BARINGS BDC, INC. The following discussion is designed to provide a better understanding of our unaudited consolidated financial statements for the three months endedMarch 31, 2022 , including a brief discussion of our business, key factors that impacted our performance and a summary of our operating results. The following discussion should be read in conjunction with the Unaudited Consolidated Financial Statements and the notes thereto included in Item 1 of this Quarterly Report on Form 10-Q, and the Consolidated Financial Statements and notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year endedDecember 31, 2021 . Historical results and percentage relationships among any amounts in the financial statements are not necessarily indicative of trends in operating results for any future periods.
Forward-Looking Statements
Some of the statements in this Quarterly Report constitute forward-looking statements because they relate to future events or our future performance or financial condition. Forward-looking statements may include, among other things, statements as to our future operating results, our business prospects and the prospects of our portfolio companies, the impact of the investments that we expect to make, the ability of our portfolio companies to achieve their objectives, our expected financings and investments, the adequacy of our cash resources and working capital, and the timing of cash flows, if any, from the operations of our portfolio companies. Words such as "expect," "anticipate," "target," "goals," "project," "intend," "plan," "believe," "seek," "estimate," "continue," "forecast," "may," "should," "potential," variations of such words, and similar expressions indicate a forward-looking statement, although not all forward-looking statements include these words. Readers are cautioned that the forward-looking statements contained in this Quarterly Report are only predictions, are not guarantees of future performance, and are subject to risks, events, uncertainties and assumptions that are difficult to predict. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the items discussed herein, in Item 1A entitled "Risk Factors" in Part I of our Annual Report on Form 10-K for the year endedDecember 31, 2021 and in Item 1A entitled "Risk Factors" in Part II of our subsequently filed Quarterly Reports on Form 10-Q. Other factors that could cause our actual results and financial condition to differ materially include, but are not limited to, changes in political, economic or industry conditions, the interest rate environment or conditions affecting the financial and capital markets, including with respect to changes from the impact of the COVID-19 pandemic; the length and duration of the COVID-19 outbreak inthe United States as well as worldwide and the magnitude of the economic impact of that outbreak; the effect of the COVID-19 pandemic on our business prospects and the prospects of our portfolio companies, including our and their ability to achieve our respective objectives; the effect of the disruptions caused by the COVID-19 pandemic on our ability to continue to effectively manage our business and on the availability of equity and debt capital and our use of borrowed money to finance a portion of our investments; risks associated with possible disruption due to terrorism in our operations or the economy generally; and future changes in laws or regulations and conditions in our operating areas. These statements are based on our current expectations, estimates, forecasts, information and projections about the industry in which we operate and the beliefs and assumptions of our management as of the date of filing of this Quarterly Report. We assume no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless we are required to do so by law. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with theSEC , including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Overview of Our Business We are aMaryland corporation incorporated onOctober 10, 2006 . InAugust 2018 , in connection with the closing of an externalization transaction through whichBarings LLC ("Barings") agreed to become our external investment adviser, we entered into an investment advisory agreement (the "Original Advisory Agreement") and an administration agreement (the "Administration Agreement") with Barings. In connection with the completion of our acquisition ofMVC Capital, Inc. , aDelaware corporation, onDecember 23, 2020 (the "MVC Acquisition"), we entered into an amended and restated investment advisory agreement (the "Amended and Restated Advisory Agreement") with Barings onDecember 23, 2020 , following approval of the Amended and Restated Advisory Agreement by our stockholders at ourDecember 23, 2020 special meeting of stockholders. The terms of the Amended and Restated Advisory Agreement became effective onJanuary 1, 2021 . In connection with the completion of the Sierra Acquisition (as defined below), onFebruary 25, 2022 , we entered into a second amended and restated investment advisory agreement (the "New Barings BDC Advisory Agreement") with the Adviser. Under the terms of the New Barings BDC Advisory Agreement and the Administration Agreement, Barings serves as our investment adviser and administrator and manages our investment portfolio and performs (or oversees, or arranges for, the performance of) the administrative services necessary for our operation. 90 -------------------------------------------------------------------------------- An externally-managed BDC generally does not have any employees, and its investment and management functions are provided by an outside investment adviser and administrator under an advisory agreement and administration agreement. Instead of directly compensating employees, we pay Barings for investment management and administrative services pursuant to the terms of an investment advisory agreement and an administration agreement. Under the terms of the New Barings BDC Advisory Agreement, the fees paid to Barings for managing our affairs are determined based upon an objective and fixed formula, as compared with the subjective and variable nature of the costs associated with employing management and employees in an internally-managed BDC structure, which include bonuses that cannot be directly tied to Company performance because of restrictions on incentive compensation under the Investment Company Act of 1940, as amended (the "1940 Act"). Beginning inAugust 2018 , Barings shifted our investment focus to invest in syndicated senior secured loans, bonds and other fixed income securities. Since that time, Barings has transitioned our portfolio to primarily senior secured private debt investments in well-established middle-market businesses that operate across a wide range of industries. Barings' existingSEC co-investment exemptive relief under the 1940 Act (the "Exemptive Relief") permits us and Barings' affiliated private andSEC -registered funds to co-invest in Barings-originated loans, which allows Barings to efficiently implement its senior secured private debt investment strategy for us. Barings employs fundamental credit analysis, and targets investments in businesses with relatively low levels of cyclicality and operating risk. The holding size of each position will generally be dependent upon a number of factors including total facility size, pricing and structure, and the number of other lenders in the facility. Barings has experience managing levered vehicles, both public and private, and will seek to enhance our returns through the use of leverage with a prudent approach that prioritizes capital preservation. Barings believes this strategy and approach offers attractive risk/return with lower volatility given the potential for fewer defaults and greater resilience through market cycles. A significant portion of our investments are expected to be rated below investment grade by rating agencies or, if unrated would be rated below investment grade if they were rated. Below investment grade securities, which are often referred to as "junk," have predominantly speculative characteristics with respect to the issuer's capacity to pay interest and repay principal. We generate revenues in the form of interest income, primarily from our investments in debt securities, loan origination and other fees and dividend income. Fees generated in connection with our debt investments are recognized over the life of the loan using the effective interest method or, in some cases, recognized as earned. Our senior secured, middle-market, private debt investments generally have terms of between five and seven years. Our senior secured, middle-market, first lien private debt investments generally bear interest between LIBOR (or the applicable currency rate for investments in foreign currencies) plus 450 basis points and LIBOR plus 650 basis points per annum. Our subordinated middle-market, private debt investments generally bear interest between LIBOR (or the applicable currency rate for investments in foreign currencies) plus 700 basis points and LIBOR plus 900 basis points per annum if floating rate, and between 8% and 15% if fixed rate. From time to time, certain of our investments may have a form of interest, referred to as payment-in-kind, or PIK, interest, which is not paid currently but is instead accrued and added to the loan balance and paid at the end of the term. As ofMarch 31, 2022 andDecember 31, 2021 , the weighted average yield on the principal amount of our outstanding debt investments other than non-accrual debt investments was approximately 7.3% and 7.2%, respectively. The weighted average yield on the principal amount of all of our outstanding debt investments (including non-accrual debt investments) was approximately 6.8% and 6.9% as ofMarch 31, 2022 andDecember 31, 2021 , respectively.
Sierra Income Corporation Acquisition
OnFebruary 25, 2022 , we completed our acquisition of Sierra Income Corporation, aMaryland corporation ("Sierra"), pursuant to the terms and conditions of that certain Agreement and Plan of Merger (the "Sierra Merger Agreement"), dated as ofSeptember 21, 2021 , with Sierra,Mercury Acquisition Sub, Inc. , aMaryland corporation and our direct wholly owned subsidiary ("Sierra Acquisition Sub"), and Barings. To effect the acquisition, Sierra Acquisition Sub merged with and into Sierra, with Sierra surviving the merger as our wholly owned subsidiary (the "FirstSierra Merger "). Immediately thereafter, Sierra merged with and into us, withBarings BDC, Inc. as the surviving company (the "SecondSierra Merger " and, together with the FirstSierra Merger , the "Sierra Merger"). Pursuant to the Sierra Merger Agreement, each share of Sierra common stock, par value$0.001 per share (the "Sierra Common Stock"), issued and outstanding immediately prior to the effective time of the FirstSierra Merger (other than shares of Sierra Common Stock issued and outstanding immediately prior to the effective time of the FirstSierra Merger that were held by a subsidiary of Sierra or held, directly or indirectly, by us or Sierra Acquisition Sub) was converted into the right to receive (i) an amount in cash from Barings, without interest, equal to$0.9783641 , and (ii) 0.44973 shares of the our common stock, plus any cash in lieu of fractional shares. As a result of the Sierra Merger, former Sierra stockholders received approximately 46.0 million shares of our common stock for their shares of Sierra Common Stock. 91 -------------------------------------------------------------------------------- In connection with the Sierra Acquisition, onFebruary 25, 2022 , following the closing of the Sierra Merger, we entered into (1) the New Barings BDC Advisory Agreement, and (2) a credit support agreement (the "Sierra Credit Support Agreement") with Barings, pursuant to which Barings has agreed to provide credit support to us in the amount of up to$100.0 million relating to the net cumulative realized and unrealized losses on the acquired Sierra investment portfolio over a 10-year period. See "Note 2. Agreements andRelated Party Transactions" and "Note. 6 Derivative Instruments" in the Notes to our Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for more information. In addition, in connection with the closing of the Sierra Merger, our board of directors (the "Board") affirmed our commitment to purchase in open-market transactions, pursuant to Rule 10b-18 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and subject to our compliance with our covenant and regulatory requirements, shares of our common stock in an aggregate amount of up to$30,000,000 at then-current market prices at any time the shares of our common stock trade below 90% of our then most recently disclosed net asset value per share during the 12-month period commencing onApril 1, 2022 .
