CRESCENT CAPITAL BDC, INC. Management's Discussion and Analysis should be read in conjunction with ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in "ITEM 1A. RISK FACTORS." Actual results may differ materially from those contained in any forward-looking statements.
OVERVIEW
We are a specialty finance company focused on lending to middle-market companies and were incorporated under the laws of theState of Delaware onFebruary 5, 2015 ("Inception"). OnJanuary 30, 2020 , we changed our state of incorporation from theState of Delaware to theState of Maryland . We have elected to be treated as a BDC under the 1940 Act. In addition, we have elected to be treated forU.S. federal income tax purposes as a RIC under Subchapter M of the Code. As such, we are required to comply with various regulatory requirements, such as the requirement to invest at least 70% of our assets in "qualifying assets," source of income limitations, asset diversification requirements, and the requirement to distribute annually at least 90% of our taxable income and tax-exempt interest. We are managed by the Adviser, an investment adviser that is registered with theSEC under the 1940 Act. The Administrator provides the administrative services necessary for us to operate. Company management consists of investment and administrative professionals from the Adviser and Administrator along with our Board. The Adviser directs and executes our investment operations and capital raising activities subject to oversight from the Board, which sets our broad policies. The Board has delegated investment management of our investment assets to the Adviser. The Board consists of five directors, four of whom are independent. Our primary investment objective is to maximize the total return to our stockholders in the form of current income and capital appreciation through debt and related equity investments. We seek to achieve our investment objectives by investing primarily in secured debt (including senior secured first lien, unitranche and senior secured second-lien debt) and unsecured debt (including senior unsecured, mezzanine and subordinated debt), as well as related equity securities of privateU.S. middle-market companies. We may purchase interests in loans or make debt investments, either (i) directly from our target companies as primary market or private credit investments (i.e., private credit transactions), or (ii) primary or secondary market bank loan or high yield transactions in the broadly syndicated "over-the-counter" market (i.e., broadly syndicated loans and bonds). Although our focus is to invest in less liquid private credit transactions, we may from time to time invest in more liquid broadly syndicated loans and bonds to complement our private credit transactions. "First lien" investments are senior loans on a lien basis to other liabilities in the issuer's capital structure that have the benefit of a first-priority security interest in assets of the issuer. The security interest ranks above the security interest of any second-lien lenders in those assets. "Unitranche first lien" investments are loans that may extend deeper in a company's capital structure than traditional first lien debt and may provide for a waterfall of cash flow priority among different lenders in the unitranche loan. In certain instances, we may find another lender to provide the "first out" portion of such loan and retain the "last out" portion of such loan, in which case, the "first out" portion of the loan would generally receive priority with respect to payment of principal, interest and any other amounts due thereunder over the "last out" portion that we would continue to hold. In exchange for the greater risk of loss, the "last out" portion earns a higher interest rate. "Second lien" investments are loans with a second priority lien on all existing and future assets of the portfolio company. The security interest ranks below the security interests of any first lien and unitranche first lien lenders in those assets.
"Mezzanine" or "unsecured debt" investments are loans that generally rank senior to a borrower's equity securities and junior in right of payment to such borrower's other senior indebtedness.
Alcentra Acquisition
OnAugust 12, 2019 , we entered into the Merger Agreement to acquireAlcentra Capital , in a cash and stock transaction. The board of directors of both companies each unanimously approved the Alcentra Acquisition and onJanuary 29, 2020 ,Alcentra Capital's stockholders approved the merger and our stockholders approved the issuance of shares of our common stock toAlcentra Capital's stockholders. OnJanuary 31, 2020 , we completed the Alcentra Acquisition, pursuant to the terms and conditions of the Merger Agreement. To effect the acquisition, Acquisition Sub merged with and intoAlcentra Capital , withAlcentra Capital surviving the merger as our wholly owned subsidiary. Immediately thereafter and as a single integrated transaction,Alcentra Capital consummated the Second Merger, whereby it merged with and into us, withCrescent Capital BDC surviving the merger. Pursuant to the Merger Agreement,Alcentra Capital stockholders received the right to the following merger consideration in exchange for each share ofAlcentra Capital common stock outstanding immediately prior toJanuary 31, 2020 , (a)$3.1784 per share in cash consideration (less the$0.8000 final dividend declared byAlcentra Capital ) and (b) stock consideration at the fixed exchange ratio of 0.4041 shares of Common Stock. This resulted in our then-existing stockholders owning approximately 82% of us andAlcentra Capital's then-existing stockholders owning approximately 18% of us. 49 -------------------------------------------------------------------------------- The aggregate cash consideration was comprised of (i)$19.3 million in cash, or$1.5023 per share, from us (less$10.3 million or$0.8000 per share in final dividends paid byAlcentra Capital onJanuary 31, 2020 ) and (ii)$21.6 million in cash, or$1.6761 per share, in transaction support provided by the Adviser.
CRITICAL ACCOUNTING POLICIES
Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted inthe United States of America ("GAAP"). The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Changes in the economic environment, financial markets and any other parameters used in determining such estimates could cause actual results to differ materially. The critical accounting policies should be read in connection with our risk factors as disclosed herein.
In addition to the discussion below, our critical accounting policies are further described in Note 2. Summary of Significant Accounting Policies to our consolidated financial statements.
Investment Valuation
We apply Financial Accounting Standards Board ASC 820, Fair Value Measurement
("ASC 820"), as amended, which establishes a framework for measuring fair value
in accordance with GAAP and required disclosures of fair value measurements. ASC
820 determines fair value to be the price that would be received for an
investment in a current sale, which assumes an orderly transaction between
market participants on the measurement date. Market participants are defined as
buyers and sellers in the principal or most advantageous market (which may be a
hypothetical market) that are independent, knowledgeable, and willing and able
to transact. In accordance with ASC 820, we consider our principal market to be
the market that has the greatest volume and level of activity. ASC 820 specifies
a fair value hierarchy that prioritizes and ranks the level of observability of
inputs used in the determination of fair value. In accordance with ASC 820,
these levels are summarized below:
Level 1-Valuations based on quoted prices in active markets for identical assets or liabilities that we have the ability to access.
