CAPITAL SOUTHWEST CORPORATION

(CSWC)
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CAPITAL SOUTHWEST CORP Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-K)

05/24/2022 | 04:30pm EDT
The following discussion should be read in conjunction with our consolidated
financial statements and the notes thereto included elsewhere in this Annual
Report on Form 10-K. Statements we make in the following discussion which
express a belief, expectation or intention, as well as those that are not
historical fact, are forward-looking statements that are subject to risks,
uncertainties and assumptions. Our actual results, performance or achievements,
or industry results, could differ materially from those we express in the
following discussion as a result of a variety of factors, including the risks
and uncertainties we have referred to under the headings "Cautionary Statement
Concerning Forward-Looking Statements" and "Risk Factors" in Part I of this
report.

OVERVIEW


We are an internally managed closed-end, non-diversified investment company that
has been elected to be regulated as a BDC under the 1940 Act. We specialize in
providing customized debt and equity financing to LMM companies and debt capital
to UMM companies in a broad range of investment segments located primarily in
the United States. Our investment objective is to produce attractive
risk-adjusted returns by generating current income from our debt investments and
capital appreciation from our equity and equity related investments. Our
investment strategy is to partner with business owners, management teams and
financial sponsors to provide flexible financing solutions to fund growth,
changes of control, or other corporate events. We invest primarily in senior
debt securities, secured by security interests in portfolio company assets. We
also invest in equity interests in our portfolio companies alongside our debt
securities.

We focus on investing in companies with histories of generating revenues and
positive cash flow, established market positions and proven management teams
with strong operating discipline. We primarily target senior debt and equity
investments in LMM companies, and opportunistically target first and second lien
loans in UMM companies. Our target LMM companies typically have annual earnings
before interest, taxes, depreciation and amortization ("EBITDA") generally
between $3.0 million and $20.0 million, and our LMM investments generally range
in size from $5.0 million to $35.0 million. Our UMM investments generally
include first and second lien loans in companies with EBITDA generally greater
than $20.0 million, and our UMM investments typically range in size from $5.0
million to $20.0 million.

We seek to fill the financing gap for LMM companies, which, historically, have
had more limited access to financing from commercial banks and other traditional
sources. The underserved nature of the LMM creates the opportunity for us to
meet the financing needs of LMM companies while also negotiating favorable
transaction terms and equity participations. Our ability to invest across a LMM
company's capital structure, from secured loans to equity securities, allows us
to offer portfolio companies a comprehensive suite of financing options.
Providing customized financing solutions is important to LMM companies. We
generally seek to partner directly with financial sponsors, entrepreneurs,
management teams and business owners in making our investments. Our LMM debt
investments typically include senior loans with a first lien on the assets of
the portfolio company. Our LMM debt investments typically have a term of between
five and seven years from the original investment date. We also often seek to
invest in the equity securities of our LMM portfolio companies.

Our investments in UMM companies primarily consist of direct investments in or
secondary purchases of interest bearing debt securities in privately held
companies that are generally larger in size than the LMM companies included in
our portfolio. Our UMM debt investments are generally secured by either a first
or second priority lien on the assets of the portfolio company and typically
have an expected duration of between three and seven years from the original
investment date.

Since the Share Distribution on September 30, 2015 through March 31, 2022, our
exited investments resulted in total proceeds received of approximately $694.4
million and a weighted average internal rate of return to the Company of
approximately 14.4% (based on original cash invested of approximately $639.2
million). Internal rate of return is the discount rate that makes the net
present value of all cash flows related to a particular investment equal to
zero. Internal rate of return is gross of expenses related to investments as
these expenses are not allocable to specific investments. Investments are
considered to be exited when the original investment objective has been achieved
through the receipt of cash and/or non-cash consideration upon the repayment of
a debt investment or sale of an investment or through the determination that no
further consideration was collectible and, thus, a loss may have been realized.

Because we are internally managed, we do not pay any external investment
advisory fees, but instead directly incur the operating costs associated with
employing investment and portfolio management professionals. We believe that our
internally managed structure provides us with a beneficial operating expense
structure when compared to other publicly traded and
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privately held investment firms which are externally managed, and our internally
managed structure allows us the opportunity to leverage our non-interest
operating expenses as we grow our investment portfolio. For the years ended
March 31, 2022, 2021 and 2020, the ratio of our last twelve months ("LTM")
operating expenses, excluding interest expense, as a percentage of our LTM
average total assets was 2.20%, 2.42% and 2.76%, respectively.

Recent COVID-19 Developments


We have been closely monitoring, and will continue to monitor, the impact of the
COVID-19 pandemic (including new variants of COVID-19) and its impact on all
aspects of our business, including how it will impact our portfolio companies,
employees, due diligence and underwriting processes, and financial markets.
Given the continued fluidity of the pandemic, we cannot estimate the long-term
impact of COVID-19 on our business, future results of operations, financial
position or cash flows at this time. Further, the operational and financial
performance of the portfolio companies in which we make investments may be
significantly impacted by COVID-19, which may in turn impact the valuation of
our investments. We believe our portfolio companies have taken, and continue to
take, immediate actions to effectively and efficiently respond to the challenges
posed by COVID-19 and related restrictions imposed by state and local
governments and other private businesses, including developing liquidity plans
supported by internal cash reserves, and shareholder support. The COVID-19
pandemic and preventative measures taken to contain or mitigate its spread have
caused, and are continuing to cause, business shutdowns, cancellations of events
and restrictions on travel, significant reductions in demand for certain goods
and services, reductions in business activity and financial transactions, supply
chain disruptions, labor difficulties and shortages, commodity inflation and
elements of economic and financial market instability in the United States and
globally. Such effects will likely continue for the duration of the pandemic,
which is uncertain, and for some period thereafter.

CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES


The preparation of our consolidated financial statements in accordance with U.S.
GAAP requires management to make certain estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses for the
periods covered by the consolidated financial statements. We have identified
investment valuation and revenue recognition as our most critical accounting
estimates. On an on-going basis, we evaluate our estimates, including those
related to the matters 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.

Valuation of Investments


The most significant determination inherent in the preparation of our
consolidated financial statements is the valuation of our investment portfolio
and the related amounts of unrealized appreciation and depreciation. As of
March 31, 2022 and 2021, our investment portfolio at fair value represented
approximately 96.2% and 93.6% of our total assets, respectively. We are required
to report our investments at fair value. We follow the provisions of ASC
820. ASC 820 defines fair value, establishes a framework for measuring fair
value, establishes a fair value hierarchy based on the quality of inputs used to
measure fair value, and enhances disclosure requirements for fair value
measurements. ASC 820 requires us to assume that the portfolio investment is to
be sold in the principal market to independent market participants, which may be
a hypothetical market. See Note 4 - "Fair Value Measurements" in the notes to
consolidated financial statements for a detailed discussion of our investment
portfolio valuation process and procedures.

