What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-08-05 compared with 2020-04-30 · 237 added, 217 removed, 350 unchanged (56% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion is designed to provide a better understanding of our unaudited consolidated financial statements for the three months ended March 31, 2020 , including a brief discussion of our business, key factors that impacted our performance and a summary of our operating results.

The following discussion is designed to provide a better understanding of our unaudited consolidated financial statements for the three and six months ended June 30, 2020, including a brief discussion of our business, key factors that impacted our performance and a summary of our operating results.

The following discussion should be read in conjunction with the Unaudited Consolidated Financial Statements and the notes thereto included in Item 1 of this Quarterly Report on Form 10-Q, and the Consolidated Financial Statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2019.

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Readers are cautioned that the forward-looking statements contained in this Quarterly Report are only predictions, are not guarantees of future performance, and are subject to risks, events, uncertainties and assumptions that are difficult to predict.

Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors discussed herein, in Item 1A entitled "Risk Factors" in Part I of our Annual Report on Form 10-K for the year ended December 31, 2019 and in Item 1A entitled "Risk Factors" in Part II of our subsequently filed Quarterly Reports on Form 10-Q.

Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the items discussed herein, in Item 1A entitled "Risk Factors" in Part I of our Annual Report on Form 10-K for the year ended December 31, 2019 and in Item 1A entitled "Risk Factors" in Part II of our subsequently filed Quarterly Reports on Form 10-Q, including our Quarterly Report on Form 10-Q for the quarter ended March 31 ,2020.

Other factors that could cause our actual results and financial condition to differ materially include, but are not limited to, changes in political, economic or industry conditions, the interest rate environment or conditions affecting the financial and capital markets, including with respect to changes from the impact of the Coronavirus (“COVID- 19”) pandemic;

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When Barings became our external investment adviser in August 2018, they initially focused our investments in syndicated senior secured loans, bonds and other fixed income securities.

Since that time, Barings has been transitioning our portfolio to senior secured private debt investments in performing, well-established middle-market businesses that operate

across a wide range of industries.

Since that time, Barings has been transitioning our portfolio to senior secured private debt investments in middle-market businesses that operate across a wide range of industries.

Barings’ existing SEC co-investment exemptive relief under the 1940 Act, or the Exemptive Relief, permits us and Barings’ affiliated private funds and SEC-registered funds to co-invest in Barings-originated loans, which allows Barings to efficiently implement its senior secured private debt investment strategy for us.

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From time to time, certain of our investments may have a form of interest, referred to as payment-in-kind, or PIK, interest, which is not paid currently but is instead accrued and added to the loan balance and paid at the end of the term.

As of March 31, 2020 , the weighted average yield on our syndicated senior secured loan portfolio, our middle-market senior secured private debt portfolio and our structured product investments was approximately 4.9%, 6.4%, and 7.9%, respectively.

As of March 31, 2020 , the weighted average yield on these three portfolios on a combined basis was approximately 5.8%.

The weighted-average yield on all of our outstanding investments (including equity and equity-linked investments and short-term investments) was approximately 5.3% as of March 31, 2020 .

As of December 31, 2019 , the weighted average yield on our syndicated senior secured loan portfolio and our middle-market senior secured private debt portfolio was approximately 5.4% and 7.0%, respectively.

As of December 31, 2019 , the weighted average yield on these two portfolios on a combined basis was approximately 6.2%.

The weighted-average yield on all of our outstanding investments (including equity and equity-linked investments and short-term investments) was approximately 5.8% as of December 31, 2019 .

As of March 31, 2019, the weighted average yield on our syndicated senior secured loan portfolio and our middle-market senior secured private debt portfolio was approximately 5.8% and 7.6%, respectively.

As of March 31, 2019, the weighted average yield on these two portfolios on a combined basis was approximately 6.3%.

The weighted-average yield on all of our outstanding investments (including equity and equity-linked investments and short-term investments) was approximately 6.1% as of March 31, 2019.

As of June 30, 2020, the weighted average yield on the principal amount of our syndicated senior secured loan portfolio (excluding non-accrual investments), our middle-market senior secured private debt portfolio and our structured product investments was approximately 4.5%, 6.2%, and 7.4%, respectively.

As of June 30, 2020, the weighted average yield on the principal amount on these three portfolios (excluding non-accrual investments) on a combined basis was approximately 5.5%.

The weighted-average yield on the principal amount of our outstanding investments (including equity and equity-linked investments and short-term investments and excluding non-accrual investments) was approximately 5.3% as of June 30, 2020.

As of December 31, 2019, the weighted average yield on the principal amount of our syndicated senior secured loan portfolio and our middle-market senior secured private debt portfolio was approximately 5.4% and 7.0%, respectively.

As of December 31, 2019, the weighted average yield on the principal amount of these two portfolios on a combined basis was approximately 6.2%.

The weighted-average yield on the principal amount of our outstanding investments (including equity and equity-linked investments and short-term investments) was approximately 5.8% as of December 31, 2019.

As of June 30, 2019, the weighted average yield on the principal amount of our syndicated senior secured loan portfolio and our middle-market senior secured private debt portfolio was approximately 5.6% and 7.4%, respectively.

As of June 30, 2019, the weighted average yield on the principal amount of these two portfolios on a combined basis was approximately 6.2%.

COVID-19 Developments

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governmental authorities.

