Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 814-01175
BAIN CAPITAL SPECIALTY FINANCE, INC.
(Exact name of registrant as specified in its charter)
Delaware
81-2878769
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
200 Clarendon Street, 37th Floor
Boston, MA
02116
(Address of principal executive offices)
(Zip Code)
(617) 516-2000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.001 per share
BCSF
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒
Accelerated filer ☐
Non-accelerated filer ☐
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of August 3, 2022 the registrant had 64,562,265.27 shares of common stock, $0.001 par value, outstanding.
TABLE OF CONTENTS
Page
PART I
FINANCIAL INFORMATION
2
Item 1.
Consolidated Financial Statements
Consolidated Statements of Assets and Liabilities as of June 30, 2022 (unaudited) and December 31, 2021
Consolidated Statements of Operations for the three and six months ended June 30, 2022 and 2021 (unaudited)
3
Consolidated Statements of Changes in Net Assets for the three and six months ended June 30, 2022 and 2021 (unaudited)
4
Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021 (unaudited)
5
Consolidated Schedules of Investments as of June 30, 2022 (unaudited) and December 31, 2021
6
Notes to Consolidated Financial Statements (unaudited)
31
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
82
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
103
Item 4.
Controls and Procedures
104
PART II
OTHER INFORMATION
Legal Proceedings
Item 1A.
Risk Factors
Unregistered Sales of Equity Securities and Use of Proceeds
105
Defaults Upon Senior Securities
Mine Safety Disclosures
Item 5.
Other Information
Item 6.
Exhibits
106
Signatures
109
FORWARD-LOOKING STATEMENTS
Statements contained in this Quarterly Report on Form 10-Q (the “Quarterly Report”) (including those relating to current and future market conditions and trends in respect thereof) that are not historical facts are based on current expectations, estimates, projections, opinions and/or beliefs of the Company, BCSF Advisors, LP (the “Advisor”) and/or Bain Capital Credit, LP and its affiliated advisers (collectively, “Bain Capital Credit”). Such statements involve known and unknown risks, uncertainties and other factors and undue reliance should not be placed thereon. Certain information contained in this Quarterly Report constitutes “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “seek,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue,” “target,” or “believe” or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events or results or the actual performance of the Company may differ materially from those reflected or contemplated in such forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and are difficult to predict, that could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements including, without limitation, the risks, uncertainties and other factors we identify in the section entitled Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K (the “Annual Report”) for the fiscal year ended December 31, 2021 and in our filings with the Securities and Exchange Commission (the “SEC”).
Although we believe that the assumptions on which these forward-looking statements are based are reasonable, some of those assumptions may be based on the work of third parties and any of those assumptions could prove to be inaccurate; as a result, the forward-looking statements based on those assumptions also could prove to be inaccurate. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this Quarterly Report should not be regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include those described or identified in the section entitled Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. Investors should not place undue reliance on these forward-looking statements, which apply only as of the date of this Quarterly Report. We do not undertake any obligation to update or revise any forward-looking statements or any other information contained herein, except as required by applicable law. The safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which preclude civil liability for certain forward-looking statements, do not apply to the forward-looking statements in this Quarterly Report because we are an investment company.
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Bain Capital Specialty Finance, Inc.
Consolidated Statements of Assets and Liabilities
(in thousands, except share and per share data)
As of
June 30, 2022
December 31, 2021
(Unaudited)
Assets
Investments at fair value:
Non-controlled/non-affiliate investments (amortized cost of $1,837,653 and $1,921,970, respectively)
$
1,784,423
1,901,054
Non-controlled/affiliate investment (amortized cost of $124,564 and $100,888, respectively)
151,735
113,290
Controlled affiliate investment (amortized cost of $357,458 and $288,526, respectively)
350,880
274,761
Cash and cash equivalents
38,013
87,443
Foreign cash (cost of $8,902 and $30,877, respectively)
5,003
29,979
Restricted cash and cash equivalents
25,910
86,159
Collateral on forward currency exchange contracts
—
2,815
Deferred financing costs
1,961
2,178
Interest receivable on investments
27,776
19,269
Receivable for sales and paydowns of investments
13,863
30,334
Prepaid Insurance
559
193
Unrealized appreciation on forward currency exchange contracts
15,095
5,321
Dividend receivable
10,826
18,397
Total Assets
2,426,044
2,571,193
Liabilities
Debt (net of unamortized debt issuance costs of $12,440 and $15,718, respectively)
1,244,283
1,414,982
Interest payable
7,164
7,058
Payable for investments purchased
27,052
7,594
Base management fee payable
8,451
8,792
Incentive fee payable
4,069
4,727
2,743
Accounts payable and accrued expenses
3,317
6,083
Distributions payable
21,951
Total Liabilities
1,319,030
1,471,187
Commitments and Contingencies (See Note 10)
Net Assets
Common stock, par value $0.001 per share, 100,000,000,000 and 100,000,000,000 shares authorized, 64,562,265 and 64,562,265 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively
65
Paid in capital in excess of par value
1,168,384
Total distributable earnings (loss)
(61,435)
(68,443)
Total Net Assets
1,107,014
1,100,006
Total Liabilities and Total Net assets
Net asset value per share
17.15
17.04
See Notes to Consolidated Financial Statements
Consolidated Statements of Operations
For the Three Months
For the Six Months
Ended June 30
2022
2021
Income
Investment income from non-controlled/non-affiliate investments:
Interest from investments
29,769
36,706
64,056
76,619
Dividend income
108
PIK income
2,375
1,082
4,883
2,062
Other income
7,690
875
8,155
4,331
Total investment income from non-controlled/non-affiliate investments
39,834
38,663
77,202
83,012
Investment income from non-controlled/affiliate investments:
1,901
477
2,225
900
1,851
45
1,366
1,449
2,752
Total investment income from non-controlled/affiliate investments
3,797
1,843
5,525
3,652
Investment income from controlled affiliate investments:
4,214
2,572
7,636
4,209
4,519
2,929
8,012
4,964
483
Total investment income from controlled affiliate investments
8,733
5,984
15,648
9,656
Total investment income
52,364
46,490
98,375
96,320
Expenses
Interest and debt financing expenses
11,027
13,017
21,670
24,850
Base management fee
8,623
16,820
17,320
Incentive fee
8,042
7,380
14,771
Professional fees
446
714
836
1,673
Directors fees
179
171
354
343
Other general and administrative expenses
1,477
1,241
2,897
2,629
Total expenses before fee waivers
25,649
31,808
49,957
61,586
Base management fee waiver
(2,723)
(4,837)
Incentive fee waiver
(4,519)
Total expenses, net of fee waivers
24,566
52,230
Net investment income
26,715
21,924
48,418
44,090
Net realized and unrealized gains (losses)
Net realized gain (loss) on non-controlled/non-affiliate investments
(2,576)
4,845
(1,159)
23,258
Net realized gain (loss) on controlled affiliate investments
(3,237)
Net realized gain (loss) on foreign currency transactions
3,166
1,005
2,678
(2,021)
Net realized gain (loss) on forward currency exchange contracts
2,018
(18,396)
3,261
(21,688)
Net change in unrealized appreciation (depreciation) on foreign currency translation
(2,051)
(65)
(1,705)
322
Net change in unrealized appreciation on forward currency exchange contracts
8,124
16,028
9,775
20,604
Net change in unrealized appreciation (depreciation) on non-controlled/non-affiliate investments
(27,206)
4,426
(32,314)
1,202
Net change in unrealized appreciation (depreciation) on non-controlled/affiliate investments
9,102
5,780
14,769
5,407
Net change in unrealized appreciation (depreciation) on controlled affiliate investments
(63)
6,886
7,187
6,249
Total net gains (losses)
(9,486)
20,509
2,492
30,096
Net increase in net assets resulting from operations
17,229
42,433
50,910
74,186
Basic and diluted net investment income per common share
0.41
0.34
0.75
0.68
Basic and diluted increase in net assets resulting from operations per common share
0.27
0.66
0.79
1.15
Basic and diluted weighted average common shares outstanding
64,562,265
Consolidated Statements of Changes in Net Assets
For the Three
For the Six
Months Ended
June 30
Operations:
Net realized gain (loss)
2,608
(12,546)
4,780
(3,688)
Net change in unrealized appreciation (depreciation)
(12,094)
33,055
(2,288)
33,784
Stockholder distributions:
Distributions from distributable earnings
(21,951)
(43,902)
Net decrease in net assets resulting from stockholder distributions
Total increase (decrease) in net assets
(4,722)
20,482
7,008
30,284
Net assets at beginning of period
1,111,736
1,077,806
1,068,004
Net assets at end of period
1,098,288
Net asset value per common share
17.01
Common stock outstanding at end of period
Consolidated Statements of Cash Flows
Cash flows from operating activities
Adjustments to reconcile net increase in net assets from operations to net cash used in operating activities:
Purchases of investments
(761,843)
(607,995)
Proceeds from principal payments and sales of investments
434,198
805,272
Net realized (gain) loss from investments
1,159
(20,021)
Net realized (gain) loss on foreign currency transactions
(2,678)
2,021
Net change in unrealized (appreciation) depreciation on forward currency exchange contracts
(9,775)
(20,604)
Net change in unrealized (appreciation) depreciation on investments
10,358
(12,858)
Net change in unrealized (appreciation) depreciation on foreign currency translation
1,705
(322)
Increase in investments due to PIK
(6,314)
(5,297)
Accretion of discounts and amortization of premiums
(2,694)
(2,951)
Amortization of deferred financing costs and debt issuance costs
2,001
3,351
Changes in operating assets and liabilities:
5,558
1,180
(8,507)
(4,398)
(366)
(558)
7,571
(4,229)
632
(341)
(390)
(658)
(276)
(579)
(525)
Net cash provided by (used in) operating activities
(280,189)
206,218
Cash flows from financing activities
Borrowings on debt
349,747
457,550
Repayments on debt
(157,000)
(605,374)
Payments of financing costs
(2,186)
Payments of debt issuance costs
(5,657)
Stockholder distributions paid
Net cash (used in) provided by financing activities
146,659
(197,383)
Net increase (decrease) in cash, foreign cash, restricted cash and cash equivalents
(133,530)
8,835
Effect of foreign currency exchange rates
(1,125)
(1,817)
Cash, foreign cash, restricted cash and cash equivalents, beginning of period
203,581
81,702
Cash, foreign cash, restricted cash and cash equivalents, end of period
68,926
88,720
Supplemental disclosure of cash flow information:
Cash interest paid during the period
19,562
22,403
Supplemental disclosure of non-cash information:
Debt investment sold by the Company to ISLP
317,077
Company investment into ISLP in exchange for investments sold
128,970
Company investment into SLP
5,584
Deconsolidation of 2018-1 Issuer
Disposition of assets
470,616
Reduction of liabilities
(390,448)
Cash
29,869
Restricted cash
57,144
Foreign cash
1,707
Total cash, foreign cash, restricted cash, and cash equivalents shown in the consolidated statements of cash flows
Consolidated Schedule of Investments
As of June 30, 2022
(In thousands)
Control Type
Industry
Portfolio Company
Investment Type
Spread Above Index (1)
Interest Rate
Maturity Date
Principal/Shares (9)
Cost
Market Value
% of NAV (4)
Non-Controlled/Non-Affiliate Investments
Aerospace & Defense
Ansett Aviation Training (6)(18)(19)
First Lien Senior Secured Loan
BBSY+ 4.69%
5.69
%
9/24/2031
AUD
21,215
15,924
14,664
Ansett Aviation Training (6)(14)(19)(25)
Equity Interest
15,357
11,527
10,614
Forming Machining Industries Holdings, LLC (18)(19)
Second Lien Senior Secured Loan
L+ 8.25%
9.92
10/9/2026
6,540
6,500
5,297
L+ 4.25%
5.92
10/9/2025
16,354
16,280
14,065
GSP Holdings, LLC (15)(19)(26)(29)
L+ 5.75% (0.25% PIK)
6.76
11/6/2025
35,491
35,448
33,361
GSP Holdings, LLC (3)(15)(19)(26)
First Lien Senior Secured Loan - Revolver
6.75
2,736
2,711
2,463
Kellstrom Aerospace Group, Inc (14)(19)(25)
1
1,963
720
Kellstrom Commercial Aerospace, Inc. (3)(15)(19)(26)
SOFR+ 6.00% (0.75% PIK)
7.15
7/1/2025
3,305
3,256
3,005
Kellstrom Commercial Aerospace, Inc. (15)(19)
SOFR+ 6.00%
7.00
30,248
29,915
28,357
Mach Acquisition R/C (3)(18)(19)
L+ 7.50%
9.78
10/18/2026
2,009
1,836
Mach Acquisition T/L (15)(19)
8.54
32,806
32,241
31,822
Precision Ultimate Holdings, LLC (14)(19)(25)
1,417
1,447
Robinson Helicopter (14)(19)(25)
1,592
Robinson Helicopter (15)(19)(29)
SOFR+ 6.50%
8.13
6/29/2029
49,405
48,294
48,293
WCI-HSG HOLDCO, LLC (14)(19)(25)
Preferred Equity
675
2,053
WCI-HSG Purchaser, Inc. (3)(15)(19)(29)
L+ 4.50%
2/22/2025
137
133
WCI-HSG Purchaser, Inc. (15)(19)(29)
L+ 4.75%
2/24/2025
8,666
8,608
Whitcraft LLC (2)(3)(5)(19)
4/3/2023
(4)
(72)
Whitcraft LLC (15)(19)(29)
L+ 6.00%
8.25
28,834
28,759
27,680
WP CPP Holdings, LLC. (15)(19)
L+ 7.75%
8.99
4/30/2026
11,724
11,657
10,668
Aerospace & Defense Total
258,732
246,539
22.3
Automotive
American Trailer Rental Group (19)(26)
Subordinated Debt
L+ 9.00% (2.00% PIK)
11.00
12/1/2027
4,948
4,882
15,267
14,968
15,268
19,064
18,663
Cardo (6)(17)(19)
8.09
5/12/2028
98
97
CST Buyer Company (3)(5)(19)
10/3/2025
(7)
CST Buyer Company (15)(19)(29)
L+ 5.50%
7.17
8,322
8,280
JHCC Holdings, LLC (15)(19)(28)
First Lien Senior Secured Loan - Delayed Draw
L+ 5.75%
8.00
9/9/2025
2,635
2,620
2,503
JHCC Holdings, LLC (3)(15)(19)
965
936
823
JHCC Holdings, LLC (15)(19)
5,740
5,735
5,453
JHCC Holdings, LLC (15)(19)(29)
21,373
21,192
20,304
Automotive Total
77,366
76,783
6.9
Banking
Green Street Parent, LLC (3)(5)(19)(29)
8/27/2025
(25)
Green Street Parent, LLC (16)(19)(29)
6.50
8/27/2026
3,419
3,376
7.32
4,478
4,398
Banking Total
7,749
7,897
0.7
Banking, Finance, Insurance & Real Estate
Morrow Sodali (3)(15)(19)
SOFR+ 5.00%
6.10
4/25/2028
266
235
234
Morrow Sodali (2)(3)(5)(19)
(20)
Banking, Finance, Insurance & Real Estate Total
215
214
0.0
Beverage, Food & Tobacco
NPC International, Inc. (14)(19)(25)(27)
428
639
121
Beverage, Food & Tobacco Total
Capital Equipment
ClockSpring (15)(19)
12.11
8/1/2025
5,100
5,005
4,997
East BCC Coinvest II, LLC (14)(19)(25)
1,419
989
FCG Acquisitions, Inc. (14)(19)(25)
Jonathan Acquisition Company (15)(19)
L+ 9.00%
11.10
12/22/2027
8,000
7,832
TCFIII Owl Finance, LLC (19)
12.00%
12.00
1/30/2027
4,556
4,493
4,453
Capital Equipment Total
18,749
18,439
1.7
Chemicals, Plastics & Rubber
V Global Holdings LLC (16)(19)(29)
SOFR+ 5.75%
7.63
15,891
15,548
15,681
V Global Holdings LLC (3)(16)(19)
7.67
12/22/2025
1,453
1,281
1,332
Vertellus (16)(19)
EURIBOR+ 5.75%
€
9,500
9,810
9,834
Chemicals, Plastics & Rubber Total
26,639
26,847
2.4
Construction & Building
Chase Industries, Inc. (15)(19)(26)
L+ 7.00% PIK
9.88
5/12/2025
1,279
1,278
997
13,531
13,504
10,554
Elk Parent Holdings, LP (14)(19)(25)
12
528
120
1,484
Regan Development Holdings Limited (6)(17)(19)
EURIBOR+ 6.50%
4/18/2023
2,087
2,274
2,117
677
768
686
6,335
6,896
6,392
SAM (19)
11.25%
11.25
5/9/2028
32,500
32,191
32,175
Service Master (3)(15)(19)
8.91
8/16/2027
1,350
1,273
Service Master (15)(19)
8.50
934
918
Service Master (14)(19)(25)
327
351
YLG Holdings, Inc. (3)(15)(19)
L+ 5.00%
6.79
10/31/2025
256
209
YLG Holdings, Inc. (19)(21)
7.08
5,034
5,030
YLG Holdings, Inc. (15)(19)(29)
L+ 5.25%
6.72
27,291
27,178
Construction & Building Total
93,060
90,149
8.1
Consumer Goods: Durable
New Milani Group LLC (15)(19)
6/6/2024
21,598
21,094
21,382
Stanton Carpet (15)(19)
10.47
4/1/2028
11,434
11,226
11,435
Tangent Technologies Acquisition, LLC (15)(19)
SOFR+ 8.75%
9.99
5/30/2028
8,915
8,750
8,737
TLC Holdco LP (14)(19)(25)
1,221
TLC Purchaser, Inc. (2)(3)(5)(19)
10/13/2025
(97)
(1,409)
TLC Purchaser, Inc. (3)(15)(19)
P+ 5.25%
10.00
8,508
8,338
6,746
TLC Purchaser, Inc. (15)(19)(29)
L+ 6.25%
8.08
34,315
33,614
27,967
Consumer Goods: Durable Total
84,146
74,858
6.8
7
Consumer Goods: Non-Durable
Fineline Technologies, Inc. (14)(19)(25)
939
1,344
FL Hawk Intermediate Holdings, Inc. (15)(19)
8/22/2028
15,125
14,736
RoC Opco LLC (3)(15)(19)
L+ 8.50%
10.13
2/25/2025
5,462
5,368
RoC Opco LLC (15)(19)(29)
10.75
15,119
14,932
Solaray, LLC (15)(19)
SOFR+ 5.50%
7.13
9/9/2023
14,202
Solaray, LLC (3)(15)(19)
SOFR+ 4.50%
6.65
5,950
5,947
Solaray, LLC (15)(19)(29)
9/11/2023
30,844
WU Holdco, Inc. (3)(18)(19)
7.73
3/26/2025
3,043
3,014
2,986
WU Holdco, Inc. (15)(19)(29)
7.75
3/26/2026
37,872
37,414
37,494
WU Holdco, Inc. (15)(19)(28)
1,704
1,676
1,687
Consumer Goods: Non-Durable Total
129,072
130,213
11.8
Consumer Goods: Wholesale
WSP Initial Term Loan (15)(19)(29)
7.92
4/27/2027
6,033
5,927
5,731
WSP Initial Term Loan (2)(3)(5)(19)
(21)
(90)
WSP LP Interest (14)(19)(25)
2,898
1,740
WSP Revolving Loan (3)(18)(19)
6.25
47
40
25
Consumer Goods: Wholesale Total
8,844
7,406
Containers, Packaging, & Glass
ASP-r-pac Acquisition Co LLC (3)(5)(19)
12/29/2027
(60)
ASP-r-pac Acquisition Co LLC (16)(19)(29)
14,104
13,843
Intertape Polymer Group (17)(29)
SOFR+ 4.75%
6.34
6/15/2028
23,050
21,841
21,110
Containers, Packaging, & Glass Total
35,624
35,214
3.2
Energy: Oil & Gas
Amspec Services, Inc. (3)(18)(19)
7/2/2024
1,011
987
1,012
Amspec Services, Inc. (15)(19)(29)
33,163
32,987
33,162
Amspec Services, Inc. (15)(19)
2,784
2,761
Energy: Oil & Gas Total
36,735
36,958
3.3
8
Environmental Industries
Reconomy (6)(15)(19)
SONIA+ 6.25%
7.44
6/24/2029
£
6,118
7,430
7,375
Reconomy (6)(18)(19)
EURIBOR+ 6.00%
6.00
2,467
2,577
2,560
Reconomy (2)(3)(5)(6)(19)
(69)
Environmental Industries Total
9,869
9,797
0.9
FIRE: Finance
Allworth Financial Group, L.P. (3)(15)(19)(29)
6.38
12/23/2026
879
865
880
Allworth Financial Group, L.P. (15)(19)(29)
1,501
1,485
1,502
Allworth Financial Group, L.P. (3)(5)(19)
(14)
Parmenion (6)(15)(19)
SONIA+ 5.75%
6.69
5/11/2029
32,628
40,604
39,334
TA/Weg Holdings (15)(19)(29)
10/2/2025
9,447
2,385
FIRE: Finance Total
54,762
53,548
4.8
FIRE: Insurance
Margaux Acquisition Inc. (15)(19)(29)
6.68
12/19/2024
17,682
17,504
Margaux Acquisition Inc. (15)(19)
9,152
9,131
Margaux Acquisition Inc. (3)(5)(19)
(24)
Margaux UK Finance Limited (6)(16)(19)
7,531
9,723
9,171
Margaux UK Finance Limited (3)(5)(6)(19)
(5)
MRHT (3)(5)(6)(19)
7/26/2028
(105)
MRHT (3)(6)(18)(19)
EURIBOR+ 5.50%
5.50
267
297
280
MRHT (6)(18)(19)
216
249
226
Paisley Bidco Limited (6)(18)(19)
11/26/2028
32
36
34
Paisley Bidco Limited (3)(6)(18)(19)
First Lien Senior Secured Loan- Revolver
86
28
World Insurance (15)(19)(29)
7.80
4/1/2026
8,316
8,254
8,275
World Insurance (3)(15)(19)
6.99
372
358
368
World Insurance (3)(15)(19)(29)
3,129
3,079
3,113
FIRE: Insurance Total
48,525
48,406
4.4
Healthcare & Pharmaceuticals
Apollo Intelligence (15)(19)(29)
6.80
6/1/2028
26,225
25,968
25,962
Apollo Intelligence (2)(3)(5)(19)
(95)
(96)
(71)
Apollo Intelligence (14)(19)(25)
3,162
CB Titan Holdings, Inc. (14)(19)(25)
1,953
910
CPS Group Holdings, Inc. (3)(5)(19)
3/3/2025
(46)
CPS Group Holdings, Inc. (15)(19)(29)
44,902
44,674
Datix Bidco Limited (6)(18)(19)
SONIA+ 4.50%
5.19
10/28/2024
10
13
SONIA+ 7.75%
9.44
4/27/2026
164
149
BBSW+ 4.00%
4.57
4/28/2025
42
29
Great Expressions Dental Center PC (3)(13)(15)(19)(26)
L+ 4.25% (0.50% PIK)
6.43
9/28/2023
878
784
Great Expressions Dental Center PC (15)(19)(26)
P+ 4.25% (0.50% PIK)
7,851
7,877
7,223
Mertus 522. GmbH (6)(18)(19)
EURIBOR+ 6.25%
5/28/2026
131
142
135
225
247
231
Premier Imaging, LLC (3)(15)(19)
6.92
1/2/2025
1,951
1,864
1,849
Premier Imaging, LLC (15)(19)(29)
7.42
7,177
7,085
7,069
SunMed Group Holdings, LLC (3)(16)(19)
6/16/2027
590
572
571
SunMed Group Holdings, LLC (16)(19)(29)
6/16/2028
8,738
8,604
8,607
TecoStar Holdings, Inc. (15)(19)
9.74
11/1/2024
9,472
9,371
8,856
Healthcare & Pharmaceuticals Total
112,394
110,283
10.0
9
High Tech Industries
Access (6)(18)(19)
5.75
6/1/2029
7,960
9,763
9,451
Access (2)(3)(5)(6)(19)
(307)
(297)
AMI US Holdings Inc. (6)(15)(19)(29)
6.96
4/1/2025
3,886
3,847
3,887
Applitools (6)(32)(19)
7.25
5/24/2029
24,008
23,768
Applitools (2)(3)(5)(19)
5/26/2028
(34)
Appriss Holdings, Inc. (15)(19)
L+ 7.25%
9.05
5/6/2027
11,292
11,100
11,066
Appriss Holdings, Inc. (2)(3)(5)(19)
(12)
(15)
Appriss Holdings, Inc. (14)(19)(25)
2,136
1,606
AQ Software Corporation (14)(18)(19)(25)
1,107
1,104
1,844
1,839
AQ Software Corporation (14)(19)(25)
507
506
CB Nike IntermediateCo Ltd (3)(6)(19)
CB Nike IntermediateCo Ltd (6)(15)(19)
345
341
Drilling Info Holdings, Inc (18)
7/30/2025
11,207
11,188
10,992
Eagle Rock Capital Corporation (14)(18)(19)(25)
3,345
3,730
Element Buyer, Inc. (15)(19)
6.56
7/19/2025
11,022
11,038
10,994
7/18/2025
36,816
36,992
36,724
Element Buyer, Inc. (3)(15)(19)
7/19/2024
1,700
1,677
1,689
Eleven Software (15)(19)
SOFR+ 8.00%
9.00
4/22/2027
7,439
7,367
7,365
Eleven Software (2)(3)(5)(19)
9/22/2026
Eleven Software (14)(19)(25)
896
Gluware (19)(26)
9.00% (3.50% PIK)
12.50
10/15/2025
19,232
18,486
18,463
Gluware (14)(19)(25)
Warrants
3,328
478
459
MRI Software LLC (15)(28)
2/10/2026
25,794
25,732
25,278
MRI Software LLC (2)(3)
51
(36)
Revalize, Inc. (3)(18)(19)
4/15/2027
281
161
181
838
825
827
Revalize, Inc. (15)(19)(29)
5,104
5,059
5,066
Superna Inc. (6)(15)(19)(29)
SOFR+ 6.25%
3/6/2028
15,033
14,740
14,732
Superna Inc. (2)(3)(5)(6)(19)
(53)
Superna Inc. (6)(14)(19)(25)
1,463
Swoogo LLC (2)(3)(5)(18)(19)
12/9/2026
(22)
Swoogo LLC (15)(19)
L+ 8.00%
2,330
2,287
2,283
Utimaco (6)(18)(19)
5/13/2029
8,342
8,863
8,658
7.05
16,578
16,413
16,412
7.35
8,812
8,724
Utimaco (6)(14)(19)(25)
2,123
2,115
Ventiv Holdco, Inc. (2)(3)(5)(18)(19)
9/3/2025
(35)
(77)
Ventiv Holdco, Inc. (15)(19)(29)
13,842
13,721
Ventiv Topco, Inc. (14)(19)(25)
2,833
2,109
VPARK BIDCO AB (6)(16)(19)
CIBOR+ 4.00%
4.75
3/10/2025
DKK
570
92
80
NIBOR+ 4.00%
5.42
NOK
740
93
75
High Tech Industries Total
250,179
247,807
22.4
Hospitality Holdings
PPX (14)(19)(25)
33
163
5,000
Hospitality Holdings Total
5,688
0.5
Hotel, Gaming & Leisure
Aimbridge Acquisition Co., Inc. (18)(19)
8.56
2/1/2027
14,193
13,896
13,305
Concert Golf Partners Holdco (2)(3)(5)(19)
3/30/2029
(78)
(84)
Concert Golf Partners Holdco (3)(16)(19)
7.96
3/31/2028
356
310
306
Concert Golf Partners Holdco (19)(29)
6.59
16,864
16,535
16,527
Quidditch Acquisition, Inc. (15)(29)
L+ 7.00%
8.67
3/21/2025
9,128
9,184
8,027
Saltoun (18)(19)(29)
SOFR+ 10.50%
10.50
4/11/2028
4,750
Saltoun (3)(18)(19)
890
Hotel, Gaming & Leisure Total
45,487
43,721
3.9
Media: Advertising, Printing & Publishing
Ansira Holdings, Inc. (3)(7)(15)(19)(23)
12/20/2024
5,383
2,869
Ansira Holdings, Inc. (7)(15)(19)
L+ 6.50%
8.17
41,044
41,017
26,472
Ansira Holdings, Inc. (7)(15)(19)(33)
8.12
5,072
5,073
3,271
TGI Sport Bidco Pty Ltd (6)(17)(19)
BBSY+ 7.00%
63
TGI Sport Bidco Pty Ltd (2)(3)(6)(19)
(158)
Media: Advertising, Printing & Publishing Total
51,548
32,517
2.9
Media: Broadcasting & Subscription
