the voluntary incentive fee waiver and voluntary management fee waiver to average net assets for the three months ended March 31, 2020 would be 8.90%. The ratio of net investment income without the voluntary incentive fee waiver to average net assets for the three months ended March 31, 2019 would be 8.13%. The ratio of total expenses without the voluntary incentive fee waiver and voluntary management fee waiver to average net assets for the three months ended March 31, 2020 would be 11.47%. The ratio of total expenses without the voluntary incentive fee waiver to average net assets for the three months ended March 31, 2019 would be 8.02%.
(12)Total return based on market value (not annualized) is calculated as the change in market value per share during the period, assuming dividends and distributions, plus the declared distributions, divided by the beginning market price for the period. Total return has not been annualized.
(13)Ratio is annualized. Incentive fees, voluntary incentive fee waivers, and voluntary management fee waivers, if any, included within the ratio are not annualized.

 

43

 

 

 

Note 12. Subsequent Events

 

On May 4, 2020, the Company's Board of Directors approved a transferable subscription rights offering to our stockholders of record as of May 13, 2020. The rights will entitle record stockholders to subscribe for up to an aggregate of 12,912,453 shares of our common stock at an estimated price per share of $9.46. Record stockholders will receive one right for each share of common stock owned on the record date. The rights will entitle the holders to purchase one new share of common stock for every four rights held, and record stockholders who fully exercise their rights will be entitled to subscribe, subject to certain limitations and allotment, for additional shares that remain unsubscribed as a result of any unexercised rights. The rights are transferable and we have applied to list the rights on the New York Stock Exchange under the symbol “BCSF RT”. Our Board has determined that it is in the best interest of the Company and its stockholders to raise additional equity capital, via the rights offering, to (i) repay outstanding indebtedness, including indebtedness under the BCSF Revolving Credit Facility and the JPM Credit Facility, in an aggregate amount equal to at least $100 million, in order to continue to maintain an appropriate level of debt in a challenging market environment, (ii) support our existing portfolio companies, particularly in light of current market conditions, and (iii) make opportunistic investments, in accordance with our investment objectives and policies, in assets that the Advisor believes have become undervalued due to the current extreme market volatility, and on more attractive terms than we would otherwise be able to obtain under typical, less volatile market conditions.

 

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

 

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

 

Overview

 

Bain Capital Specialty Finance, Inc. (the “Company”, “we”, “our” and “us”) is an externally managed specialty finance company focused on lending to middle market companies. We have elected to be regulated as a business development company (a “BDC”) under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the “1940 Act”). We are managed by BCSF Advisors, LP (our “Advisor” or “BCSF Advisors”), a subsidiary of Bain Capital Credit, LP (“Bain Capital Credit”). Our Advisor is registered as an investment adviser with the SEC under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). Our Advisor also provides the administrative services necessary for us to operate (in such capacity, our “Administrator” or “BCSF Advisors”). Since we commenced operations on October 13, 2016 through March 31, 2020, we have invested approximately $3.7 billion in aggregate principal amount of debt and equity investments prior to any subsequent exits or repayments. We seek to generate current income and, to a lesser extent, capital appreciation through direct originations of secured debt, including first lien, first lien/last-out, unitranche and second lien debt, investments in strategic joint ventures, equity investments and, to a lesser extent, corporate bonds.

  

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

 

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

 

Investments

 

Our level of investment activity may vary substantially from period to period depending on many factors, including the amount of debt and equity capital available to middle-market companies, the level of merger and acquisition activity for such companies, the level of investment and capital expenditures of such companies, the general economic environment, the amount of capital we have available to us and the competitive environment for the type of investments we make. Due to the impact of COVID-19 and related measures taken to contain its spread, investment activity for the first quarter of 2020 was focused primarily on meeting undrawn commitments from existing portfolio companies and, to a lesser extent, opportunistically pursuing investments made available or potentially more attractively priced as a result of market disruptions. The future duration and breadth of the adverse impact of COVID-19 on the broader markets in which the Company invests cannot currently be accurately predicted and future investment activity of the Company will be subject to these effects and the related uncertainty.

 

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

 

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

 

44

 

 

Revenues

 

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

 

Our debt investment portfolio consists of primarily floating rate loans. As of March 31, 2020 and December 31, 2019, 99.7% and 99.0%, respectively, of our debt investments, based on fair value, bore interest at floating rates, which may be subject to interest rate floors. Variable-rate investments subject to a floor generally reset periodically to the applicable floor, only if the floor exceeds the index. Trends in base interest rates, such as LIBOR, may affect our net investment income over the long term. In addition, our results may vary from period to period depending on the interest rates of new investments made during the period compared to investments that were sold or repaid during the period; these results reflect the characteristics of the particular portfolio companies that we invested in or exited during the period and not necessarily any trends in our business or macroeconomic trends.

 

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

 

Expenses

 

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

 

·our operational and organizational cost;

 

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

 

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

 

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

 

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

 

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

 

·the base management fee and any incentive fee;

 

·distributions on our common stock;

 

·transfer agent and custody fees and expenses;

 

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

 

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

 

·brokerage fees and commissions;

 

·federal and state registration fees;

 

·U.S. federal, state and local taxes;

 

45

 

 

·Independent Director fees and expenses;

 

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

 

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

 

·costs of holding stockholder meetings;

 

·our fidelity bond;

 

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

 

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

 

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

 

·fees and expenses associated with marketing efforts;

 

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

 

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

 

To the extent that expenses to be borne by us are paid by BCSF Advisors, we will generally reimburse BCSF Advisors for such expenses. To the extent the Administrator outsources any of its functions, the Company will pay the fees associated with such functions on a direct basis without profit to the Administrator. We will also reimburse the Administrator for its costs and expenses and our allocable portion of overhead incurred by it in performing its obligations under the Administration Agreement, including certain rent and compensation paid to or compensatory distributions received by our officers (including our Chief Compliance Officer and Chief Financial Officer) and any of their respective staff who provide services to us, operations staff who provide services to us, internal audit staff, if any, to the extent internal audit performs a role in our Sarbanes-Oxley internal control assessment and fees paid to third-party providers for goods or services. Our allocable portion of overhead will be determined by the Administrator, which expects to use various methodologies such as allocation based on the percentage of time certain individuals devote, on an estimated basis, to our business and affairs, and will be subject to oversight by our Board of Directors (our “Board”). We incurred expenses related to the Administrator of $0.0 million and $0.1 million for the three months ended March 31, 2020 and 2019, respectively, which is included in other general and administrative expenses on the consolidated statements of operations. The sub-administrator is paid its compensation for performing its sub-administrative services under the sub-administration agreement. We incurred expenses related to the sub-administrator of $0.1 million and $0.2 million for the three months ended March 31, 2020 and 2019, respectively, which is included in other general and administrative expenses on the consolidated statements of operations. BCSF Advisors will not be reimbursed to the extent that such reimbursements would cause any distributions to our stockholders to constitute a return of capital. All of the foregoing expenses are ultimately borne by our stockholders.

 

Leverage

 

We may borrow money from time to time. However, our ability to incur indebtedness (including by issuing preferred stock), as of March 31, 2020, is limited by applicable regulations such that our asset coverage, as defined in the 1940 Act, must equal at least 150%. In determining whether to borrow money, we will analyze the maturity, covenant package and rate structure of the proposed borrowings as well as the risks of such borrowings compared to our investment outlook.

 

Impact of COVID-19

 

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

 

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

 

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

 

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

 

The Company experienced a significant reduction in our net asset value as of March 31, 2020 as compared to our net asset value as of December 31, 2019. The significant decrease is primarily the result of the impact of the COVID-19 pandemic. During the three months ended March 31, 2020, the Company had significant net losses driven by unrealized depreciation across the fair value of the Company’s investments due to spread widening.