As such, we are unable to predict the duration of any

business and supply-chain disruptions, the extent to which COVID-19 will negatively affect our portfolio companies’ operating results or the impact that such disruptions may have on our results of operations and financial condition.

As such, we are unable to predict the duration of any business and supply-chain disruptions, the extent to which COVID-19 will negatively affect our portfolio companies’ operating results or the impact that such disruptions may have on our results of operations and financial condition.

Depending on the duration and extent of the disruption to the operations of our portfolio companies, we expect that certain portfolio companies will experience financial distress and possibly default on their financial obligations to us and their other capital providers.

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Any reduction in the borrowing base under the February 2019 Credit Facility could have a material adverse effect on our results of operations, financial condition and available liquidity.

In addition, any decreases in our net investment income would increase the portion of our cash flows dedicated to servicing our existing borrowings under the August 2018 Credit Facility, the February 2019 Credit Facility, and the Debt Securitization (each as defined below under "Liquidity and Capital Resources").

In addition, any decreases in our net investment income would increase the portion of our cash flows dedicated to servicing our existing borrowings under the February 2019 Credit Facility and the Debt Securitization (each as defined below under "Liquidity and Capital Resources").

As a result, we may be required to reduce the amount of our distributions to stockholders.

We have had a significant reduction in our net asset value as of March 31, 2020 as compared to our net asset value as of December 31, 2019, which is primarily the result of the impact of the COVID-19 pandemic.

The decrease in net asset value as of March 31, 2020 primarily resulted from an increase in the aggregate unrealized depreciation of our investment portfolio resulting from decreases in the fair value of some of our portfolio company investments primarily due to the immediate adverse economic effects of the COVID-19 pandemic and the continuing uncertainty surrounding its long-term impact, as well as the re-pricing of credit risk in the broadly syndicated credit market.

As of March 31, 2020, we are permitted under the 1940 Act, as a BDC, to borrow amounts such that our asset coverage, as defined in the 1940 Act, equals at least 150% after such borrowing.

We have had a significant reduction in our net asset value as of June 30, 2020 as compared to our net asset value as of December 31, 2019, which is primarily the result of the impact of the COVID-19 pandemic.

The decrease in net asset value as of June 30, 2020 primarily resulted from an increase in the aggregate unrealized depreciation of our investment portfolio resulting from decreases in the fair value of some of our portfolio company investments primarily due to the immediate adverse economic effects of the COVID-19 pandemic and the continuing uncertainty surrounding its long-term impact, as well as the re-pricing of credit risk in the broadly syndicated credit market.

From March 31, 2020 to June 30, 2020, the Company did experience unrealized appreciation on our broadly syndicated loan portfolio of $31.6 million which partially offset the $82.6 million of unrealized depreciation that occurred from December 31, 2019 to March 31, 2020.

As of June 30, 2020, we are permitted under the 1940 Act, as a BDC, to borrow amounts such that our asset coverage, as defined in the 1940 Act, equals at least 150% after such borrowing.

In addition, the February 2019 Credit Facility contains affirmative and negative covenants and events of default relating to minimum stockholders’ equity, minimum obligors’ net worth, minimum asset coverage, minimum liquidity and maintenance of RIC and BDC status, as well as cross-default provisions relating to other indebtedness.

Similarly, the August 2018 Credit Facility includes various events of default, including those relating to borrowings under the credit facility exceeding applicable advance rates and the decline of BSF’s net asset value below a specified threshold.

As of March 31, 2020, we are in compliance with our asset coverage requirements under the 1940 Act.

In addition, neither we nor BSF are in default under any of our credit facilities as of March 31, 2020.

However, any continued increase in unrealized depreciation of our investment portfolio or further significant reductions in our net asset value as a result of the effects of the COVID-19 pandemic or otherwise increases the risk of breaching the relevant covenants, including those relating to minimum stockholders’ equity, minimum obligors’ net worth, and minimum asset coverage.

If we or BSF fail to satisfy the respective covenants in each of the February 2019 Credit Facility and the August 2018 Credit Facility or are unable to cure any event of default or obtain a waiver from the applicable lender, it could result in foreclosure by the lenders under the applicable credit facility, which would accelerate BSF’s and our repayment obligations under the facilities and thereby have a material adverse effect on our business, liquidity, financial condition, results of operations and ability to pay distributions to our stockholders.

See “Item 1A - “Risk Factors - Risks Relating to our Business and Structure - In addition to regulatory limitations on our ability to raise capital, the August 2018 Credit Facility and the February 2019 Credit Facility contain various covenants, which, if not complied with, could accelerate our repayment obligations under the August 2018 Credit Facility or the February 2019 Credit Facility, thereby materially and adversely affecting our liquidity, financial condition, results of operations and ability to pay distributions” included in our most recent Annual Report on Form 10-K and the other risk factors contained therein and in our subsequent filings with the SEC, including this Quarterly Report on Form 10-Q.

As of June 30, 2020, we are in compliance with our asset coverage requirements under the 1940 Act.

In addition, we are not in default under our credit facility as of June 30, 2020.

However, any increase in unrealized depreciation of our investment portfolio or further significant reductions in our net asset value as a result of the effects of the COVID-19 pandemic or otherwise increases the risk of breaching the relevant covenants, including those relating to minimum stockholders’ equity, minimum obligors’ net worth, and minimum asset coverage.