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

Our Board of Directors is responsible for determining, in good faith, the fair
value for our investment portfolio and our valuation procedures, consistent with
1940 Act requirements. Our Board of Directors believes that our investment
portfolio as of March 31, 2022 and 2021 reflects fair value as of those dates
based on the markets in which we operate and other conditions in existence on
those reporting dates.

Revenue Recognition

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Interest and Dividend Income

Interest and dividend income is recorded on an accrual basis to the extent
amounts are expected to be collected. Dividend income is recognized on the date
dividends are declared by the portfolio company or at the point an obligation
exists for the portfolio company to make a distribution. Discounts/premiums
received to par on loans purchased are capitalized and accreted or amortized
into income over the life of the loan. In accordance with our valuation policy,
accrued interest and dividend income is evaluated periodically for
collectability. When we do not expect the debtor to be able to service all of
its debt or other obligations, we will generally establish a reserve against
interest income receivable, thereby placing the loan or debt security on
non-accrual status, and cease to recognize interest income on that loan or debt
security until the borrower has demonstrated the ability and intent to pay
contractual amounts due. If a loan or debt security's status significantly
improves regarding ability to service debt or other obligations, it will be
restored to accrual basis. As of March 31, 2022, we had three investments on
non-accrual status, which represent approximately 1.5% of our total investment
portfolio's fair value and approximately 2.6% of its cost. As of March 31, 2021,
we did not have any investments on non-accrual status.

Recently Issued Accounting Standards


In March 2020, the FASB issued ASU 2020-04, "Reference rate reform (Topic
848)-Facilitation of the effects of reference rate reform on financial
reporting." The amendments in this update provide optional expedients and
exceptions for applying U.S. GAAP to certain contracts and hedging relationships
that reference LIBOR or another reference rate expected to be discontinued due
to reference rate reform and became effective upon issuance for all entities.
The Company has agreements that have LIBOR as a reference rate with certain
portfolio companies and under our Credit Facility (as described in Note 5) and
the I-45 SLF LLC credit facility (as described in Note 13). Many of these
agreements (including the credit agreements relating to the Credit Facility and
the I-45 credit facility) include an alternative successor rate or language for
choosing an alternative successor rate when LIBOR reference is no longer
considered to be appropriate. With respect to other agreements, the Company
intends to work with its portfolio companies to modify agreements to choose an
alternative successor rate. Contract modifications are required to be evaluated
in determining whether the modifications result in the establishment of new
contracts or the continuation of existing contracts. The standard is effective
as of March 12, 2020 through December 31, 2022 and the Company plans to apply
the amendments in this update to account for contract modifications due to
changes in reference rates. The Company does not believe that it will have a
material impact on its consolidated financial statements or its disclosures.

In November 2020, the SEC issued a final rule that modernized and simplifies
Management's Discussion and Analysis and certain financial disclosure
requirements in Regulation S-K (the "Amendments"). Specifically, the Amendments:
(i) eliminate Item 301 of Regulation S-K (Selected Financial Data); (ii)
simplify Item 302 of Regulation S-K (Supplementary Financial Information); and
(iii) amend certain aspects of Item 303 of Regulation S-K (Management's
Discussion and Analysis of Financial Condition and Results of Operations). The
Amendments became effective on February 10, 2021 and compliance will be required
for the registrants' fiscal year ending on or after August 9, 2021. Early
adoption of the Amendments is permitted on an item-by-item basis after the
effective date; however, a registrant must fully comply with each adopted item
in its entirety. The Company adopted the Amendments for the year ended March 31,
2022 and there were no material changes to the consolidated financial statement
or its disclosures.


INVESTMENT PORTFOLIO COMPOSITION


The total value of our investment portfolio was $936.6 million as of March 31,
2022, as compared to $688.4 million as of March 31, 2021. As of March 31, 2022,
we had investments in 73 portfolio companies with an aggregate cost of $938.3
million. As of March 31, 2021, we had investments in 55 portfolio companies with
an aggregate cost of $703.6 million.

As of March 31, 2022 and 2021, approximately $772.7 million, or 97.3%, and
$546.6 million, or 95.5%, respectively, of our debt investment portfolio (at
fair value) bore interest at floating rates, of which 100.0% were subject to
contractual minimum interest rates. As of March 31, 2022 and 2021, the weighted
average contractual minimum interest rate is 1.08% and 1.30%, respectively. As
of March 31, 2022 and 2021, approximately $21.1 million, or 2.7%, and $26.0
million, or 4.5%, respectively, of our debt investment portfolio (at fair value)
bore interest at fixed rates.


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The following tables provide a summary of our investments in portfolio companies
as of March 31, 2022 and 2021 (excluding our investment in I-45 SLF LLC):

                                                                       

March 31, 2022 March 31, 2021

                                                                               (dollars in thousands)
Number of portfolio companies (a)                                                 72                      54
Fair value                                                            $      879,011          $      631,274
Cost                                                                  $      862,303          $      630,757
% of portfolio at cost - debt                                                   90.3  %                 90.7  %
% of portfolio at cost - equity                                                  9.7  %                  9.3  %
% of debt investments at cost secured by first lien                             84.2  %                 83.0  %
Weighted average annual effective yield (b)                                      9.3  %                 10.8  %
Weighted average EBITDA (c)                                           $       20,889          $       16,960
Weighted average leverage through CSWC security (c)(d)                             4.0x                    4.1x



(a)At March 31, 2022 and 2021, we had equity ownership in approximately 56.9%
and 53.7%, respectively, of our investments.
(b)The weighted-average annual effective yields were computed using the
effective interest rates for all debt investments at cost as of March 31, 2022
and 2021, including accretion of original issue discount but excluding fees
payable upon repayment of the debt instruments and any debt investments on
non-accrual status. As of March 31, 2022, there were three investments on
non-accrual status. As of March 31, 2021, we did not have any investments on
non-accrual status. Weighted-average annual effective yield is not a return to
shareholders and is higher than what an investor in shares in our common stock
will realize on its investment because it does not reflect our expenses or any
sales load paid by an investor.
(c)Includes CSWC debt investments only. Weighted average EBITDA metric is
calculated using investment cost basis weighting. For the year ended March 31,
2022, three portfolio companies are excluded from this calculation due to a
reported debt to adjusted EBITDA ratio that was not meaningful. For the year
ended March 31, 2021, six portfolio companies are excluded from this calculation
due to a reported debt to adjusted EBITDA ratio that was not meaningful.
(d)Includes CSWC debt investments only. Calculated as the amount of each
portfolio company's debt (including CSWC's position and debt senior or pari
passu to CSWC's position, but excluding debt subordinated to CSWC's position) in
the capital structure divided by each portfolio company's adjusted EBITDA.
Weighted average leverage is calculated using investment cost basis weighting.
Management uses this metric as a guide to evaluate relative risk of its position
in each portfolio debt investment. For the year ended March 31, 2022, three
portfolio companies are excluded from this calculation due to a reported debt to
adjusted EBITDA ratio that was not meaningful. For the year ended March 31,
2021, six portfolio companies are excluded from this calculation.