Level 2-Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3-Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
Investments in investment companies are valued at fair value. Fair values are
generally determined utilizing the net asset value ("NAV") supplied by, or on
behalf of, management of each investment company, which is net of management and
incentive fees or allocations charged by the investment company and is in
accordance with the "practical expedient", as defined by ASC 820. NAVs received
by, or on behalf of, management of each investment company are based on the fair
value of the investment company's underlying investments in accordance with
policies established by management of each investment company, as described in
each of their financial statements and offering memorandum. Investments which
are valued using NAV as a practical expedient are excluded from the above
hierarchy.
Investments for which market quotations are readily available are typically
valued at those market quotations. To validate market quotations, we utilize a
number of factors to determine if the quotations are representative of fair
value, including the source and number of the quotations. Debt and equity
securities that are not publicly traded or whose market prices are not readily
available are valued at fair value as determined in good faith by the Board,
based on, among other things, the input of the Adviser, our Audit Committee and
independent third-party valuation firms engaged at the direction of the Board.
The Board oversees and supervises a multi-step valuation process, which includes, among other procedures, the following:
• The valuation process begins with each investment being initially valued
by the investment professionals responsible for the portfolio investment
in conjunction with the portfolio management team.
• The Adviser's management and Crescent's alternative investment valuationcommittee reviews the preliminary valuations with the investment
professionals. Agreed upon valuation recommendations are presented to the
Audit Committee.
• The Audit Committee reviews the valuations presented and recommends
values for each investment to the Board.
• The Board reviews the recommended valuations and determines the fair
value of each investment.
In connection with debt and equity securities that are valued at fair value in
good faith by the Board, the Board will periodically engage independent
third-party valuation firms to estimate a range of fair values for a sample of
investments, which are used to corroborate management's fair value estimates.
In addition to using the above inputs in investment valuations, we apply the
valuation policy approved by our Board that is consistent with ASC 820.
Consistent with the valuation policy, we evaluate the source of inputs,
including any markets in which our investments are trading (or any markets in
which securities with similar attributes are trading), in determining fair
value. When a security is valued
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based on prices provided by reputable dealers or pricing services (that is,
broker quotes), we subject those prices to various criteria in making the
determination as to whether a particular investment would qualify for
classification as a Level 2 or Level 3 investment. For example, we review
pricing methodologies provided by dealers or pricing services in order to
determine if observable market information is being used, versus unobservable
inputs. Some additional factors considered include the number of prices obtained
as well as an assessment as to their quality. Transfers between levels, if any,
are recognized at the beginning of the period in which the transfers occur.
Due to the inherent uncertainty of determining the fair value of investments
that do not have a readily available market value, the fair value of our
investments may fluctuate from period to period. Additionally, the fair value of
such investments may differ significantly from the values that would have been
used had a ready market existed for such investments and may differ materially
from the values that may ultimately be realized. Further, such investments are
generally less liquid than publicly traded securities and may be subject to
contractual and other restrictions on resale. If we were required to liquidate a
portfolio investment in a forced or liquidation sale, we could realize amounts
that are different from the amounts presented and such differences could be
material. 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 unrealized
gains or losses reflected herein. See Note 4. Investments and Note 5. Fair Value
of Financial Instruments for additional information on our investment portfolio.
Interest and Dividend Income Recognition
Interest income is recorded on an accrual basis and includes the amortization of
purchase discounts and premiums. Discounts and premiums to par value on
securities purchased are accreted or amortized into interest income over the
contractual life of the respective securities using the effective yield method.
The amortized cost of investments represents the original cost adjusted for the
accretion and amortization of discounts and premiums, if any. Upon prepayment of
a loan or debt security, any prepayment premiums, unamortized upfront loan
origination fees and unamortized discounts are recorded as interest income.
Dividend income from common equity securities is recorded on the record date for
private portfolio companies or on the ex-dividend date for publicly-traded
portfolio companies. Dividend income from preferred equity securities is
recorded on an accrual basis to the extent that such amounts are payable by the
portfolio company and are expected to be collected. Each distribution received
from an equity investment is evaluated to determine if the distribution should
be recorded as dividend income or a return of capital. Generally, we will not
record distributions from equity investments as dividend income unless there is
sufficient current or accumulated earnings prior to the distribution.
Distributions that are classified as a return of capital are recorded as a
reduction of capital are recorded as a reduction in the cost basis of the
investment.
Certain investments have contractual payment-in-kind ("PIK") interest or
dividends. PIK represents accrued interest or accumulated dividends that are
added to the loan principal or cost basis of the investment on the respective
interest or dividend payment dates rather than being paid in cash and generally
becomes due at maturity or upon being called by the issuer. PIK is recorded as
interest or dividend income, as applicable. If at any point we believe PIK is
not expected to be realized, the investment generating PIK will be placed on
non-accrual status. Accrued PIK interest or dividends are generally reversed
through interest or dividend income, respectively, when an investment is placed
on non-accrual status.
Loans are generally placed on non-accrual status when principal or interest
payments are past due 30 days or more or when there is reasonable doubt that
principal or interest will be collected in full. Accrued and unpaid interest is
generally reversed when a loan is placed on non-accrual status. Interest
payments received on non-accrual loans may be recognized as income or applied to
principal depending upon management's judgment regarding collectability.
Non-accrual loans are restored to accrual status when past due principal and
interest is paid current and, in management's judgment, are likely to remain
current. Management may determine to not place a loan on non-accrual status if
the loan has sufficient collateral value and is in the process of collection.
