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, 2025
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 814-01211
Great Elm Capital Corp.
(Exact name of registrant as specified in its charter)
Maryland
81-2621577
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
3801 PGA Boulevard, Suite 603, Palm Beach Gardens, FL
33410
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (617) 375-3006
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 $0.01 per share
GECC
Nasdaq Global Market
5.875% Notes due 2026
GECCO
8.75% Notes due 2028
GECCZ
8.50% Notes due 2029
GECCI
8.125% Notes due 2029
GECCH
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 July 31, 2025, the registrant had 11,568,378 shares of common stock, $0.01 par value per share, outstanding.
Table of Contents
Page
PART I.
FINANCIAL INFORMATION
Item 1.
Financial Statements
3
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
14
Item 4.
Controls and Procedures
15
PART II.
OTHER INFORMATION
Legal Proceedings
Item 1A.
Risk Factors
Item 5.
Other Information
Item 6.
Exhibits
16
Signatures
17
Index to Financial Statements
F-18
Statements of Assets and Liabilities (unaudited)
F-19
Statements of Operations (unaudited)
F-20
Statements of Changes in Net Assets (unaudited)
F-21
Statements of Cash Flows (unaudited)
F-22
Schedule of Investments (unaudited)
F-23
Notes to the Unaudited Financial Statements
F-35
i
PART I—FINANCIAL INFORMATION
Unless the context otherwise requires, all references to “GECC,” “we,” “us,” “our,” the “Company” and words of similar import are to Great Elm Capital Corp. and/or its subsidiaries. We reference materials on our website, www.greatelmcc.com, but nothing on our website shall be deemed incorporated by reference or otherwise contained in this report.
Cautionary Note Regarding Forward-Looking Information
Some of the statements in this report (including in the following discussion) constitute forward-looking statements, which relate to future events or our future performance or financial conditions. Important factors that could cause actual results to differ from those in the forward-looking statements contained in this report include, without limitation:
We use words such as “anticipate,” “believe,” “expect,” “intend,” “will,” “should,” “could,” “may,” “plan” and similar words to identify forward-looking statements. The forward-looking statements contained in this report involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth under “Item 1A. Risk Factors,” herein and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
We have based the forward-looking statements included in this report on information available to us on the date of this report, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we have filed or in the future may file with the Securities and Exchange Commission (the “SEC”).
2
Item 1. Financial Statements.
The financial statements listed in the index to financial statements immediately following the signature page to this report are incorporated herein by reference.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Overview
We are a BDC that seeks to generate both current income and capital appreciation through debt and income generating equity investments, including investments in specialty finance businesses. To achieve our investment objective, we invest in secured and senior secured debt instruments of middle market companies, as well as income generating equity investments in specialty finance companies, that we believe offer sufficient downside protection and have the potential to generate attractive returns. In addition, we invest in collateralized loan obligation ("CLO") securities and related warehouse facilities. We generally define middle market companies as companies with enterprise values between $100 million and $2 billion. We also make investments throughout other portions of a company’s capital structure, including subordinated debt, mezzanine debt, and equity or equity linked securities. We source these transactions directly with issuers and in the secondary markets through relationships with industry professionals.
On April 23, 2024, we contributed investments in certain CLOs and formed a joint venture, the CLO Formation JV, LLC (the “CLO JV”) to facilitate the creation of CLOs. The CLO JV invests primarily in the subordinated note securities in CLOs (colloquially referred to as “CLO equity”), as well as loan accumulation facilities (colloquially referred to as “CLO warehouses”). CLO subordinated note securities are entitled to recurring distributions which are generally equal to the residual cash flow of payments received from underlying securities after contractual payments to more senior CLO mezzanine debt holders and fund expenses.
On September 1, 2023, we contributed investments in certain of our operating company subsidiaries and other specialty finance assets to our formerly wholly owned subsidiary, Great Elm Specialty Finance, LLC (“GESF”) in exchange for equity and subordinated indebtedness in GESF. In connection with this contribution, a strategic investor purchased approximately 12.5% of the equity interests and subordinated indebtedness in GESF. Through its subsidiaries, GESF provides a variety of financing options along a “continuum of lending” to middle-market borrowers, including receivables factoring, asset-based and asset-backed lending, lender finance, and equipment financing. GESF expects to generate both revenue and cost synergies across its specialty finance company subsidiaries.
On September 27, 2016, we and Great Elm Capital Management, LLC (“GECM”), our external investment manager, entered into an investment management agreement (the "Investment Management Agreement") and an administration agreement (the "Administration Agreement"), and we began to accrue obligations to our external investment manager under those agreements. On August 1, 2022, upon receiving our stockholders’ approval, we and GECM entered into an amendment to the Investment Management Agreement to reset the capital gains incentive fee to begin on April 1, 2022, which eliminated $163.2 million of realized and unrealized losses incurred prior to April 1, 2022 in calculating future incentive fees. In addition, the incentive fee based on income was amended to reset the mandatory deferral commencement date used in calculating deferred incentive fees to April 1, 2022. The Investment Management Agreement renews for successive annual periods, subject to requisite approvals from our board of directors (our "Board") and/or stockholders.
We have elected to be treated as a RIC for U.S. federal income tax purposes. As a RIC, we will not be taxed on our income to the extent that we distribute such income each year and satisfy other applicable income tax requirements. To qualify as a RIC, we must, among other things, meet source-of-income and asset diversification requirements and annually distribute to our stockholders generally at least 90% of our investment company taxable income on a timely basis. If we qualify as a RIC, we generally will not have to pay corporate level taxes on any income that we distribute to our stockholders.
Investments
Our level of investment activity can and does vary substantially from period to period depending on many factors, including, among others, the amount of debt and equity capital available from other sources to middle-market companies, the level of merger and acquisition activity, pricing in the high yield and leveraged loan credit markets, our expectations of future investment opportunities, the general economic environment as well as the competitive environment for the types of investments we make.
As a BDC, our investments and the composition of our portfolio are required to comply with regulatory requirements.
Revenues
We generate revenue primarily from interest on the debt investments that we hold. We may also generate revenue from dividends on the equity investments that we hold, capital gains on the disposition of investments, and lease, fee, and other income. Our investments in fixed income instruments generally have an expected maturity of three to five years, although we have no lower or upper constraint on maturity. Our debt investments generally pay interest quarterly or semi-annually. Payments of principal of our debt investments may be amortized over the stated term of the investment, deferred for several years or due entirely at maturity. In some cases, our debt investments and preferred stock investments may defer payments of cash interest or dividends or payment-in-kind (“PIK”). In addition, we may generate revenue in the form of prepayment fees, commitment, origination, due diligence fees, end-of-term or exit fees, fees for providing significant managerial assistance, consulting fees and other investment-related income.
Expenses
Our primary operating expenses include the payment of a base management fee, administration fees (including the allocable portion of overhead under the Administration Agreement), and, depending on our operating results, an incentive fee. The base management fee and incentive fee remunerates GECM for work in identifying, evaluating, negotiating, closing and monitoring our investments. The Administration Agreement provides for reimbursement of costs and expenses incurred for office space rental, office equipment and utilities allocable to us under the Administration Agreement, as well as certain costs and expenses incurred relating to non-investment advisory, administrative or operating services provided by GECM or its affiliates to us. We also bear all other costs and expenses of our operations and transactions. In addition, our expenses include interest on our outstanding indebtedness.
Critical Accounting Policies and Estimates
Valuation of Portfolio Investments
We value our portfolio investments at fair value based upon the principles and methods of valuation set forth in policies adopted by our Board. Fair value is defined as the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. Market participants are buyers and sellers in the principal (or most advantageous) market for the asset that (1) are independent of us; (2) are knowledgeable, having a reasonable understanding about the asset based on all available information (including information that might be obtained through due diligence efforts that are usual and customary); (3) are able to transact for the asset; and (4) are willing to transact for the asset (that is, they are motivated but not forced or otherwise compelled to do so).
Investments for which market quotations are readily available are valued at such market quotations unless the quotations are deemed not to represent fair value. Debt and equity securities for which market quotations are not readily available or for which market quotations are deemed not to represent fair value, are valued at fair value using a valuation process consistent with our Board-approved policy.
Our Board approves in good faith the valuation of our portfolio as of the end of each quarter. Due to the inherent uncertainty and subjectivity 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 may differ materially from the values that we may ultimately realize. In addition, changes in the market environment and other events may impact the market quotations used to value some of our investments.
Those investments for which market quotations are not readily available or for which market quotations are deemed not to represent fair value are valued utilizing a market approach, an income approach, or both approaches, as appropriate. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors that we may take into account in determining the fair value of our investments include, as relevant and among other factors: available current market data, including relevant and applicable market trading and transaction comparables; applicable market yields and multiples, security covenants, call protection provisions, information rights and the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, and merger and acquisition comparables; and enterprise values.
We prefer the use of observable inputs and minimize the use of unobservable inputs in our valuation process. Inputs refer broadly to the assumptions that market participants would use in pricing an asset. Observable inputs are inputs that reflect the assumptions market participants would use in pricing an asset developed based on market data obtained from sources independent of us. Unobservable inputs are inputs that reflect our assumptions about the assumptions market participants would use in pricing an asset developed based on the best information available in the circumstances.
4
Both observable and unobservable inputs are subject to some level of uncertainty and assumptions used bear the risk of change in the future. We utilize the best information available to us, including the factors listed above, in preparing the fair valuations. In determining the fair value of any individual investment, we may use multiple inputs or utilize more than one approach to calculate the fair value to assess the sensitivity to change and determine a reasonable range of fair value. In addition, our valuation procedures include an assessment of the current valuation as compared to the previous valuation for each investment and where differences are material understanding the primary drivers of those changes, incorporating updates to our current valuation inputs and approaches as appropriate.
Revenue Recognition
Interest and dividend income, including PIK income, is recorded on an accrual basis. Origination, structuring, closing, commitment and other upfront fees, including original issue discounts (“OID”), earned with respect to capital commitments are generally amortized or accreted into interest income over the life of the respective debt investment, as are end-of-term or exit fees receivable upon repayment of a debt investment if such fees are fixed in nature. Other fees, including certain amendment fees, prepayment fees and commitment fees on broken deals, and end-of-term or exit fees that have a contingency feature or are variable in nature are recognized as earned. Prepayment fees and similar income due upon the early repayment of a loan or debt security are recognized when earned and are included in interest income.
We may purchase debt investments at a discount to their face value. Discounts on the acquisition of corporate debt instruments are generally amortized using the effective-interest or constant-yield method unless there are material questions as to collectability.
We assess the outstanding accrued income receivables for collectability at least quarterly, or more frequently if there is an event that indicates the underlying portfolio company may not be able to make the expected payments. If it is determined that amounts are not likely to be paid we may establish a reserve against or reverse the income and put the investment on non-accrual status.
Net Realized Gains (Losses) and Net Change in Unrealized Appreciation (Depreciation)
We measure realized gains or losses by the difference between the net proceeds from the repayment or sale of an investment and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized. Realized gains and losses are computed using the specific identification method.
Net change in unrealized appreciation or depreciation reflects the net change in portfolio investment fair values and portfolio investment cost bases during the reporting period, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized.
Portfolio and Investment Activity
The following is a summary of our investment activity for the year ended December 31, 2024 and the six months ended June 30, 2025:
(in thousands)
Acquisitions(1)
Dispositions(2)
Weighted Average YieldEnd of Period(3)
Quarter ended March 31, 2024
64,584
(29,289
)
12.84
%
Quarter ended June 30, 2024
121,743
(83,159
12.58
Quarter ended September 30, 2024
97,633
(62,005
12.76
Quarter ended December 31, 2024
61,724
(71,123
12.37
For the Year Ended December 31, 2024
$
345,684
(245,576
Quarter ended March 31, 2025
48,097
(27,039
12.29
Quarter ended June 30, 2025
36,589
(50,050
12.54
For the Six Months Ended June 30, 2025
84,686
(77,089
5
Portfolio Reconciliation
The following is a reconciliation of the investment portfolio for the six months ended June 30, 2025 and the year ended December 31, 2024. Investments in short-term securities, including U.S. Treasury Bills and money market mutual funds, are excluded from the table below.