Lightning Finco Limited (6)(16)(19)
9/1/2028
1,443
1,407
1,300
1,416
1,363
Media: Broadcasting & Subscription Total
2,823
2,806
0.3
11
Media: Diversified & Production
9 Story Media Group Inc. (3)(5)(6)(19)
CAD
(1)
9 Story Media Group Inc. (6)(16)(19)
CDOR+ 5.25%
1,299
1,006
1,010
9 Story Media Group Inc. (6)(18)(19)
EURIBOR+ 5.25%
5.25
588
622
617
Aptus 1724 Gmbh (6)(19)(21)
2/23/2028
9,971
9,846
Efficient Collaborative Retail Marketing Company, LLC (3)(15)(19)
6/15/2024
2,054
Efficient Collaborative Retail Marketing Company, LLC (15)(19)
L+ 6.75%
7.76
15,050
14,072
9,788
9,821
International Entertainment Investments Limited (6)(18)(19)
SONIA+ 4.75%
5.72
5/31/2025
88
Music Creation Group Bidco GmbH (6)(19)(21)
7.88
8/3/2027
4,065
3,971
4,014
Media: Diversified & Production Total
42,602
40,873
3.7
Retail
Batteries Plus Holding Corporation (3)(15)(19)
7.81
6/30/2023
2,504
2,494
Batteries Plus Holding Corporation (15)(19)(29)
18,172
18,126
New Look (Delaware) Corporation (3)(6)(15)(19)
6.51
320
New Look (Delaware) Corporation (6)(15)(19)(29)
9,701
9,613
9,604
New Look Vision Group (3)(6)(15)(19)
CDOR+ 5.50%
8.18
3,579
2,805
2,725
8.10
5/26/2026
443
325
Thrasio, LLC (15)(29)
9.25
12/18/2026
8,528
8,333
7,974
Walker Edison (15)(19)(26)(29)
L+ 5.75% (3.00% PIK)
3/31/2027
20,804
20,626
19,140
Retail Total
62,690
60,685
5.5
Services: Business
ACAMS (14)(19)(25)
3,337
AMCP Clean Acquisition Company, LLC (18)
5.88
7/10/2025
16,339
16,208
13,156
3,954
3,922
3,183
Avalon Acquiror, Inc. (15)(19)(29)
3/10/2028
31,722
31,412
31,405
Avalon Acquiror, Inc. (3)(15)(19)
1,050
870
966
Brook Bidco (6)(18)(19)(26)
SONIA+ 3.00% (4.25% PIK)
7/7/2028
644
Brook Bidco (6)(14)(19)(25)
5,675
7,783
7,670
Caribou Bidco Limited (6)(18)(19)
SONIA+ 6.00%
6.20
1/29/2029
8,070
10,798
9,729
Caribou Bidco Limited (3)(6)(18)(19)
16
20
19
Chamber Bidco Limited (6)(17)(19)
6.47
6/7/2028
237
Darcy Partners (19)(32)
SOFR+ 7.90%
9.65
1,534
1,519
Darcy Partners (3)(19)
Darcy Partners (14)(19)(25)
359
Elevator Holdco Inc. (14)(19)(25)
2,448
2,844
iBanFirst (2)(3)(5)(6)(19)
7/13/2028
(31)
iBanFirst (6)(19)(32)
EURIBOR+ 8.50%
2,623
2,927
2,729
iBanFirst Facility (6)(14)(19)(25)
7,112
8,136
9,511
Learning Pool (6)(16)(19)(26)
L+ 3.00% (4.25% PIK)
274
334
127
119
masLabor (14)(19)(25)
642
masLabor (3)(5)(19)
7/1/2027
(19)
masLabor (15)(19)
8,556
8,324
Opus2 (6)(18)(19)
SONIA+ 5.28%
5.97
5/5/2028
123
167
Opus2 (6)(14)(19)(25)
-
2,272
2,900
3,357
Parcel2Go (3)(6)(18)(19)
7/15/2028
39
50
Parcel2Go (6)(18)(19)
6.94
125
169
Parcel2Go (6)(14)(19)(25)
3,083
4,237
3,780
Refine Intermediate, Inc. (3)(5)(18)(19)
9/3/2026
(86)
Refine Intermediate, Inc. (15)(19)(29)
3/3/2027
11,094
10,897
Smartronix (2)(3)(5)(18)(19)
11/23/2027
(116)
Smartronix (15)(19)(29)
12,700
12,466
12,509
SumUp Holdings Luxembourg S.à.r.l. (6)(19)(32)
2/17/2026
6,650
7,944
6,884
7,055
8,213
7,303
TEI Holdings Inc. (15)(19)(29)
P+ 4.75%
9.50
38,573
38,343
TEI Holdings Inc. (3)(5)(15)(19)
12/23/2025
494
(40)
WCI Gigawatt Purchaser (3)(15)(19)
11/19/2027
3,211
418
451
WCI Gigawatt Purchaser (15)(19)(29)
11,480
11,245
11,365
Services: Business Total
199,873
195,805
17.7
Services: Consumer
MZR Aggregator (14)(19)(25)
798
MZR Buyer, LLC (3)(5)(19)
12/21/2026
MZR Buyer, LLC (15)(19)(29)
26,891
26,478
Surrey Bidco Limited (6)(17)(19)
5/11/2026
52
56
Zeppelin BidCo Pty Limited (6)(18)(19)
BBSY+ 5.00%
6/28/2024
206
143
Services: Consumer Total
27,405
28,000
2.5
Telecommunications
ACM dcBLOX LLC (14)(19)(25)
3,822
3,851
4,338
Conterra Ultra Broadband Holdings, Inc. (15)(29)
6,289
6,271
6,046
DC Blox Inc. (3)(15)(19)(26)
L+ 2.00% (6.00% PIK)
3/22/2026
23,310
23,081
DC Blox Inc. (14)(19)(25)
177
Telecommunications Total
33,205
33,694
3.0
Transportation: Cargo
A&R Logistics, Inc. (19)(32)
SOFR+ 6.60%
5/5/2025
2,638
2,585
2,639
A&R Logistics, Inc. (15)(19)(29)
32,147
31,790
31,746
A&R Logistics, Inc. (15)(19)
5,943
5,893
5,870
A&R Logistics, Inc. (3)(15)(19)
3,152
3,097
3,077
2,411
2,382
7.50
2,702
2,685
2,703
ARL Holdings, LLC (14)(19)(25)
445
603
26
Grammer Investment Holdings LLC (19)(25)(26)
10.00% PIK
790
829
Grammer Investment Holdings LLC (14)(19)(25)
122
Grammer Purchaser, Inc. (2)(3)(19)(29)
9/30/2024
Grammer Purchaser, Inc. (15)(19)(29)
6.07
3,843
3,782
3,824
Omni Intermediate (3)(15)(19)
11/23/2026
366
360
Omni Intermediate (15)(19)(29)
7.10
8,087
8,013
8,080
Omni Intermediate (3)(19)
11/30/2026
Omni Logistics, LLC (15)(19)
10.06
12/30/2027
8,770
8,652
8,771
REP Coinvest III- A Omni, L.P. (14)(19)(25)
1,377
3,128
Transportation: Cargo Total
72,871
75,098
Transportation: Consumer
Toro Private Investments II, L.P. (6)(18)(26)
L+ 5.00% (1.75% PIK)
5/29/2026
6,731
5,071
5,256
Toro Private Investments ll, L.P. (6)(15)(26)
L+ 1.50% (7.25% PIK)
9.75
2/28/2025
387
383
384
Toro Private Investments II, L.P. (6)(14)(19)(25)
3,090
1,222
Transportation: Consumer Total
8,544
6,862
0.6
Wholesale
Abracon Group Holding, LLC (14)(19)(25)
1,833
5,636
Abracon Group Holding, LLC (3)(5)(19)
7/18/2024
Abracon Group Holding, LLC (15)(19)(29)
15,533
15,500
15,534
Aramsco, Inc. (3)(5)(18)(19)
8/28/2024
(26)
Aramsco, Inc. (18)(19)(29)
14,140
14,002
Armor Group, LP (14)(19)(25)
1,885
Wholesale Total
32,306
37,195
3.4
Non-Controlled/Non-Affiliate Investments Total
1,837,653
161.2
14
Non-Controlled/Affiliate Investments
ADT Pizza, LLC (10)(14)(19)(25)
6,720
16,932
1.5
Blackbrush Oil & Gas, L.P. (10)(15)(19)(26)(29)
L+ 5.00% (2.00% PIK)
7.11
8,948
8,946
Blackbrush Oil & Gas, L.P. (10)(14)(19)(25)
1,198
38,505
11,777
33,277
20,724
42,225
3.8
BCC Middle Market CLO 2018-1, LLC (6)(10)(19)(25)
10/20/2030
25,635
24,050
23,981
2.2
Direct Travel, Inc. (10)(18)(19)
L+ 6.30%
10/2/2023
4,841
Direct Travel, Inc. (10)(15)(19)
L+ 8.28%
3,440
3,199
Direct Travel, Inc. (10)(15)(19)(28)
1,741
1,619
58,721
54,611
Direct Travel, Inc.(3)(10)(15)(19)(28)
4,125
Direct Travel, Inc. (10)(18)(19)(28)
202
Direct Travel, Inc. (10)(14)(19)(25)
68
73,070
68,597
6.2
Non-Controlled/Affiliate Investments Total
124,564
13.7
15
Controlled Affiliate Investments
BCC Jetstream Holdings Aviation (Off I), LLC (6)(10)(11)(19)(20)(25)
11,863
10,278
BCC Jetstream Holdings Aviation (On II), LLC (10)(11)(18)(19)(20)
L+ 10.00%
6/2/2023
7,915
6,442
BCC Jetstream Holdings Aviation (On II), LLC (10)(11)(19)(20)(25)
1,116
Gale Aviation (Offshore) Co (6)(10)(11)(19)(25)
90,450
90,451
87,919
111,345
104,639
9.5
Investment Vehicles
Bain Capital Senior Loan Program, LLC (6)(10)(11)(18)(19)
Subordinated Note Investment Vehicles
10.00%
12/27/2033
35,780
Bain Capital Senior Loan Program, LLC (6)(10)(11)(19)(25)
Preferred Equity Interest Investment Vehicles
(271)
Equity Interest Investment Vehicles
5,594
4,641
International Senior Loan Program, LLC (6)(10)(11)(19)(25)
47,463
44,788
45,344
International Senior Loan Program, LLC (6)(10)(11)(15)(19)
2/22/2028
142,357
Investment Vehicles Total
228,529
227,851
20.5
Lightning Holdings B, LLC(6)(10)(11)(14)(19)(25)
17,274
17,584
18,390
Controlled Affiliate Investments Total
357,458
31.7
Investments Total
2,319,675
2,287,038
206.6
Cash Equivalents
Goldman Sachs Financial Square Government Fund Institutional Share Class (30)
0.03
35,601
Cash Equivalents Total
Investments and Cash Equivalents Total
2,355,276
2,322,639
209.8
Forward Foreign Currency Exchange Contracts
Unrealized
Appreciation
Currency Purchased
Currency Sold
Counterparty
Settlement Date
(Depreciation) (8)
US DOLLARS 13,195
AUSTRALIAN DOLLARS 18,260
Bank of New York Mellon
8/3/2022
640
US DOLLARS 6,783
EURO 6,400
8/18/2022
67
US DOLLARS 68,981
EURO 65,300
8/24/2022
(424)
US DOLLARS 69,893
1,426
US DOLLARS 42,586
POUND STERLING 29,810
9/2/2022
6,344
US DOLLARS 2,369
POUND STERLING 1,840
Citibank
132
US DOLLARS 58,021
EURO 47,890
7,709
US DOLLARS 8,457
EURO 7,120
977
US DOLLARS 13,822
AUSTRALIAN DOLLARS 19,080
699
US DOLLARS 1,558
CANADIAN DOLLAR 2,000
US DOLLARS 27,411
POUND STERLING 20,700
9/6/2022
(2,244)
US DOLLARS 5,940
EURO 5,200
(477)
US DOLLARS 8,144
(664)
US DOLLARS 24,349
POUND STERLING 19,320
11/17/2023
658
US DOLLARS 10,773
EURO 9,890
5/17/2024
(11)
US DOLLARS 11,215
POUND STERLING 9,000
6/24/2024
17
Investment
Acquisition Date
Abracon Group Holding, LLC
7/18/2018
ACAMS
3/10/2022
ACM dcBLOX LLC
3/22/2021
ADT Pizza, LLC
10/29/2018
Ansett Aviation Training
3/24/2022
Apollo Intelligence LLC
6/1/2022
Appriss Holdings, Inc.
5/3/2021
AQ Software Corporation
12/10/2021
ARL Holdings, LLC
5/3/2019
Armor Group, LP
8/28/2018
Bain Capital Senior Loan Program, LLC
12/27/2021
BCC Jetstream Holdings Aviation (Off I), LLC
6/1/2017
BCC Jetstream Holdings Aviation (On II), LLC
BCC Middle Market CLO 2018-1, LLC
2/28/2022
Blackbrush Oil & Gas, L.P.
9/3/2020
Brook Bidco Series A Preferred Units
7/8/2021
CB Titan Holdings, Inc.
5/1/2017
Darcy Partners
DC Blox Inc.
3/23/2021
Direct Travel, Inc.
10/2/2020
Eagle Rock Capital Corporation
12/9/2021
East BCC Coinvest II, LLC
7/23/2019
Elevator Holdco Inc.
12/23/2019
Eleven Software
4/25/2022
Elk Parent Holdings, LP
11/1/2019
18
FCG Acquisitions, Inc.
1/24/2019
Fineline Technologies, Inc.
2/22/2021
Gale Aviation (Offshore) Co
1/2/2019
Gluware Warrant
10/15/2021
Grammer Investment Holdings LLC
10/1/2018
iBanFirst Facility Series A Preferred Units
7/13/2021
International Senior Loan Program, LLC
Kellstrom Aerospace Group, Inc
7/1/2019
Lightning Holdings B, LLC
1/2/2020
masLabor Equity
7/1/2021
MZR Aggregator
12/22/2020
NPC International, Inc.
4/1/2021
Opus2
6/16/2021
Parcel2Go Shares
7/15/2021
PPX Class A Units
7/29/2021
PPX Class B Units
Precision Ultimate Holdings, LLC
11/6/2019
REP Coinvest III- A Omni, L.P.
2/5/2021
Revalize
4/14/2022
Robinson Helicopter
6/30/2022
ServiceMaster LP Interest Class B Preferred Units
8/16/2021
Superna Inc.
3/8/2022
TLC Holdco LP
10/11/2019
Toro Private Investments II, L.P.
4/2/2019
Utimaco
6/28/2022
Ventiv Topco, Inc.
9/3/2019
WCI-HSG HOLDCO, LLC
2/22/2019
WSP LP Interest
8/31/2021
As of December 31, 2021
Interest
Maturity
Market
% of
Rate
Date
Value
NAV(4)
Forming & Machining Industries Inc.(18)(19)
L+ 8.25
8.47
6,494
5,821
Forming & Machining Industries Inc.(12)(18)
L+ 4.25
4.47
16,439
16,352
15,288
GSP Holdings, LLC(12)(15)(19)(26)(29)
11/6/2024
35,622
35,516
32,951
GSP Holdings, LLC(15)(19)(26)
First Lien Senior Secured Loan— Revolver
1,602
1,573
1,261
Kellstrom Aerospace Group, Inc(14)(19)(25)
913
Kellstrom Commercial Aerospace, Inc.(18)(19)(24)
L+ 5.50
2,239
2,176
1,919
Kellstrom Commercial Aerospace, Inc.(12)(15)(19)
32,855
32,430
30,884
Mach Acquisition R/C(2)(5)(18)(19)
(193)
(201)
Mach Acquisition T/L(15)(19)
L+ 7.50
32,640
32,006
31,987
Precision Ultimate Holdings, LLC(14)(19)(25)
1,204
WCI-HSG HOLDCO, LLC(14)(19)(25)
1,993
WCI-HSG Purchaser, Inc.(12)(15)(19)(29)
L+ 4.75
1,209
1,190
17,422
17,285
Whitcraft LLC(2)(3)(5)(15)(19)
(59)
Whitcraft LLC(12)(15)(19)(29)
L+ 6.00
39,775
39,594
38,482
WP CPP Holdings, LLC.(12)(15)
L+ 7.75
8.75
11,646
11,495
200,117
192,569
17.5
American Trailer Rental Group(19)(26)
9.00% (2.00% PIK)
4,913
4,842
15,114
14,793
Cardo(6)(12)(17)(19)
10,898
10,795
CST Buyer Company(3)(5)(15)(19)
CST Buyer Company(12)(15)(19)(29)
L+ 5.55
19,238
19,122
JHCC Holdings, LLC(15)(19)
First Lien Senior Secured Loan— Delayed Draw
P+ 4.50
2,618
JHCC Holdings, LLC(19)(31)
P+ 5.75
894
863
L+ 5.75
5,782
5,776
JHCC Holdings, LLC(12)(15)(19)(29)
29,081
28,799
87,597
88,555
Green Street Parent, LLC(3)(5)(17)(19)(29)
(29)
Green Street Parent, LLC(12)(17)(19)(29)
14,190
13,988
Green Street Parent, LLC(17)(19)(29)
L+ 5.00
4,500
4,411
18,370
18,690
% of
NPC International, Inc.(19)(25)(27)
564
843
228
East BCC Coinvest II, LLC(14)(19)(25)
1,065
Electronics For Imaging, Inc.(12)(18)(19)
L+ 9.00
9.10
7/23/2027
12,070
11,460
11,285
FCG Acquisitions, Inc.(14)(19)(25)
Jonathan Acquisition Company(19)(15)
7,821
Tidel Engineering, L.P.(12)(15)(19)(29)
3/1/2024
38,155
Tidel Engineering, L.P.(15)(19)
6,337
6,274
6,336
65,129
64,841
5.9
V Global Holdings LLC(12)(15)(19)(29)
24,813
24,242
V Global Holdings LLC(15)(19)
P+ 5.00
2,050
1,893
26,135
26,863
Chase Industries, Inc.(15)(19)(26)
First Lien Senior Secured Loan—Delayed Draw
L+ 5.50% (1.5% PIK)
1,197
1,195
946
12,622
12,586
Elk Parent Holdings, LP(14)(19)(25)
407
1,427
Regan Development Holdings Limited(6)(17)(19)
EURIBOR+ 6.50
4/18/2022
2,326
754
6,895
7,041
ServiceMaster LP Interest Class B Preferred Units(14) (19)(25)
353
Service Master Revolving Loan(15)(19)
First Lien Senior Secured Loan—Revolver
1,260
1,176
Service Master Term Note(17)(19)
921
YLG Holdings, Inc.(15)(19)
5,060
5,055
YLG Holdings, Inc.(3)(5)(15)(19)
(55)
YLG Holdings, Inc.(12)(15)(19)(29)
L+ 5.25
38,086
37,900
70,256
68,570
New Milani Group LLC(12)(15)(19)
L+ 6.50
16,752
16,678
16,250
Stanton Carpet T/L 2nd Lien(15)(19)
19,664
19,277
19,271
TLC Holdco LP(14)(19)(25)
1,188
1,186
431
TLC Purchaser, Inc.(2)(3)(5)(19)
(45)
(854)
TLC Purchaser, Inc.(15)(19)
6,408
6,296
5,340
TLC Purchaser, Inc.(12)(15)(19)(29)
L+ 6.25
41,066
40,511
36,137
83,903
76,575
7.0
Fineline Parent Holdings(14)(19)(25)
FL Hawk Intermediate Holdings, Inc.(15)(19)
21,125
20,543
New Era Cap Co., Inc.(12)(15)(19)(29)
9/10/2023
9,970
RoC Opco LLC(3)(5)(15)(19)
(111)
RoC Opco LLC(12)(15)(19)(29)
L+ 8.50
40,079
39,486
21
Solaray, LLC(15)(19)
14,276
L+ 4.50
9/9/2022
907
895
Solaray, LLC(12)(15)(19)
41,729
WU Holdco, Inc.(18)(19)
1,690
1,656
WU Holdco, Inc.(12)(15)(19)(29)
44,452
43,847
WU Holdco, Inc.(12)(15)(19)
6,594
6,534
WU Holdco, Inc.(3)(5)(15)(19)
179,733
182,063
16.6
WSP LP Interest(14)(19)(25)
2,829
WSP Initial Term Loan(12)(15)(19)(29)
12,251
12,017
12,037
WSP Initial Term Loan(2)(3)(5)(15)(19)
4/27/2023
WSP Revolving Loan(2)(3)(5)(15)(19)
(9)
(8)
14,870
14,827
1.3
ASP-r-pac Acquisition Co LLC(16)(19)
651
586
ASP-r-pac Acquisition Co LLC(12)(16)(19)
27,339
26,793
26,792
27,379
27,378
Amspec Services, Inc.(15)(19)
1,488
1,457
1,487
Amspec Services, Inc.(12)(15)(19)(29)
43,207
42,923
2,798
2,768
47,148
47,492
4.3
Allworth Financial Group, L.P.(15)(19)
2,528
2,476
Allworth Financial Group, L.P.(12)(15)(19)(29)
10,037
9,908
Allworth Financial Group, L.P.(3)(5)(15)(19)
TA/Weg Holdings(15)(19)(29)
10/2/2027
9,495
TA/Weg Holdings(15)(19)
2,392
2,381
24,245
24,452
Margaux Acquisition Inc.(15)(19)
9,198
9,173
Margaux Acquisition, Inc.(3)(5)(15)(19)
(28)
Margaux Acquisition Inc.(12)(15)(19)(29)
28,334
Margaux UK Finance Limited(3)(6)(19)
GBP LIBOR+ 5.50
89
112
Margaux UK Finance Limited(6)(15)(19)
7,551
9,740
10,218
MRHT Facility A(6)(18)(19)
EURIBOR+ 5.50
248
245
MRHT Acquisition Facility(3)(5)(6)(19)
(6)
Paisley Bidco Limited(6)(18)(19)
11/24/2028
3,210
3,583
3,614
22
Paisley Bidco Limited(2)(3)(5)(6)(18)(19)
World Insurance(15)(19)
8,358
8,285
8,296
World Insurance(3)(15)(19)
70
54
3,144
3,088
3,121
62,165
63,123
5.7
CB Titan Holdings, Inc.(14)(19)(25)
1,153
CPS Group Holdings, Inc.(3)(5)(15)(19)
(52)
CPS Group Holdings, Inc.(12)(15)(19)(29)
54,843
54,517
Datix Bidco Limited(6)(18)(19)
4.96
8.21
BBSW+ 4.00
4.25
Great Expressions Dental Centers PC(13)(15)(19)(26)
L+ 4.75% (0.5% PIK)
9/28/2022
1,027
1,025
929
Great Expressions Dental Centers PC(15)(19)(26)
7,831
7,844
7,205
Island Medical Management Holdings, LLC(15)(19)
9/1/2023
8,520
8,496
8,371
Mertus 522. GmbH(6)(18)(19)
EURIBOR+ 6.25
255
SunMed Group Holdings, LLC(16)(19)
197
SunMed Group Holdings, LLC(12)(16)(19)(29)
18,510
18,204
TecoStar Holdings, Inc.(12)(15)(19)
9,354
8,951
102,116
100,771
9.2
AMI US Holdings Inc.(3)(6)(12)(18)(19)
5.35
4/1/2024
698
682
AMI US Holdings Inc.(6)(12)(15)(19)(29)
12,892
12,735
Appriss Holdings, Inc.(15)(19)
L+ 7.25
11,081
11,179
Appriss Holdings, Inc.(2)(3)(5)(15)(19)
(13)
Appriss Holdings, Inc.(19)(25)
1,552
AQ Software Corporation(19)
1,029
1,715
Armstrong Bidco Limited(3)(6)(19)(21)
SONIA+ 4.75
5.00
4/30/2025
78
76
Armstrong Bidco T/L(6) (19)
5.06
705
763
954
CB Nike IntermediateCo Ltd(6)(15)(19)
44
347
342
Drilling Info Holdings, Inc(12)(18)
4.35
22,152
22,101
21,930
Eagle Rock Capital Corporation(19)
2,354
Element Buyer, Inc.(15)(19)
11,078
11,097
1,672
37,007
37,199
23
NAV (4)
Gluware T/L(6)(19)
Fixed+ 12.50
18,898
18,534
18,520
Gluware Warrant(6)(19)
MRI Software LLC(15)(19)
25,926
25,850
MRI Software LLC(3)(15)(19)
48
Revalize, Inc.(2)(3)(5)(19)
(133)
(134)
Revalize, Inc.(2)(3)(5)(18)(19)
Revalize, Inc.(15)(19)(29)
5,130
5,079
Swoogo LLC(2)(3)(5)(18)(19)
Swoogo LLC(15)(19)
L+ 8.00
2,284
Utimaco, Inc.(6)(18)(19)
L+ 4.00
4.10
8/9/2027
148
146
Ventiv Topco, Inc.(3)(5)(18)(19)
(38)
Ventiv Topco, Inc.(14)(19)(25)
2,755
Ventiv Holdco, Inc.(12)(15)(19)(29)
23,812
23,576
VPARK BIDCO AB(6)(16)(19)
CIBOR+ 4.00
87
NIBOR+ 4.00
84
182,811
183,069
PPX Class A Units(14)(19)(25)
PPX Class B Units(14)(19)(25)
5,279
5,442
Aimbridge Acquisition Co., Inc.(12)(18)(19)
7.59
20,193
19,772
18,679
Captain D’s LLC(3)(5)(15)(19)
12/15/2023
Captain D’s LLC(12)(15)(19)(29)
12,559
12,539
Captain D’s LLC(15)(19)(29)
2,301
Quidditch Acquisition, Inc.(12)(15)(29)
L+ 7.00
18,636
18,626
18,392
53,232
51,956
4.7
Ansira Holdings, Inc.(15)(19)(26)(33)
4,873
4,874
3,862
Ansira Holdings, Inc.(19)(23)(31)
7.41
3,913
Ansira Holdings, Inc.(15)(19)(26)
L+ 6.50% PIK
40,086
40,057
31,768
TGI Sport Bidco Pty Ltd(6)(17)(19)
BBSW+ 7.00
TGI Sport Bidco Pty Ltd(2)(3)(6)(17)(19)
4/30/2027
(151)
50,389
39,459
3.6
Lightning Finco Limited(6)(16)(19)
7/14/2028
4,350
4,234
4,629
4,506
8,740
8,979
0.8
9 Story Media Group Inc.(3)(6)(16)(19)
9 Story Media Group Inc.(6)(16)(19)
CDOR+ 5.50
72
57
24
9 Story Media Group Inc.(6)(18)(19)
EURIBOR+ 5.25
Aptus 1724 Gmbh(6)(19)(21)
EURIBOR+ 6.00
4,162
4,732
14,971
6/15/2022
1,275
L+ 6.75
14,340
9,800
9,298
International Entertainment Investments Limited (6) (18)(19)
GBP LIBOR+ 4.75
5/31/2023
118
46,420
44,835
4.1
Batteries Plus Holding Corporation (19)(31)
8.44
817
Batteries Plus Holding Corporation (12)(15)(19)(29)
28,672
28,671
New Look Vision Group (6)(15)(19)
CDOR+ 5.25
2,380
1,868
1,883
313
New Look Vision Group (16)(19)
New Look Vision Group (16)(19)(29)
9,750
9,653
Thrasio, LLC (12)(15)(19)(29)
21,746
21,241
Walker Edison Initial Term Loan (12)(15)(19)(29)
8/5/2027
20,447
20,248
19,627
83,036
83,064
7.6
AMCP Clean Acquisition Company, LLC (12)(18)
3,816
3,810
3,189
15,767
15,747
13,176
Brook Bidco I Limited (6)(16)(19)
GBP LIBOR+ 6.00
5,385
7,047
7,287
7,180
9,396
9,716
Brook Bidco Series A Preferred Units (6)(14)(19)(25)
7,908
Brook Bidco Facility B (6)(18)(19)
6.09
684
935
926
Chamber Bidco Limited(6)(17)(19)
Elevator Holdco Inc.(14)(19)(25)
2,550
iBanFirst Facility Series A Preferred Units(6)(14)(19)(25)
5,080
5,996
6,290
iBanFirst Facility B(6)(18)(19)
EURIBOR+ 8.50
102
128
116
iBanFirst Revolving Facility(6)(18)(19)
2,030
2,244
2,308
masLabor Equity(19)(25)
masLabor Revolver (3)(5)(19)
masLabor Term Loan Note(15)(19)
8,578
Opus2(6)(18)(19)
SONIA+ 5.50
5.55
166
Opus2(3)(5)(6)(18)(19)
(173)
Opus2(6)(25)(19)
1,460
1,769
2,373
Parcel2Go Acquisition Facility(3)(6)(19)
SONIA+ 5.75
3,863
4,982
5,183
Parcel2Go Facility B(6)(18)(19)
5.80
Parcel2Go Shares(6)(14)(19)(25)
2,881
3,983
3,899
Refine Intermediate, Inc.(3)(5)(18)(19)
Refine Intermediate, Inc.(12)(15)(19)(29)
21,894
21,467
Smartronix RC(2)(3)(5)(18)(19)
11/23/2028
(124)
(126)
Smartronix T/L(12)(15)(19)
36,991
36,260
36,251
SumUp Holdings Luxembourg S.à.r.l.(6)(19)(32)
7,939
7,561
10,055
11,700
11,432
TEI Holdings Inc.(15)(19)
L+6.00
458
412
TEI Holdings Inc.(12)(15)(19)(26)(29)
L+ 7.00% (1.25% PIK)
48,720
48,350
WCI Gigawatt Purchaser DD T/L(15)(19)
3,182
3,076
3,074
WCI Gigawatt Purchaser R/C(2)(3)(5)(19)
WCI Gigawatt Purchaser T/L(12)(15)(19)
22,304
21,809
21,802
226,035
225,437
MZR Aggregator(14)(19)(25)
MZR Buyer, LLC(3)(5)(15)(19)
MZR Buyer, LLC(12)(15)(19)(29)
40,228
39,551
Surrey Bidco Limited(6)(17)(19)
GBP LIBOR+ 7.00
62
60
Zeppelin BidCo Pty Limited(6)(18)(19)
BBSY+ 6.00
5.12
150
40,467
41,236
ACM dcBLOX LLC(14)(19)(25)
4,130
Conterra Ultra Broadband Holdings, Inc.(15)(29)
6,321
6,300
6,332
DC Blox Inc.(15)(19)(26)
L+ 8.00% (6.00% PIK)
16,998
16,738
DC Blox Inc.(14)(19)(25)
Horizon Telcom, Inc.(15)(19)(29)
6/15/2023
114
Horizon Telcom, Inc.(12)(15)(19)(29)
888
13,104
13,045
40,938
41,570
A&R Logistics, Inc.(15)(19)
2,748
A&R Logistics, Inc.(12)(15)(19)(29)
43,092
42,527
2,423
2,391
5,974
5,916
2,716
2,695
ARL Holdings, LLC(14)(19)(25)
575
81
Grammer Investment Holdings LLC(14)(19)(25)
1,056
Grammer Investment Holdings LLC(19)(25)(26)
10% PIK
830
126
Grammer Purchaser, Inc.(12)(15)(19)(29)
7,319
7,202
Omni Logistics, LLC(15)(19)
13,770
13,527
Omni Intermediate DD T/L 1(15)(19)
776
769
Omni Intermediate DD T/L 2(15)(19)
46
37
Omni Intermediate Holdings Closing Date Term Loan (15)(19)
7,306
7,233
Omni Intermediate R/C(15)(19)
11/23/2025
183
176
REP Coinvest III- A Omni, L.P.(14)(19)(25)
2,616
88,860
91,607
8.3
Toro Private Investments II, L.P.(6)(14)(19)(25)
1,353
Toro Private Investments II, L.P.(6)(12)(18)(19)
6.90
6,706
4,846
5,603
Toro Private Investments II, L.P.(6)(15)(26)
363
377
8,299
7,333
Abracon Group Holding, LLC(14)(19)(25)
3,282
Abracon Group Holding, LLC(3)(5)(15)(19)
(18)
Abracon Group Holding, LLC(12)(15)(19)(29)
35,363
35,270
Aramsco, Inc.(3)(5)(18)(19)
(30)
Aramsco, Inc.(12)(18)(19)(29)
23,796
23,537
Armor Group, LP(14)(19)(25)
2,131
PetroChoice Holdings, Inc.(12)(15)
8/19/2022
9,721
9,327
6,445
6,412
6,171
77,737
80,070
7.3
1,921,970
172.8
ADT Pizza, LLC(10)(14)(19)(25)
19,527
1.8
Blackbrush Oil & Gas, L.P.(10)(14)(19)(25)
1,123
36,084
10,104
19,720
Blackbrush Oil & Gas, L.P.(10)(12)(15)(19)(26)(29)
L+ 5.00% (2% PIK)
12,336
22,440
32,056
Direct Travel, Inc.(10)(18)(19)(26)
L+ 1.00% (6.30% PIK)
4,766
Direct Travel, Inc.(10)(14)(19)(25)
Direct Travel, Inc.(10)(15)(19)(26)
L+ 1.00% (8.28% PIK)
3,370
2,831
1,710
1,436
57,555
48,347
Direct Travel, Inc.(10)(15)(19)
Direct Travel, Inc.(10)(18)(19)
71,728
61,707
5.6
100,888
10.3
27
BCC Jetstream Holdings Aviation (Off I), LLC(6)(10)(11)(19)(20)(25)
10,563
BCC Jetstream Holdings Aviation (On II), LLC(10)(11)(18)(19)(20)(26)
L+ 10.00
6/2/2022
7,377
6,627
Gale Aviation (Offshore) Co(6)(10)(11)(19)(25)
88,985
72,839
109,341
90,029
8.2
International Senior Loan Program, LLC(6)(10)(11)(25)
41,823
39,596
44,444
International Senior Loan Program, LLC(6)(10)(11)(15) (19)
125,437
165,033
169,881
15.4
14,152
14,851
1.4
288,526
25.0
2,311,384
2,289,105
208.1
Goldman Sachs Financial Square Government Fund Institutional Share Class(30)
177,554
16.1
2,488,938
2,466,659
224.2
(Depreciation)(8)
US DOLLARS 1,458
POUND STERLING 1,100
2/18/2022
US DOLLARS 481
AUSTRALIAN DOLLARS 410
3/2/2022
US DOLLARS 29,087
POUND STERLING 20,990
721
US DOLLARS 75,862
EURO 63,360
3,390
563
US DOLLARS 14,330
EURO 12,550
US DOLLARS 35,821
POUND STERLING 25,700
1,035
US DOLLARS 6,954
POUND STERLING 5,260
2/23/2022
US DOLLARS 12,327
EURO 10,510
305
US DOLLARS 4,754
EURO 3,251
(1,036)
Acquisition
30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1. Organization
Bain Capital Specialty Finance, Inc. (the “Company”, “we”, “our” and “us”) was formed on October 5, 2015 and commenced investment operations on October 13, 2016. The Company has elected to be treated and is regulated as a business development company (a “BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, for tax purposes the Company has elected to be treated and intends to operate in a manner so as to continuously qualify as a regulated investment company (a “RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). The Company is externally managed by BCSF Advisors, LP (the “Advisor” or “BCSF Advisors”), our investment adviser that is registered with the Securities and Exchange Commission (the “SEC”) under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). The Advisor also provides the administrative services necessary for the Company to operate (in such capacity, the “Administrator” or “BCSF Advisors”).