Income Taxes
We have elected to be treated as a BDC under the 1940 Act. We also have elected to be treated as a RIC under the Internal Revenue Code. So long as we maintain our status as a RIC, we will generally not pay corporate-levelU.S. federal income or excise taxes on any ordinary income or capital gains that we distribute at least annually to our stockholders as dividends. As a result, any tax liability related to income earned and distributed by us represents obligations of our stockholders and will not be reflected in our consolidated financial statements. We evaluate tax positions taken or expected to be taken in the course of preparing our consolidated financial statements to determine whether the tax positions are "more-likely-than-not" to be sustained by the applicable tax authority. Tax positions not deemed to meet the "more-likely-than-not" threshold are reversed and recorded as a tax benefit or expense in the current year. All penalties and interest associated with income taxes are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, on-going analyses of tax laws, regulations and interpretations thereof. We account for income taxes in conformity with ASC 740 - Income Taxes ("ASC 740"). ASC 740 provides guidelines for how uncertain tax positions should be recognized, measured, presented and disclosed in financial statements. 51 -------------------------------------------------------------------------------- In order for us not to be subject to federal excise taxes, we must distribute annually an amount at least equal to the sum of (i) 98% of our ordinary income (taking into account certain deferrals and elections), (ii) 98.2% of our net capital gains from the current year and (iii) any undistributed ordinary income and net capital gains from preceding years. We, at our discretion, may carry forward taxable income in excess of calendar year dividends and pay a 4% excise tax on this income. If we choose to do so, this generally would increase expenses and reduce the amount available to be distributed to stockholders. We accrue excise tax on estimated undistributed taxable income as required on a quarterly basis.CBDC Universal Equity, Inc. is a taxable entity ("Taxable Subsidiary"). The Taxable Subsidiary permits us to hold equity investments in portfolio companies which are "pass through" entities for tax purposes and continue to comply with the "source income" requirements contained in RIC tax provisions of the Code. The Taxable Subsidiary is not consolidated with us for income tax purposes and may generate income tax expense, benefit, and the related tax assets and liabilities, as a result of their ownership of certain portfolio investments. The income tax expense, or benefit, if any, and related tax assets and liabilities are reflected in our consolidated financial statements. We intend to comply with the applicable provisions of the Code, pertaining to regulated investment companies and to make distributions of taxable income sufficient to relieve it from substantially all federal income taxes. As ofDecember 31, 2020 , we are subject to examination byU.S. federal tax authorities for returns filed for the three most recent calendar years and by state tax authorities for returns filed for the four most recent calendar years. We may generate qualified net interest income or qualified net short-term capital gains that may be exempt fromU.S. withholding tax when distributed to foreign stockholders. A RIC is permitted to designate distributions of qualified net interest income and qualified short-term capital gains as exempt fromU.S. withholding tax when paid to non-U.S. shareholders with proper documentation. As ofDecember 31, 2020 , the percentage of 2020 income estimated as qualified interest income for tax purposes was 98.0%.
New Accounting Pronouncements
InMarch 2020 , the FASB issued Accounting Standard Update ("ASU") No. 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." This ASU provides optional exceptions for applying GAAP to contract modifications, hedging relationships and other transactions affected reference rate reform if certain criteria are met. ASU 2020-04 is elective and can be adopted betweenMarch 12, 2020 andDecember 31, 2022 . We do not expect that the adoption of this guidance will have a material impact on our consolidated financial statements. TheSEC issued final rules that, among other things, amended the financial disclosure requirements of Regulation S-Xfor acquired and disposed businesses and the significance tests for a "significant subsidiary" as applicable to BDCs and amended certain forms used by BDCs. The amendments are intended to assist BDCs in making more meaningful determinations as to whether a subsidiary or an acquired or disposed entity is significant and improve the financial disclosure requirements applicable to acquisitions and dispositions of investment companies and BDCs. The Company early adopted the updated rules for the year endedDecember 31, 2020 which did not result in any new significant subsidiaries being identified. COMPONENTS OF OPERATIONS Investments We expect our investment activity to vary substantially from period to period depending on many factors, the general economic environment, the amount of capital we have available to us, the level of merger and acquisition activity for middle-market companies, including the amount of debt and equity capital available to such companies and the competitive environment for the type of investments we make. In addition, as part of our risk strategy on investments, we may reduce certain levels of investments through partial sales or syndication to additional investors. We may not invest in any assets other than "qualifying assets" specified in the 1940 Act, unless, at the time the investments are made, at least 70% of our total assets are qualifying assets (with certain limited exceptions). Qualifying assets include investments in "eligible portfolio companies." Pursuant to rules adopted by theSEC , "eligible portfolio companies" include certain companies that do not have any securities listed on a national securities exchange and public companies whose securities are listed on a national securities exchange but whose market capitalization is less than$250 million .
The Investment Adviser
Our investment activities are managed by the Adviser, which is responsible for originating prospective investments, conducting research and due diligence investigations on potential investments, analyzing investment opportunities, negotiating and structuring our investments and monitoring our investments and portfolio companies on an ongoing basis. The Adviser has entered into a resource sharing agreement with Crescent, pursuant to which Crescent provides the Adviser with experienced investment professionals (including the members of the Adviser's investment committee) and access to Crescent's resources so as to enable the Adviser to fulfill its obligations under the Investment Advisory Agreement. Through the resource sharing agreement, the Adviser intends to capitalize on the deal origination, credit underwriting, due diligence, investment structuring, execution, portfolio management and monitoring experience of Crescent's investment professionals. OnJanuary 5, 2021 , Sun Life Financial Inc. (together with its subsidiaries 52 -------------------------------------------------------------------------------- and joint ventures, "Sun Life") acquired a majority interest in Crescent (the "Sun Life Transaction"). There were no changes to our investment objective, strategies and process or to the Crescent team responsible for the investment operations as a result of the Sun Life Transaction.
Revenues
We generate revenue primarily in the form of interest income on debt investments, capital gains and distributions, if any, on equity securities that we may acquire in portfolio companies. Certain investments may have contractual PIK interest or dividends. PIK represents accrued interest or accumulated dividends that are added to the loan principal of the investment on the respective interest or dividend payment dates rather than being paid in cash and generally becomes due at maturity or upon being called by the issuer. PIK is recorded as interest or dividend income, as applicable. Dividend income from common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly-traded portfolio companies. Dividend income from preferred equity securities is recorded on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. We may receive other income, which may include income such as consent, waiver, amendment, underwriting, and arranger fees associated with our investment activities as well as any fees for managerial assistance services rendered to the portfolio companies. Such fees are recognized as income when earned or the services are rendered. We also generate revenue in the form of commitment or origination fees. Loan origination fees, original issue discount and market discount or premium are capitalized, and we accrete or amortize such amounts into income over the life of the loan using the effective yield method.