Beginning Investment Portfolio, at fair value
324,262
230,612
Portfolio Investments acquired(1)
Amortization of premium and accretion of discount, net
1,468
2,437
Portfolio Investments repaid or sold(2)
Net change in unrealized appreciation (depreciation) on investments
1,003
(10,771
Net realized gain (loss) on investments
723
1,876
Ending Investment Portfolio, at fair value
335,053
6
Portfolio Classification
The following table shows the fair value of our portfolio of investments by industry as of June 30, 2025 and December 31, 2024 (in thousands):
June 30, 2025
December 31, 2024
Industry
Investments atFair Value
Percentage ofFair Value
Short-Term Investments
68,206
16.90
8,448
2.54
Structured Finance
55,427
13.74
40,089
12.05
Technology
44,092
10.93
29,811
8.96
Specialty Finance
36,351
9.01
43,215
12.99
Consumer Products
27,321
6.78
25,179
7.57
Chemicals
26,940
6.68
26,131
7.85
Transportation Equipment Manufacturing
25,004
6.20
26,140
7.86
Insurance
21,986
5.45
22,364
6.72
Metals & Mining
13,774
3.42
13,071
3.93
Food & Staples
12,363
3.07
9,367
2.82
Industrial
11,759
2.92
12,874
3.87
Oil & Gas Exploration & Production
10,070
2.50
10,436
3.14
Consumer Services
8,764
2.17
8,681
2.61
Internet Media
6,395
1.59
6,997
2.10
Energy Services
6,128
1.52
6,522
1.96
Apparel
4,862
1.21
4,911
1.48
Aircraft
4,543
1.13
4,566
1.37
Casinos & Gaming
3,886
0.96
5,485
1.65
Restaurants
3,814
0.95
3,789
1.14
Closed-End Fund
2,986
0.74
3,430
1.03
Financial Services
2,934
0.73
2,532
0.76
Textiles
2,103
0.52
1,285
0.39
Transportation
1,369
0.34
-
Marketing Services
1,261
0.31
1,416
0.43
Business Services
752
0.19
Media
97
0.02
Retail
72
3,100
0.93
Shipping
8,872
2.67
Defense
3,999
1.20
Total
403,259
100.00
332,710
7
Results of Operations
Investment Income
For the Three Months Ended June 30,
For the Six Months Ended June 30,
2025
2024
In Thousands
Per Share(1)
Per Share(2)
Total Investment Income
14,277
1.24
9,548
1.00
26,772
2.32
18,457
2.03
Interest income
7,969
0.69
7,763
0.81
15,935
1.38
15,344
1.69
Dividend income
6,236
0.54
1,570
0.16
9,848
0.85
2,341
0.26
Other commitment fees
175
700
0.08
Other income
0.01
40
0.00
989
0.09
Investment income consists of interest income, including net amortization of premium and accretion of discount on loans and debt securities, dividend income and other income, which primarily consists of amendment fees, commitment fees and funding fees on loans.
Interest income increased for the three and six months ended June 30, 2025 as compared to the corresponding period in the prior year primarily due to an increased debt investment portfolio size, offset to some extent by lower average coupon rate. As of June 30, 2025, the debt investment portfolio had an average coupon rate of 11.7% on approximately $232.6 million of principal as compared to 12.8% on approximately $216.8 million of principal as of June 30, 2024, excluding positions on non-accrual in each period.
The increase in dividend income for the three and six months ended June 30, 2025 as compared to the three and six months ended June 30, 2024 is primarily attributable to the investments in Trouvaille Re Ltd. and in the CLO JV, which was formed in 2024 and pays periodic dividends to its equity-holders.
Other commitment fees decreased for the three and six months ended June 30, 2025 as compared to the three and six months ended June 30, 2024 due to termination of revolver commitments and associated commitment fees. Other income fees increased for the three and six months ended June 30, 2025 as compared to the three and six months ended June 30, 2024 primarily due to non-refundable carry fees and amendment fees on new and amended debt positions.
8
Total Expenses
8,305
0.72
6,490
0.68
16,156
1.40
12,201
1.34
Management fees
1,278
0.11
1,068
2,550
0.22
2,008
Incentive fees
1,470
0.13
764
2,620
0.23
1,562
0.17
Total advisory and management fees
2,748
0.24
1,832
5,170
0.45
3,570
Administration fees
383
0.03
396
0.04
738
0.06
781
Directors’ fees
53
54
106
108
Interest expense
4,318
0.38
3,473
0.37
8,569
6,280
Professional services
459
413
883
801
Custody fees
37
36
75
Other
307
286
615
0.05
589
Income Tax Expense
Excise tax
68
136
Expenses are largely comprised of advisory fees and administration fees paid to GECM and interest expense on our outstanding notes payable. See “—Liquidity and Capital Resources.” Advisory fees include management fees and incentive fees calculated in accordance with the Investment Management Agreement, and administration fees include direct costs reimbursable to GECM under the Administration Agreement and fees paid for sub-administration services.
Management fees increased for the three and six months ended June 30, 2025 as compared to the three and six months ended June 30, 2024 due to growth of the portfolio and increases in fair values.
Incentive fees increased for the three and six months ended June 30, 2025 as compared to the three and six months ended June 30, 2024 due to higher pre-incentive net investment income over the same period.
Professional services costs increased for the three and six months ended June 30, 2025 as compared to the corresponding periods in the prior year, primarily due to general rate increases for professional services including valuation, legal and accounting costs.
Interest expense increased for the three and six months ended June 30, 2025 as compared to the corresponding periods in the prior year primarily due to the issuance of $56.5 million in aggregate principal amount of the 8.50% Notes due 2029 (the “GECCI Notes”) in April and July 2024, and the issuance of $36.0 million in aggregate principal amount of the 8.125% Notes due 2029 (the “GECCH Notes”) in September 2024, offset with the redemption of $45.6 million in aggregate principal amount of the 6.75% Notes due in 2025 (the "GECCM Notes") in October 2024.
Realized Gains (Losses)
Net Realized Gain (Loss)
(470
(0.05
1,886
0.21
Gross realized gain
478
515
843
0.07
2,885
0.32
Gross realized loss
(19
(985
(0.10
(120
(0.01
(999
(0.11
9
Net realized gain for the three and six months ended June 30, 2025 includes $0.2 million in gains from the realization of our investment in Lummus Technology Holdings unsecured bonds and $0.1 million in gains from the realization of our investment in Harvey Gulf term loan. Net realized gain for the six months ended June 30, 2025 also includes $0.2 million in gains from the realization of our investment in W&T Offshore Inc. secured bonds.
For the three months ended June 30, 2024, net realized losses were primarily driven by the realization of our investment in the Phillips Pet Food term loan of $0.6 million. During the six months ended June 30, 2024, net realized gains includes $0.9 million in gains from the partial sale of our investment in Blackstone Secured Lending common equity and $0.8 million in gains from the partial sale of our investment in American Coastal Insurance Corp.
Change in Unrealized Appreciation (Depreciation) on Investments
Net change in unrealized appreciation/ (depreciation)
5,380
0.47
(3,914
(0.41
993
(9,921
(1.09
Unrealized appreciation
16,580
1.44
5,071
0.53
19,256
1.67
6,102
0.67
Unrealized depreciation
(11,200
(0.97
(8,985
(0.94
(18,263
(1.58
(16,023
(1.76
For the three months ended June 30, 2025, unrealized appreciation was primarily driven by an increase in fair value of our investment in CW Opportunity 2, LP of approximately $13.7 million. Unrealized depreciation for the three months ended June 30, 2025 was primarily driven by a decrease in fair value of approximately $2.2 million in the CLO JV common equity, $1.6 million in Trouvaille Re preference shares, and $1.5 million in Maverick Gaming, LLC term loans.
Net unrealized appreciation for the six months ended June 30, 2025 was primarily driven by an increase in fair value of our investment in CW Opportunity 2, LP of $12.7 million. These gains were offset by decreases in the fair value of our investments in the CLO JV, Flexsys Cayman Holdings, LP, and Maverick Gaming LLC of $4.1 million, $1.8 million, and $1.7 million, respectively.
For the three months ended June 30, 2024, unrealized appreciation was due to an increase in fair value on our investment in NICE-PAK Products, Inc. warrants of $0.9 million and due to the reversal of approximately $0.8 million in previously recognized unrealized depreciation on our investment in Phillips Pet Food term loan which was reclassified to realized loss upon the sale of our position. Unrealized depreciation for the three months ended June 30, 2024 was primarily due to decreases in fair value on our investments in New Wilkie Energy Pty Limited (“New Wilkie Energy”) of $2.0 million, Dynata of $1.7 million, and GESF common equity of $0.8 million.
Liquidity and Capital Resources
We generate liquidity through our operations with cash received from investment income and sales and paydowns on investments. Such proceeds are generally reinvested in new investment opportunities, distributed to shareholders in the form of dividends, or used to pay operating expenses. We also receive proceeds from our issuances of notes payable and our revolving credit facility and from time to time may raise additional equity capital. See “—Revolver” and “—Notes Payable” below for more information regarding our outstanding credit facility and notes.
As of June 30, 2025, we had approximately $1.0 million of cash and cash equivalents and approximately $3.4 million of money market fund investments at fair value. As of June 30, 2025, we had investments in 56 debt instruments across 44 companies, totaling approximately $221.2 million at fair value and 18 equity investments in 14 companies, with an aggregate fair value of approximately $113.8 million.
10
In the normal course of business, we may enter into investment agreements under which we commit to make an investment in a portfolio company at some future date or over a specified period of time. As of June 30, 2025, we had approximately $1.8 million in unfunded commitments to provide financing to certain of our portfolio companies. We had sufficient availability on our Revolver as well as cash and other liquid assets on our June 30, 2025 balance sheet to satisfy the unfunded commitments.
For the six months ended June 30, 2025, net cash used for operating activities was approximately $3.8 million, reflecting the purchases and repayments of investments offset by net investment income, including non-cash income related to accretion of discount and PIK income and proceeds from sales of investments and principal payments received. Net cash provided by purchases and proceeds from sales of investments was approximately $(53.9) million, reflecting payments for additional investments of $28.2 million, offset by proceeds from principal repayments and sales of $82.1 million.
For the six months ended June 30, 2025, net cash used by financing activities was $2.9 million, consisting of $6.0 million in net borrowings on the revolving credit facility, less $9.1 million in distributions to stockholders.
We believe we have sufficient liquidity available to meet our short-term and long-term obligations for at least the next 12 months and for the foreseeable future thereafter.
Contractual Obligations and Cash Requirements
A summary of our material contractual payment and other cash obligations as of June 30, 2025 is as follows:
Less than1 year
1-3 years
3-5 years
More than5 years
Contractual and Other Cash Obligations
GECCO Notes
57,500
GECCZ Notes
40,000
GECCI Notes
56,500
GECCH Notes
41,400
Revolving Credit Facility
6,000
201,400
137,900
See “—Revolver” and “—Notes Payable” below for more information regarding our outstanding credit facility and notes.
We have certain contracts under which we have material future commitments. Under the Investment Management Agreement, GECM provides investment advisory services to us. For providing these services, we pay GECM a fee, consisting of two components: (1) a base management fee based on the average value of our total assets and (2) an incentive fee based on our performance.
We are also party to the Administration Agreement with GECM. Under the Administration Agreement, GECM furnishes us with, or otherwise arranges for the provision of, office facilities, equipment, clerical, bookkeeping, finance, accounting, compliance and record keeping services at such office facilities and other such services as our administrator.
If any of the contractual obligations discussed above are terminated, our costs under any new agreements that we enter into may increase. In addition, we would likely incur significant time and expense in locating alternative parties to provide the services we expect to receive under our Investment Management Agreement and our Administration Agreement. Any new investment management agreement would also be subject to approval by our stockholders.
Both the Investment Management Agreement and the Administration Agreement may be terminated by either party without penalty upon no fewer than 60 days’ written notice to the other.
11
Revolver
On May 5, 2021, we entered into a Loan, Guarantee and Security Agreement (the “Loan Agreement”) with City National Bank (“CNB”). The Loan Agreement provides for a senior secured revolving line of credit (the “Revolver”) of up to $25 million (subject to a borrowing base as defined in the Loan Agreement). We may request to increase the revolving line in an aggregate amount not to exceed $25 million, which increase is subject to the sole discretion of CNB. In November 2023, the Company entered into an amendment to the Loan Agreement extending the maturity date of the revolving line to May 5, 2027. Borrowings under the revolving line currently bear interest at a rate equal to (i) the Secured Overnight Financing Rate (“SOFR”) plus 3.00% (reduced from SOFR plus 3.50% prior to the November 2023 amendment), (ii) a base rate plus 2.00% or (iii) a combination thereof, as determined by us. Additionally, we are required to pay a commitment fee of 0.50% per annum on any unused portion of the revolving line of credit. As of June 30, 2025, there were $6 million in borrowings outstanding under the revolving line.