 

The decline in value of the Company’s net asset value, together, with the new fundings of draw requests on revolving credit and delayed draw facilities, caused the Company’s asset coverage to decrease as of March 31, 2020 as compared to our asset coverage as of December 31, 2019. As of March 31, 2020, we are permitted under the 1940 Act, as a BDC, to borrow amounts such that our asset coverage, as defined in the 1940 Act, must equal at least 150% immediately after each time we incur indebtedness. As of March 31, 2020, the Company’s asset coverage was 154%.

 

As of March 31, 2020, the Company was in compliance with its asset coverage requirements under the 1940 Act. In addition, the Company was in compliance with all financial covenants within its credit facilities as of March 31, 2020. However, any continued increase in realized or unrealized depreciation of our investment portfolio or further significant reductions in our net asset value as a result of the effects of the COVID-19 pandemic or otherwise increase the risk of breaching the relevant covenants and requirements. Any breach of these requirements may adversely affect the Company's access to sufficient debt and equity capital. The effects of the COVID-19 pandemic may also cause the Company to limit distributions.

 

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

 

Portfolio and Investment Activity

 

During the three months ended March 31, 2020, we invested $276.3 million, including PIK, in 52 portfolio companies, and had $180.7 million in aggregate amount of principal repayments and sales, resulting in a net increase in investments of $95.6 million for the period. Of the $276.3 million invested during the three months ended March 31, 2020, $165.4 million was related to drawdowns on delayed draw term loans and revolvers of our portfolio companies.

 

During the three months ended March 31, 2019, we invested $275.6 million, including PIK, in 45 portfolio companies, including ABCS as a single portfolio company, and had $192.2 million in aggregate amount of principal repayments and sales, resulting in a net increase in investments of $83.4 million for the period.

 

46

 

 

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

 

  

As of March 31, 2020

 
                   Weighted Average Yield (1)
at		 
   Amortized Cost   Percentage of
Total Portfolio		   Fair Value   Percentage of
Total Portfolio		   Amortized
Cost		   Market
Value		 
First Lien Senior Secured Loans  $2,283,074    87.0%  $2,178,825    87.7%   6.9%   7.2%
First Lien Last Out Loans   16,821    0.6    16,258    0.6    10.7    11.1 
Second Lien Senior Secured Loans   187,660    7.2    153,050    6.2    9.2    10.8 
Subordinated Debt   14,763    0.6    15,000    0.6    12.7    12.5 
Equity Interests   103,332    3.9    99,867    4.0    10.1    9.9 
Preferred Equity   19,584    0.7    21,533    0.9    15.1    15.0 
Warrants   —    0.0    —    0.0    N/A    N/A 
Total  $2,625,234    100.0%  $2,484,533    100.0%   7.3%   7.6%

 

 

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

 

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

 

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

 

 

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

 

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

 

   As of 
   March 31, 2020 
Number of portfolio companies   108 
Percentage of debt bearing a floating rate (1)   99.7%
Percentage of debt bearing a fixed rate (1)   0.3%

 

 

(1)       Measured on a fair value basis.

 

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

 

   As of 
   December 31, 2019 
Number of portfolio companies   114 
Percentage of debt bearing a floating rate (1)   99.0%
Percentage of debt bearing a fixed rate (1)   1.0%
(1)Measured on a fair value basis.

 

47

 

 

 

 

 

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

 

   As of March 31, 2020 
   Amortized Cost   Percentage at
Amortized Cost		   Fair Value   Percentage at
Fair Value		 
Performing  $2,579,499    98.3%  $2,458,445    98.9%
Non-accrual   45,735    1.7    26,088    1.1 
Total  $2,625,234    100%  $2,484,533    100%

 

 

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

 

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

 

Loans or debt securities are placed on non-accrual status when there is reasonable doubt that principal or interest will be collected. Accrued interest generally is reversed when a loan or debt security is placed on non-accrual status. Interest payments received on non-accrual loans or debt securities may be recognized as income or applied to principal depending upon management’s judgment. Non-accrual loans and debt securities are restored to accrual status when past due principal and interest is paid and, in management’s judgment, are likely to remain current. We may make exceptions to this treatment if the loan has sufficient collateral value and is in the process of collection. As of March 31, 2020, there had been three loans placed on non-accrual in the Company's portfolio and only 1.1% of portfolio, based on fair value, was on non-accrual status. This is compared to two loans on non-accrual as of December 31, 2019 and 0.1% of the portfolio being on non-accrual status.

 

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

 

   As of March 31, 2020 
   Amortized Cost   Percentage of
Total		   Fair Value   Percentage of
Total		 
Cash and cash equivalents  $55,128    2.0%  $55,128    2.2%
Foreign cash   943    0.0    632    0.0 
Restricted cash   18,706    0.7    18,706    0.7 
First Lien Senior Secured Loans   2,283,074    84.6    2,178,825    85.1 
First Lien Last Out Loans   16,821    0.6    16,258    0.6 
Second Lien Senior Secured Loans   187,660    7.0    153,050    6.0 
Subordinated Debt   14,763    0.6    15,000    0.7 
Equity Interests   103,332    3.8    99,867    3.9 
Preferred Equity   19,584    0.7    21,533    0.8 
Warrants   —    0.0    —    0.0 
Total  $2,700,011    100.0%  $2,558,999    100.0%

 

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

 

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

 

48

 

 

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

 

   As of March 31, 2020 
   Amortized Cost   Percentage of
Total Portfolio		   Fair Value   Percentage of
Total Portfolio		 
High Tech Industries  $393,219    15.0%  $378,539    15.2%
Aerospace & Defense   319,706    12.2    306,957    12.4 
Healthcare & Pharmaceuticals   225,606    8.6    209,603    8.4 
Consumer Goods: Non-Durable   211,887    8.1    206,863    8.3 
Capital Equipment   188,172    7.2    185,100    7.5 
Services: Business   198,438    7.6    182,645    7.4 
Transportation: Cargo   117,045    4.5    113,471    4.6 
Construction & Building   109,634    4.2    106,754    4.3 
Wholesale   80,575    3.1    73,846    3.0 
Energy: Oil & Gas   80,603    3.1    72,177    2.9 
Automotive   69,217    2.6    67,997    2.7 
Consumer Goods: Durable   67,532    2.6    65,370    2.6 
Transportation: Consumer   69,696    2.6    61,343    2.4 
FIRE: Insurance (1)   58,540    2.2    56,203    2.3 
Media: Advertising, Printing & Publishing   59,762    2.3    52,736    2.1 
Hotel, Gaming & Leisure   53,022    2.0    46,867    1.9 
Media: Broadcasting & Subscription   43,199    1.6    43,162    1.7 
Media: Diversified & Production   37,920    1.4    36,777    1.5 
Chemicals, Plastics & Rubber   33,702    1.3    33,327    1.3 
Retail   32,289    1.2    32,125    1.3 
Services: Consumer   30,479    1.2    27,168    1.1 
Telecommunications   21,850    0.8    20,879    0.8 
Energy: Electricity   22,124    0.8    20,784    0.8 
Environmental Industries   16,821    0.6    16,258    0.7 
FIRE: Finance (1)   14,865    0.6    14,857    0.6 
Banking   15,340    0.6    14,388    0.6 
Containers, Packaging & Glass   11,642    0.4    11,485    0.5 
FIRE: Real Estate (1)   10,805    0.4    10,024    0.4 
Beverage, Food & Tobacco   21,235    0.8    9,461    0.4 
Forest Products & Paper   10,309    0.4    7,367    0.3 
Total  $2,625,234    100.0%  $2,484,533    100.0%

 

 

 

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

 

49

 

 

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

 

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

 

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

50

 

 

 

 

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

 

   As of March 31, 2020 
Investment Performance Rating  Fair
Value		   Percentage of
Total		   Number of
Companies		   Percentage of
Total		 
1  $15,245    0.6%   1    0.9%
2   2,128,915    85.7    88    81.5 
3   313,896    12.6    17    15.7 
4   26,477    1.1    2    1.9 
Total  $2,484,533    100.0%   108    100.0%

 

 

 

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

 

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

 

We believe that, overall, our portfolio has continued to perform well, with approximately 86% of loans performing at or above expectations. 