If we fail to satisfy the covenants in the February 2019 Credit Facility or are unable to cure any event of default or obtain a waiver from the applicable lender, it could result in foreclosure by the lenders under the credit facility, which would accelerate our repayment obligations under the February 2019 Credit Facility and thereby have a material adverse effect on our business, liquidity, financial condition, results of operations and ability to pay distributions to our stockholders.

We are also subject to financial risks, including changes in market interest rates.

As of March 31, 2020, approximately $1,218.4 million (principal amount) of our debt portfolio investments bore interest at variable rates, which generally are LIBOR-based (or based on an equivalent applicable currency rate), and many of which are subject to certain floors.

In addition, the Class A-1 2019 Notes and the Class A-2 2019 Notes issued in connection with the Debt Securitization have floating rate

interest provisions, and each of the August 2018 Credit Facility and February 2019 Credit Facility has floating rate interest provisions.

In connection with the COVID-19 pandemic, the U.S.

As of June 30, 2020, approximately $1,053.9 million (principal amount) of our debt portfolio investments bore interest at variable rates, which generally are LIBOR-based (or based on an equivalent applicable currency rate), and many of which are subject to certain floors.

In addition, the Class A-1 2019 Notes and the Class A-2 2019 Notes issued in connection with the Debt Securitization have floating rate interest provisions, and the February 2019 Credit Facility has a floating rate interest provision.

In connection with the

COVID-19 pandemic, the U.S.

Federal Reserve and other central banks have reduced certain interest rates and LIBOR has decreased.

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Quantitative and Qualitative Disclosures About Market Risk” for an analysis of the impact of hypothetical base rate changes in interest rates.

We will continue to monitor the rapidly evolving situation relating to the COVID-19 pandemic and guidance from U.S.

We will continue to monitor the situation relating to the COVID-19 pandemic and guidance from U.S.

and international authorities, including federal, state and local public health authorities and may take additional actions based on their recommendations.

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As a result, we are permitted under the 1940 Act to incur indebtedness at a level which is more consistent with a portfolio of senior secured debt.

As of March 31, 2020 , our asset coverage ratio was 169.1%.

As of June 30, 2020, our asset coverage ratio was 186.1%.

Portfolio Investment Composition

The total value of our investment portfolio was $1,071.8 million as of March 31, 2020 , as compared to $1,173.6 million as of December 31, 2019 .

As of March 31, 2020 , we had investments in 157 portfolio companies, 8 structured product investments and two money market funds with an aggregate cost of $1,211.9 million .

The total value of our investment portfolio was $1,034.0 million as of June 30, 2020, as compared to $1,173.6 million as of December 31, 2019.

As of June 30, 2020, we had investments in 147 portfolio companies, 8 structured product investments and four money market funds with an aggregate cost of $1,107.8 million.

As of December 31, 2019, we had investments in 147 portfolio companies and two money market fund with an aggregate cost of $1,192.6 million.

As of both March 31, 2020 and December 31, 2019 , none of our portfolio investments represented greater than 10% of the total fair value of our investment portfolio.

As of March 31, 2020 and December 31, 2019 , our investment portfolio consisted of the following investments:

Percentage of

March 31, 2020:

As of both June 30, 2020 and December 31, 2019, none of our portfolio investments represented greater than 10% of the total fair value of our investment portfolio.

As of June 30, 2020 and December 31, 2019, our investment portfolio consisted of the following investments:

Cost Percentage of

Portfolio Fair Value Percentage of

June 30, 2020:

Senior debt and 1 st lien notes

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Subordinated debt and 2 nd lien notes

17,505,684 2 16,040,935 2

Structured products 11,519,473 1 12,264,235 1

Equity shares 1,028,125 — 1,070,410 —

Investment in joint venture

Investments in joint ventures 16,658,270 2 15,933,845 2

Short-term investments 58,046,476 5 58,046,124 6

$ 1,107,751,535 100 % $ 1,034,041,032 100 %

1,071,753,340

December 31, 2019:

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$ 1,070,031,715 90 % $ 1,050,863,369 90 %

1,050,863,369

Subordinated debt and 2 nd lien notes

15,339,180 1 15,220,969 1

Equity shares 515,825 — 760,716 —

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$ 1,192,613,930 100 % $ 1,173,643,807 100 %

1,173,643,807

Investment Activity

During the three months ended March 31, 2020 , we purchased $27.9 million in syndicated senior secured loans, purchased $11.5 million in structured product investments, made new investments in ten middle-market portfolio companies totaling $78.1 million, consisting of ten senior secured private debt investments, one subordinated debt investment and one minority equity investment, and made additional debt investments in ten existing portfolio companies totaling $14.7 million.

We had eight syndicated senior secured loans repaid at par totaling total $32.7 million, had one middle-market portfolio company loan repaid at par totaling $8.4 million, received $1.5 million of syndicated senior secured loan principal payments and received $1.5 million of middle-market portfolio company principal payments.

During the six months ended June 30, 2020, we purchased $38.3 million in syndicated senior secured loans, purchased $11.5 million in structured product investments, made new investments in 12 middle-market portfolio companies totaling $91.3 million, consisting of 12 senior secured private debt investments, one subordinated debt investment and two minority equity investment, made one new joint venture equity investment totaling $1.5 million, made additional debt investments in 14 existing portfolio companies totaling $19.0 million and made an additional investment in one joint venture equity portfolio company totaling $5.0 million.