Borrowings under the revolving line are secured by a first priority security interest in substantially all of our assets, subject to certain specified exceptions. We have made customary representations and warranties and are required to comply with various affirmative and negative covenants, reporting requirements and other customary requirements for similar loan agreements. In addition, the Loan Agreement contains financial covenants requiring (i) net assets of not less than $65 million, (ii) asset coverage equal to or greater than 150% and (iii) bank asset coverage equal to or greater than 300%, in each case tested as of the last day of each fiscal quarter of the Company. Borrowings are also subject to the leverage restrictions contained in the Investment Company Act of 1940, as amended (the “Investment Company Act”).
Notes Payable
On January 11, 2018, we issued $43.0 million in aggregate principal amount of 6.75% notes due 2025 (the “GECCM Notes”). On January 19, 2018 and February 9, 2018, we issued an additional $1.9 million and $1.5 million, respectively, of the GECCM Notes upon partial exercise of the underwriters’ over-allotment option. On September 12, 2024, we caused redemption notices to be issued to the holders of the GECCM Notes regarding the Company's exercise of its option to redeem, in whole, the issued and outstanding GECCM Notes. We redeemed all of the issued and outstanding GECCM Notes on October 12, 2024 at 100% of the principal amount plus accrued and unpaid interest thereon from September 30, 2024 through, but excluding, the redemption date, October 12, 2024.
On June 23, 2021, we issued $50.0 million in aggregate principal amount of 5.875% notes due 2026 (the “GECCO Notes”). On July 9, 2021, we issued an additional $7.5 million of the GECCO Notes upon full exercise of the underwriters’ over-allotment option. The aggregate principal balance of the GECCO Notes outstanding as of June 30, 2025 is $57.5 million.
On August 16, 2023, we issued $40.0 million in aggregate principal amount of 8.75% notes due 2028 (the “GECCZ Notes” and, together with the GECCM Notes and GECCO Notes, the “Notes”). The aggregate principal balance of the GECCZ Notes outstanding as of June 30, 2025 is $40.0 million.
On April 17, 2024, we issued $30.0 million in aggregate principal amount of 8.50% notes due 2029 (the “GECCI Notes”). On April 25, 2024, we issued an additional $4.5 million of the GECCI Notes upon full exercise of the underwriters’ over-allotment option. On July 9, 2024, we issued an additional $22.0 million in aggregate principal amount of the GECCI Notes in a direct placement. The aggregate principal balance of the GECCI Notes outstanding as of June 30, 2025 is $56.5 million.
On September 19, 2024, the Company issued $36.0 million in aggregate principal amount of 8.125% notes due 2029 (the "GECCH Notes" and, together with the GECCO Notes, GECCZ Notes and GECCI Notes, the "Notes"). On October 3, 2024, the Company issued an additional $5.4 million of the GECCH Notes upon full exercise of the underwriters' over-allotment option. The aggregate principal balance of the GECCH Notes outstanding as of June 30, 2025 is $41.4 million.
The Notes are our unsecured obligations and rank equal with all of our outstanding and future unsecured unsubordinated indebtedness. The unsecured notes are effectively subordinated, or junior in right of payment, to indebtedness under our Loan Agreement and any other future secured indebtedness that we may incur to the extent of the value of the assets securing such indebtedness and structurally subordinated to all future indebtedness and other obligations of our subsidiaries. We pay interest on the Notes on March 31, June 30, September 30 and December 31 of each year. The GECCO Notes, GECCZ Notes, GECCI Notes and GECCH Notes will mature on June 30, 2026, September 30, 2028, April 30, 2029, and December 31, 2029 respectively. The GECCO Notes are currently callable at the Company’s option and the GECCZ Notes, GECCI Notes and GECCH Notes can be called on, or after, September 30, 2025, April 30, 2026, and December 31, 2026, respectively. Holders of the Notes do not have the option to have the Notes repaid prior to the stated maturity date. The Notes were issued in minimum denominations of $25 and integral multiples of $25 in excess thereof.
We may repurchase the Notes in accordance with the Investment Company Act and the rules promulgated thereunder.
12
As of June 30, 2025, our asset coverage ratio was approximately 169.5%. Under the Investment Company Act, we are subject to a minimum asset coverage ratio of 150%.
Share Price Data
The following table sets forth: (i) NAV per share of our common stock as of the applicable period end, (ii) the range of high and low closing sales prices of our common stock as reported on the Nasdaq Global Market during the applicable period, (iii) the closing high and low sales prices as a premium (discount) to NAV during the relevant period, and (iv) the distributions per share of our common stock declared during the applicable period. Shares of business development companies may trade at a market price that is less than the value of the net assets attributable to those shares. The possibility that our shares of common stock will trade at a discount or premium to NAV is separate and distinct from the risk that our NAV will decrease. During the last two fiscal years, our common stock has generally traded below NAV.
During the last two fiscal years, using the high and low sales prices within each fiscal quarter compared to the NAV at such quarter end, our common stock has traded as high as a 1.0% discount to NAV and as low as a 40.4% discount to NAV.
Closing Sales Price
Premium (Discount) of High Sales Price
Premium (Discount) of Low Sales Price
Distributions
NAV
High
Low
to NAV(1)
Declared(2)
Fiscal year ending December 31, 2025
Third Quarter (through July 31, 2025)
N/A
11.00
10.84
--
Second Quarter
12.10
11.11
9.20
(8.2)%
(24.0)%
First Quarter
11.46
11.34
10.02
(1.0)%
(12.6)%
Fiscal year ending December 31, 2024
Fourth Quarter
11.79
10.99
9.68
(6.8)%
(17.9)%
0.35
Third Quarter
12.04
10.90
9.66
(9.5)%
(19.8)%
12.06
10.91
10.07
(16.5)%
12.57
11.10
10.22
(11.7)%
(18.7)%
Fiscal year ending December 31, 2023
10.98
8.51
(15.5)%
(34.5)%
12.88
10.25
7.68
(20.4)%
(40.4)%
12.21
9.10
7.58
(25.5)%
(37.9)%
11.88
9.75
8.50
(28.5)%
For all periods presented in the table above, there was no return of capital included in any distribution.
The last reported closing price for our common stock on July 31, 2025 was $10.99 per share. As of July 31, 2025, we had 10 record holders of our common stock.
13
The following table summarizes our distributions declared for record dates since January 1, 2023:
Record Date
Payment Date
Distribution Per Share Declared
March 15, 2023
March 31, 2023
June 15, 2023
June 30, 2023
September 15, 2023
September 29, 2023
December 15, 2023
December 29, 2023
January 12, 2024
0.10
March 15, 2024
March 29, 2024
June 14, 2024
June 30, 2024
September 16, 2024
September 30, 2024
December 16, 2024
January 15, 2025
March 17, 2025
March 31, 2025
June 16, 2025
September 16, 2025
September 30, 2025
Recent Developments
Distribution
Our board set the distribution for the quarter ending September 30, 2025 at a rate of $0.37 per share. The full amount of each distribution will be from distributable earnings. The schedule of distribution payments will be established by GECC pursuant to authority granted by our Board. The distribution will be paid in cash.
Interest Rate Risk
We are also subject to financial risks, including changes in market interest rates. As of June 30, 2025, approximately $166.4 million in principal amount of our debt investments bore interest at variable rates, which are generally based on SOFR or US prime rate, and many of which are subject to certain floors. Recently, interest rates have risen and a prolonged increase in interest rates will increase our gross investment income and could result in an increase in our net investment income if such increases in interest rates are not offset by a corresponding decrease in the spread over variable rates that we earn on any portfolio investments or an increase in our operating expenses. See “Item 3. Quantitative and Qualitative Disclosures About Market Risk” for an analysis of the impact of hypothetical base rate changes in interest rates.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are subject to financial market risks, including changes in interest rates. As of June 30, 2025, 10 debt investments in our portfolio bore interest at a fixed rate, and the remaining 41 debt investments were at variable rates, representing approximately $60.7 million and $166.4 million in principal debt, respectively. As of December 31, 2024, 9 debt investments in our portfolio bore interest at a fixed rate, and the remaining 43 debt investments were at variable rates, representing approximately $65.1 million and $179.8 million in principal debt, respectively. The variable rates are generally based upon the SOFR or US prime rate.
To illustrate the potential impact of a change in the underlying interest rate on our net investment income, we have assumed a 1%, 2%, and 3% increase and 1%, 2%, and 3% decrease in the underlying reference rate, and no other change in our portfolio as of June 30, 2025. We have also assumed there are no outstanding floating rate borrowings by the Company. See the following table for the effect the rate changes would have on net investment income.
Reference Rate Increase (Decrease)
Increase (decrease) of NetInvestment Income(in thousands)(1)
3.00%
4,991
2.00%
3,327
1.00%
1,664
(1.00)%
(1,664
(2.00)%
(3,327
(3.00)%
(4,991
Although we believe that this analysis is indicative of our existing interest rate sensitivity as of June 30, 2025, it does not adjust for changes in the credit quality, size and composition of our portfolio, and other business developments, including borrowing under a credit facility, that could affect the net increase (decrease) in net assets resulting from operations. Accordingly, no assurances can be given that actual results would not differ materially from the results under this hypothetical analysis.
We may in the future hedge against interest rate fluctuations by using standard hedging instruments such as futures, options and forward contracts. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in the benefits of lower interest rates with respect to the investments in our portfolio with fixed interest rates.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As of June 30, 2025, we, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed in our periodic filings with the SEC 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 management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended June 30, 2025 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.
From time to time, we, our investment adviser or administrator may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. A description of our legal proceedings is included in Note 7 of the unaudited financial statements attached to this report.
Item 1A. Risk Factors.
There have been no material changes in risk factors in the period covered by this report. See discussion of risk factors in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2024.
Item 5. Other Information.
During the quarter ended June 30, 2025, no director or officer (as defined in Rule 16a-1(f) promulgated under the Exchange Act) of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” (as each term is defined in Item 408 of Regulation S-K).
Item 6. Exhibits.
Unless otherwise indicated, all references are to exhibits to the applicable filing by Great Elm Capital Corp. (the “Registrant”) under File No. 814-01211 with the Securities and Exchange Commission.
Exhibit
Number
Description
3.1
Amended and Restated Charter of the Registrant (incorporated by reference to Exhibit 3.1 to the Form 8-K filed on November 7, 2016)
3.2
Amendment to Amended and Restated Articles of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Form 8-K filed on March 2, 2022)
3.3
Bylaws of the Registrant (incorporated by reference to Exhibit 2 to the Registration Statement on Form N-14 (File No. 333-212817) filed on August 1, 2016)
31.1*
Certification of the Registrant’s Chief Executive Officer (“CEO”)
31.2*
Certification of the Registrant’s Chief Financial Officer (“CFO”)
32.1*#
Certification of the Registrant’s CEO and CFO
101
Materials from the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2024, formatted in inline Extensible Business Reporting Language (XBRL): (i) statements of assets and liabilities, (ii) statements of operations, (iii) statements of changes in net assets, (iv) statements of cash flows, (v) schedules of investments, and (vi) related notes to the financial statements, tagged in detail (furnished herewith)
104
The cover page from the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2024, formatted in inline XBRL (included as Exhibit 101)
* Filed herewith
# This certification is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended ("Exchange Act"), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.
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.
GREAT ELM CAPITAL CORP.
Date: August 4, 2025
By:
/s/ Matt Kaplan
Name:
Matt Kaplan
Title:
Chief Executive Officer
/s/ Keri A. Davis
Keri A. Davis
Chief Financial Officer
INDEX TO FINANCIAL STATEMENTS
Statements of Assets and Liabilities as of June 30, 2025 and December 31, 2024 (unaudited)
Statements of Operations for the three and six months ended June 30, 2025 and 2024 (unaudited)
Statements of Changes in Net Assets for the three and six months ended June 30, 2025 and 2024 (unaudited)
Statements of Cash Flows for the six months ended June 30, 2025 and 2024 (unaudited)
Schedule of Investments as of June 30, 2025 and December 31, 2024 (unaudited)
STATEMENTS OF ASSETS AND LIABILITIES (unaudited)
Dollar amounts in thousands (except per share amounts)
Assets
Non-affiliated, non-controlled investments, at fair value (amortized cost of $247,896 and $244,378, respectively)
250,099
240,958
Non-affiliated, non-controlled short-term investments, at fair value (amortized cost of $68,216 and $8,448, respectively)
Affiliated investments, at fair value (amortized cost of $12,378 and $12,378, respectively)
Controlled investments, at fair value (amortized cost of $93,284 and $87,014, respectively)
84,954
83,304
Total investments
Cash and cash equivalents
960
Receivable for investments sold
5,065
Interest receivable
3,279
3,306
Dividends receivable
853
364
Due from portfolio company
32
Due from affiliates
107
160
Deferred financing costs
188
237
Prepaid expenses and other assets
573
154
Total assets
409,326
342,028
Liabilities
Notes payable (including unamortized discount of $4,923 and $5,705, respectively)
190,477
189,695
Revolving credit facility
Payable for investments purchased
66,144
11,194
Interest payable
79
Accrued incentive fees payable
3,636
1,712
Distributions payable
577
Due to affiliates
1,500
1,385
Accrued expenses and other liabilities
1,458
1,320
Total liabilities
269,294
205,915
Commitments and contingencies (Note 7)
Net Assets
Common stock, par value $0.01 per share (100,000,000 shares authorized, 11,568,378 shares issued and outstanding and 11,544,415 shares issued and outstanding, respectively)
116
115
Additional paid-in capital
332,385
332,111
Accumulated losses
(192,469
(196,113
Total net assets
140,032
136,113
Total liabilities and net assets
Net asset value per share
The accompanying notes are an integral part of these financial statements.