 

Antares Bain Capital Complete Financing Solution

 

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

 

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

 

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

 

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

 

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

 

51

 

 

Below is selected statements of operations information for the three months ended March 31, 2019:

 

Selected Statements of Operations Information

 

   For the Three Months Ended 
   March 31, 2019 
Interest Income  $38,911 
Fee income   188 
Total revenues   39,099 
Credit facility expenses (1)   16,260 
Other fees and expenses   5,066 
Total expenses   21,326 
Net investment income   17,773 
Net increase in members’ capital from operations  $17,773 

 

 

 

(1)As of March 31, 2019 the ABCS Facility had $1,243.4 million of outstanding debt.

 

Results of Operations

 

Our operating results for the three months ended March 31, 2020 and 2019 were as follows (dollars in thousands):

 

   For the Three Months Ended March 31, 
   2020   2019 
Total investment income  $51,496   $39,890 
Total expenses, net of fee waivers   28,996    18,647 
Net investment income before taxes   22,500    21,243 
Net investment income after taxes   22,500    21,243 
Net realized gain (loss)   (9,366)   2,789 
Net change in unrealized appreciation (depreciation)   (117,581)   15,281 
Net increase (decrease) in net assets resulting from operations  $(104,447)  $39,313 

 

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

 

Investment Income

 

The composition of our investment income for the three months ended March 31, 2020 and 2019 was as follows (dollars in thousands):

 

   For the Three Months Ended March 31, 
   2020   2019 
Interest income  $48,643   $30,495 
Dividend income   2,413    9,373 
Other income   440    22 
Total investment income  $51,496   $39,890 

 

Interest income from investments, which includes interest and accretion of discounts and fees, increased to $48.6 million for the three months ended March 31, 2020 from $30.5 million for the three months ended March 31, 2019, primarily due to the growth of our investment portfolio and an increase in accelerated unamortized discounts from paydowns. Our investment portfolio at amortized cost increased to $2,625.2 million from $1,836.5 million as of March 31, 2020 and 2019, respectively. Accelerated unamortized discounts from paydowns increased to $1.5 million for the three months ended March 31, 2020 from $0.6 million for the three months ended March 31, 2019. Dividend income decreased to $2.4 million for the three months ended March 31, 2020 from $9.4 million for the three months ended March 31, 2019, primarily due to the closing of the ABCS distribution transaction on April 30, 2019. Other income increased to $0.4 for the three months ended March 31, 2020, primarily due to an increase in amendment fees earned on certain investments and prepayment fees. As of March 31, 2020, the weighted average yield of our investment portfolio at amortized cost decreased to 7.3% from 8.8% as of March 31, 2019.

 

52

 

 

 

 

Operating Expenses

 

The composition of our operating expenses for the three months ended March 31, 2020 and 2019 was as follows (dollars in thousands):

 

   For the Three Months Ended March 31, 
   2020   2019 
Interest and debt financing expenses  $17,876   $10,546 
Base management fee   8,726    6,751 
Incentive fee   —    4,086 
Professional fees   970    550 
Directors fees   175    105 
Other general and administrative expenses   1,249    841 
Total expenses, before fee waivers  $28,996   $22,879 
Base management fee waiver   —    (2,250)
Incentive fee waiver   —    (1,982)
Total expenses, net of fee waivers  $28,996   $18,647 

 

Interest and Debt Financing Expenses

 

Interest and debt financing expenses on our borrowings totaled approximately $17.9 million and $10.5 million for the three months ended March 31, 2020 and 2019, respectively. Interest and debt financing expense for the three months ended March 31, 2020 as compared to March 31, 2019, increased primarily due to higher principal debt balances outstanding on our revolving credit facilities and the issuance of our 2019-1 Debt in August 2019. The weighted average principal debt balance outstanding for the three months ended March 31, 2020 was $1,581.9 million compared to $834.0 million for the three months ended March 31, 2019.

 

The weighted average interest rate (excluding deferred upfront financing costs and unused fees) on our debt outstanding was 4.1% and 4.7% as of March 31, 2020 and December 31, 2019, respectively.

 

Management Fees

 

Management fees (net of waivers) increased to $8.7 million for the three months ended March 31, 2020 from $4.5 million for the three months ended March 31, 2019. Management fees (gross of waivers) increased to $8.7 million for the three months ended March 31, 2020 from $6.8 million for the three months ended March 31, 2019, primarily due to an increase in assets to $2.6 billion as of March 31, 2020 from $2.0 billion as of March 31, 2019. Management fees waived for the three months ended March 31, 2020 and 2019 were $0.0 million and $2.3 million, respectively. As of December 31, 2019, the voluntary management fee waiver related to ABCS has expired.

 

Incentive Fees

 

Incentive fee (net of waivers) decreased to $0.0 million for the three months ended March 31, 2020 from $2.1 million for the three months ended March 31, 2019. The Company did not incur an incentive fee for the three months ended March 31, 2020 due to the Incentive Fee Cap. Incentive fee waivers related to pre-incentive fee net investment income consisted of voluntary waivers of $0.0 million for the three months ended March 31, 2020 and $2.0 million for the three months ended March 31, 2019. For the three months ended March 31, 2020, there were no incentive fees related to the GAAP Incentive Fee.

 

Professional Fees and Other General and Administrative Expenses

 

Professional fees and other general and administrative expenses increased to $2.2 million for the three months ended March 31, 2020 from $1.4 million for the three months ended March 31, 2019, primarily due to an increase in costs associated with servicing our investment portfolio and legal fees.

 

53

 

 

Net Realized and Unrealized Gains and Losses

 

The following table summarizes our net realized and unrealized gains (losses) for the three months ended March 31, 2020 and 2019 (dollars in thousands):

 

   For the Three Months Ended March 31, 
   2020   2019 
Net realized gain on investments  $185   $439 
Net realized loss on investments   (10,641)   (1,289)
Net realized gain on foreign currency transactions   132    18 
Net realized loss on foreign currency transactions   (547)   (12)
Net realized gain on forward currency exchange contracts   1,681    3,633 
Net realized loss on forward currency exchange contracts   (176)   — 
Net realized gains (losses)  $(9,366)  $2,789 
           
Change in unrealized appreciation on investments  $5,080   $24,822 
Change in unrealized depreciation on investments   (135,573)   (6,060)
Net change in unrealized appreciation (depreciation) on investments   (130,493)   18,762 
Unrealized depreciation on foreign currency translation   (209)   (198)
Unrealized appreciation (depreciation) on forward currency exchange contracts   13,121    (3,283)
Net change in unrealized appreciation (depreciation) on foreign currency and forward currency exchange contracts   12,912    (3,481)
Net change in unrealized appreciation (depreciation)  $(117,581)  $15,281 

 

For the three months ended March 31, 2020, and 2019, we had net realized gains (losses) on investments of ($10.5) million and ($0.8) million, respectively. For the three months ended March 31, 2020 and 2019, we had net realized gains (losses) on foreign currency transactions of ($0.4) million and $0.0 million, respectively. For the three months ended March 31, 2020 and 2019, we had net realized gains (losses) on forward currency contracts of $1.5 million and $3.6 million, respectively, primarily as a result of settling GBP, AUD, DKK, EUR and NOK forward contracts.