On November 19, 2018, the Company closed its initial public offering (the “IPO”), which was a Qualified IPO, issuing 7,500,000 shares of its common stock at a public offering price of $20.25 per share. Shares of common stock of the Company began trading on the New York Stock Exchange under the symbol “BCSF” on November 15, 2018.
The Company’s primary focus is capitalizing on opportunities within its Advisor’s Senior Direct Lending Strategy, which seeks to provide risk-adjusted returns and current income to its stockholders by investing primarily in middle-market companies with between $10.0 million and $150.0 million in EBITDA. The Company focuses on senior investments with a first or second lien on collateral and strong structures and documentation intended to protect the lender. The Company generally seeks to retain voting control in respect of the loans or particular classes of securities in which the Company invests through maintaining affirmative voting positions or negotiating consent rights that allow the Company to retain a blocking position. The Company may also invest in mezzanine debt and other junior securities and in secondary purchases of assets or portfolios, as described below. Investments are likely to include, among other things, (i) senior first lien, stretch senior, senior second lien, unitranche, (ii) mezzanine debt and other junior investments and (iii) secondary purchases of assets or portfolios that primarily consist of middle-market corporate debt. The Company may also invest, from time to time, in equity securities, distressed debt, debtor-in-possession loans, structured products, structurally subordinate loans, investments with deferred interest features, zero-coupon securities and defaulted securities.
Our operations comprise only a single reportable segment.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation
The Company’s consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”). The Company’s consolidated financial statements and related financial information have been prepared pursuant to the requirements for reporting on Form 10-Q and Regulation S-X. These consolidated financial statements reflect adjustments that in the opinion of the Company are necessary for the fair statement of the financial position and results of operations for the periods presented herein and are not necessarily indicative of the full fiscal year. The Company has determined it meets the definition of an investment company and follows the accounting and reporting guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946 — Financial Services — Investment Companies. The functional currency of the Company is U.S. dollars and these consolidated financial statements have been prepared in that currency. Certain prior period information has been reclassified to conform to the current period presentation and this had no effect on the Company’s consolidated financial position or the consolidated results of operations as previously reported.
The information included in this Form 10-Q should be read in conjunction with the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021.
Basis of Consolidation
The Company will generally consolidate any wholly, or substantially, owned subsidiary when the design and purpose of the subsidiary is to act as an extension of the Company’s investment operations and to facilitate the execution of the Company’s investment strategy. Accordingly, the Company consolidated the results of its subsidiaries in its consolidated financial statements BCSF CFSH, LLC, BCSF CFS, LLC and BCC Middle Market CLO 2019-1, LLC in its consolidated financial statements. All intercompany transactions and balances have been eliminated in consolidation. Since the Company is an investment company, portfolio investments held by the Company are not consolidated into the consolidated financial statements. The portfolio investments held by the Company (including its investments held by consolidated subsidiaries) are included on the consolidated statements of assets and liabilities as investments at fair value.
Use of Estimates
The preparation of the consolidated financial statements in conformity with US GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates and such differences could be material.
Valuation of Portfolio Investments
Investments for which market quotations are readily available are typically valued at such market quotations. Market quotations are obtained from an independent pricing service, where available. If a price cannot be obtained from an independent pricing service or if the independent pricing service is not deemed to be current with the market, certain investments held by the Company will be valued on the basis of prices provided by principal market makers. Generally, investments marked in this manner will be marked at the mean of the bid and ask of the independent broker quotes obtained. To validate market quotations, the Company utilizes a number of factors to determine if the quotations are representative of fair value, including the source and number of quotations. Debt and equity securities that are not publicly traded or whose market prices are not readily available are valued at fair value, subject at all times to the oversight and approval of the Board of Directors of the Company (the “Board”), based on, among other things, the input of the Advisor, the Company’s audit committee of the Board (the “Audit Committee”) and one or more independent third party valuation firms engaged by the Board.
With respect to unquoted portfolio investments, the Company will value each investment considering, among other measures, discounted cash flow models, comparisons of financial ratios of peer companies that are public and other factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the Company will use the pricing indicated by the external event to corroborate and/or assist us in our valuation. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material.
With respect to investments for which market quotations are not readily available, the Advisor will undertake a multi-step valuation process, which includes among other things, the below:
In following this approach, the types of factors that are taken into account in the fair value pricing of investments include, as relevant, but are not limited to: comparison to publicly traded securities, including factors such as yield, maturity and measures of credit quality; the enterprise value of a portfolio company; the nature and realizable value of any collateral; the portfolio company’s ability to make payments and its earnings and discounted cash flows; and the markets in which the portfolio company does business. In cases where an independent valuation firm provides fair valuations for investments, the independent valuation firm provides a fair valuation report, a description of the methodology used to determine the fair value and their analysis and calculations to support their conclusion.
The Company applies ASC Topic 820, Fair Value Measurement (“ASC 820”), which establishes a framework for measuring fair value in accordance with US GAAP and required disclosures of fair value measurements. The fair value of a financial instrument is the amount that would be received in an orderly transaction between market participants at the measurement date. The Company determines the fair value of investments consistent with its valuation policy. The Company discloses the fair value of its investments in a hierarchy which prioritizes and ranks the level of market observability used in the determination of fair value. In accordance with ASC 820, these levels are summarized below:
A financial instrument’s level within the hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuations of Level 2 investments are generally based on quotations received from pricing services, dealers or brokers. Consideration is given to the source and nature of the quotations and the relationship of recent market activity to the quotations provided.
Transfers between levels, if any, are recognized at the beginning of the reporting period in which the transfers occur. The Company evaluates the source of inputs used in the determination of fair value, including any markets in which the investments, or similar investments, are trading. When the fair value of an investment is determined using inputs from a pricing service (or principal market makers), the Company considers various criteria in determining whether the investment should be classified as a Level 2 or Level 3 investment. Criteria considered includes the pricing methodologies of the pricing services (or principal market makers) to determine if the inputs to the valuation are observable or unobservable, as well as the number of prices obtained and an assessment of the quality of the prices obtained. The level of an investment within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment.
The fair value assigned to these investments is based upon available information and may fluctuate from period to period. In addition, it does not necessarily represent the amount that might ultimately be realized upon sale. Due to inherent uncertainty of valuation, the estimated fair value of investments may differ from the value that would have been used had a ready market for the security existed, and the difference could be material.
Securities Transactions, Revenue Recognition and Expenses
The Company records its investment transactions on a trade date basis. The Company measures realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, using the specified identification method. Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis. Discount and premium to par value on investments acquired are accreted and amortized, respectively, into interest income over the life of the respective investment using the effective interest method. Commitment fees are recorded on an accrual basis and recognized as interest income. Loan origination fees, original issue discount and market discount or premium are capitalized and amortized against or accreted into interest income using the effective interest method or straight-line method, as applicable. For the Company’s investments in revolving bank loans, the cost basis of the investment purchased is adjusted for the cash received for the discount on the total balance committed. The fair value is also adjusted for price appreciation or depreciation on the unfunded portion. As a result, the purchase of commitments not completely funded may result in a negative value until it is offset by the future amounts called and funded. Upon prepayment of a loan or debt security, any prepayment premium, unamortized upfront loan origination fees and unamortized discount are recorded as interest income.
Dividend income on preferred equity investments is recorded on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity investments is recorded on the record date for private portfolio companies and on the ex-dividend date for publicly traded portfolio companies. Distributions received from an equity interest, limited liability company or a limited partnership investment are evaluated to determine if the distribution should be recorded as dividend income or a return of capital.
Certain investments may have contractual payment-in-kind (“PIK”) interest or dividends. PIK represents accrued interest or accumulated dividends that are added to the loan principal of the investment on the respective interest or dividend payment dates rather than being paid in cash and generally becomes due at maturity or upon being called by the issuer. PIK is recorded as interest or dividend income, as applicable. If at any point the Company believes PIK is not expected to be realized, the investment generating PIK will be placed on non-accrual status. Accrued PIK interest or dividends are generally reversed through interest or dividend income, respectively, when an investment is placed on non-accrual status.
Certain structuring fees and amendment fees are recorded as other income when earned. Administrative agent fees received by the Company are recorded as other income when the services are rendered.
Expenses are recorded on an accrual basis.
Non-Accrual Loans
Loans or debt securities are placed on non-accrual status when there is reasonable doubt that principal or interest will be collected. Accrued interest generally is reversed when a loan or debt security is placed on non-accrual status. Interest payments received on non-accrual loans or debt securities may be recognized as income or applied to principal depending upon management’s judgment. Non-accrual loans and debt securities are restored to accrual status when past due principal and interest are paid and, in management’s judgment, principal and interest payments are likely to remain current. The Company may make exceptions to this treatment if a loan has sufficient collateral value and is in the process of collection. As of June 30, 2022, there were three loans from one issuer on non-accrual. As of December 31, 2021, there were no loans placed on non-accrual status.
Distributions
Distributions to common stockholders are recorded on the record date. The amount to be distributed, if any, is determined by the Board each quarter, and is generally based upon the earnings estimated by the Advisor. Distributions from net investment income and net realized capital gains are determined in accordance with U.S. federal income tax regulations, which may differ from those amounts determined in accordance with US GAAP. The Company may pay distributions to its stockholders in a year in excess of its investment company taxable income and net capital gain for that year and, accordingly, a portion of such distributions may constitute a return of capital for U.S. federal income tax purposes. This excess generally would be a tax-free return of capital in the period and generally would reduce the stockholder’s tax basis in its shares. These book/tax differences are either temporary or permanent in nature. To the extent these differences are permanent; they are charged or credited to paid-in capital in excess of par, accumulated undistributed net investment income or accumulated net realized gain (loss), as appropriate, in the period that the differences arise. Temporary and permanent differences are primarily attributable to differences in the tax treatment of certain loans and the tax characterization of income and non-deductible expenses.
The Company intends to timely distribute to its stockholders substantially all of its annual taxable income for each year, except that the Company may retain certain net capital gains for reinvestment and, depending upon the level of the Company’s taxable income earned in a year, the Company may choose to carry forward taxable income for distribution in the following year and incur applicable U.S. federal excise tax. The specific tax characteristics of the Company’s distributions will be reported to stockholders after the end of the calendar year. All distributions will be subject to available funds, and no assurance can be given that the Company will be able to declare such distributions in future periods.
The Company distributes net capital gains (i.e., net long-term capital gains in excess of net short-term capital losses), if any, at least annually out of the assets legally available for such distributions. However, the Company may decide in the future to retain such capital gains for investment, incur a corporate-level tax on such capital gains, and elect to treat such capital gains as deemed distributions to stockholders.
Dividend Reinvestment Plan
The Company has adopted a dividend reinvestment plan that provides for the reinvestment of cash dividends and distributions. Stockholders who do not “opt out” of the Company’s dividend reinvestment plan will have their cash dividends and distributions automatically reinvested in additional shares of the Company’s common stock, rather than receiving cash dividends and distributions.
Offering Costs
Offering costs consist primarily of fees and expenses incurred in connection with the offering of shares, legal, printing and other costs associated with the preparation and filing of applicable registration statements. To the extent such expenses relate to equity offerings, these expenses are charged as a reduction of paid-in-capital upon each such offering.
Cash, Restricted Cash, and Cash Equivalents
Cash and cash equivalents consist of deposits held at custodian banks, and highly liquid investments, such as money market funds, with original maturities of three months or less. Cash and cash equivalents are carried at cost or amortized cost, which approximates fair value. The Company may deposit its cash and cash equivalents in financial institutions and, at certain times, such balances may exceed the Federal Deposit Insurance Corporation insurance limits. Cash equivalents are presented separately on the consolidated schedules of investments. Restricted cash is collected and held by the trustee who has been appointed as custodian of the assets securing certain of the Company’s financing transactions.
Foreign Currency Translation
The accounting records of the Company are maintained in U.S. dollars. The fair values of foreign securities, foreign cash and other assets and liabilities denominated in foreign currency are translated to U.S. dollars based on the current exchange rates at the end of each business day. Income and expenses denominated in foreign currencies are translated at current exchange rates when accrued or incurred. Unrealized gains and losses on foreign currency holdings and non-investment assets and liabilities attributable to the changes in foreign currency exchange rates are included in the net change in unrealized appreciation (depreciation) on foreign currency translation on the consolidated statements of operations. Net realized gains and losses on foreign currency holdings and non-investment assets and liabilities attributable to changes in foreign currency exchange rates are included in net realized gain (loss) on foreign currency transactions on the consolidated statements of operations. The portion of both realized and unrealized gains and losses on investments that result from changes in foreign currency exchange rates is not separately disclosed, but is included in net realized gain (loss) on investments and net change in unrealized appreciation (depreciation) on investments, respectively, on the consolidated statements of operations.
Forward Currency Exchange Contracts
The Company may enter into forward currency exchange contracts to reduce the Company’s exposure to foreign currency exchange rate fluctuations in the value of foreign currencies. A forward currency exchange contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The Company does not utilize hedge accounting and as such the Company recognizes the value of its derivatives at fair value on the consolidated statements of assets and liabilities with changes in the net unrealized appreciation (depreciation) on forward currency exchange contracts recorded on the consolidated statements of operations. Forward currency exchange contracts are valued using the prevailing forward currency exchange rate of the underlying currencies. Unrealized appreciation (depreciation) on forward currency exchange contracts are recorded on the consolidated statements of assets and liabilities by counterparty on a net basis, not taking into account collateral posted which is recorded separately, if applicable. Cash collateral maintained in accounts held by counterparties is included in collateral on forward currency exchange contracts on the consolidated statements of assets and liabilities. Notional amounts and the gross fair value of forward currency exchange contracts assets and liabilities are presented separately on the consolidated schedules of investments.
Changes in net unrealized appreciation (depreciation) are recorded on the consolidated statements of operations in net change in unrealized appreciation (depreciation) on forward currency exchange contracts. Net realized gains and losses are recorded on the consolidated statements of operations in net realized gain (loss) on forward currency exchange contracts. Realized gains and losses on forward currency exchange contracts are determined using the difference between the fair market value of the forward currency exchange contract at the time it was opened and the fair market value at the time it was closed or covered. Additionally, losses, up to the fair value, may arise if the counterparties do not perform under the contract terms.
Deferred Financing Costs and Debt Issuance Costs
The Company records costs related to issuance of revolving debt obligations as deferred financing costs. These costs are deferred and amortized using the straight-line method over the stated maturity life of the obligation. The Company records costs related
35
to the issuance of term debt obligations as debt issuance costs. These costs are deferred and amortized using the effective interest method. These costs are presented as a reduction to the outstanding principal amount of the term debt obligations on the consolidated statements of assets and liabilities. In the event that we modify or extinguish our debt before maturity, the Company follows the guidance in ASC Topic 470-50, Modification and Extinguishments. For modifications to or exchanges of our revolving debt obligations, any unamortized deferred financing costs related to lenders who are not part of the new lending group are expensed. For extinguishments of our term debt obligations, any unamortized debt issuance costs are deducted from the carrying amount of the debt in determining the gain or loss from the extinguishment.
Income Taxes
The Company has elected to be treated for U.S. federal income tax purposes as a RIC under the Code. So long as the Company maintains its status as a RIC, it will generally not be subject to corporate-level U.S. federal income taxes on any ordinary income or capital gains that it distributes at least annually as dividends to its stockholders. As a result, any tax liability related to income earned and distributed by the Company represents obligations of the Company’s stockholders and will not be reflected in the consolidated financial statements of the Company.
The Company intends to comply with the applicable provisions of the Code pertaining to RICs and to make distributions of taxable income sufficient to relieve it from substantially all federal income taxes. Accordingly, no provision for income taxes is required in the consolidated financial statements. For income tax purposes, distributions made to stockholders are reported as ordinary income, capital gains, non-taxable return of capital, or a combination thereof. The tax character of distributions paid to stockholders through June 30, 2022 may include return of capital, however, the exact amount cannot be determined at this point. The final determination of the tax character of distributions will not be made until the Company files our tax return for the tax year ending December 31, 2022. The character of income and gains that the Company distributes is determined in accordance with income tax regulations that may differ from GAAP. BCSF CFSH, LLC, BCSF CFS, LLC, and BCC Middle Market CLO 2019-1, LLC are disregarded entities for tax purposes and are consolidated with the tax return of the Company.
The Company evaluates tax positions taken or expected to be taken in the course of preparing its consolidated financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are reversed and recorded as a tax benefit or expense in the current year. All penalties and interest associated with income taxes, if any, are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, on-going analyses of tax laws, regulations and interpretations thereof. Management has analyzed the Company’s tax positions, and has concluded that no liability for unrecognized tax benefits related to uncertain tax positions on returns to be filed by the Company for all open tax years should be recorded. The Company identifies its major tax jurisdiction as the United States, and the Company is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months. As of June 30, 2022, the tax years that remain subject to examination are from 2018 forward.
Recent Accounting Pronouncements
In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848),” which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848), which expanded the scope of Topic 848 to include derivative instruments impacted by discounting transition. ASU 2020-04 and ASU 2021-01 are effective for all entities through December 31, 2022. The expedients and exceptions provided by the amendments do not apply to contract modifications and hedging relationships entered into or evaluated after December 31, 2022, except for hedging transactions as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The Company is currently evaluating the impact of the adoption of ASU 2020-04 and 2021-01 on its consolidated financial statements.
In March 2022, the FASB issued ASU 2022-02, “Financial Instruments - Credit Losses (Topic 326)”, which is intended to address issues identified during the post-implementation review of ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. The amendment, among other things, eliminates the accounting guidance for troubled debt restructurings by creditors in Subtopic 310-40, “Receivables - Troubled Debt Restructurings by Creditors”, while
enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. The new guidance is effective for interim and annual periods beginning after December 15, 2022. The Company is currently evaluating the impact of the adoption of ASU 2022-02 on its consolidated financial statements.
Note 3. Investments
The following table shows the composition of the investment portfolio, at amortized cost and fair value as of June 30, 2022 (with corresponding percentage of total portfolio investments):
Percentage of
Amortized Cost
Total Portfolio
Fair Value
First Lien Senior Secured Loans
1,693,248
73.0
1,632,091
71.4
210,127
9.0
216,020
9.4
Subordinated Note Investment Vehicles (1)
178,137
7.7
7.8
Second Lien Senior Secured Loans
97,789
4.2
95,340
50,989
75,950
Equity Interest Investment Vehicles (1)
50,382
49,985
38,513
39,280
480
Preferred Equity Interest Investment Vehicles (1)
Total
100.0
The following table shows the composition of the investment portfolio, at amortized cost and fair value as of December 31, 2021 (with corresponding percentage of total portfolio investments):
1,807,805
78.2
1,774,675
77.5
156,399
151,844
6.6
Subordinated Note Investment Vehicles (1)
120,058
5.2
118,561
42,452
53,991
1.9
19,635
20,027
The following table shows the composition of the investment portfolio by geographic region, at amortized cost and fair value as of June 30, 2022 (with corresponding percentage of total portfolio investments):
United States
1,956,393
84.3
1,933,085
84.5
Cayman Islands
123,954
5.4
123,490
United Kingdom
53,594
2.3
51,542
Germany
48,772
2.1
48,526
Guernsey
40,668
39,473
Luxembourg
32,994
31,194
Australia
27,668
1.2
25,326
1.1
Canada
20,912
20,766
Ireland
11,299
10,432
Belgium
2,895
0.1
2,704
Israel
Sweden
185
155
The following table shows the composition of the investment portfolio by geographic region, at amortized cost and fair value as of December 31, 2021 (with corresponding percentage of total portfolio investments):
2,071,058
89.5
2,061,372
90.0
116,916
5.1
101,888
4.5
41,736
43,658
27,315
28,050
24,848
24,973
20,657
20,352
3,499
0.2
3,528
2,372
2,424
2,195
2,232
386
391
217
66
The following table shows the composition of the investment portfolio by industry, at amortized cost and fair value as of June 30, 2022 (with corresponding percentage of total portfolio investments):
370,077
16.0
351,178
10.9
10.8
Investment Vehicles (2)
10.1
8.6
90,455
93,488
4.0
57,459
79,183
3.5
FIRE: Finance (1)
78,812
77,529
81,614
75,459
2.7
FIRE: Insurance (1)
2.0
1.6
38
Chemicals, Plastics, & Rubber
7,359
17,053
0.4
Consumer goods: Wholesale
The following table shows the composition of the investment portfolio by industry, at amortized cost and fair value as of December 31, 2021 (with corresponding percentage of total portfolio investments):
309,458
13.4
282,598
12.3
9.8
7.9
8.0
7.1
7.4
103,012
106,458
69,588
79,548
80,027
69,040
2.8
Containers, Packaging & Glass
1.0
7,563
19,755
Media: Broadcasting and Subscription
On February 9, 2021, the Company and Pantheon ("Pantheon"), a leading global alternative private markets manager, formed the International Senior Loan Program, LLC (“ISLP”), an unconsolidated joint venture. ISLP invests primarily in non-US first lien senior secured loans. ISLP was formed as a Delaware limited liability company. The Company and Pantheon committed to initially provide $138.3 million of debt and $46.1 million of equity capital, to ISLP. Equity contributions will be called from each member on a pro-rata basis, based on their equity commitments. Pursuant to the terms of the transaction, Pantheon invested $50.0 million to acquire a 29.5% stake in ISLP. The Company contributed debt investments of $317.1 million for a 70.5% stake in ISLP, and received a one-time gross distribution of $190.2 million in cash in consideration of contributing such investments. As of June 30, 2022, the Company’s investment in ISLP consisted of subordinated notes of $142.4 million, and equity interests of $45.3 million. As of December 31, 2021, the Company’s investment in ISLP consisted of subordinated notes of $125.4 million, and equity interests of $44.4 million
As of June 30, 2022, the Company had commitments with respect to their equity and subordinated note interests of ISLP in the aggregate amount of $249.3 million. The Company has contributed $188.6 million in capital and has $60.7 million in unfunded capital
contributions. As of June 30, 2022, Pantheon had commitments with respect to their equity and subordinated note interests of ISLP in the aggregate amount of $103.9 million. Pantheon has contributed $73.9 million in capital and has $30.0 million in unfunded capital contributions.
As of December 31, 2021, the Company had commitments with respect to their equity and subordinated note interests of ISLP in the aggregate amount of $189.5 million. The Company has contributed $165.7 million in capital and has $23.8 million in unfunded capital contributions. As of December 31, 2021, Pantheon had commitments with respect to their equity and subordinated note interests of ISLP in the aggregate amount of $78.9 million. Pantheon has contributed $69.8 million in capital and has $9.1 million in unfunded capital contributions.
In future periods, the Company may sell certain of its investments or a participating interest in certain of its investments to ISLP. Since inception, the Company has sold $681.7 million of its investments to ISLP. The sale of the investments met the criteria set forth in ASC 860, Transfers and Servicing for treatment as a sale.