STATEMENTS OF OPERATIONS (unaudited)
Investment Income:
Interest income from:
Non-affiliated, non-controlled investments
6,560
5,968
12,962
11,955
Non-affiliated, non-controlled investments (PIK)
644
811
1,255
1,441
Affiliated investments
31
64
Controlled investments
765
953
1,718
1,884
Total interest income
Dividend income from:
2,332
1,045
2,568
1,431
3,904
525
7,280
910
Total dividend income
Other commitment fees from non-affiliated, non-controlled investments
Other income from:
815
174
Total other income
Total investment income
Expenses:
Other expenses
Total expenses
Net investment income before taxes
5,972
3,058
10,616
6,256
Net investment income
5,904
10,480
6,251
Net realized and unrealized gains (losses):
Net realized gain (loss) on investment transactions from:
155
2,511
(625
Total net realized gain (loss)
Net change in unrealized appreciation (depreciation) on investment transactions from:
7,679
(3,856
5,613
(7,389
827
(23
(2,299
(885
(4,620
(2,509
Total net change in unrealized appreciation (depreciation)
Net realized and unrealized gains (losses)
5,839
(4,384
1,716
(8,035
Net increase (decrease) in net assets resulting from operations
11,743
(1,326
12,196
(1,784
Net investment income per share (basic and diluted):
0.51
0.91
Earnings per share (basic and diluted):
1.02
(0.14
1.06
(0.20
Weighted average shares outstanding (basic and diluted):
11,556,857
9,551,037
11,550,739
9,105,190
STATEMENTS OF CHANGES IN NET ASSETS (unaudited)
Dollar amounts in thousands
Increase (decrease) in net assets resulting from operations:
Net realized gain (loss)
Distributions to stockholders:
Distributions(1)
(4,281
(3,309
(8,552
(6,617
Total distributions to stockholders
Capital transactions:
Issuance of common stock, net
275
11,849
35,671
Net increase (decrease) in net assets resulting from capital transactions
Total increase (decrease) in net assets
7,737
7,214
3,919
27,270
Net assets at beginning of period
132,295
118,795
98,739
Net assets at end of period
126,009
Capital share activity
Shares outstanding at the beginning of the period
11,544,415
9,452,382
7,601,958
Issuance of common stock
23,963
997,506
2,847,930
Shares outstanding at the end of the period
11,568,378
10,449,888
STATEMENTS OF CASH FLOWS (unaudited)
Cash flows from operating activities
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used for) operating activities:
Purchases of investments
(28,167
(165,659
Net change in short-term investments
(59,768
(9,625
Capitalized payment-in-kind interest
(1,568
(1,240
Proceeds from sales of investments
55,489
90,077
Proceeds from principal payments
26,589
22,821
Net realized (gain) loss on investments
(723
(1,886
Net change in unrealized (appreciation) depreciation on investments
(993
9,921
(1,468
(1,193
Amortization of discount (premium) on long term debt
841
570
Increase (decrease) in operating assets and liabilities:
(Increase) decrease in interest receivable
27
(1,489
(Increase) decrease in dividends receivable
(489
(308
(Increase) decrease in due from portfolio company
(Increase) decrease in due from affiliates
(Increase) decrease in prepaid expenses and other assets
(419
(148
Increase (decrease) in due to affiliates
2,039
312
Increase (decrease) in interest payable
47
34
Increase (decrease) in accrued expenses and other liabilities
138
(141
Net cash provided by (used for) operating activities
3,824
(59,702
Cash flows from financing activities
Issuance of notes payable, net of issuance costs
33,030
Borrowings under credit facility
32,000
5,000
Repayments under credit facility
(26,000
(5,000
Proceeds from issuance of common stock, net of issuance costs
Payments of deferred financing costs
(10
Distributions paid
(9,129
(7,377
Net cash provided by (used for) financing activities
(2,864
61,324
Net increase (decrease) in cash
1,622
Cash and cash equivalents and restricted cash, beginning of period
Cash and cash equivalents and restricted cash, end of period
2,575
Supplemental disclosure of cash flow information:
Cash paid for excise tax
270
226
Cash paid for interest
7,522
5,631
SCHEDULE OF INVESTMENTS (unaudited)
Portfolio Company
Security(1)
Notes
Interest Rate(2)
Initial Acquisition Date
Maturity Date
Par Amount / Quantity
Cost
Fair Value
Percentage of Class(3)
Investments at Fair Value
Advancion
2nd Lien, Secured Loan
2, 16
1M SOFR + 7.75% (12.18%)
09/21/2022
11/24/2028
1,625
1,541
1,520
American Coastal Insurance Corp.
Unsecured Bond
7.25%
12/20/2022
12/15/2027
13,000
8,701
12,594
Auction.com
1st Lien, Secured Loan
2, 6, 17
6M SOFR + 6.00% (10.25%)
09/09/2024
05/26/2028
3,173
3,045
Avation Capital SA
2nd Lien, Secured Bond
10, 11
8.25%
02/04/2022
10/31/2026
4,671
4,444
Blackstone Secured Lending Fund
Common Equity
n/a
09/25/2024
182
185
*
Blue Ribbon, LLC
2, 6, 7, 16
3M SOFR + 8.00% (8.26% Cash + 4.00% PIK)
01/16/2025
05/08/2028
246
240
Brightline East, LLC
1st Lien, Secured Bond
11.00%
03/10/2025
01/31/2030
1,850
1,460
CLO Formation JV, LLC
4, 10, 12
04/23/2024
166
52,359
48,603
71.25
Confluence Technologies
2, 15
3M SOFR + 3.75% (8.20%)
03/04/2025
07/31/2028
1,101
946
Conuma Resources LTD
6, 10, 11
13.13%
04/15/2025
05/01/2028
1,400
1,367
08/08/2024
4,245
4,331
4,049
Coreweave Compute Acquisition Co. II, LLC
2, 6, 14
3M SOFR + 9.62% (13.92%)
08/21/2023
13,563
13,503
13,901
Coreweave Compute Acquisition Co. IV, LLC
3M SOFR + 6.00% (10.29%)
05/29/2024
05/16/2030
3,259
3,215
3,324
CSC ServiceWorks
3M SOFR + 4.00% (8.58%)
09/26/2023
03/04/2028
4,926
4,348
4,310
CW Opportunity 2 LP
Private Fund
10, 12
05/14/2024
6,000,000
19,900
Del Monte Foods Corp II Inc
2, 7, 15
3M SOFR + 11.00% (12.47% Cash + 3.00% PIK)
10/16/2024
08/02/2028
5,454
5,403
4,895
3M SOFR + 11.00% (12.41% Cash + 3.00% PIK)
04/17/2025
707
681
634
Dynata, LLC (New Insight Holdings, Inc.)
6, 8
07/15/2024
100,000
11,230
2,222
Warrants
45,714
3.20
2, 17
3M SOFR + 5.50% (10.09%)
10/15/2028
4,744
4,173
EagleView Technology Corp
2, 7, 20
3M SOFR + 6.50% (9.80% Cash + 1.00% PIK)
03/27/2025
08/14/2028
6,199
6,037
6,021
Elevate Textiles, Inc.
2, 6, 7, 17
3M SOFR + 6.50% (5.45% Cash + 5.50% PIK)
11/07/2024
09/30/2027
2,504
2,044
First Brands, Inc.
3M SOFR + 5.00% (9.54%)
06/09/2023
03/30/2027
7,544
7,474
7,114
3M SOFR + 8.50% (13.04%)
03/24/2021
03/30/2028
16,200
15,774
14,498
03/08/2024
1,773
1,765
1,669
Flexsys Cayman Holdings, LP
1M SOFR + 5.25% (9.69%)
05/28/2025
08/01/2029
5,992
5,052
3,034
1M SOFR + 6.25% (10.58%)
05/23/2025
1,820
1,784
1,711
Foresight Energy
2, 6, 19
3M SOFR + 8.00% (12.40%)
07/29/2021
06/30/2027
5,859
5,877
5,534
Form Technologies LLC
3M SOFR + 5.75% (10.02%)
11/01/2024
07/19/2030
4,750
4,661
4,483
FPL Food LLC
2, 6, 22
PRIME + 3.25% (11.50%)
10/02/2024
02/13/2027
4,000
FS KKR CAPITAL CORP
05/09/2024
135,000
2,742
2,801
Graftech
9.88%
04/25/2025
12/23/2029
900
650
708
Great Elm Specialty Finance, LLC
4, 6
09/01/2023
87,500
17,000
12,426
87.50
Subordinated Note
13.00%
06/30/2026
23,925
Greenfire Resources Ltd.
12.00%
09/13/2023
10/01/2028
4,178
4,118
4,400
Inmar Inc.
3M SOFR + 4.50% (8.80%)
10/31/2024
10/30/2031
1,980
1,970
1,992
Ipsen US Holdings, Inc.
2, 6, 7, 21
1M SOFR + 11.82% (7.61% Cash + 8.54% PIK)
08/14/2024
07/31/2029
5,362
5,198
5,068
Mad Engine Global, LLC
3M SOFR + 7.00% (11.56%)
06/30/2021
07/15/2027
5,632
Main Street Sports Group LLC
15.00%
02/06/2025
01/03/2028
100
Manchester Acquisition Sub, LLC
2, 6, 16
3M SOFR + 5.75% (10.22%)
12/01/2026
6,648
6,350
6,308
Maverick Gaming LLC
2, 6, 9, 17
04/03/2024
06/03/2028
5,741
6,353
2,410
1,476
New Wilkie Energy Pty Limited
6, 10, 14
02/20/2025
02/20/2027
1,268
1,229
114
110
6, 8, 10, 14
4,153
4,973
1,393
NGC CLO 2 Ltd.
CLO Equity
03/07/2025
7,410
6,190
6,824
Nice-Pak Products Inc.
Secured Loan B
3M SOFR + 11.50% (10.06% Cash + 6.00% PIK)
09/30/2022
10,990
10,889
11,244
Promissory Note
1,448,864
1,449
880,909
2.56
Northeast Grocery Inc
3M SOFR + 7.50% (11.82%)
12/13/2028
2,595
2,588
PFS Holdings Corp.
5, 6, 8
11/13/2020
5,238
12,379
PowerStop LLC
3M SOFR + 4.75% (9.13%)
02/09/2024
01/26/2029
2,307
2,153
1,723
ProFrac Holdings II, LLC
2, 6, 10, 11, 21
3M SOFR + 7.25% (11.81%)
12/27/2023
01/23/2029
5,956
5,910
Ruby Tuesday Operations LLC
2, 6, 7, 18
1M SOFR + 12.00% (10.44% Cash + 6.00% PIK)
09/03/2024
02/24/2027
2,674
2,656
2,607
F-24
2, 6, 7, 14
1M SOFR + 16.00% (0.00% Cash + 20.44% PIK)
01/31/2023
821
812
02/24/2021
311,697
395
2.81
SIRVA Worldwide Inc
2, 6, 20
3M SOFR + 8.00% (12.32%)
02/20/2029
693
676
Delayed Draw, Secured Loan
02/19/2025
80
78
76
Stone Ridge Opportunities Fund L.P.
8, 10, 12
01/01/2023
2,379,875
2,388
3,942
Thryv, Inc.
2, 10, 16
1M SOFR + 6.75% (11.08%)
04/30/2024
05/01/2029
1,260
1,250
TPC Group Inc
6M SOFR + 5.75% (9.95%)
11/22/2024
12/16/2031
948
934
912
Trouvaille Re Ltd.
Preference Shares
6, 8, 10
03/27/2024
5,450
TRU Taj Trust
07/21/2017
16,000
611
2.75
TruGreen LP
1M SOFR + 4.00% (8.43%)
11/02/2027
1,777
1,717
1,682
11/02/2028
730
780
Universal Fiber Systems
1M SOFR + 12.00% (8.44% Cash + 8.00% PIK)
09/30/2028
5,674
5,666
5,629
41,687
6,809
6,366
5.44
371
976
2.37
Vantage Specialty Chemicals, Inc.