Expenses
Our primary operating expenses include the payment of management fees and incentive fees to the Adviser under the Investment Advisory Agreement, as amended, our allocable portion of overhead expenses under the administration agreement with our Administrator (the "Administration Agreement"), operating costs associated with our sub-administration agreement withState Street Bank and Trust Company and other operating costs described below. The management and incentive fees compensate the Adviser for its work in identifying, evaluating, negotiating, closing and monitoring our investments. We bear all other out-of-pocket costs and expenses of our operations and transactions, including: • the cost of calculating our net asset value, including the cost of any third-party valuation services; • fidelity bond, directors' and officers' liability insurance and other insurance premiums;
• fees and expenses associated with independent audits and outside legal
costs;
• independent directors' fees and expenses;
• administration fees and expenses, if any, payable under theAdministration Agreement (including payments based upon our allocable
portion of the Administrator's overhead in performing its obligations
under the Administration Agreement, rent and the allocable portion of the
cost of certain professional services provided to us, including but not
limited to, our compliance professionals, our legal counsel and other
professionals);
• U.S. federal, state and local taxes;
• the cost of effecting sales and repurchases of shares of our common stock
and other securities;
• fees payable to third parties relating to making investments, includingout-of-pocket fees and expenses associated with performing due diligence
and reviews of prospective investments;
• out-of-pocket fees and expenses associated with marketing efforts;
• federal and state registration fees and any stock exchange listing fees;
• brokerage commissions;
• costs associated with our reporting and compliance obligations under the
1940 Act and other applicable U.S. federal and state securities laws;
• debt service and other costs of borrowings or other financing
arrangements; and
• all other expenses reasonably incurred by us in connection with making
investments and administering our business.
We expect our general and administrative expenses to be relatively stable or
decline as a percentage of total assets during periods of asset growth and to
increase during periods of asset declines.
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Leverage
Our financing facilities allow us to borrow money and lever our investment portfolio, subject to the limitations of the 1940 Act, with the objective of increasing our yield. This is known as "leverage" and could increase or decrease returns to our stockholders. The use of leverage involves significant risks. Prior to the Small Business Credit Availability Act being signed into law, a BDC generally was not permitted to incur indebtedness unless immediately after such borrowing it has an asset coverage for total borrowings of at least 200%. The Small Business Credit Availability Act, signed into law onMarch 23, 2018 , contains a provision that grants a BDC the option, subject to certain conditions and disclosure obligations, to reduce the asset coverage requirement to 150%. OnMarch 3, 2020 , our Board of Directors approved, and onMay 4, 2020 , at an annual meeting of our stockholders, our stockholders approved, the application to us of the reduced asset coverage requirements in Section 61(a) of the 1940 Act. The application of the reduced asset coverage requirement, which became effective onMay 4, 2020 , permits us, provided certain requirements are satisfied, to double the maximum amount of leverage that it is permitted to incur by reducing the asset coverage requirement applicable to us from 200% to 150% (i.e., we are permitted to borrow up totwo dollars for every dollar we have in assets less all liabilities and indebtedness not represented by senior securities issued by us) in order to issue senior securities. Short-term credits necessary for the settlement of securities transactions and arrangements with respect to securities lending will not be considered borrowings for these purposes. The amount of leverage that we employ depends on our Adviser's and our Board's assessment of market conditions and other factors at the time of any proposed borrowing.
PORTFOLIO INVESTMENT ACTIVITY
We seek to create a broad and diversified portfolio that generally includes senior secured first lien, unitranche, senior secured second lien and subordinated loans and minority equity securities ofU.S. middle market companies. The size of our individual investments will vary proportionately with the size of our capital base. We generally invest in securities that have been rated below investment grade by independent rating agencies or that would be rated below investment grade if they were rated. These securities have speculative characteristics with respect to the issuer's capacity to pay interest and repay principal. In addition, many of our debt investments have floating interest rates that reset on a periodic basis and typically do not fully pay down principal prior to maturity. As ofDecember 31, 2020 and 2019, our portfolio at fair value was comprised of the following: December 31, 2020 December 31, 2019 ($ in millions) Investment Type Fair Value Percentage Fair Value Percentage Senior Secured First Lien$ 373.6 36.1 %$ 351.3 48.3 % Unitranche First Lien 413.6 40.0 218.3 30.1 Unitranche First Lien - Last Out 14.9 1.5 16.2 2.2 Senior Secured Second Lien 104.7 10.1 58.9 8.1 Unsecured Debt 3.0 0.3 7.4 1.0 Equity & Other 69.3 6.7 21.4 3.0 LLC/LP Equity Interests 54.9 5.3 53.0 7.3 Total investments$ 1,034.0 100.0 %$ 726.5 100.0 % 54
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The following table shows our investment activity by investment type:
Year Ended
($ in millions) December 31, 2020 (1) December 31, 2019
New investments at cost:
Senior Secured First Lien $ 110.8 $ 140.7
Unitranche First Lien 204.2 166.9
Unitranche First Lien - Last Out - 16.0
Senior Secured Second Lien 17.9 4.4
Unsecured Debt 0.8 -
Equity & Other 9.2 5.4
LLC/LP Equity Interests 9.5 44.9
Total $ 352.4 $ 378.3
Proceeds from investments sold or repaid:
Senior Secured First Lien $ 165.3 $ 78.4
Unitranche First Lien 57.0 41.3
Unitranche First Lien - Last Out 0.2 0.2
Senior Secured Second Lien 24.2 14.2
Unsecured Debt 6.5 -
Equity & Other 0.5 2.0
LLC/LP Equity Interests 5.3 9.7
Total $ 259.0 $ 145.8
Net increase (decrease) in portfolio $ 93.4 $ 232.5
(1) Excludes
Alcentra Acquisition. The assets acquired, at cost, were comprised of
lien,
debt and
The following table presents certain selected information regarding our
investment portfolio as of
December 31, 2020 December 31, 2019
Weighted average yield on income
producing securities (at cost) (1) 8.0 % 8.1 % (2)
Percentage of debt bearing a
floating rate (at fair value) 98.4 % 97.9 %
Percentage of debt bearing a fixed
rate (at fair value) 1.6 % 2.1 %
Number of portfolio companies 132 98
(1) Yield excludes investments on non-accrual status.
(2) Prior period updated to conform to current period methodology.
The following table shows the amortized cost of our performing and non-accrual
debt and income producing debt securities as of
December 31, 2020 December 31, 2019
Amortized Cost Percentage Amortized Cost Percentage
Performing $ 899.2 98.3 % $ 645.4 98.1 %
Non-accrual 15.6 1.7 12.6 1.9
Total income producing
debt securities $ 914.8 100.0 % $ 658.0 100.0 %
Loans are generally placed on non-accrual status when there is reasonable doubt
that principal or interest will be collected in full. Non-accrual loans are
restored to accrual status when past due principal and interest is paid current
and, in management's judgment, are likely to remain current. Management may
determine to not place a loan on non-accrual status if the loan has sufficient
collateral value and is in the process of collection.