The Company has determined that ISLP is an investment company under ASC, Topic 946, Financial Services—Investment Companies; however, in accordance with such guidance, the Company will generally not consolidate its investment in a company other than a wholly or substantially owned investment company subsidiary, which is an extension of the operations of the Company, or a controlled operating company whose business consists of providing services to the Company. The Company does not consolidate its investments in ISLP as it is not a substantially wholly owned investment company subsidiary. In addition, the Company does not control ISLP due to the allocation of voting rights among ISLP members. The Company measures the fair value of ISLP in accordance with ASC Subtopic 820, Fair Value Measurements and Disclosures, using the net asset value (or its equivalent) as a practical expedient. The Company and Pantheon each appointed two members to ISLP’s four-person Member Designees’ Committee. All material decisions with respect to ISLP, including those involving its investment portfolio, require unanimous approval of a quorum of Member Designees’ Committee.
As of June 30, 2022, ISLP had $541.3 million in debt investments, at fair value. As of December 31, 2021, ISLP had $501.5 million in debt investments, at fair value.
Additionally, ISLP, through a wholly-owned subsidiary, has entered into a $300.0 million senior secured revolving credit facility which bears interest at LIBOR (or an alternative risk-free interest rate index) plus 225 basis points with JP Morgan through its wholly-owned subsidiary, subject to leverage and borrowing base restrictions (the “ISLP Credit Facility”). The maturity date of the ISLP Credit Facility is February 9, 2026. On February 4, 2022, ISLP entered into the second amended and restated credit agreement, which among other things increased the financing limit from $300.0 million to $350.0 million. As of June 30, 2022, the ISLP Credit Facility had $311.1 million of outstanding debt under the credit facility. As of December 31, 2021 the ISLP Credit Facility had $272.1 million of outstanding debt under the credit facility. As of June 30, 2022, the effective rate on the ISLP Credit Facility was 2.7% per annum. As of December 31, 2021, the effective rate on the ISLP Credit Facility was 2.5% per annum.
Below is a summary of ISLP’s portfolio at fair value:
Total investments
541,271
501,545
Weighted average yield on investments
6.5
Number of borrowers in ISLP
Largest portfolio company investment
40,985
40,071
Total of five largest portfolio company investments
177,614
171,291
Unfunded commitments
12,072
41
Below is a listing of ISLP’s individual investments as of:
Currency
Spread Above Index
Principal/Shares
% of Members Equity
Australian Dollar
Datix Bidco Limited
4,169
3,290
2,882
4.6
TGI Sport Bidco Pty Ltd
9,634
6,924
6,293
Zeppelin BidCo Pty Limited
20,415
16,064
14,111
Australian Dollar Total
26,278
23,286
37.0
British Pounds
12,013
16,916
14,628
963
1,323
1,172
18,239
15,800
25.1
International Entertainment Investments Limited
8,648
12,133
10,497
16.7
Caribou Bidco Limited
3,279
1,950
1,880
19,500
24,133
23,508
Comet Bidco Limited
L + 5.25%
5.98
7,362
9,573
7,261
Brook Bidco I Limited
21,374
29,066
25,995
4,665
6,254
5,681
6,490
8,700
7,902
Midcap Invest UK 1 Bidco Limited
12,151
14,797
Pack-A-Punch Bidco Limited
6,554
5,086
4,498
12,395
16,646
14,791
117,760
106,313
168.9
Surrey Bidco Limited
5,179
6,754
5,306
8.4
British Pounds Total
154,886
137,916
219.1
Canadian Dollar
9 Story Media Group Inc.
6,833
5,425
5,309
New Look Vision Group Inc.
17,966
14,692
13,817
22.0
Canadian Dollar Total
20,117
19,126
30.4
Danish Krone
VPARK BIDCO AB
56,429
9,231
7,953
12.6
Danish Krone Total
European Currency
MRH Trowe Beteiligungsgesellschaft MBH
21,335
24,535
22,365
Paisley Bidco Limited
3,178
3,367
3,332
27,902
25,697
40.8
RH Diagnostik & Therapie Holding GmbH
12,999
15,691
13,355
22,244
26,849
22,852
Pharmathen Bidco B.V.
10/25/2028
13,492
14,946
13,790
2,453
315
57,827
50,312
79.9
Lightning Finco Limited
2,619
2,951
2,746
3,683
4,481
3,861
Aptus 1724. Gmbh
35,000
41,031
36,047
45,512
39,908
63.4
Condor Finco SRL
10,353
11,729
10,771
SumUp Holdings Midco S.à.r.l.
24,000
28,439
24,845
40,168
35,616
56.6
European Currency Total
174,360
154,279
245.1
43
Norwegian Krone
73,280
8,651
7,447
Norwegian Krone Total
U.S. Dollars
CST Buyer Company
L + 5.50%
14,855
BTM Comms Jersey Limited
9,568
24,423
24,508
38.9
V Global Holdings LLC
23,634
23,339
37.1
Consumer goods: Non-durable
RoC Opco LLC
15,959
Consumer goods: Non-durable Total
25.4
Consumer goods: Durable
Stanton Carpet Corp.
4,926
Consumer goods: Durable Total
Golden State Buyer, Inc.
5.99
6/22/2026
14,161
14,102
13,311
21.1
CB Nike IntermediateCo Ltd
34,191
54.3
Media: Broadcasting and Subscription Industry
23,907
23,713
Media: Broadcasting and Subscription Industry Total
38.0
4,938
Avalon Acquiror, Inc.
12,000
11,882
11,880
Chamber Bidco Limited
23,423
23,217
Smartronix, LLC
10,972
10,838
10,808
45,937
46,111
73.3
U.S. Dollars Total
191,885
191,264
303.9
585,408
859.8
(Depreciation)
EURO 2,030
AUSTRALIAN DOLLARS 2,980
Morgan Stanley
7/25/2022
77
EURO 738
CANADIAN DOLLARS 1,010
Standard Chartered
(10)
EURO 892
DANISH KRONE 6,640
EURO 8,516
BRITISH POUNDS 7,110
EURO 904
NORWEGIAN KRONE 8,630
73
EURO 3,175
US DOLLARS 3,518
Goldman Sachs
7/21/2022
EURO 22,702
US DOLLARS 24,630
(860)
BRITISH POUNDS 528
EURO 620
US DOLLARS 8,523
AUSTRALIAN DOLLARS 11,539
592
US DOLLARS 3,086
CANADIAN DOLLARS 3,894
US DOLLARS 3,747
DANISH KRONE 25,709
US DOLLARS 5,755
EURO 5,440
US DOLLARS 3,040
EURO 2,844
US DOLLARS 1,423
EURO 1,330
US DOLLARS 36,673
EURO 33,800
US DOLLARS 2,450
EURO 2,209
US DOLLARS 1,627
BRITISH POUNDS 1,320
US DOLLARS 2,571
BRITISH POUNDS 2,042
91
US DOLLARS 35,794
BRITISH POUNDS 27,545
2,338
US DOLLARS 3,794
NORWEGIAN KRONE 33,417
411
4,555
(in thousands)
Spread Above
% of Members’
Index(1)
Equity
3,289
3,028
4.9
Information Technology Services
LEAP Legal Software PTY Ltd
BBSY+ 5.75
3/12/2025
30,093
22,867
21,856
Information Technology Services Total
35.1
BBSY+ 7.00
9,610
6,631
10.6
16,045
23.8
49,087
46,342
74.4
1,303
16,255
17,558
28.2
Armstrong Bidco Limited
5,602
7,711
7,581
12.2
8,734
12,255
11,782
18.9
GBP LIBOR+ 5.25
9/27/2024
9,460
9,249
Learning Pool Facility B
21,000
28,584
28,417
16,326
16,443
Parcel2Go Facility B
16,619
16,689
70,989
70,798
113.7
4,979
6,732
5,929
115,926
113,648
182.5
5,669
Index (1)
5,701
5,682
9.1
New Look Vision Group
CDOR+5.25
18,056
14,752
14,288
22.9
20,453
19,970
32.0
8,628
13.9
MRHT Facility A
24,521
24,257
39.0
Mertus 522. GmbH
15,680
14,780
26,830
25,291
42,510
64.4
3,859
4,694
4,388
Aptus 1724 Gmbh
40,944
39,795
45,638
44,183
71.0
iBanFirst Facility B
10,058
11,387
11,437
SumUp Holdings Luxembourg S.à.r.l.
25,038
23,877
36,425
35,314
56.7
149,094
143,825
231.1
8,310
13.3
14,927
Cardo
9,560
24,487
24,580
39.5
14,779
14,709
14,733
23.7
4,384
34,367
Index
Principal/Shares(9)
Utimaco, Inc.
14,701
53,452
85.8
20,790
Media: Broadcasting and Subscription Total
33.7
23,198
37.6
160,270
160,822
258.3
512,712
805.5
AUSTRALIAN DOLLARS 189
EURO 121
1/21/2022
AUSTRALIAN DOLLARS 731
US DOLLARS 532
EURO 2,038
AUSTRALIAN DOLLARS 3,166
EURO 683
CANADIAN DOLLARS 982
Standard Chartered Bank
(2)
DANISH KRONE 6,643
EURO 8,236
BRITISH POUNDS 6959
(57)
EURO 884
NORWEGIAN KRONE 8,626
EURO 15,594
US DOLLARS 18,205
EURO 5,379
US DOLLARS 6,110
US DOLLARS 9,207
AUSTRALIAN DOLLARS 12,254
299
US DOLLARS 3,087
CANADIAN DOLLARS 3,803
US DOLLARS 4,033
DANISH KRONE 25,714
US DOLLARS 33,462
EURO 28,674
US DOLLARS 5,022
EURO 4,420
(3)
US DOLLARS 948
EURO 840
US DOLLARS 609
EURO 540
US DOLLARS 37,224
BRITISH POUNDS 26,939
756
US DOLLARS 3,993
NORWEGIAN KRONE 33,392
1,800
Below is the financial information for ISLP:
Selected Balance Sheet Information
Investments at fair value (cost—$585,408 and $512,712, respectively)
10,152
6,830
16,050
3,937
2,813
1,981
Other assets
6,755
7,347
Total assets
581,596
521,640
Debt
311,075
272,133
Subordinated notes payable to members
197,449
176,336
Dividend payable
2,327
1,150
Unrealized depreciation on forward currency exchange contracts
61
Other payables
7,793
9,693
Total liabilities
518,644
459,373
Members’ equity
62,952
62,267
Total liabilities and members’ equity
Selected Statements of Operations Information
For the Three Months Ended
For the Six Months Ended
June 30, 2021
Investment Income
Interest Income
9,394
6,010
17,637
8,112
Other
1,873
3,764
1,908
Interest expense on members subordinated notes
4,325
3,137
8,327
4,444
General and administrative expenses
595
401
1,162
758
Total expenses
6,793
4,891
13,253
7,110
Net investment income (loss)
2,601
1,119
1,002
Net realized and unrealized gain (losses)
Net realized gain (loss) on investments
(1,219)
(1,895)
2,173
(678)
2,808
2,666
Net realized gain on forward contracts
723
1,194
Net unrealized gain on foreign currency
15,641
1,877
19,497
4,869
Net change in unrealized appreciation (depreciation) on forward contracts
(1,223)
430
Net change in unrealized appreciation (depreciation) on investments
(26,547)
309
(32,970)
(3,777)
Net gain (loss) on investments
(6,019)
1,481
(7,669)
5,362
Net increase (decrease) in members’ equity resulting from operations
(3,418)
2,600
(3,285)
6,364
Bain Capital Senior Loan Program, LLC (“SLP”)
On February 9, 2022, the Company, and an entity advised by Amberstone Co., Ltd. (“Amberstone”), a credit focused investment manager that advises institutional investors, committed capital to a newly formed joint venture, SLP. Pursuant to an amended and restated limited liability company agreement (the “LLC Agreement”) between the Company and Amberstone, each such party has a 50% economic ownership interest in SLP. Amberstone’s initial capital commitments to SLP are $179.0 million, with each party expected to maintain their pro rata proportionate share for each capital contribution. SLP will seek to invest primarily in senior secured first lien loans of U.S. borrowers. Through these capital contributions, SLP acquired 70% of the membership equity interests of the Company’s 2018-1 portfolio (“2018-1”). The Company retained 30% of the 2018-1 membership equity interests as a non-controlling equity interest. As of June 30, 2022, the Company’s investment in SLP consisted of subordinated notes of $35.8 million, preferred equity interests of ($0.3) million and equity interests of $4.6 million.
In future periods, the Company may sell certain of its investments or a participating interest in certain of its investments to SLP. The Company has determined that SLP is an investment company under ASC, Topic 946, Financial Services—Investment Companies; however, in accordance with such guidance, the Company will generally not consolidate its investment in a company other than a wholly or substantially owned investment company subsidiary, which is an extension of the operations of the Company, or a controlled operating company whose business consists of providing services to the Company. The Company does not consolidate its investments in SLP as it is not a substantially wholly owned investment company subsidiary. In addition, the Company does not control SLP due to the allocation of voting rights among SLP members. The Company measures the fair value of SLP in accordance with ASC Subtopic 820, Fair Value Measurements and Disclosures, using the net asset value (or its equivalent) as a practical expedient. The Company and Amberstone each appointed two members to SLP’s four-person Member Designees’ Committee. All material decisions with respect to SLP, including those involving its investment portfolio, require unanimous approval of a quorum of Member Designees’ Committee.
49
On March 7, 2022, SLP acquired 70% of the Company’s Membership Interests of BCC Middle Market CLO 2018-1 LLC (the “2018-1 Issuer”). The Company received $56.1 million in proceeds resulting in a realized gain of $1.2 million, which is included in net realized gain in non-controlled/non-affiliate investments. The sale of the investments met the criteria set forth in ASC 860, Transfers and Servicing for treatment as a sale. Through this acquisition, the 2018-1 Issuer became a consolidated subsidiary of SLP and was deconsolidated from the Company’s consolidated financial statements. The Company retained the remaining 30% of the 2018-1 membership interests as a non-controlling equity interest. Please see Note 6 for additional details on the formation of the 2018-1 Issuer and the related CLO Transaction.
The Class A-1 A, A-1 B, A-2, B and C 2018-1 Notes (the “2018-1 Notes”) are scheduled to mature on October 20, 2030 and are included in SLP’s consolidated financial statements. The Membership Interests are eliminated in consolidation on SLP’s consolidated financial statements. Below is a table summary of the 2018-1 Notes as of June 30, 2022:
2018-1 Debt
Principal Amount
Spread above Index
Interest rate at June 30, 2022
Class A-1 A
205,900
1.55% + 3 Month LIBOR
2.61
Class A-1 B
45,000
1.50% + 3 Month LIBOR (first 24 months)
2.86
1.80% + 3 Month LIBOR (thereafter)
Class A-2
55,100
2.15% + 3 Month LIBOR
3.21
Class B
29,300
3.00% + 3 Month LIBOR
4.06
Class C
30,400
4.00% + 3 Month LIBOR
Total 2018-1 Notes
365,700
Below is a summary of SLP’s portfolio at fair value:
433,090
Number of borrowers in SLP
21,364
76,243
Below is a listing of SLP’s individual investments as of:
Senior Loan Program, LLC
% of Members' Equity
WCI-HSG Purchaser, Inc.
400
Whitcraft LLC
10,738
10,309
19,563
19,375
70.5
10,800
10,823
JHCC Holdings, LLC
7,559
7,181
29,182
28,804
104.9
Green Street Parent, LLC
10,698
SOFR+ 5.75
10,421
10,291
37.5
YLG Holdings, Inc.
10,588
38.5
4,905
TLC Purchaser, Inc.
9,612
8,571
7,834
13,476
12,834
46.7
FL Hawk Intermediate Holdings, Inc.
6,000
8,798
Solaray, LLC
10,665
WU Holdco, Inc.
6,577
6,511
6,352
6,288
38,392
38,262
139.3
WSP Midco LLC
6,157
6,056
5,848
21.3
ASP-r-pac Acquisition Co LLC
13,167
12,919
47.9
Amspec Services, Inc.
9,822
4,371
51.7
Allworth Financial Group, L.P.
2,144
8,474
10,618
38.7
McLarens Acquisition Inc.
10,506
38.2
CPS Group Holdings, Inc.
9,801
Sunmed Group Holdings, LLC
9,679
9,534
19,480
19,335
70.4
AMI US Holdings Inc.
7.53
8,949
Drilling Info Holdings, Inc
10,830
10,732
10,622
21,800
21,589
Ventiv Holdco, Inc.
9,848
9,627
51,816
51,260
186.6
Aimbridge Acquisition Co., Inc.
5,555
5,625
Concert Golf Partners Holdco LLC
SOFR + 5.75%
10,589
10,584
Quidditch Acquisition, Inc.
9,411
9,302
8,276
Saltoun Franchise Holdings I, LLC
10,498
10,469
35,915
34,983
127.3
Batteries Plus Holding Corporation
10,500
10,474
Thrasio, LLC
13,112
12,260
23,612
22,734
82.8
15,642
Eagle Parent Corp
6.30
3/19/2029
3,360
3,349
3,231
Morrow Sodali Global LLC
7,959
7,840
Refine Intermediate, Inc.
13,134
12,884
12,937
TEI Holdings Inc.
9,871
9,870
WCI-Gigawatt Purchaser, LLC
10,773
10,545
70,936
70,985
258.4
MZR Buyer, LLC
13,133
47.8
A&R Logistics, Inc.
10,724
10,590
Grammer Purchaser, Inc.
3,475
3,458
Omni Intermediate Holdings, LLC
19,199
19,046
69.3
Abracon Group Holding, LLC.
6,897
Aramsco, Inc.
9,533
16,430
59.8
437,133
1,576.5
Below is the financial information for SLP:
Investments at fair value (cost—$437,133)
35,094
8,209
476,393
364,267
71,570
13,085
448,922
27,471
Selected Statement of Operations Information
7,295
9,811
2,710
3,454
1,809
2,445
470
4,877
6,369
2,418
3,442
Net realized gain on investments
Net change in unrealized depreciation on investments
(3,896)
(4,042)
Net loss on investments
(3,891)
(4,031)
Net decrease in members’ equity resulting from operations
(1,473)
(589)
Note 4. Fair Value Measurements
Fair Value Disclosures
The following table presents fair value measurements of investments by major class, cash equivalents and derivatives as of June 30, 2022, according to the fair value hierarchy:
Fair Value Measurements
Measured at
Net Asset
Level 1
Level 2
Level 3
Value (2)
Investments:
101,370
1,530,721
Subordinated Note in Investment Vehicles (1)
53
Equity Interest in Investment Vehicles (1)
Preferred Equity Interest in Investment Vehicles (1)
Total Investments
2,135,954
49,714
Cash equivalents
Forward currency exchange contracts (asset)
Includes debt and equity investment in ISLP and SLP.
In accordance with ASC Subtopic 820-10, Fair Value Measurements and Disclosures, or ASC 820-10, our preferred equity and equity investments in ISLP, SLP and MM_2018-1 is measured using the net asset value per share (or its equivalent) as a practical expedient for fair value, have not been classified in the fair value hierarchy.
The following table presents fair value measurements of investments by major class, cash equivalents and derivatives as of December 31, 2021, according to the fair value hierarchy:
99,785
1,674,890
107,066
Equity Interests
111,280
2,133,381
Represents debt and equity investment in ISLP.
In accordance with ASC Subtopic 820-10, Fair Value Measurements and Disclosures, or ASC 820-10, our equity investment in ISLP is measured using the net asset value per share (or its equivalent) as a practical expedient for fair value, have not been classified in the fair value hierarchy.
The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the six months ended June 30, 2022:
First Lien
Second Lien
Subordinated
Senior
Note in
Secured
Preferred
Loans
Interests
Vehicles (2)
Investments
Balance as of January 1, 2022
Purchases of investments and other adjustments to cost (1)
658,706
53,929
15,477
52,700
8,537
18,573
808,400
Paid-in-kind interest
6,002
253
6,255
Net accretion of discounts (amortization of premiums)
2,127
221
2,401
Principal repayments and sales of investments (1)
(753,527)
(136)
(37,844)
(791,507)
(24,109)
10,450
(953)
13,422
374
(98)
(914)
Net realized gains (losses) on investments
(984)
(67)
(122)
(1,173)
Transfers out of Level 3
(47,672)
Transfers to Level 3
26,783
Balance as of June 30, 2022
Change in unrealized appreciation (depreciation) attributable to investments still held at June 30, 2022
(22,995)
(1,128)
Includes reorganizations and restructuring of investments and the impact of the SLP transaction.
Represents debt investment in ISLP and SLP.
Transfers between levels, if any, are recognized at the beginning of the quarter in which transfers occur. For the six months ended June 30, 2022, transfers from Level 2 to Level 3 were primarily due to decreased price transparency. For the six months ended June 30, 2022, transfers from Level 3 to Level 2 were primarily due to increased price transparency.
The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the six months ended June 30, 2021:
Balance as of January 1, 2021
1,951,150
119,905
140,341
37,713
2,249,109
390,853
9,563
44,741
97,360
3,889
16,557
562,965
2,543
244
2,793
(641,023)
(86,463)
(11,268)
(738,754)
(10,791)
7,111
(309)
(1,831)
15,799
7,018
24,656
29,994
Balance as of June 30, 2021
1,743,822
136,579
102,846
37,043
16,579
2,134,229
Change in unrealized appreciation (depreciation) attributable to investments still held at June 30, 2021
(5,208)
2,103
3,710
(1)Includes reorganizations and restructuring of investments.
(2)Represents debt investment in ISLP.
Transfers between levels, if any, are recognized at the beginning of the quarter in which transfers occur. For the six months ended June 30, 2021, transfers from Level 2 to Level 3 were primarily due to decreased price transparency. For the six months ended June 30, 2021, transfers from Level 3 to Level 2 were primarily due to increased price transparency.
Significant Unobservable Inputs
ASC 820 requires disclosure of quantitative information about the significant unobservable inputs used in the valuation of assets and liabilities classified as Level 3 within the fair value hierarchy. Disclosure of this information is not required in circumstances where a valuation (unadjusted) is obtained from a third-party pricing service and the information regarding the unobservable inputs is not reasonably available to the Company and as such, the disclosures provided below exclude those investments valued in that manner.
The valuation techniques and significant unobservable inputs used in Level 3 fair value measurements of assets as of June 30, 2022 were as follows:
55
Significant
Range of Significant
Fair Value of
Unobservable
Unobservable Inputs
Level 3 Assets (1)
Valuation Technique
Inputs
(Weighted Average (2))
1,118,785
Discounted cash flows
Comparative Yields
5.9%-19.6% (10.8%)
67,775
Comparable company multiple
EBITDA Multiple
5.2x-9.3x (7.8x)
7.0x
Probability weighting of alternative outcomes
33.3%-66.7%
Discounted Cash Flows
Discount Rate
10.0%
9,016
Collateral Coverage
Recovery Rate
100%
Revenue Multiple
5.5x
11.2%-19.3% (13.9)%
11.6%
116,586
10.0%-16.4% (15.3%)
66,618
5.2x-23.0x (11.3x)
16.0x
51,420
3.6x-23.0x (7.2x)
21,519
5.5x-8.5x (7.4x)
7.8x-8.1x (8.1x)
1,864,816
Included within the Level 3 assets of $2,135,954 is an amount of $271,138 for which the Advisor did not develop the unobservable inputs for the determination of fair value (examples include single source quotation and prior or pending transactions such as investments originated in the quarter or imminent payoffs).
Weighted average is calculated by weighing the significant unobservable input by the relative fair value of each investment in the category.
The Company used the income approach and market approach to determine the fair value of certain Level 3 assets as of June 30, 2022. The significant unobservable inputs used in the income approach are the comparative yield and discount rate. The comparative yield and discount rate are used to discount the estimated future cash flows expected to be received from the underlying investment. An increase/decrease in the comparative yield or discount rate would result in a decrease/increase, respectively, in the fair value. The significant unobservable inputs used in the market approach are the comparable company multiple and the recovery rate. The multiple is used to estimate the enterprise value of the underlying investment. An increase/ decrease in the multiple would result in an increase/decrease, respectively, in the fair value. The recovery rate represents the extent to which proceeds can be recovered. An increase/decrease in the recovery rate would result in an increase/decrease, respectively, in the fair value.
The valuation techniques and significant unobservable inputs used in Level 3 fair value measurements of assets as of December 31, 2021 were as follows:
1,376,465
4.9%-19.4% (8.1)%
68,877
Comparable Company Multiple
1.0x-9.8x (7.5x)
7.3x
3,669
Collateral Analysis
87,795
9.6%-13.5% (11.6)%
11.2%
53,363
5.5x-24.5x (12.0x)
92,420
10.0%-16.4% (15.2)%
43,451
4.6x-13.5x (6.7x)
18.0%
5.5x-8.3x (8.3x)
1,945,406
Included within the Level 3 assets of $2,133,381 is an amount of $187,975 for which the Advisor did not develop the unobservable inputs for the determination of fair value (examples include single source quotation and prior or pending transactions such as investments originated in the quarter or imminent payoffs).
The Company used the income approach and market approach to determine the fair value of certain Level 3 assets as of December 31, 2021. The significant unobservable inputs used in the income approach are the comparative yield and discount rate. The comparative yield and discount rate are used to discount the estimated future cash flows expected to be received from the underlying investment. An increase/decrease in the comparative yield or discount rate would result in a decrease/increase, respectively, in the fair value. The significant unobservable inputs used in the market approach are the comparable company multiple and the recovery rate. The multiple is used to estimate the enterprise value of the underlying investment. An increase/ decrease in the multiple would result in an increase/decrease, respectively, in the fair value. The recovery rate represents the extent to which proceeds can be recovered. An increase/decrease in the recovery rate would result in an increase/decrease, respectively, in the fair value.
The 2019-1 Debt (as defined in Note 6), the 2023 Notes (as defined in Note 6), the March 2026 Notes (as defined in Note 6), the October 2026 Notes (as defined in Note 6), and the Sumitomo Credit Facility (as defined in Note 6), which are categorized as Level 3 within the fair value hierarchy as of June 30, 2022, approximate the carrying value of such notes.
The fair values of the 2018-1 Notes (as defined in Note 6), the 2019-1 Debt (as defined in Note 6), the 2023 Notes (as defined in Note 6), the March 2026 Notes (as defined in Note 6), the October 2026 Notes (as defined in Note 6), and the Sumitomo Credit Facility (as defined in Note 6), which are categorized as Level 3 within the fair value hierarchy as of December 31, 2021, approximate the carrying value of such notes.
Note 5. Related Party Transactions
Investment Advisory Agreement
The Company entered into the first amended and restated investment advisory agreement as of November 14, 2018 (the “Prior Advisory Agreement”) with the Advisor, pursuant to which the Advisor manages the Company’s investment program and related activities. On November 28, 2018, the Board, including a majority of the Independent Directors, approved a second amended and restated advisory agreement (the “Amended Advisory Agreement”) between the Company and BCSF Advisors, LP (“the Advisor”). On February 1, 2019, Shareholders approved the Amended Advisory Agreement which replaced the Prior Advisory Agreement.
Base Management Fee
The Company pays the Advisor a base management fee (the “Base Management Fee”), accrued and payable quarterly in arrears. The Base Management Fee is calculated at an annual rate of 1.5% (0.375% per quarter) of the average value of the Company’s gross assets (excluding cash and cash equivalents, but including assets purchased with borrowed amounts) at the end of each of the two most recently completed calendar quarters. Such amount shall be appropriately adjusted (based on the actual number of days elapsed relative to the total number of days in such calendar quarter) for any share issuance or repurchases by the Company during a calendar quarter.
The Base Management Fee for any partial quarter will be appropriately prorated. Effective February 1, 2019, the base management fee has been revised to a tiered management fee structure so that the base management fee of 1.5% (0.375% per quarter) of the average value of the Company’s gross assets (excluding cash and cash equivalents, but including assets purchased with borrowed amounts) will continue to apply to assets held at an asset coverage ratio down to 200%, but a lower base management fee of 1.0% (0.25% per quarter) of the average value of the Company’s gross assets (excluding cash and cash equivalents, but including assets purchased with borrowed amounts) will apply to any amount of assets attributable to leverage decreasing the Company’s asset coverage ratio below 200%.
For the three months ended June 30, 2022 and 2021, management fees were $8.5 million and $8.6 million, respectively. For the six months ended June 30, 2022 and 2021, management fees were $16.8 million and $17.3 million, respectively. For the three months ended June 30, 2022, $0.0 million was contractually waived and $0.0 million was voluntarily waived. For the six months ended June 30, 2022, $0.0 million was contractually waived and $0.0 million was voluntarily waived. For the three months ended June 30, 2021, $0.0 million was contractually waived and $2.7 million was voluntarily waived. For the six months ended June 30, 2021, $0.0 million was contractually waived and $4.8 million was voluntarily waived.
As of June 30, 2022, and December 31, 2021, $8.5 million and $8.8 million, respectively, remained payable related to the base management fee accrued in base management fee payable on the consolidated statements of assets and liabilities.
Incentive Fee
The incentive fee consists of two parts that are determined independently of each other such that one component may be payable even if the other is not.
The first part, the Incentive Fee based on income is calculated and payable quarterly in arrears as detailed below.
The second part, the capital gains incentive fee, is determined and payable in arrears as detailed below.