 

For the three months ended March 31, 2020, we had $5.1 million in unrealized appreciation on 3 portfolio company investments which was primarily related to unrealized appreciation due to the reversal of unrealized depreciation upon pay-off, which was offset by $135.6 million in unrealized depreciation on 117 portfolio company investments. Unrealized depreciation for the three months ended March 31, 2020 resulted from a decrease in fair value, primarily due to negative valuation adjustments.

 

For the three months ended March 31, 2019, we had $24.8 million in unrealized appreciation on 84 portfolio company investments, which was offset by $6.1 million in unrealized depreciation on 41 portfolio company investments. Unrealized appreciation for the three months ended March 31, 2019 resulted from an increase in fair value, primarily due to reversal of prior period unrealized depreciation and positive valuation adjustments.

 

For the three months ended March 31, 2020 and 2019, we had unrealized appreciation (depreciation) on forward currency exchange contracts of $13.1 million and ($3.3) million, respectively. For the three months ended March 31, 2020, unrealized appreciation on forward currency exchange contracts was due to EUR, GBP, DKK, NOK and AUD forward contracts. For the three months ended March 31, 2019, unrealized depreciation on forward currency exchange contracts was due to EUR, GBP, DKK, NOK and AUD forward contracts.

 

The following table summarizes the impact of foreign currency for the three months ended March 31, 2020 and 2019 (dollars in thousands):

 

   For the Three Months Ended March 31, 
   2020   2019 
Net change in unrealized appreciation (depreciation) on investments due to foreign currency  $(13,012)  $646 
Net realized gain (loss) on investments due to foreign currency   2    — 
Net change in unrealized depreciation on foreign currency translation   (209)   (198)
Net realized gain (loss) on foreign currency transactions   (415)   6 
Net change in unrealized appreciation (depreciation) on forward currency exchange contracts   13,121    (3,283)
Net realized gain on forward currency exchange contracts   1,505    3,633 
Foreign currency impact to net increase in net assets resulting from operations  $992   $804 

 

Included in total net gains (losses) on the consolidated statements of operations is net gains (losses) of ($13.6) million and $0.5 million related to realized and unrealized gains and losses on investments, foreign currency holdings and non-investment assets and liabilities attributable to the changes in foreign currency exchange rates for the three months ended March 31, 2020 and 2019, respectively. Including the total net realized and unrealized gains (losses) on forward currency exchange contracts of $14.6 million and $0.3 million, respectively, included in the above table, the net impact of foreign currency on total net gains (losses) on the consolidated statements of operations is $1.0 million and $0.8 million for the three months ended March 31, 2020 and 2019, respectively.

 

54

 

 

Net Increase (Decrease) in Net Assets Resulting from Operations

 

For the three months ended March 31, 2020 and 2019, the net increase (decrease) in net assets resulting from operations was ($104.4) million and $39.3 million, respectively. Based on the weighted average shares of common stock outstanding for the three months ended March 31, 2020 and 2019, our per share net increase (decrease) in net assets resulting from operations was ($2.02) and $0.76, respectively.

 

Financial Condition, Liquidity and Capital Resources

 

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

 

We intend to continue to generate cash primarily from cash flows from operations, future borrowings and future offerings of securities. We may from time to time raise additional equity or debt capital through registered offerings, enter into additional debt facilities, or increase the size of existing facilities or issue debt securities. Any such incurrence or issuance would be subject to prevailing market conditions, our liquidity requirements, contractual and regulatory restrictions and other factors. We are required to meet an asset coverage ratio, defined under the 1940 Act as the ratio of our total assets (less all liabilities and indebtedness not represented by senior securities) to our outstanding senior securities, of at least 150% after each issuance of senior securities. As of March 31, 2020 and December 31, 2019, our asset coverage ratio was 154% and 164%, respectively.

 

At March 31, 2020 and December 31, 2019, we had $74.5 million and $68.8 million in cash, foreign cash, restricted cash and cash equivalents, respectively.

 

At March 31, 2020, we had approximately $73.0 million of availability on our BCSF Revolving Credit Facility, $50.4 million of availability on our JPM Credit Facility and $31.7 million Revolving Advisor Loan, subject to existing terms and regulatory requirements. At December 31, 2019, we had approximately $232.0 million of availability on our BCSF Revolving Credit Facility and $119.8 million of availability on our JPM Credit Facility, subject to existing terms and regulatory requirements.

 

For the three months ended March 31, 2020, cash, foreign cash, restricted cash, and cash equivalents increased by $5.6 million. During the three months ended March 31, 2020, we used $51.4 million in cash for operating activities. The decrease in cash used for operating activities is primarily related to the purchase of investments of $275.9 million and a net decrease in net assets resulting from operations of $104.4 million, which was offset by proceeds from principal payments and sales of investments of $190.6 million and the net change in unrealized depreciation on investments of $130.5 million. During the three months ended March 31, 2020, we generated $57.9 million from financing activities, primarily from borrowings on our debt from BCSF Revolving Credit Facility, JPM Credit Facility, and Revolving Advisor Loan, offset by repayments on our debt of $252.9 million and distributions paid during the period of $21.2 million.

 

For the three months ended March 31, 2019, cash, foreign cash, restricted cash, and cash equivalents increased by $61.4 million. During the three months ended March 31, 2019, we used $197.1 million in cash for operating activities, primarily to purchase investments of $370.3 million, which was offset by proceeds from principal payments and sales of investments of $153.6 million, a net increase in net assets resulting from operations of $39.3 million, and a change in unrealized appreciation of investments of $18.8 million. During the three months ended March 31, 2019, we generated $258.6 million from financing activities, primarily from borrowings on our BCSF Revolving Credit Facility and our Citibank Revolving Credit Facility, together referred to as the “Revolving Credit Facilities”, of $465.9 million, offset by repayments on our Revolving Credit Facilities of $186.0 million and distributions paid during the period of $21.1 million.

 

Equity

 

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

 

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

 

During the three months ended March 31, 2020, we did not issue shares of our common stock to investors who have opted into our dividend reinvestment plan. During the three months ended March 31, 2019, we did not issue shares of our common stock to investors who have opted into our dividend reinvestment plan.

 

55

 

 

 

On May 7, 2019, the Company’s Board of Directors authorized the Company to repurchase up to $50 million of its outstanding common stock in accordance with safe harbor rules under the Securities Exchange Act of 1934. Any such repurchases will depend upon market conditions and there is no guarantee that the Company will repurchase any particular number of shares or any shares at all. As of March 31, 2020, there have been no repurchases of common stock.

 

Debt

 

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

 

   As of March 31, 2020   As of December 31, 2019 
   Total Aggregate
Principal Amount
Committed		   Principal
Amount
Outstanding		   Carrying
Value (1)		   Total Aggregate
Principal Amount
Committed		   Principal
Amount
Outstanding		   Carrying
Value (1)		 
BCSF Revolving Credit Facility  $500,000   $427,015   $427,015   $500,000   $268,015   $268,015 
2018-1 Notes   365,700    365,700    363,876    365,700    365,700    363,832 
JPM Credit Facility   500,000    449,593    449,593    666,581    546,754    546,754 
2019-1 Debt   398,750    398,750    396,091    398,750    398,750    396,034 
Revolving Advisor Loan   50,000    18,325    18,325    —    —    — 
Total Debt  $1,814,450   $1,659,383   $1,654,900   $1,931,031   $1,579,219   $1,574,635 

 

 

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

 

BCSF Revolving Credit Facility

 

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

 

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

 

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

 

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

 

Borrowings under the BCSF Revolving Credit Facility bear interest at LIBOR plus a margin. As of March 31, 2020, the BCSF Revolving Credit Facility was accruing interest expense at a rate of LIBOR plus 3.25%. As of December 31, 2019, the BCSF Revolving Credit Facility was accruing interest expense at a rate of LIBOR plus 2.50%. The Company pays an unused commitment fee of 30 basis points (0.30%) per annum. Interest is payable quarterly in arrears. Any amounts borrowed under the BCSF Revolving Credit Facility, and all accrued and unpaid interest, will be due and payable, on the earliest of: (a) October 5, 2022 and (b) the date upon which all loans shall become due and payable in full, whether by acceleration or otherwise.

