BUSINESS DEVELOPMENT CORP OF AMERICA MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS (Form 10-Q)

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The following discussion and analysis should be read in conjunction with the
accompanying consolidated financial statements of Business Development
Corporation of America (the "Company," "BDCA," "we," or "our") and the notes
thereto and other financial information included elsewhere in this Quarterly
Report on Form 10-Q. We are externally managed by our adviser, BDCA Adviser, LLC
(the "Adviser").
Forward Looking Statements
This report, and other statements that we may make, may contain forward-looking
statements with respect to future financial or business performance, strategies,
or expectations. Forward-looking statements are typically identified by words or
phrases such as "trend," "opportunity," "pipeline," "believe," "comfortable,"
"expect," "anticipate," "current," "intention," "estimate," "position,"
"assume," "potential," "outlook," "continue," "remain," "maintain," "sustain,"
"seek," "achieve," and similar expressions, or future conditional verbs such as
"will," "would," "should," "could," "may," or similar expressions.
Forward-looking statements are subject to numerous assumptions, risks, and
uncertainties, which change over time. Forward-looking statements speak only as
of the date they are made, and we assume no duty to and do not undertake to
update forward-looking statements. Actual results could differ materially from
those anticipated in forward-looking statements and future results could differ
materially from historical performance.
In addition to factors previously disclosed in our U.S. Securities and Exchange
Commission ("SEC") reports and those identified elsewhere in this report,
including the "Risk Factors" section, the following factors, among others, could
cause actual results to differ materially from forward-looking statements or
historical performance:
•our future operating results;
•the impact of the COVID-19 pandemic on our business and our portfolio
companies, including our and their ability to access capital and liquidity;
•changes in political, economic or industry conditions, the interest rate
environment or conditions affecting the financial and capital markets, including
the effect of the current COVID-19 pandemic;
•the impact that the discontinuation of LIBOR and the transition to new
reference rates could have on the value of our LIBOR-indexed portfolio
investments and the cost of borrowing under our credit facilities;
•the impact of the investments that we expect to make;
•the ability of our portfolio companies to achieve their objectives;
•our contractual arrangements and relationships with third parties;
•our expected financings and investments;
•the adequacy of our cash resources and working capital;
•the timing of cash flows, if any, from the operations of our portfolio
companies;
•our repurchase of shares;
•actual and potential conflicts of interest with our Adviser and its affiliates;
•the dependence of our future success on the general economy and its effect on
the industries in which we invest;
•the ability to qualify and maintain our qualifications as a regulated
investment company ("RIC") and a business development company ("BDC");
•the timing, form, and amount of any distributions;
•the impact of fluctuations in interest rates on our business;
•the valuation of any investments in portfolio companies, particularly those
having no liquid trading market;
•the impact of changes to generally accepted accounting principles, and the
impact to BDCA; and
•the impact of changes to tax legislation and, generally, our tax position.
Our actual results could differ materially from those implied or expressed in
the forward-looking statements for any reason, including the factors set forth
in "Item 1A. Risk Factors" and elsewhere in this Quarterly Report.

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Overview

We are an externally managed, non-diversified closed-end management investment
company incorporated in Maryland in May 2010 that has elected to be regulated as
a BDC under the Investment Company Act of 1940, as amended ("the 1940 Act"). In
addition, we have elected to be treated for tax purposes as a RIC under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). Our
investment activities are managed by the Adviser, a subsidiary of Benefit Street
Partners L.L.C. ("BSP") and supervised by our Board of Directors, a majority of
whom are independent of the Adviser and its affiliates. As a BDC, we are
required to comply with certain regulatory requirements.
Our investment objective is to generate both current income and to a lesser
extent long-term capital appreciation through debt and equity investments. We
invest primarily in senior secured loans, and to a lesser extent, mezzanine
loans, unsecured loans, and equity of predominantly private U.S. middle-market
companies. We define middle market companies as those with annual revenues of
less than $1 billion, although we may invest in larger or smaller companies. We
may also purchase interests in loans or corporate bonds through secondary market
transactions. We expect that each investment generally will range between
approximately 0.5% and 3.0% of our total assets. As of September 30, 2021, 78.0%
of our portfolio was invested in senior secured loans.
Senior secured loans generally are senior debt instruments that rank ahead of
subordinated debt and equity in priority of payments and are generally secured
by liens on the operating assets of a borrower which may include inventory,
receivables, plant, property, and equipment. Mezzanine debt is subordinated to
senior loans and is generally unsecured. We may also invest in the equity and
junior debt tranches of collateralized loan obligation investment vehicles
("Collateralized Securities" or "CLO's").
Financial and Operating Highlights
(Dollars in millions, except per share amounts)
At September 30, 2021:
                      Investment Portfolio                                                        $ 2,493.8
                      Net assets                                                                    1,497.7
                      Debt (net of deferred financing costs)                                        1,084.8
                      Net asset value per share                                                        7.46

Portfolio activity for the nine months ended September 30, 2021:

                      Purchases during the period                                                   1,272.0
                      Sales, repayments, and other exits during the period                          1,507.8
                      Number of portfolio companies at end of period                                       175

Operating results for the nine months ended September 30, 2021:

                      Net investment income per share                                                  0.40
                      Distributions declared per share                                                 0.35
                      Net increase in net assets resulting from operations per share                   0.86
                      Net investment income                                                            80.9
                      Net realized and unrealized gain, net of change in deferred taxes                90.3
                      Net increase in net assets resulting from operations                            171.1


Portfolio and Investment Activity
During the nine months ended September 30, 2021, we made $1,272.0 million of
investments in new and existing portfolio companies and had $1,507.8 million in
aggregate amount of sales and repayments, resulting in a net decrease in
investments of $235.8 million for the period. The total portfolio of debt
investments at fair value consisted of 92.6% bearing variable interest rates and
7.4% bearing fixed interest rates.
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The composition of our portfolio, based on the fair value at September 30, 2021 was as follows:

                                                                                    September 30, 2021
                                                                                                    Weighted Average Current
                                                                     Percentage of                 Yield for Total Portfolio
                                                                    Total Portfolio                           (1)
Senior Secured First Lien Debt                                                      68.6  %                             7.4  %
Senior Secured Second Lien Debt                                                      9.4                                8.7
Subordinated Debt                                                                    2.3                               11.4
Collateralized Securities (2)                                                        1.5                               15.6
Equity/Other (3)                                                                     6.0                               19.7
BDCA Senior Loan Fund, LLC (3)                                                      12.2                                8.0
Total                                                                              100.0  %                             8.5  %


______________
(1) Includes the effect of the amortization or accretion of loan premiums or
discounts.
(2) Weighted average current yield for Collateralized Securities is based on the
estimation of effective yield to expected maturity for each security as
calculated in accordance with Accounting Standards Codification ("ASC") Topic
325-40-35, Beneficial Interests in Securitized Financial Assets (see Note 2 -
Summary of Significant Accounting Policies).
(3) Weighted average current yield may be based on actual or annualized income,
where applicable.
During the year ended December 31, 2020, we made $1,082.5 million of investments
in new and existing portfolio companies and had $891.7 million in aggregate
amount of sales and repayments, resulting in net investments of $190.8 million
for the period. The total portfolio of debt investments at fair value consisted
of 91.3% bearing variable interest rates and 8.7% bearing fixed interest rates.
Our portfolio composition, based on fair value at December 31, 2020 was as
follows:
                                                                                    December 31, 2020
                                                                                                   Weighted Average Current
                                                                    Percentage of                 Yield for Total Portfolio
                                                                   Total Portfolio                           (1)
Senior Secured First Lien Debt                                                     73.5  %                             7.1  %
Senior Secured Second Lien Debt                                                     9.1                                9.4
Subordinated Debt                                                                   4.5                               12.3
Collateralized Securities (2)                                                       4.1                                9.6
Equity/Other (3)                                                                    8.8                               14.8
Total                                                                             100.0  %                             8.3  %