2, 14
3M SOFR + 4.75% (9.03%)
05/29/2025
10/26/2026
1,511
1,451
1,457
Vi-Jon
3M SOFR + 10.00% (12.54% Cash + 2.00% PIK)
10/29/2024
12/28/2028
2,939
2,876
2,890
12/28/2023
8,710
8,516
8,565
Walor North America, Inc
2, 6, 23
1M SOFR + 5.75% (10.07%)
06/17/2025
06/17/2028
W&T Offshore, Inc.
10.75%
01/14/2025
02/02/2029
6,450
6,131
5,670
Total Investments excluding Short-Term Investments (239.27% of Net Assets)
353,558
United States Treasury
Treasury Bill
0.00%
65,000,000
64,800
64,790
MFB Northern Inst Funds Treas Portfolio Premier CL
Money Market
4.16%
3,415,594
3,416
Total Short-Term Investments (48.71% of Net Assets)
68,216
TOTAL INVESTMENTS (287.98% of Net Assets)
421,774
Other Liabilities in Excess of Net Assets (187.98% of Net Assets)
(263,227
NET ASSETS
F-25
F-26
* Represents less than 1%.
As of June 30, 2025, the Company’s investments consisted of the following:
Investment Type
Percentage ofNet Assets
Debt
221,242
158.00
Equity/Other
113,811
81.27
48.71
287.98
As of June 30, 2025, the geographic composition of the Company’s portfolio at fair value was as follows:
Geography
United States
383,401
273.81
Canada
9,865
7.04
Bermuda
3.89
Europe
3.24
F-27
As of June 30, 2025, the industry composition of the Company’s portfolio at fair value was as follows:
39.58
31.49
25.96
19.51
19.24
17.86
15.70
9.84
8.83
8.40
7.19
6.26
4.57
4.38
3.47
2.78
2.72
2.13
1.50
0.98
0.90
48.69
F-28
SCHEDULE OF INVESTMENTS
Maturity
1M SOFR + 7.85% (12.21%)
1,532
1,584
8,112
12,367
3M SOFR + 6.00% (10.27%)
2,835
2,739
7, 10, 11, 14
4,369
194
3M SOFR + 6.26% (10.85%)
09/05/2024
05/07/2028
493
351
330
124
39,714
10, 14
4,900
5,014
4,974
3M SOFR + 9.62% (14.15%)
12,780
12,653
13,035
3M SOFR + 6.00% (10.53%)
5,058
4,985
3M SOFR + 4.26% (8.71%)
4,951
4,286
4,158
7,246
3M SOFR + 10.15% (12.62% Cash + 2.00% PIK)
3,853
3,803
3,830
3M SOFR + 5.26% (9.79%)
07/15/2028
793
783
3M SOFR + 5.76% (10.29%)
4,768
4,451
108,405
11,525
1,753
1.08
3M SOFR + 3.76% (8.09%)
10/21/2024
08/14/2025
4,737
4,504
4,472
3M SOFR + 6.65% (5.74% Cash + 5.50% PIK)
1,642
1,265
Fairbanks Morse Defense (Arcline FM Holdings, LLC)
3M SOFR + 4.50% (9.31%)
07/19/2024
06/23/2028
3,980
3,978
3M SOFR + 5.26% (9.85%)
7,583
7,495
7,141
1,783
1,679
3M SOFR + 8.76% (13.35%)
15,715
15,122
Flexsys Holdings
3M SOFR + 5.51% (9.84%)
10/27/2022
11/01/2028
4,389
3,665
3,347
F-29
3M SOFR + 8.10% (12.43%)
5,896
5,918
5,429
Form Technologies, LLC
3M SOFR + 4.85% (9.36%)
01/25/2024
07/22/2025
3,228
3,167
3,223
2, 6, 15
1M SOFR + 5.75% (10.08%)
04/30/2030
4,655
Prime + 3.25% (11.50%)
2,500
2,512
149,000
3,022
3,236
4, 6, 14
29,733
17,567
13,482
5,178
5,095
5,579
Harvey Gulf Holdings LLC
1M SOFR + 7.03% (11.39%)
02/28/2024
01/19/2029
8,784
8,721
1M SOFR + 5.00% (9.36%)
10/24/2031
1,990
1,993
Ipsen US Holdings, INC.
1M SOFR + 11.57% (7.63% Cash + 8.30% PIK)
5,162
4,982
4,996
Lummus Technology Holdings
11, 14
9.00%
05/17/2022
07/01/2028
1,519
3M SOFR + 7.00% (11.59%)
5,709
5,154
3M SOFR + 5.90% (10.37%)
11/01/2026
6,927
6,524
3M SOFR + 7.50% (12.11%)
2, 6, 7
3M SOFR + 7.50% (12.11% PIK)
5,569
6,221
4,009
New Wilkie Energy
Super Senior Receivership Loan
6, 7, 10
06/03/2024
02/18/2027
144
SS Working Capital Facility
16.00%
02/16/2024
1,202
2, 6, 7, 9, 10, 14
04/03/2023
04/06/2026
4,935
4,821
1,322
04/06/2023
1,078,899
3M SOFR + 11.76% (10.09% Cash + 6.00% PIK)
9,253
9,098
9,363
2,744
3M SOFR + 7.50% (12.02%)
2,672
2,704
2,695
5.05
3M SOFR + 4.75% (9.36%)
2,319
2,148
2,198
3M SOFR + 7.51% (11.84%)
6,344
6,290
1M SOFR + 12.11% (10.65% Cash + 6.00% PIK)
2,657
2,633
1M SOFR + 16.00% (0.00% Cash + 20.65% PIK)
741
456
F-30
Runner Buyer Inc.
3M SOFR + 5.61% (10.11%)
10/23/2028
1,995
977
921
Spencer Spirit IH LLC
1M SOFR + 5.50% (10.02%)
06/25/2024
07/15/2031
898
891
901
2,380
3,842
1M SOFR + 6.75% (11.11%)
1,395
1,382
3M SOFR + 5.75% (10.11%)
11/22/2031
950
936
944
6,155
1M SOFR + 4.10% (8.46%)
1,786
1,715
1,735
713
795
1M SOFR + 12.11% (8.47% Cash + 8.00% PIK)
5,451
5,442
5,369
6,836
Victra (LSF9 Atlantis Holdings LLC)
3M SOFR + 5.25% (9.61%)
09/10/2024
03/31/2029
1,210
1,211
1,224
3M SOFR + 10.26% (12.85% Cash + 2.00% PIK)
8,837
8,616
8,691
3M SOFR + 10.26% (12.87% Cash + 2.00% PIK)
2,981
2,909
2,932
10, 11, 14
11.75%
01/12/2023
02/01/2026
4,816
4,857
Total Investments excluding Short-Term Investments (238.23% of Net Assets)
343,770
12/12/2024
8,448,462
Total Short-Term Investments (6.21% of Net Assets)
TOTAL INVESTMENTS (244.44% of Net Assets)
352,218
Other Liabilities in Excess of Net Assets (144.44% of Net Assets)
(196,597
F-31
F-32
As of December 31, 2024 the Company’s investments consisted of the following:
236,718
173.91
87,544
64.32
6.21
244.44
As of December 31, 2024 the geographic composition of the Company’s portfolio at fair value was as follows:
308,768
226.86
10,553
7.75
4.52
3.35
Australia
2,668
F-33
As of December 31, 2024 the industry composition of the Company’s portfolio at fair value was as follows:
31.76
29.45
21.90
19.20
18.50
16.43
9.60
9.46
7.67
6.88
6.52
6.38
5.14
4.79
4.03
3.61
2.94
2.52
2.28
1.86
1.04
0.94
F-34
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
Dollar amounts in thousands, except share and per share amounts
1. ORGANIZATION
Great Elm Capital Corp. (the “Company”) was formed on April 22, 2016 as a Maryland corporation. The Company is structured as an externally managed, non-diversified closed-end management investment company. The Company elected to be regulated as a business development company (a “BDC”) under the Investment Company Act of 1940, as amended (the “Investment Company Act”). The Company is managed by Great Elm Capital Management, LLC, a Delaware corporation (“GECM”), a subsidiary of Great Elm Group, Inc., a Delaware corporation (“GEG”).
The Company seeks to generate current income and capital appreciation through debt and income-generating equity investments, including investments in specialty finance businesses.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation. The Company’s functional currency is U.S. dollars and these financial statements have been prepared in that currency. The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to Regulation S-X and Regulation S-K. These financial statements reflect all adjustments (consisting of normal recurring items or items discussed herein) that management believes are necessary to fairly state results for the interim periods presented. Results of operations for interim periods are not necessarily indicative of annual results of operations. The Company is an investment company following accounting and reporting guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946, Financial Services – Investment Companies.
Basis of Consolidation. Under GAAP, the Company is generally precluded from consolidating any entity other than another investment company or an operating company which provides substantially all of its services and benefits to the Company.
Use of Estimates. The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ materially.
Revenue Recognition. Interest and dividend income, including income paid in kind, is recorded on an accrual basis. Origination, structuring, closing, commitment and other upfront fees, including original issue discounts, earned with respect to capital commitments, are generally amortized or accreted into interest income over the life of the respective debt investment, as are end-of-term or exit fees receivable upon repayment of a debt investment if such fees are fixed in nature. Other fees, including certain amendment fees, prepayment fees and commitment fees on broken deals, and end-of-term or exit fees that have a contingency feature or are variable in nature are recognized as earned. Prepayment fees and similar income due upon the early repayment of a loan or debt security are generally included in interest income.
Interest income received as paid-in-kind (“PIK”) is reported separately in the Statements of Operations. Income is included as PIK if the instrument solely provides for settlement in kind. In the event that the borrower can settle in kind or via cash payment, the income is not included as PIK until the borrower elects to pay in kind and the payment is received by the Company. In the event there is a lesser cash rate in a PIK toggle instrument, income is accrued at the lesser cash rate until the coupon is paid in kind and such larger payment is received by the Company.
Certain of the Company’s debt investments were purchased at a discount to par as a result of the underlying credit risks and financial results of the issuer, as well as general market factors that influence the financial markets as a whole. Discounts on the acquisition of corporate debt instruments are generally amortized using the effective-interest or constant-yield method assuming there are no material questions as to collectability.
Interest income in CLO subordinated note investments are recorded on an accrual basis utilizing an effective interest methodology based upon an effective yield to maturity of projected cash flows. ASC Topic 325-40, Beneficial Interests in Securitized Financial Assets (“ASC 325”) requires investment income from such investments be recognized under the effective interest method, with any difference between cash distributed and the amount calculated pursuant to the effective interest method be recorded as an adjustment to the cost basis of the investment. It is the Company’s policy to monitor and update the effective yield for each CLO subordinated note position held at each measurement date and updated periodically, as needed.
Net Realized Gains (Losses) and Net Change in Unrealized Appreciation (Depreciation). The Company measures realized gains or losses by the difference between the net proceeds from the repayment or sale of an investment and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized. Realized gains and losses are computed using the specific identification method. Net change in unrealized appreciation or depreciation reflects the net change in portfolio investment values and portfolio investment cost bases during the reporting period, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized.
Cash and Cash Equivalents. Cash and cash equivalents typically consist of bank demand deposits. Restricted cash generally consists of collateral for unfunded positions held by counterparties.
Valuation of Portfolio Investments. The Company carries its investments in accordance with ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), which defines fair value, establishes a framework for measuring fair value and requires disclosures about fair value measurements. Fair value is generally based on quoted market prices provided by independent pricing services, broker or dealer quotations or alternative price sources. In the absence of quoted market prices, broker or dealer quotations or alternative price sources, investments are measured at fair value as determined by the Company’s board of directors (the “Board”).
Due to the inherent uncertainties of valuation, certain estimated fair values may differ significantly from the values that would have been realized had a ready market for these investments existed, and these differences could be material. See Note 4.
The Company values its portfolio investments at fair value based upon the principles and methods of valuation set forth in policies adopted by the Board. Fair value is defined as the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. Market participants are buyers and sellers in the principal (or most advantageous) market for the asset that (1) are independent of the Company, (2) are knowledgeable, having a reasonable understanding about the asset based on all available information (including information that might be obtained through due diligence efforts that are usual and customary), (3) are able to transact for the asset, and (4) are willing to transact for the asset (that is, they are motivated but not forced or otherwise compelled to do so).