COVID-19 Developments
The spread of the Coronavirus and the COVID-19 pandemic, and the related effect on theU.S. and global economies, has had adverse consequences for the business operations of some of our portfolio companies and has adversely affected, and threatens to continue to adversely affect, our operations and the operations of Barings, including with respect to us. Barings has taken proactive steps around COVID-19 to address the potential impacts on their people, clients, communities and everyone they come in contact with, directly or through their premises. Protecting their employees and supporting the communities in which they live and work is a priority. Barings has now adopted a hybrid working model globally while maintaining service levels to our partners and clients. Barings' return-to-office taskforce continues to monitor the COVID-19 situation globally and is prepared to adapt office working patterns as required to ensure the safety of its employees and clients who visit Barings office locations. Barings' cybersecurity policies are applied consistently when working remotely or in the office. While we have been carefully monitoring the COVID-19 pandemic and its impact on our business and the business of our portfolio companies, we have continued to fund our existing debt commitments. In addition, we have continued to make and originate, and expect to continue to make and originate, new loans. We cannot predict the full impact of the COVID-19 pandemic, including its duration inthe United States and worldwide and the magnitude of the economic impact of the outbreak, including with respect to the travel restrictions, business closures and other quarantine measures imposed on service providers and other individuals by various local, state, and federal governmental authorities, as well as non-U.S. governmental authorities. We are unable to predict the extent and duration of any business and supply-chain disruptions, the extent to which COVID-19 will negatively affect our portfolio companies' operating results or the impact that such disruptions may have on our results of operations and financial condition. Depending on the duration and extent of the disruption to the operations of our portfolio companies, certain portfolio companies could experience financial distress and possibly default on their financial obligations to us and their other capital providers. Some of our portfolio companies may significantly curtail business operations, furlough or lay off employees and terminate service providers, and defer capital expenditures if subjected to prolonged and severe financial distress, which would likely impair their business on a permanent basis. These developments would likely result in a decrease in the value of our investment in any such portfolio company. We will continue to monitor the situation relating to the COVID-19 pandemic and guidance fromU.S. and international authorities, including federal, state and local public health authorities and may take additional actions based on their recommendations. In these circumstances, there may be developments outside our control requiring us to adjust our plan of operation. As such, given the dynamic nature of this situation, we cannot reasonably estimate the impacts of COVID-19 on our financial condition, results of operations or cash flows in the future. However, to the extent our portfolio companies are adversely impacted by the effects of the COVID-19 pandemic, it may have a material adverse impact on our future net investment income, the fair value of our portfolio investments, our financial condition and the results of operations and financial condition of our portfolio companies. 92 --------------------------------------------------------------------------------
Relationship with Our Adviser, Barings
Our investment adviser, Barings, a wholly-owned subsidiary ofMassachusetts Mutual Life Insurance Company , is a leading global asset management firm and is registered with theSEC as an investment adviser under the Investment Advisers Act of 1940, as amended. Barings' primary investment capabilities include fixed income, private credit, real estate, equity, and alternative investments. Subject to the overall supervision of the Board,Barings' Global Private Finance Group ("BGPF") manages our day-to-day operations, and provides investment advisory and management services to us. BGPF is part of Barings'$290.9 billion Global Fixed Income Platform that invests in liquid, private and structured credit. BGPF manages private funds and separately managed accounts, along with multiple public vehicles. Among other things, Barings (i) determines the composition of our portfolio, the nature and timing of the changes therein and the manner of implementing such changes; (ii) identifies, evaluates and negotiates the structure of the investments made by us; (iii) executes, closes, services and monitors the investments that we make; (iv) determines the securities and other assets that we will purchase, retain or sell; (v) performs due diligence on prospective portfolio companies and (vi) provides us with such other investment advisory, research and related services as we may, from time to time, reasonably require for the investment of our funds. Under the terms of the Administration Agreement, Barings performs (or oversees, or arranges for, the performance of) the administrative services necessary for our operation, including, but not limited to, office facilities, equipment, clerical, bookkeeping and record keeping services at such office facilities and such other services as Barings, subject to review by the Board, will from time to time determine to be necessary or useful to perform its obligations under the Administration Agreement. Barings also, on our behalf and subject to the Board's oversight, arranges for the services of, and oversees, custodians, depositories, transfer agents, dividend disbursing agents, other stockholder servicing agents, accountants, attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and such other persons in any such other capacity deemed to be necessary or desirable. Barings is responsible for the financial and other records that we are required to maintain and will prepare all reports and other materials required to be filed with theSEC or any other regulatory authority.
Stockholder Approval of Reduced Asset Coverage Ratio
OnJuly 24, 2018 , our stockholders voted at a special meeting of stockholders (the "2018 Special Meeting") to approve a proposal to authorize us to be subject to a reduced asset coverage ratio of at least 150% under the 1940 Act. As a result of the stockholder approval at the 2018 Special Meeting, effectiveJuly 25, 2018 , our applicable asset coverage ratio under the 1940 Act has been decreased to 150% from 200%. As a result, we are permitted under the 1940 Act to incur indebtedness at a level which is more consistent with a portfolio of senior secured debt. As ofMarch 31, 2022 , our asset coverage ratio was 188.9%.
Portfolio Investment Composition
The total value of our investment portfolio was$2,403.4 million as ofMarch 31, 2022 , as compared to$1,800.6 million as ofDecember 31, 2021 . As ofMarch 31, 2022 , we had investments in 287 portfolio companies with an aggregate cost of$2,391.6 million . As ofDecember 31, 2021 , we had investments in 212 portfolio companies with an aggregate cost of$1,787.8 million . As of bothMarch 31, 2022 andDecember 31, 2021 , none of our portfolio investments represented greater than 10% of the total fair value of our investment portfolio. 93 --------------------------------------------------------------------------------
As of
Percentage of Percentage of
Total Total
($ in thousands) Cost Portfolio Fair Value Portfolio
March 31, 2022 :
Senior debt and 1st lien notes $ 1,560,223 65 % $ 1,555,746 65 %
Subordinated debt and 2nd lien notes 346,381 14 317,643 13
Structured products 84,056 4 82,014 3
Equity shares 170,691 7 219,466 9
Equity warrants 174 - 156 -
Investment in joint ventures / PE fund 230,076 10 228,400 10
$ 2,391,601 100 % $ 2,403,425 100 %
December 31, 2021:
Senior debt and 1st lien notes $ 1,217,899 68 % $ 1,221,598 68 %
Subordinated debt and 2nd lien notes 253,551 14 240,037 13
Structured products 37,055 2 40,271 2
Equity shares 145,791 8 154,477 9
Equity warrants 1,111 - 1,107 -
Investment in joint ventures / PE fund 132,417 8 143,104 8
$ 1,787,824 100 % $ 1,800,594 100 %
Investment Activity
During the three months endedMarch 31, 2022 , we made 22 new investments totaling$229.3 million , purchased$442.2 million of investments as part of the Sierra Acquisition, made investments in existing portfolio companies totaling$89.3 million and made additional investments in joint venture equity portfolio companies totaling$11.7 million . We had four loans repaid totaling$12.4 million and received$7.5 million of portfolio company principal payments. In addition, we sold$19.2 million of loans, recognizing a net realized gain on these transactions of$0.8 million , and sold$132.3 million of middle-market portfolio company debt investments to one of our joint ventures and realized a loss on these transactions of$0.2 million . Lastly, we received proceeds related to the sale of equity investments totaling$1.6 million and recognized a net realized loss on such sales totaling$0.7 million . During the three months endedMarch 31, 2021 , we made 18 new investments totaling$172.2 million , made investments in existing portfolio companies totaling$73.2 million , made one new investment in a joint venture equity portfolio company totaling$4.5 million and made additional investments in existing joint venture equity portfolio companies totaling$25.0 million . We had six loans repaid at par totaling$26.2 million and received$6.0 million of portfolio company principal payments. In addition, we sold$57.1 million of loans, recognizing a net realized gain on these transactions of$2.4 million , and sold$94.7 million of middle-market portfolio company debt investments to one of our joint ventures and realized a gain on these transactions of$0.5 million . Lastly, we received proceeds related to the sale of an equity investment totaling$5.9 million and recognized a net realized loss on such sale totaling$0.1 million . 94 -------------------------------------------------------------------------------- Total portfolio investment activity for the three months endedMarch 31, 2022 and 2021 was as follows: Three Months Ended Senior Debt Investments in March 31, 2022: and 1st Lien Subordinated Debt Structured Equity Equity Joint Ventures / ($ in thousands) Notes and 2nd Lien Notes Products Shares Warrants PE Fund Total
Fair value, beginning of period
$ 40,271 $ 154,477 $ 1,107 $ 143,104 $ 1,800,594 New investments 268,202 30,065 1,060 19,200 - 11,696 330,223 Investments acquired in Sierra merger 235,770 66,662 46,666 7,065 72 85,963 442,198 Proceeds from sales of investments (151,575) - - (1,388) (249) - (153,212) Loan origination fees received (5,350) 36 - - - - (5,314) Principal repayments received (8,114) (11,020) (730) - - - (19,864) Payment-in-kind interest 1,050 6,984 - - - 8,034 Accretion of loan premium/discount 301 33 5 - - - 339 Accretion of deferred loan origination revenue 1,461 62 - - - - 1,523 Realized gain (loss) 579 8 - 24 (760) - (149) Unrealized appreciation (depreciation) (8,176) (15,224) (5,258) 40,088 (14) (12,363) (947)
Fair value, end of period
$ 82,014 $ 219,466 $ 156 $ 228,400 $ 2,403,425 Three Months Ended Senior Debt Investments in March 31, 2021: and 1st Lien Subordinated Debt Structured Equity Equity Joint Ventures / Short-term ($ in thousands) Notes and 2nd Lien Notes Products Shares Warrants PE Fund Investments Total Fair value, beginning of period$ 1,171,250 $ 138,767
$ 65,558 $ 1,495,795 New investments 227,057 14,479 - 3,873 - 29,500 198,550 473,459 Proceeds from sales of investments (144,893) - (6,823) (5,972) - - (190,542) (348,230) Loan origination fees received (4,176) (402) - - - - - (4,578) Principal repayments received (21,392) (10,120) (753) - - - - (32,265) Payment-in-kind interest 829 7,007 - - - - - 7,836 Accretion of loan premium/discount 645 1,319 16 - - - - 1,980 Accretion of deferred loan origination revenue 1,270 211 - - - - - 1,481 Realized gain (loss) 2,207 3 652 (51) - - 3 2,814 Unrealized appreciation (depreciation) 5,381 (666) 553 (2,883) 134 1,316 (3) 3,832
Fair value, end of period
$ 26,154 $ 39,618 $ 1,434 $ 72,576 $ 73,566 $ 1,602,124 Non-Accrual Assets Generally, when interest and/or principal payments on a loan become past due, or if we otherwise do not expect the borrower to be able to service its debt and other obligations, we will place the loan on non-accrual status and will generally cease recognizing interest income on that loan for financial reporting purposes until all principal and interest have been brought current through payment or due to a restructuring such that the interest income is deemed to be collectible. As ofMarch 31, 2022 , we had seven portfolio companies with investments on non-accrual, the fair value of which was$42.9 million , which comprised 1.8% of the total fair value of our portfolio, and the cost of which was$71.3 million , which comprised 3.0% of the total cost of our portfolio. As ofDecember 31, 2021 , we had two portfolio companies with investments on non-accrual, the fair value of which was$36.0 million , which comprised 2.0% of the total fair value of our portfolio, and the cost of which was$50.9 million , which comprised 2.9% of the total cost of our portfolio. 95 --------------------------------------------------------------------------------
A summary of our non-accrual assets as of
1888
In connection with the Sierra Acquisition, we purchased our debt and equity investments in 1888Industrial Services, LLC , or 1888. The 1888 first lien senior secured term loan is on non-accrual status and as a result, underU.S. GAAP, we will not recognize interest income on our first lien senior secured term loan in 1888 for financial reporting purposes. As ofMarch 31, 2022 , the cost and fair of our first lien senior secured term loan in 1888 was$0.4 million and$0.2 million , respectively.