______________
(1) Includes the effect of the amortization or accretion of loan premiums or
discounts.
(2) Weighted average current yield for Collateralized Securities is based on the
estimation of effective yield to expected maturity for each security as
calculated in accordance with ASC Topic 325-40-35, Beneficial Interests in
Securitized Financial Assets (see Note 2 - Summary of Significant Accounting
Policies).
(3) Weighted average current yield for Equity/Other may be based on actual or
annualized income, where applicable.
Portfolio Asset Quality
Our Adviser employs an investment rating system to categorize our investments.
In addition to various risk management and monitoring tools, our Adviser grades
the credit risk of all debt investments on a scale of 1 to 5 no less frequently
than quarterly. This system is intended primarily to reflect the underlying risk
of a portfolio debt investment relative to the inherent risk at the time the
original debt investment was made (i.e., at the time of acquisition), although
it may also take into account under certain circumstances the performance of the
portfolio company's business, the collateral coverage of the investment and
other relevant factors.
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      Loan Rating             Summary Description
                              Debt investment exceeding fundamental 

performance expectations and / or

          1                   capital gain expected. Trends and risk factors since the time of
                              investment are favorable.

          2                   Performing consistent with expectations and a

full repayment of capital and

                              interest expected. Trends and risk factors 

are neutral to favorable. All

                              investments are initially rated a "2".

          3                   Performing debt investment requiring closer 

surveillance. Trends and risks

                              factors show some deterioration.

          4                   Underperforming debt investment. Some loss of interest or dividend
                              expected, but still expecting a positive

return on investment. Trends and

                              risk factors are negative.

          5                   Underperforming debt investment with expected loss of interest and some
                              principal.


The weighted average risk rating of our investments based on fair value was 2.15
and 2.33 as of September 30, 2021 and December 31, 2020, respectively. As of
September 30, 2021, we had seven portfolio companies on non-accrual with a total
amortized cost of $66.4 million and fair value of $24.6 million, which
represented 2.6% and 1.0% of the investment portfolio's total amortized cost and
fair value, respectively. As of December 31, 2020, we had eleven portfolio
companies on non-accrual with a total amortized cost of $104.1 million and fair
value of $55.4 million, which represented 3.8%, and 2.1% of the investment
portfolio's total amortized cost and fair value, respectively. Refer to Note 2 -
Summary of Significant Accounting Policies - in our consolidated financial
statements included in this report for additional details regarding our
non-accrual policy.
RESULTS OF OPERATIONS
Operating results for the three and nine months ended September 30, 2021 and
2020 were as follows (dollars in thousands):
                                      For the three months ended September         For the nine months ended September
                                                      30,                                          30,
                                           2021                   2020                 2021                  2020
Total investment income              $       58,532          $    44,166          $    173,217          $    142,528
Total expenses                               30,625               22,609                90,082                74,286
Income tax expense, including excise
tax                                           1,181                1,237                 2,284                 1,931

Net investment income                $       26,726          $    20,320          $     80,851          $     66,311


Investment Income
For the three and nine months ended September 30, 2021, total investment income
was $58.5 million and $173.2 million, respectively, and was primarily
attributable to interest income from investments in portfolio companies with an
average portfolio fair value of $2.6 billion and a weighted average current
yield of 8.5%. Included within total investment income was $1.3 million and $5.7
million, respectively, of fee income for the three and nine months ended
September 30, 2021. Fee income consists primarily of prepayment and amendment
fees. For the three and nine months ended September 30, 2020, total investment
income was $44.2 million and $142.5 million, respectively, and was primarily
attributable to interest income from investments in portfolio companies with an
average portfolio fair value of $2.4 billion and a weighted average current
yield of 7.5%. Included within total investment income was $2.2 million and $4.4
million, respectively, of fee income for the three and nine months ended
September 30, 2020. Fee income consists primarily of prepayment and amendment
fees.

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Operating Expenses
The composition of our operating expenses for the three and nine months ended
September 30, 2021 and 2020 was as follows (dollars in thousands):
                           For the three months ended September 30,         

For the nine months ended September 30,

                                  2021                    2020                    2021                    2020
Management fees            $        10,008          $       8,933          $        29,044          $      28,255
Incentive fee on income              6,682                      -                   20,213                      -

Interest and debt fees              11,519                 10,909                   32,151                 36,986
Professional fees                      549                  1,365                    2,961                  3,966
Other general and
administrative                       1,437                    785                    4,467                  3,391
Administrative services                186                    395                      548                    955

Directors' fees                        244                    222                      698                    733

Total operating expenses $ 30,625 $ 22,609 $ 90,082 $ 74,286


For the three and nine months ended September 30, 2021, we incurred management
fees of $10.0 million and $29.0 million, respectively. For the three and nine
months ended September 30, 2021, we incurred incentive fees on income of $6.7
million and $20.2 million, respectively. For the three and nine months ended
September 30, 2020, we incurred management fees of $8.9 million and $28.3
million, respectively. For the three and nine months ended September 30, 2020,
we did not incur incentive fees on income.
For the three and nine months ended September 30, 2021, we incurred interest and
debt fees of $11.5 million and $32.2 million, respectively. For the three and
nine months ended September 30, 2020, we incurred interest and debt fees of
$10.9 million and $37.0 million, respectively. Interest and debt fees are
comprised of interest expense, non-usage fees, trustee fees, amortization of
deferred financing costs, and amortization of discount if applicable related to
our revolving credit facilities and unsecured notes, each as defined herein in
the section entitled "Borrowings". The increase in interest and debt fees for
the three months ended September 30, 2021 as compared to the same period in 2020
is primarily the result of the issuance of our 2026 Notes, partially offset by
the redemption of our 2020 Notes as well as the transfer of the Citi Credit
Facility to the SLF. The decrease in interest and debt fees for the nine months
ended September 30, 2021 as compared to the same period in 2020 is primarily the
result of the transfer of the Citi Credit Facility to the SLF as well as the
redemption of our 2020 Notes, partially offset by the issuance of our 2026
Notes.
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Net Realized Gain (Loss) and Net Change in Unrealized Appreciation
(Depreciation) on Investments, Foreign Currency Transactions, and Forward
Currency Exchange Contracts
Net realized gain (loss) and net change in unrealized appreciation
(depreciation) on investments and foreign currency transactions, net of change
in deferred taxes for the three and nine months ended September 30, 2021 and
2020 were as follows (dollars in thousands):
                                            For the three months ended September        For the nine months ended September
                                                            30,                                         30,
                                                  2021                 2020                  2021                  2020
Net realized gain (loss)
  Control investments                       $      (6,243)         $  

(12 689) $ (6,240) (13,061) $

  Affiliate investments                             1,885                  32                 22,877                  634
  Non-affiliate investments                         4,554             (23,254)                10,812              (93,560)
  Net realized gain (loss) on foreign
currency transactions                                 662                (845)                  (719)                 (72)
Net realized loss on extinguishment of debt             -                   -                 (1,286)                   -
Total net realized gain (loss)                        858             (36,756)                25,444             (106,059)
Net change in unrealized appreciation
(depreciation) on investments
  Control investments                              10,690              21,652                  1,264              (15,230)
  Affiliate investments                              (357)              1,278                 19,755              (24,400)
  Non-affiliate investments                         2,909              51,891                 46,324              (26,735)
Net change in deferred taxes                       (3,073)               (930)                (3,073)                 818
Total net change in unrealized appreciation
(depreciation) on investments, net of
change in deferred taxes                           10,169              73,891                 64,270              (65,547)