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As of December 31, 2020 , we had investments in two portfolio companies with
three investment positions on non-accrual status, which represented 1.7% and
1.3% of the total debt investments at cost and fair value, respectively. As of
December 31, 2019 , we had an investment in one portfolio company with three
investment positions on non-accrual status, which represented 1.9% and 1.0% of
total debt investments at cost and fair value, respectively. The remaining debt
investments were performing and current on their interest payments as of
December 31, 2020 and 2019.
The Adviser monitors our portfolio companies on an ongoing basis. The Adviser
monitors the financial trends of each portfolio company to determine if it is
meeting its business plans and to assess the appropriate course of action for
each company. The Adviser has a number of methods of evaluating and monitoring
the performance and fair value of our investments, which may include the
following:
• assessment of success of the portfolio company in adhering to its business
plan and compliance with covenants;
• review of monthly and quarterly financial statements and financial
projections for portfolio companies.
• contact with portfolio company management and, if appropriate, the financial
or strategic sponsor, to discuss financial position, requirements and
accomplishments;
• comparisons to other companies in the industry; and
• attendance and participation in board meetings.
As part of the monitoring process, the Adviser regularly assesses the risk profile of each of our investments and, on a quarterly basis, grades each investment on a risk scale of 1 to 5. Risk assessment is not standardized in our industry and our risk assessment may not be comparable to ones used by our competitors. Our assessment is based on the following categories:
1 Involves the least amount of risk in our portfolio. The investment/borrower
is performing above expectations since investment, and the trends and risk
factors are generally favorable, which may include the financial performance
of the borrower or a potential exit.
2 Involves an acceptable level of risk that is similar to the risk at the time
of investment. The investment/borrower is generally performing as expected,
and the risk factors are neutral to favorable.
3 Involves an investment/borrower performing below expectations and indicates
that the investment's risk has increased somewhat since investment. The
borrower's loan payments are generally not past due and more likely than not
the borrower will remain in compliance with debt covenants. An investment
rating of 3 requires closer monitoring.
4 Involves an investment/borrower performing materially below expectations and
indicates that the loan's risk has increased materially since investment. In
addition to the borrower being generally out of compliance with debt
covenants, loan payments may be past due (but generally not more than 180
days past due). Placing loans on non-accrual status should be considered for
investments rated 4.
5 Involves an investment/borrower performing substantially below expectations
and indicates that the loan's risk has substantially increased since
investment. Most or all of the debt covenants are out of compliance and
payments are substantially delinquent. Loans rated 5 are not anticipated to
be repaid in full and the fair market values of the loans are generally
reduced to the anticipated recovery amounts. Loans with an investment rating
of 5 are generally placed on non-accrual status.
The following table shows the distribution of our investments on the 1 to 5 investment performance rating scale at fair value as ofDecember 31, 2020 and 2019. Investment performance ratings are accurate only as of those dates and may change due to subsequent developments relating to a portfolio company's business or financial condition, market conditions or developments, and other factors. ($ in millions) December 31, 2020 December 31, 2019 Investments at Percentage of Investments at Percentage of Investment Performance Rating Fair Value Total Portfolio Fair Value Total Portfolio 1 $ 9.8 0.9 % $ 19.1 2.6 % 2 895.1 86.6 653.1 89.9 3 117.0 11.3 47.8 6.6 4 12.1 1.2 6.5 0.9 5 - - - - Total $ 1,034.0 100.0 % $ 726.5 100.0 % 56
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RESULTS OF OPERATIONS
Operating results for the years endedDecember 31, 2020 and 2019 were as follows: For the years ended December 31, 2020 December 31, 2019 ($ in millions) Total investment income $ 77.1 $ 53.5 Total net expenses 27.2 21.8 Net investment income $ 49.9 $ 31.7 Net realized gain (loss) on investments (1) (15.3 ) (7.2 ) Net unrealized appreciation (depreciation) on investments (1) (2) 24.1 5.0 Net realized and unrealized gains (losses) on investments $ 8.8 $ (2.2 ) Realized loss on asset acquisition (3.8 ) - Benefit/(Provision) for taxes on realized and unrealized appreciation (depreciation) on investments (0.2 ) (0.2 ) Net increase (decrease) in net assets resulting from operations $ 54.7 $ 29.3
(1) Includes gains and losses related to foreign currency transactions and
translation.
(2) Includes gains and losses related to foreign currency forward contracts.
Investment Income
For the years ended
December 31, 2020 December 31, 2019
($ in millions)
Interest from investments $ 71.1 $ 47.7
Dividend Income 4.9 5.0
Other income 1.1 0.8
Total $ 77.1 $ 53.5
Interest income, which includes amortization of upfront fees, increased from
$47.7 million for the year ended December 31, 2019 to $71.1 million for the year
ended December 31, 2020 , due to an increase in the size of our portfolio related
to the Alcentra Acquisition and organic net deployment. Included in interest
from investments for the years ended December 31, 2020 and 2019 are $2.3 million
and $1.4 million of accelerated accretion of OID, respectively.
Dividend income remained relatively flat for the years ended December 31, 2020
and 2019. Other income which includes amendment fees, amortization of loan
administration fees and other fees increased modestly as a result of a growing
investment portfolio.
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Expenses
For the years ended
December 31, 2020 December 31, 2019
($ in millions)
Interest and other debt financing costs $ 15.5 $ 13.4
Management fees 11.4 9.2
Incentive fees 8.6 4.8
Professional fees 1.5 0.9
Directors' fees 0.4 0.3
Organization expenses - 0.1
Other general and administrative expenses 2.6 2.2
Total expenses $ 40.0 $ 30.9
Management fee waiver (4.7 ) (4.5 )
Incentive fee waiver (8.6 ) (4.8 )
Net expenses $ 26.7 $ 21.6
Income and excise taxes 0.5 0.2
Total $ 27.2 $ 21.8
Interest and other debt financing costs
Interest and other debt financing costs include interest, amortization of deferred financing costs including upfront commitment fees and unused fees on our credit facilities. For the years endedDecember 31, 2020 and 2019 interest and debt financing costs were$15.5 million and$13.4 million , respectively. The increase between the periods is due to an increase in the debt outstanding in connection with financing needs of a growing investment portfolio. The increase in the debt outstanding was partially offset by a decrease in the average benchmark rates during the year endedDecember 31, 2020 .