Incentive Fee on Pre-Incentive Fee Net Investment Income
Pre-incentive fee net investment income means interest income, dividend income and any other income (including any other fees such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies but excluding fees for providing managerial assistance) accrued during the calendar quarter, minus operating expenses for the quarter (including the Base Management Fee, any expenses payable under the Administration Agreement, and any interest expense and dividends paid on any outstanding preferred stock, but excluding the incentive fee). Pre-incentive fee net investment income includes, in the case of investments with a deferred interest feature such as market discount, original issue discount (“OID”), debt instruments with PIK interest, preferred stock with PIK dividends and zero-coupon securities, accrued income that the Company has not yet received in cash.
Pre-incentive fee net investment income does not include any realized or unrealized capital gains or losses or unrealized capital appreciation or depreciation. Because of the structure of the incentive fee, it is possible that the Company may pay an incentive fee in a quarter where the Company incurs a loss. For example, if the Company receives pre-incentive fee net investment income in excess of the Hurdle rate for a quarter, the Company will pay the applicable incentive fee even if the Company has incurred a loss in that quarter due to realized and unrealized capital losses.
The incentive fee based on income is calculated and payable quarterly in arrears based on the aggregate pre-incentive fee net investment income in respect of the current calendar quarter and the eleven preceding calendar quarters (the “Trailing Twelve Quarters”). This calculation is referred to as the “Three-Year Lookback.”
Pre-incentive fee net investment income in respect of the relevant Trailing Twelve Quarters is compared to a “Hurdle Amount” equal to the product of (i) the hurdle rate of 1.5% per quarter (6% annualized) and (ii) the sum of our net assets (defined as total assets less indebtedness and before taking into account any incentive fees payable during the period) at the beginning of each applicable calendar quarter comprising the relevant Trailing Twelve Quarters. The Hurdle Amount will be calculated after making appropriate adjustments to our NAV at the beginning of each applicable calendar quarter for our subscriptions (which shall include all issuances by us of shares of our Common Stock, including issuances pursuant to the Company’s dividend reinvestment plan) and distributions during the applicable calendar quarter.
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The quarterly incentive fee based on income is calculated, subject to the Incentive Fee Cap (as defined below), based on the amount by which (A) aggregate pre-incentive fee net investment income in respect of the relevant Trailing Twelve Quarters exceeds (B) the Hurdle Amount for such Trailing Twelve Quarters. The amount of the excess of (A) over (B) described in this paragraph for such Trailing Twelve Quarters is referred to as the “Excess Income Amount.” The incentive fee based on income that is paid to the Advisor in respect of a particular calendar quarter will equal the Excess Income Amount less the aggregate incentive fees based on income that were paid to the Advisor in the preceding eleven calendar quarters (or portion thereof) comprising the relevant Trailing Twelve Quarters.
The incentive fee based on income for each calendar quarter is determined as follows:
(i)
No incentive fee based on income is payable to the Advisor for any calendar quarter for which there is no Excess Income Amount;
(ii)
100% of the aggregate pre-incentive fee net investment income in respect of the Trailing Twelve Quarters with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the Hurdle Amount, but is less than or equal to an amount, which the Company refers to as the “Catch-up Amount,” determined as the sum of 1.8182% multiplied by our NAV at the beginning of each applicable calendar quarter comprising the relevant Trailing Twelve Quarters; and
(iii)
17.5% of the aggregate pre-incentive fee net investment income in respect of the Trailing Twelve Quarters that exceeds the Catch-up Amount.
Incentive Fee Cap
The incentive fee based on income is subject to a cap (the “Incentive Fee Cap”). The Incentive Fee Cap in respect of any calendar quarter is an amount equal to 17.5% of the Cumulative Net Return (as defined below) during the relevant Trailing Twelve Quarters less the aggregate incentive fees based on income that were paid to the Advisor in the preceding eleven calendar quarters (or portion thereof) comprising the relevant Trailing Twelve Quarters.
“Cumulative Net Return” during the relevant Trailing Twelve Quarters means (x) the pre-incentive fee net investment income in respect of the relevant Trailing Twelve Quarters less (y) any Net Capital Loss, if any, in respect of the relevant Trailing Twelve Quarters. If, in any quarter, the Incentive Fee Cap is zero or a negative value, the Company will pay no incentive fee based on income to the Advisor in respect of that quarter. If, in any quarter, the Incentive Fee Cap for such quarter is a positive value but is less than the incentive fee based on income that is payable to the Advisor for such quarter calculated as described above, the Company will pay an incentive fee based on income to the Advisor equal to the Incentive Fee Cap in respect of such quarter. If, in any quarter, the Incentive Fee Cap for such quarter is equal to or greater than the incentive fee based on income that is payable to the Advisor for such quarter calculated as described above, the Company will pay an incentive fee based on income to the Advisor equal to the incentive fee calculated as described above for such quarter without regard to the Incentive Fee Cap.
“Net Capital Loss” in respect of a particular period means the difference, if positive, between (i) aggregate capital losses, whether realized or unrealized, in respect of such period and (ii) aggregate capital gains, whether realized or unrealized, in respect of such period.
For the three months ended June 30, 2022 and 2021, the Company incurred $4.1 million and $8.0 million, respectively, of income incentive fees (before waivers), which are included in incentive fees on the consolidated statements of operations. The Advisor has voluntarily waived $0.0 million and $4.5 million, respectively, of the income incentive fees earned by the Advisor during the three months ended June 30, 2022 and 2021. Such income incentive fee waiver is irrevocable and such waived income incentive fees will not be subject to recoupment in future periods. This income incentive fee waiver does not impact any income incentive fees earned by the Advisor in future periods.
For the six months ended June 30, 2022 and 2021, the Company incurred $7.4 million and $14.8 million, respectively, of income incentive fees (before waivers), which are included in incentive fees on the consolidated statements of operations. The Advisor has voluntarily waived $0.0 million and $4.5 million, respectively, of the income incentive fees earned by the Advisor during the six months ended June 30, 2022 and 2021. Such income incentive fee waiver is irrevocable and such waived income incentive fees will not
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be subject to recoupment in future periods. This income incentive fee waiver does not impact any income incentive fees earned by the Advisor in future periods.
As of June 30, 2022 and December 31, 2021, there was $4.1 million and $4.7 million, respectively, related to the income incentive fee accrued in incentive fee payable on the consolidated statements of assets and liabilities.
The Amended Advisory Agreement approved by Stockholders on February 1, 2019 incorporates (i) a three-year lookback provision and (ii) a cap on quarterly income incentive fee payments based on net realized or unrealized capital loss, if any, during the applicable three-year lookback period.
Annual Incentive Fee Based on Capital Gains
The second part of the incentive fee is a capital gains incentive fee that will be determined and payable in arrears in cash as of the end of each fiscal year (or upon termination of the Amended Advisory Agreement, as of the termination date), and equals to 17.5% of our realized capital gains as of the end of the fiscal year. In determining the capital gains incentive fee payable to the Advisor, the Company calculates the cumulative aggregate realized capital gains and cumulative aggregate realized capital losses since our inception, and the aggregate unrealized capital depreciation as of the date of the calculation, as applicable, with respect to each of the investments in our portfolio. For this purpose, cumulative aggregate realized capital gains, if any, equals the sum of the differences between the net sales price of each investment, when sold, and the cost of such investment. Cumulative aggregate realized capital losses equals the sum of the amounts by which the net sales price of each investment, when sold, is less than the cost of such investment. Aggregate unrealized capital depreciation equals the sum of the difference, if negative, between the valuation of each investment as of the applicable calculation date and the cost of such investment. At the end of the applicable year, the amount of capital gains that serves as the basis for our calculation of the capital gains incentive fee equals the cumulative aggregate realized capital gains less cumulative aggregate realized capital losses, less aggregate unrealized capital depreciation, with respect to our portfolio of investments. If this number is positive at the end of such year, then the capital gains incentive fee for such year will equal to 17.5% of such amount, less the aggregate amount of any capital gains incentive fees paid in respect of our portfolio in all prior years.
There was no capital gains incentive fee payable to the Advisor under the Amended Advisory Agreement as of June 30, 2022 and December 31, 2021.
US GAAP requires that the incentive fee accrual consider the cumulative aggregate unrealized capital appreciation of investments or other financial instruments in the calculation, as an incentive fee would be payable if such unrealized capital appreciation were realized, even though such unrealized capital appreciation is not permitted to be considered in calculating the fee actually payable under the Amended Advisory Agreement (“GAAP Incentive Fee”). There can be no assurance that such unrealized appreciation will be realized in the future. Accordingly, such fee, as calculated and accrued, would not necessarily be payable under the Amended Advisory Agreement, and may never be paid based upon the computation of incentive fees in subsequent period.
For the three months ended June 30, 2022 and 2021, the Company incurred no incentive fees related to the GAAP Incentive Fee. For the six months ended June 30, 2022 and 2021, the Company incurred no incentive fees related to the GAAP Incentive Fee. As of June 30, 2022 and December 31, 2021, there was $0.0 million and $0.0 million related to the GAAP Incentive Fee accrued in incentive fee payable on the consolidated statements of assets and liabilities, respectively.
Administration Agreement
The Company has entered into an administration agreement (the “Administration Agreement”) with the advisor, pursuant to which the Administrator will provide the administrative services necessary for us to operate, and the Company will utilize the Administrator’s office facilities, equipment and recordkeeping services. Pursuant to the Administration Agreement, the Administrator has agreed to oversee our public reporting requirements and tax reporting and monitor our expenses and the performance of professional services rendered to us by others. The Administrator has also hired a sub-administrator to assist in the provision of administrative services. The Company will reimburse the Administrator for its costs and expenses and our allocable portion of overhead incurred by it in performing its obligations under the Administration Agreement, including certain compensation paid to or compensatory distributions received by our officers (including our Chief Compliance Officer and Chief Financial Officer) and any of their respective staff who provide services to us, operations staff who provide services to us, and internal audit staff, if any, to the extent internal audit performs a role in our Sarbanes-Oxley internal control assessment. Our allocable portion of overhead will be determined by the Administrator,
which expects to use various methodologies such as allocation based on the percentage of time certain individuals devote, on an estimated basis, to the business and affairs of the Company, and will be subject to oversight by the Board. The Company incurred expenses related to the Administrator of $0.0 million and $0.0 million for the three months ended June 30, 2022 and 2021, respectively, which is included in other general and administrative expenses on the consolidated statements of operations. The Company incurred expenses related to the Administrator of $0.0 million and $0.0 million for the six months ended June 30, 2022 and 2021, respectively, which is included in other general and administrative expenses on the consolidated statements of operations. As of June 30, 2022 and December 31, 2021, there were $0.0 million and $0.0 million in expenses related to the Administrator that were payable and included in “accounts payable and accrued expenses” in the consolidated statements of assets and liabilities, respectively. The sub-administrator is paid its compensation for performing its sub-administrative services under the sub-administration agreement. The Company incurred expenses related to the sub-administrator of $0.1 million and $0.1 million for the three months ended June 30, 2022 and 2021, respectively, which is included in other general and administrative expenses on the consolidated statements of operations. The sub-administrator is paid its compensation for performing its sub-administrative services under the sub-administration agreement. The Company incurred expenses related to the sub-administrator of $0.3 million and $0.2 million for the six months ended June 30, 2022 and 2021, respectively, which is included in other general and administrative expenses on the consolidated statements of operations. The Administrator will not seek reimbursement in the event that any such reimbursements would cause any distributions to our stockholders to constitute a return of capital. In addition, the Administrator is permitted to delegate its duties under the Administration Agreement to affiliates or third parties and the Company will reimburse the expenses of these parties incurred and paid by the Advisor on our behalf.
Resource Sharing Agreement
The Company’s investment activities are managed by the Advisor, an investment adviser that is registered with the SEC under the Advisers Act. The Advisor is responsible for originating prospective investments, conducting research and due diligence investigations on potential investments, analyzing investment opportunities, negotiating and structuring our investments and monitoring our investments and portfolio companies on an ongoing basis.
The Advisor has entered into a Resource Sharing Agreement (the “Resource Sharing Agreement”) with Bain Capital Credit, LP (“Bain Capital Credit”), pursuant to which Bain Capital Credit provides the Advisor with experienced investment professionals (including the members of the Advisor’s Credit Committee) and access to the resources of Bain Capital Credit so as to enable the Advisor to fulfill its obligations under the Amended Advisory Agreement. Through the Resource Sharing Agreement, the Advisor intends to capitalize on the significant deal origination, credit underwriting, due diligence, investment structuring, execution, portfolio management and monitoring experience of Bain Capital Credit’s investment professionals. There can be no assurance that Bain Capital Credit will perform its obligations under the Resource Sharing Agreement. The Resource Sharing Agreement may be terminated by either party on 60 days’ notice, which if terminated may have a material adverse consequence on the Company’s operations.
Co-investments
The Company will invest alongside our affiliates, subject to compliance with applicable regulations and our allocation procedures. Certain types of negotiated co-investments will be made only in accordance with the terms of the exemptive order the Company received from the SEC initially on August 23, 2016, as amended on March 23, 2018 (the “Order”). Under the terms of the Order, a “required majority” (as defined in Section 57(o) of the 1940 Act) of our independent directors must be able to reach certain conclusions in connection with a co-investment transaction, including that (1) the terms of the proposed transaction are reasonable and fair to us and our stockholders and do not involve overreaching of 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 Board’s approved criteria. In certain situations where co-investment with one or more funds managed by the Advisor or its affiliates is not covered by the Order, the personnel of the Advisor or its affiliates will need to decide which funds will proceed with the investment. Such personnel will make these determinations based on policies and procedures, which are designed to reasonably ensure that investment opportunities are allocated fairly and equitably among affiliated funds over time and in a manner that is consistent with applicable laws, rules and regulations.
Revolving Advisor Loan
On March 27, 2020, the Company entered into an unsecured revolving loan agreement (the “Revolving Advisor Loan”) with BCSF Advisors, LP, the investment adviser of the Company. The Revolving Advisor Loan has a maximum credit limit of $50.0 million
and a maturity date of March 27, 2023. The Revolving Advisor Loan accrues interest at the Applicable Federal Rate from the date of such loan until the loan is repaid in full. Please see Note 6 for additional details.
Related Party Commitments
As of June 30, 2022 and December 31, 2021, the Advisor held 488,112.46 and 487,932.46 shares of the Company’s common stock, respectively. An affiliate of the Advisor is the investment manager to certain pooled investment vehicles which are investors in the Company. These investors held 12,875,920.66 and 12,875,920.66 shares of the Company at June 30, 2022 and December 31, 2021, respectively.
Non-Controlled/Affiliate and Controlled Affiliate Investments
Transactions during the six months ended June 30, 2022 in which the issuer was either an Affiliated Person or an Affiliated Person that the Company is deemed to Control are as follows:
Change in
as of
Realized
Dividend,
December 31,
Gross
Gains
June 30,
Interest, and
Additions
Reductions
(Losses)
PIK Income
Non-Controlled/affiliate investment
ADT Pizza, LLC, Equity Interest (1)
(2,595)
BCC Middle Middle Market CLO 2018-1, LLC. Equity Interest
Blackbrush Oil & Gas, L.P. First Lien Senior Secured Loan
937
(4,327)
395
Blackbrush Oil & Gas, L.P. Equity Interest (1)
Blackbrush Oil & Gas, L.P. Preferred Equity (1)
1,674
11,883
Direct Travel, Inc. First Lien Senior Secured Loan
Direct Travel, Inc. First Lien Senior Secured Loan – Delayed Draw
69
130
152
1,166
5,098
2,742
151
Direct Travel, Inc. Equity Interest (1)
Total Non-Controlled/affiliate investment
28,003
Controlled affiliate investment
Bain Capital Senior Loan Program, LLC Subordinated Note Investment Vehicles
1,223
Bain Capital Senior Loan Program, LLC Class A Preferred Equity Interests Investment Vehicles
(281)
Bain Capital Senior Loan Program, LLC Class B Equity Interests Investment Vehicles
615
BCC Jetstream Holdings Aviation (On II), LLC, Equity Interest
BCC Jetstream Holdings Aviation (On II), LLC, First Lien Senior Secured Loan
538
(723)
BCC Jetstream Holdings Aviation (Off I), LLC, Equity Interest
(285)
534
Gale Aviation (Offshore) Co, Equity Interest
1,466
13,614
3,754
International Senior Loan Program, LLC, Equity Interest Investment Vehicle
5,193
(4,293)
2,842
International Senior Loan Program, LLC, Subordinated Note Investment Vehicle
16,920
6,045
Lightning Holdings B, LLC- Equity Interest (1)
3,431
Total Controlled affiliate investment
68,932
388,051
96,935
21,956
502,615
21,173
(1)Non-income producing.
Transactions during the year ended December 31, 2021 in which the issuer was either an Affiliated Person or an Affiliated Person that the Company is deemed to Control are as follows:
2020
15,918
3,609
10,239
9,481
12,089
4,404
362
2,588
271
308
1,313
156
44,212
4,607
(472)
5,276
2,175
279
92,915
7,799
12,576
7,440
ACC Holdco, LLC, Preferred Equity
10,828
(10,828)
2,306
Air Comm Corporation LLC, First Lien Senior Secured Loan
26,484
661
(27,023)
1,948
629
(629)
100
6,712
665
(750)
873
11,703
(1,140)
1,068
66,448
5,329
1,062
8,100
43,457
4,848
(3,861)
2,636
8,058
Lightning Holdings B, LLC- Equity Interest
7,308
6,845
130,112
182,394
(37,851)
3,964
(3,858)
25,089
223,027
190,193
16,540
32,529
Note 6. Debt
In accordance with applicable SEC staff guidance and interpretations, as a BDC, with certain exceptions, effective February 2, 2019, the Company is permitted to borrow amounts such that its asset coverage ratio is at least 150% after such borrowing (if certain requirements are met), rather than 200%, as previously required. As of June 30, 2022 and December 31, 2021, the Company’s asset coverage ratio based on aggregated borrowings outstanding was 188% and 177%, respectively.
The Company’s outstanding borrowings as of June 30, 2022 and December 31, 2021 were as follows:
Aggregate
Principal
Amount
Carrying
Committed
Outstanding
Value (1)
2018-1 Notes
364,178
2019-1 Notes
352,500
351,034
350,969
50,000
2023 Notes
150,000
112,500
111,584
111,133
March 2026 Notes
300,000
295,821
295,260
October 2026 Notes
294,121
293,442
Sumitomo Credit Facility
191,723
Total Debt
1,452,500
1,256,723
1,818,200
1,430,700
Carrying value represents aggregate principal amount outstanding less unamortized debt issuance costs.
The combined weighted average interest rate (excluding deferred upfront financing costs and unused fees) of the aggregate borrowings outstanding for the six months ended June 30, 2022 and year ended December 31, 2021 were 3.0% and 3.1%, respectively.
The following table shows the contractual maturities of our debt obligations as of June 30, 2022:
Payments Due by Period
Less than
More than
1 year
1 — 3 years
3 — 5 years
5 years
2019-1 Debt
Total Debt Obligations
791,723
BCSF Revolving Credit Facility
On October 4, 2017, the Company entered into the revolving credit agreement (the “BCSF Revolving Credit Facility”) with us, as equity holder, BCSF I, LLC, a Delaware limited liability company and a wholly owned and consolidated subsidiary of the Company, as borrower, and Goldman Sachs Bank USA, as sole lead arranger (“Goldman Sachs”). The BCSF Revolving Credit Facility was subsequently amended on May 15, 2018 to reflect certain clarifications regarding margin requirements and hedging currencies. The maximum commitment amount under the BCSF Revolving Credit Facility is $500.0 million, and may be increased up to $750.0 million. Proceeds of the loans under the BCSF Revolving Credit Facility may be used to acquire certain qualifying loans and such other uses as permitted under the BCSF Revolving Credit Facility. The BCSF Revolving Credit Facility includes customary affirmative and negative covenants, including certain limitations on the incurrence of additional indebtedness and liens, as well as usual and customary events of default for revolving credit facilities of this nature.
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On January 8, 2020, the Company entered into an amended and restated credit agreement of its BCSF Revolving Credit Facility. The amendment amended the existing credit facility to, among other things, modify various financial covenants, including removing a liquidity covenant and adding a net asset value covenant with respect to the Company, as sponsor.
On March 31, 2020, the Parties entered into Omnibus Amendment No. 1 to the amended and restated credit agreement. The amendment amended the existing credit facility to, among other things, provide for enhanced flexibility to purchase or contribute and borrow against revolving loans and delayed draw term loans, and to count certain additional assets in the calculation of collateral for the outstanding advances; increase the spread payable under the facility from 2.50% to 3.25% per annum; include additional events of default to the existing credit facility, including but not limited to, a qualified equity raise not effected on or prior to June 22, 2020; and, after June 22, 2020, require the Company to maintain at least $50.0 million of unencumbered liquidity or pay down the facility by at least $50.0 million.
On May 27, 2020, the Parties entered into Amendment No. 2 to the amended and restated credit agreement. The amendment amended the existing credit facility to, among other things, (i) permit the Company to incur a lien on assets purchased with the proceeds of the rights offering and (ii) remove the requirement that the Company maintain $50.0 million in unencumbered cash after the completion of the rights offering, instead requiring a pay down of $50.0 million within two business days after the closing of the rights offering, which was subsequently paid.
On August 14, 2020, the Parties entered into the second amended and restated credit agreement and the third amended and restated margining agreement (collectively, the “Amendment”), which amended and restated the terms of the existing credit facility (the “Amended and Restated Credit Facility”). The Amendment amends the existing credit facility to, among other things, (i) decrease the financing limit from $500.0 million to $425.0 million, (ii) decrease the interest rate on financing from LIBOR plus 3.25% per annum to LIBOR plus 3.00% per annum, and (iii) provide enhanced flexibility to contribute and borrow against revolving and delayed draw loans and modify certain other terms relating to collaterals.
On March 11, 2021, the BCSF Revolving Credit Facility was terminated. The proceeds from the March 2026 Notes were used to repay the total outstanding debt.
Borrowings under the BCSF Revolving Credit Facility bore interest at LIBOR plus a margin. For the period from January 1, 2021 through March 11, 2021, the BCSF Revolving Credit Facility accrued interest expense at a rate of LIBOR plus 3.00%. The Company paid an unused commitment fee of 30 basis points (0.30%) per annum.
For the three months ended June 30, 2022 and 2021, the components of interest expense related to the BCSF Revolving Credit Facility were as follows:
For the Three Months Ended June 30,
Borrowing interest expense
Unused facility fee
Amortization of deferred financing costs and upfront commitment fees
Total interest and debt financing expenses
For the six months ended June 30, 2022 and 2021, the components of interest expense related to the BCSF Revolving Credit Facility were as follows:
For the Six Months Ended June 30,
509
627
On September 28, 2018 (the “2018-1 Closing Date”), we, through BCC Middle Market CLO 2018-1 LLC (the “2018-1 Issuer”), a Delaware limited liability company and a wholly owned and consolidated subsidiary of the Company, completed its $451.2 million term debt securitization (the “CLO Transaction”). The notes issued in connection with the CLO Transaction (the “2018-1 Notes”) are secured by a diversified portfolio of the 2018-1 Issuer consisting primarily of middle market loans, the majority of which are senior secured loans (the “2018-1 Portfolio”). At the 2018-1 Closing Date, the 2018-1 Portfolio was comprised of assets transferred from the Company and its consolidated subsidiaries. All transfers were eliminated in consolidation and there were no realized gains or losses recognized in the CLO Transaction.
The CLO Transaction was executed through a private placement of the following 2018-1 Notes. The Class A-1 A, A-1 B, A-2, B and C 2018-1 Notes were issued at par and are scheduled to mature on October 20, 2030. The Company received 100% of the membership interests (the “Membership Interests”) in the 2018-1 Issuer in exchange for its sale to the 2018-1 Issuer of the initial closing date loan portfolio. The Membership Interests do not bear interest. As of December 31, 2021, the Class A-1 A, A-1 B, A-2, B and C 2018-1 Notes were included in the consolidated financial statements. The Membership Interests were eliminated in consolidation.
For the three months ended June 30, 2022 and 2021, the components of interest expense related to the 2018-1 Issuer were as follows:
2,064
For the six months ended June 30, 2022 and 2021, the components of interest expense related to the 2018-1 Issuer were as follows:
4,045
1,327
4,131
On March 7, 2022, the Company sold 70% of the membership equity interests of the Company’s 2018-1 Notes to SLP, which resulted in the deconsolidation of the 2018-1 Notes from the Company’s consolidated financial statements as further discussed in Note 3.
JPM Credit Facility
On April 30, 2019, the Company entered into a loan and security agreement (the “JPM Credit Agreement” or the “JPM Credit Facility”) as Borrower, with JPMorgan Chase Bank, National Association, as Administrative Agent, and Wells Fargo Bank, National Association as Collateral Administrator, Collateral Agent, Securities Intermediary and Bank. The facility amount under the JPM Credit Agreement was $666.6 million. Borrowings under the JPM Credit Facility bore interest at LIBOR plus 2.75%.
On January 29, 2020, the Company entered into an amended and restated loan and security agreement (the “Amended Loan and Security Agreement”) as Borrower, with JPMorgan Chase Bank, National Association, as Administrative Agent, and Wells Fargo Bank, National Association as Collateral Administrator, Collateral Agent, Securities Intermediary and Bank. The Amended Loan and Security Agreement amended the Existing Loan and Security Agreement to, among other things, (1) decrease the financing limit under the agreement from $666.6 million to $500.0 million; (2) decrease the minimum facility amount from $466.6 million to $300.0 million period from January 29, 2020 to July 29, 2020 (the minimum facility amount will increase to $350.0 million after July 29, 2020 until the end of the reinvestment period); (3) decrease the interest rate on financing from 2.75% per annum over the applicable LIBOR to 2.375% per annum over the applicable LIBOR; and (4) extend the scheduled termination date of the agreement from November 29, 2022 to January 29, 2025.
On March 20, 2020, the Company entered into a second amended and restated loan and security agreement between the parties (the “Second Amended Loan and Security Agreement”). The Second Amended Loan and Security Agreement, among other things, provided flexibility to contribute and borrow against revolving loans, reduce the amount required to be reserved for unfunded revolvers and delayed draw obligations and decreased the financing limit by $50.0 million within 90 days or, based on the occurrence of certain events, such earlier period as may be set forth in the Second Amended Loan and Security Agreement. The Company paid the Administrative Agent $50.0 million to the prepayment of Advances and the Financing Commitments reduced by the amount of principal so prepaid on the earlier of two Business days following the closing of the Rights Offering and June 18, 2020.
On July 2, 2020, the Company entered into a third amended and restated loan and security agreement with respect to the JPM Credit Agreement to, among other things, adjust the advance rates and make certain changes of an updating nature.
The facility amount under the JPM Credit Agreement is $450.0 million. Proceeds of the loans under the JPM Credit Facility were used to acquire certain qualifying loans and such other uses as permitted under the JPM Credit Agreement. The period from the effective date of the amendment until January 29, 2023 is referred to as the reinvestment period and during such reinvestment period, the Borrower could request drawdowns under the JPM Credit Facility.
The maturity date was the earliest of: (a) January 29, 2025, (b) the date on which the secured obligations become due and payable following the occurrence of an event of default, (c) the date on which the advances are repaid in full and (d) the date after a market value cure failure occurs on which all portfolio investments have been sold and proceeds there from have been received by the Borrower. The stated maturity date of January 29, 2025 could be extended for successive one-year periods by mutual agreement of the Borrower and the Administrative Agent.
The JPM Credit Agreement included customary affirmative and negative covenants, including certain limitations on the incurrence of additional indebtedness and liens, as well as usual and customary events of default for revolving credit facilities of this nature.
Borrowings under the JPM Credit Facility bore interest at LIBOR plus a margin. The Company paid an unused commitment fee of between 37.5 basis points (0.375%) and 75 basis points (0.75%) per annum depending on the size of the unused portion of the facility. Interest was payable quarterly in arrears. As of December 31, 2020, the JPM Credit Facility was accruing interest expense at a rate of LIBOR plus 2.375%. We paid an unused commitment fee of 75 basis points (0.75%) per annum.
On December 27, 2021, the JPM Credit Facility was terminated.
For the three months ended June 30, 2022 and 2021, the components of interest expense related to the JPM Credit Facility were as follows:
2,404
For the six months ended June 30, 2022 and 2021, the components of interest expense related to the JPM Credit Facility were as follows:
2,419
2,344
129
4,892
On August 28, 2019, the Company, through BCC Middle Market CLO 2019-1 LLC (the “2019-1 Issuer”), a Cayman Islands limited liability company and a wholly-owned and consolidated subsidiary of the Company, and BCC Middle Market CLO 2019-1 Co-Issuer, LLC (the “Co-Issuer” and, together with the Issuer, the “Co-Issuers”), a Delaware limited liability company, completed its $501.0 million term debt securitization (the “2019-1 CLO Transaction”). The notes issued in connection with the 2019-1 CLO Transaction (the “2019-1 Notes”) are secured by a diversified portfolio of the Co-Issuers consisting primarily of middle market loans, the majority of which are senior secured loans (the “2019-1 Portfolio”). The Co-Issuers also issued Class A-1L Loans (the “Loans” and, together with the 2019-1 Notes, the “2019-1 Debt”). The Loans are also secured by the 2019-1 Portfolio. At the 2019-1 closing date, the 2019-1 Portfolio was comprised of assets transferred from the Company and its consolidated subsidiaries. All transfers were eliminated in consolidation and there were no realized gains or losses recognized in the 2019-1 CLO Transaction.