Net change in unrealized appreciation
(depreciation) from forward currency
exchange contracts                                   (320)                519                    568                  442

Net realized and unrealized gain (loss) $ 10,707 $ 37,654 $ 90,282 $ (171,164)


Net realized and unrealized gain (loss) on investments and foreign currency
transactions, net of change in deferred taxes, resulted in a net gain of $10.7
million and $90.3 million, respectively, for the three and nine months ended
September 30, 2021 compared to net gain (loss) of $37.7 million and $(171.2)
million for the same periods in 2020. We look at net realized gain (loss) and
change in unrealized appreciation (depreciation) together, as movement in
unrealized appreciation or depreciation can be the result of realizations.
The net realized and unrealized gain for the three months ended September 30,
2021 was primarily driven by unrealized gains on Senior Secured Investments and
Equity Investments. The net realized and unrealized gain for the nine months
ended September 30, 2021 was primarily driven by realized gains on Equity
Investment sales as well as unrealized gains on Senior Secured Investments and
Collateralized Securities.
The net realized and unrealized gain for the three months ended September 30,
2020 was primarily driven by unrealized gains on Senior Secured Investments,
partially offset by realized losses on Senior Secured Investment sales. The net
realized and unrealized loss for the nine months ended September 30, 2020 was
primarily driven by realized losses on Senior Secured Investment sales as well
as unrealized losses on Senior Secured Investments, Collateralized Securities,
and Equity investments.
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Changes in Net Assets from Operations
For the three and nine months ended September 30, 2021, we recorded a net
increase in net assets resulting from operations of $37.4 million and $171.1
million, respectively, versus a net increase (decrease) in net assets resulting
from operations of $58.0 million and $(104.9) million, respectively, for the
three and nine months ended September 30, 2020. The decrease for the three
months ended September 30, 2021 as compared to the same period in 2020 is
primarily driven by a decrease in unrealized gain on our investments. The
increase for the nine months ended September 30, 2021 as compared to the same
period in 2020 is primarily driven by an increase in realized and unrealized
gain on our investments. Based on the weighted average shares of common stock
outstanding for the periods ended September 30, 2021 and 2020, our per share net
increase in net assets resulting from operations was $0.19 and $0.86,
respectively, for the three and nine months ended September 30, 2021, versus a
net increase (decrease) in net assets resulting from operations of $0.29 and
$(0.53), respectively, for the three and nine months ended September 30, 2020.
Cash Flows
For the nine months ended September 30, 2021, net cash used in operating
activities was $266.3 million. The level of cash flows used in or provided by
operating activities is affected by the timing of purchases, redemptions, and
sales of portfolio investments. The increase in cash flows used in operating
activities for the nine months ended September 30, 2021 was primarily a result
of purchases of investments of $952.1 million as well as payable for unsettled
trades of $177.8 million, partially offset by sales and repayments of $843.6
million.
Net cash provided by financing activities of $254.7 million during the nine
months ended September 30, 2021 primarily related to proceeds from debt of
$982.0 million, partially offset by payments on debt of $661.0 million.
For the nine months ended September 30, 2020, net cash provided by operating
activities was $239.3 million. The level of cash flows used in or provided by
operating activities is affected by the timing of purchases, redemptions, and
sales of portfolio investments. The increase in cash flows provided by operating
activities for the nine months ended September 30, 2020 was primarily a result
of sales and repayments of investments of $669.9 million and net change in
unrealized depreciation on investments of $66.4 million, offset by purchases of
investments of $495.5 million.
Net cash used in financing activities of $214.7 million during the nine months
ended September 30, 2020 primarily related to payments on debt of $976.7
million, which was partially offset by proceeds from debt of $774.0 million.
BDCA Senior Loan Fund, LLC
On January 20, 2021, BDCA and Cliffwater Corporate Lending Fund ("CCLF") formed
a joint venture, BDCA Senior Loan Fund, LLC (the "SLF"), that invests primarily
in senior secured loans, and to a lesser extent may invest in mezzanine loans,
unsecured loans and equity of predominantly private U.S. middle-market
companies. SLF was formed as a Delaware limited liability company and is not
consolidated by either BDCA or CCLF for financial reporting purposes. BDCA
provides capital to the SLF in the form of LLC equity interests. As of
September 30, 2021, BDCA and CCLF owned 87.5% and 12.5%, respectively, of the
LLC equity interests of SLF. BDCA and CCLF each appoint two members to SLF's
four-person board of directors. All material decisions with respect to SLF,
including those involving its investment portfolio, require unanimous approval
of a quorum of the board of directors. Quorum is defined as (i) the presence of
two members of the board of directors; provided that at least one individual is
present that was elected, designated or appointed by each member; (ii) the
presence of three members of the board of directors; provided that the
individual that was elected, designated or appointed by the member with only one
individual present shall be entitled to cast two votes on each matter; and (iii)
the presence of four members of the board of directors; provided that two
individuals are present that were elected, designated or appointed by each
member.
As part of the initial contribution to SLF, BDCA contributed $751.8 million of
assets including $664.2 million of investments and $42.4 million of cash as well
as $446.9 million worth of liabilities including the Citi Credit Facility debt
of $344.4 million in exchange for $304.9 million of equity in SLF. As of
September 30, 2021, BDCA's investment in SLF consisted of equity contributions
of $304.9 million.
Below is a summary of SLF's portfolio, as of September 30, 2021 and a listing of
the individual investments in SLF's portfolio as of such date can be found in
"Note 3 - Fair Value of Investments" in the notes to the accompanying
consolidated financial statements (dollars in thousands):
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                                                                 September 30, 2021
   Total assets                                                 $       1,147,035
   Total investments (1)                                        $       1,023,289
   Weighted Average Current Yield for Total Portfolio (2)                   

5.20%

   Number of Portfolio companies in SLF                                     

170

   Largest portfolio company investment (1)                     $          

19,861

Total of the top five investments in holding companies (1) $ 96,282


(1)At fair value
(2)Includes the effect of the amortization or accretion of loan premiums or
discounts.
Below is certain summarized financial information for the SLF as of
September 30, 2021 and for the period ended September 30, 2021 (dollars in
thousands):
Selected Statement of Assets and Liabilities Information     September 30,
                                                                  2021
                                                              (Unaudited)

ASSETS

Investments, at fair value (amortized cost of $1,015,681)   $    1,023,289
Cash and other assets                                              123,746
Total assets                                                $    1,147,035

LIABILITIES
Revolving credit facilities                                 $      532,608
Secured borrowings                                                 115,199
Other liabilities                                                  136,045
Total liabilities                                                  783,852

MEMBERS' CAPITAL
Total members' capital                                             363,183

Total liabilities and members' capital                      $    1,147,035


                                                                                    For the period
                                                                                   January 20, 2021
                                                   For the three months           (inception) through
Selected Statements of Operations Information       ended September 30,              September 30,
                                                           2021                          2021
                                                        (Unaudited)                   (Unaudited)
Investment income:
Total investment income                          $               11,563          $           30,889

Operating expenses:
Interest and credit facility financing expenses                   2,879                       6,854
Other expenses                                                      566                       1,329
Total expenses                                                    3,445                       8,183