Base Management Fees
For the years endedDecember 31, 2020 and 2019, we incurred management fees of$6.7 million and$4.7 million , respectively, which are net of a waived amounts of$4.7 million and$4.5 million , respectively. As ofDecember 31, 2020 and 2019,$1.9 million and$1.3 million of management fees, respectively, remained payable. The increase in net management fees is driven by growing assets under management. The Adviser has voluntarily waived its right to receive management fees on our investment inGACP II LP for any period in whichGACP II LP remains in the investment portfolio. For the years endedDecember 31, 2020 and 2019,$0.1 million and$0.1 million of management fees waived were attributable to our investment inGACP II LP . Incentive Fees
For the years ended
Professional Fees and Other General and Administrative Expenses
Professional fees generally include expenses from independent auditors, tax advisors, legal counsel and third party valuation agents. Other general and administrative expenses generally include expenses from the sub-administration agreement, insurance premiums, overhead and staffing costs allocated from the Administrator and other miscellaneous general and administrative costs associated with our operations and investment activity. For the years endedDecember 31, 2020 and 2019, professional fees were$1.5 million and$0.9 million , respectively. For the years endedDecember 31, 2020 and 2019, other general and administrative expenses were$2.6 million and$2.2 million , respectively. The net increase in expenses was due to an increase in costs associated with servicing a growing investment portfolio.
Organization expenses
We agreed to repay the Adviser for initial organization costs and equity offering costs incurred prior to the commencement of our operations up to a maximum of$1.5 million on a pro rata basis over the first$350.0 million of invested capital not to exceed 3 years from the initial capital commitment onJune 26, 2015 . The initial 3 year term was later extended toJune 30, 2019 , with shareholder approval. To the extent such costs related to equity offerings, these costs were charged as a reduction of capital upon the issuance of common shares. To the extent such costs related to organization costs, these costs were expensed in the Consolidated Statements of Operations upon the issuance of common shares. The Adviser was responsible for organization and private equity offerings costs in excess of$1.5 million . During the reimbursement period which began onJune 26, 2015 and expired onJune 30, 2019 , the Adviser had allocated to us$0.8 million of equity offering costs and$0.6 million of organization costs. 58
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Income and Excise Taxes
For the years endedDecember 31, 2020 and 2019, we expensed income and excise taxes of$0.5 million and$0.2 million , respectively. As ofDecember 31, 2020 and 2019,$0.4 million and$0.1 million of excise taxes remained payable, respectively.
Net Realized and Unrealized Gains and Losses
We value our portfolio investments quarterly and any changes in fair value are recorded as unrealized appreciation (depreciation) on investments. For the years endedDecember 31, 2020 and 2019, net realized gains (losses) and net unrealized appreciation (depreciation) on our investment portfolio were comprised of the following: For the years ended December 31, 2020 December 31, 2019 ($ in millions) Realized losses on non-controlled and non-affiliated investments $ (11.6 ) $ (0.6 ) Realized gains on non-controlled and non-affiliated investments 0.7 1.4 Realized losses on non-controlled and affiliated investments (5.6 ) (7.9 ) Realized gains on non-controlled and affiliated investments 1.3 - Realized losses on controlled and affiliated investments - - Realized gains on controlled and affiliated investments - - Realized losses on foreign currency transactions (0.3 ) (0.6 ) Realized gains on foreign currency transactions 0.2 0.5 Net realized gains (losses) on investments $ (15.3 ) $ (7.2 ) Change in unrealized depreciation on non-controlled and non-affiliated investments $ (1.7 ) $ (1.2 ) Change in unrealized appreciation on non-controlled and non-affiliated investments 8.4 4.5 Change in unrealized depreciation on foreign currency translation (0.5 ) (0.8 ) Change in unrealized appreciation on foreign currency translation 0.6 1.4 Change in unrealized depreciation on non-controlled and affiliated investments (0.4 ) (0.9 ) Change in unrealized appreciation on non-controlled and affiliated investments 20.7 0.9 Change in unrealized depreciation on controlled and affiliated investments (1.3 ) - Change in unrealized appreciation on controlled and affiliated investments (0.4 ) 0.4 Change in unrealized depreciation on foreign currency forwards (1.3 ) (0.1 ) Change in unrealized appreciation on foreign currency forwards - 0.8 Net unrealized appreciation (depreciation) $ 24.1 $ 5.0 Realized loss on asset acquisition (3.8 ) - Net realized and unrealized gains (losses) on investments and asset acquisition $ 5.0 $ (2.2 ) Hedging We may, but are not required to, enter into interest rate, foreign exchange or other derivative agreements to hedge interest rate, currency, credit or other risks. Generally, we do not intend to enter into any such derivative agreements for speculative purposes. Any derivative agreements entered into for speculative purposes are not expected to be material to our business or results of operations. These hedging activities, which are in compliance with applicable legal and regulatory requirements, may include the use of various instruments, including futures, options and forward contracts. We bear the costs incurred in connection with entering into, administering and settling any such derivative contracts. There can be no assurance any hedging strategy we employ will be successful.