Investments for which market quotations are readily available are valued at such market quotations unless the quotations are deemed not to represent fair value. The Company generally obtains market quotations from recognized exchanges, market quotation systems, independent pricing services or one or more broker-dealers or market makers. Short term debt investments with remaining maturities within ninety days are generally valued at amortized cost, which approximates fair value. Debt and equity securities for which market quotations are not readily available, which is the case for many of the Company’s investments, or for which market quotations are deemed not to represent fair value, are valued at fair value using a consistently applied valuation process in accordance with the Company’s documented valuation policy that has been reviewed and approved by the Board, who also approve in good faith the valuation of such securities as of the end of each quarter. Due to the inherent uncertainty and subjectivity of determining the fair value of investments that do not have a readily available market value, the fair value of the Company’s investments may differ significantly from the values that would have been used had a readily available market value existed for such investments and may differ materially from the values that the Company may ultimately realize. In addition, changes in the market environment and other events may have differing impacts on the market quotations used to value some of the Company’s investments than on the fair values of the Company’s investments for which market quotations are not readily available. Market quotations may be deemed not to represent fair value in certain circumstances where the Company believes that facts and circumstances applicable to an issuer, a seller or purchaser, or the market for a particular security cause current market quotations to not reflect the fair value of the security.
The valuation process approved by the Board with respect to investments for which market quotations are not readily available or for which market quotations are deemed not to represent fair value is as follows:
F-36
Those investments for which market quotations are not readily available or for which market quotations are deemed not to represent fair value are valued utilizing a market approach, an income approach, or both approaches, as appropriate. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors that the Company may take into account in determining the fair value of its investments include, as relevant and among other factors: available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, merger and acquisition comparables, and enterprise values.
Investments in revolvers or delayed draw loans may include unfunded commitments for which the Company’s acquisition cost will be offset by compensation received on the portion of the commitment that is unfunded. As a result, the purchases of a commitment that is not fully funded may result in a negative cost basis for the funded commitment. The fair value of the unfunded commitment is adjusted for price appreciation or depreciation and may result in a negative fair value for the unfunded commitment.
Deferred Financing Costs and Deferred Offering Costs. Deferred financing costs and deferred offering costs consist of fees and expenses incurred in connection with financing or capital raising activities and include professional fees, printing fees, filing fees and other related expenses.
Deferred financing costs incurred in connection with the revolving credit facility are amortized on a straight-line basis over the term of the revolving credit facility. Unamortized costs are included in deferred financing costs on the statements of assets and liabilities and amortization of those costs is included in interest expense on the statements of operations.
Deferred offering costs incurred in connection with the unsecured notes are amortized over the term of the respective unsecured note using the effective interest method. Unamortized costs are treated as a reduction to the carrying amount of the debt on the statements of assets and liabilities and amortization of those costs is included in interest expense on the statements of operations.
Deferred offering costs incurred in connection with the shelf registration on form N-2 are capitalized when incurred and recognized as a reduction to offering proceeds when the offering becomes effective or expensed upon expiration of the registration statement, if applicable. Deferred offering costs are included with prepaid expenses and other assets on the statements of assets and liabilities.
Prepaid Expenses and Other Assets. Prepaid expenses include expenses paid in advance such as annual insurance premiums and deferred offering costs, as described above. Other assets may include contributions to investments paid in advance of trade date.
U.S. Federal Income Taxes. From inception to September 30, 2016, the Company was a taxable association under Internal Revenue Code of 1986, as amended (the “Code”). The Company has elected to be taxed as a regulated investment company (“RIC”) under subchapter M of the Code. The Company intends to operate in a manner so as to qualify for the tax treatment applicable to RICs in that taxable year and all future taxable years. In order to qualify as a RIC, among other things, the Company will be required to timely distribute to its stockholders at least 90% of investment company taxable income (“ICTI”) including PIK interest, as defined by the Code, for each taxable year in order to be eligible for tax treatment under subchapter M of the Code. Depending on the level of ICTI earned in a tax year, the Company may choose to relate back distributions in the next tax year to meet the requirement to distribute 90% of its ICTI in the prior year. Any such "spillover dividends" must generally be declared on or before the 15th day of the ninth month after the tax-year end. So long as the Company maintains its status as a RIC, it generally will not be subject to corporate-level U.S. federal income taxes on any ordinary income or capital gains that it distributes at least annually to its stockholders as distributions. Rather, any tax liability related to income earned by the Company represents obligations of the Company’s stockholders and will not be reflected in the financial statements of the Company.
If the Company does not distribute (or is not deemed to have distributed) each calendar year the sum of (1) 98% of its net ordinary income for each calendar year, (2) 98.2% of its capital gain net income for the one-year period ending October 31 in that calendar year and (3) any income recognized, but not distributed, in preceding years (the “Minimum Distribution Amount”), the Company will generally be required to pay an excise tax equal to 4% of the amount by the which Minimum Distribution Amount exceeds the distributions for the year. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year dividend distributions from such taxable income, the Company accrues excise taxes, if any, on estimated excess taxable income as taxable income is earned using an annual effective excise tax rate. The annual effective excise tax rate is determined by dividing the estimated annual excise tax by the estimated annual taxable income.
F-37
The Company has accrued $136 of excise tax expense during the six months ended June 30, 2025. The Company accrued $348 of excise tax expense during the year ended December 31, 2024.
At December 31, 2024, the Company, for federal income tax purposes, had capital loss carryforwards of $181,545 which will reduce its taxable income arising from future net realized gains on investment transactions, if any, to the extent permitted by the Code, and thus will reduce the amount of distributions to stockholders, which would otherwise be necessary to relieve the Company of any liability for federal income tax. On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Modernization Act”) was signed by the President. The Modernization Act changed the capital loss carryforward rules as they relate to regulated investment companies. Capital losses generated in tax years beginning after the date of enactment may now be carried forward indefinitely, and retain the character of the original loss. Of the capital loss carryforwards at December 31, 2024, $39,740 are limited losses and available for use subject to annual limitation under Section 382. Of the capital losses at December 31, 2024, $16,815 are short-term and $164,730 are long term.
ASC 740, Accounting for Uncertainty in Income Taxes (“ASC 740”) provides guidance on the accounting for and disclosure of uncertainty in tax position. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions deemed to meet the more-likely-than-not threshold are recorded as a tax benefit or expense in the current year. Based on its analysis of its tax position for all open tax years (fiscal years 2021 through 2024), the Company has concluded that it does not have any uncertain tax positions that met the recognition or measurement criteria of ASC 740. Such open tax years remain subject to examination and adjustment by tax authorities.
Recently Adopted Accounting Standards. The Company adopted FASB Accounting Standards Update 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures (“ASU 2023-07”). The adoption of ASU 2023-07 impacted the financial statement disclosures of the Company and did not impact the Company’s financial position or the results of its operations. An operating segment is defined as a component of a public entity that engages in business activities from which it may recognize revenues and incur expenses, has operating results that are regularly reviewed by the public entity’s chief operating decision maker (“CODM”) to make decisions about resources to be allocated to the segment and assess its performance, and has discrete financial information available. The Company operates under one operating segment and reporting unit, investment management. The CODM is the chief executive officer of the Company, who is responsible for determining the Company’s investment strategy, capital allocation, expense structure, and significant transactions impacting the Company. Key metrics include, but are not limited to, net investment income and net increase in net assets resulting from operations that is reported on the Statement of Operations, fair value of investments as disclosed on the Schedule of Investments, as well as distributions made to the Company’s shareholders.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which is intended to enhance the transparency of income tax disclosures. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024 and is to be adopted on a prospective basis with the option to apply retrospectively. The Company is currently assessing the impact of this guidance, however, the Company does not expect a material impact on its consolidated financial statements.
3. SIGNIFICANT AGREEMENTS AND RELATED PARTIES
Investment Management Agreement. The Company has an investment management agreement (the “Investment Management Agreement”) with GECM. Beginning on November 4, 2016, the Company began accruing for GECM’s fees for its services under the Investment Management Agreement. This fee consists of two components: a base management fee and an incentive fee. Effective August 1, 2022, upon receiving approval from the Company’s stockholders, the Company and GECM amended the Investment Management Agreement to reset the Capital Gains Incentive Fee to begin on April 1, 2022, which eliminated $163.2 million of historical realized and unrealized losses incurred prior to April 1, 2022 in calculating future incentive fees. In addition, the Income Incentive Fee was amended to reset the mandatory deferral commencement date used in calculating deferred incentive fees to April 1, 2022.
The Company’s President and Chief Executive Officer is also a portfolio manager and president of GECM, as well as a Managing Director of Imperial Capital Asset Management, LLC. The Company’s Chief Compliance Officer is also the chief compliance officer and general counsel of GECM, and the president of GEG. The Company’s Chief Financial Officer is also the chief financial officer of GEG.
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Management Fee The base management fee is calculated at an annual rate of 1.50% of the Company’s average adjusted gross assets, including assets purchased with borrowed funds. The base management fee is payable quarterly in arrears. The base management fee is calculated based on the average value of the Company’s gross assets, excluding cash and cash equivalents, at the end of the two most recently completed calendar quarters, and appropriately adjusted for any share issuances or repurchases during the then current calendar quarter. Base management fees for any partial quarter are prorated.
For the three and six months ended June 30, 2025, management fees amounted to $1,278 and $2,550, respectively. For the three and six months ended June 30, 2024, management fees amounted to $1,068 and $2,008, respectively. As of June 30, 2025 and December 31, 2024, $1,278 and $1,248, respectively, remained payable.
Incentive Fee The incentive fee consists of two components that are independent of each other with the result that one component may be payable even if the other is not. One component of the incentive fee is based on income (the “Income Incentive Fee”) and the other component is based on capital gains (the “Capital Gains Incentive Fee”).
The Income Incentive Fee is calculated on a quarterly basis as 20% of the amount by which the Company’s pre-incentive fee net investment income (the “Pre-Incentive Fee Net Investment Income”) for the quarter exceeds a hurdle rate of 1.75% (7.0% annualized) of the Company’s net assets at the end of the immediately preceding calendar quarter, subject to a “catch-up” provision pursuant to which GECM receives all of such income in excess of the 1.75% level but less than 2.1875% (8.75% annualized) and subject to a total return requirement (described below). The effect of the “catch-up” provision is that, subject to the total return provision, if pre-incentive fee net investment income exceeds 2.1875% of the Company’s net assets at the end of the immediately preceding calendar quarter, in any calendar quarter, GECM will receive 20.0% of the Company’s pre-incentive fee net investment income as if the 1.75% hurdle rate did not apply. These calculations will be appropriately prorated for any period of less than three months and adjusted for any share issuances or repurchases during the then current quarter.
Pre-Incentive Fee Net Investment Income includes any accretion of original issue discount, market discount, PIK interest, PIK dividends or other types of deferred or accrued income, including in connection with zero coupon securities, that the Company and its consolidated subsidiaries have recognized in accordance with GAAP, but have not yet received in cash (collectively, “Accrued Unpaid Income”). Pre-Incentive Fee Net Investment Income does not include any realized capital gains or losses or unrealized capital appreciation or depreciation.
Any Income Incentive Fee otherwise payable with respect to Accrued Unpaid Income (collectively, the “Accrued Unpaid Income Incentive Fees”) is deferred, on a security by security basis, and becomes payable only if, as, when and to the extent cash is received by the Company or its subsidiaries in respect thereof. Any Accrued Unpaid Income that is subsequently reversed in connection with a write-down, write-off, impairment or similar treatment of the investment giving rise to such Accrued Unpaid Income will, in the applicable period of reversal, (1) reduce Pre-Incentive Fee Net Investment Income and (2) reduce the amount of Accrued Unpaid Income Incentive Fees previously deferred.
The Company will defer cash payment of any Income Incentive Fee otherwise payable to the investment adviser in any quarter (excluding Accrued Unpaid Income Incentive Fees with respect to such quarter) that exceeds (1) 20% of the Cumulative Pre‑Incentive Fee Net Return (as defined below) during the most recent twelve full calendar quarter period ending on or prior to the date such payment is to be made (the “Trailing Twelve Quarters”) less (2) the aggregate incentive fees that were previously paid to the investment adviser during such Trailing Twelve Quarters (excluding Accrued Unpaid Income Incentive Fees during such Trailing Twelve Quarters and not subsequently paid). “Cumulative Pre‑Incentive Fee Net Return” during the relevant Trailing Twelve Quarters means the sum of (a) pre‑incentive fee net investment income in respect of such Trailing Twelve Quarters less (b) net realized capital losses and net unrealized capital depreciation, if any, in each case calculated in accordance with GAAP, in respect of such Trailing Twelve Quarters. As a result of the amendment effective August 1, 2022, the calculation of Cumulative Pre-Incentive Fee Net Return begins as of April 1, 2022.