Portfolio Asset Quality


We utilize an internally developed investment rating system to rate the
performance and monitor the expected level of returns for each debt investment
in our portfolio. The investment rating system takes into account both
quantitative and qualitative factors of the portfolio company and the
investments held therein, including each investment's expected level of returns
and the collectability of our debt investments, comparisons to competitors and
other industry participants and the portfolio company's future outlook. The
ratings are not intended to reflect the performance or expected level of returns
of our equity investments.

•Investment Rating 1 represents the least amount of risk in our portfolio. The
investment is performing materially above underwriting expectations and the
trends and risk factors are generally favorable. The investment generally has a
higher probability of being prepaid in part or in full.
•Investment Rating 2 indicates the investment is performing as expected at the
time of underwriting and the trends and risk factors are generally favorable to
neutral. All new loans are initially rated 2.
•Investment Rating 3 involves an investment performing below underwriting
expectations and the trends and risk factors are generally neutral to negative.
The investment may be out of compliance with financial covenants and interest
payments may be impaired, however principal payments are generally not past
due.
•Investment Rating 4 indicates that the investment is performing materially
below underwriting expectations, the trends and risk factors are generally
negative and the risk of the investment has increased substantially. Interest
and principal payments on our investment are likely to be impaired.

As the COVID-19 pandemic continues to evolve, we are maintaining close
communications with our portfolio companies to assess and manage potential risks
across our debt investment portfolio. We have also increased oversight of
credits in vulnerable industries in an attempt to improve loan performance and
reduce credit risk.

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The following table shows the distribution of our debt portfolio investments on
the 1 to 4 investment rating scale at fair value as of March 31, 2022 and 2021:


                                   As of March 31, 2022
                                 Debt
                            Investments at             Percentage of
Investment Rating             Fair Value               Debt Portfolio
                                  (dollars in thousands)
1                   $          124,192                         15.6  %
2                              632,675                         79.7
3                               36,648                          4.6
4                                  319                          0.1
Total               $          793,834                        100.0  %

                                   As of March 31, 2021
                                 Debt
                            Investments at             Percentage of
Investment Rating             Fair Value               Debt Portfolio
                                  (dollars in thousands)
1                   $           58,466                         10.2  %
2                              461,239                         80.6
3                               52,909                          9.2
4                                    -                            -
Total               $          572,614                        100.0  %



Interest and dividend income is recorded on an accrual basis to the extent
amounts are expected to be collected. When we do not expect the debtor to be
able to service all of its debt or other obligations, we will generally
establish a reserve against interest income receivable, thereby placing the loan
or debt security on non-accrual status, and cease to recognize interest income
on that loan or debt security until the borrower has demonstrated the ability
and intent to pay contractual amounts due.

As of March 31, 2022, we had three debt investments on non-accrual status, which
represents approximately 1.5% of our total investment portfolio's fair value and
approximately 2.6% of its cost. As of March 31, 2021, we did not have any
investments on non-accrual status.

Investment Activity


During the year ended March 31, 2022, we made new debt investments in
34 portfolio companies totaling $412.2 million, follow-on debt investments in
fourteen portfolio companies totaling $46.2 million, and equity investments in
15 new and six existing portfolio companies totaling $15.0 million. We also
funded $3.2 million on our existing equity commitment to I-45 SLF LLC. We
received contractual principal repayments totaling approximately $16.0 million
and full prepayments of approximately $241.2 million. We funded $22.6 million on
revolving loans and received $9.1 million in repayments on revolving loans. In
addition, we received proceeds from sales of equity investments totaling $11.9
million.

During the year ended March 31, 2021, we made new debt investments in
sixteen portfolio companies totaling $164.0 million, follow-on debt investments
in fourteen portfolio companies totaling $26.3 million, and equity investments
in four existing and seven new portfolio companies totaling $8.8 million. We
received contractual principal repayments totaling approximately $24.7 million
and full prepayments of approximately $63.1 million. We funded $7.5 million on
revolving loans and received $11.0 million in repayments on revolving loans. In
addition, we received proceeds from sales of equity investments totaling $9.8
million.


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Total portfolio investment activity for the years ended March 31, 2022 and 2021
was as follows (in thousands):

                                                                                                      Preferred &
                                 First Lien          Second Lien                                    Common Equity &           Financial
Year ended March 31, 2022           Loans               Loans             Subordinated Debt            Warrants              Instruments             I-45 SLF LLC            Total

Fair value, beginning of period $ 524,161 $ 36,919 $

        11,534          $     58,660          $             -          $      57,158          $ 688,432
New investments                    462,032              18,669                         318                14,999                        -                  3,200            499,218
Proceeds from sales of
investments                              -                 (53)                          -               (11,881)                       -                      -            (11,934)
Principal repayments received     (247,538)             (7,223)                    (11,521)                    -                        -                      -           (266,282)
Conversion of security              (4,683)              5,208                           -                  (525)                       -                      -                  -
PIK interest capitalized             2,455               1,217                         518                     -                        -                      -              4,190
Accretion of loan discounts          2,726                 233                          46                     -                        -                      -              3,005
Realized (loss) gain                   (67)             (2,274)                         46                 8,845                        -                      -              6,550
Unrealized gain (loss)                 786                 (51)                        376                15,079                        -                 (2,755)            13,435

Fair value, end of period $ 739,872 $ 52,645 $

          1,317          $     85,177          $             -          $      57,603          $ 936,614
Weighted average yield on debt
investments at end of period                                                                                                                                                   9.30  %
Weighted average yield on total
investments at end of period                                                                                                                                                   9.01  %



                                                                                                      Preferred &
                                 First Lien          Second Lien                                    Common Equity &           Financial
Year ended March 31, 2021           Loans               Loans             Subordinated Debt            Warrants              Instruments             I-45 SLF LLC            Total

Fair value, beginning of period $ 427,447 $ 37,139 $

         9,747          $     38,979          $             -          $      39,760          $ 553,072
New investments                    197,237                   -                         516                 8,796                        -                 12,800            219,349
Proceeds from sales of
investments                              -                   -                           -                (9,841)                       -                      -             (9,841)
Principal repayments received      (98,567)               (250)                          -                     -                        -                 (8,000)          (106,817)
Conversion of security              (9,692)                778                           -                 8,914                        -                      -                  -
PIK interest capitalized             5,919                 899                       1,062                     -                        -                      -              7,880
Accretion of loan discounts          2,125                 192                          30                     -                        -                      -              2,347
Realized gain                      (13,581)                  -                           -                 6,549                   (1,517)                     -             (8,549)
Unrealized gain (loss)              13,273              (1,839)                        179                 5,263                    1,517                 12,598             30,991