In connection with the Sierra Acquisition, we purchased our debt and equity investments inBlack Angus Steakhouse, LLC , or Black Angus. The Black Angus PIK term loan is on non-accrual status and as a result, underU.S. GAAP, we will not recognize interest income on our PIK term loan in Black Angus for financial reporting purposes. As ofMarch 31, 2022 , both the cost and fair value of our PIK term loan in Black Angus was$9.6 million .
Charming Charlie LLC
In connection with the Sierra Acquisition, we purchased our debt and equity investments inCharming Charlie, LLC , orCharming Charlie .Charming Charlie is on non-accrual status and as a result, underU.S. GAAP, we will not recognize interest income on our debt investments inCharming Charlie for financial reporting purposes. As ofMarch 31, 2022 , both the cost and fair value of our debt investments inCharming Charlie was zero.
In connection with the MVC Acquisition, we purchased our debt investment inCustom Alloy Corporation , or Custom Alloy. During the quarter endedDecember 31, 2021 , we placed our debt investment in Custom Alloy on non-accrual status. As a result, underU.S. GAAP, we will not recognize interest income on our debt investment in Custom Alloy for financial reporting purposes. As ofMarch 31, 2022 , the cost of our debt investment in Custom Alloy was$46.4 million and the fair value of such investment was$28.6 million .
In connection with the Sierra Acquisition, we purchased our debt investment inHolland Acquisition Corp. , or Holland. Holland is on non-accrual status and as a result, underU.S. GAAP, we will not recognize interest income on our debt investments in Holland for financial reporting purposes. As ofMarch 31, 2022 , both the cost and fair value of our debt investments in Holland was zero.
In connection with the MVC Acquisition, we purchased our debt investment inLegal Solutions Holdings , or Legal Solutions. During the quarter endedSeptember 30, 2021 , we placed our debt investment in Legal Solutions on non-accrual status. As a result, underU.S. GAAP, we will not recognize interest income on our debt investment in Legal Solutions for financial reporting purposes. As ofMarch 31, 2022 , the cost of our debt investment in Legal Solutions was$10.1 million and the fair value of such investment was zero.
In connection with the Sierra Acquisition, we purchased our debt and equity investments inPath Medical LLC , or Path Medical. Path Medical is on non-accrual status and as a result, underU.S. GAAP, we will not recognize interest income on our debt investments in Path Medical for financial reporting purposes. As ofMarch 31, 2022 , both the cost and fair value of our debt investments in Path Medical was$4.6 million . 96
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Results of Operations
Comparison of the three months ended
Operating results for the three months endedMarch 31, 2022 and 2021 were as follows: Three Months Three Months Ended Ended March 31, March 31, (in thousands) 2022 2021 Total investment income$ 43,757 $ 30,593 Total operating expenses 24,742 16,237 Net investment income before taxes 19,015 14,356 Income taxes, including excise tax provision 6 (18) Net investment income after taxes 19,009 14,374 Net realized gains (losses) (1,442) 1,839 Net unrealized appreciation 3,465 6,275 Net increase in net assets resulting from operations $
21,032
Net increases or decreases in net assets resulting from operations can vary substantially from period to period due to various factors, including recognition of realized gains and losses and unrealized appreciation and depreciation. As a result, quarterly comparisons of net changes in net assets resulting from operations may not be meaningful.
Investment Income
Three Months Three Months
Ended Ended
March 31, March 31,
($ in thousands) 2022 2021
Investment income:
Total interest income $ 32,069 $ 25,214
Total dividend income 7,693 72
Total fee and other income 1,197 2,133
Total payment-in-kind interest income 2,798 3,173
Interest income from cash - 1
Total investment income $ 43,757 $ 30,593
The change in total investment income for the three months ended March 31, 2022 ,
as compared to the three months ended March 31, 2021 , was primarily due to an
increase in the average size of our portfolio and increased dividends from
portfolio companies and joint venture investments. The increase in the average
size of our portfolio was largely due to the increased middle-market investment
opportunities and the investments acquired as part of the Sierra Acquisition;
however, as the Sierra Acquisition did not close until late in the first quarter
of 2022, we did not receive a full quarter of investment income from the
acquired Sierra portfolio. This increase was partial offset by a decrease in
payment-in-kind ("PIK") interest income and a decrease in acceleration of
unamortized OID and unamortized loan origination fee income associated with
repayments of loans. For the three months ended March 31, 2022 , dividends from
portfolio companies and joint venture investments were $7.7 million , as compared
to $0.1 million for the three months ended March 31, 2021 . The amount of our
outstanding debt investments was $2,134.2 million as of March 31, 2022 , as
compared to $1,451.9 million as of March 31, 2021 . This increase is in part due
to the acquisition of investment assets in the Sierra Acquisition. The weighted
average yield on the principal amount of our outstanding debt investments other
than non-accrual debt investments was 7.3% as of March 31, 2022 , as compared to
7.2% as of March 31, 2021 . For the three months ended March 31, 2022 , PIK
interest income was $2.8 million , as compared to $3.2 million for the three
months ended March 31, 2021 . For the three months ended March 31, 2022 ,
acceleration of unamortized OID income and unamortized loan origination fees
totaled $0.2 million , as compared to $0.4 million for the three months ended
March 31, 2021 .
Operating Expenses
Three Months Three Months
Ended Ended
March 31, March 31,
($ in thousands) 2022 2021
Operating expenses:
Interest and other financing fees $ 11,661 $ 7,285
Base management fees 5,872 3,929
Incentive management fees 4,754 2,722
General and administrative expenses 2,455 2,301
Total operating expenses $ 24,742 $ 16,237
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Interest and Other Financing Fees
Interest and other financing fees during the three months endedMarch 31, 2022 were attributable to borrowings under theFebruary 2019 Credit Facility, theAugust 2025 Notes, the November Notes, the February Notes and theNovember 2026 Notes (each as defined below under "Liquidity and Capital Resources"). Interest and other financing fees during the three months endedMarch 31, 2021 were attributable to borrowings under theFebruary 2019 Credit Facility, theAugust 2025 Notes, the November Notes and the February Notes. The increase in interest and other financing fees for the three months endedMarch 31, 2022 as compared to the three months endedMarch 31, 2021 , was primarily attributable to the issuance of the February Notes and theNovember 2026 Notes and increased borrowings under theFebruary 2019 Credit Facility.
Base Management Fees
Under the terms of the New Barings BDC Advisory Agreement, we pay Barings a base management fee (the "Base Management Fee"), quarterly in arrears on a calendar quarter basis. The Base Management Fee is calculated based on the average value of our gross assets, excluding cash and cash equivalents, at the end of the two most recently completed calendar quarters prior to the quarter for which such fees are being calculated. Base Management Fees for any partial month or quarter are appropriately pro-rated. See Note 2 to our Unaudited Consolidated Financial Statements for additional information regarding the terms of the New Barings BDC Advisory Agreement (and, fromJanuary 1, 2021 toFebruary 25, 2022 , the terms of the Amended and Restated Advisory Agreement) and the fee arrangements thereunder. For the three months endedMarch 31, 2022 , the amount of Base Management Fee incurred was approximately$5.9 million . For the three months endedMarch 31, 2021 , the amount of Base Management Fee incurred was approximately$3.9 million . The increase in the Base Management Fee for the three months endedMarch 31, 2022 versus the corresponding 2021 period is primarily related to the average value of gross assets increasing from$1,257.4 million as of the end of the two most recently completed calendar quarters prior toMarch 31, 2021 to$1,879.0 million as of the end of the two most recently completed calendar quarters prior toMarch 31, 2022 . For both the three months endedMarch 31, 2022 and 2021, the Base Management Fee rate was 1.250%.
Incentive Fee
Under the New Barings BDC Advisory Agreement (and, fromJanuary 1, 2021 toFebruary 25, 2022 , pursuant to the terms of the Amended and Restated Advisory Agreement), we pay Barings an incentive fee. A portion of the incentive fee is based on our income and a portion is based on our capital gains. The income-based fee will be determined and paid quarterly in arrears based on the amount by which (x) 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 commences on or afterJanuary 1, 2021 , as the case may be (or the appropriate portion thereof in the case of any of our first eleven calendar quarters that commences on or afterJanuary 1, 2021 ) exceeds (y) the hurdle amount as calculated for the same period. See Note 2 to our Unaudited Consolidated Financial Statements for additional information regarding the terms of the New Barings BDC Advisory Agreement and the fee arrangements thereunder. For the three months endedMarch 31, 2022 , the amount of income-based fee incurred was$4.8 million , as compared to$2.7 million for the three months endedMarch 31, 2021 .
General and Administrative Expenses
We entered into the Administration Agreement with Barings inAugust 2018 . Under the terms of the Administration Agreement, Barings performs (or oversees, or arranges for, the performance of) the administrative services necessary for our operations. We will reimburse Barings for the costs and expenses incurred by it in performing its obligations and providing personnel and facilities under the Administration Agreement in an amount to be negotiated and mutually agreed to by us and Barings quarterly in arrears; provided that the agreed-upon quarterly expense amount will not exceed the amount of expenses that would otherwise be reimbursable by us under the Administration Agreement for the applicable quarterly period, and Barings will not be entitled to the recoupment of any amounts in excess of the agreed-upon quarterly expense amount. See Note 2 to our Unaudited Consolidated Financial Statements for additional information regarding the Administration Agreement. For the three months endedMarch 31, 2022 , the amount of administration expense incurred and invoiced by Barings for expenses was approximately$1.0 million . For the three months endedMarch 31, 2021 , the amount of administration expense incurred and invoiced by Barings for expenses was approximately$0.5 million . In addition to expenses incurred under the Administration Agreement, general and administrative expenses include Board fees, D&O insurance costs, as well as legal, valuation and accounting expenses. 98 --------------------------------------------------------------------------------
Net Realized Gains (Losses)
Net realized gains (losses) during the three months endedMarch 31, 2022 and 2021 were as follows: Three Months Three Months Ended Ended March 31, March 31, ($ in thousands) 2022 2021
Net realized gain (losses):
Non-Control / Non-Affiliate investments $ (250) $ 2,891
Affiliate investments 101 (77)
Net realized gains (losses) on investments (149) 2,814
Foreign currency transactions (1,293) (975)
Net realized gains (losses) $ (1,442) $ 1,839
During the three months ended March 31, 2022 , we recognized net realized losses
totaling $1.4 million , which consisted primarily of a net loss on foreign
currency transactions of $1.3 million . During the three months ended March 31,
2021 , we recognized net realized gains totaling $1.8 million , which consisted
primarily of a net gain on our loan portfolio of $2.8 million partially offset
by a net loss on foreign currency transactions of $1.0 million .