On November 30, 2021, the Co-Issuers refinanced the 2019-1 CLO Transaction through a private placement of $410 million of senior secured and senior deferrable notes consisting of: (i) $282.5 million of Class A-1-R Senior Secured Floating Rate Notes, which currently bear interest at the applicable reference rate plus 1.50% per annum; (ii) $55 million of Class A-2-R Senior Secured Floating Rate Notes, which bear interest at the applicable reference rate plus 2.00% per annum; (iii) $47.5 million of Class B-R Senior Deferrable Floating Rate Notes, which bear interest at the applicable reference rate plus 2.60% per annum; and (iv) $25.0 million of Class C-R Senior Deferrable Floating Rate Notes, which bear interest at the applicable reference rate plus 3.75% per annum (collectively, the “2019-1 CLO Reset Notes”). The 2019-1 CLO Reset Notes are scheduled to mature on October 15, 2033 and the reinvestment period ends October 15, 2025. The Company retained $32.5 million of the Class B-R Notes and $25.0 million of the Class C-R Notes. The retained notes by the Company are eliminated in consolidation. The transaction resulted in a realized loss on the extinguishment of debt of $2.3 million from the acceleration of unamortized debt issuance costs of. The obligations of the Issuer under the CLO Transaction are non-recourse to the Company.
The 2019-1 CLO Reset Notes was executed through a private placement of the following 2019-1 Debt:
Class A-1-R
282,500
1.50% + 3 Month LIBOR
2.54
Class A-2-R
55,000
2.00% + 3 Month LIBOR
3.04
Class B-R
15,000
2.60% + 3 Month LIBOR
3.64
Total 2019-1 Debt
Membership Interests
102,250
Non-interest bearing
Not applicable
454,750
The Loans and Class A-1-R, A-2-R, and B-R Notes are included in the consolidated financial statements of the Company. The $32.5 million of the Class B-R Notes, $25.0 million of the Class C-R Notes and Membership Interests retained by the Company are eliminated in consolidation.
The Company serves as portfolio manager of the 2019-1 Issuer pursuant to a portfolio management agreement between the Company and the 2019-1 Issuer. For so long as the Company serves as portfolio manager, the Company will not charge any management fee or subordinated interest to which it may be entitled.
During the reinvestment period, pursuant to the indenture and loan agreement governing the 2019-1 Notes and Loans, respectively, all principal collections received on the underlying collateral may be used by the 2019-1 Issuer to purchase new collateral under the direction of the Company in its capacity as portfolio manager of the 2019-1 Issuer and in accordance with the 2019-1 Issuer investment strategy and the terms of the indenture and loan agreement, as applicable.
The Company has agreed to hold on an ongoing basis the Membership Interests with an aggregate dollar purchase price at least equal to 5% of the aggregate amount of all obligations issued by the 2019-1 Co-Issuers for so long as the 2019-1 Debt remains outstanding.
The 2019-1 Issuer pays ongoing administrative expenses to the trustee, independent accountants, legal counsel, rating agencies and independent managers in connection with developing and maintaining reports, and providing required services in connection with the administration of the 2019-1 Issuer.
As of June 30, 2022, there were 49 first lien and second lien senior secured loans with a total fair value of approximately $467.0 million and cash of $25.9 million securing the 2019-1 Debt. As of December 31, 2021, there were 45 first lien and second lien senior secured loans with a total fair value of approximately $441.0 million and cash of $62.6 million securing the 2019-1 Debt. Assets that are pledged as collateral for the 2019-1 Debt are not directly available to the creditors of the Company to satisfy any obligations of the Company other than the Company’s obligations under the indenture and loan agreement governing the 2019-1 Debt. The creditors of the 2019-1 Co-Issuers have received security interests in such assets and such assets are not intended to be available to the creditors of the Company (or an affiliate of the Company). The 2019-1 Portfolio must meet certain requirements, including asset mix and concentration, term, agency rating, collateral coverage, minimum coupon, minimum spread and sector diversity requirements in the indenture and loan agreement governing the 2019-1 Debt. As of June 30, 2022, and December 31, 2021, the Company was in compliance with its covenants related to the 2019-1 Debt.
Costs of the offering of $1.5 million were incurred in connection with the 2019-1 CLO Reset Notes which have been recorded as debt issuance costs and presented as a reduction to the outstanding principal amount of the 2019-1 Debt on the consolidated statements of assets and liabilities and are being amortized over the life using the effective interest method. The balance of the unamortized debt issuance costs related to the 2019-1 Issuer was $1.5 million and $1.5 million as of June 30, 2022 and December 31, 2021, respectively.
For the three months ended June 30, 2022 and 2021, the components of interest expense related to the 2019-1 Co-Issuers were as follows:
2,268
2,506
2,300
2,563
For the six months ended June 30, 2022 and 2021, the components of interest expense related to the 2019-1 Co-Issuers were as follows:
3,892
5,032
3,956
5,146
On March 27, 2020, the Company entered into an unsecured revolving loan agreement (the “Revolving Advisor Loan”) with BCSF Advisors, LP, the investment adviser of the Company. The Revolving Advisor Loan has a maximum credit limit of $50.0 million and a maturity date of March 27, 2023. The Revolving Advisor Loan accrues interest at the Applicable Federal Rate from the date of such loan until the loan is repaid in full. As of June 30, 2022, there were no borrowings under the Revolving Advisor Loan.
For the three months ended June 30, 2022 and 2021, the components of interest expense related to the Revolving Advisor Loan were as follows:
For the six months ended June 30, 2022 and 2021, the components of interest expense related to the Revolving Advisor Loan were as follows:
On June 10, 2020, the Company entered into a Master Note Purchase Agreement with institutional investors listed on the Purchaser Schedule thereto (the “Note Purchase Agreement”), in connection with the Company’s issuance of $150.0 million aggregate principal amount of its 8.50% senior unsecured notes due 2023 (the “ 2023 Notes”). The sale of the 2023 Notes generated net proceeds of approximately $146.4 million, including an offering discount of $1.5 million and debt issuance costs in connection with the transaction, including fees and commissions, of $2.1 million.
The 2023 Notes will mature on June 10, 2023 and may be redeemed in whole or in part at the Company’s option at any time or from time to time at the redemption prices set forth in the Note Purchase Agreement. The 2023 Notes will bear interest at a rate of 8.50% per year payable semi-annually on June 10 and December 10 of each year, commencing on December 10, 2020. As of June 30, 2022 and December 31, 2021, the Company was in compliance with the terms of the Note Purchase Agreement governing the 2023 Notes.
On July 16, 2021 the Company repurchased $37.5 million of the 2023 Notes at a total cost of $39.5 million. This resulted in a realized loss on the extinguishment of debt of $2.5 million, which included a premium paid of $2.0 million and acceleration of unamortized debt issuance costs and original issue discount of $0.5 million.
As of June 30, 2022 and December 31, 2021, the components of the carrying value of the 2023 Notes were as follows:
Principal amount of debt
Unamortized debt issuance cost
(518)
(822)
Original issue discount, net of accretion
(343)
(545)
Carrying value of 2023 Notes
111,639
For the three months ended June 30, 2022 and 2021, the components of interest expense related to the 2023 Notes were as follows:
3,187
Amortization of debt issuance cost
Accretion of original issue discount
3,491
For the six months ended June 30, 2022 and 2021, the components of interest expense related to the 2023 Notes were as follows:
4,594
6,375
272
240
5,047
6,978
On March 10, 2021, the Company and U.S. Bank National Association (the “Trustee”), entered into an Indenture (the “Base Indenture”) and First Supplemental Indenture (the “First Supplemental Indenture,” and together with the Base Indenture, the “Indenture”) between the Company and the Trustee. The First Supplemental Indenture relates to the Company’s issuance of $300.0 million aggregate principal amount of its 2.95% notes due 2026 (the “2026 Notes”).
The March 2026 Notes will mature on March 10, 2026 and may be redeemed in whole or in part at the Company’s option at any time or from time to time at the redemption prices set forth in the Indenture. The March 2026 Notes bear interest at a rate of 2.95% per year payable semi-annually on March 10th and September 10th of each year, commencing on September 10, 2021. The March 2026 Notes are general unsecured obligations of the Company that rank senior in right of payment to all of the Company’s existing and future indebtedness that is expressly subordinated in right of payment to the March 2026 Notes, rank pari passu with all existing and future unsecured unsubordinated indebtedness issued by the Company, rank effectively junior to any of the Company’s secured indebtedness (including unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness, and rank structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company’s subsidiaries, financing vehicles or similar facilities.
The net proceeds to the Company were approximately $294.3 million, after deducting the underwriting discounts and commissions of $4.4 million and offering expenses of $1.3 million.
As of June 30, 2022 and December 31, 2021, the components of the carrying value of the March 2026 Notes were as follows:
(2,397)
(2,719)
(1,782)
Carrying value of 2026 Notes
For the three months ended June 30, 2022 and 2021, the components of interest expense related to the 2026 Notes were as follows:
2,213
162
2,495
For the six months ended June 30, 2022 and 2021, the components of interest expense related to the 2026 Notes were as follows:
321
199
239
4,986
On October 13, 2021, the Company and the Trustee entered into a Second Supplemental Indenture (the “Second Supplemental Indenture”) to the Indenture between the Company and the Trustee. The Second Supplemental Indenture relates to the Company’s
71
issuance of $300.0 million aggregate principal amount of its 2.55% notes due 2026 (the “October 2026 Notes,” and together with the March 2026 Notes, the “2026 Notes”).
The October 2026 Notes will mature on October 13, 2026 and may be redeemed in whole or in part at the Company’s option at any time or from time to time at the redemption prices set forth in the Indenture. The October 2026 Notes bear interest at a rate of 2.55% per year payable semi-annually on April 13 and October 13 of each year, commencing on April 13, 2022. The October 2026 Notes are general unsecured obligations of the Company that rank senior in right of payment to all of the Company’s existing and future indebtedness that is expressly subordinated in right of payment to the October 2026 Notes, rank pari passu with all existing and future unsecured unsubordinated indebtedness issued by the Company, rank effectively junior to any of the Company’s secured indebtedness (including unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness, and rank structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company’s subsidiaries, financing vehicles or similar facilities.
The net proceeds to the Company were approximately $293.1 million, after deducting the underwriting discounts and commissions of $6.2 million and offering expenses of $0.7 million.
As of June 30, 2022 and December 31, 2021, the components of the carrying value of the October 2026 Notes were as follows:
(3,134)
(3,495)
(2,745)
(3,063)
Carrying value of October 2026 Notes
For the three months ended June 30, 2022 and 2021, the components of interest expense related to the October 2026 Notes were as follows:
1,913
182
159
2,254
For the six months ended June 30, 2022 and 2021, the components of interest expense related to the October 2026 Notes were as follows:
3,825
317
4,504
On December 24, 2021, the Company entered into a senior secured revolving credit agreement (the “Sumitomo Credit Agreement” or the “Sumitomo Credit Facility”) as Borrower, with Sumitomo Mitsui Banking Corporation, as Administrative Agent and Sole Book Runner, and with Sumitomo Mitsui Banking Corporation and MUFG Union Bank, N.A., as Joint Lead Arrangers. The Credit Agreement is effective as of December 24, 2021.
The facility amount under the Sumitomo Credit Agreement is $300.0 million with an accordion provision to permit increases to the total facility amount up to $1.0 billion. Proceeds of the loans under the Sumitomo Credit Agreement may be used for general
corporate purposes of the Company, including, without limitation, repaying outstanding indebtedness, making distributions, contributions and investments, and acquisition and funding, and such other uses as permitted under the Sumitomo Credit Agreement. The maturity date is December 24, 2026.
Interest under the Sumitomo Credit Agreement for (i) loans for which the Company elects the base rate option, (A) if the borrowing base is equal to or greater than the product of 1.60 and the revolving credit exposure, is payable at an “alternate base rate” (which is the greater of zero and the highest of (a) the prime rate as published in the print edition of The Wall Street Journal, Money Rates Section, (b) the federal funds effective rate plus 0.5% and (c) the one-month Eurocurrency rate plus 1% per annum) plus 0.75% per annum and (B) if the borrowing base is less than the product of 1.60 and the revolving credit exposure, the alternate base rate plus 0.875% per annum; (ii) loans for which the Company elects the Eurocurrency option, (A) if the borrowing base is equal to or greater than the product of 1.60 and the revolving credit exposure, is payable at a rate equal to the Eurocurrency rate plus 1.75% per annum and (B) if the borrowing base is less than the product of 1.60 and the revolving credit exposure, is payable at a rate equal to the Eurocurrency rate plus 1.875% per annum; and (iii) loans for which the Company elects the risk-free-rate option, (A) if the borrowing base is equal to or greater than the product of 1.60 and the revolving credit exposure, is payable at a rate equal to risk-free-rate plus 1.8693% per annum and (B) if the borrowing base is less than the product of 1.60 and the revolving credit exposure, is payable at a rate equal to risk-free-rate plus 1.9943% per annum. The Company pays a used commitment fee of 37.5 basis points (0.375%) on the average daily unused amount of the dollar commitment.
The Sumitomo Credit Agreement includes customary affirmative and negative covenants, including certain limitations on the incurrence of additional indebtedness and liens, as well as usual and customary events of default for revolving credit facilities of this nature. As of June 30, 2022, the Company was in compliance with its covenants related to the Sumitomo Credit Facility.
As of June 30, 2022 and December 31, 2021, there were $191.7 million and $0.0 million of borrowings under the Sumitomo Credit Facility.
For the three months ended June 30, 2022 and 2021, the components of interest expense related to the Sumitomo Credit Facility were as follows:
1,160
Amortization of original issue discount
1,406
For the six months ended June 30, 2022 and 2021, the components of interest expense related to the Sumitomo Credit Facility were as follows:
429
1,850
Note 7. Derivatives
The Company is subject to foreign currency exchange rate risk in the normal course of pursuing its investment objectives. The value of foreign investments held by the Company may be significantly affected by changes in foreign currency exchange rates. The dollar value of a foreign security generally decreases when the value of the dollar rises against the foreign currency in which the security is denominated and tends to increase when the value of the dollar declines against such foreign currency.
The Company may enter into forward currency exchange contracts to reduce the Company’s exposure to foreign currency exchange rate fluctuations in the value of foreign currencies, as described in Note 2. The fair value of derivative contracts open as of June 30, 2022 and December 31, 2021 is included on the consolidated schedules of investments by contract. The Company had collateral payable of $2.7 million for June 30, 2022 and collateral receivable of $2.8 million for December 31, 2021 with the counterparties on foreign currency exchange contracts. Collateral amounts posted are included in collateral on forward currency exchange contracts on the consolidated statements of assets and liabilities. Collateral payable is included in collateral payable on forward currency exchange contracts on the consolidated statements of assets and liabilities.
For the three and six months ended June 30, 2022, the Company’s average U.S. dollar notional exposure to forward currency exchange contracts was $130.1 million and $116.9 million, respectively. For the three and six months ended June 30, 2021, the Company’s average U.S. dollar notional exposure to forward currency exchange contracts was $101.1 million and $184.3 million, respectively.
By using derivative instruments, the Company is exposed to the counterparty’s credit risk—the risk that derivative counterparties may not perform in accordance with the contractual provisions offset by the value of any collateral received. The Company’s exposure to credit risk associated with counterparty non-performance is limited to collateral posted and the unrealized gains inherent in such transactions that are recognized in the consolidated statements of assets and liabilities. The Company minimizes counterparty credit risk through credit monitoring procedures, executing master netting arrangements and managing margin and collateral requirements, as appropriate.
The Company presents forward currency exchange contracts on a net basis by counterparty on the consolidated statements of assets and liabilities. The Company has elected not to offset assets and liabilities in the consolidated statements of assets and liabilities that may be received or paid as part of collateral arrangements, even when an enforceable master netting arrangement or other arrangement is in place that provides the Company, in the event of counterparty default, the right to liquidate collateral and the right to offset a counterparty’s rights and obligations.
The following table presents both gross and net information about derivative instruments eligible for offset in the consolidated statements of assets and liabilities as of June 30, 2022:
Net amount of
Gross amount of
assets or
(liabilities)
assets on the
on the
presented on the
Account in the
consolidated
statements of
Cash Collateral
statements of assets
assets and
paid
Net
and liabilities
liabilities
(received) (1)
Amounts (2)
Bank of New York
Unrealized appreciation on forward currency contracts
20,394
(5,744)
14,650
1,708
(1,263)
Amount excludes excess cash collateral paid.
Net amount represents the net amount due (to) from counterparty in the event of default based on the contractual set-off rights under the agreement. Net amount excludes any over-collateralized amounts.
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The following table presents both gross and net information about derivative instruments eligible for offset in the consolidated statements of assets and liabilities as of December 31, 2021:
4,851
1,767
(1,297)
The effect of transactions in derivative instruments to the consolidated statements of operations during the three months ended June 30, 2022 and 2021 was as follows:
Net realized gains (losses) on forward currency exchange contracts
Total net realized and unrealized gains (losses) on forward currency exchange contracts
10,142
(2,368)
Included in total net gains (losses) on the consolidated statements of operations is net gains (losses) of ($9.0) million and $2.2 million related to realized and unrealized gains and losses on investments, foreign currency holdings and non-investment assets and liabilities attributable to the changes in foreign currency exchange rates for the three months ended June 30, 2022 and 2021, respectively. Including the total net realized and unrealized gains (losses) on forward currency exchange contracts of $10.1 million and ($2.4) million, respectively, included in the above table, the net impact of foreign currency on total net gains (losses) on the consolidated statements of operations is $1.1 million and ($0.2) million for the three months ended June 30, 2022 and 2021, respectively.
The effect of transactions in derivative instruments to the consolidated statements of operations during the six months ended June 30, 2022 and 2021 was as follows:
13,036
(1,084)
Included in total net losses on the consolidated statements of operations is net losses of ($12.2) million and ($1.9) million related to realized and unrealized gains and losses on investments, foreign currency holdings and non-investment assets and liabilities attributable to the changes in foreign currency exchange rates for the six months ended June 30, 2022 and 2021, respectively. Including the total net realized and unrealized gains (losses) on forward currency exchange contracts of $13.0 million and ($1.1) million, respectively, included in the above table, the net impact of foreign currency on total net gains (losses) on the consolidated statements of operations is $0.9 million and ($3.0) million for the six months ended June 30, 2022 and 2021, respectively.
Note 8. Distributions
The Company’s distributions are recorded on the record date. The following table summarizes distributions declared during the six months ended June 30, 2022:
Date Declared
Record Date
Payment Date
Per Share
February 16, 2022
March 31, 2022
April 29, 2022
April 26, 2022
July 29, 2022
Total distributions declared
43,902
The distributions declared during the six months ended June 30, 2022 were derived from investment company taxable income and net capital gain, if any.
The Company’s distributions are recorded on the record date. The following table summarizes distributions declared during the six months ended June 30, 2021:
Amount Per
Share
February 18, 2021
March 31, 2021
April 30, 2021
April 27, 2021
July 30, 2021
The distributions declared during the six months ended June 30, 2021 were derived from investment company taxable income and net capital gain, if any.
The federal income tax characterization of distributions declared and paid for the fiscal year will be determined at fiscal year-end based upon the Company’s investment company taxable income for the full fiscal year and distributions paid during the full year.
Note 9. Common Stock/Capital
The Company has authorized 100,000,000,000 shares of its common stock with a par value of $0.001 per share. The Company has authorized 10,000,000,000 shares of its preferred stock with a par value of $0.001 per share. Shares of preferred stock have not been issued.
Prior to the IPO, the Company had issued 43,982,137.46 shares in the private placement of the Company’s common shares (the “Private Offering”). Each investor had entered into a separate subscription agreement relating to the Company’s common stock (the “Subscription Agreements”). Each investor had made a capital commitment to purchase shares of the Company’s common stock pursuant to the Subscription Agreements. Investors were required to make capital contributions to purchase shares of the Company’s common stock each time the Company delivered a drawdown notice, which were delivered at least 10 business days prior to the required funding date in an aggregate amount not to exceed their respective capital commitments. The number of shares to be issued to a stockholder was determined by dividing the total dollar amount of the contribution by a stockholder by the net asset value per share of the common stock as of the last day of the Company’s fiscal quarter or such other date and price per share as determined by the Board in accordance with the requirements of the 1940 Act. As of December 31, 2018, aggregate commitments relating to the Private Offering were $1.3 billion. All outstanding commitments related to these Subscription Agreements were cancelled due to the completion of the IPO on November 15, 2018. As of June 30, 2022 and December 31, 2021, BCSF Advisors, LP contributed in aggregate $8.9 million and $8.9 million to the Company and received 488,112.46 and 487,932.46 shares of the Company, respectively. At June 30, 2022 and December 31, 2021, BCSF Advisors, LP owned 0.76% and 0.76%, respectively, of the outstanding common stock of the Company.
On November 19, 2018, the Company closed its initial public offering (the “IPO”) issuing 7,500,000 shares of its common stock at a public offering price of $20.25 per share. Shares of common stock of the Company began trading on the New York Stock Exchange under the symbol “BCSF” on November 15, 2018. The offering generated proceeds, before expenses, of $147.3 million. All outstanding commitments were cancelled due to the completion of the initial public offering.
For the three months ended June 30, 2022 and 2021, there were no shares issued pursuant to the dividend reinvestment plan. For the six months ended June 30, 2022 and 2021, there were no shares issued pursuant to the dividend reinvestment plan.
BCSF Investments, LLC and certain individuals, including Michael A. Ewald, the Company’s Chief Executive Officer and a Managing Director of Bain Capital Credit; Jonathan S. Lavine, Co-Managing Partner of Bain Capital, LP and Founder and Chief Investment Officer of Bain Capital Credit; John Connaughton, Co-Managing Partner of Bain Capital, LP; Jeffrey B. Hawkins, Chairman of the Company’s Board of Directors and a Managing Director of Bain Capital Credit; and Michael J. Boyle, the Company’s Vice President and Treasurer and a Managing Director of Bain Capital Credit, adopted the 10b5-1 Plan in accordance with Rules 10b5-1 and 10b-18 under the Exchange Act, under which such parties would buy up to $20 million in the aggregate of the Company’s common stock in the open market during the period beginning after four full calendar weeks after the closing of the IPO and ending on the earlier of the date on which the capital committed to the 10b5-1 has been exhausted or one year after the closing of the IPO. For the year ended December 31, 2019, 827,933 shares were purchased at a weighted average price of $18.78, inclusive of commissions, for a total cost of $15.6 million. As of February 28, 2019, zero dollars remain under the 10b5-1 Plan and no further purchases are intended under the 10b5-1 Plan.
On May 7, 2019, the Company’s Board of Directors authorized the Company to repurchase up to $50 million of its outstanding common stock in accordance with safe harbor rules under the Securities Exchange Act of 1934. Any such repurchases will depend upon market conditions and there is no guarantee that the Company will repurchase any particular number of shares or any shares at all. As of June 30, 2022, there have been no repurchases of common stock.
On May 4, 2020, the Company’s Board of Directors approved a transferable subscription rights offering to our stockholders of record as of May 13, 2020. The rights entitled record stockholders to subscribe for up to an aggregate of 12,912,453 shares of our common stock. Record stockholders received one right for each share of common stock owned on the record date. The rights entitled the holders to purchase one new share of common stock for every four rights held, and record stockholders who fully exercised their rights were entitled to subscribe, subject to certain limitations and allotment rules, for additional shares that remain unsubscribed as a result of any unexercised rights. The rights were transferable and on the New York Stock Exchange under the symbol “BCSF RT”. The rights offering expired June 5, 2020. Based on the terms of the offering and the market price of the stock during the applicable period, holders of rights participating in the offering were entitled to purchase one new share of common stock for every four rights held at a subscription price of $10.2163 per share. On June 16, 2020, the Company closed its transferrable rights offering and issued 12,912,453 shares. The offering generated net proceeds, before expenses, of $129.6 million, including the underwriting discount and commissions of $2.3 million.
Note 10. Commitments and Contingencies
Commitments
The Company’s investment portfolio may contain debt investments that are in the form of lines of credit and unfunded delayed draw commitments, which require the Company to provide funding when requested by portfolio companies in accordance with the terms of the underlying loan agreements.
As of June 30, 2022, the Company had $283.3 million of unfunded commitments under loan and financing agreements as follows:
Expiration Date (1)
Unfunded Commitments (2)
Portfolio Company & Investment
9 Story Media Group Inc. - Revolver
523
A&R Logistics, Inc. - Revolver
2,944
Abracon Group Holding, LLC - Revolver
Access - First Lien Senior Secured Loan
11,890
Allworth Financial Group, L.P. - Delayed Draw
Allworth Financial Group, L.P. - Revolver
2,440
Amspec Services, Inc. - Revolver
4,656
Ansira Holdings, Inc. - Revolver
Apollo Intelligence - Revolver
7,208
Apollo Intelligence - First Lien Senior Secured Loan
9,611
Applitools - Revolver
3,430
Appriss Holdings, Inc. - Revolver
753
Aramsco, Inc. - Revolver
3,387
ASP-r-pac Acquisition Co LLC - Revolver
3,253
Avalon Acquiror, Inc. - Revolver
7,353
Batteries Plus Holding Corporation - Revolver
1,746
Caribou Bidco Limited - First Lien Senior Secured Loan
CB Nike IntermediateCo Ltd - Revolver
Concert Golf Partners Holdco DD T/L - Delayed Draw
4,201
Concert Golf Partners Holdco R/C - Revolver
CPS Group Holdings, Inc. - Revolver
4,933
CST Buyer Company - Revolver
2,190
Darcy Partners - Revolver
349
DC Blox Inc. - First Lien Senior Secured Loan
7,023
Direct Travel, Inc. - Delayed Draw
2,625
Efficient Collaborative Retail Marketing Company, LLC - Revolver
Element Buyer, Inc. - Revolver
Eleven Software - Revolver
Grammer Purchaser, Inc. - Revolver
750
Great Expressions Dental Center PC - Revolver
307
Green Street Parent, LLC - Revolver
GSP Holdings, LLC - Revolver
1,813
iBanFirst - First Lien Senior Secured Loan
83
3,145
JHCC Holdings, LLC - Revolver
Kellstrom Commercial Aerospace, Inc. - Revolver
1,493
Mach Acquisition R/C - Revolver
8,034
Margaux Acquisition Inc. - Revolver
2,872
Margaux UK Finance Limited - Revolver
608
masLabor Revolver - Revolver
1,034
Morrow Sodali - Revolver
1,861
Morrow Sodali - First Lien Senior Secured Loan
2,659
MRHT - First Lien Senior Secured Loan
10,483
MRHT Acquisition Facility - Delayed Draw
MRI Software LLC - Revolver
1,782
MZR Buyer, LLC - Revolver
5,210
New Look (Delaware) Corporation - Delayed Draw
2,005
New Look Vision Group - Delayed Draw
2,791
New Look Vision Group - Revolver
1,568
Omni Intermediate DD - Delayed Draw
292
Omni Intermediate R/C - Revolver
732
Paisley Bidco Limited - Revolver
7,656
Parcel2Go Acquisition Facility - First Lien Senior Secured Loan
Premier Imaging, LLC - Delayed Draw
4,816
Reconomy - First Lien Senior Secured Loan
Refine Intermediate, Inc. - Revolver
Revalize, Inc. - Delayed Draw
13,114
Revalize, Inc. - Revolver
503
RoC Opco LLC - Revolver
4,779
Saltoun - First Lien Senior Secured Loan
14,822
Service Master Revolving Loan - Revolver
3,150
Smartronix RC - Revolver
Solaray, LLC - Revolver
6,800
SunMed Group Holdings, LLC - Revolver
Superna Inc. - Delayed Draw
2,631
Superna Inc. - Revolver
Swoogo LLC - Revolver
1,243
TEI Holdings Inc. - Revolver
4,523
TGI Sport Bidco Pty Ltd - Revolver
2,879
TLC Purchaser, Inc. - Delayed Draw
7,616
TLC Purchaser, Inc. - Revolver
1,013
V Global Holdings LLC - Revolver
8,236
Ventiv Holdco, Inc. - Revolver
3,407
WCI Gigawatt Purchaser DD T/L - Delayed Draw
1,609
WCI Gigawatt Purchaser R/C - Revolver
2,735
WCI-HSG Purchaser, Inc. - Revolver
550
Whitcraft LLC - Revolver
1,812
World Insurance - Revolver
World Insurance - First Lien Senior Secured Loan
172
WSP Initial Term Loan - Delayed Draw
1,797
WSP Revolving Loan - Revolver
402
WU Holdco, Inc. - Revolver
2,592
YLG Holdings, Inc. - Revolver
8,289
283,294
As of December 31, 2021, the Company had $234.0 million of unfunded commitments under loan and financing agreements as follows:
3,281
AMI US Holdings Inc. - Revolver
1,047
4,179
12/20/2022
Armstrong Bidco T/L - First Lien Senior Secured Loan
6,542
2,603
3,433
Captain D’s LLC - Revolver
1,862
12,781
2,267
2,947
1,939
3,092
10,043
MRHT Acquisition Facility - First Lien Senior Secured Loan
569
12/22/2026
3,803
Omni Intermediate DD T/L 2 - First Lien Senior Secured Loan
11/30/2027
549
Opus2 - Delayed Draw
7,382
Paisley Bidco Limited - Delayed Draw
8,624
Parcel2Go Acquisition Facility - Subordinated Debt
7/17/2028
3,731
13,395
1,340
10,241
3,240
11,844
1,032
4,070
3,026
Tidel Engineering, L.P. - Revolver
3/1/2023
4,250
10/10/2025
7,119
5,835
1,646
3,218
1,478
861
WSP Initial Term Loan - First Lien Senior Secured Loan
WU Holdco, Inc. - First Lien Senior Secured Loan
3,944
8,545
234,031
Commitments are generally subject to borrowers meeting certain criteria such as compliance with covenants and certain operational metrics. These amounts may remain outstanding until the commitment period of an applicable loan expires, which may be shorter than its maturity.