During the years ended
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For the years ended
The comparison of the fiscal years endedDecember 31, 2019 and 2018 can be found in our annual report on Form 10-K for the fiscal year endedDecember 31, 2019 located within Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, which is incorporated by reference herein.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The primary uses of our cash and cash equivalents are for (1) investments in portfolio companies and other investments; (2) the cost of operations (including paying the Adviser); (3) debt service, repayment, and other financing costs; and (4) cash distributions to the holders of our common stock. We expect to generate additional liquidity from (1) borrowings from our SPV Asset Facility, Corporate Revolving Facility, Unsecured Notes, and from other banks, lenders, or future issuances of debt and equity securities; and, (2) cash flows from operations. As ofDecember 31, 2020 , we had$14.8 million in cash and cash equivalents and restricted cash and cash equivalents and$139.9 million of undrawn capacity on our senior unsecured notes and revolving credit and special purpose vehicle asset facilities, subject to borrowing base and other limitations. As ofDecember 31, 2020 , the undrawn capacity under our facilities is in excess of our unfunded commitments. As ofDecember 31, 2020 , we were in compliance with our asset coverage requirements under the 1940 Act. In addition, we were in compliance with all the financial covenant requirements of our credit facilities as ofDecember 31, 2020 . However, any continued increase in realized losses or unrealized depreciation of our investment portfolio or further significant reductions in our net asset value as a result of the effects of the COVID-19 pandemic, increase the risk of breaching the relevant covenants requirements. Any breach of these requirements may adversely affect the access to sufficient debt and equity capital. We expect that the market and business disruption created by the COVID-19 pandemic will continue to impact certain aspects of our liquidity, and we are therefore continuously and critically monitoring our operating results, liquidity and anticipated capital requirements. It is impossible at this time to determine the full scope of this outbreak, or any future outbreaks, how long any such outbreak, market disruption or uncertainties may last, the effect any governmental actions will have or the full potential impact on our liquidity and overall performance. Capital Share Activity BetweenJune 26, 2015 , commencement of operations, andJanuary 31, 2020 , the date of Alcentra Acquisition, we entered into subscription agreements (collectively, the "Subscription Agreements") with several investors, including Crescent, providing for the private placement of our common shares. Pursuant to the Subscription Agreements, betweenJune 26, 2015 andJanuary 31, 2020 , we issued 23,127,335 common shares for aggregate proceeds of$456.3 million , of which$10.0 million was from Crescent. Proceeds from the issuances were used to fund our investing activities and for other general corporate purposes. Subsequently, onJanuary 31, 2020 , we issued 5,203,016 shares in connection with the Alcentra Acquisition. Upon closing of the Alcentra Acquisition, all unfunded commitments of stockholders subscribing in private offering were terminated. During the years endedDecember 31, 2020 and 2019 we issued 30,128 shares and 76,969 shares of our common stock, respectively, to investors who have opted into our dividend reinvestment plan for proceeds of$0.6 million and$1.5 million , respectively.
Debt
Debt consisted of the following as of
December 31, 2020
Weighted Weighted
Average Average
Aggregate Principal Drawn Amount Carrying Debt Interest
Amount Committed Amount Available (1) Value (2) Outstanding Rate SPV Asset Facility
$ 350.0 $ 260.2 $ 89.8 $ 260.2 $ 235.3 2.63 %
Corporate Revolving Facility 200.0 149.9 50.1 149.9 150.4 2.93 %
Unsecured Notes 50.0 50.0 - 50.0 15.0 6.49 %
InterNotes ® 16.4 16.4 - 16.4 20.4 6.40 %
Total Debt $ 616.4 $ 476.5 $ 139.9 $ 476.5 $ 421.1 3.26 %
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December 31, 2019
Weighted Weighted
Aggregate Average Average
Principal Drawn Amount Carrying Debt Interest
Amount Committed Amount Available (1) Value (2) Outstanding Rate SPV Asset Facility
$ 250.0 $ 220.7 $ 29.3 $ 220.7 $ 201.0 4.03 %
Corporate Revolving Facility 200.0 104.7 95.3 104.7 74.9 4.26 %
Total Debt $ 450.0 $ 325.4 $ 124.6 $ 325.4 $ 275.9 4.10 %
(1) The amount available is subject to any limitations related to the respective
debt facilities' borrowing bases and foreign currency translation
adjustments.
(2) Amount presented excludes netting of deferred financing costs.
SPV Asset Facility
OnMarch 28, 2016 ,Crescent Capital BDC Funding, LLC ("CCAP SPV"), a wholly owned subsidiary of CCAP, entered into a loan and security agreement, as amended (the "SPV Asset Facility") with us as the collateral manager, seller and equity holder, CCAP SPV as the borrower, the banks and other financial institutions from time to time party thereto as lenders, andWells Fargo Bank, National Association ("Wells Fargo"), as administrative agent, collateral agent, and lender. We consolidate CCAP SPV in our consolidated financial statements and no gain or loss is recognized from the transfer of assets to and from CCAP SPV. BetweenFebruary 8, 2017 andMarch 10, 2020 , we have entered into multiple amendments to the SPV Asset Facility to, among other things, increase the facility limit from$75 million to$350 million . The maximum commitment amount under the SPV Asset Facility is$350 million , and may be increased with the consent of Wells Fargo or reduced upon our request. Proceeds of the Advances under the SPV Asset Facility may be used to acquire portfolio investments, to make distributions to us in accordance with the SPV Asset Facility, and to pay related expenses. The maturity date is the earlier of (a) the date the borrower voluntarily reduces the commitments to zero, (b)March 10, 2025 (the Facility Maturity Date) and (c) the date upon which Wells Fargo declares the obligations due and payable after the occurrence of an Event of Default. Borrowings under the SPV Asset Facility bear interest at LIBOR plus a margin with no LIBOR floor. The margin is between 1.65% and 2.20% as determined by the proportion of liquid and illiquid loans pledged to the SPV Asset Facility. We pay unused facility fees of 0.50% per annum on committed but undrawn amounts under the SPV Asset Facility. The SPV Asset Facility includes customary covenants, including certain limitations on the incurrence of additional indebtedness and liens, as well as usual and customary events of default for revolving credit facilities of this nature. The facility size is subject to availability under the borrowing base, which is based on the amount of CCAP SPV's assets from time to time, and satisfaction of certain conditions, including an asset coverage test and certain concentration limits.
Corporate Revolving Facility
OnAugust 20, 2019 , we entered into the "Corporate Revolving Facility" withAlly Bank ("Ally"), as Administrative Agent and Arranger. Proceeds of the advances under the Revolving Credit Agreement may be used to acquire portfolio investments, to make distributions to us in accordance with the Revolving Credit Agreement and to pay related expenses. The maximum principal amount of the Corporate Revolving Facility is$200 million , subject to availability under the borrowing base. Borrowings under the Corporate Revolving Facility bear interest at LIBOR plus a 2.35% margin, which includes a 0.05% utilization fee, with no LIBOR floor. We pay unused facility fees of 0.50% per annum on committed but undrawn amounts under the Corporate Revolving Facility. Interest is payable quarterly in arrears. Any amounts borrowed under the Corporate Revolving Facility, and all accrued and unpaid interest, will be due and payable, onAugust 20, 2024 . The Corporate Revolving Facility replaced the prior corporate revolving facility withCapital One, National Association . The maximum principal amount of the prior corporate revolving facility was$85 million , subject to availability under the borrowing base. Borrowings under the prior corporate revolving facility bore interest at LIBOR plus a 1.55% margin with no LIBOR floor. We paid unused facility fees of 0.20% per annum on committed but undrawn amounts. Interest was payable monthly in arrears. We paid down in full and terminated the prior corporate revolving facility onAugust 20, 2019 .