 

As of March 31, 2020 and December 31, 2019, there were $427.0 million and $268.0 million borrowings under the BCSF Revolving Credit Facility, respectively, and we were in compliance with the terms of the BCSF Revolving Credit Facility.

 

56

 

 

For the three months ended March 31, 2020 and 2019, the components of interest expense related to the BCSF Revolving Credit Facility were as follows (dollars in thousands):

 

   For the Three Months Ended March 31, 
   2020   2019 
Borrowing interest expense  $4,398   $4,988 
Unused facility fee   94    87 
Amortization of deferred financing costs and upfront commitment fees   266    264 
Total interest and debt financing expenses  $4,758   $5,339 

 

2018-1 Notes

 

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

 

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

 

2018-1 Notes  Principal Amount   Spread above Index  Interest rate at March 31, 2020 
Class A-1 A  $205,900   1.55% + 3 Month LIBOR   3.37%
Class A-1 B   45,000   1.50% + 3 Month LIBOR (first 24 months)   3.32%
        1.80% + 3 Month LIBOR (thereafter)     
Class A-2   55,100   2.15% + 3 Month LIBOR   3.97%
Class B   29,300   3.00% + 3 Month LIBOR   4.82%
Class C   30,400   4.00% + 3 Month LIBOR   5.82%
Total 2018-1 Notes   365,700         
Membership Interests   85,450   Non-interest bearing   Not applicable 
Total  $451,150         

 

The Class A-1 A, A-1 B, A-2, B and C 2018-1 Notes were issued at par and are scheduled to mature on October 20, 2030. The Company received 100% of the membership interests (the “Membership Interests”) in the 2018-1 Issuer in exchange for its sale to the 2018-1 Issuer of the initial closing date loan portfolio. The Membership Interests do not bear interest. As of March 31, 2020, the Company’s Membership Interests are pledged as collateral to the BCSF Revolving Credit Facility.

 

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

 

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

 

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

 

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

 

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

 

57

 

 

As of March 31, 2020, there were 59 first lien and second lien senior secured loans with a total fair value of approximately $415.7 million and cash of $8.9 million securing the 2018-1 Notes. As of December 31, 2019, there were 61 first lien and second lien senior secured loans with a total fair value of approximately $435.8 million and cash of $9.1 million securing the 2018-1 Notes. Assets that are pledged as collateral for the 2018-1 Notes are not directly available to the creditors of the Company to satisfy any obligations of the Company other than the Company’s obligations under the indenture governing the 2018-1 Notes. Such assets are included in the Company’s consolidated financial statements. The creditors of the 2018-1 Issuer have received security interests in such assets and such assets are not intended to be available to the creditors of the Company (or an affiliate of the Company). The 2018-1 Portfolio must meet certain requirements, including asset mix and concentration, term, agency rating, collateral coverage, minimum coupon, minimum spread and sector diversity requirements in the indenture governing the 2018-1 Notes. As of March 31, 2020 and December 31, 2019, the Company was in compliance with its covenants related to the 2018-1 Notes.

 

Costs of $2.1 million were incurred in connection with debt securitization of the 2018-1 Notes by the 2018-1 Issuer which have been recorded as debt issuance costs and presented as a reduction to the outstanding principal amount of the 2018-1 Notes on the consolidated statements of assets and liabilities and are being amortized over the life of the 2018-1 Issuer using the effective interest method. The balance of the unamortized deferred financing costs related to the 2018-1 Issuer was $1.8 million and $1.9 million as of March 31, 2020 and December 31, 2019, respectively.

 

For the three months ended March 31, 2020 and 2019, the components of interest expense related to the 2018-1 Issuer were as follows (dollars in thousands):

 

   For the Three Months Ended March 31, 
   2020   2019 
Borrowing interest expense  $3,518   $4,238 
Amortization of deferred financing costs and upfront commitment fees   43    43 
Total interest and debt financing expenses  $3,561   $4,281 

 

Citibank Revolving Credit Facility

 

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

 

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

 

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

 

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

 

For the three months ended March 31, 2020 and 2019, the components of interest expense related to the Citibank Revolving Credit Facility were as follows (dollars in thousands):

 

   For the Three Months Ended March 31, 
   2020   2019 
Borrowing interest expense  $—   $906 
Unused facility fee   —    14 
Amortization of deferred financing costs and upfront commitment fees   —    6 
Total interest and debt financing expenses  $—   $926 

 

58

 

 

 

 

 

JPM Credit Facility

 

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

 

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

 

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

 

The facility amount under the JPM Credit Agreement is currently $500.0 million. Proceeds of the loans under the JPM Credit Facility may be used to acquire certain qualifying loans and such other uses as permitted under the JPM Credit Agreement. The period from the effective date of the amendment until January 29, 2023 is referred to as the reinvestment period and during such reinvestment period, the Borrower may request drawdowns under the JPM Credit Facility.

 

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

 

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

 

Borrowings under the JPM Credit Facility bear interest at LIBOR plus a margin. As of March 31, 2020, the JPM Credit Facility was accruing interest expense at a rate of LIBOR plus 2.375%. The Company pays an unused commitment fee of between 37.5 basis points (0.375%) and 75 basis points (0.75%) per annum depending on the size of the unused portion of the facility. Interest is payable quarterly in arrears.

 

As of March 31, 2020, there were $449.6 million borrowings under the JPM Credit Facility and we were in compliance with the terms of the JPM Credit Facility.

 

For the three months ended March 31, 2020 and 2019, the components of interest expense related to the JPM Credit Facility were as follows:

 

   For the Three Months Ended March 31, 
   2020   2019 
Borrowing interest expense  $4,924   $— 
Unused facility fee   162    — 
Amortization of deferred financing costs and upfront commitment fees   275    — 
Total interest and debt financing expenses  $5,361   $— 

 

59

 

 

2019-1 Debt

 

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

 

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

 

2019-1 Debt  Principal Amount   Spread above Index  Interest rate at March 31, 2020 
Class A-1L  $50,000   1.70% + 3 Month LIBOR   3.53%
Class A-1   222,500   1.70% + 3 Month LIBOR   3.53%
Class A-2A   50,750   2.70% + 3 Month LIBOR   4.53%
Class A-2B   13,000   4.23% (Fixed)   4.23%
Class B   30,000   3.60% + 3 Month LIBOR   5.43%
Class C   32,500   4.75% + 3 Month LIBOR   6.58%
Total 2019-1 Debt   398,750         
Membership Interests   102,250   Non-interest bearing   Not applicable 
Total  $501,000         

 

The Loans and the Class A-1, A-2A, A-2B, and B Notes were issued at par. The Class C Notes were issued at a discount. The Notes are scheduled to mature on October 15, 2031. The Company received 100% of the membership interests (the “Membership Interests”) in the 2019-1 Issuer in exchange for its sale to the 2019-1 Issuer of the initial closing date loan portfolio. The Membership Interests do not bear interest. As of March 31, 2020, the Company’s Membership Interests are pledged as collateral to the BCSF Revolving Credit Facility.