Net Unrealized Appreciation (Depreciation)
Net unrealized appreciation (depreciation) during the three months ended
Three Months Three Months
Ended Ended
March 31, March 31,
($ in thousands) 2022 2021
Net unrealized appreciation (depreciation):
Non-Control / Non-Affiliate investments $ (28,587) $ 5,357
Affiliate investments 12,996 2,445
Control investments 14,644 (3,969)
Net unrealized appreciation (depreciation) on investments (947) 3,833
Credit support agreements (400) (1,600)
Foreign currency transactions 4,812 4,042
Net unrealized appreciation $
3,465
During the three months endedMarch 31, 2022 , we recorded net unrealized appreciation totaling$3.5 million , consisting of net unrealized appreciation on our current portfolio of$0.1 million and net unrealized appreciation related to foreign currency transactions of$4.8 million , net of unrealized depreciation of$0.4 million on the MVC credit support agreement with Barings and net unrealized depreciation reclassification adjustments of$1.0 million related to the net realized gains on the sales / repayments of certain investments. The net unrealized appreciation on our current portfolio of$0.1 million was driven primarily by credit or fundamental performance of investments of$27.8 million , partially offset by the impact of foreign currency exchange rates on investments of$4.7 million and broad market moves for investments of$23.1 million . During the three months endedMarch 31, 2021 , we recorded net unrealized appreciation totaling$6.3 million , consisting of net unrealized appreciation on our current portfolio of$6.4 million and net unrealized appreciation related to foreign currency transactions of$4.0 million , net of unrealized depreciation of$1.6 million on the MVC credit support agreement with Barings and net of unrealized depreciation reclassification adjustments of$2.6 million related to the net realized gains on the sales / repayments of certain investments. The net unrealized appreciation on our current portfolio of$6.4 million was driven primarily by broad market moves for investments of$13.8 million , partially offset by depreciation from the credit or fundamental performance of investments of$3.0 million and the impact of foreign currency exchange rates on investments of$4.4 million .
Liquidity and Capital Resources
We believe that our current cash and foreign currencies on hand, our available borrowing capacity under theFebruary 2019 Credit Facility and our anticipated cash flows from operations will be adequate to meet our cash needs for our daily operations for at least the next twelve months. This "Liquidity and Capital Resources" section should be read in conjunction with "COVID-19 Developments" above, as well as with the notes to our Unaudited Consolidated Financial Statements. 99 --------------------------------------------------------------------------------
Cash Flows
For the three months endedMarch 31, 2022 , we experienced a net increase in cash in the amount of$70.2 million . During that period, our operating activities used$18.8 million in cash, consisting primarily of purchases of portfolio investments of$335.5 million , partially offset by net cash acquired from the acquisition of Sierra of$101.9 million and proceeds from sales or repayments of portfolio investments totaling$210.5 million . In addition, our financing activities provided net cash of$89.0 million , consisting of net borrowings under theFebruary 2019 Credit Facility (as defined below under "Financing Transactions") of$107.7 million , partially offset by dividends paid in the amount of$15.0 million and share repurchases of$2.1 million . As ofMarch 31, 2022 , we had$154.4 million of cash and foreign currencies on hand. For the three months endedMarch 31, 2021 , we experienced a net decrease in cash in the amount of$52.0 million . During that period, our operating activities used$85.1 million in cash, consisting primarily of purchases of portfolio investments of$276.5 million and purchases of short-term investments of$198.6 million , partially offset by proceeds from sales of portfolio investments totaling$188.2 million and sales of short-term investments of$190.5 million . In addition, our financing activities provided$33.1 million of cash, consisting of net proceeds of$149.8 million from the issuance of the February Notes, partially offset by net repayments under theFebruary 2019 Credit Facility of$104.3 million and dividends paid in the amount of$12.4 million . As ofMarch 31, 2021 , we had$40.5 million of cash and foreign currencies on hand. Financing TransactionsFebruary 2019 Credit Facility OnFebruary 21, 2019 , we entered into a senior secured credit facility withING Capital LLC ("ING"), as administrative agent, and the lenders party thereto (as amended, restated and otherwise modified from time to time, the "February 2019 Credit Facility"). The initial commitments under theFebruary 2019 Credit Facility total$800.0 million . Effective onNovember 4, 2021 , we increased aggregate commitments under theFebruary 2019 Credit Facility to$875.0 million from$800.0 million pursuant to the accordion feature under theFebruary 2019 Credit Facility, which allows for an increase in the total commitments to an aggregate of$1.2 billion subject to certain conditions and the satisfaction of specified financial covenants. Effective onFebruary 25, 2022 , we increased aggregate commitments under theFebruary 2019 Credit Facility to$965.0 million from$875.0 million pursuant to the accordion feature under theFebruary 2019 Credit Facility, and the allowance for an increase in the total commitments increased to$1.5 billion from$1.2 billion subject to certain conditions and the satisfaction of specified financial covenants. We can borrow foreign currencies directly under theFebruary 2019 Credit Facility. TheFebruary 2019 Credit Facility, which is structured as a revolving credit facility, is secured primarily by a material portion of our assets and guaranteed by certain of our subsidiaries. Following the termination onJune 30, 2020 ofBarings BDC Senior Funding I, LLC's ("BSF") credit facility entered into inAugust 2018 withBank of America, N.A . (the "August 2018 Credit Facility"), BSF became a subsidiary guarantor and its assets secure theFebruary 2019 Credit Facility. The revolving period of theFebruary 2019 Credit Facility ends onFebruary 21, 2024 , followed by a one-year repayment period with a maturity date ofFebruary 21, 2025 . Borrowings denominated inU.S. Dollars under theFebruary 2019 Credit Facility bear interest, subject to our election, on a per annum basis equal to (i) the alternate base rate plus 1.25% (or 1.00% for so long as we maintain an investment grade credit rating) or (ii) the term Secured Overnight Financing Rate ("SOFR") plus 2.25% (or 2.00% for so long as we maintain an investment grade credit rating) plus a credit spread adjustment of 0.10% for borrowings with an interest period of one month, 0.15% for borrowings with an interest period of three months or 0.25% for borrowings with an interest period of six months. The alternate base rate is equal to the greatest of (i) the prime rate, (ii) the federal funds rate plus 0.5%, (iii) the Overnight Bank Funding Rate plus 0.5%, (iv) one-month term SOFR plus 1.0% plus a credit spread adjustment of 0.10% and (v) 1.0%. For borrowings denominated in certain foreign currencies other than Australian dollars, the applicable currency rate for the foreign currency as defined in the credit agreement plus 2.00% (or 2.25% if we no longer maintain an investment grade credit rating) or for borrowings denominated in Australian dollars, the applicable Australian dollars Screen Rate, plus 2.20% (or 2.45% if we no longer maintain an investment grade credit rating). In addition, we pay a commitment fee of (i) 0.5% per annum on undrawn amounts if the unused portion of theFebruary 2019 Credit Facility is greater than two-thirds of total commitments or (ii) 0.375% per annum on undrawn amounts if the unused portion of theFebruary 2019 Credit Facility is equal to or less than two-thirds of total commitments. In connection with entering into theFebruary 2019 Credit Facility, we incurred financing fees of approximately$6.4 million , which will be amortized over the life of theFebruary 2019 Credit Facility. As ofMarch 31, 2022 , we were in compliance with all covenants under theFebruary 2019 Credit Facility and hadU.S. dollar borrowings of$472.0 million outstanding under theFebruary 2019 Credit Facility with an interest rate of 2.318% (one month SOFR of 0.218%), borrowings denominated in Swedish kronas of 12.8kr million ($1.4 million U.S. dollars) with an interest rate of 2.000% (one month STIBOR of 0.000%), borrowings denominated in British pounds sterling of £77.6 million 100 -------------------------------------------------------------------------------- ($102.1 million U.S. dollars) with an interest rate of 2.477% (one month SONIA of 0.477%), borrowings denominated in Australian dollars ofA$36.6 million ($27.5 million U.S. dollars) with an interest rate of 2.250% (one month AUD Screen Rate of 0.250%) and borrowings denominated in Euros of €138.6 million ($154.2 million U.S. dollars) with an interest rate of 2.000% (one month EURIBOR of 0.000%). The borrowings denominated in foreign currencies were translated intoU.S. dollars based on the spot rate at the relevant balance sheet date. The impact resulting from changes in foreign exchange rates on theFebruary 2019 Credit Facility borrowings is included in "Net unrealized appreciation (depreciation) - foreign currency transactions" in our Unaudited Consolidated Statements of Operations. The fair values of the borrowings outstanding under theFebruary 2019 Credit Facility are based on a market yield approach and current interest rates, which are Level 3 inputs to the market yield model. As ofMarch 31, 2022 , the total fair value of the borrowings outstanding under theFebruary 2019 Credit Facility was$757.2 million . See Note 5 to our Unaudited Consolidated Financial Statements for additional information regarding theFebruary 2019 Credit Facility.
OnAugust 3, 2020 , we entered into a Note Purchase Agreement (the "August 2020 NPA") withMassachusetts Mutual Life Insurance Company governing the issuance of (1)$50.0 million in aggregate principal amount of Series A senior unsecured notes dueAugust 2025 (the "Series A Notes due 2025") with a fixed interest rate of 4.66% per year, and (2) up to$50.0 million in aggregate principal amount of additional senior unsecured notes dueAugust 2025 with a fixed interest rate per year to be determined (the "Additional Notes" and, collectively with the Series A Notes due 2025, the "August 2025 Notes"), in each case, to qualified institutional investors in a private placement. An aggregate principal amount of$25.0 million of the Series A Notes due 2025 was issued onSeptember 24, 2020 and an aggregate principal amount of$25.0 million of the Series A Notes due 2025 was issued onSeptember 29, 2020 , both of which will mature onAugust 4, 2025 unless redeemed, purchased or prepaid prior to such date by us in accordance with their terms. Interest on theAugust 2025 Notes is due semiannually in March and September, beginning inMarch 2021 . In addition, we are obligated to offer to repay theAugust 2025 Notes at par (plus accrued and unpaid interest to, but not including, the date of prepayment) if certain change in control events occur. Subject to the terms of theAugust 2020 NPA, we may redeem theAugust 2025 Notes in whole or in part at any time or from time to time at our option at par plus accrued interest to the prepayment date and, if redeemed on or beforeNovember 3, 2024 , a make-whole premium. TheAugust 2025 Notes are guaranteed by certain of our subsidiaries, and are our general unsecured obligations that rank pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by us.