Unsecured Notes
OnJuly 30, 2020 , we completed a private offering of$50.0 million aggregate principal amount of 5.95% senior unsecured notes dueJuly 30, 2023 (the "Unsecured Notes"). The Unsecured Notes have a delayed draw feature. The initial issuance of$25.0 million of Unsecured Notes closedJuly 30, 2020 . The issuance of the remaining$25.0 million of Unsecured Notes closed onOctober 28, 2020 . 61
-------------------------------------------------------------------------------- The Unsecured Notes will mature onJuly 30, 2023 and may be redeemed in whole or in part, at our option, at any time or from time to time at par plus a "make-whole" premium, if applicable. Interest on the Unsecured Notes is due and payable semiannually in arrears onJanuary 30th andJuly 30th of each year, commencing onJanuary 30, 2021 . As ofDecember 31, 2020 , we were in compliance with the terms of the note purchase agreement governing the Unsecured Notes. Costs incurred in connection with issuing the Unsecured Notes are recorded as deferred financing costs and are being amortized over the life of the Unsecured Notes on an effective yield basis.
InterNotes®
OnJanuary 31, 2020 , in connection with the Alcentra Acquisition, we assumed direct unsecured fixed interest rate obligations or "InterNotes®". The majority of InterNotes® were issued byAlcentra Corporation betweenJanuary 2015 andJanuary 2016 . Each series of notes has been issued by a separate trust administered byU.S. Bank . As ofDecember 31, 2020 , the outstanding InterNotes® bear interest at fixed interest rates ranging between 6.25% and 6.75% and offer a variety of maturities ranging betweenFebruary 15, 2021 andApril 15, 2022 . The summary of costs incurred in connection with the SPV Asset Facility, Corporate Revolving Facility, InterNotes®, Unsecured Notes, and prior corporate revolving facility for the years endedDecember 31, 2020 and 2019, were as follows: ($ in millions) For the years ended December 31, 2020 December 31, 2019 Borrowing interest expense $ 13.4 $ 12.1 Unused facility fees 0.8 0.2 Amortization of financing costs 1.3 1.1 Total interest and credit facility expenses $ 15.5 $ 13.4 Weighted average outstanding balance $ 421.1 $ 275.9 To the extent we determine that additional capital would allow us to take advantage of additional investment opportunities, if the market for debt financing presents attractively priced opportunities, or if our Board otherwise determines that leveraging our portfolio would be in our best interest and the best interests of our stockholders, we may enter into new debt financing opportunities in addition to our existing debt. The pricing and other terms of any such opportunities would depend upon market conditions and the performance of our business, among other factors. In accordance with applicableSEC staff guidance and interpretations, effectiveMay 5, 2020 with shareholder approval, we, as a BDC, are permitted to borrow amounts such that our asset coverage ratio is at least 150% after such borrowing (if certain requirements are met), rather than 200%, as previously required. Short-term credits necessary for the settlement of securities transactions and arrangements with respect to securities lending will not be considered borrowings for these purposes. The amount of leverage that we employ depends on our Adviser's and our Board's assessment of market conditions and other factors at the time of any proposed borrowing. As ofDecember 31, 2020 and 2019, our asset coverage ratio was 217% and 225%, respectively. We may also refinance or repay any of our indebtedness at any time based on our financial condition and market conditions. See Note 6. Debt to our consolidated financial statements for more detail on the debt facilities.
STOCK REPURCHASE PROGRAM
OnJanuary 31, 2020 , we entered into a$20.0 million repurchase plan which allowed us to purchase shares in the open market any time our common stock traded below 90% of the most recently disclosed net asset value per share. The plan was subject to compliance with our liquidity, covenant, leverage and regulatory requirements. Pursuant to the terms of the repurchase plan, repurchases began onMarch 2, 2020 . OnApril 9, 2020 , our Board of Directors unanimously approved the termination of the stock repurchase program.
For the year ended
OFF BALANCE SHEET ARRANGEMENTS
Our investment portfolio may contain investments that are in the form of lines
of credit or unfunded commitments which require us to provide funding when
requested by portfolio companies in accordance with the terms of the underlying
agreements. Unfunded commitments to provide funds to portfolio companies are not
reflected on our Consolidated Statements of Assets and Liabilities.
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These commitments are subject to the same underwriting and ongoing portfolio
maintenance as are the on-balance sheet financial instruments that we hold.
Since these commitments may expire without being drawn upon, the total
commitment amount does not necessarily represent future cash requirements. As of
December 31, 2020 and 2019, we had aggregate unfunded commitments totaling
$80.8 million and $82.7 million , respectively. The foreign denominated
commitments were converted to USD at each balance sheet date.
RECENT DEVELOPMENTS
On
OnFebruary 15, 2021 ,$5.4 million of InterNotes® matured and were redeemed at par. We provided notice to redeem the remaining$11.0 million of InterNotes® which is expected to be paid off onMarch 19, 2021 . OnFebruary 17, 2021 , we completed a private offering of$135.0 million aggregate principal amount of 4.00% senior unsecured notes dueFebruary 17, 2026 (the "2026 Unsecured Notes"). The 2026 Unsecured Notes have a delayed draw feature. The initial issuance of$50.0 million of Unsecured Notes closedFebruary 17, 2021 . The issuance of the remaining$85.0 million of 2026 Unsecured Notes is expected to close on or beforeMay 17, 2021 . OnFebruary 22, 2021 , our Board of Directors declared a regular cash dividend of$0.41 per share, which will be paid onApril 15, 2021 to stockholders of record as ofMarch 31, 2021 . OnFebruary 22, 2021 , the Adviser notified the Board of Directors of its intent to voluntarily waive incentive fees to the extent net investment income falls short of the declared dividend on a full dollar basis. The waiver will become effective upon expiration of the current waivers onJuly 31, 2021 and will continue throughDecember 31, 2022 .
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