Net investment income                                             8,118                      22,706

Realized and unrealized gain:
Net realized and unrealized gain                                    398                      12,456

Net increase in net assets resulting from
operations                                       $                8,516          $           35,162


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Impact of COVID-19 Pandemic
The COVID-19 pandemic has resulted in governments around the world implementing
a broad suite of measures to help control the spread of the virus, including
quarantines, travel restrictions and business curtailments and others. The
emergence of COVID-19 created economic and financial disruptions that may affect
our business, financial condition, liquidity and certain of our portfolio
companies' results of operations and liquidity. The extent to which the COVID-19
pandemic will affect our business, financial condition, liquidity and certain of
our portfolio companies' results of operations and liquidity will depend on
future developments, which are highly uncertain and cannot be predicted.
Given the unprecedented nature of the COVID-19 exigency and the fiscal and
monetary response designed to mitigate strain to businesses and the economy, the
operating environment of certain of our portfolio companies is evolving rapidly.
We have been in frequent communication with management, as well as the private
equity sponsors, of our portfolio companies in order to understand the impact of
the COVID-19 pandemic on their particular businesses and assess their ability to
meet their obligations. We continue to closely monitor our investment portfolio
in order to be positioned to respond appropriately.
Recent Developments
On August 10, 2021, Michael Frick was appointed to serve as Secretary of the
Company effective upon the resignation of Leeor Avigdor from such position. Mr.
Avigdor will remain an employee of BSP and his decision to step down was not due
to any dispute or disagreement with the Company on any matter relating to the
Company's operations, policies, practices or accounting matters.
Liquidity and Capital Resources
We generate cash flows from fees, interest, and dividends earned from our
investments, as well as proceeds from sales of our investments and, previously,
from the net proceeds of our Offering. As of September 30, 2021, we had issued
231.5 million shares of our common stock for gross proceeds of $2.4 billion,
including the shares purchased by affiliates and shares issued pursuant to the
DRIP. As of September 30, 2021, we had $610.0 million of senior unsecured notes
outstanding. We suspended the DRIP from March 29, 2020 through June 26, 2020.
While the DRIP was suspended, participants and all other holders of our common
stock received distributions paid in cash. On March 31, 2020, we issued in a
private placement an aggregate amount of 9,532,062 newly issued shares of our
common stock at a price of $5.77 per share for aggregate cash proceeds of $55.0
million and on April 30, 2020, we issued in a private placement an aggregate
amount of 693,240 newly issued shares of our common stock at a price of $5.77
per share for aggregate cash proceeds of $4.0 million.
Our principal demands for funds in both the short-term and long-term are for
portfolio investments, for the payment of operating expenses, distributions to
our investors, repurchases under our share repurchase program, and for the
payment of principal and interest on our outstanding indebtedness. We may also
from time to time enter into other agreements with third parties whereby third
parties will contribute to specific investment opportunities. Other potential
future sources of capital include proceeds from secured or unsecured financings
from banks or other lenders, proceeds from private offerings, proceeds from the
sale of investments, and undistributed funds from operations. However, our
ability to incur additional debt will be dependent on a number of factors,
including our degree of leverage, the value of our unencumbered assets, and
borrowing restrictions that may be imposed by lenders.
We intend to conduct annual tender offers pursuant to our share repurchase
program. Our Board of Directors will consider the following factors, among
others, in making its determination regarding whether to cause us to offer to
repurchase shares and under what terms:
•the effect of such repurchases on our qualification as a RIC (including the
consequences of any necessary asset sales);
•the liquidity of our assets (including fees and costs associated with disposing
of assets);
•our investment plans and working capital requirements;
•the relative economies of scale with respect to our size;
•our history in repurchasing shares or portions thereof; and
•the condition of the securities markets.
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We intend to conduct tender offers on an annual basis. We intend to continue to
limit the number of shares to be repurchased in any calendar year to the lesser
of (i) 10% of the weighted average number of shares outstanding in the prior
calendar year or (ii) the number of shares of common stock the Company is able
to repurchase with the proceeds received from the sale of shares of common stock
under the DRIP during the relevant redemption period. In addition, in the event
of a stockholder's death or disability, any repurchases of shares made in
connection with a stockholder's death or disability may be included within the
overall limitation imposed on tender offers during the relevant redemption
period, which provides that we may limit the number of shares to be repurchased
during any redemption period to the number of shares of common stock we are able
to repurchase with the proceeds received from the sale of shares of common stock
under the DRIP during such redemption period.
Distributions
For the period from January 1, 2018 to March 29, 2020, the Company's Board of
Directors had authorized, and had declared, cash distributions payable on a
monthly basis to stockholders of record at a distribution rate of $0.00178082
per day, which is equivalent to approximately $0.65 annually, per share of
common stock, except for 2020 where the daily distribution rate was $0.00177596
per day to accurately reflect 2020 being a leap year. Effective April 21, 2020,
the Board of Directors of the Company approved a transition in the timing of its
distributions to holders of the Company's common stock from a monthly to a
quarterly basis. On June 26, 2020, the Board declared a regular quarterly cash
dividend of $0.10 per share of the Company's common stock, payable on July 6,
2020 to stockholders of record as of June 30, 2020. On September 25, 2020, the
Board declared a regular quarterly cash dividend of $0.10 per share of the
Company's common stock, payable on October 1, 2020 to stockholders of record as
of September 30, 2020. On November 9, 2020, the Board declared a regular
quarterly cash dividend of $0.10 per share of the Company's common stock,
payable on January 4, 2021 to stockholders of record as of December 31, 2020. On
March 11, 2021, the Board declared a regular quarterly cash dividend of $0.10
per share of the Company's common stock, payable on April 1, 2021 to
stockholders of record as of March 31, 2021. On May 7, 2021, the Board declared
a regular quarterly cash dividend of $0.10 per share of the Company's common
stock, payable July 1, 2021 to stockholders of record as of June 30, 2021. On
September 28, 2021, the Board declared a regular quarterly cash dividend of
$0.13 per share and a special dividend of $0.02 per share of the Company's
common stock, payable on October 1, 2021 to stockholders of record as of
September 30, 2021.
The amount of each such distribution is subject to the discretion of the Board
of Directors and applicable legal restrictions related to the payment of
distributions. The Company calculates each stockholder's specific distribution
amount for the quarter using record and declaration dates. The distributions are
payable by the fifth day following each record date.
The table below shows the components of the distributions we have declared
and/or paid during the nine months ended September 30, 2021 and 2020 (dollars in
thousands).
                                                              For the nine months ended September 30,
                                                                  2021                         2020
Distributions declared                                  $              69,634          $          70,528
Distributions paid                                      $              61,989          $          65,786
Portion of distributions paid in cash                   $              46,017          $          48,129
Portion of distributions paid in DRIP shares            $              

$ 15,972 17,657


As of September 30, 2021, we had $23.1 million of distributions accrued and
unpaid. As of December 31, 2020, we had $15.5 million of distributions accrued
and unpaid.
We may fund our cash distributions to stockholders from any sources of funds
available to us, including offering proceeds, borrowings, net investment income
from operations, capital gain proceeds from the sale of assets, and non-capital
gain proceeds from the sale of assets. We have not established limits on the
amount of funds we may use from available sources to make distributions. We may
have distributions which could be characterized as a return of capital for tax
purposes. During the nine months ended September 30, 2021 and 2020, no portion
of our distributions was characterized as return of capital for tax purposes.
The specific tax characteristics of our distributions made in respect of our
anticipated fiscal year ending December 31, 2021 will be reported to
stockholders shortly after the end of the calendar year 2021 as well as in our
periodic reports with the SEC. Stockholders should read any written disclosure
accompanying a distribution payment carefully and should not assume that the
source of any distribution is our ordinary income or gain. Moreover, you should
understand that any such distributions were not based on our investment
performance and can only be sustained if we achieve positive investment
performance in future periods and/or our Adviser continues to make such
reimbursements. There can be no assurance that we will achieve the performance
necessary to sustain our distributions or that we will be able to pay
distributions at all.
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The following table shows the distributions declared during the nine months ended. September 30, 2021 and 2020 (dollars in thousands):