Unfunded commitments denominated in currencies other than U.S. dollars have been converted to U.S. dollars using the applicable foreign currency exchange rate as of December 31, 2021.
Contingencies
79
In the normal course of business, the Company may enter into certain contracts that provide a variety of indemnities. The Company’s maximum exposure under these indemnities is unknown as it would involve future claims that may be made against the Company. Currently, the Company is not aware of any such claims and no such claims are expected to occur. As such, the Company does not consider it necessary to record a liability in this regard.
Note 11. Financial Highlights
The following is a schedule of financial highlights for the six months ended June 30, 2022 and 2021:
Per share data:
Net asset value at beginning of period
16.54
Net investment income (1)
Net realized gain (loss) (1) (7)
0.08
(0.06)
Net change in unrealized appreciation (depreciation) (1) (2) (8)
(0.04)
0.53
Net increase in net assets resulting from operations (1) (9) (10)
Stockholder distributions from income (3)
(0.68)
Net asset value at end of period
Shares outstanding at end of period
64,562,265.27
Per share market value at end of period
13.61
15.30
Total return based on market value (12)
(6.28)
31.90
Total return based on net asset value (4)
4.65
7.03
Ratios:
Ratio of net investment income to average net assets (5) (11) (13)
9.51
8.80
Ratio of total net expenses to average net assets (5) (11) (13)
8.43
9.30
Supplemental data:
Ratio of interest and debt financing expenses to average net assets (5) (13)
3.95
4.67
Ratio of expenses (without incentive fees) to average net assets (5) (11) (13)
8.35
Ratio of incentive fees and management fees, net of contractual and voluntary waivers, to average net assets (5) (11) (13)
3.73
3.76
Average principal debt outstanding
1,267,665
1,380,515
Portfolio turnover (6)
18.66
25.09
Note 12. Subsequent Events
On July 6, 2022, Bain Capital Specialty Finance (the “Company”) entered into the First Amendment to the Sumitomo Credit Agreement. The First Amendment provides for an upsize in the total commitments from lenders under the revolving credit facility governed by the Sumitomo Credit Agreement from $300,000,000 to $385,000,000. The First Amendment also replaced the LIBOR benchmark provisions under the Sumitomo Credit Agreement with SOFR benchmark provisions, including applicable credit spread adjustments. On July 22, 2022, the Company entered into the Increasing Lender/Joinder Lender Agreement (the “Joinder Agreement”), dated as of July 22, 2022, pursuant to Section 2.08(e) of the Sumitomo Credit Agreement. The Joinder Agreement provides for, among other things, an upsize in the total commitments from lenders under the revolving credit facility governed by the Sumitomo Credit Agreement from $385,000,000 to $485,000,000.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and other parts of this report contain forward-looking information that involves risks and uncertainties. The discussion and analysis contained in this section refers to our financial condition, results of operations and cash flows. The information contained in this section should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this report. Please see “Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with this discussion and analysis. Our actual results could differ materially from those anticipated by such forward-looking information due to factors discussed under “Forward-Looking Statements” appearing elsewhere in this report.
Overview
Bain Capital Specialty Finance, Inc. (the “Company”, “we”, “our” and “us”) is an externally managed specialty finance company focused on lending to middle market companies. We have elected to be regulated as a business development company (a “BDC”) under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the “1940 Act”). We are managed by BCSF Advisors, LP (our “Advisor” or “BCSF Advisors”), a subsidiary of Bain Capital Credit, LP (“Bain Capital Credit”). Our Advisor is registered as an investment adviser with the SEC under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). Our Advisor also provides the administrative services necessary for us to operate (in such capacity, our “Administrator” or “BCSF Advisors”). Since we commenced operations on October 13, 2016 through June 30, 2022, we have invested approximately $5,819.3 million in aggregate principal amount of debt and equity investments prior to any subsequent exits or repayments. We seek to generate current income and, to a lesser extent, capital appreciation through direct originations of secured debt, including first lien, first lien/last-out, unitranche and second lien debt, investments in strategic joint ventures, equity investments and, to a lesser extent, corporate bonds.
On November 19, 2018, we closed our initial public offering (the “IPO”) issuing 7,500,000 shares of our common stock at a public offering price of $20.25 per share. Shares of common stock of the Company began trading on the New York Stock Exchange under the symbol “BCSF” on November 15, 2018.
Our primary focus is capitalizing on opportunities within our Senior Direct Lending strategy, which seeks to provide risk-adjusted returns and current income to our stockholders by investing primarily in middle-market companies with between $10.0 million and $150.0 million in annual earnings before interest, taxes, depreciation and amortization (“EBITDA”). However, we may, from time to time, invest in larger or smaller companies. We generally seek to retain effective voting control in respect of the loans or particular classes of securities in which we invest through maintaining affirmative voting positions or negotiating consent rights that allow us to retain a blocking position. We focus on senior investments with a first or second lien on collateral and strong structures and documentation intended to protect the lender. We may also invest in mezzanine debt and other junior securities, including common and preferred equity, on an opportunistic basis, and in secondary purchases of assets or portfolios but such investments are not the principal focus of our investment strategy. In addition, we may invest, from time to time, in distressed debt, debtor-in-possession loans, structured products, structurally subordinate loans, investments with deferred interest features, zero-coupon securities and defaulted securities.
We generate revenues primarily through receipt of interest income from the investments we hold. In addition, we generate income from various loan origination and other fees, dividends on direct equity investments and capital gains on the sales of investments. The companies in which we invest use our capital for a variety of reasons, including to support organic growth, to fund changes of control, to fund acquisitions, to make capital investments and for refinancing and recapitalizations.
Our level of investment activity may vary substantially from period to period depending on many factors, including the amount of debt and equity capital available to middle-market companies, the level of merger and acquisition activity for such companies, the level of investment and capital expenditures of such companies, the general economic environment, the amount of capital we have available to us and the competitive environment for the type of investments we make. Due to the impact of COVID-19 and related measures taken to contain its spread, the future duration and breadth of the adverse impact of COVID-19 on the broader markets in which the Company invests cannot currently be accurately predicted and future investment activity of the Company will be subject to these effects and the related uncertainty.
As a BDC, we may not acquire any assets other than “qualifying assets” specified in the 1940 Act, unless, at the time the acquisition is made, at least 70% of our total assets are qualifying assets (with certain limited exceptions). Qualifying assets include investments in “eligible portfolio companies.” Pursuant to rules adopted by the SEC, “eligible portfolio companies” include certain companies that do not have any securities listed on a national securities exchange and public companies whose securities are listed on a national securities exchange but whose market capitalization is less than $250 million.
As a BDC, we may also invest up to 30% of our portfolio opportunistically in “non-qualifying” portfolio investments, such as investments in non-U.S. companies.
Revenues
We primarily generate revenue in the form of interest income on debt investments and distributions on equity investments and, to a lesser extent, capital gains, if any, on equity securities that we may acquire in portfolio companies. Some of our investments may provide for deferred interest payments or payment-in-kind (“PIK”) interest. The principal amount of the debt investments and any accrued but unpaid interest generally becomes due at the maturity date. In addition, we may generate revenue in the form of commitment, origination, structuring or diligence fees, fees for providing managerial assistance and consulting fees. Loan origination fees, original issue discount and market discount or premium are capitalized, and we accrete or amortize such amounts into or against income over the life of the loan. We record contractual prepayment premiums on loans and debt securities as interest income.
Our debt investment portfolio consists of primarily floating rate loans. As of June 30, 2022 and December 31, 2021, 94.8% and 97.8%, respectively, of our debt investments, based on fair value, bore interest at floating rates, which may be subject to interest rate floors. Variable-rate investments subject to a floor generally reset periodically to the applicable floor, only if the floor exceeds the index. Trends in base interest rates, such as LIBOR, may affect our net investment income over the long term. In addition, our results may vary from period to period depending on the interest rates of new investments made during the period compared to investments that were sold or repaid during the period; these results reflect the characteristics of the particular portfolio companies that we invested in or exited during the period and not necessarily any trends in our business or macroeconomic trends.
Dividend income on preferred equity investments is recorded on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity investments is recorded on the record date for private portfolio companies and on the ex-dividend date for publicly traded portfolio companies.
Our primary operating expenses include the payment of fees to our Advisor under the Amended Advisory Agreement, our allocable portion of overhead expenses under the administration agreement (the “Administration Agreement”) and other operating costs, including those described below. The Base Management Fee and Incentive Fee compensate our Advisor for its work in identifying, evaluating, negotiating, closing and monitoring our investments. We bear all other out-of-pocket costs and expenses of our operations and transactions, including:
To the extent that expenses to be borne by us are paid by BCSF Advisors, we will generally reimburse BCSF Advisors for such expenses. To the extent the Administrator outsources any of its functions, the Company will pay the fees associated with such functions on a direct basis without profit to the Administrator. We will also reimburse the Administrator for its costs and expenses and our allocable portion of overhead incurred by it in performing its obligations under the Administration Agreement, including certain rent and compensation paid to or compensatory distributions received by our officers (including our Chief Compliance Officer and Chief Financial Officer) and any of their respective staff who provide services to us, operations staff who provide services to us, internal audit staff, if any, to the extent internal audit performs a role in our Sarbanes-Oxley internal control assessment and fees paid to third-party providers for goods or services. Our allocable portion of overhead will be determined by the Administrator, which expects to use various methodologies such as allocation based on the percentage of time certain individuals devote, on an estimated basis, to our business and affairs, and will be subject to oversight by our Board of Directors (our “Board”). We incurred expenses related to the Administrator of $0.0 million and $0.0 million for the three months ended June 30, 2022 and 2021, respectively, and $0.0 million and $0.0 million for the six months ended June 30, 2022 and 2021, respectively, which is included in other general and administrative expenses on the
consolidated statements of operations. The sub-administrator is paid its compensation for performing its sub-administrative services under the sub-administration agreement. We incurred expenses related to the sub-administrator of $0.1 million and $0.1 million for the three months ended June 30, 2022 and 2021, respectively, and $0.3 million and $0.2 million for the six months ended June 30, 2022 and 2021, respectively, which is included in other general and administrative expenses on the consolidated statements of operations. BCSF Advisors will not be reimbursed to the extent that such reimbursements would cause any distributions to our stockholders to constitute a return of capital. All of the foregoing expenses are ultimately borne by our stockholders.
Leverage
We may borrow money from time to time. However, our ability to incur indebtedness (including by issuing preferred stock), is limited by applicable regulations such that our asset coverage, as defined in the 1940 Act, must equal at least 150%. In determining whether to borrow money, we will analyze the maturity, covenant package and rate structure of the proposed borrowings as well as the risks of such borrowings compared to our investment outlook. As of June 30, 2022, the Company’s asset coverage was 188%.
Recent Events
On February 24, 2022, Russia launched a full-scaled military invasion of Ukraine. In response, countries worldwide, including the United States, have imposed sanctions against Russia on certain businesses and individuals, including, but not limited to, those in the banking, import and export sectors. This invasion has led, is currently leading, and for an unknown period of time will continue to lead to disruptions in local, regional, national, and global markets and economies affected thereby. These disruptions caused by the invasion have included, and may continue to include political, social, and economic disruptions and uncertainties that may affect our business operations or the business operations of our portfolio companies.
Investment Decision Process
The Advisor’s investment process can be broken into four processes: (1) Sourcing and Idea Generation, (2) Investment Diligence & Recommendation, (3) Credit Committee Approval and Portfolio Construction and (4) Portfolio & Risk Management.
Sourcing and Idea Generation
The investment decision-making process begins with sourcing ideas. Bain Capital Credit’s Private Credit Group interacts with over 1,500 global contacts as a means to generate middle market investment opportunities. Our Advisor also seeks to leverage the contacts of Bain Capital Credit’s industry groups, Trading Desk, Portfolio Group and Restructuring team, including private equity firms, banks and a variety of advisors and other intermediaries.
Investment Diligence & Recommendation
Our Advisor utilizes Bain Capital Credit’s bottom-up approach to investing, and it starts with the due diligence performed by its Private Credit Group. The group works with the close support of Bain Capital Credit’s industry groups. This diligence process typically begins with a detailed review of an offering memorandum as well as Bain Capital Credit’s own independent diligence efforts, including in-house materials and expertise, third-party independent research and interviews, and hands-on field checks where appropriate. For deals that progress beyond an initial stage, the team will usually schedule one or more meetings with company management, facilities visits and also meetings with the sponsor in order to ask more detailed questions and to better understand the sponsor’s view of the business and plans for it going forward. The team’s diligence work is summarized in investment memoranda and accompanying credit packs. Work product also includes full models and covenant analysis.
Credit Committee Approval and Portfolio Construction
If the reviewing team deems an investment worthy of serious consideration, it generally must be presented to the credit committee, which is comprised of at least three experienced credit professionals, who are selected based on strategy and geography. A portfolio manager leads the decision making process for each investment and engages the credit committee throughout the investment process in order to prioritize and direct the underwriting of each potential investment opportunity. For middle market holdings, the path to exit an investment is often discussed at credit committee meetings, including restructurings, acquisitions and sale to strategic buyers.
85
Since most middle market investments are illiquid, exits are driven by a sale of the portfolio company or a refinancing of the portfolio company’s debt.
Portfolio & Risk Management
Our Advisor utilizes Bain Capital Credit’s Private Credit Group for the daily monitoring of its respective credits after an investment has been made. Our Advisor believes that the ongoing monitoring of financial performance and market developments of portfolio investments is critical to successful investment management. Accordingly, our Advisor is actively involved in an on-going portfolio review process and attends board meetings. To the extent a portfolio investment is not meeting our Advisor’s expectations, our Advisor takes corrective action when it deems appropriate, which may include raising interest rates, gaining a more influential role on its board, taking warrants and, where appropriate, restructuring the balance sheet to take control of the company. Our Advisor will utilize the Bain Capital Credit Risk and Oversight Committee. The Risk and Oversight Committee is responsible for monitoring and reviewing risk management, including portfolio risk, counterparty risk and firm-wide risk issues. In addition to the methods noted above, there are a number of proprietary methods and tools used through all levels of Bain Capital Credit to manage portfolio risk.
Environmental, Social and Governance
Our Advisor believes that environmental, social, and governance (ESG) management helps to create lasting impact for all of its stakeholder groups, including investors, portfolio companies, employees and communities. ESG risks can have a negative impact on an issuer’s ability to meet its financial obligations. Therefore, strong ESG management aligns with our Advisor’s goal to seek and generate attractive risk-adjusted returns with the capital it invests. Our Advisor considers ESG factors throughout its investment decision-making process. These factors include, but are not limited to, applying a negative screen to avoid investing in companies with outsized ESG risks; examining the impact a company has on society and the environment during the diligence process; seeking to consider ESG factors from a company-specific and sector-wide perspective; and engaging companies via proxy voting, corporate actions and board seats, where applicable.
Portfolio and Investment Activity
During the three months ended June 30, 2022, we invested $484.3 million, including PIK, in 59 portfolio companies, and had $332.4 million in aggregate amount of principal repayments and sales, resulting in a net increase in investments of $151.9 million for the period. Of the $484.3 million invested during the three months ended June 30, 2022, $44.1 million was related to drawdowns on delayed draw term loans and revolvers of our portfolio companies.
During the three months ended June 30, 2021, we invested $216.1 million, including PIK, in 35 portfolio companies, and had $257.7 million in aggregate amount of principal repayments and sales, resulting in a net decrease in investments of $41.6 million for the period. Of the $216.1 million invested during the three months ended June 30, 2021, $52.3 million was related to drawdowns on delayed draw term loans and revolvers of our portfolio companies.
During the six months ended June 30, 2022, we invested $859.2 million, including PIK, in 79 portfolio companies, and had $853.4 million in aggregate amount of principal repayments and sales, resulting in a net increase in investments of $5.8 million for the period. Of the $859.2 million invested during the six months ended June 30, 2022, $69.9 million was related to drawdowns on delayed draw term loans and revolvers of our portfolio companies.
During the six months ended June 30, 2021, we invested $602.4 million, including PIK, in 48 portfolio companies, and had $807.1 million in aggregate amount of principal repayments and sales, resulting in a net decrease in investments of $204.7 million for the period. Of the 602.4 million invested during the six months ended June 30, 2021, $78.0 million was related to drawdowns on delayed draw term loans and revolvers of our portfolio companies.
The following table shows the composition of the investment portfolio and associated yield data as of June 30, 2022 (dollars in thousands):
Weighted Average
Yield (1)
at
Amortized
9.7
Subordinated Note Investment Vehicles (2)
13.8
11.5
11.3
N/A
Preferred Equity Interest in Investment Vehicles (2)
8.5
8.8
Weighted average yields are computed as (a) the annual stated interest rate or yield earned on the relevant accruing debt and other income producing securities, divided by (b) the total relevant investments at amortized cost or at fair value, as applicable. The weighted average yield does not represent the total return to our stockholders.
Represents debt and equity investment in ISLP and SLP.
The following table shows the composition of the investment portfolio and associated yield data as of December 31, 2021 (dollars in thousands):
9.9
Preferred equity
Equity Interest in Investment Vehicles (2)
7.5
11.4
11.2
The following table presents certain selected information regarding our investment portfolio as of June 30, 2022:
Number of portfolio companies
Percentage of debt bearing a floating rate (1)
94.8
Percentage of debt bearing a fixed rate (1)
The following table presents certain selected information regarding our investment portfolio as of December 31, 2021:
97.8
The following table shows the amortized cost and fair value of our performing and non-accrual investments as of June 30, 2022 (dollars in thousands):
Percentage at
Performing
2,268,202
2,254,426
98.6
Non-accrual
51,473
32,612
The following table shows the amortized cost and fair value of our performing and non-accrual investments as of December 31, 2021 (dollars in thousands):
Loans or debt securities are placed on non-accrual status when there is reasonable doubt that principal or interest will be collected. Accrued interest generally is reversed when a loan or debt security is placed on non-accrual status. Interest payments received on non-accrual loans or debt securities may be recognized as income or applied to principal depending upon management’s judgment. Non-accrual loans and debt securities are restored to accrual status when past due principal and interest is paid and, in management’s judgment, are likely to remain current. We may make exceptions to this treatment if the loan has sufficient collateral value and is in the process of collection. As of June 30, 2022, there were three loans from one issuer placed on non-accrual in the Company’s portfolio. As of December 31, 2021, there were no loans placed on non-accrual in the Company’s portfolio.
The following table shows the amortized cost and fair value of the investment portfolio, cash and cash equivalents and foreign cash as of June 30, 2022 (dollars in thousands):
Percentage
of
8,902
70.8
2,392,500
2,355,964
The following table shows the amortized cost and fair value of the investment portfolio, cash and cash equivalents and foreign cash as of December 31, 2021 (dollars in thousands):
30,877
71.9
71.2
6.1
5.0
2,515,863
2,492,686
Our Advisor monitors our portfolio companies on an ongoing basis. It monitors the financial trends of each portfolio company to determine if they are meeting their respective business plans and to assess the appropriate course of action for each company. The Advisor has several methods of evaluating and monitoring the performance and fair value of our investments, which may include the following:
Our Advisor rates the investments in our portfolio at least quarterly and it is possible that the rating of a portfolio investment may be reduced or increased over time. For investments rated 3 or 4, our Advisor enhances its level of scrutiny over the monitoring of such portfolio company. Our internal performance ratings do not constitute any rating of investments by a nationally recognized statistical rating organization or represent or reflect any third-party assessment of any of our investments.
The following table shows the composition of our portfolio on the 1 to 4 rating scale as of June 30, 2022 (dollars in thousands):
Number of
Investment Performance Rating
of Total
Companies(1)
19,469
2,077,806
90.8
110
90.2
157,151
Number of investment rated companies may not agree to total portfolio companies due to investments across investment types and structures.
90
The following table shows the composition of our portfolio on the 1 to 4 rating scale as of December 31, 2021 (dollars in thousands):
42,233
2,017,059
88.1
95
89.6
229,813
Results of Operations
Our operating results for the three months ended June 30, 2022 and 2021 were as follows (dollars in thousands):
Our operating results for the six months ended June 30, 2022 and 2021 were as follows (dollars in thousands):
Net increase in net assets resulting from operations can vary from period to period as a result of various factors, including additional financing, new investment commitments, the recognition of realized gains and losses and changes in unrealized appreciation and depreciation on the investment portfolio. Due to these factors, comparisons may not be meaningful.
The composition of our investment income for the three months ended June 30, 2022 and 2021 was as follows (dollars in thousands):
Interest income
35,884
39,755
6,370
2,420
2,931
Interest income from investments, which includes interest and accretion of discounts and fees, decreased to $35.8 million for the three months ended June 30, 2022 from $39.8 million for the three months ended June 30, 2021, primarily due to the decrease in the Company’s investment portfolio and the establishment of the newly formed joint venture, SLP, between the periods. Our investment portfolio at amortized cost decreased to $2,319.7 million as June 30, 2022 compared to $2,344.9 million as of June 30, 2021. Dividend income increased to $6.4 million for the three months ended June 30, 2022 from $2.9 million for the three months ended June 30, 2021, primarily due to an increase in dividend income from our equity interests in ISLP, SLP, and 2018-1 Issuer. Other income increased to approximately $7.7 million for the three months ended June 30, 2022 from $0.9 million for the three months ended June 30, 2021, primarily due to an increase in one-time fees earned on certain investments. As of June 30, 2022, the weighted average yield of our investment portfolio at amortized cost increased to 8.4% from 7.5% as of June 30, 2021.
The composition of our investment income for the six months ended June 30, 2022 and 2021 was as follows (dollars in thousands):
73,917
81,728
Interest income from investments, which includes interest and accretion of discounts and fees, decreased to $73.9 million for the six months ended June 30, 2022 from $81.7 million for the six months ended June 30, 2021, primarily due to the decrease in the Company’s investment portfolio and the establishment of the newly formed joint venture, SLP, between the periods. Our investment portfolio at amortized cost decreased to $2,319.7 million as June 30, 2022 compared to $2,344.9 million as of June 30, 2021. Dividend income increased to $10.0 million for the six months ended June 30, 2022 from $5.0 million for the six months ended June 30, 2021, primarily due to an increase in dividend income from our equity interests in ISLP, SLP, and 2018-1 Issuer. Other income increased to approximately $8.2 million for the six months ended June 30, 2022 from $4.3 million for the six months ended June 30, 2021, primarily due to an increase in one-time fees earned on certain investments.
Operating Expenses
The composition of our operating expenses for the three months ended June 30, 2022 and 2021 was as follows (dollars in thousands):
Total expenses, before fee waivers
The composition of our operating expenses for the six months ended June 30, 2022 and 2021 was as follows (dollars in thousands):
Interest and Debt Financing Expenses
Interest and debt financing expenses on our borrowings totaled approximately $11.0 million and $13.0 million for the three months ended June 30, 2022 and 2021, respectively. Interest and debt financing expense for the three months ended June 30, 2022 as compared to June 30, 2021 decreased primarily due to a decrease in total principal debt outstanding, improved average stated interest rate on debt, and partial redemption of the 2023 Notes between periods. Interest and debt financing expenses on our borrowings totaled approximately $21.7 million and $24.8 million for the six months ended June 30, 2022 and 2021, respectively. Interest and debt financing expense for the six months ended June 30, 2022 as compared to June 30, 2021 decreased primarily due to a decrease in total principal debt outstanding, improved average stated interest rate on debt, and partial redemption of the 2023 Notes between periods. The weighted average principal debt balance outstanding for the three months ended June 30, 2022 was $1,220.9 million compared to $1,311.1 million for the three months ended June 30, 2021. The weighted average principal debt balance outstanding for the six months ended June 30, 2022 was $1,267.7 million compared to $1,380.5 million for the six months ended June 30, 2021.
Management Fees
Management fees (net of waivers) increased to $8.5 million for the three months ended June 30, 2022 from $5.9 million for the three months ended June 30, 2021. Management fees (gross of waivers) decreased to $8.5 million for the three months ended June 30, 2022 compared to $8.6 million for the three months ended June 30, 2021. Management fees waived for the three months ended June 30, 2022 and 2021 were $0.0 million and $2.7 million, respectively.
Management fees (net of waivers) increased to $16.8 million for the six months ended June 30, 2022 from $12.5 million for the six months ended June 30, 2021. Management fees (gross of waivers) decreased to $16.8 million for the six months ended June 30, 2022 compared to $17.3 million for the six months ended June 30, 2021. Management fees waived for the six months ended June 30, 2022 and 2021 were $0.0 million and $4.8 million, respectively.
Incentive Fees
Incentive fee (net of waivers) increased to $4.1 million for the three months ended June 30, 2022 from $3.5 million for the three months ended June 30, 2021. Incentive fee waivers related to pre-incentive fee net investment income consisted of voluntary waivers of $0.0 million for the three months ended June 30, 2022 and $4.5 million for the three months ended June 30, 2021. For the three months ended June 30, 2022 there were no incentive fees related to the GAAP Incentive Fee. Incentive fee (net of waivers) decreased to $7.4 million for the six months ended June 30, 2022 from $10.3 million for the six months ended June 30, 2021. Incentive fee waivers related to pre-incentive fee net investment income consisted of voluntary waivers of $0.0 million for the six months ended June 30, 2022 and $4.5 million for the six months ended June 30, 2021. For the six months ended June 30, 2022 there were no incentive fees related to the GAAP Incentive Fee.
Professional Fees and Other General and Administrative Expenses
Professional fees and other general and administrative expenses decreased to $1.9 million for the three months ended June 30, 2022 from $2.0 million for the three months ended June 30, 2021, primarily due to a decrease in costs associated with servicing our investment portfolio.
Professional fees and other general and administrative expenses decreased to $3.7 million for the six months ended June 30, 2022 from $4.3 million for the six months ended June 30, 2021, primarily due to a decrease in costs associated with servicing our investment portfolio.
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Net Realized and Unrealized Gains and Losses
The following table summarizes our net realized and unrealized gains (losses) for the three months ended June 30, 2022 and 2021 (dollars in thousands):
1,120
7,917
Net realized loss on investments
(3,696)
(3,072)
Net realized gain on foreign currency transactions
1,298
Net realized loss on foreign currency transactions
(293)
Net realized gain on forward currency exchange contracts
Net realized loss on forward currency exchange contracts
Net realized gains (losses)
Change in unrealized appreciation on investments
22,376
32,411
Change in unrealized depreciation on investments
(40,543)
(15,319)
(18,167)
17,092
Unrealized depreciation on foreign currency translation
Net change in unrealized appreciation on foreign currency and forward currency exchange contracts
6,073
15,963
For the three months ended June 30, 2022, and 2021, we had net realized gains (losses) on investments of $(2.6) million and $4.8 million, respectively. For the three months ended June 30, 2022 and 2021, we had net realized gains on foreign currency transactions of $3.2 million and $1.0 million, respectively. For the three months ended June 30, 2022 and 2021, we had net realized gains (losses) on forward currency contracts of $2.0 million and ($18.4) million, respectively, primarily as a result of settling GBP forward contracts.
For the three months ended June 30, 2022, we had $22.4 million in unrealized appreciation on 22 portfolio company investments, which was offset by $40.5 million in unrealized depreciation on 103 portfolio company investments. Unrealized depreciation for the three months ended June 30, 2022 resulted from a decrease in fair value, primarily due to a widening of credit spreads and negative valuation adjustments. Unrealized appreciation was primarily due to positive valuation adjustments.
For the three months ended June 30, 2021, we had $32.4 million in unrealized appreciation on 60 portfolio company investments, which was offset by $15.3 million in unrealized depreciation on 63 portfolio company investments. Unrealized appreciation for the three months ended June 30, 2021 resulted from an increase in fair value, primarily due to a tightening spread environment, positive investment-related adjustments, and the reversal of unrealized depreciation from the sale of our debt investments. Unrealized depreciation was primarily due to negative valuation adjustments.
For the three months ended June 30, 2022 and 2021, we had unrealized appreciation on forward currency exchange contracts of $8.1 million and $16.0 million, respectively. For the three months ended June 30, 2022, unrealized appreciation on forward currency exchange contracts was due to EUR and GBP forward contracts.