Fair value, end of period $ 524,161 $ 36,919 $

         11,534          $     58,660          $             -          $      57,158          $ 688,432
Weighted average yield on debt
investments at end of period                                                                                                                                                  10.76  %
Weighted average yield on total
investments at end of period                                                                                                                                                  10.22  %



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RESULTS OF OPERATIONS

The composite measure of our financial performance in the Consolidated
Statements of Operations is captioned "Net increase (decrease) in net assets
from operations" and consists of four elements. The first is "Net investment
income," which is the difference between income from interest, dividends and
fees and our combined operating and interest expenses, net of applicable income
taxes. The second element is "Net realized gain (loss) on investments, net of
tax," which is the difference between the proceeds received from the disposition
of portfolio securities and their stated cost. The third element is the "Net
change in unrealized appreciation on investments, net of tax" which is the net
change in the market or fair value of our investment portfolio, compared with
stated cost. It should be noted that the "Net realized gain (loss) on
investments, net of tax" and "Net change in unrealized appreciation on
investments, net of tax" are directly related in that when an appreciated
portfolio security is sold to realize a gain, a corresponding decrease in net
unrealized appreciation occurs by transferring the gain associated with the
transaction from being "unrealized" to being "realized." Conversely, when a loss
is realized on a depreciated portfolio security, an increase in net unrealized
appreciation occurs. The fourth element is the "Realized loss on extinguishment
of debt," which is the difference between the principal amount due at maturity
adjusted for any unamortized debt issuance costs and any "make-whole" premium
payable at the time of the debt extinguishment.

Set forth below is a comparison of the results of operations for the years ended
March 31, 2022 and 2021. For the comparison of the results of operations for the
years ended March 31, 2021 and 2020, see the Company's Annual Report on Form
10-K for the year ended March 31, 2021, which was filed with the SEC on May 26,
2021, located within Part II, Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations, which is incorporated by
reference herein.

Comparison of years ended March 31, 2022 and March 31, 2021


                                                                Year ended March 31,                             Net Change
                                                               2022                  2021              Amount                 %
                                                                                         (in thousands)
Total investment income                                 $     82,215              $ 68,062          $  14,153                    20.8  %
Interest expense                                             (19,924)              (17,941)            (1,983)                   11.1  %
Other operating expenses                                     (18,989)              (16,008)            (2,981)                   18.6  %
Income before taxes                                           43,302                34,113              9,189                    26.9  %
Income tax provision                                             615                 2,442             (1,827)                  (74.8) %
Net investment income                                         42,687                31,671             11,016                    34.8  %
Net realized gain (loss) on investments, net of tax            5,834                (8,536)            14,370                   168.3  %

Net unrealized appreciation on investments, net of tax 11,467

         28,755            (17,288)                  (60.1) %
Realized loss on extinguishment of debt                      (17,087)               (1,007)           (16,080)                1,596.8  %
Realized loss on disposal of fixed assets                        (86)                    -                (86)                  100.0  %
Net increase in net assets from operations              $     42,815              $ 50,883          $  (8,068)                  (15.9) %



Investment Income

Total investment income consisted of interest, dividend, fee and other income
for each applicable period. For the year ended March 31, 2022, total investment
income was $82.2 million, a $14.2 million, or 20.8%, increase as compared to
total investment income of $68.1 million for the year ended March 31, 2021.
The increase was primarily due to a $12.2 million, or 21.6%, increase in
interest income generated from our debt investments, which was a result of a
37.8% increase in the cost basis of debt investments held from $582.2 million to
$802.3 million year-over-year, and an increase of $2.1 million in prepayment
fees received in the current year.

Operating Expenses


Due to the nature of our business, the majority of our operating expenses are
related to interest and fees on our borrowings, employee compensation (including
both cash and share-based compensation), and general and administrative
expenses.


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Interest and Fees on our Borrowings

For the year ended March 31, 2022, total interest expense was $19.9 million, an
increase of $2.0 million, as compared to the total interest expense of $17.9
million for the year ended March 31, 2021. The increase was primarily
attributable to an increase in average borrowings outstanding, partially offset
by a decrease in the weighted average interest rate on our total debt to 3.58%
from 4.41% for the years ended March 31, 2022 and 2021, respectively. The
decrease in the weighted average interest rate on our total debt was primarily
due to the full redemption of the $140 million in aggregate principal amount of
the October 2024 Notes, which had an interest rate of 5.375%, and the issuance
of the $150 million in aggregate principal amount of the October 2026 Notes,
which have an interest rate of 3.375%.

Salaries, General and Administrative Expenses


For the year ended March 31, 2022, total employee compensation expense
(including both cash and share-based compensation) was $12.4 million, a $1.7
million, or 16.1%, increase over total employee compensation expense of $10.7
million for the year ended March 31, 2021. The increase was primarily due to an
increase in accrued bonus compensation for the current year based on the
Company's performance compared to its plan. For the year ended March 31, 2022,
our total general and administrative expense was $6.6 million, an increase of
$1.3 million as compared to the total general and administrative expense of $5.3
million for the year ended March 31, 2021. The increase was primarily due to an
increase in director compensation and the addition of a new independent board
member. In addition, the increase was attributable to increased costs related to
insurance, valuation and employee recruiting during the current year.

Net Investment Income

For the year ended March 31, 2022, net investment income increased from the prior year by $11.0 million, or 34.8%, to $42.7 million as a result of a $14.2 million increase in total investment income and a $1.8 million decrease in income tax provision, offset by a $2.0 million increase in interest expense.

Net Realized and Unrealized Gains (Losses) on Investments


During the fiscal year ended March 31, 2022, we recognized net realized and
unrealized gains totaling $17.3 million, which primarily consisted of net
realized and unrealized gains on equity investments of $24.0 million, partially
offset by net realized and unrealized losses on I-45 SLF LLC of $2.8 million and
on debt investments of $0.5 million. These realized and unrealized gains and
losses were due to changes in fair value based on the overall EBITDA performance
and cash flows of each investment, as well as exits of investments. We also
recorded an income tax provision related to realized gains on investments of
$1.4 million and net unrealized depreciation related to deferred tax of $2.0
million associated with the Taxable Subsidiary.

During the fiscal year ended March 31, 2021, we recognized net realized and
unrealized gains totaling $20.2 million, which primarily consisted of net
realized and unrealized gains on I-45 SLF LLC of $12.6 million and on equity
investments of $11.8 million, partially offset by realized and unrealized losses
on debt investments of $2.0 million. These realized and unrealized gains and
losses were due to changes in fair value based on the overall EBITDA performance
and cash flows of each investment, as well as exits of investments. We also
recorded net unrealized depreciation related to deferred tax associated with the
Taxable Subsidiary of $2.2 million.