                                For the nine months ended September 30,
                                           2021                            2020
Distributions         $              69,634                             $ 70,528
Total distributions   $              69,634                             $ 70,528


Taxation as a RIC
We have elected to be treated as a RIC under Subchapter M of the Code commencing
with our tax year ended December 31, 2011 and intend to maintain our
qualification as a RIC thereafter. As a RIC, we generally will not be subject to
corporate-level U.S. federal income taxes on any income that we distribute as
dividends for U.S. federal income tax purposes to our stockholders. To maintain
our qualification as a RIC, we must, among other things, meet certain
source-of-income and asset diversification requirements. In addition, in order
to maintain RIC tax treatment, we must distribute to our stockholders, for each
tax year, an amount equal to at least 90% of our "investment company taxable
income," which is generally our net ordinary income plus the excess, if any, of
realized net short-term capital gain over realized net long-term capital loss
and determined without regard to any deduction for dividends paid, or the annual
distribution requirement. Even if we qualify as a RIC, we generally will be
subject to corporate-level U.S. federal income tax on our undistributed taxable
income and could be subject to state, local, and foreign taxes.
Additionally, in order to avoid the imposition of a U.S. federal excise tax, we
are required to distribute, in respect of each calendar year, dividends to our
stockholders of an amount at least equal to the sum of 98% of our calendar year
net ordinary income (taking into account certain deferrals and elections); 98.2%
of our capital gain net income (adjusted for certain ordinary losses) for the
one year period ending on October 31 of such calendar year; and any net ordinary
income and capital gain net income for preceding calendar years that were not
distributed during such calendar years and on which we previously did not incur
any U.S. federal income tax. If we fail to qualify as a RIC for any reason and
become subject to corporate tax, the resulting corporate taxes could
substantially reduce our net assets, the amount of income available for
distribution and the amount of our distributions. Such a failure would have a
material adverse effect on us and our stockholders. In addition, we could be
required to recognize unrealized gains, incur substantial taxes and interest and
make substantial distributions in order to re-qualify as a RIC. We cannot assure
stockholders that they will receive any distributions.
Related Party Transactions and Agreements
Investment Advisory Agreement
We entered into an Investment Advisory Agreement as of February 1, 2019, which
was approved by the Board of Directors for a two year term, under which the
Adviser, subject to the overall supervision of our Board of Directors manages
the day-to-day operations of, and provides investment advisory services to us.
The Adviser and its affiliates also provide investment advisory services to
other funds that have investment mandates that are similar, in whole and in
part, with ours. The Adviser and its affiliates serve as investment adviser or
sub-adviser to private funds and registered open-end funds, and serves as an
investment adviser to a public real estate investment trust. The Adviser's
policies are designed to manage and mitigate the conflicts of interest
associated with the allocation of investment opportunities. In addition, any
affiliated fund currently formed or formed in the future and managed by the
Adviser or its affiliates may have overlapping investment objectives with our
own and, accordingly, may invest in asset classes similar to those targeted by
us. However, in certain instances due to regulatory, tax, investment, or other
restrictions, certain investment opportunities may not be appropriate for either
us or other funds managed by the Adviser or its affiliates. The Board renewed
the Investment Advisory Agreement on January 21, 2021.
Prior to February 1, 2019, our Adviser provided investment advisory and
management services under the Prior Investment Advisory Agreement, effective
November 1, 2016, and most recently re-approved by the Board in August 2018. The
terms of the Prior Investment Advisory Agreement were materially identical to
the Investment Advisory Agreement. The Prior Investment Advisory Agreement
automatically terminated upon the indirect change of control of the Adviser on
the consummation of the FT Transaction.
Administration Agreement
On November 1, 2016, we entered into the Administration Agreement with BSP,
pursuant to which BSP provides us with office facilities and administrative
services. The Administration Agreement may be terminated by either party without
penalty upon not less than 60 days' written notice to the other. For the three
and nine months ended September 30, 2021, the Company incurred $0.4 million and
$1.3 million, respectively, in administrative service fees under the
Administration Agreement. For the three and nine months ended September 30,
2020, the Company incurred $0.6 million and $1.4 million, respectively, in
administrative service fees under the Administration Agreement.
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Co-Investment Relief
The 1940 Act generally prohibits BDCs from entering into negotiated
co-investments with affiliates absent an order from the SEC permitting the BDC
to do so. The SEC staff has granted us exemptive relief that allows it to enter
into certain negotiated co-investment transactions alongside other funds managed
by the Adviser or its affiliates ("Affiliated Funds") in a manner consistent
with our investment objective, positions, policies, strategies, and restrictions
as well as regulatory requirements and other pertinent factors, subject to
compliance with certain conditions (the "Order"). Pursuant to the Order, we are
permitted to co-invest with our affiliates if a "required majority" (as defined
in Section 57(o) of the 1940 Act) of our eligible directors make certain
conclusions in connection with a co-investment transaction, including that (1)
the terms of the transactions, including the consideration to be paid, are
reasonable and fair to us and our stockholders and do not involve overreaching
in respect of us or our stockholders on the part of any person concerned, and
(2) the transaction is consistent with the interests of our stockholders and is
consistent with our investment objective and strategies.
Borrowings
We are only allowed to borrow money such that our asset coverage, which, as
defined in the 1940 Act, measures the ratio of total assets less total
liabilities not represented by senior securities to total borrowings, equals at
least 200% after such borrowing, with certain limited exceptions. We are
continually exploring additional forms of alternative debt financing which could
include new or expanded credit facilities or the issuance of debt securities. We
may use borrowed funds, known as "leverage," to make investments and to attempt
to increase returns to our stockholders by reducing our overall cost of capital.
We currently have credit facilities with Wells Fargo, JPM, and MassMutual and
have sold $610.0 million in aggregate principal of unsecured notes.
Wells Fargo Credit Facility
On July 24, 2012, the Company, through a wholly-owned, consolidated special
purpose financing subsidiary, Funding I, entered into a revolving credit
facility with Wells Fargo and U.S. Bank as collateral agent, account bank, and
collateral custodian (as amended from time to time, the "Existing Wells Fargo
Credit Facility"). The Existing Wells Fargo Credit Facility was amended on July
7, 2020 (the "July 7th Amendment") to decrease the total aggregate principal
amount of borrowings from $600.0 million on a committed basis to $575.0 million.
Prior to the July 7th Amendment, the facility was priced at one-month LIBOR,
with no LIBOR floor, plus a spread ranging between 1.65% and 2.50% per annum.
After the July 7th Amendment, the Existing Wells Fargo Credit Facility was
priced at one-month LIBOR, with no LIBOR floor, plus a spread of 2.75% per