We had 11 syndicated senior secured loans repaid at par totaling total $43.6 million, had one middle-market portfolio company loan repaid at par totaling $8.4 million, received $3.3 million of syndicated senior secured loan principal payments and received $3.1 million of middle-market portfolio company principal payments.

In addition, we sold $105.5 million of syndicated senior secured loans, recognizing a net realized loss on these transactions of $16.4 million, and sold $30.8 million of middle-market portfolio company debt investments to our joint venture.

Lastly, we received $0.2 million in escrow distributions from two legacy portfolio companies, which were recognized as realized gains.

During the three months ended March 31, 2019, we purchased $0.7 million in syndicated senior secured loans, made new investments in six middle-market portfolio companies totaling $63.0 million, consisting of five senior secured private debt investments and one second lien private debt investment, and made additional debt investments in two existing portfolio companies totaling $1.7 million.

In addition, we invested $17.2 million, net, in money market fund investments during the three months ended March 31, 2019.

We received $5.9 million of principal payments and sold $33.4 million of syndicated secured loans and senior secured private debt investments, recognizing a net realized loss on these sales of $0.4 million.

In addition, w e received $0.3 million in escrow distributions from two portfolio companies, which were recognized as realized gains.

Total portfolio investment activity for the three months ended March 31, 2020 and 2019 was as follows:

Three Months Ended

March 31, 2020:

Subordinated debt and 2nd Lien Notes

Structured Products

Investment in Joint Venture

In addition, one broadly syndicated loan investment was restructured.

GAAP, this restructuring was considered a material modification and as a result, we recognized a loss of approximately $0.6 million related to this restructuring.

Lastly, we received $0.2 million in escrow distributions from legacy portfolio companies, which were recognized as realized gains.

During the six months ended June 30, 2019, we purchased $3.6 million in syndicated senior secured loans, made thirteen new middle-market debt investments totaling $130.1 million, consisting of 12 senior secured private debt investments and one second lien private debt investment, made one joint venture equity investment totaling $5.2 million and made additional debt investments in four existing portfolio companies totaling $6.9 million.

We had four portfolio company loans repaid at par totaling $26.6 million, received $20.8 million of principal payments and sold $33.7 million of syndicated secured loans and senior secured private debt investments, recognizing a net realized loss on these transactions of $0.5 million.

In addition, w e received $0.5 million in escrow distributions from three portfolio companies, which were recognized as realized gains.

Total portfolio investment activity for the six months ended June 30, 2020 and 2019 was as follows:

Six Months Ended

June 30, 2020:

Notes Subordinated debt and 2nd Lien Notes Structured Products Equity

Shares Investments in Joint Ventures Short-term

Investments Total

Fair value, beginning of period $ 1,050,863,369 $ 15,220,969 $ — $ 760,716 $ 10,229,813 $ 96,568,940 $ 1,173,643,807

1,050,863,370

1,173,643,807

New investments 145,908,541 2,160,081 11,518,233 512,299 6,500,000 403,971,410 570,570,564

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Principal repayments received (58,401,447) — (19,432) — — — (58,420,879)

Payment in kind interest earned 198,839 — — — — — 198,839

Accretion of loan discounts 576,166 9,299 18,831 — — — 604,296

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Fair value, end of period $ 930,685,483 $ 16,040,935 $ 12,264,235 $ 1,070,410 $ 15,933,845 $ 58,046,124 $ 1,034,041,032

1,071,753,340

Three Months Ended

March 31, 2019:

Subordinated debt and 2nd Lien Notes

Six Months Ended

June 30, 2019:

Notes Subordinated debt and 2nd Lien Notes Equity

Shares Investment in Joint Venture Short-term

Investments Total

Fair value, beginning of period $ 1,068,436,847 $ 7,679,132 $ 515,825 $ — $ 45,223,941 $ 1,121,855,745

1,068,436,847

1,121,855,745

New investments 135,673,192 4,951,685 — 5,162,299 317,480,389 463,267,565

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Fair value, end of period $ 1,150,957,046 $ 9,648,558 $ 583,658 $ 5,000,210 $ 34,423,491 $ 1,200,612,963

1,113,978,655

1,189,384,128

Non-Accrual Assets

Generally, when interest and/or principal payments on a loan become past due, or if we otherwise do not expect the borrower to be able to service its debt and other obligations, we will place the loan on non-accrual status and will generally cease recognizing interest income on that loan for financial reporting purposes until all principal and interest have been brought current through payment or due to a restructuring such that the interest income is deemed to be collectible.

As of both March 31, 2020 , and December 31, 2019 , we had no non-accrual assets.

As of June 30, 2020, the fair value of our non-accrual asset was $1.8 million, which comprised 0.2% of the total fair value of our portfolio, and the cost of our non-accrual asset was $10.1 million, which comprised 0.9% of the total cost of our portfolio.

As of December 31, 2019, we had no non-accrual assets.

Our non-accrual asset as of June 30, 2020 was as follows:

Fieldwood Energy LLC

Effective with the quarterly payment due April 30, 2020, we placed our debt investment in Fieldwood Energy LLC, or Fieldwood, on non-accrual status.

As a result, under U.S.

GAAP, we no longer recognize interest income on our debt investment in Fieldwood for financial reporting purposes.

As of June 30, 2020, the cost of our debt investment in Fieldwood was $10.1 million and the fair value of such investment was $1.8 million.