Realized Losses on Extinguishment of Debt


During the fiscal years ended March 31, 2022 and 2021, we recognized losses on
extinguishment of debt of $17.1 million and $1.0 million, respectively, due to
the full redemption of the October 2024 Notes and the December 2022 Notes,
respectively.

FINANCIAL LIQUIDITY AND CAPITAL RESOURCES


Our liquidity and capital resources are generated primarily from cash flows from
operations, the net proceeds of public offerings of debt and equity securities,
advances from the Credit Facility, and our continued access to SBA Debentures.
Management believes that the Company's cash and cash equivalents, cash available
from investments, and commitments under the Credit Facility are adequate to meet
its needs for the next twelve months. We anticipate that we will continue to
fund our investment activities through existing cash and cash equivalents, cash
flows generated through our ongoing operating activities, utilization of
available borrowings under our Credit Facility and future issuances of debt and
equity on terms we believe are favorable to the Company and our shareholders
(including the Equity ATM Program, as described below). Our primary uses of
funds will be investments in portfolio companies and operating expenses. Due to
the diverse capital sources available to us at
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this time, we believe we have adequate liquidity to support our near-term
capital requirements. As the impact of COVID-19 continues to evolve, we will
continually evaluate our overall liquidity position and take proactive steps to
maintain that position based on the current circumstances. This "Financial
Liquidity and Capital Resources" section should be read in conjunction with
"Recent COVID-19 Developments" above, as well as with the notes of our
consolidated financial statements.

Cash Flows


At March 31, 2022, the Company had cash and cash equivalents of approximately
$11.4 million. For the year ended March 31, 2022, we experienced a net decrease
in cash and cash equivalents in the amount of $20.2 million. During that period,
our operating activities used $182.7 million in cash, consisting primarily of
new portfolio investments of $499.2 million, partially offset by $259.2 million
of repayments received from debt investments in portfolio companies and $11.9
million of proceeds from sales of equity investments. In addition, our financing
activities increased cash by $164.5 million, consisting primarily of net
borrowings under the Credit Facility of $85.0 million, net proceeds from the
issuance of the October 2026 Notes of $146.4 million, net proceeds from the
issuance of SBA Debentures of $39.0 million and net proceeds from the offering
of our common stock of $98.1 million, partially offset by the redemption of the
October 2024 Notes of $125.0 million and cash dividends paid in the amount of
$58.6 million.

At March 31, 2021, the Company had cash and cash equivalents of approximately
$31.6 million. For the year ended March 31, 2021, we experienced a net increase
in cash and cash equivalents in the amount of $17.9 million. During that period,
our operating activities used $68.3 million in cash, consisting primarily of new
portfolio investments of $219.3 million, partially offset by $97.6 million of
repayments received from debt investments in portfolio companies and $17.8
million of proceeds from sales of equity investments. In addition, our financing
activities increased cash by $86.1 million, consisting primarily of net proceeds
from the issuance of additional October 2024 Notes of $49.0 million, net
proceeds from the issuance of the January 2026 Notes of $138.6 million and net
proceeds from the offering of our common stock of $50.4 million, partially
offset by the redemption of the December 2022 Notes of $77.1 million, net
repayments under the Credit Facility of $34.0 million and cash dividends paid in
the amount of $39.9 million.

Financing Transactions

In accordance with the 1940 Act, with certain limitations, effective April 25,
2019, the Company is only allowed to borrow amounts such that its asset coverage
(i.e., the ratio of assets less liabilities not represented by senior securities
to senior securities such as borrowings), calculated pursuant to the 1940 Act,
is at least 150% after such borrowing. The Board of Directors also approved a
resolution that limits the Company's issuance of senior securities such that the
asset coverage ratio, taking into account any such issuance, would not be less
than 166%, which became effective April 25, 2019. On August 11, 2021, we
received an exemptive order from the SEC to permit us to exclude the senior
securities issued by SBIC I or any future SBIC subsidiary of the Company from
the definition of senior securities in the asset coverage requirement applicable
to the Company under the 1940 Act. As of March 31, 2022, the Company's asset
coverage was 193%.

Credit Facility

In August 2016, CSWC entered into a senior secured credit facility (as amended,
restated, supplemented or otherwise modified from time to time, the "Credit
Facility") to provide additional liquidity to support its investment and
operational activities. The Credit Facility contains an accordion feature that
allows CSWC to increase the total commitments under the Credit Facility up to
$400 million from new and existing lenders on the same terms and conditions as
the existing commitments.

On August 9, 2021, CSWC entered into the Second Amended and Restated Senior
Secured Revolving Credit Agreement (the "Credit Agreement"). Prior to the Credit
Agreement, (1) borrowings under the Credit Facility accrued interest on a per
annum basis at a rate equal to the applicable LIBOR rate plus 2.50% with no
LIBOR floor, and (2) the total borrowing capacity was $340 million with
commitments from a diversified group of eleven lenders. The Credit Agreement (1)
decreased the total borrowing capacity under the Credit Facility to $335 million
with commitments from a diversified group of ten lenders, (2) reduced the
interest rate on borrowings to LIBOR plus 2.15% with no LIBOR floor and removed
conditions related thereto as previously set forth in the Amended and Restated
Senior Secured Revolving Credit Agreement, and (3) extended the end of the
Credit Facility's revolver period from December 21, 2022 to August 9, 2025 and
extended the final maturity from December 21, 2023 to August 9, 2026. The Credit
Agreement also modified certain covenants in the Credit Facility, including,
among other things, to increase the minimum obligors' net worth test from $180
million to $200 million.

CSWC pays unused commitment fees of 0.50% to 1.00% per annum, based on
utilization, on the unused lender commitments under the Credit Facility. The
Credit Facility contains certain affirmative and negative covenants, including
but
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not limited to: (1) certain reporting requirements, (2) maintaining RIC and BDC
status, (3) maintaining a minimum senior coverage ratio of 2 to 1, (4)
maintaining a minimum shareholders' equity, (5) maintaining a minimum
consolidated net worth, (6) maintaining a regulatory asset coverage of not less
than 150%, (7) maintaining an interest coverage ratio of at least 2.25 to 1.0,
and (8) at any time the outstanding advances exceed 90% of the borrowing base,
maintaining a minimum liquidity of not less than 10% of the covered debt amount.

The Credit Facility also contains customary events of default, including,
without limitation, nonpayment, misrepresentation of representations and
warranties in a material respect, breach of covenant, bankruptcy, and change of
control, with customary cure and notice provisions. If the Company defaults on
its obligations under the Credit Facility, the lenders may have the right to
foreclose upon and sell, or otherwise transfer, the collateral subject to their
security interests.