On
TheAugust 2020 NPA contains certain representations and warranties, and various covenants and reporting requirements customary for senior unsecured notes issued in a private placement, including, without limitation, affirmative and negative covenants such as information reporting, maintenance of our status as a BDC within the meaning of the 1940 Act, certain restrictions with respect to transactions with affiliates, fundamental changes, changes of line of business, permitted liens, investments and restricted payments, minimum shareholders' equity, maximum net debt to equity ratio and minimum asset coverage ratio. TheAugust 2020 NPA also contains customary events of default with customary cure and notice periods, including, without limitation, nonpayment, incorrect representation in any material respect, breach of covenant, cross-default under our other indebtedness or that of our subsidiary guarantors, certain judgements and orders, and certain events of bankruptcy. Upon the occurrence of an event of default, the holders of at least 66-2/3% in principal amount of theAugust 2025 Notes at the time outstanding may declare allAugust 2025 Notes then outstanding to be immediately due and payable. As ofMarch 31, 2022 , we were in compliance with all covenants under theAugust 2020 NPA. TheAugust 2025 Notes were offered in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended (the "Securities Act"). TheAugust 2025 Notes have not and will not be registered under the Securities Act or any state securities laws and, unless so registered, may not be offered or sold inthe United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, as applicable. As ofMarch 31, 2022 , the fair value of the outstandingAugust 2025 Notes was$49.7 million . The fair value determination of theAugust 2025 Notes was based on a market yield approach and current interest rates, which are Level 3 inputs to the market yield model. November Notes OnNovember 4, 2020 , we entered into a Note Purchase Agreement (the "November 2020 NPA") governing the issuance of (1)$62.5 million in aggregate principal amount of Series B senior unsecured notes dueNovember 2025 (the "Series B Notes") with a fixed interest rate of 4.25% per year and (2)$112.5 million in aggregate principal amount of Series C senior 101 -------------------------------------------------------------------------------- unsecured notes dueNovember 2027 (the "Series C Notes," and, collectively with the Series B Notes, the "November Notes") with a fixed interest rate of 4.75% per year, in each case, to qualified institutional investors in a private placement. Each stated interest rate is subject to a step up of (x) 0.75% per year, to the extent the applicable November Notes do not satisfy certain investment grade conditions and/or (y) 1.50% per year, to the extent the ratio of our secured debt to total assets exceeds specified thresholds, measured as of each fiscal quarter end. The November Notes were delivered and paid for onNovember 5, 2020 . The Series B Notes will mature onNovember 4, 2025 , and the Series C Notes will mature onNovember 4, 2027 unless redeemed, purchased or prepaid prior to such date by us in accordance with their terms. Interest on the November Notes is due semiannually in May and November, beginning inMay 2021 . In addition, we are obligated to offer to repay the November Notes at par (plus accrued and unpaid interest to, but not including, the date of prepayment) if certain change in control events occur. Subject to the terms of theNovember 2020 NPA, we may redeem the Series B Notes and the Series C Notes in whole or in part at any time or from time to time at our option at par plus accrued interest to the prepayment date and, if redeemed on or beforeMay 4, 2025 , with respect to the Series B Notes, or on or beforeMay 4, 2027 , with respect to the Series C Notes, a make-whole premium. The November Notes are guaranteed by certain of our subsidiaries, and are our general unsecured obligations that rank pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by us. TheNovember 2020 NPA contains certain representations and warranties, and various covenants and reporting requirements customary for senior unsecured notes issued in a private placement, including, without limitation, affirmative and negative covenants such as information reporting, maintenance of our status as a BDC within the meaning of the 1940 Act, certain restrictions with respect to transactions with affiliates, fundamental changes, changes of line of business, permitted liens, investments and restricted payments, minimum shareholders' equity, maximum net debt to equity ratio and minimum asset coverage ratio. TheNovember 2020 NPA also contains customary events of default with customary cure and notice periods, including, without limitation, nonpayment, incorrect representation in any material respect, breach of covenant, cross-default under our other indebtedness or that of our subsidiary guarantors, certain judgements and orders, and certain events of bankruptcy. Upon the occurrence of an event of default, the holders of at least 66-2/3% in principal amount of the November Notes at the time outstanding may declare all November Notes then outstanding to be immediately due and payable. As ofMarch 31, 2022 , we were in compliance with all covenants under theNovember 2020 NPA. The November Notes were offered in reliance on Section 4(a)(2) of the Securities Act. The November Notes have not and will not be registered under the Securities Act or any state securities laws and, unless so registered, may not be offered or sold inthe United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, as applicable. As ofMarch 31, 2022 , the fair value of the outstanding Series B Notes and the Series C Notes was$61.1 million and$109.0 million , respectively. The fair value determinations of the Series B Notes and Series C Notes were based on a market yield approach and current interest rates, which are Level 3 inputs to the market yield model. February Notes OnFebruary 25, 2021 , we entered into a Note Purchase Agreement (the "February 2021 NPA") governing the issuance of (1)$80.0 million in aggregate principal amount of Series D senior unsecured notes dueFebruary 26, 2026 (the "Series D Notes") with a fixed interest rate of 3.41% per year and (2)$70.0 million in aggregate principal amount of Series E senior unsecured notes dueFebruary 26, 2028 (the "Series E Notes" and, collectively with the Series D Notes, the "February Notes") with a fixed interest rate of 4.06% per year, in each case, to qualified institutional investors in a private placement. Each stated interest rate is subject to a step up of (x) 0.75% per year, to the extent the applicable February Notes do not satisfy certain investment grade rating conditions and/or (y) 1.50% per year, to the extent the ratio of our secured debt to total assets exceeds specified thresholds, measured as of each fiscal quarter end. The February Notes were delivered and paid for onFebruary 26, 2021 . The Series D Notes will mature onFebruary 26, 2026 , and the Series E Notes will mature onFebruary 26, 2028 unless redeemed, purchased or prepaid prior to such date by us in accordance with the terms of theFebruary 2021 NPA. Interest on the February Notes is due semiannually in February and August of each year, beginning inAugust 2021 . In addition, we are obligated to offer to repay the February Notes at par (plus accrued and unpaid interest to, but not including, the date of prepayment) if certain change in control events occur. Subject to the terms of theFebruary 2021 NPA, we may redeem the Series D Notes and the Series E Notes in whole or in part at any time or from time to time at our option at par plus accrued interest to the prepayment date and, if redeemed on or beforeAugust 26, 2025 , with respect to the Series D Notes, or on or beforeAugust 26, 2027 , with respect to the Series E Notes, a make-whole premium. The February Notes are guaranteed by certain of our subsidiaries, and are our general unsecured obligations that rank pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by us. 102 -------------------------------------------------------------------------------- TheFebruary 2021 NPA contains certain representations and warranties, and various covenants and reporting requirements customary for senior unsecured notes issued in a private placement, including, without limitation, information reporting, maintenance of our status as a BDC within the meaning of the 1940 Act, and certain restrictions with respect to transactions with affiliates, fundamental changes, changes of line of business, permitted liens, investments and restricted payments. In addition, theFebruary 2021 NPA contains the following financial covenants: (a) maintaining a minimum obligors' net worth, measured as of each fiscal quarter end; (b) not permitting our asset coverage ratio, as of the date of the incurrence of any debt for borrowed money or the making of any cash dividend to shareholders, to be less than the statutory minimum then applicable to us under the 1940 Act; and (c) not permitting our net debt to equity ratio to exceed 2.0x, measured as of each fiscal quarter end. TheFebruary 2021 NPA also contains customary events of default with customary cure and notice periods, including, without limitation, nonpayment, incorrect representation in any material respect, breach of covenant, cross-default under other indebtedness or that of our subsidiary guarantors, certain judgements and orders, and certain events of bankruptcy. Upon the occurrence of certain events of default, the holders of at least 66-2/3% in principal amount of the February Notes at the time outstanding may declare all February Notes then outstanding to be immediately due and payable. As ofMarch 31, 2022 , we were in compliance with all covenants under theFebruary 2021 NPA. The February Notes were offered in reliance on Section 4(a)(2) of the Securities Act. The February Notes have not and will not be registered under the Securities Act or any state securities laws and, unless so registered, may not be offered or sold inthe United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, as applicable. As ofMarch 31, 2022 , the fair value of the outstanding Series D Notes and the Series E Notes was$75.5 million and$65.2 million , respectively. The fair value determinations of the Series D Notes and Series E Notes were based on a market yield approach and current interest rates, which are Level 3 inputs to the market yield model.
OnNovember 23, 2021 , we entered into an Indenture (the "Base Indenture") and a Supplemental Indenture (the "First Supplemental Indenture" and, together with the Base Indenture, the "Indenture") withU.S. Bank National Association (the "Trustee"). The First Supplemental Indenture relates to our issuance of$350.0 million aggregate principal amount of its 3.300% notes due 2026 (the "November 2026 Notes"). TheNovember 2026 Notes will mature onNovember 23, 2026 and may be redeemed in whole or in part at our option at any time or from time to time at the redemption prices set forth in the Indenture. TheNovember 2026 Notes bear interest at a rate of 3.300% per year payable semi-annually onMay 23 andNovember 23 of each year, commencing onMay 23, 2022 . TheNovember 2026 Notes are our general unsecured obligations that rank senior in right of payment to all of our existing and future indebtedness that is expressly subordinated in right of payment to theNovember 2026 Notes, rank pari passu with all existing and future unsecured unsubordinated indebtedness issued by us, rank effectively junior to any of our secured indebtedness (including unsecured indebtedness that we later secure) to the extent of the value of the assets securing such indebtedness, and rank structurally junior to all existing and future indebtedness (including trade payables) incurred by our subsidiaries, financing vehicles or similar facilities. The Indenture contains certain covenants, including covenants requiring us to comply with the asset coverage requirements of Section 18(a)(1)(A) as modified by Section 61(a)(1) and (2) of the 1940 Act, whether or not it is subject to those requirements, and to provide financial information to the holders of theNovember 2026 Notes and the Trustee if we are no longer subject to the reporting requirements under the Exchange Act. These covenants are subject to important limitations and exceptions that are described in the Indenture. In addition, on the occurrence of a "change of control repurchase event," as defined in the Indenture, we will generally be required to make an offer to purchase the outstandingNovember 2026 Notes at a price equal to 100% of the principal amount of suchNovember 2026 Notes plus accrued and unpaid interest to the repurchase date. TheNovember 2026 Notes were offered to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act and to certain non-U.S. persons outsidethe United States pursuant to Regulation S under the Securities Act. TheNovember 2026 Notes have not been registered under the Securities Act or any state securities laws and may not be offered or sold inthe United States absent registration or an applicable exemption from such registration requirements. 103 -------------------------------------------------------------------------------- As ofMarch 31, 2022 , the fair value of the outstandingNovember 2026 Notes was$320.9 million . The fair value determinations of theNovember 2026 Notes were based on a market yield approach and current interest rates, which are Level 3 inputs to the market yield model.