 

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

 

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

 

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

 

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

 

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

 

As of March 31, 2020, there were 66 first lien and second lien senior secured loans with a total fair value of approximately $458.7 million and cash of $9.8 million securing the 2019-1 Debt. As of December 31, 2019, there were 65 first lien and second lien senior secured loans with a total fair value of approximately $471.3 million and cash of $22.4 million securing the 2019-1 Notes. Assets that are pledged as collateral for the 2019-1 Debt are not directly available to the creditors of the Company to satisfy any obligations of the Company other than the Company’s obligations under the indenture and loan agreement governing the 2019-1 Debt. The creditors of the 2019-1 Co-Issuers have received security interests in such assets and such assets are not intended to be available to the creditors of the Company (or an affiliate of the Company). The 2019-1 Portfolio must meet certain requirements, including asset mix and concentration, term, agency rating, collateral coverage, minimum coupon, minimum spread and sector diversity requirements in the indenture and loan agreement governing the 2019-1 Debt. As of March 31, 2020, the Company was in compliance with its covenants related to the 2019-1 Debt.

 

60

 

 

Costs of the offering, including the discount of the Class C Notes, of $2.8 million were incurred in connection with debt securitization of the 2019-1 Debt by the 2019-1 Co-Issuers which have been recorded as debt issuance costs and presented as a reduction to the outstanding principal amount of the 2019-1 Debt on the consolidated statements of assets and liabilities and are being amortized over the life of the 2019-1 Issuer using the effective interest method. The balance of the unamortized deferred financing costs related to the 2019-1 Issuer was $2.7 million as of March 31, 2020. The 2019-1 issuer was not in existence as of March 31, 2019 and the 2019-1 Debt were not outstanding.

 

For the three months ended March 31, 2020 and 2019, the components of interest expense related to the 2019-1 Co-Issuers were as follows (dollars in thousands):

 

   For the Three Months Ended March 31, 
   2020   2019 
Borrowing interest expense  $4,137   $— 
Amortization of deferred financing costs and upfront commitment fees   57    — 
Total interest and debt financing expenses  $4,194   $— 

 

Revolving Advisor Loan

 

On March 27, 2020, the Company entered into an unsecured revolving loan agreement (the “Revolving Advisor Loan”) with BCSF Advisors, LP, the investment adviser of the Company. The Revolving Advisor Loan has a maximum credit limit of $50.0 million and a maturity date of March 27, 2023. The Revolving Advisor Loan accrues interest at the Applicable Federal Rate from the date of such loan until the loan is repaid in full. The Applicable Federal Rate as of March 31, 2020 was 1.59%. As of March 31, 2020, there were $18.3 million borrowings under the Revolving Advisor Loan.

 

For the three months ended March 31, 2020 and 2019, the components of interest expense related to the Revolving Advisor Loan were as follows:

 

   For the Three Months Ended March 31, 
   2020   2019 
Borrowing interest expense  $2   $— 
Total interest and debt financing expenses  $2   $— 

 

Distribution Policy

 

The following table summarizes distributions declared during the three months ended March 31, 2020 (dollars in thousands, except per share data):

 

Date Declared  Record Date  Payment Date  Amount
Per Share		   Total
Distributions		 
February 20, 2020  March 31, 2020  April 30, 2020  $0.41   $21,176 
Total distributions declared        $0.41   $21,176 

 

The following table summarizes distributions declared during the three months ended March 31, 2019 (dollars in thousands, except per share data):

 

Date Declared  Record Date  Payment Date  Amount
Per Share		   Total
Distributions		 
February 21, 2019  March 29, 2019  April 12, 2019  $0.41   $21,108 
Total distributions declared        $0.41   $21,108 

 

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

 

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

 

61

 

 

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

 

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

 

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

 

Commitments and Off-Balance Sheet Arrangements

 

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

 

62

 

 

 

As of March 31, 2020, the Company had $90.9 million of unfunded commitments under loan and financing agreements as follows (dollars in thousands):

 

   Expiration Date (1)  Unfunded Commitments (2) 
First Lien Senior Secured Loans        
A&R Logistics, Inc. - Revolver  5/5/2025  $1,155 
Abracon Group Holding, LLC. - Revolver  7/18/2024   2,833 
Allworth Financial Group, L.P. - Revolver  12/31/2025   2,431 
AMI US Holdings Inc. - Revolver  4/1/2024   140 
Amspec Services, Inc. - Revolver  7/2/2024   113 
Ansira Holdings, Inc. - Delayed Draw  12/20/2022   1,509 
AP Plastics Group, LLC - Revolver  8/2/2021   1,417 
Appriss Holdings, Inc. - Revolver  5/30/2025   2,383 
Aramsco, Inc. - Revolver  8/28/2024   1,581 
Batteries Plus Holding Corporation - Revolver  7/6/2022   710 
Captain D's LLC - Revolver  12/15/2023   485 
CMI Marketing Inc. - Revolver  5/24/2023   704 
Cruz Bay Publishing, Inc. - Delayed Draw  5/4/2020   1,098 
CST Buyer Company - Revolver  10/3/2025   876 
Direct Travel, Inc. - Delayed Draw  12/1/2021   7,030 
Dorner Manufacturing Corp - Revolver  3/15/2022   1,099 
Efficient Collaborative Retail Marketing Company, LLC - Revolver  6/15/2022   1,275 
Element Buyer, Inc. - Delayed Draw  7/18/2025   2,267 
Grammer Purchaser, Inc. - Revolver  9/30/2024   683 
Green Street Parent, LLC - Revolver  8/27/2025   1,210 
Hightower Holding, LLC - Delayed Draw  1/31/2025   6,640 
Horizon Telcom, Inc. - Delayed Draw  6/15/2023   806 
Ivy Finco Limited - First Lien Senior Secured Loan  5/19/2025   2,746 
JHCC Holdings, LLC - Delayed Draw  9/9/2025   6,262 
JHCC Holdings, LLC - Revolver  9/9/2025   2,463 
Kellstrom Commercial Aerospace, Inc. - Delayed Draw  7/1/2025   3,838 
Margaux Acquisition Inc. - Delayed Draw  12/19/2024   7,139 
Margaux UK Finance Limited - Revolver  12/19/2024   4 
MRI Software LLC - Delayed Draw  2/10/2026   3,906 
MRI Software LLC - Revolver  2/10/2026   891 
Profile Products LLC - Revolver  12/20/2024   1,150 
Refine Intermediate, Inc. - Revolver  9/3/2026   4,450 
Solaray, LLC - Revolver  9/9/2022   623 
Tidel Engineering, L.P. - Revolver  3/1/2023   1,417 
TLC Purchaser, Inc. - Delayed Draw  10/13/2025   7,119 
TLC Purchaser, Inc. - Revolver  10/13/2025   1,068 
Ventiv Holdco, Inc. - Revolver  9/3/2025   2,981 
Whitcraft LLC - Revolver  4/3/2023   362 
WU Holdco, Inc. - Revolver  3/26/2025   26 
YLG Holdings, Inc. - Delayed Draw  10/31/2025   5,127 
YLG Holdings, Inc. - Revolver  10/31/2025   855 
Total First Lien Senior Secured Loans     $90,872 

 

 

 

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

 

63

 

 

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

 

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

 

 

 

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

 

During the month of March 2020, we received unprecedented draw requests on revolving credit and delayed draw facilities we provided to our portfolio companies as many of them sought to husband excess cash as a defensive measure in these uncertain times. All of those draws were met in a timely fashion and we maintain adequate cash and additional borrowing capacity in reserve to meet any further such draw requests.