The Credit Facility is secured by (1) substantially all of the present and
future property and assets of the Company and the guarantors and (2) 100% of the
equity interests in the Company's wholly-owned subsidiary. As of March 31, 2022,
substantially all of the Company's assets were pledged as collateral for the
Credit Facility, except for assets held in SBIC I.

At March 31, 2022, CSWC had $205.0 million in borrowings outstanding under the
Credit Facility. CSWC recognized interest expense related to the Credit
Facility, including unused commitment fees and amortization of deferred loan
costs of $6.2 million, $6.8 million and $8.3 million respectively, for the years
ended March 31, 2022, 2021 and 2020. The weighted average interest rate on the
Credit Facility was 2.50% and 3.05%, respectively, for the years ended March 31,
2022 and 2021. Average borrowings for the years ended March 31, 2022 and 2021
were $173.5 million and $166.0 million, respectively. As of March 31, 2022 and
2021, CSWC was in compliance with all financial covenants under the Credit
Facility.

December 2022 Notes


In December 2017, the Company issued $57.5 million in aggregate principal
amount, including the underwriters' full exercise of their option to purchase
additional principal amounts to cover over-allotments, of 5.95% Notes due 2022
(the "December 2022 Notes"). The December 2022 Notes bore interest at a rate of
5.95% per year.

On June 11, 2018, the Company entered into an ATM debt distribution agreement,
pursuant to which it may offer for sale, from time to time, up to $50 million in
aggregate principal amount of December 2022 Notes through B. Riley FBR, Inc.,
acting as its sales agent. The Company issued an additional $19.6 million in
aggregate principal amount of the December 2022 Notes under this agreement. All
issuances of December 2022 Notes ranked equally in right of payment and form a
single series of notes.

On September 29, 2020, the Company redeemed $20,000,000 in aggregate principal
of the $77,136,175 in aggregate principal amount of issued and outstanding
December 2022 Notes. On December 10, 2020, the Company redeemed $20,000,000 in
aggregate principal of the $57,136,175 in aggregate principal amount of issued
and outstanding December 2022 Notes. On January 21, 2021, the Company redeemed
the remaining $37,136,175 in aggregate principal amount of issued and
outstanding December 2022 Notes. The December 2022 Notes were redeemed at 100%
of their principal amount, plus the accrued and unpaid interest thereon,
through, but excluding each of the redemption dates. Accordingly, the Company
recognized a realized loss on extinguishment of debt, equal to the write-off of
the related unamortized debt issuance costs, of $1.0 million during the year
ended March 31, 2021.

The Company recognized interest expense related to the December 2022 Notes, including amortization of deferred issuance costs, of $3.5 million and $5.3 million for the years ended March 31, 2021 and 2020, respectively. Average borrowings for the years ended March 31, 2021 and 2020 were $53.8 million and $77.1 million, respectively. The December 2022 Notes had a weighted average effective yield of 5.93%.

October 2024 Notes


In September 2019, the Company issued $65.0 million in aggregate principal
amount of 5.375% Notes due 2024 (the "Existing October 2024 Notes"). In October
2019, the Company issued an additional $10.0 million in aggregate principal
amount of the October 2024 Notes (the "Additional October 2024 Notes"). In
August 2020, the Company issued an additional $50.0 million in aggregate
principal amount of the October 2024 Notes (the "New Notes" together with the
Existing October 2024 Notes and the Additional October 2024 Notes, the "October
2024 Notes"). The Additional October 2024 Notes and the New Notes were treated
as a single series with the Existing October 2024 Notes under the indenture and
had the same terms as the Existing October 2024 Notes. The maturity date of the
October 2024 Notes was October 1, 2024 and were redeemable in whole or in part
at any time prior to July 1, 2024, at par plus a "make-whole" premium, and
thereafter at par. The October 2024 Notes bore interest at a rate of 5.375% per
year.
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On September 24, 2021, the Company redeemed $125,000,000 in aggregate principal
amount of the issued and outstanding October 2024 Notes. The October 2024 Notes
were redeemed at 100% of their principal amount, plus (i) the accrued and unpaid
interest thereon, through, but excluding the redemption date, and (ii) a
"make-whole" premium. Accordingly, the Company recognized a realized loss on
extinguishment of debt, equal to the write-off of the related unamortized debt
issuance costs of $1.8 million and the "make-whole" premium of $15.2 million
during the three months ended September 30, 2021.

The Company recognized interest expense related to the October 2024 Notes,
including amortization of deferred issuance costs, of $3.6 million, $6.3
million and $2.2 million, respectively, for the years ended March 31, 2022, 2021
and 2020. From April 1, 2021 through September 24, 2021 (the redemption date of
the October 2024 Notes), average borrowings were $125.0 million. For the year
ended March 31, 2021, average borrowings were $106.1 million. The October 2024
Notes had a weighted average effective yield of 5.375%.

January 2026 Notes


In December 2020, the Company issued $75.0 million in aggregate principal amount
of 4.50% Notes due 2026 (the "Existing January 2026 Notes"). The Existing
January 2026 Notes were issued at par. In February 2021, the Company issued an
additional $65.0 million in aggregate principal amount of the January 2026 Notes
(the "Additional January 2026 Notes" together with the Existing January 2026
Notes, the "January 2026 Notes"). The Additional January 2026 Notes were issued
at a price of 102.11% of the aggregate principal amount of the Additional
January 2026 Notes, resulting in a yield-to-maturity of approximately 4.0% at
issuance. The Additional January 2026 Notes are treated as a single series with
the Existing January 2026 Notes under the indenture and had the same terms as
the Existing January 2026 Notes. The January 2026 Notes mature on January 31,
2026 and may be redeemed in whole or in part at any time prior to October 31,
2025, at par plus a "make-whole" premium, and thereafter at par. The January
2026 Notes bear interest at a rate of 4.50% per year, payable semi-annually on
January 31 and July 31 of each year. The January 2026 Notes are the direct
unsecured obligations of the Company and rank pari passu with our other
outstanding and future unsecured unsubordinated indebtedness and are effectively
or structurally subordinated to all of our existing and future secured
indebtedness, including borrowings under our Credit Facility and the SBA
Debentures.

As of March 31, 2022, the carrying amount of the January 2026 Notes was $138.7
million on an aggregate principal amount of $140.0 million at a weighted average
effective yield of 4.46%. As of March 31, 2022, the fair value of the January
2026 Notes was $129.2 million. This is a Level 3 fair value measurement under
ASC 820 based on a valuation model using a discounted cash flow analysis. The
Company recognized interest expense related to the January 2026 Notes, including
amortization of deferred issuance costs, of $6.7 million and $1.2 million,
respectively, for the years ended March 31, 2022 and 2021. For the year ended
March 31, 2022, average borrowings were $140.0 million. Since the issuance of
the January 2026 Notes on December 29, 2020 through March 31, 2021, average
borrowings were $99.5 million.