Under the Capital Gains Incentive Fee, the Company is obligated to pay GECM at the end of each calendar year 20% of the aggregate cumulative realized capital gains from April 1, 2022 through the end of that year, computed net of aggregate cumulative realized capital losses and aggregate cumulative unrealized depreciation through the end of such year, less the aggregate amount of any previously paid capital gains incentive fees.
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For the six months ended June 30, 2025 and 2024, the Company incurred Income Incentive Fees of $2,620 and $1,562, respectively. As of June 30, 2025, cumulative accrued incentive fees payable were $3,636, and after calculating the total return requirement, $2.5 million was immediately payable. As of December 31, 2024, cumulative accrued incentive fees payable were $1,712, and after calculating the total return requirement, $400 was immediately payable. These payable amounts included both Accrued Unpaid Income Incentive Fees and amounts deferred under the total return requirement and would have become due upon meeting the criteria described above. For the six months ended June 30, 2025 and the year ended December 31, 2024, the Company did not have any Capital Gains Incentive Fees accrual.
The Investment Management Agreement provides that, absent willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of the reckless disregard of its duties and obligations, GECM and its officers, managers, agents, employees, controlling persons, members and any other person or entity affiliated with it are entitled to indemnification from the Company for any damages, liabilities, costs and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) arising from the rendering of GECM’s services under the Investment Management Agreement or otherwise as an investment adviser of the Company.
Administration Fees. The Company has an administration agreement (the “Administration Agreement”) with GECM to provide administrative services, including, among other things, furnishing the Company with office facilities, equipment, clerical, bookkeeping and record keeping services. The Company will reimburse GECM for its allocable portion of overhead and other expenses of GECM in performing its obligations under the Administration Agreement. Compensation of administrator personnel is allocated based on time allocation for the period. Other overhead costs are based on a combination of time allocation and total headcount.
The Administration Agreement provides that, absent willful misfeasance, bad faith or negligence in the performance of its duties or by reason of the reckless disregard of its duties and obligations, GECM and its officers, managers, partners, agents, employees, controlling persons, members and any other person or entity affiliated with it are entitled to indemnification from the Company for any damages, liabilities, costs and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) arising from the rendering of GECM’s services under the Administration Agreement or otherwise as administrator for the Company.
For the three and six months ended June 30, 2025, the Company incurred expenses under the Administration Agreement of $383 and $738, respectively. For the three and six months ended June 30, 2024, the Company incurred expenses under the Administration Agreement of $396 and $781, respectively. As of June 30, 2025 and December 31, 2024, $172 and $156 remained payable.
4. FAIR VALUE MEASUREMENT
The fair value of a financial instrument is the amount that would be received to sell an asset or would be paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price).
The fair value hierarchy under ASC 820 prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The levels used for classifying investments are not necessarily an indication of the risk associated with investing in these securities. The three levels of the fair value hierarchy are as follows:
Basis of Fair Value Measurement
Level 1 Investments valued using unadjusted quoted prices in active markets for identical assets.
Level 2 Investments valued using other unadjusted observable market inputs, e.g. quoted prices in markets that are not active or quotes for comparable instruments.
Level 3 Investments that are valued using quotes and other observable market data to the extent available, but which also take into consideration one or more unobservable inputs that are significant to the valuation taken as a whole.
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Note 2 should be read in conjunction with the information outlined below.
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The table below presents the valuation techniques and the nature of significant inputs generally used in determining the fair value of Level 2 and Level 3 Instruments.
Level 2 Instruments Valuation Techniques and Significant Inputs
Equity, Bank Loans, Corporate Debt, and Other Debt Obligations
The types of instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency may include commercial paper, most government agency obligations, certain corporate debt securities, certain mortgage-backed securities, certain bank loans, less liquid publicly-listed equities, certain state and municipal obligations, certain money market instruments and certain loan commitments.
Valuations of Level 2 debt and equity instruments can be verified to quoted prices, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency. Consideration is given to the nature of the quotations (e.g. indicative or firm) and the relationship of recent market activity to the prices provided from alternative pricing sources.
Level 3 Instruments Valuation Techniques and Significant Inputs
Bank Loans, Corporate Debt, and Other Debt Obligations
Valuations are generally based on discounted cash flow techniques, for which the significant inputs are the amount and timing of expected future cash flows, market yields and recovery assumptions. The significant inputs are generally determined based on an analysis of market comparables, transactions in similar instruments and/or recovery and liquidation analyses.
Equity
Recent third-party investments or pending transactions are considered to be the best evidence for any change in fair value. When these are not available, the following valuation methodologies are used, as appropriate and available:
Evidence includes recent or pending reorganizations (for example, merger proposals, tender offers and debt restructurings) and significant changes in financial metrics, including:
As noted above, the income and market approaches were used in the determination of fair value of certain Level 3 assets as of June 30, 2025 and December 31, 2024. The significant unobservable inputs used in the income approach are the discount rate or market yield used to discount the estimated future cash flows expected to be received from the underlying investment, which include both future principal and interest payments. An increase in the discount rate or market yield would result in a decrease in the fair value. Included in the consideration and selection of discount rates is risk of default, rating of the investment (if any), call provisions and comparable company valuations. The significant unobservable inputs used in the market approach are based on market comparable transactions and market multiples of publicly traded comparable companies. Increases or decreases in market multiples would result in an increase or decrease, respectively, in the fair value.
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The following summarizes the Company’s investment assets categorized within the fair value hierarchy as of June 30, 2025:
Type of Investment
Level 1
Level 2
Level 3
Asset
97,365
123,877
38,380
41,366
Short Term Investments
71,192
162,257
330,814
Investment measured at net asset value(1)
72,445
Total Investments, at fair value
The following summarizes the Company’s investment assets categorized within the fair value hierarchy as of December 31, 2024:
76,764
159,954
32,937
36,367
11,878
192,891
281,533
51,177
The following is a reconciliation of Level 3 assets for the six months ended June 30, 2025:
Beginning Balance as of January 1, 2025
Net Transfers In/Out
Purchases(1)
Net Change in UnrealizedAppreciation (Depreciation)(2)
Sales and Settlements(1)
Net Amortization of Premium/ Discount
Ending Balance as of June 30, 2025
(21,860
24,138
281
(2,039
(36,849
252
6,396
(89
(979
Total investment assets
30,534
192
(1,924
(37,828
The following is a reconciliation of Level 3 assets for the year ended December 31, 2024:
Beginning Balance as of January 1, 2024
Ending Balance as of December 31, 2024
122,693
17,179
80,149
(36
740
(61,155
384
20,044
28,334
(11,890
142,737
18,628
108,483
(11,150
(66,155
Six investments with an aggregate fair value of $37,959 were transferred from Level 3 to Level 2 as a result of increased pricing transparency during the six months ended June 30, 2025. Six investments with an aggregate fair value of $16,099 were transferred from Level 2 to Level 3 as a result of reduced pricing transparency during the six months ended June 30, 2025.
One investment with a fair value of $3,970 was transferred from Level 3 to Level 2 as a result of increased pricing transparency during the year ended December 31, 2024. Four investments with an aggregate fair value of $22,597 were transferred from Level 2 to Level 3 as a result of decreased pricing transparency during the year ended December 31, 2024.
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The following tables below present the ranges of significant unobservable inputs used to value the Company’s Level 3 assets as of June 30, 2025 and December 31, 2024, respectively. These ranges represent the significant unobservable inputs that were used in the valuation of each type of instrument, but they do not represent a range of values for any one instrument. For example, the lowest yield in 1st Lien Debt is appropriate for valuing that specific debt investment, but may not be appropriate for valuing any other debt investments in this asset class. Accordingly, the ranges of inputs presented below do not represent uncertainty in, or possible ranges of, fair value measurements of the Company’s Level 3 assets.
As of June 30, 2025
Fair value
Valuation Technique(1)
Unobservable Input(1)
Range (Weighted Average)(2)
91,273
Income Approach
Discount Rate
8.86% - 25.71% (15.34%)
27,335
Recent Transaction
5,269
Market Approach
Earnings Multiple
0.25 - 6.75 (4.74)
Total Debt
18,794
7,240
0.09 - 8.00 (6.79)
16.00% - 20.00% (18.00%)
Insurance Industry Model
Estimated Losses
$0.0MM - $65.0MM ($32.5MM)
Asset Recovery / Liquidation (3)
Total Equity/Other
As of December 31, 2024
117,413
9.37% - 22.48% (15.13%)
35,710
6,831
0.30 - 8.00 (4.66)
20,327
6,401
0.09 - 8.25 (6.67)
$0.0MM-$65.0MM($32.5MM)
In accordance with ASC 820, certain investments that do not have a readily determinable fair value and which are within the scope of Topic 946, Financial Services - Investment Companies, may be measured using NAV as a practical expedient. As of June 30, 2025 the Company held three investments valued using NAV as a practical expedient. These investments are generally restricted from withdrawal subject to the terms of each investment vehicle with withdrawals allowed no more than annually. There is no set duration for these entities.
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5. DEBT
On May 5, 2021, the Company entered into a Loan, Guarantee and Security Agreement (the “Loan Agreement”) with City National Bank (“CNB”). The Loan Agreement provides for a senior secured revolving line of credit of up to $25 million (subject to a borrowing base as defined in the Loan Agreement). The Company may request to increase the revolving line in an aggregate amount not to exceed $25 million, which increase is subject to the sole discretion of CNB. On November 22, 2023, the Company amended the Loan Agreement to extend the maturity date of the revolving line from May 5, 2024 to May 5, 2027. Borrowings under the revolving line bear interest at a rate equal to (i) the secured overnight financing rate (“SOFR”) plus 3.00% (reduced from SOFR plus 3.50% prior to the November 2023 amendment), (ii) a base rate plus 2.00% or (iii) a combination thereof, as determined by the Company. Additionally, we are required to pay a commitment fee of 0.50% per annum on any unused portion of the revolving line of credit. As of June 30, 2025, there were $6 million in borrowings outstanding under the revolving line.
Borrowings under the revolving line are secured by a first priority security interest in substantially all of the Company’s assets, subject to certain specified exceptions. The Company has made customary representations and warranties and is required to comply with various affirmative and negative covenants, reporting requirements and other customary requirements for similar loan agreements. In addition, the Loan Agreement contains financial covenants requiring (i) net assets of not less than $65 million, (ii) asset coverage equal to or greater than 150% and (iii) bank asset coverage equal to or greater than 300%, in each case tested as of the last day of each fiscal quarter of the Company. Borrowings are also subject to the leverage restrictions contained in the Investment Company Act of 1940, as amended.
Unsecured Notes
On January 11, 2018, the Company issued $43.0 million in aggregate principal amount of 6.75% notes due 2025 (the “GECCM Notes”). On January 19, 2018 and February 9, 2018, the Company issued an additional $1.9 million and $1.5 million of the GECCM Notes upon partial exercise of the underwriters’ over-allotment option. On September 12, 2024, we caused redemption notices to be issued to the holders of the GECCM Notes regarding the Company's exercise of its option to redeem, in whole, the issued and outstanding GECCM Notes. We redeemed all of the issued and outstanding GECCM Notes on October 12, 2024 at 100% of the principal amount plus accrued and unpaid interest thereon from September 30, 2024 through, but excluding, the redemption date, October 12, 2024.
On June 23, 2021, the Company issued $50.0 million in aggregate principal amount of 5.875% notes due 2026 (the “GECCO Notes”). On July 9, 2021, the Company issued an additional $7.5 million of the GECCO Notes upon full exercise of the underwriters’ over-allotment option.
On August 16, 2023, the Company issued $40.0 million in aggregate principal amount of 8.75% notes due 2028 (the “GECCZ Notes”).
On April 17, 2024, the Company issued $30.0 million in aggregate principal amount of 8.50% notes due 2029 (the “GECCI Notes”). On April 25, 2024, the Company issued an additional $4.5 million of the GECCI Notes upon full exercise of the underwriters’ over-allotment option. On July 9, 2024, we issued an additional $22.0 million in aggregate principal amount of the GECCI Notes in a direct placement.
On September 19, 2024, the Company issued $36.0 million in aggregate principal amount of 8.125% notes due 2029 (the "GECCH Notes"). On October 3, 2024, the Company issued an additional $5.4 million of the GECCH Notes upon full exercise of the underwriters' over-allotment option.