4,723
27,731
(5,882)
(7,710)
(488)
(3,174)
3,301
40,777
53,457
(51,135)
(40,599)
(10,358)
12,858
Unrealized appreciation (depreciation) on foreign currency translation
20,926
For the six months ended June 30, 2022, and 2021, we had net realized gains (losses) on investments of $(1.2) million and $20.0 million, respectively. For the six months ended June 30, 2022 and 2021, we had net realized gains (losses) on foreign currency transactions of $2.7 million and ($2.0) million, respectively. For the six months ended June 30, 2022 and 2021, we had net realized gains (losses) on forward currency contracts of $3.3 million and ($21.7) million, respectively, primarily as a result of settling GBP forward contracts.
For the six months ended June 30, 2022, we had $40.8 million in unrealized appreciation on 31 portfolio company investments, which was offset by ($51.1) million in unrealized depreciation on 96 portfolio company investments. Unrealized depreciation for the six months ended June 30, 2022 resulted from an decrease in fair value, primarily due to a widening of credit spreads and negative valuation adjustments. Unrealized appreciation was primarily due to positive valuation adjustments.
For the six months ended June 30, 2021, we had $53.5 million in unrealized appreciation on 72 portfolio company investments, which was offset by $40.6 million in unrealized depreciation on 62 portfolio company investments. Unrealized appreciation for the six months ended June 30, 2021 resulted from an increase in fair value, primarily due to a tightening spread environment, positive investment-related adjustments, and the reversal of unrealized depreciation from the sale of our debt investments. Unrealized depreciation was primarily due to negative valuation adjustments.
For the six months ended June 30, 2022 and 2021, we had unrealized appreciation on forward currency exchange contracts of $9.8 million and $20.6 million, respectively. For the six months ended June 30, 2022, unrealized appreciation on forward currency exchange contracts was due to EUR and GBP forward contracts.
96
The following table summarizes the impact of foreign currency for the three months ended June 30, 2022 and 2021 (dollars in thousands):
Net change in unrealized appreciation (depreciation) on investments due to foreign currency
(7,731)
1,628
Net realized loss on investments due to foreign currency
(2,393)
(387)
Net change in unrealized depreciation on foreign currency translation
(2,053)
Foreign currency impact to net increase (decrease) in net assets resulting from operations
1,131
(187)
The following table summarizes the impact of foreign currency for the six months ended June 30, 2022 and 2021 (dollars in thousands):
Net change in unrealized (depreciation) on investments due to foreign currency
(10,607)
(15,711)
Net realized gain (loss) on investments due to foreign currency
(2,546)
15,529
(1,707)
854
(2,965)
Included in total net (losses) on the consolidated statements of operations is net (losses) of ($12.2) million and ($1.9) million related to realized and unrealized gains and losses on investments, foreign currency holdings and non-investment assets and liabilities attributable to the changes in foreign currency exchange rates for the six months ended June 30, 2022 and 2021, respectively. Including the total net realized and unrealized gains (losses) on forward currency exchange contracts of $13.0 million and ($1.1) million, respectively, included in the above table, the net impact of foreign currency on total net gains (losses) on the consolidated statements of operations is $0.9 million and ($3.0) million for the six months ended June 30, 2022 and 2021, respectively.
Net Increase (Decrease) in Net Assets Resulting from Operations
For the three months ended June 30, 2022 and 2021, the net increase in net assets resulting from operations was $17.2 million and $42.4 million, respectively. Based on the weighted average shares of common stock outstanding for the three months ended June 30, 2022 and 2021, our per share net increase in net assets resulting from operations was $0.27 and $0.66, respectively.
For the six months ended June 30, 2022 and 2021, the net increase in net assets resulting from operations was $50.9 million and $74.2 million, respectively. Based on the weighted average shares of common stock outstanding for the six months ended June 30, 2022 and 2021, our per share net increase in net assets resulting from operations was $0.79 and $1.15, respectively.
Financial Condition, Liquidity and Capital Resources
Our liquidity and capital resources are derived primarily from proceeds from equity issuances, advances from our credit facilities, 2019-1 Debt, 2023 Notes, March 2026 Notes, October 2026 Notes and cash flows from operations. The primary uses of our cash are for (1) investments in portfolio companies and other investments and to comply with certain portfolio diversification requirements; (2) the cost of operations (including payments to the Advisor under the Investment Advisory and Administration Agreements); (3) debt service, repayment, and other financing costs; and, (4) cash distributions to the holders of our common shares.
We intend to continue to generate cash primarily from cash flows from operations, future borrowings and future offerings of securities. We may from time to time raise additional equity or debt capital through registered offerings, enter into additional debt facilities, or increase the size of existing facilities or issue debt securities. Any such incurrence or issuance would be subject to prevailing market conditions, our liquidity requirements, contractual and regulatory restrictions and other factors. We are required to meet an asset coverage ratio, defined under the 1940 Act as the ratio of our total assets (less all liabilities and indebtedness not represented by senior securities) to our outstanding senior securities, of at least 150% after each issuance of senior securities. As of June 30, 2022 and December 31, 2021, our asset coverage ratio was 188% and 177%, respectively.
At June 30, 2022 and December 31, 2021, we had $68.9 million and $203.6 million in cash, foreign cash, restricted cash and cash equivalents, respectively.
At June 30, 2022, we had approximately $108.3 million of availability on our Sumitomo Credit Facility and $50.0 million of availability on our Revolving Advisor Loan, subject to existing terms and regulatory requirements. At December 31, 2021, we had approximately $300.0 million of availability on our Sumitomo Credit Facility and $50.0 million of availability on our Revolving Advisor Loan, subject to existing terms and regulatory requirements.
For the six months ended June 30, 2022, cash, foreign cash, restricted cash, and cash equivalents decreased by $133.5 million. During the six months ended June 30, 2022, we used $280.2 million in cash for operating activities. The decrease in cash used for operating activities was primarily related to the purchases of investments of $761.8 million, which was offset by proceeds from principal payments and sales of investments of $434.2 million and a net increase in assets resulting from operations of $50.9 million.
During the six months ended June 30, 2022, we provided $146.7 million for financing activities, primarily due to borrowings and repayments on our Sumitomo Credit Facility.
For the six months ended June 30, 2021, cash, foreign cash, restricted cash, and cash equivalents increased by $7.0 million. During the six months ended June 30, 2021, we provided $206.2 million in cash for operating activities. The increase in cash used for operating activities was primarily related to the proceeds from principal payments and sales of investments of $805.3 million, and a net increase in net assets resulting from operations of $74.2 million, which was offset by purchases of investments of $608.0 million and net realized loss from investments of $20.0 million.
During the six months ended June 30, 2021, we used $197.4 million from financing activities, primarily from borrowings on our debt from the JPM Credit Facility and the issuance of the $300.0 million 2026 Notes, offset by repayments on our debt of $605.4 million, including the termination of our BCSF Revolving Credit Facility, and distributions paid during the period of $43.9 million.
On November 19, 2018, we closed our initial public offering (the “IPO”) issuing 7,500,000 shares of its common stock at a public offering price of $20.25 per share. Shares of common stock of the Company began trading on the New York Stock Exchange under the symbol “BCSF” on November 15, 2018. The offering generated net proceeds, after expenses, of $145.4 million. All outstanding capital commitments from the Company’s Private Offering were cancelled as of the completion of the IPO.
During the six months ended June 30, 2022, we did not issue shares of our common stock to investors who have opted into our dividend reinvestment plan. During the six months ended June 30, 2021, we did not issue shares of our common stock to investors who have opted into our dividend reinvestment plan.
On May 7, 2019, the Company’s Board of Directors authorized the Company to repurchase up to $50 million of its outstanding common stock in accordance with safe harbor rules under the Exchange Act of 1934. Any such repurchases will depend upon market conditions and there is no guarantee that the Company will repurchase any particular number of shares or any shares at all. As of June 30 2022, there have been no repurchases of common stock.
On May 4, 2020, the Company’s Board of Directors approved a transferable subscription rights offering to our stockholders of record as of May 13, 2020. The rights entitled record stockholders to subscribe for up to an aggregate of 12,912,453 shares of our common stock. Record stockholders received one right for each share of common stock owned on the record date. The rights entitled the holders to purchase one new share of common stock for every four rights held, and record stockholders who fully exercised their rights were entitled to subscribe, subject to certain limitations and allotment rules, for additional shares that remain unsubscribed as a result of any unexercised rights. The rights were transferable and listed on the New York Stock Exchange under the symbol “BCSF RT”. The rights offering expired June 5, 2020. Based on the terms of the offering and the market price of the stock during the applicable period, holders of rights participating in the offering were entitled to purchase one new share of common stock for every four rights held at a subscription price of $10.2163 per share. On June 16, 2020, the Company closed its transferrable rights offering and issued 12,912,453 shares. The offering generated net proceeds, before expenses, of $129.6 million, including the underwriting discount and commissions of $2.3 million.
Total Aggregate
Distribution Policy
The Company’s distributions are recorded on the record date. The following table summarizes distributions declared during the six months ended June 30, 2022 (dollars in thousands):
99
The Company’s distributions are recorded on the record date. The following table summarizes distributions declared during the six months ended June 30, 2021 (dollars in thousands):
Distributions to common stockholders are recorded on the record date. To the extent that we have income available, we intend to distribute quarterly distributions to our stockholders. Our quarterly distributions, if any, will be determined by the Board. Any distributions to our stockholders will be declared out of assets legally available for distribution.
We have elected to be treated, and intend to operate in a manner so as to continuously qualify, as a regulated investment company (a “RIC) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), beginning with our taxable year ended December 31, 2016. To qualify for and maintain RIC tax treatment, among other things, we must distribute dividends to our stockholders in respect of each taxable year of an amount generally at least equal to 90% of the sum of our net ordinary income and net short-term capital gains in excess of our net long-term capital losses. In order to avoid the imposition of certain excise taxes imposed on RICs, we must distribute dividends to our stockholders in respect of each calendar year of an amount at least equal to the sum of: (1) 98% of our net ordinary income (taking into account certain deferrals and elections) for such calendar year; (2) 98.2% of our capital gains in excess of capital losses, adjusted for certain ordinary losses, generally for the one-year period ending on October 31 of such calendar year; and (3) the sum of any net ordinary income plus capital gains net income for preceding years that were not distributed during such years and on which we paid no federal income tax.
We intend to distribute net capital gains (i.e., net long-term capital gains in excess of net short-term capital losses), if any, at least annually out of the assets legally available for such distributions. However, we may decide in the future to retain all or a portion of our net capital gains for investment, incur a corporate-level tax on such capital gains, and elect to treat such capital gains as deemed distributions to our stockholders.
We have adopted a dividend reinvestment plan that provides for the reinvestment of cash dividends and distributions. Prior to the IPO, stockholders who “opted in” to our dividend reinvestment plan had their cash dividends and distributions automatically reinvested in additional shares of our common stock, rather than receiving cash dividends and distributions. Subsequent to the IPO, stockholders who do not “opt out” of our dividend reinvestment plan will have their cash dividends and distributions automatically reinvested in additional shares of our common stock, rather than receiving cash dividends and distributions. Stockholders could elect to “opt in” or “opt out” of our dividend reinvestment plan in their subscription agreements, through the private offering. The elections of stockholders prior to the IPO shall remain effective after the IPO.
The U.S. federal income tax characterization of distributions declared and paid for the fiscal year will be determined at fiscal year-end based upon our investment company taxable income for the full fiscal year and distributions paid during the full year.
Commitments and Off-Balance Sheet Arrangements
We may become a party to financial instruments with off-balance sheet risk in the normal course of our business to fund investments and to meet the financial needs of our portfolio companies. These instruments may include commitments to extend credit and involve, to varying degrees, elements of liquidity and credit risk in excess of the amount recognized on the statements of assets and liabilities. As of June 30, 2022, the Company had $283.3 million of unfunded commitments under loan and financing agreements
Significant Accounting Estimates and Critical Accounting Policies
The Company’s unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”). The Company’s unaudited consolidated financial statements and related financial information have been prepared pursuant to the requirements for reporting on Form 10-Q and Articles 1, 6, 10 and 12 of Regulation S-X. These consolidated financial statements reflect adjustments that in the opinion of the Company are necessary for the fair statement of the financial position and results of operations for the periods presented herein and are not necessarily indicative of the full fiscal year. We have determined we meet the definition of an investment company and follow the accounting and reporting guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946 — Financial Services — Investment Companies (“ASC 946”). Our financial currency is U.S. dollars and these consolidated financial statements have been prepared in that currency.
The preparation of the consolidated financial statements in conformity with US GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates and such differences could be material.
Revenue Recognition
We record our investment transactions on a trade date basis. We record realized gains and losses based on the specific identification method. We record interest income, adjusted for amortization of premium and accretion of discount, on an accrual basis. Discount and premium to par value on investments acquired are accreted and amortized, respectively, into interest income over the life of the respective investment using the effective interest method. Loan origination fees, original issue discount and market discount or premium are capitalized and amortized into or against interest income using the effective interest method or straight-line method, as applicable. We record any prepayment premiums, unamortized upfront loan origination fees and unamortized discounts received upon prepayment of a loan or debt security as interest income.
Dividend income on preferred equity investments is recorded on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity investments is recorded on the record date for such distributions in the case of private portfolio companies, and on the ex-dividend date for publicly traded portfolio companies. Distributions received from a limited liability company or limited partnership investment are evaluated to determine if the distribution should be recorded as dividend income or a return of capital.
Certain investments may have contractual PIK interest or dividends. PIK represents accrued interest or accumulated dividends that are added to the loan principal of the investment on the respective interest or dividend payment dates rather than being paid in cash and generally becomes due at maturity or upon being called by the issuer. We record PIK as interest or dividend income, as applicable. If at any point we believe PIK may not be realized, we place the investment generating PIK on non-accrual status. When a PIK investment is placed on non-accrual status, the accrued, uncapitalized interest or dividends are generally reversed through interest or dividend income, as applicable.
Certain structuring fees and amendment fees are recorded as other income when earned. We record administrative agent fees received as other income when the services are rendered.
Investments for which market quotations are readily available are typically valued at such market quotations. Market quotations are obtained from an independent pricing service, where available. If we cannot obtain a price from an independent pricing service or if the independent pricing service is not deemed to be representative with the market, we value certain investments held by us on the basis of prices provided by principal market makers. Generally investments marked in this manner will be marked at the mean of the bid and ask of the independent broker quotes obtained, in some cases, primarily illiquid securities, multiple quotes may not be available and the
101
mid of the bid/ask from one broker will be used. To validate market quotations, we utilize a number of factors to determine if the quotations are representative of fair value, including the source and number of quotations. Debt and equity securities that are not publicly traded or whose market prices are not readily available are valued at fair value, subject at all times to the oversight and approval of the Board, based on the input of our Advisor, our Audit Committee and one or more independent third party valuation firms engaged by our Board.
With respect to unquoted securities, we value each investment considering, among other measures, discounted cash flow models, comparisons of financial ratios of peer companies that are public and other factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, we use the pricing indicated by the external event to corroborate and/or assist us in our valuation. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material.
In following this approach, the types of factors that are taken into account in the fair value pricing of investments include, as relevant, but are not limited to: comparison to publicly traded securities, including factors such as yield, maturity and measures of credit quality; the enterprise value of a portfolio company; the nature and realizable value of any collateral; the portfolio companies ability to make payments and its earnings and discounted cash flows; and the markets in which the portfolio company does business. In cases where an independent valuation firm provides fair valuations for investments, the independent valuation firm provides a fair valuation report, a description of the methodology used to determine the fair value and their analysis and calculations to support their conclusion.
Contractual Obligations
We have entered into the Amended Advisory Agreement with our Advisor (which supersedes the Prior Investment Advisory Agreement dated November 14, 2018 we had previously entered into). Our Advisor has agreed to serve as our investment adviser in accordance with the terms of the Amended Advisory Agreement. Under the Amended Advisory Agreement, we have agreed to pay an annual base management fee as well as an incentive fee based on our investment performance.
On November 28, 2018, our Board, including a majority of our Independent Directors, approved the Amended Advisory Agreement. On February 1, 2019 the Company’s stockholders approved the Amended Advisory Agreement. Pursuant to this Agreement, effective February 1, 2019, the base management fee of 1.5% (0.375% per quarter) of the average value of the Company’s gross assets (excluding cash and cash equivalents, but including assets purchased with borrowed amounts) will continue to apply to assets held at an asset coverage ratio of 200%, but a lower base management fee of 1.0% (0.25% per quarter) of the average value of the Company’s gross assets (excluding cash and cash equivalents, but including assets purchased with borrowed amounts) will apply to any amount of assets attributable to leverage decreasing the Company’s asset coverage ratio below 200%. The Amended Advisory Agreement incorporates (i) a three-year lookback provision and (ii) a cap on quarterly income incentive fee payments based on net realized or unrealized capital loss, if any, during the applicable three-year lookback period.
We have entered into an Administration Agreement with the Administrator pursuant to which the Administrator will furnish us with administrative services necessary to conduct our day-to-day operations. We reimburse the Administrator for its costs and expenses and our allocable portion of overhead incurred by it in performing its obligations under the Administration Agreement, including certain compensation paid to or compensatory distributions received by our officers (including our Chief Compliance Officer and Chief Financial Officer) and any of their respective staff who provide services to us, operations staff who provide services to us, and internal audit staff, if any, to the extent internal audit performs a role in our Sarbanes-Oxley internal control assessment.
If any of our contractual obligations discussed above are terminated, our costs may increase under any new agreements that we enter into as replacements. We would also likely incur expenses in locating alternative parties to provide the services we expect to receive under our Amended Advisory Agreement and Administration Agreement.
The following table shows the contractual maturities of our debt obligations as of June 30, 2022 (dollars in thousands):
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are subject to financial market risks, including changes in interest rates. We will generally invest in illiquid loans and securities including debt and equity securities of middle-market companies. Because we expect that there will not be a readily available market for many of the investments in our portfolio, we expect to value many of our portfolio investments at fair value as determined in good faith by the Board using a documented valuation policy and a consistently applied valuation process. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material.
Assuming that the statement of financial condition as of June 30, 2022 were to remain constant and that we took no actions to alter our existing interest rate sensitivity, the following table shows the annualized impact of hypothetical base rate changes in interest rates (dollars in thousands):
Net Increase
Increase
(Decrease) in Net
(Decrease) in
Change in Interest Rates
Interest Expense
Down 25 basis points
(3,610)
(1,302)
(2,308)
Up 100 basis points
15,377
9,935
Up 200 basis points
34,582
10,884
23,698
Up 300 basis points
53,880
16,327
37,553
From time to time, we may make investments that are denominated in a foreign currency. These investments are translated into U.S. dollars at the balance sheet date, exposing us to movements in foreign exchange rates. We may employ hedging techniques to minimize these risks, but we cannot assure you that such strategies will be effective or without risk to us. We may seek to utilize instruments such as, but not limited to, forward contracts to seek to hedge against fluctuations in the relative values of our portfolio positions from changes in currency exchange rates.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of June 30, 2022 (the end of the period covered by this report), our management has carried out an evaluation, under the supervision of and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15 and 15d-15(e) under the Exchange Act). Based on that evaluation our Chief Executive Officer and Chief Financial Officer have concluded that our current disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our Chief Executive Officer and Chief Financial Officer as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Changes in Internal Controls Over Financial Reporting
There have been no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, that occurred during our most recently completed fiscal quarter ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us. From time to time, we may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under loans to or other contracts with our portfolio companies.
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, which could materially affect our business, financial condition and/or operating results. The risks described in our Annual Report on Form 10-K are not the only risks we face. Additional risks and uncertainties are not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. During the three months ended June 30, 2022, there have been no material changes from the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2021.
Risks Related to Invastion of Ukraine
On February 24, 2022, Russia launched a full-scaled military invasion of Ukraine. In response, countries worldwide, including the United States, have imposed sanctions against Russia on certain businesses and individuals, including, but not limited to, those in the banking, import and export sectors. This invasion has led, is currently leading, and for an unknown period of time will continue to lead to disruptions in local, regional, national, and global markets and economies affected thereby. These disruptions caused by the invasion have included, and may continue to include, political, social, and economic disruptions and uncertainties that may affect our business operations or the business operations of our portfolio companies.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits, Financial Statement Schedules
The following exhibits are included, or incorporated by reference, in this Quarterly Report on Form 10-Q for the three months ended June 30, 2022 (and are numbered in accordance with Item 601 of Regulation S-K under the Securities Act).
ExhibitNumber
Description of Document
3.1
Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form 10 (File No. 000-55528) filed on October 6, 2016).
Bylaws (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form 10 (File No. 000-55528) filed on October 6, 2016).
Dividend Reinvestment Plan (incorporated by reference to Exhibit 10.5 to the Company’s Registration Statement on Form 10 (File No. 000-55528) filed on October 6, 2016).
Second Amended and Restated Investment Advisory Agreement, dated November 28, 2018, by and between the Company and the Advisor (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 814-01175), filed on February 1, 2019).
10.2
Administration Agreement, dated October 6, 2016, by and between the Company and the Administrator (incorporated by reference to Exhibit 10.2 to the Company’s Registration Statement on Form 10 (File No. 000-55528) filed on October 6, 2016).
Form of Advisory Fee Waiver Agreement by and between the Company and the Advisor (incorporated by reference to Exhibit 10.3 to the Company’s Registration Statement on Form 10 (File No. 000-55528) filed on October 6, 2016).
10.4
Form of Custodian Agreement by and between the Company and U.S. Bank National Association (incorporated by reference to Exhibit 10.6 to the Company’s Registration Statement on Form 10 (File No. 000-55528) filed on October 6, 2016).
10.5
Indenture, dated as of September 28, 2018, between BCC Middle Market CLO 2018-1, LLC, as issuer, and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on October 17, 2018).
Portfolio Management Agreement, dated as of September 28, 2018, by and between BCC Middle Market CLO 2018-1, LLC, as issuer, and Bain Capital Specialty Finance, Inc., as portfolio manager (incorporated by reference to Exhibit 10.10 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on October 17, 2018).
10.7
Loan Sale Agreement, dated as of September 28, 2018, by and between BCC Middle Market CLO 2018-1, LLC, as issuer, and Bain Capital Specialty Finance, Inc., as the transferor (incorporated by reference to Exhibit 10.11 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on October 17, 2018).
Collateral Administration Agreement, dated as of September 28, 2018, by and between BCC Middle Market CLO 2018-1, LLC, as issuer, Bain Capital Specialty Finance, Inc., as portfolio manager, and Wells Fargo Bank, National Association, as collateral administrator (incorporated by reference to Exhibit 10.12 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on October 17, 2018).
Master Participation Agreement, dated as of September 28, 2018, by and between BCSF I, LLC, as financing subsidiary, and BCC Middle Market CLO 2018-1, LLC, as issuer (incorporated by reference to Exhibit 10.13 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on October 17, 2018).
10.10
Amended and Restated Indenture, dated as of November 31, 2021, between BCC Middle Market CLO 2019-1, LLC, as issuer, BCC Middle Market CLO 2019-1 Co-Issuer, LLC, as co-issuer and Wells Fargo Bank, National Association, as trustee. (incorporated by reference to Exhibit 10.10 to the Company's Quarterly Report on Form 10-Q (File No. 814-01175), filed on May 5, 2022).
10.11
Amended and Restated Portfolio Management Agreement, dated as of November 30, 2021, by and between BCC Middle Market CLO 2019-1, LLC, as issuer, and Bain Capital Specialty Finance, Inc., as portfolio manager. (incorporated by reference to Exhibit 10.11 to the Company's Quarterly Report on Form 10-Q (File No. 814-01175), filed on May 5, 2022).
10.12
Loan Sale Agreement, dated as of August 28, 2019, by and between BCC Middle Market CLO 2019-1, LLC, as issuer, and Bain Capital Specialty Finance, Inc., as the transferor (incorporated by reference to Exhibit 10.18 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on November 6, 2019).
Collateral Administration Agreement, dated as of August 28, 2019, by and between BCC Middle Market CLO 2019-1, LLC, as issuer, Bain Capital Specialty Finance, Inc., as portfolio manager, and Wells Fargo Bank, National Association, as collateral administrator (incorporated by reference to Exhibit 10.19 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on November 6, 2019).
10.14
Master Participation Agreement, dated as of August 28, 2019, by and between BCSF I, LLC, as financing subsidiary, and BCC Middle Market CLO 2019-1, LLC, as issuer (incorporated by reference to Exhibit 10.20 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on November 6, 2019).
10.15
Master Participation Agreement, dated as of August 28, 2019, by and between BCSF II-C, LLC, as financing subsidiary, and BCC Middle Market CLO 2019-1, LLC, as issuer (incorporated by reference to Exhibit 10.21 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on November 6, 2019).
10.16
Revolving Loan Agreement, dated March 27, 2020, by and between the Company, as Borrower, and BCSF Advisors, LP, as Lender (incorporated by reference to Exhibit 10.26 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on May 4, 2020).
10.17
Master Note Purchase Agreement, dated June 10, 2020, of the Company (incorporated by reference to Exhibit 10.28 to the Company’s Quarterly Report on Form 10-Q (File No. 814-01175), filed on August 5, 2020).
10.18
Amended and Restated Limited Liability Company Agreement, dated February 9, 2021, of International Senior Loan Program, LLC, by and among the Company, Pantheon Private Debt Program SCSp SICAV—RAIF—Pantheon Senior Debt Secondaries II (USD), Pantheon Private Debt Program SCSp SICAV—RAIF—Tubera Credit 2020, Solutio Premium Private Debt I SCSp and Solutio Premium Private Debt II Master SCSp (incorporated by reference to Exhibit 10.31 to the Company’s Annual Report on Form 10-K (File No. 814-01175) filed on February 24, 2021).
10.19
Underwriting Agreement, dated March 3, 2021, by and among Bain Capital Specialty Finance, Inc., BCSF Advisors, LP and Goldman Sachs & Co. LLC, as the representative of the underwriters (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K (File No. 814-01175), filed on March 5, 2021).
10.20
Indenture, dated as of March 10, 2021, by and between the Company and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K (File No. 814-01175), filed on March 10, 2021).
10.21
First Supplemental Indenture, dated as of March 10, 2021, relating to the 2.950% Notes due 2026, by and between the Company and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K (File No. 814-01175), filed on March 10, 2021).
10.22
Form of 2.950% Notes due 2026 (incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K (File No. 814-01175), filed on March 10, 2021).
107
10.23
Underwriting Agreement, dated October 5, 2021, by and among Bain Capital Specialty Finance, Inc., BCSF Advisors, LP, and Goldman Sachs & Co. LLC and SMBC Nikko Securities America Inc., as the representative of the underwriters (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K (File No. 814-01175), filed on October 6, 2021).
10.24
Second Supplemental Indenture, dated as of October 13, 2021, relating to the 2.550% Notes due 2026, by and between the Company and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K (File No. 814-01175), filed on October 13, 2021).
10.25
Form of 2.550% Notes due 2026 (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K (File No. 814-01175), filed on October 13, 2021).
10.26
Revolving Credit Agreement, dated as of December 24, 2021, by and among the Company as Borrower, with Sumitomo Mitsui Banking Corporation, as Administrative Agent and Sole Book Runner, and with Sumitomo Mitsui Banking Corporation and MUFG Union Bank, N.A., as Joint Lead Arrangers (incorporated by reference to Exhibit 10.41 to the Company’s Annual Report on Form 10-K (File No. 814-01175) filed on February 23, 2022).
10.27*
First Amendment dated as of July 6, 2022 to Revolving Credit Agreement, dated as of December 24, 2021, by and among the Company as Borrower, with Sumitomo Mitsui Banking Corporation, as Administrative Agent and Sole Book Runner, and with Sumitomo Mitsui Banking Corporation and MUFG Union Bank, N.A., as Joint Lead Arrangers.
10.28*
Increasing Lender/Joinder Lender Agreement dated as of July 22, 2022, pursuant to Section 2.08(e) of the Revolving Credit Agreement, dated as of December 24, 2021, by and among the Company as Borrower, with Sumitomo Mitsui Banking Corporation, as Administrative Agent and Sole Book Runner, and with Sumitomo Mitsui Banking Corporation and MUFG Union Bank, N.A., as Joint Lead Arrangers.
10.29
Amended and Restated Limited Liability Company Agreement, dated December 27, 2021, of Bain Capital Senior Loan Program, LLC. (incorporated by reference to Exhibit 10.42 to the Company’s Annual Report on Form 10-K (File No. 814-01175) filed on February 23, 2022).
23.1
Consent of Independent Registered Public Accounting Firm (incorporated by reference to Exhibit 23.1 to the Company’s Annual Report on Form 10-K (File No. 814-01175) filed on February 23, 2022).
24.1
Powers of Attorney (incorporated by reference to Exhibit 24.1 to the Company’s Annual Report on Form 10-K (File No. 814-01175), filed on March 29, 2017).
31.1*
Certification of Chief Executive Officer pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended.
31.2*
Certification of Chief Financial Officer pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended.
32*
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended.
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
*
Filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: August 3, 2022
By:
/s/ Michael A. Ewald
Name:
Michael A. Ewald
Title:
Chief Executive Officer
/s/ Sally F. Dornaus
Sally F. Dornaus
Chief Financial Officer