Results of Operations

Three months ended March 31, 2020 and March 31, 2019

Operating results for the three months ended March 31, 2020 and 2019 were as follows:

Three and Six months ended June 30, 2020 and June 30, 2019

Operating results for the three and six months ended June 30, 2020 and 2019 were as follows:

Ended Three Months

Ended Six Months Ended Six Months Ended

2020 June 30,

2019 June 30,

2020 June 30,

Total investment income $ 16,139,764 $ 19,601,688 $ 34,819,362 $ 37,941,446

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Net investment income 6,529,129 7,412,882 13,823,198 15,370,169

Net realized losses

Net realized gains (losses) (16,514,997) 50,024 (16,817,369) (79,751)

Net unrealized appreciation (depreciation) 65,043,310 1,852,007 (54,352,743) 27,249,195

Loss on extinguishment of debt (306,202) (85,356) (443,592) (129,751)

Provision for taxes

Benefit from (provision for) taxes (2,532) 17,493 17,467 (499)

Net increase (decrease) in net assets resulting from operations $ 54,748,708 $ 9,247,050 $ (57,773,039) $ 42,409,363

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Investment Income

Ended Three Months

Ended Six Months Ended Six Months Ended

2020 June 30,

2019 June 30,

2020 June 30,

Investment income:

Interest income $ 15,295,679 $ 19,074,824 $ 32,970,081 $ 37,108,838

Dividend income 2,603 4,711 2,603 4,711

Fee and other income 650,433 519,970 1,611,426 821,027

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Total investment income $ 16,139,764 $ 19,601,688 $ 34,819,362 $ 37,941,446

The change in investment income for the three months ended March 31, 2020 , as compared to the three months ended March 31, 2019 , was primarily due to an increase in fee income from March 31, 2019 to March 31, 2020 and the continued rotation of our portfolio from syndicated senior secured loans to senior secured private debt investments in performing, well-established middle-market businesses.

These increases were partially offset by the decrease in LIBOR from March 31, 2019 to March 31, 2020 and a decrease in the average size of our portfolio.

As of March 31, 2019 , we had investments in 136 portfolio companies, which included 25 middle-market debt investments and 111 syndicated senior secured loans as compared to investments in eight structured product investments and 157 portfolio companies as of March 31, 2020 , which included 62 middle-market debt investments, 94 syndicated senior secured loans and one joint venture equity investment.

The weighted average yield on our investments was 5.3% as of March 31, 2020 , as compared to 6.1% as of March 31, 2019 .

The change in investment income for the three and six months ended June 30, 2020, as compared to the three and six months ended June 30, 2019, was primarily due to a decrease in LIBOR from June 30, 2019 to June 30, 2020 and a decrease in the average size of our portfolio.

These decreases were partially offset by increases in fee income from June 30, 2019 to June 30, 2020 and the continued rotation of our portfolio from syndicated senior secured loans to senior secured private debt investments in middle-market businesses.

As of June 30, 2019, we had investments in 142 portfolio companies, which included 30 middle-market debt investment, 111 syndicated senior secured loans and one joint venture equity investment as compared to investments in eight structured product investments and 147 portfolio companies as of June 30, 2020, which included 64 middle-market debt investments, 81 syndicated senior secured loans and two joint venture equity investments.

The weighted average yield on our investments was 5.3% as of June 30, 2020, as compared to 6.0% as of June 30, 2019.

Operating Expenses

Ended Three Months

Ended Six Months Ended Six Months Ended

2020 June 30,

2019 June 30,

2020 June 30,

Operating expenses:

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Interest and Other Financing Fees

Interest and other financing fees during the three months ended March 31, 2020 were attributable to borrowings under the August 2018 Credit Facility, the February 2019 Credit Facility and the Debt Securitization (each as defined below under "Liquidity and Capital Resources").

Interest and other financing fees during the three months ended March 31, 2019 were attributable to borrowings under the August 2018 Credit Facility and the February 2019 Credit Facility.

The increase in interest and other financing fees for the three months ended March 31, 2020 as compared to the three months ended March 31, 2019 was primarily attributable to the increase in amortization of deferred financing fees associated with the February 2019 Credit Facility and the Debt Securitization.

Interest and other financing fees during the three and six months ended June 30, 2020 were attributable to borrowings under the August 2018 Credit Facility, the February 2019 Credit Facility and the Debt Securitization (each as defined below under "Liquidity and Capital Resources").

Interest and other financing fees during the three and six months ended June 30, 2019 were attributable to borrowings under the August 2018 Credit Facility, the February 2019 Credit Facility and the Debt Securitization.

The decrease in interest and other financing fees for the three and six months ended June 30, 2020 as compared to the three and six months ended June 30, 2019 was primarily attributable to the decrease in average borrowings outstanding and the decrease in interest rates associated with the February 2019 Credit Facility and the Debt Securitization as a result of a decrease in LIBOR.

Base Management Fees

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See Note 2 to our unaudited consolidated financial statements for additional information regarding the Advisory Agreement and the fee arrangement thereunder.

For the three months ended March 31, 2020 and March 31, 2019 , the amount of base management fee incurred was approximately $3.9 million and $2.5 million , respectively.

The increase between periods is primarily due to the increase in the base management fee rate to 1.375% for the three month ended March 31, 2020 , pursuant to the terms of the Advisory Agreement, as compared to 1.125% for the three months ended March 31, 2019 .

For the three and six months ended June 30, 2020, the amount of base management fee incurred was approximately $3.6 million and $7.5 million, respectively.