Share Repurchases
In connection with the closing of the MVC Acquisition onDecember 23, 2020 , we committed to make open-market purchases of shares of our common stock in an aggregate amount of up to$15.0 million at then-current market prices at any time shares trade below 90% of our then most recently disclosed NAV per share. Any repurchases pursuant to the authorized program will occur during the 12-month period that commenced upon the filing of our quarterly report on Form 10-Q for the quarter endedMarch 31, 2021 , which occurred onMay 6, 2021 , and will be made in accordance with applicable legal, contractual and regulatory requirements. During the three months endedMarch 31, 2022 , we repurchased a total of 207,677 shares of our common stock in the open market under the authorized program at an average price of$10.14 per share, including broker commissions. In connection with the completion of the acquisition of Sierra, we committed to make open-market purchases of shares of our common stock in an aggregate amount of up to$30.0 million at then-current market prices at any time shares trade below 90% of our then most recently disclosed NAV per share. Any repurchases pursuant to the authorized program will occur during the 12-month period commencing onApril 1, 2022 and are expected to be made in accordance with a Rule 10b5-1 purchase plan that qualifies for the safe harbors provided by Rules 10b5-1 and 10b-18 under the Exchange Act, as well as subject to compliance with our covenant and regulatory requirements.
Distributions to Stockholders
We intend to pay quarterly distributions to our stockholders out of assets
legally available for distribution. We have adopted a dividend reinvestment plan
("DRIP") that provides for reinvestment of dividends on behalf of our
stockholders, unless a stockholder elects to receive cash. As a result, when we
declare a dividend, stockholders who have not opted out of the DRIP will have
their dividends automatically reinvested in shares of our common stock, rather
than receiving cash dividends.
We have elected to be treated as a RIC under the Code, and intend to make the
required distributions to our stockholders as specified therein. In order to
maintain our tax treatment as a RIC and to obtain RIC tax benefits, we must meet
certain minimum distribution, source-of-income and asset diversification
requirements. If such requirements are met, then we are generally required to
pay income taxes only on the portion of our taxable income and gains we do not
distribute (actually or constructively) and certain built-in gains. We have
historically met our minimum distribution requirements and continually monitor
our distribution requirements with the goal of ensuring compliance with the
Code. We can offer no assurance that we will achieve results that will permit
the payment of any level of cash distributions and our ability to make
distributions will be limited by the asset coverage requirement and related
provisions under the 1940 Act and contained in any applicable indenture or
financing agreement and related supplements. In addition, in order to satisfy
the annual distribution requirement applicable to RICs, we may declare a
significant portion of our dividends in shares of our common stock instead of in
cash. As long as a portion of such dividend is paid in cash (which portion may
be as low as 20% of such dividend (and 10% of the dividend declared through June
30, 2022 ) under published guidance from the Internal Revenue Service) and
certain requirements are met, the entire distribution will be treated as a
dividend for U.S. federal income tax purposes. As a result, a stockholder
generally would be subject to tax on 100% of the fair market value of the
dividend on the date the dividend is received by the stockholder in the same
manner as a cash dividend, even though most of the dividend was paid in shares
of our common stock.
The minimum distribution requirements applicable to RICs require us to
distribute to our stockholders each year at least 90% of our investment company
taxable income, or ICTI, as defined by the Code. Depending on the level of ICTI
and net capital gain, if any, earned in a tax year, we may choose to carry
forward ICTI in excess of current year distributions into the next tax year and
pay a 4% U.S. federal excise tax on such excess. Any such carryover ICTI must be
distributed before the end of the next tax year through a dividend declared
prior to filing the final tax return related to the year which generated such
ICTI.
ICTI generally differs from net investment income for financial reporting
purposes due to temporary and permanent differences in the recognition of income
and expenses. We may be required to recognize ICTI in certain circumstances in
which we do not receive cash. For example, if we hold debt obligations that are
treated under applicable tax rules as having original issue discount (such as
debt instruments issued with warrants), we must include in ICTI each year a
portion of the original issue discount that accrues over the life of the
obligation, regardless of whether cash representing such income is received by
us in the same taxable year. We may also have to include in ICTI other amounts
that we have not yet received in cash, such as (i) PIK interest income and (ii)
interest income from investments that have been classified as non-accrual for
financial reporting purposes. Interest income on non-accrual investments is not
recognized for financial reporting purposes, but generally is recognized in
ICTI. Because any original issue discount or other amounts accrued will be
included in our ICTI for the year of
104
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accrual, we may be required to make a distribution to our stockholders in order
to satisfy the minimum distribution requirements, even though we will not have
received and may not ever receive any corresponding cash amount. ICTI also
excludes net unrealized appreciation or depreciation, as investment gains or
losses are not included in taxable income until they are realized.
Recent Developments
Subsequent toMarch 31, 2022 , we made approximately made approximately$174.4 million of new commitments, of which$141.0 million closed and funded. The$141.0 million of investments consists of$120.9 million of first lien senior secured debt investments,$16.2 million of second lien senior secured and subordinated debt investments and$3.8 million of equity investments. The weighted average yield of the debt investments was 7.1%. In addition, the Company funded$15.0 million of previously committed delayed draw term loans. Effective onApril 1, 2022 , we increased aggregate commitments under theFebruary 2019 Credit Facility to$1.1 billion from$965.0 million pursuant to the accordion feature under theFebruary 2019 Credit Facility, which allows for an increase in the total commitments to an aggregate of$1.5 billion subject to certain conditions and the satisfaction of specified financial covenants.
On
Critical Accounting Policies and Use of Estimates
The preparation of our unaudited financial statements in accordance withU.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the periods covered by such financial statements. We have identified investment valuation and revenue recognition as our most critical accounting estimates. On an ongoing basis, we evaluate our estimates, including those related to the matters described below. These estimates are based on the information that is currently available to us and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ materially from those estimates under different assumptions or conditions. A discussion of our critical accounting policies follows.
Investment Valuation
The most significant estimate inherent in the preparation of our financial statements is the valuation of investments and the related amounts of unrealized appreciation and depreciation of investments recorded. We have a valuation policy, as well as established and documented processes and methodologies for determining the fair values of portfolio company investments on a recurring (at least quarterly) basis in accordance with the 1940 Act and FASB ASC Topic 820, Fair Value Measurements and Disclosures, or ASC Topic 820. Our current valuation policy and processes were established by Barings and have been approved by the Board. As ofMarch 31, 2022 , our investment portfolio, valued at fair value in accordance with the Board-approved valuation policies, represented approximately 182% of our total net assets, as compared to approximately 243% of our total net assets as ofDecember 31, 2021 . Under ASC Topic 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between a willing buyer and a willing seller at the measurement date. For our portfolio securities, fair value is generally the amount that we might reasonably expect to receive upon the current sale of the security. The fair value measurement assumes that the sale occurs in the principal market for the security, or in the absence of a principal market, in the most advantageous market for the security. If no market for the security exists or if we do not have access to the principal market, the security should be valued based on the sale occurring in a hypothetical market.
Under ASC Topic 820, there are three levels of valuation inputs, as follows:
Level 1 Inputs - include quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 Inputs - include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 Inputs - include inputs that are unobservable and significant to the fair value measurement.
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A financial instrument is categorized within the ASC Topic 820 valuation
hierarchy based upon the lowest level of input to the valuation process that is
significant to the fair value measurement. For example, a Level 3 fair value
measurement may include inputs that are observable (Levels 1 and 2) and
unobservable (Level 3). Therefore, unrealized appreciation and depreciation
related to such investments categorized as Level 3 investments within the tables
in the notes to our consolidated financial statements may include changes in
fair value that are attributable to both observable inputs (Levels 1 and 2) and
unobservable inputs (Level 3).
Our investment portfolio includes certain debt and equity instruments of
privately held companies for which quoted prices or other observable inputs
falling within the categories of Level 1 and Level 2 are generally not
available. In such cases, we determine the fair value of our investments in good
faith primarily using Level 3 inputs. In certain cases, quoted prices or other
observable inputs exist, and if so, we assess the appropriateness of the use of
these third-party quotes in determining fair value based on (i) our
understanding of the level of actual transactions used by the broker to develop
the quote and whether the quote was an indicative price or binding offer and
(ii) the depth and consistency of broker quotes and the correlation of changes
in broker quotes with underlying performance of the portfolio company.
There is no single standard for determining fair value in good faith, as fair
value depends upon the specific circumstances of each individual investment. The
recorded fair values of our Level 3 investments may differ significantly from
fair values that would have been used had an active market for the securities
existed. In addition, changes in the market environment and other events that
may occur over the life of the investments may cause the gains or losses
ultimately realized on these investments to be different than the valuations
currently assigned.
Investment Valuation Process
Barings has established a pricing committee that is, subject to the oversight of
the Board, responsible for the approval, implementation and oversight of the
processes and methodologies that relate to the pricing and valuation of assets
we hold. Barings uses independent third-party providers to price the portfolio,
but in the event an acceptable price cannot be obtained from an approved
external source, Barings will utilize alternative methods in accordance with
internal pricing procedures established by Barings' pricing committee.
At least annually, Barings conducts reviews of the primary pricing vendors to
validate that the inputs used in the vendors' pricing process are deemed to be
market observable. While Barings is not provided access to proprietary models of
the vendors, the reviews have included on-site walkthroughs of the pricing
process, methodologies and control procedures for each asset class and level for
which prices are provided. The review also includes an examination of the
underlying inputs and assumptions for a sample of individual securities across
asset classes, credit rating levels and various durations, a process Barings
continues to perform annually. In addition, the pricing vendors have an
established challenge process in place for all security valuations, which
facilitates identification and resolution of prices that fall outside expected
ranges. Barings believes that the prices received from the pricing vendors are
representative of prices that would be received to sell the assets at the
measurement date (i.e., exit prices).