 

64

 

 

Significant Accounting Estimates and Critical Accounting Policies

 

Basis of Presentation

 

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

 

Use of Estimates

 

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

 

65

 

 

Revenue Recognition

 

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

 

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

 

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

 

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

 

Valuation of Portfolio Investments

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

66

 

 

In following this approach, the types of factors that are taken into account in the fair value pricing of investments include, as relevant, but are not limited to: comparison to publicly traded securities, including factors such as yield, maturity and measures of credit quality; the enterprise value of a portfolio company; the nature and realizable value of any collateral; the portfolio companies ability to make payments and its earnings and discounted cash flows; and the markets in which the portfolio company does business. In cases where an independent valuation firm provides fair valuations for investments, the independent valuation firm provides a fair valuation report, a description of the methodology used to determine the fair value and their analysis and calculations to support their conclusion. Spreads have generally widened as a result of the impact of COVID-19 and the pricing of many of the Company's portfolio securities has become more volatile. There can be no assurance that this volatility will abate over the short or medium term.

 

Recent Accounting Pronouncements

 

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 is part of the disclosure framework project and eliminates certain disclosure requirements for fair value measurements, requires entities to disclose new information, and modifies existing disclosure requirements. The new guidance is effective after December 15, 2019. Early adoption is permitted. We do not believe this change will have a material effect on our consolidated financial statements and disclosures.

 

Contractual Obligations

 

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

 

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

 

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

 

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

 

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

 

A summary of the maturities of our principal amounts of debt and other contractual payment obligations as of March 31, 2020 are as follows (dollars in thousands):

 

   Payments Due by Period 
   Total   Less than
1 year		   1 — 3 years   3 — 5 years   More than
5 years		 
BCSF Revolving Credit Facility  $427,015   $50,000   $377,015   $—   $— 
2018-1 Notes   365,700        —    —    —    365,700 
JPM Credit Facility   449,593    50,000    —    399,593    — 
2019-1 Debt   398,750    —    —    —    398,750 
Revolving Advisor Loan   18,325    —    18,325    —    — 
Total Debt Obligations  $1,659,383   $100,000   $395,340   $399,593   $764,450 

 

Subsequent Events

 

On May 4, 2020, the Company's Board of Directors approved a transferable subscription rights offering to our stockholders of record as of May 13, 2020. The rights will entitle record stockholders to subscribe for up to an aggregate of 12,912,453 shares of our common stock at an estimated price per share of $9.46. Record stockholders will receive one right for each share of common stock owned on the record date. The rights will entitle the holders to purchase one new share of common stock for every four rights held, and record stockholders who fully exercise their rights will be entitled to subscribe, subject to certain limitations and allotment, for additional shares that remain unsubscribed as a result of any unexercised rights. The rights are transferable and we have applied to list the rights on the New York Stock Exchange under the symbol “BCSF RT”. Our Board has determined that it is in the best interest of the Company and its stockholders to raise additional equity capital, via the rights offering, to (i) repay outstanding indebtedness, including indebtedness under the BCSF Revolving Credit Facility and the JPM Credit Facility, in an aggregate amount equal to at least $100 million, in order to continue to maintain an appropriate level of debt in a challenging market environment, (ii) support our existing portfolio companies, particularly in light of current market conditions, and (iii) make opportunistic investments, in accordance with our investment objectives and policies, in assets that the Advisor believes have become undervalued due to the current extreme market volatility, and on more attractive terms than we would otherwise be able to obtain under typical, less volatile market conditions.

 

67

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

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

 

Assuming that the statement of financial condition as of March 31, 2020 were to remain constant and that we took no actions to alter our existing interest rate sensitivity, the following table shows the annualized impact of hypothetical base rate changes in interest rates.

 

           Net Increase 
   Increase (Decrease) in   Increase (Decrease) in   (Decrease) in 
Change in Interest Rates  Interest Income   Interest Expense   Net Investment Income 
Down 25 basis points  $(4,856)  $(4,116)  $(740)
Up 100 basis points   24,195    16,464    7,731 
Up 200 basis points   49,279    32,928    16,351 
Up 300 basis points   74,559    49,391    25,168 

 

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

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

As of March 31, 2020 (the end of the period covered by this report), our management has carried out an evaluation, under the supervision of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15 under the Exchange Act). Based on that evaluation our Chief Executive Officer and Chief Financial Officer have concluded that our current disclosure controls and procedures are effective in timely alerting management, including the Chief Executive Officer and Chief Financial Officer, to material information relating to us that is required to be disclosed by us in the reports we file or submit under the Exchange Act. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

 

Changes in Internal Controls Over Financial Reporting

 

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

 

68

 

 

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

 

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

 

Item 1A. Risk Factors

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

During any such periods of market disruption and instability, we and other companies in the financial services sector may have limited access, if any, to alternative markets for debt and equity capital. Equity capital may be difficult to raise because, subject to some limited exceptions that will apply to us as a BDC, we will generally not be able to issue additional shares of our common stock at a price less than NAV without first obtaining approval for such issuance from our stockholders and our Independent Directors. In addition, our ability to incur indebtedness (including by issuing preferred stock) is limited by applicable regulations such that our asset coverage, as defined in the 1940 Act, must equal at least 150% immediately after each time we incur indebtedness. The debt capital that will be available, if any, may be at a higher cost and on less favorable terms and conditions in the future. Any inability to raise capital could have a negative effect on our business, financial condition and results of operations.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

None.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None.

 

69

 

 

Item 6. Exhibits, Financial Statement Schedules

 

The following exhibits are included, or incorporated by reference, in this Quarterly Report on Form 10-Q for the three months ended March 31, 2020 (and are numbered in accordance with Item 601 of Regulation S-K under the Securities Act).

 

Exhibit
Number		   Description of Document
3.1   Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form 10 (File No. 000-55528) filed on October 6, 2016).
3.2   Bylaws (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form 10 (File No. 000-55528) filed on October 6, 2016).
4.1   Dividend Reinvestment Plan (incorporated by reference to Exhibit 10.5 to the Company’s Registration Statement on Form 10 (File No. 000-55528) filed on October 6, 2016).
10.1   Investment Advisory Agreement, dated October 6, 2016, by and between the Company and the Advisor (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement on Form 10 (File No. 000-55528) filed on October 6, 2016).
10.2   Administration Agreement, dated October 6, 2016, by and between the Company and the Administrator (incorporated by reference to Exhibit 10.2 to the Company’s Registration Statement on Form 10 (File No. 000-55528) filed on October 6, 2016).
10.3   Form of Advisory Fee Waiver Agreement by and between the Company and the Advisor (incorporated by reference to Exhibit 10.3 to the Company’s Registration Statement on Form 10 (File No. 000-55528) filed on October 6, 2016).
10.4   Form of Subscription Agreement (incorporated by reference to Exhibit 10.4 to the Company’s Registration Statement on Form 10 (File No. 000-55528) filed on October 6, 2016).
10.5   Form of Custodian Agreement by and between the Company and U.S. Bank National Association (incorporated by reference to Exhibit 10.6 to the Company’s Registration Statement on Form 10 (File No. 000-55528) filed on October 6, 2016).
10.6   Revolving Credit Agreement, dated December 22, 2016, among the Company, as Borrower, BCSF Holdings, L.P., as the Feeder Fund, and BCSF Holdings Investors, L.P., as the Feeder Fund General Partner and Sumitomo Mitsui Banking Corporation, as Sole Lead Arranger, Administrative Agent, Letter of Credit Issuer and Lender. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 814-01175), filed on December 23, 2016).
10.7   Revolving Credit Agreement, dated October 4, 2017, among the Company as Equity Holder, BCSF I, LLC as Borrower, and Goldman Sachs Bank USA, as Sole Lead Arranger, Syndication Agent and Administrative Agent, and U.S. Bank National Association as Collateral Administrator, Collateral Agent and Collateral Custodian (incorporated by reference to Exhibit 10.7. to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on November 13, 2017).
10.8   Omnibus Amendment No. 1, dated May 15, 2018, to Revolving Credit Agreement, dated October 4, 2017, among the Company as Equity Holder, BCSF I, LLC as Borrower, and Goldman Sachs Bank USA, as Sole Lead Arranger, Syndication Agent and Administrative Agent, and U.S. Bank National Association as Collateral Administrator, Collateral Agent and Collateral Custodian (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 814-01175), filed on May 17, 2018).
10.9   Indenture, dated as of September 28, 2018, between BCC Middle Market CLO 2018-1, LLC, as issuer, and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on October 17, 2018).
10.10   Portfolio Management Agreement, dated as of September 28, 2018, by and between BCC Middle Market CLO 2018-1, LLC, as issuer, and Bain Capital Specialty Finance, Inc., as portfolio manager (incorporated by reference to Exhibit 10.10 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on October 17, 2018).
10.11   Loan Sale Agreement, dated as of September 28, 2018, by and between BCC Middle Market CLO 2018-1, LLC, as issuer, and Bain Capital Specialty Finance, Inc., as the transferor (incorporated by reference to Exhibit 10.11 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on October 17, 2018).
10.12   Collateral Administration Agreement, dated as of September 28, 2018, by and between BCC Middle Market CLO 2018-1, LLC, as issuer, Bain Capital Specialty Finance, Inc., as portfolio manager, and Wells Fargo Bank, National Association, as collateral administrator (incorporated by reference to Exhibit 10.12 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on October 17, 2018).