For the three and six months ended June 30, 2019, the amount of base management fee incurred was approximately $3.1 million and $5.6 million, respectively.

The increase between periods was primarily due to the increase in the base management fee rate to 1.375% for the three and six months ended June 30, 2020, pursuant to the terms of the Advisory Agreement, as compared to 1.125% for the three and six months ended June 30, 2019.

Compensation Expenses

The compensation expenses for the three months ended March 31, 2020 and March 31, 2019 related to salaries, benefits and discretionary compensation.

As of March 31, 2020 , all employees have been terminated in connection with the Company’s transition to an externally managed structure.

The compensation expenses for the six months ended June 30, 2020 and June 30, 2019 related to salaries, benefits and discretionary compensation.

As of March 31, 2020, all of our employees had been terminated in connection with our transition to an externally managed structure.

General and Administrative Expenses

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See Note 2 to our unaudited consolidated financial statements for additional information regarding the Administration Agreement.

For the three months ended March 31, 2020 and March 31, 2019 , the amount of administration expense incurred and invoiced by Barings for expenses was approximately $0.4 million and $0.6 million, respectively.

For the three and six months ended June 30, 2020, the amount of administration expense incurred and invoiced by Barings for expenses was approximately $0.2 million and $0.6 million, respectively.

For the three and six months ended June 30, 2019, the amount of administration expense incurred and invoiced by the Adviser for expenses was approximately $0.9 million and $1.4 million, respectively.

In addition to expenses incurred under the Administration Agreement, general and administrative expenses include Board fees, D&O insurance costs, as well as legal and accounting expenses.

Net Realized Losses

Net realized losses during the three months ended March 31, 2020 and 2019 were as follows:

Net realized losses:

Net Realized Gains (Losses)

Net realized gains (losses) during the three and six months ended June 30, 2020 and 2019 were as follows:

Ended Three Months

Ended Six Months Ended Six Months Ended

2020 June 30,

2019 June 30,

2020 June 30,

Net realized gain (losses):

Non-Control / Non-Affiliate investments $ (16,597,865) $ 50,024 $ (16,755,844) $ (79,751)

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Foreign currency transactions 82,868 — (61,525) —

Net realized losses

In the three months ended March 31, 2020 , we recognized net realized losses totaling $0.3 million , which consisted primarily of a net loss on our loan portfolio of $0.3 million and a net loss on foreign currency transactions of $0.1 million , partially offset by $0.2 million in escrow distributions we received from two legacy portfolio companies, which were recognized as realized gains.

In the three months ended March 31, 2019, we recognized net realized losses totaling $0.1 million, which consisted primarily of net losses on our syndicated senior secured loan portfolio of $0.4 million, partially offset by gains on escrow payments received of $0.3 million.

Net realized gains (losses) $ (16,514,997) $ 50,024 $ (16,817,369) $ (79,751)

In the three months ended June 30, 2020, we recognized net realized losses totaling $16.5 million, which consisted primarily of a net loss on our loan portfolio of $16.7 million, partially offset by a net gain on foreign currency transactions of $0.1 million, and by $0.1 million in escrow distributions we received from legacy portfolio companies, which were recognized as realized gains.

In the six months ended June 30, 2020, we recognized net realized losses totaling $16.8 million, which consisted primarily of a net loss on our loan portfolio of $17.0 million and a net loss on foreign currency transactions of $0.1 million, partially offset by $0.2 million in escrow distributions we received from legacy portfolio companies, which were recognized as realized gains.

In the three months ended June 30, 2019, we recognized net realized gains totaling $0.1 million, which consisted primarily of a net gain on escrow payments received of $0.2 million, partially offset by a net loss on our syndicated senior secured loan portfolio of $0.1 million.

In the six months ended June 30, 2019, we recognized a net realized loss totaling $0.1 million, which consisted primarily of a net loss on our syndicated senior secured loan portfolio of $0.5 million, partially offset by a net gain on escrow payments received of $0.5 million.

Net Unrealized Appreciation (Depreciation)

Net unrealized appreciation (depreciation) during three months ended March 31, 2020 and 2019 was as follows:

Net unrealized appreciation (depreciation) during three and six months ended June 30, 2020 and 2019 was as follows:

Ended Three Months

Ended Six Months Ended Six Months Ended

2020 June 30,

2019 June 30,

2020 June 30,

Net unrealized appreciation (depreciation):

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Net unrealized appreciation (depreciation) $ 65,043,310 $ 1,852,007 $ (54,352,743) $ 27,249,195

During the three months ended March 31, 2020 , we recorded net unrealized depreciation totaling $119.4 million , consisting of net unrealized depreciation on our current portfolio of $121.6 million , net unrealized appreciation related to foreign currency transactions of $1.8 million and net unrealized appreciation reclassification adjustments of $0.4 million related to the net realized losses on the sales / repayments of certain syndicated secured loans.

The net unrealized depreciation on the Company’s current portfolio of $121.6 million was driven by broad market moves for liquid syndicated secured loans and structured products totaling $82.6 million, broad market moves for middle-market debt investments of $25.5 million, the credit or fundamental performance of middle-market debt investments totaling $8.2 million, the impact of foreign currency exchange rates on middle-market debt investments of $1.3 million, and net unrealized depreciation on the Company’s total equity and joint venture investments of $4.0 million.

During the three months ended March 31, 2019, we recorded net unrealized appreciation totaling $25.4 million consisting of net unrealized appreciation on our current portfolio of $24.5 million and net unrealized appreciation reclassification adjustments of $0.9 million related to the net realized losses on the sale of certain syndicated secured loans.