Our money market fund investments are generally valued using Level 1 inputs and
our equity investments listed on an exchange or on the NASDAQ National Market
System are valued using Level 1 inputs, using the last quoted sale price of that
day. Our syndicated senior secured loans and structured product investments are
generally valued using Level 2 inputs, which are generally valued at the bid
quotation obtained from dealers in loans by an independent pricing service. Our
middle-market, private debt and equity investments are generally valued using
Level 3 inputs.
Independent Valuation
The fair value of loans and equity investments that are not syndicated or for
which market quotations are not readily available, including middle-market
loans, are generally submitted to independent providers to perform an
independent valuation on those loans and equity investments as of the end of
each quarter. Such loans and equity investments are initially held at cost, as
that is a reasonable approximation of fair value on the acquisition date, and
monitored for material changes that could affect the valuation (for example,
changes in interest rates or the credit quality of the borrower). At the quarter
end following the initial acquisition, such loans and equity investments are
generally sent to a valuation provider which will determine the fair value of
each investment. The independent valuation providers apply various methods
(synthetic rating analysis, discounting cash flows, and re-underwriting
analysis) to establish the rate of return a market participant would require
(the "discount rate") as of the valuation date, given market conditions,
prevailing lending standards and the perceived credit quality of the issuer.
Future expected cash flows for each investment are discounted back to present
value using these discount rates in the discounted cash flow analysis. A range
of values will be provided by the valuation provider and Barings will determine
the point within that range that it will use in making valuation recommendations
to the Board, and will report to the Board on its rationale for each such
determination. Barings uses its internal valuation model as a comparison point
to validate the price range
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provided by the valuation provider and, where applicable, in determining the
point within that range that it will use in making valuation recommendations to
the Board. If Barings' pricing committee disagrees with the price range
provided, it may make a fair value recommendation to the Board that is outside
of the range provided by the independent valuation provider, and will notify the
Board of any such override and the reasons therefore. In certain instances, we
may determine that it is not cost-effective, and as a result is not in the
stockholders' best interests, to request an independent valuation firm to
perform an independent valuation on certain investments. Such instances include,
but are not limited to, situations where the fair value of the investment in the
portfolio company is determined to be insignificant relative to the total
investment portfolio. Pursuant to these procedures, the Board determines in good
faith whether our investments were valued at fair value in accordance with our
valuation policies and procedures and the 1940 Act based on, among other things,
the input of Barings, our Audit Committee and the independent valuation firm.
The SEC has adopted new Rule 2a-5 under the 1940 Act. This rule establishes
requirements for determining fair value in good faith for purposes of the 1940
Act. We will comply with the new rule's valuation requirements on or before the
SEC's September 8, 2022 compliance date.
Valuation Techniques
Our valuation techniques are based upon both observable and unobservable pricing inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument. An independent pricing service provider is the preferred source of pricing a loan, however, to the extent the independent pricing service provider price is unavailable or not relevant and reliable, we will utilize alternative approaches such as broker quotes or manual prices. We attempt to maximize the use of observable inputs and minimize the use of unobservable inputs. The availability of observable inputs can vary from investment to investment and is affected by a wide variety of factors, including the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets and other characteristics particular to the security.
Valuation of Investments in Jocassee,
As Jocassee,Thompson Rivers ,Waccamaw River ,Sierra JV and MVC Private Equity Fund LP are investment companies with no readily determinable fair values, we estimate the fair value of our investments in these entities using net asset value of each company and our ownership percentage as a practical expedient. The net asset value is determined in accordance with the specialized accounting guidance for investment companies.
Revenue Recognition
Interest and Dividend Income
Interest income, including amortization of premium and accretion of discount, is recorded on the accrual basis to the extent that such amounts are expected to be collected. Generally, when interest and/or principal payments on a loan become past due, or if we otherwise do not expect the borrower to be able to service its debt and other obligations, we will place the loan on non-accrual status and will generally cease recognizing interest income on that loan for financial reporting purposes until all principal and interest have been brought current through payment or due to a restructuring such that the interest income is deemed to be collectible. The cessation of recognition of such interest will negatively impact the reported fair value of the investment. We write off any previously accrued and uncollected interest when it is determined that interest is no longer considered collectible. Dividend income is recorded on the ex-dividend date. We may have to include interest income in our ICTI, including original issue discount income, from investments that have been classified as non-accrual for financial reporting purposes. Interest income on non-accrual investments is not recognized for financial reporting purposes, but generally is recognized in ICTI. As a result, we may be required to make a distribution to our stockholders in order to satisfy the minimum distribution requirements to maintain our RIC tax treatment, even though we will not have received and may not ever receive any corresponding cash amount. Additionally, any loss recognized by us forU.S. federal income tax purposes on previously accrued interest income will be treated as a capital loss.
Fee Income
Origination, facility, commitment, consent and other advance fees received in
connection with the origination of a loan, or Loan Origination Fees, are
recorded as deferred income and recognized as investment income over the term of
the loan. Upon prepayment of a loan, any unamortized Loan Origination Fees are
recorded as investment income. In the general course of our business, we receive
certain fees from portfolio companies, which are non-recurring in nature. Such
fees include loan prepayment penalties, advisory, loan amendment and other fees,
and are recorded as investment income when earned.
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Fee income for the three months ended March 31, 2022 and 2021 was as follows:
Three Months Three Months
Ended Ended
($ in thousands) March 31, 2022 March 31, 2021
Recurring Fee Income:
Amortization of loan origination fees $ 1,327 $ 1,078
Management, valuation and other fees (585) 581 Total Recurring Fee Income 742 1,659 Non-Recurring Fee Income: Prepayment fees - 50 Acceleration of unamortized loan origination fees 196
403
Advisory, loan amendment and other fees 259
21
Total Non-Recurring Fee Income 455 474 Total Fee Income$ 1,197 $ 2,133
Payment-in-Kind (PIK) Interest Income
We currently hold, and expect to hold in the future, some loans in our portfolio that contain PIK interest provisions. PIK interest, computed at the contractual rate specified in each loan agreement, is periodically added to the principal balance of the loan, rather than being paid to us in cash, and is recorded as interest income. Thus, the actual collection of PIK interest may be deferred until the time of debt principal repayment. PIK interest, which is a non-cash source of income at the time of recognition, is included in our taxable income and therefore affects the amount we are required to distribute to our stockholders to maintain our tax treatment as a RIC forU.S. federal income tax purposes, even though we have not yet collected the cash. Generally, when current cash interest and/or principal payments on a loan become past due, or if we otherwise do not expect the borrower to be able to service its debt and other obligations, we will place the loan on non-accrual status and will generally cease recognizing PIK interest income on that loan for financial reporting purposes until all principal and interest have been brought current through payment or due to a restructuring such that the interest income is deemed to be collectible. We write off any previously accrued and uncollected PIK interest when it is determined that the PIK interest is no longer collectible. We may have to include in our ICTI, PIK interest income from investments that have been classified as non-accrual for financial reporting purposes. Interest income on non-accrual investments is not recognized for financial reporting purposes, but generally is recognized in ICTI. As a result, we may be required to make a distribution to our stockholders in order to satisfy the minimum distribution requirements, even though we will not have received and may not ever receive any corresponding cash amount.
Unused Commitments
In the normal course of business, we are party to financial instruments with off-balance sheet risk, consisting primarily of unused commitments to extend financing to our portfolio companies. Since commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. As ofMarch 31, 2022 andDecember 31, 2021 , we believed that we had adequate financial resources to satisfy our unfunded commitments. The balances of unused commitments to extend financing as ofMarch 31, 2022 andDecember 31, 2021 were as follows:Portfolio Company ($ in thousands) Investment Type March 31, 2022 December 31, 2021 1888 Industrial Services, LLC(1)(2) Revolver $ 314 $ - Acclime Holdings HK Limited(1) Delayed Draw Term Loan 1,179 1,179 Acclime Holdings HK Limited(1) Delayed Draw Term Loan 110 110 Air Comm Corporation, LLC(1) Delayed Draw Term Loan 11 11 Air Comm Corporation, LLC(1) Delayed Draw Term Loan 1,448 1,448 Amtech Software(1) Delayed Draw Term Loan 1,527 2,727 Amtech Software(1) Revolver 682 682 108