 

70

 

 

Exhibit
Number		   Description of Document
10.13   Master Participation Agreement, dated as of September 28, 2018, by and between BCSF I, LLC, as financing subsidiary, and BCC Middle Market CLO 2018-1, LLC, as issuer (incorporated by reference to Exhibit 10.13 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on October 17, 2018).
10.14   Credit and Security Agreement, dated February 19, 2019, by and among the Company as Equityholder and Servicer, BCSF II-C, LLC as Borrower, Citibank, N.A., as Administrative Agent, and Wells Fargo Bank, National Association as Collateral Administrator, Collateral Agent and Custodian (incorporated by reference to Exhibit 10.9 to the Company’s Annual Report on Form 10-K (File No. 814-01175), filed on February 28, 2019).
10.15   Loan and Security Agreement, dated April 30, 2019, by and among BCSF Complete Financing Solution LLC, as Borrower, JPMorgan Chase Bank, National Association, as Administrative Agent and Wells Fargo Bank, National Association as Collateral Administrator, Collateral Agent, Securities Intermediary and Bank (incorporated by reference to Exhibit 10.10 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on August 7, 2019).
10.16   Indenture, dated as of August 28, 2019, between BCC Middle Market CLO 2019-1, LLC, as issuer, BCC Middle Market CLO 2019-1 Co-Issuer, LLC, as co-issuer and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 10.16  to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on November 6, 2019).
10.17   Class A-1L Credit Agreement, dated as of August 28, 2019, among BCC Middle Market CLO 2019-1, LLC, as borrower, BCC Middle Market CLO 2019-1 Co-Issuer, LLC, as co-borrower, Capital One, National Association, as lender, Wells Fargo Bank, National Association, as loan agent, and Wells Fargo, National Association, as collateral trustee (incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K (File No. 814-01175), filed on February 26, 2020).
10.18   Portfolio Management Agreement, dated as of August 28, 2019, by and between BCC Middle Market CLO 2019-1, LLC, as issuer, and Bain Capital Specialty Finance, Inc., as portfolio manager (incorporated by reference to Exhibit 10.16  to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on November 6, 2019).
10.19   Loan Sale Agreement, dated as of August 28, 2019, by and between BCC Middle Market CLO 2019-1, LLC, as issuer, and Bain Capital Specialty Finance, Inc., as the transferor (incorporated by reference to Exhibit 10.16  to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on November 6, 2019).
10.20   Collateral Administration Agreement, dated as of August 28, 2019, by and between BCC Middle Market CLO 2019-1, LLC, as issuer, Bain Capital Specialty Finance, Inc., as portfolio manager, and Wells Fargo Bank, National Association, as collateral administrator (incorporated by reference to Exhibit 10.16  to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on November 6, 2019).
10.21   Master Participation Agreement, dated as of August 28, 2019, by and between BCSF I, LLC, as financing subsidiary, and BCC Middle Market CLO 2019-1, LLC, as issuer (incorporated by reference to Exhibit 10.16  to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on November 6, 2019).
10.22   Master Participation Agreement, dated as of August 28, 2019, by and between BCSF II-C, LLC, as financing subsidiary, and BCC Middle Market CLO 2019-1, LLC, as issuer (incorporated by reference to Exhibit 10.16  to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on November 6, 2019).
10.23   Amended and Restated Credit Agreement, dated January 8, 2020, among the Company as Equity Holder, BCSF I, LLC as Borrower, and Goldman Sachs Bank USA, as Sole Lead Arranger, Syndication Agent and Administrative Agent, and U.S. Bank National Association as Collateral Administrator, Collateral Agent and Collateral Custodian (incorporated by reference to Exhibit 10.23 to the Company’s Annual Report on Form 10-K (File No. 814-01175), filed on February 26, 2020).

 

71

 

 

Exhibit
Number		   Description of Document
10.24   First Amendment to Loan and Security Agreement, dated January 29, 2020, by and among BCSF Complete Financing Solution LLC, as Borrower, JPMorgan Chase Bank, National Association, as Administrative Agent and Wells Fargo Bank, National Association as Collateral Administrator, Collateral Agent, Securities Intermediary and Bank  (incorporated by reference to Exhibit 10.24 to the Company’s Annual Report on Form 10-K (File No. 814-01175), filed on February 26, 2020).
10.25*   Second Amendment to Loan and Security Agreement, dated March 20, 2020, by and among BCSF Complete Financing Solution LLC, as Borrower, JPMorgan Chase Bank, National Association, as Administrative Agent and Wells Fargo Bank, National Association as Collateral Administrator, Collateral Agent, Securities Intermediary and Bank
10.26*   Revolving Loan Agreement, dated March 27, 2020, by and between the Company, as Borrower, and BCSF Advsiors, LP, as Lender.
10.27*   Omnibus Amendment No. 1 to Amended and Restated Credit Agrement, dated March 31, 2020, among the Company as Equity Holder, BCSF I, LLC as Borrower, and Goldman Sachs Bank USA, as Sole Lead Arranger, Syndication Agent and Administrative Agent, and U.S. Bank National Association as Collateral Administrator, Collateral Agent and Collateral Custodian.
14.1   Code of Conduct (incorporated by reference to Exhibit 14.1 to the Company’s Current Report on Form 8-K (File No. 814-01175), filed on November 15, 2018).
24.1   Powers of Attorney (incorporated by reference to Exhibit 24.1 to the Company’s Annual Report on Form 10-K (File No. 814-01175), filed on March 29, 2017).
31.1*   Certification of Chief Executive Officer pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended.
31.2*   Certification of Chief Financial Officer pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended.
32*   Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended.

 

 

 

* Filed herewith.

 

72

 

 

SIGNATURES

 

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

 

Bain Capital Specialty Finance, Inc.    
     
Date: May 4, 2020 By: /s/ Michael A. Ewald
  Name: Michael A. Ewald
  Title: Chief Executive Officer
     
Date: May 4, 2020 By: /s/ Sally F. Dornaus
  Name: Sally F. Dornaus
  Title: Chief Financial Officer

 

73

 

Bain Capital Specialty Finance, Inc. Reports