The change between periods is primarily due to the immediate adverse economic effects of the COVID-19 pandemic and the continuing uncertainty surrounding its long-term impact, as well as the re-pricing of credit risk in the broadly syndicated credit market and was not the result of changes to expectations regarding the collectability of principal amounts outstanding.

The Company received all interest and principal payments due from its portfolio companies during the first quarter of 2020.

During the three months ended June 30, 2020, we recorded net unrealized appreciation totaling $65.0 million, consisting of net unrealized appreciation on our current portfolio of $43.8 million, net unrealized depreciation related to foreign currency transactions of $1.4 million and net unrealized appreciation reclassification adjustments of $22.7 million related to the net realized losses on the sales / repayments of certain syndicated secured loans.

The net unrealized appreciation on the Company’s current portfolio of $43.8 million was driven by broad market moves for liquid syndicated secured loans and structured products totaling $31.6 million, broad market moves for middle-market debt investments of $5.1 million, the credit or fundamental performance of middle-market debt investments totaling $2.9 million, the impact of foreign currency exchange rates on middle-market debt investments of $1.3 million, and net unrealized appreciation on the Company’s total equity and joint venture investments of $3.0 million.

During the six months ended June 30, 2020, we recorded net unrealized depreciation totaling $54.4 million, consisting of net unrealized depreciation on our current portfolio of $77.8 million, net unrealized appreciation related to foreign currency transactions of $0.4 million and net unrealized appreciation reclassification adjustments of $23.0 million related to the net realized losses on the sales / repayments of certain syndicated secured loans.

The net unrealized depreciation on the Company’s current portfolio of $77.8 million was driven by broad market moves for liquid syndicated secured loans and structured products totaling $51.0 million, broad market moves for middle-market debt investments of $20.4 million, the credit or fundamental performance of middle-market debt investments totaling $5.3 million and net unrealized depreciation on the Company’s total equity and joint venture investments of $1.0 million.

During the three months ended June 30, 2019, we recorded net unrealized appreciation totaling $1.9 million, consisting of net unrealized appreciation on our current portfolio of $1.7 million and net unrealized appreciation reclassification adjustments of $0.2 million related predominately to the net realized losses on the sales / repayments of certain syndicated secured loans.

During the six months ended June 30, 2019, we recorded net unrealized appreciation totaling $27.2 million, consisting of net unrealized appreciation on our current portfolio of $25.5 million and net unrealized appreciation reclassification adjustments of $1.8 million related predominately to the net realized losses on the sales / repayments of certain syndicated secured loans.

Liquidity and Capital Resources

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This "Liquidity and Capital Resources" section should be read in conjunction with "COVID-19 Developments" above.

For the three months ended March 31, 2020 , we experienced a net decrease in cash in the amount of $14.5 million .

For the six months ended June 30, 2020, we experienced a net decrease in cash in the amount of $3.5 million.

During that period, our operating activities provided $120.0 million in cash, consisting primarily of proceeds from sales of portfolio investments totaling $239.7 million and sales of short-term investments of $442.5 million, partially offset by purchases of portfolio investments of $171.5 million and purchases of short-term investments of $404.0 million.

In addition, our financing activities used $50.5 million of cash, consisting primarily of net repayments under the August 2018 Credit Facility and the February 2019 Credit Facility of $10.9 million, repayments of the Debt Securitization of $27.0 million , share repurchases of $4.8 million and dividends paid in the amount of $7.8 million .

As of March 31, 2020 , we had $7.5 million of cash on hand.

For the three months ended March 31, 2019, we experienced a net decrease in cash in the amount of $9.4 million.

During that period, our operating activities used $41.0 million in cash, consisting primarily of purchases of portfolio investments of $93.3 million and purchases of short-term investments of $174.9 million, partially offset by proceeds from sales of investments totaling $58.4 million and the sales of short-term investments of $157.7 million.

In addition, our financing activities provided $31.6 million of cash, consisting primarily of net borrowings under the August 2018 Credit Facility and the February 2019 Credit Facility of $50.0 million, partially offset by share repurchases of $5.9 million, financing fees of $6.4 million and paid cash dividends in the amount of $6.1 million.

As of March 31, 2019, we had $3.1 million of cash on hand.

In addition, our financing activities used $123.5 million of cash, consisting primarily of net repayments under the August 2018 Credit Facility and the

February 2019 Credit Facility of $9.1 million, repayments of the Debt Securitization of $91.8 million, share repurchases of $7.1 million and dividends paid in the amount of $15.5 million.

As of June 30, 2020, we had $18.5 million of cash on hand.

For the six months ended June 30, 2019, we experienced a net increase in cash in the amount of $0.5 million.

During that period, our operating activities used $32.7 million in cash, consisting primarily of purchases of portfolio investments of $171.4 million and purchases of short-term investments of $317.5 million, partially offset by proceeds from sales of investments totaling $104.4 million and sales of short-term investments of $328.3 million.

In addition, our financing activities provided $33.2 million of cash, consisting primarily of net proceeds from our $449.3 million term debt securitization, or the Debt Securitization, of $348.3 million, partially offset by net repayments under the August 2018 Credit Facility and the February 2019 Credit Facility of $284.5 million, purchases of shares in the share repurchase plan of $9.6 million, financing fees of $8.2 million and dividends paid in the amount of $12.6 million.