annum. Interest was payable quarterly in arrears. Funding I was subject to a
non-usage fee to the extent the aggregate principal amount available under the
Existing Wells Fargo Credit Facility has not been borrowed. The non-usage fee
per annum was 0.50% for the first 25% of the unused balance and 2.0% for the
portion of the unused balance that exceeds 25%, except for the period from March
15, 2019 through June 15, 2019, where the non-usage fee per annum was 0.50% on
any principal amount unused.
On August 28, 2020, the Company refinanced the Existing Wells Fargo Credit
Facility with (i) a $300.0 million revolving credit facility with the Company,
as collateral manager, Funding I, as borrower, the lenders party thereto, Wells
Fargo, as administrative agent, and U.S. Bank, as collateral agent and
collateral custodian (the "New Wells Fargo Credit Facility," together with
Existing Wells Fargo Credit Facility, "Wells Fargo Credit Facility") and (ii)
the JPM Credit Facility (as defined below).
The New Wells Fargo Credit Facility provides for borrowings of up to $300.0
million through August 28, 2023, and any amounts borrowed under the New Wells
Fargo Credit Facility will mature on August 28, 2025. The New Wells Fargo Credit
Facility is priced at three-month LIBOR, with a LIBOR floor of zero, plus a
spread calculated based upon the composition of loans in the collateral pool,
which will not exceed 2.75% per annum. Interest is payable quarterly in arrears.
Funding I will be subject to a non-usage fee to the extent the commitments
available under the New Wells Fargo Credit Facility have not been borrowed. The
non-usage fee per annum is 0.50% for the first 25% of the unused balance and up
to 2.0% for the remaining unused balance. Funding I paid a structuring fee and
incurred other customary costs and expenses in connection with the New Wells
Fargo Credit Facility. Pursuant to an amendment entered into on April 6, 2021,
the commitment fee for any unused portion of the New Wells Fargo Credit Facility
was temporarily reduced until September 30, 2021. Additionally, the maximum
spread was reduced from 2.75% to 2.50% as a result of this amendment. The other
terms of the New Wells Fargo Credit Facility were unchanged.
Funding I's obligations under the New Wells Fargo Credit Facility are secured by
a first priority security interest in substantially all of the assets of Funding
I, including its portfolio of investments and the Company's equity interest in
Funding I. The obligations of Funding I under the New Wells Fargo Credit
Facility are non-recourse to the Company.
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In connection with the New Wells Fargo Credit Facility, the Company and Funding
I have made certain representations and warranties and are required to comply
with various covenants and other customary requirements. The New Wells Fargo
Credit Facility contains customary default provisions pursuant to which the
administrative agent and the lenders under the New Wells Fargo Credit Facility
may terminate the Company in its capacity as collateral manager/portfolio
manager under the New Wells Fargo Credit Facility. Upon the occurrence of an
event of default under the New Wells Fargo Credit Facility, the administrative
agent or the lenders may declare the outstanding advances and all other
obligations under the New Wells Fargo Credit Facility immediately due and
payable.
JPM Credit Facility
On August 28, 2020, the Company, through a wholly-owned, consolidated special
purpose financing subsidiary, 57th Street, entered into a $300.0 million
revolving credit facility with JPMorgan Chase Bank, Nation Association, as
administrative agent ("JPM"), and U.S. Bank, as collateral agent, collateral
administrator and securities intermediary (the "JPM Credit Facility"). The JPM
Credit Facility provides for borrowings of up to $300.0 million through August
28, 2023, and any amounts borrowed under the JPM Credit Facility will mature on
August 28, 2023 unless the administrative agent exercises its option to extend
the maturity date to August 28, 2024. The JPM Credit Facility is priced at
three-month LIBOR, with a LIBOR floor of zero, plus a spread of 2.75% per annum.
Interest is payable quarterly in arrears. 57th Street will be subject to a
non-usage fee to the extent the commitments available under the JPM Credit
Facility have not been borrowed. The non-usage fee per annum is 0.50% for the
first 20% of the unused balance and up to 2.75% for the remaining unused balance
until August 28, 2021, when the non-usage fee per annum is 0.75% for the first
20% of the unused balance and up to 2.75% for the remaining unused balance.
57th Street paid a structuring fee and incurred other customary costs and
expenses in connection with the JPM Credit Facility. On January 21, 2021, the
Company entered into an amendment (the "JPM Amendment") to the JPM Credit
Facility. The JPM Amendment, among other things, increases the amount that the
Company is permitted to borrow under the JPM Credit Agreement from $300.0
million to $400.0 million. On April 12, 2021, the Company, through 57th Street,
amended and restated the JPM Credit Facility. The amendment and restatement
temporarily reduced the previous minimum funding amount until October 13, 2021.
The other material terms of the JPM Credit Facility were unchanged.
57th Street's obligations under the JPM Credit Facility are secured by a first
priority security interest in substantially all of the assets of 57th Street,
including its portfolio of investments and the Company's equity interest in 57th
Street. The obligations of 57th Street under the JPM Credit Facility are
non-recourse to the Company.
In connection with the JPM Credit Facility, the Company and 57th Street have
made certain representations and warranties and are required to comply with
various covenants and other customary requirements. The JPM Credit Facility
contains customary default provisions pursuant to which the administrative agent
and the lenders under the JPM Credit Facility may terminate the Company in its
capacity as collateral manager/portfolio manager under the JPM Credit Facility.
Upon the occurrence of an event of default under the JPM Credit Facility, the
administrative agent or the lenders may declare the outstanding advances and all
other obligations under the JPM Credit Facility immediately due and payable.
Citi Credit Facility
On June 27, 2014, the Company, through a wholly-owned, special purpose financing
subsidiary, CB Funding, entered into a credit facility as amended from time to
time, (the "Citi Credit Facility") with Citibank, N.A. ("Citi") as
administrative agent and U.S. Bank as collateral agent, account bank, and
collateral custodian. From January 1, 2020 to January 20, 2021 the Citi Credit
Facility provided for borrowings in an aggregate principal amount of up to
$400.0 million on a committed basis, with a reinvestment period ending on May
31, 2021 and maturity date of May 31, 2022. On January 20, 2021, SLF entered
into an amendment to the Citi Credit Facility (the "Citi Credit Agreement"). The
amendment, among other things, (i) replaces the Company with SLF as the
collateral manager under the Citi Credit Agreement, (ii) extends the end of the
reinvestment period from May 31, 2021 to May 31, 2023 and (iii) extends the
final maturity date from May 31, 2022 to May 31, 2024. As a result of this
amendment to the Citi Credit Facility, the Company incurred a realized loss on
extinguishment of debt of $1.3 million. In connection with the Citi Credit
Facility, CB Funding has made certain representations and warranties, is
required to comply with various covenants, reporting requirements, and other
customary requirements for similar facilities and is subject to certain
customary events of default. Upon the occurrence and during the continuation of
an event of default, Citi may declare the outstanding advances and all other
obligations under the Citi Credit Facility immediately due and payable. During
the continuation of an event of default, CB Funding must pay interest at a
default rate.
The Citi Credit Facility contains customary default provisions for facilities of
this type pursuant to which Citi may terminate the rights, obligations, power,