The Notes are our unsecured obligations and rank equal with all of our outstanding and future unsecured unsubordinated indebtedness. The unsecured notes are effectively subordinated, or junior in right of payment, to indebtedness under our Loan Agreement and any other future secured indebtedness that the Company may incur to the extent of the value of the assets securing such indebtedness and structurally subordinated to all future indebtedness and other obligations of our subsidiaries. The Company pays interest on the unsecured notes on March 31, June 30, September 30 and December 31 of each year. The GECCO Notes, GECCZ Notes, GECCI Notes and GECCH Notes will mature on June 30, 2026, September 30, 2028, April 30, 2029 and December 31, 2029, respectively. The GECCO Notes are currently callable at the Company’s option and the GECCZ Notes, GECCI Notes and GECCH Notes can be called on or after September 30, 2025, April 30, 2026 and December 31, 2026, respectively. Holders of the unsecured notes do not have the option to have the unsecured notes repaid prior to the stated maturity date. The unsecured notes were issued in minimum denominations of $25 and integral multiples of $25 in excess thereof.
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As part of the offerings, the Company incurred fees and costs, which are treated as a reduction of the carrying amount of the debt on the Company’s statements of assets and liabilities. These deferred financing costs presented as a reduction to the Notes payable balance are being amortized into interest expense over the term of the Notes.
The Company may repurchase the Notes in accordance with the Investment Company Act and the rules promulgated thereunder.
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Information about the Company’s senior securities (including debt securities and other indebtedness) is shown in the following table:
As of
Total AmountOutstanding(1)
Asset CoverageRatio Per Unit(2)
Involuntary LiquidationPreference Per Unit(3)
Average MarketValue Per Unit(4)
December 31, 2016
8.25% Notes due 2020
33,646
6,168
December 31, 2017
6.50% Notes due 2022 (“GECCL Notes”)
32,631
5,010
December 31, 2018
GECCL Notes
2,393
1.01
GECCM Notes
46,398
December 31, 2019
1,701
GECCN Notes
45,000
December 31, 2020
30,293
1,671
0.89
45,610
0.84
42,823
December 31, 2021
December 31, 2022
1,544
0.99
10,000
December 31, 2023
1,690
1,697
1,695
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The terms of the unsecured notes are governed by a base indenture, dated as of September 18, 2017, by and between the Company and Equiniti Trust Company, LLC (formerly known as American Stock Transfer & Trust Company, LLC), as trustee (as supplemented with respect to each series of notes, the “Indenture”). The Indenture’s covenants, include restrictions on certain activities in the event the Company falls below the minimum asset coverage requirements set forth in Section 18(a)(1)(A) as modified by Section 61(a)(1) of the Investment Company Act, as well as covenants requiring the Company to provide financial information to the holders of the Notes and the trustee if the Company ceases to be subject to the reporting requirements of the Securities Exchange Act of 1934. These covenants are subject to limitations and exceptions that are described in the Indenture. The Investment Company Act limits, with certain exceptions, the Company’s borrowing such that its asset coverage ratio, as defined in the Investment Company Act, is at least 1.5 to 1 after such borrowing.
As of June 30, 2025, the Company’s asset coverage ratio was approximately 169.5%.
As of June 30, 2025 and December 31, 2024, the Company was in compliance with all covenants under the indenture.
For the three and six months ended June 30, 2025 and 2024, the components of interest expense were as follows:
Borrowing interest expense
3,895
3,138
7,728
Amortization of acquisition premium
423
335
614
Weighted average interest rate(1)
8.60
8.12
8.66
8.00
Average outstanding balance
201,279
171,594
199,519
157,517
The fair value of the Company’s Notes are determined in accordance with ASC 820, which defines fair value in terms of the price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The fair value of the Company’s Notes is determined by utilizing market quotations at the measurement date as they are Level 1 securities.
Facility
Commitments
BorrowingsOutstanding
FairValue
Unsecured Debt - GECCO Notes
57,523
Unsecured Debt - GECCZ Notes
40,272
Unsecured Debt - GECCI Notes
56,658
Unsecured Debt - GECCH Notes
41,615
195,400
196,068
57,017
40,360
56,988
41,317
195,682
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6. CAPITAL ACTIVITY
On May 6, 2025, the Company and GECM entered into an Equity Distribution Agreement with Lucid Capital Markets, LLC (the "Agent"), under which the Company may issue and sell through the Agent, from time to time, shares of its common stock. Sales of the Common Stock, if any, will be made by any method that is deemed to be an “at the market offering” as defined in Rule 415(a)(4) under the Securities Act of 1933, as amended. The sales price per share of the Common Stock sold in the Offering, less the Agent’s commission, will not be less than the NAV per share of the Common Stock at the time of such sale. Consistent with the terms of the Equity Distribution Agreement, GECM or an affiliate of GECM may, from time to time and in their sole discretion, contribute proceeds necessary to ensure that no sales are made at a price below the then-current NAV per share. As of June 30, 2025, the Company has sold 23,963 shares for gross proceeds of $0.3 million at an average price of $11.51 per share for aggregate net proceeds of $0.3 million (net of transaction costs less than $0.1 million).
On December 11, 2024, we entered into a Share Purchase Agreement with Summit Grove Partners, LLC ("SGP"), pursuant to which SGP purchased, and we issued 1,094,527 shares of our common stock, par value $0.01, at a price of $12.06 per share, which represented our net asset value ("NAV") per share as of December 10, 2024, for an aggregate purchase price of $13.0 million, net of transaction costs of $0.2 million. SGP is owned 25% by GEG. GECM, the investment manager of GECC, is a wholly-owned subsidiary of GEG. The common stock was issued in a private placement exempt from registration under Section 4(a)(2) of the Securities Act.
On June 21, 2024, we entered into a Share Purchase Agreement with Prosper Peak Holdings, LLC (“PPH”), pursuant to which PPH purchased, and we issued 997,506 shares of our common stock, par value $0.01, at a price of $12.03 per share, which represented our NAV per share as of June 20, 2024, for an aggregate purchase price of $11.8 million, net of transaction costs of $0.2 million. PPH is owned 25% by GEG. GECM, the investment manager of GECC, is a wholly-owned subsidiary of GEG. The common stock was issued in a private placement exempt from registration under Section 4(a)(2) of the Securities Act.
On February 8, 2024, we entered into a Share Purchase Agreement with Great Elm Strategic Partnership I, LLC (“GESP”), pursuant to which GESP purchased, and we issued, 1,850,424 shares of our common stock, par value $0.01, at a price of $12.97 per share, which represented our NAV per share as of February 7, 2024, for an aggregate purchase price of $23.8 million, net of transaction costs of $0.2 million. GESP is owned 25% by GEG. GECM, the investment manager of GECC, is a wholly-owned subsidiary of GEG. The common stock was issued in a private placement exempt from registration under Section 4(a)(2) of the Securities Act.
7. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company may enter into investment agreements under which it commits to make an investment in a portfolio company at some future date or over a specified period of time. As of June 30, 2025, the Company had approximately $1,787 in unfunded commitments to provide financing to certain of its portfolio companies as follows:
Portfolio Company & Investment
Unfunded Commitments
1,741
Sirva Worldwide DDTL
46
1,787
To the degree applicable, unrealized gains or losses on these commitments as of June 30, 2025 are included in the Company’s Statements of Assets and Liabilities and the corresponding Schedule of Investments. The Company believes that it had sufficient cash and other liquid assets on its balance sheet to satisfy the unfunded commitments. In addition, the Company has the ability to draw on its revolving line of credit to manage cash flows. The Company has considered the net increases in net assets and positive cash flows from operations and has concluded that it has the ability to meet its obligations in the ordinary course of business based upon an evaluation of its cash position and sources of liquidity.
From time to time, the Company may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of the Company rights under contracts with the Company portfolio companies.
The Company is named as a defendant in a lawsuit filed on March 5, 2016, and captioned Intrepid Investments, LLC v. London Bay Capital, which is pending in the Delaware Court of Chancery. The plaintiff immediately agreed to stay the action in light of an ongoing mediation among parties other than the Company. This lawsuit was brought by a member of Speedwell Holdings (formerly known as The Selling Source, LLC), one of the Company’s portfolio investments, against various members of and lenders to
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Speedwell Holdings. The plaintiff asserts claims of aiding and abetting, breaches of fiduciary duty, and tortious interference against the Company. In June 2018, Intrepid Investments, LLC (“Intrepid”) sent notice to the court and defendants effectively lifting the stay and triggering defendants’ obligation to respond to the Intrepid complaint. In September 2018, the Company joined the other defendants in a motion to dismiss on various grounds. In February 2019, Intrepid filed a second amended complaint to which defendants filed a renewed motion to dismiss in March 2019. In June 2023, the Court granted in part and denied in part defendants’ motion to dismiss. The parties are currently involved in pre-trial discovery on the surviving claims.
8. INDEMNIFICATION
Under the Company’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Company. In addition, in the normal course of business the Company expects to enter into contracts that contain a variety of representations which provide general indemnifications. The Company’s maximum exposure under these agreements cannot be known; however, the Company expects any risk of loss to be remote.
9. FINANCIAL HIGHLIGHTS
Below is the schedule of financial highlights of the Company:
Per Share Data:(1)
Net asset value, beginning of period
Net realized gains (loss)
Net change in unrealized appreciation (depreciation)
(1.10
(0.03
Distributions declared from net investment income(2)
(0.74
(0.70
Net decrease resulting from distributions to common stockholders
(0.75
(0.73
Net asset value, end of period
Per share market value, end of period
10.67
10.68
Shares outstanding, end of period
Total return based on net asset value(3)
9.18
(1.79
)%
Total return based on market value(3)
4.06
6.85
Ratio/Supplemental Data:
Net assets, end of period
Ratio of total expenses to average net assets(4),(5)
22.11
19.81
Ratio of incentive fees to average net assets(4)
1.92
1.35
Ratio of net investment income to average net assets(4),(5)
17.43
12.20
Portfolio turnover
23
43
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10. AFFILIATED AND CONTROLLED INVESTMENTS
Affiliated investments are defined by the Investment Company Act, whereby the Company owns between 5% and 25% of the portfolio company’s outstanding voting securities and the investments are not classified as controlled investments. The aggregate fair value of non-controlled, affiliated investments at June 30, 2025 represented 0% of the Company’s net assets.
Controlled investments are defined by the Investment Company Act, whereby the Company owns more than 25% of the portfolio company’s outstanding voting securities or maintains the ability to nominate greater than 50% of the board representation. The aggregate fair value of controlled investments at June 30, 2025 represented 61% of the Company’s net assets.
Fair value as of June 30, 2025 along with transactions during the six months ended June 30, 2025 in these affiliated investments and controlled investments was as follows:
Issue(1)
Fair value at December 31, 2024
Gross Additions(2)
Gross Reductions(3)
Net RealizedGain (Loss)
Change in UnrealizedAppreciation (Depreciation)
Fair value at June 30, 2025
InterestIncome
FeeIncome
DividendIncome
Non-Controlled, Affiliated Investments
Common Equity (5.05% of class)
Totals
Controlled Investments
925
6,733
Equity (87.5% of class)
567
189
7,300
Equity (71.25% of class)
13,611
966
(4,131
7,091
14,536
8,266
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In accordance with SEC Regulation S-X (“S-X”) Rules 3-09 and 4-08(g), the Company must determine which of its unconsolidated controlled portfolio companies, if any, are considered to be "significant subsidiaries." After performing this analysis, the Company determined that CLO Formation JV, LLC ("CLO JV") is a significant subsidiaries for the three and six months ended June 30, 2025 under at least one of the conditions of S-X Rule 1-02(w).
Selected unaudited financial information of CLO JV as of and for the three and six months ended June 30, 2025 has been included below:
Balance Sheet
Total Assets
68,318
56,398
Total Liabilities
103
Net Equity
68,215
56,274
Statement of Operations
For the Three Months Ended June 30, 2025
For the period April 23, 2024 through June 30, 2024(1)
Total Revenues
4,627
482
6,334
45
33
90
Net Income
4,582
449
6,244
Realized Gain (Loss)
(410
Unrealized Gain
(2,012
(1,688
Net Results
2,160
4,146
Schedule of Investments
Quantity/Par
Amortized Cost
CLO Subordinated Notes
Apex Credit CLO 2024-I Ltd
04/24/24
04/20/36
14,957
10,241
10,805
Apex Credit CLO 2024-II Ltd
07/02/24
07/25/37
34,550
26,650
25,410
Apex Credit CLO 12 Ltd
11/01/24
05/23/26
32,932
30,467
29,645
Total Investments
67,358
65,860
10,994
11,990
31,095
30,561
42,089
42,551
Loan Accumulation Facility
11,300
11,502
53,389
54,053
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11. SUBSEQUENT EVENTS
Subsequent events have been evaluated through the date the financial statements were available to be issued. Other than the items discussed below, the Company has concluded that there is no impact requiring adjustment or disclosure in the financial statements.
The Board set distributions for the quarter ending September 30, 2025 at a rate of $0.37 per share. The full amount of each distribution will be from distributable earnings. The schedule of distribution payments will be established by GECC pursuant to authority granted by the Board. The distribution will be paid in cash.
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