--------------------------------------------------------------------------------Portfolio Company ($ in thousands) Investment Type March 31, 2022 December 31, 2021 AnalytiChem Holding GmbH(1)(2)(3) Delayed Draw Term Loan 6,073 6,207 Aquavista Watersides 2 LTD(1)(2)(4) Bridge Revolver 489 503
3,059 3,147
Astra Bidco Limited(1)(2)(4) Delayed Draw Term Loan 959 2,571
1,435 3,497
Azalea Buyer, Inc.(1) Delayed Draw Term Loan 962 962
Azalea Buyer, Inc.(1) Revolver 481 481
Bariacum S.A(1)(2)(3) Acquisition Facility 2,114 2,161
Beyond Risk Management, Inc.(1)(2) Delayed Draw Term Loan 2,573 2,573
BigHand UK Bidco Limited(1)(2)(4) Acquisition Facility - 378
Black Angus Steakhouses, LLC(1) Acquisition Facility 417 -
Bounteous, Inc.(1) Delayed Draw Term Loan 2,840 2,840
Brightpay Limited(1)(2)(3) Delayed Draw Term Loan 241 432
Brightpay Limited(1)(2)(3) Delayed Draw Term Loan 141 144
BrightSign LLC(1) Revolver 1,329 1,329
British Engineering Services Holdco
Limited(1)(2)(4) Bridge Revolver - 613
Brook & Whittle Holding Corp.(1) Delayed Draw Term Loan 852 -
CAi Software, LLC(1) Revolver 943 943
120 167
Centralis Finco S.a.r.l.(1)(3) Acquisition Facility 451 461
Ceres Pharma NV(1)(2)(3) Delayed Draw Term Loan 2,103 2,149
CGI Parent, LLC(1)(2) Revolver 1,212 -
Classic Collision (
309 393
Coastal Marina Holdings, LLC(1)(2) PIK Tranche B Term Loan 1,311 1,311
Coastal Marina Holdings, LLC(1)(2) Tranche A Term Loan 3,576 3,576
6,018 6,018
Coyo Uprising GmbH(1)(2)(3) Delayed Draw Term Loan 874 894
Crash Champions, LLC(1) Delayed Draw Term Loan 379 5,420
CSL Dualcom(1)(4) Acquisition Term Loan 970 998
Dart Buyer, Inc.(1) Delayed Draw Term Loan 1,163 2,431
DecksDirect, LLC(1) Revolver 58 218
DreamStart Bidco SAS(1)(3) Acquisition Facility 604 617
Dune Group(1)(3) Delayed Draw Term Loan 650 665
Dwyer Instruments, Inc.(1) Delayed Draw Term Loan 692 692
Eclipse Business Capital, LLC(1) Revolver 10,909 11,818
EMI Porta Holdco LLC(1) Delayed Draw Term Loan 11,212 12,458
EMI Porta Holdco LLC(1) Revolver 2,361 2,966
EPS NASS Parent, Inc.(1) Delayed Draw Term Loan 583 583
eShipping, LLC(1) Delayed Draw Term Loan 1,650 2,548
eShipping, LLC(1) Revolver 824 1,232
Events
481 -
F24 (Stairway BidCo GmbH)(1)(2)(3) Delayed Draw Term Loan 396 405
Fineline Technologies, Inc.(1) Delayed Draw Term Loan 180 180
Finexvet(1)(3) Acquisition Facility 967 -
FragilePak LLC(1)(2) Delayed Draw Term Loan 2,354 2,354
657 657
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Portfolio Company
($ in thousands) Investment Type March 31, 2022 December 31, 2021
Heavy Construction Systems Specialists, LLC(1) Revolver 2,632 2,632
HW Holdco, LLC (Hanley Wood LLC)(1)(2) Delayed Draw Term Loan 913 1,563
IGL Holdings III Corp.(1) Delayed Draw Term Loan 1,217 1,217
Innovad Group II BV(1)(2)(3) Delayed Draw Term Loan 1,785 1,825
INOS 19-090 GmbH(1)(2)(3) Acquisition Facility 2,481 2,535
ITI Intermodal, Inc.(1) Delayed Draw Term Loan 103 103
ITI Intermodal, Inc.(1) Revolver 124 124
Jaguar Merger Sub Inc.(1)(2) Delayed Draw Term Loan 1,781 1,961
Jaguar Merger Sub Inc.(1)(2) Revolver 490 490
Jocassee Partners LLC Joint Venture 15,000 20,000
Jon Bidco Limited(1)(2)(7) Capex & Acquisition Facility 1,585 -
Jones Fish Hatcheries & Distributors LLC(1) Revolver 418 -
Kano Laboratories LLC(1)(2) Delayed Draw Term Loan 153 153
Kano Laboratories LLC(1)(2) Delayed Draw Term Loan 2,830 4,544
Kemmerer Operations LLC(1) Delayed Draw Term Loan 908 -
LAF International(1)(2)(3) Acquisition Facility 178 341
Lambir Bidco Limited(1)(2)(3) Bridge Revolver 920 941
Lambir Bidco Limited(1)(2)(3) Delayed Draw Term Loan 1,841 1,881
LeadsOnline, LLC(1) Revolver 2,603 -
Lifestyle Intermediate II, LLC(1) Revolver 2,500 -
LivTech Purchaser, Inc.(1) Delayed Draw Term Loan 34 82
Marmoutier Holding B.V.(1)(2)(3) Delayed Draw Term Loan 396 405
Marmoutier Holding B.V.(1)(2)(3) Revolver 159 162
Marshall Excelsior Co.(1)(2) Revolver 1,047 -
MC Group Ventures Corporation(1) Delayed Draw Term Loan 817 817
1,072 1,038
Murphy Midco Limited(1)(4) Delayed Draw Term Loan 648 2,617
Narda Acquisitionco., Inc.(1) Revolver 1,311 1,311
Navia Benefit Solutions, Inc.(1) Delayed Draw Term Loan 1,261 1,261
Nexus Underwriting Management Limited(1)(2)(4) Revolver 101 103
526 541
Novotech Aus Bidco Pty Ltd(1) Capex & Acquisition Facility 809 -
OA Buyer, Inc.(1) Revolver 1,331 1,331
OAC Holdings I Corp(1) Revolver 685 -
OG III B.V.(1)(2)(3) Acquisition CapEx Facility 671 686
Omni Intermediate Holdings, LLC(1)(2) Delayed Draw Term Loan - 817
Omni Intermediate Holdings, LLC(1)(2) Delayed Draw Term Loan 2,289 4,357
OSP Hamilton Purchaser, LLC(1) Revolver 187 187
Pacific Health Supplies Bidco Pty
Limited(1)(2)(5) CapEx Term Loan 1,325 1,283
PDQ.Com Corporation(1) Delayed Draw Term Loan - 289
PDQ.Com Corporation(1) Delayed Draw Term Loan 7,753 10,948
Polara Enterprises, L.L.C.(1)(2) Revolver 545 545
Policy Services Company, LLC(1)(2) Delayed Draw Term Loan 3,772 6,944
Premium Invest(1)(2)(3) Acquisition Facility 1,892 1,933
ProfitOptics, LLC(1) Revolver 484 -
Protego Bidco B.V.(1)(2)(3) Delayed Draw Term Loan 826 844
QPE7 SPV1 BidCo Pty Ltd(1)(2)(5) Acquisition Term Loan - 373
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--------------------------------------------------------------------------------Portfolio Company December 31, ($ in thousands) Investment Type March 31, 2022 2021 RA Outdoors, LLC(1) Revolver 741 - Rep Seko Merger Sub LLC(1) Delayed Draw Term Loan 1,305 1,455 Reward Gateway (UK) Ltd(1)(2)(4) Acquisition Facility 657 1,061 Riedel Beheer B.V.(1)(2)(3) Revolver - 230 Riedel Beheer B.V.(1)(2)(3) Delayed Draw Term Loan 150 153 Scaled Agile, Inc.(1)(2) Delayed Draw Term Loan 416 416 Scaled Agile, Inc.(1)(2) Revolver 336 336 Security Holdings B.V.(1)(2)(3) Delayed Draw Term Loan 2,225 2,274 Security Holdings B.V.(1)(2)(3) Revolver 1,113 1,137 Smartling, Inc.(1) Delayed Draw Term Loan 1,978 2,353 Smartling, Inc.(1) Revolver 1,176 1,176 Smile Brands Group, Inc.(1)(2) Delayed Draw Term Loan 418 655Springbrook Software (SBRK Intermediate, Inc.)(1)(2) Delayed Draw Term Loan 2,372 2,373 SSCP Pegasus Midco Limited(1)(4) Delayed Draw Term Loan 5,105 5,251 Superjet Buyer, LLC(1) Revolver 1,825 1,825 Syntax Systems Ltd(1)(2) Revolver 448 569 Syntax Systems Ltd(1)(2) Delayed Draw Term Loan 1,933 1,933 Tank Holding Corp(1) Revolver 873 - Techone B.V.(1)(2)(3) Delayed Draw Term Loan 1,586 1,621 Techone B.V.(1)(2)(3) Revolver 423 432 Tencarva Machinery Company, LLC(1) Delayed Draw Term Loan 886 886 Tencarva Machinery Company, LLC(1) Revolver 1,128 1,129The Caprock Group, Inc. (aka TA/TCG Holdings, LLC)(1) Delayed Draw Term Loan 2,811 2,811The Caprock Group, Inc. (aka TA/TCG Holdings, LLC)(1) Revolver 827 827 The Hilb Group, LLC(1) Delayed Draw Term Loan 2,529 2,773 Thermacell Repellents, Inc.(1) Revolver 605 - Transit Technologies LLC(1)(2) Delayed Draw Term Loan - 1,857 Truck-Lite Co., LLC(1) Delayed Draw Term Loan 4,540 4,540 Turbo Buyer, Inc.(1) Delayed Draw Term Loan 1,339 2,070 Turbo Buyer, Inc.(1) Delayed Draw Term Loan 2,250 -USLS Acquisition, Inc. (f/k/a US Legal Support, Inc.)(1)(2) Delayed Draw Term Loan 3,820 - Victoria Bidco Limited(1)(2)(4) Delayed Draw Term Loan 458 - Waccamaw River, LLC(2) Joint Venture 4,580 11,280 W2O Holdings, Inc.(1) Delayed Draw Term Loan 3,831 3,832 West Dermatology, LLC(1) Revolver 552 - West Dermatology, LLC(1) Delayed Draw Term Loan 3,352 - West Dermatology, LLC(1) PIK Delayed Draw Term Loan 144 - Woodland Foods, Inc.(1) Revolver 1,734 2,070 ZB Holdco LLC(1) Revolver 845 - ZB Holdco LLC(1) Delayed Draw Term Loan 1,352 - Zeppelin Bidco Limited(1)(2)(4) Capex / Acquisition Facility 3,472 - Zeppelin Bidco Limited(1)(2)(4) Revolver $ 579 $ - Total unused commitments to extend financing
(1)Our estimate of the fair value of the current investments in these portfolio companies includes an analysis of the fair value of any unfunded commitments. (2)Represents a commitment to extend financing to a portfolio company where one or more of our current investments in the portfolio company are carried at less than cost. (3)Actual commitment amount is denominated in Euros. Commitment was translated intoU.S. dollars based on the spot rate at the relevant balance sheet date. 111
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(4)Actual commitment amount is denominated in British pounds sterling. Commitment was translated intoU.S. dollars based on the spot rate at the relevant balance sheet date. (5)Actual commitment amount is denominated in Australian dollars. Commitment was translated intoU.S. dollars based on the spot rate at the relevant balance sheet date. (6)Actual commitment amount is denominated in Canadian dollars. Commitment was translated intoU.S. dollars based on the spot rate at the relevant balance sheet date. (7)Actual commitment amount is denominated inNew Zealand dollars. Commitment was translated intoU.S. dollars based on the spot rate at the relevant balance sheet date. In the normal course of business, we guarantee certain obligations in connection with our portfolio companies (in particular, certain controlled portfolio companies). Under these guarantee arrangements, payments may be required to be made to third parties if such guarantees are called upon or if the portfolio companies were to default on their related obligations, as applicable. As ofMarch 31, 2022 andDecember 31, 2021 , we had guaranteed €9.9 million ($11.0 million U.S. dollars and$11.3 million U.S. dollars, respectively) relating to credit facilities amongErste Bank andMVC Automotive Group Gmbh , or MVC Auto. We would be required to make payments toErste Bank if MVC Auto were to default on their related payment obligations. None of the credit facility guarantees are recorded as a liability on our Unaudited and Audited Consolidated Balance Sheets. As such, the credit facility liabilities are considered in the valuation of our investments in MVC Auto. The guarantees denominated in foreign currencies were translated intoU.S. dollars based on the spot rate at the relevant balance sheet date.
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