and authority of the Company, in its capacity as servicer of the portfolio
assets under the Citi Credit Facility, including, but not limited to,
non-performance of Citi Credit Facility obligations, insolvency, defaults of
certain financial covenants, and other events with respect to the Company that
may be adverse to Citi and the secured parties under the Citi Credit Facility.
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The Citi Credit Facility is priced at three month LIBOR plus a spread of 1.60%
per annum through and including the last day of the investment period and 2.00%
per annum thereafter. Interest is payable quarterly in arrears. CB Funding is
subject to a non-usage fee to the extent the aggregate principal amount
available under the Citi Credit Facility has not been borrowed. The non-usage
fee per annum is 0.50%. Any amounts borrowed under the Citi Credit Facility
along with any accrued and unpaid interest thereunder will mature, and will be
due and payable, in three years.
MassMutual Credit Facility
On July 7, 2020, the Company and a wholly-owned, special purpose financing
subsidiary of the Company, BDCA Asset Financing, LLC ("BDCA Asset Financing"),
entered into a loan and servicing agreement (the "MassMutual Credit Facility")
with Massachusetts Mutual Life Insurance Company ("MassMutual") as facility
servicer and a lender and U.S. Bank National Association as collateral
custodian, collateral administrator and administrative agent. The MassMutual
Credit Facility provides for borrowings of up to $100.0 million on a committed
basis, and, subject to satisfaction of certain conditions, contains an accordion
feature whereby the Mass Mutual Credit Facility can be expanded to $150.0
million.
BDCA Asset Financing's obligations under the MassMutual Credit Facility are
secured by a first priority security interest in substantially all of the assets
of BDCA Asset Financing, including its portfolio of investments and the
Company's equity interest in BDCA Asset Financing. The obligations of BDCA Asset
Financing under the MassMutual Credit Facility are non-recourse to the Company.
The MassMutual Credit Facility provides for borrowings through December 31, 2021
and matures on December 31, 2025. The MassMutual Credit Facility is priced at
three-month LIBOR, with a LIBOR floor of 0.75%, plus a spread of 5.0% per annum.
Interest is payable quarterly in arrears. BDCA Asset Financing will be subject
to a non-usage fee of 0.50% to the extent the aggregate principal amount
available under the MassMutual Credit Facility has not been borrowed. BDCA Asset
Financing paid a structuring fee and incurred other customary costs and expenses
in connection with the MassMutual Credit Facility.
In connection with the MassMutual Credit Facility, the Company and BDCA Asset
Financing have made certain representations and warranties and are required to
comply with various covenants and other customary requirements. The MassMutual
Credit Facility contains customary default provisions pursuant to which
MassMutual may terminate the Company in its capacity as portfolio asset servicer
of the portfolio assets under the MassMutual Credit Facility. Upon the
occurrence of an event of default, MassMutual may declare the outstanding
advances and all other obligations under the MassMutual Credit Facility
immediately due and payable.
2020 Notes
On August 26, 2015, the Company entered into a Purchase Agreement relating to
the Company's sale of $100.0 million aggregate principal amount of its 6.00%
fixed rate senior notes due September 1, 2020 (the "2020 Notes"). The 2020 Notes
were subject to customary indemnification provisions and representations,
warranties, and covenants. The net proceeds from the sale of the 2020 Notes were
approximately $97.9 million. The 2020 Notes bore interest at a rate of 6.00% per
year payable semi-annually.
On August 14, 2020, the Company redeemed all outstanding 2020 Notes.
2022 Notes
On December 14, 2017, the Company entered into a Purchase Agreement relating to
the Company's sale of $150.0 million aggregate principal amount of its 4.75%
fixed rate notes due December 30, 2022 (the "2022 Notes"). The 2022 Notes are
subject to customary indemnification provisions and representations, warranties,
and covenants. The net proceeds from the sale of the 2022 Notes were
approximately $147.0 million. The 2022 Notes bear interest at a rate of 4.75%
per year payable semi-annually.
2023 Notes
On May 11, 2018, the Company entered into a Purchase Agreement relating to the
Company's sale of $60.0 million aggregate principal amount of its 5.375% fixed
rate notes due May 30, 2023 (the "2023 Notes"). The 2023 Notes are subject to
customary indemnification provisions and representations, warranties, and
covenants. The net proceeds from the sale of the 2023 Notes were approximately
$58.7 million. The 2023 Notes bear interest at a rate of 5.375% per year payable
semi-annually.
2024 Notes
On December 3, 2019, the Company entered into a Purchase Agreement relating to
the Company's sale of $100.0 million aggregate principal amount of its 4.85%
fixed rate notes due December 15, 2024 (the "2024 Notes"). The 2024 Notes are
subject to customary indemnification provisions and representations, warranties,
and covenants. The net proceeds from the sale of the 2024 Notes were
approximately $98.4 million. The 2024 Notes bear interest at a rate of 4.85% per
year payable semi-annually.
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2026 Notes
On March 24, 2021, the Company entered into a Purchase Agreement relating to the
Company's sale of $300.0 million aggregate principal amount of its 3.25% fixed
rate notes due March 30, 2026 (the "Restricted 2026 Notes"). The net proceeds
from the sale of the Restricted 2026 Notes were approximately $296.0 million.
Pursuant to a Registration Statement on Form N-14 (File No. 333-257321), on
September 22, 2021, the Company closed an exchange offer in which holders of the
Restricted 2026 Notes were offered the opportunity to exchange their Restricted
2026 Notes for new registered notes with substantially identical terms (the
"Unrestricted 2026 Notes" and, together with the Restricted 2026 Notes, the 2026
Notes), through which holders representing 99.88% of the outstanding principal
of the then Restricted 2026 Notes obtained Unrestricted 2026 Notes. The 2026
Notes are subject to customary indemnification provisions and representations,
warranties and covenants. The 2026 Notes bear interest at a rate of 3.25% per
year payable semi-annually.
See Note 5 to our consolidated financial statements contained in this Quarterly
Report on Form 10-Q for a more detailed discussion of our borrowings.
Contractual Obligations
The following table shows our payment obligations for repayment of debt and
other contractual obligations as of September 30, 2021 (dollars in thousands):
                                                                                        Payment Due by Period
                                    Total              Less than 1 year           1 - 3 years           3- 5 years           More than 5 years
Wells Fargo Credit Facility (1) $   200,700          $               -          $          -          $   200,700          $                -
JPM Credit Facility (2)             289,100                          -               289,100                    -                           -
MassMutual Credit Facility (3)            -                          -                     -                    -                           -
2026 Notes (4)                      296,492                          -                     -              296,492                           -
2024 Notes (5)                       99,235                          -                     -               99,235                           -
2023 Notes (6)                       59,892                          -                59,892                    -                           -
2022 Notes (7)                      149,794                          -               149,794                    -                           -
Total contractual obligations   $ 1,095,213          $               -          $    498,786          $   596,427          $                -