The indenture governing the January 2026 Notes contains certain covenants,
including certain covenants requiring the Company to comply with Section
18(a)(1)(A) as modified by Section 61(a)(2) of the 1940 Act, or any successor
provisions, whether or not the Company continues to be subject to such
provisions of the 1940 Act, but giving effect, in either case, to any exemptive
relief granted to the Company by the SEC, to comply with Section 18(a)(1)(B) as
modified by Section 61(a)(2) of the 1940 Act, or any successor provisions, after
giving effect to any exemptive relief granted to the Company by the SEC and
subject to certain other exceptions, and to provide financial information to the
holders of the January 2026 Notes and the trustee under the indenture if the
Company is no longer subject to the reporting requirements under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). These covenants are
subject to important limitations and exceptions that are described in the
indenture and the third supplemental indenture relating to the January 2026
Notes.

In addition, holders of the January 2026 Notes can require the Company to
repurchase some or all of the January 2026 Notes at a purchase price equal to
100% of their principal amount, plus accrued and unpaid interest to, but not
including, the repurchase date upon the occurrence of a "Change of Control
Repurchase Event," as defined in the third supplemental indenture relating to
the January 2026 Notes.

October 2026 Notes

In August 2021, the Company issued $100.0 million in aggregate principal amount
of 3.375% Notes due 2026 (the "Existing October 2026 Notes"). The Existing
October 2026 Notes were issued at a price of 99.418% of the aggregate principal
amount of the Existing October 2026 Notes, resulting in a yield-to-maturity of
3.5%. In November 2021, the Company issued an additional $50.0 million in
aggregate principal amount of the October 2026 Notes (the "Additional October
2026 Notes"
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together with the Existing October 2026 Notes, the "October 2026 Notes"). The
Additional October 2026 Notes were issued at a price of 99.993% of the aggregate
principal amount, resulting in a yield-to-maturity of approximately 3.375% at
issuance. The Additional October 2026 Notes are treated as a single series with
the Existing October 2026 Notes under the indenture and had the same terms as
the Existing October 2026 Notes. The October 2026 Notes mature on October 1,
2026 and may be redeemed in whole or in part at any time prior to July 1, 2026,
at par plus a "make-whole" premium, and thereafter at par. The October 2026
Notes bear interest at a rate of 3.375% per year, payable semi-annually in
arrears on April 1 and October 1 of each year. The October 2026 Notes are the
direct unsecured obligations of the Company and rank pari passu with our other
outstanding and future unsecured unsubordinated indebtedness and are effectively
or structurally subordinated to all of our existing and future secured
indebtedness, including borrowings under our Credit Facility and the SBA
Debentures.

As of March 31, 2022, the carrying amount of the October 2026 Notes was $146.5
million on an aggregate principal amount of $150.0 million at a weighted average
effective yield of 3.5%. As of March 31, 2022, the fair value of the October
2026 Notes was $139.1 million. This is a Level 3 fair value measurement under
ASC 820 based on a valuation model using a discounted cash flow analysis. The
Company recognized interest expense related to the October 2026 Notes, including
amortization of deferred issuance costs, of $3.1 million for the year ended
March 31, 2022. Since the issuance of the October 2026 Notes on August 27, 2021
through March 31, 2022, average borrowings were $132.9 million.

The indenture governing the October 2026 Notes contains certain covenants,
including certain covenants requiring the Company to comply with Section
18(a)(1)(A) as modified by Section 61(a)(2) of the 1940 Act, or any successor
provisions, whether or not the Company continues to be subject to such
provisions of the 1940 Act, but giving effect, in either case, to any exemptive
relief granted to the Company by the SEC, to comply with Section 18(a)(1)(B) as
modified by Section 61(a)(2) of the 1940 Act, or any successor provisions, after
giving effect to any exemptive relief granted to the Company by the SEC and
subject to certain other exceptions, and to provide financial information to the
holders of the October 2026 Notes and the trustee under the indenture if the
Company is 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 and the fourth supplemental indenture relating to
the October 2026 Notes.

In addition, holders of the October 2026 Notes can require the Company to
repurchase some or all of the October 2026 Notes at a purchase price equal to
100% of their principal amount, plus accrued and unpaid interest to, but not
including, the repurchase date upon the occurrence of a "Change of Control
Repurchase Event," as defined in the fourth supplemental indenture relating to
the October 2026 Notes.

SBA Debentures

On April 20, 2021, SBIC I received a license from the SBA to operate as an SBIC
under Section 301(c) of the Small Business Investment Act of 1958, as amended.
The license allows SBIC I to obtain leverage by issuing SBA Debentures, subject
to the issuance of a leverage commitment by the SBA. SBA Debentures are loans
issued to an SBIC which have interest payable semi-annually and a ten-year
maturity. The interest rate is fixed shortly after issuance at a market-driven
spread over U.S. Treasury Notes with ten-year maturities. Interest on SBA
Debentures is payable semi-annually on March 1 and September 1. Current statutes
and regulations permit SBIC I to borrow up to $175 million in SBA Debentures
with at least $87.5 million in regulatory capital (as defined in the SBA
regulations).

On May 25, 2021, SBIC I received a leverage commitment from the SBA in the
amount of $40.0 million to be issued on or prior to September 30, 2025. On
January 28, 2022, SBIC I received an additional leverage commitment in the
amount of $40.0 million to be issued on or prior to September 30, 2026. As of
March 31, 2022, SBIC I had regulatory capital of $40.0 million and approved and
unused SBA Debenture commitments of $40.0 million. The SBA may limit the amount
that may be drawn each year under these commitments, and each issuance of
leverage is conditioned on the Company's full compliance, as determined by the
SBA, with the terms and conditions set forth in the SBA regulations.

As of March 31, 2022, the carrying amount of SBA Debentures was $38.4 million on
an aggregate principal amount of $40.0 million. As of March 31, 2022, the fair
value of the SBA Debentures was $38.6 million. The fair value of the SBA
Debentures is estimated by discounting the remaining payments using current
market rates for similar instruments and considering such factors as the legal
maturity date and the ability of market participants to prepay the SBA
Debentures, which are Level 3 inputs under ASC Topic 820. The Company recognized
interest expense and related fees related to SBA Debentures of $0.3 million for
the year ended March 31, 2022. The weighted average interest rate on the SBA
Debentures was 1.30% for the year ended March 31, 2022. For the year ended March
31, 2022, average borrowings were $17.0 million.

As of March 31, 2022, the Company's issued and outstanding SBA Debentures mature as follows:

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          Pooling Date       Maturity Date       Fixed Interest Rate      March 31, 2022
            9/22/21            9/1/2031                      1.575  %    $    15,000,000
            3/23/22            3/1/2032                      3.209  %         25,000,000

                                                                         $    40,000,000


(1)The SBA has two scheduled pooling dates for SBA Debentures (in March and in
September). Certain SBA Debentures funded during the reporting periods may not
be pooled until the subsequent pooling date.

Equity Capital Activities


In January 2016, the Company's Board of Directors approved a share repurchase
program authorizing the Company to repurchase up to $10 million of its
outstanding shares of common stock in the open market at certain thresholds
below its NAV per share, in accordance with guidelines specified in Rules
10b5-1(c)(1)(i)(B) and 10b-18 under the Exchange Act. On March 1, 2016, the
Company entered into a share repurchase agreement, which became effective
immediately and terminated on March 26, 2020 upon the Company's purchase of the
aggregate gross dollar amount (inclusive of commission fees) of its common stock
under the share repurchase program meeting the threshold set forth in the share
repurchase agreement.

On July 28, 2021, the Company's Board of Directors approved a share repurchase
program authorizing the Company to repurchase up to $20 million of its
outstanding shares of common stock in the open market at certain thresholds
below its NAV per share, in accordance with guidelines specified in Rules
10b5-1(c)(1)(i)(B) and 10b-18 under the Exchange Act. On August 31, 2021, the
Company entered into a share repurchase agreement, which became effective
immediately, and the Company will cease purchasing its common stock under the
share repurchase program upon the earlier of, among other things: (1) the date
on which the aggregate purchase price for all shares equals $20 million
including, without limitation, all applicable fees, costs and expenses; or (2)
upon written notice by the Company to the broker that the share repurchase
agreement is terminated.

During the year ended March 31, 2022, the Company did not repurchase any shares
under the share repurchase program. Cumulative to date, we have repurchased a
total of 840,543 shares of our common stock in the open market under a share
repurchase program, at an average price of $11.85, including commissions paid.

On March 4, 2019, the Company established an "at-the-market" offering (the
"Equity ATM Program"), pursuant to which the Company may offer and sell, from
time to time through sales agents, shares of its common stock having an
aggregate offering price of up to $50,000,000. On February 4, 2020, the Company
(i) increased the maximum amount of shares of its common stock to be sold
through the Equity ATM Program to $100,000,000 from $50,000,000 and (ii) added
two additional sales agents to the Equity ATM Program. On May 26, 2021, the
Company (i) increased the maximum amount of shares of its common stock to be
sold through the Equity ATM Program to $250,000,000 from $100,000,000 and (ii)
reduced the commission paid to the sales agents for the Equity ATM Program to
1.5% from 2.0% of the gross sales price of shares of the Company's common stock
sold through the sales agents pursuant to the Equity ATM Program on and after
May 26, 2021.

During the year ended March 31, 2022, the Company sold 3,872,031 shares of its
common stock under the Equity ATM Program at a weighted-average price of $25.73
per share, raising $99.6 million of gross proceeds. Net proceeds were $98.1
million, after deducting commissions to the sales agents on shares sold.
Cumulative to date, the Company has sold 8,177,660 shares of its common stock
under the Equity ATM Program at a weighted-average price of $22.44, raising
$183.5 million of gross proceeds. Net proceeds were $180.3 million after
commissions to the sales agents on shares sold. As of March 31, 2022, the
Company has $66.5 million available under the Equity ATM Program.

On August 1, 2019, after receiving the requisite shareholder approval, the
Company filed an amendment to its Amended and Restated Articles of Incorporation
to increase the amount of authorized shares of common stock from 25,000,000 to
40,000,000.

OFF-BALANCE SHEET ARRANGEMENTS


We may be a party to financial instruments with off-balance sheet risk in the
normal course of business to meet the financial needs of our portfolio
companies. These instruments may include commitments to extend credit and fund
equity capital and involve, to varying degrees, elements of liquidity and credit
risk in excess of the amount recognized in the balance sheet. Because
commitments may expire without being drawn upon, the total commitment amount
does not necessarily represent future cash requirements. Additionally, our
commitment to fund delayed draw term loans is generally triggered upon
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the satisfaction of certain pre-negotiated terms and conditions, such as meeting
certain financial performance hurdles or financial covenants, which may limit a
borrower's ability to draw on such delayed draw term loans.

At March 31, 2022 and 2021, we had a total of approximately $134.3 million and
$45.4 million, respectively, in currently unfunded commitments (as discussed in
Note 11 to the Consolidated Financial Statements). As of March 31, 2022, the
total unfunded commitments included commitments to issue letters of credit
through a financial intermediary on behalf of certain portfolio companies. As of
March 31, 2022 and 2021, we had $4.0 million and $3.5 million, respectively, in
letters of credit issued and outstanding under these commitments on behalf of
the portfolio companies. For the letters of credit issued and outstanding, we
would be required to make payments to third parties if the portfolio companies
were to default on their related payment obligations. Of these letters of
credit, $0.3 million expire in August 2022, $0.4 million expire in February
2023, $0.2 million expire in April 2023, and $3.1 million expire in May 2023. As
of March 31, 2022 and March 31, 2021, none of the letters of credit issued and
outstanding were recorded as a liability on the Company's balance sheet as such
letters of credit are considered in the valuation of the investments in the
portfolio company.

The Company believes its assets will provide adequate coverage to satisfy these
unfunded commitments. As of March 31, 2022, the Company had cash and cash
equivalents of $11.4 million and $126.3 million in available borrowings under
the Credit Facility.

Contractual Obligations

As shown below, we had the following contractual obligations as of March 31,
2022. For information on our unfunded investment commitments, see Note 11 of the
Notes to Consolidated Financial Statements.


                                                       Payments Due By Period
                                                           (In thousands)
                                              Less than                                    More Than
Contractual Obligations          Total         1 Year        1-3 Years      3-5 Years       5 Years
Operating lease obligations   $   4,430      $     167      $     822      $     863      $    2,578
Credit Facility (1)             225,972          4,811          9,636        211,525               -
January 2026 Notes (2)          165,200          6,300         12,600        146,300               -
October 2026 Notes (2)          175,791          5,541         12,656        157,594               -
Total                         $ 571,393      $  16,819      $  35,714      $ 516,282      $    2,578



(1)Amounts include interest payments calculated at an average rate of 2.50% of
outstanding Credit Facility borrowings, which were $205.0 million as of March
31, 2022.
(2)Includes interest payments.

                                       64

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  Table of Contents
RECENT DEVELOPMENTS

On April 21, 2021, the Board of Directors declared a quarterly dividend of $0.48
per share and a special dividend of $0.15 per share for the quarter ended June
30, 2022. The record date for the dividend is June 15, 2022. The payment date
for the dividend is June 30, 2022.

On May 11, 2022, CSWC entered into Amendment No. 2 (the "Amendment") to the
Credit Agreement. The Amendment changed the benchmark interest rate from LIBOR
to Term SOFR. In addition, on May 11, 2022, CSWC entered into an Incremental
Commitment Agreement, pursuant to which the total commitments under the Credit
Agreement increased from $335 million to $380 million.

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