______________

(1)As of September 30, 2021, we had $99.3 million of unused borrowing capacity
under the Wells Fargo Credit Facility, subject to borrowing base limits.
(2)As of September 30, 2021, we had $110.9 million of unused borrowing capacity
under the JPM Credit Facility, subject to borrowing base limits.
(3)As of September 30, 2021, we had $100.0 million of unused borrowing capacity
under the MassMutual Credit Facility, subject to borrowing base limits.
(4)As of September 30, 2021, we had no unused borrowing capacity under the 2026
Notes.
(5)As of September 30, 2021, we had no unused borrowing capacity under the 2024
Notes.
(6)As of September 30, 2021, we had no unused borrowing capacity under the 2023
Notes.
(7)As of September 30, 2021, we had no unused borrowing capacity under the 2022
Notes.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures, or capital resources.
Commitments
In the ordinary course of business, we may enter into future funding
commitments. As of September 30, 2021, the Company had unfunded commitments on
delayed draw term loans of $88.8 million, unfunded commitments on revolver term
loans of $87.6 million, unfunded equity capital discretionary commitments of
$11.1 million, and unfunded commitments on term loans of $1.0 million. As of
December 31, 2020, the Company had unfunded commitments on delayed draw term
loans of $42.7 million (including $40.2 million of non-discretionary commitments
and $2.5 million of discretionary commitments), unfunded commitments on revolver
term loans of $48.5 million, unfunded equity capital discretionary commitments
of $11.1 million, and unfunded commitments on term loans of $3.8 million. Please
refer to Note 7 - Commitments and Contingencies for further detail of these
unfunded commitments. We maintain sufficient cash on hand and available
borrowing capacity to fund such unfunded commitments.
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Significant Accounting Estimates and Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations
is based on our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America ("U.S. GAAP"). The preparation of financial statements in conformity
with U.S. GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
While our significant accounting policies are more fully described in Note 2 -
Summary of Significant Accounting Policies appearing elsewhere in this report,
we believe the following accounting policies require the most significant
judgment in the preparation of our consolidated financial statements.
Valuation of Portfolio Investments
Portfolio investments are reported on the consolidated statements of assets and
liabilities at fair value. On a quarterly basis we perform an analysis of each
investment to determine fair value as follows:
Securities for which market quotations are readily available on an exchange are
valued at the reported closing price on the valuation date. We may also obtain
quotes with respect to certain of our investments from pricing services or
brokers or dealers in order to value assets. When doing so, we determine whether
the quote obtained is readily available according to U.S. GAAP to determine the
fair value of the security. If determined readily available, we use the quote
obtained.
Investments without a readily determined market value are primarily valued using
a market approach, an income approach, or both approaches, as appropriate. The
market approach uses prices and other relevant information generated by market
transactions involving identical or comparable assets or liabilities (including
a business). The income approach uses valuation techniques to convert future
amounts (for example, cash flows or earnings) to a single present amount
(discounted). The measurement is based on the value indicated by current market
expectations about those future amounts. In following these approaches, the
types of factors that we may take into account in fair value pricing our
investments include, as relevant: available current market data, including
relevant and applicable market trading and transaction comparables, applicable
market yields and multiples, security covenants, call protection provisions,
information rights, the nature and realizable value of any collateral, the
portfolio company's ability to make payments, its earnings and discounted cash
flows, the markets in which the portfolio company does business, comparisons of
financial ratios of peer companies that are public, M&A comparables, and
enterprise values, among other factors. When available, broker quotations and/or
quotations provided by pricing services are considered as an input in the
valuation process.
For an investment in an investment fund that does not have a readily
determinable fair value, we measure the fair value of the investment
predominately based on the net asset value per share of the investment fund if
the net asset value of the investment fund is calculated in a manner consistent
with the measurement principles of ASC 946, as of our measurement date.
For investments in Collateralized Securities, both the assets and liabilities of
each Collateralized Securities' capital structure are modeled. The model uses a
waterfall engine to store the collateral data, generate collateral cash flows
from the assets and distribute the cash flows to the liability structure based
on the contractual priority of payments. The waterfall cash flows are discounted
using rates that incorporate risk factors such as default risk, interest rate
risk, downgrade risk, and credit spread risk, among others. In addition, broker
quotations and/or comparable trade activity is considered as an input to
determining fair value when available.
As part of our quarterly valuation process the Adviser may be assisted by one or
more independent valuation firms engaged by us. The Board of Directors
determines the fair value of each investment, in good faith, based on the input
of the Adviser and the independent valuation firm(s) (to the extent applicable).
With respect to investments for which market quotations are not readily
available, the Adviser undertakes a multi-step valuation process each quarter,
as described below:
•Each portfolio company or investment will be valued by the Adviser, potentially
with assistance from one or more independent valuation firms engaged by our
Board of Directors;
•The independent valuation firm(s), if involved, will conduct independent
appraisals and make an independent assessment of the value of each investment;
and
•The Board of Directors determines the fair value of each investment, in good
faith, based on the input of the Adviser, independent valuation firm (to the
extent applicable) and the audit committee of the Board of Directors.
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Because there is not a readily available market value for most of the
investments in its portfolio, we value substantially all of our portfolio
investments at fair value as determined in good faith by our Board of Directors,
as described herein. 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 our 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 we may ultimately realize. Further, such
investments are generally subject to legal and other restrictions on resale or
otherwise are less liquid than publicly traded securities. If we were required
to liquidate a portfolio investment in a forced or liquidation sale, we could
realize significantly less than the value at which we have recorded it.
Revenue Recognition
Interest Income
Investment transactions are accounted for on the trade date. Interest income,
adjusted for amortization of premium and accretion of discount, is recorded on
an accrual basis. Discount and premium on investments purchased are
accreted/amortized over the expected life of the respective investment using the
effective yield method. The amortized cost of investments represents the
original cost adjusted for the accretion of discount and amortization of premium
on investments.
The Company has a number of investments in Collateralized Securities. Interest
income from investments in the "equity" class of these Collateralized Securities
(in the Company's case, preferred shares, or subordinated notes) is recorded
based upon an estimation of an effective yield to expected maturity utilizing
assumed cash flows in accordance with ASC 325-40-35, Beneficial Interests in
Securitized Financial Assets ("ASC 325-40-35"). The Company monitors the
expected cash inflows from its equity investments in Collateralized Securities,
including the expected principal repayments. The effective yield is determined
and updated quarterly. In accordance with ASC 325-40, investments in CLOs are
periodically assessed for other-than-temporary impairment ("OTTI"). When the
Company determines that a CLO has OTTI, the amortized cost basis of the CLO is
written down as of the date of the determination based on events and information
evaluated and that write-down is recognized as a realized loss.
Dividend Income
Dividend income on preferred equity investments is recorded on an accrual basis
to the extent that such amounts are payable by the portfolio company and are
expected to be collected. Dividend income on common equity investments is
recorded on the record date for private portfolio companies and on the
ex-dividend date for publicly traded portfolio companies.
Fee Income
Fee income, such as structuring fees, origination, closing, amendment fees,
commitment, and other upfront fees are generally non-recurring and are
recognized as revenue when earned, either upfront or amortized into income. Upon
the payment of a loan or debt security, any prepayment penalties and unamortized
loan origination, structuring, closing, commitment, and other upfront fees are
recorded as income.
Payment-in-Kind Interest/Dividends
We hold debt and equity investments in our portfolio that contain PIK interest
and dividend provisions. The PIK interest and PIK dividend, which represent
contractually deferred interest or dividends that add to the investment balance
that is generally due at maturity, are recorded on the accrual basis to the
extent such amounts are expected to be collected.
Non-accrual Income
Investments are placed on non-accrual status when principal or interest/dividend
payments are past due and/or when there is reasonable doubt that principal or
interest will be collected. Accrued cash and un-capitalized PIK interest is
generally reversed when an investment is placed on non-accrual status.
Previously capitalized PIK interest is not reversed when an investment is placed
on non-accrual status. Interest payments received on non-accrual investments may
be recognized as income or applied to principal depending upon management's
judgment of the ultimate outcome. Non-accrual investments are restored to
accrual status when past due principal and interest is paid and, in management's
judgment, are likely to remain current.
Net Realized Gain or Loss and Net Change in Unrealized Appreciation or
Depreciation
Gain or loss on the sale of investments is calculated using the specific
identification method. We measure realized gain or loss by the difference
between the net proceeds from the repayment or sale and the amortized cost basis
of the investment, without regard to unrealized appreciation or depreciation
previously recognized. Net change in unrealized appreciation or depreciation
will reflect the change in portfolio investment values during the reporting
period, including any reversal of previously recorded unrealized appreciation or
depreciation, when a gain or loss is realized.
See Note 2 - Summary of Significant Accounting Policies to the consolidated
financial statements for a description of other accounting policies and recently
issued accounting pronouncements.
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