As of June 30, 2019, we had $12.9 million of cash on hand.

Financing Transactions

On July 3, 2018, we formed Barings BDC Senior Funding I, LLC, an indirectly wholly-owned Delaware limited liability company, or BSF, the primary purpose of which is to function as our special purpose, bankruptcy-remote, financing subsidiary.

On July 3, 2018, we formed Barings BDC Senior Funding I, LLC, an indirectly wholly-owned Delaware limited liability company, or BSF, the primary purpose of which was to function as our special purpose, bankruptcy-remote, financing subsidiary.

On August 3, 2018, BSF entered into a credit facility, or the August 2018 Credit Facility (as subsequently amended in December 2018 and February 2020), with Bank of America, N.A., as administrative agent, or the Administrative Agent and Class A-1 Lender, Société Générale, as Class A Lender, and Bank of America Merrill Lynch, as sole lead arranger and sole book manager.

BSF and the Administrative Agent also entered into a security agreement dated as of August 3, 2018, or the Security Agreement pursuant to which BSF’s obligations under the August 2018 Credit Facility are secured by a first-priority security interest in substantially all of the assets of BSF, including its portfolio of investments, or the Pledged Property.

In connection with the first-priority security interest established under the Security Agreement, all of the Pledged Property is held in the custody of State Street Bank and Trust Company, as collateral administrator, or the Collateral Administrator.

The Collateral Administrator maintains and performs certain collateral administration services with respect to the Pledged Property pursuant to a collateral administration agreement among BSF, the Administrative Agent and the Collateral Administrator.

Generally, the Collateral Administrator is authorized to make distributions and payments from Pledged Property based only on the written instructions of the Administrative Agent.

BSF and the Administrative Agent also entered into a security agreement dated as of August 3, 2018, or the Security Agreement, pursuant to which BSF’s obligations under the August 2018 Credit Facility were secured by a first-priority security interest in substantially all of the assets of BSF, including its portfolio of investments, or the Pledged Property.

In connection with the first-priority security interest established under the Security Agreement, all of the Pledged Property was held in the custody of State Street Bank and Trust Company, as collateral administrator, or the Collateral Administrator.

The Collateral Administrator maintained and performed certain collateral administration services with respect to the Pledged Property pursuant to a collateral administration agreement among BSF, the Administrative Agent and the Collateral Administrator.

Generally, the Collateral Administrator was authorized to make distributions and payments from Pledged Property based only on the written instructions of the Administrative Agent.

The August 2018 Credit Facility initially provided for borrowings in an aggregate amount up to $750.0 million, including up to $250.0 million borrowed under the Class A Loan Commitments and up to $500.0 million borrowed under the Class A-1 Loan Commitments.

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Effective January 21, 2020, we further reduced our Class A-1 Loan Commitments, and therefore total commitments, under the August 2018 Credit Facility from $150.0 million to $80.0 million.

In connection with these reductions, the pro rata portion of the unamortized deferred financing costs related to the August 2018 Credit Facility was written off and recognized as a loss on extinguishment of debt in our Consolidated Statements of Operations.All borrowings under the August 2018 Credit Facility bear interest, subject to BSF’s election, on a per annum basis equal to (i) the applicable base rate plus the applicable spread or (ii) the applicable LIBOR rate plus the applicable spread.

The applicable base rate is equal to the greater of (i) the federal funds rate plus 0.5%, (ii) the prime rate or (iii) one-month LIBOR plus 1.0%.

The applicable LIBOR rate depends on the term of the borrowing under the August 2018 Credit Facility, which can be either one month or three months.

BSF is required to pay commitment fees on the unused portion of the August 2018 Credit Facility.

BSF may prepay any borrowing at any time without premium or penalty, except that BSF may be liable for certain funding breakage fees if prepayments occur prior to expiration of the relevant interest period.

BSF may also permanently reduce all or a portion of the commitment amount under the August 2018 Credit Facility without penalty.

Effective April 23, 2020, we further reduced our Class A-1 Loan Commitments, and therefore total commitments, under the August 2018 Credit Facility from $80.0 million to $30.0 million.

Finally, effective June 26, 2020, we further reduced our Class A-1 Loan Commitments, and therefore total commitments, under the August 2018 Credit Facility from $30.0 million to zero.

On February 21, 2020, we extended the maturity date of the August 2018 Credit Facility from August 3, 2020 to August 3, 2021.

Any amounts borrowed under the Class A-1 Loan Commitments will mature, and all accrued and unpaid interest thereunder will be due and payable, on August 3, 2021, or upon earlier termination of the August 2018 Credit Facility.

As of March 31, 2020 , BSF was in compliance with all covenants under the August 2018 Credit Facility and had borrowings of $48.2 million outstanding under the August 2018 Credit Facility with an interest rate of 1.812% .

The fair values of the borrowings outstanding under the August 2018 Credit Facility are based on a market yield approach and current interest rates, which are Level 3 inputs to the market yield model.

As of March 31, 2020 , the total fair value of the borrowings outstanding under the August 2018 Credit Facility was $48.2 million .

On June 30, 2020, following the repayment of all borrowings, interest, and fees payable thereunder and at our election, the August 2018 Credit Facility was terminated, including all commitments and obligations of Bank of America, N.A.

to lend or make advances to BSF.

In addition, the Security Agreement was terminated and all security interests in the assets of BSF in favor of the lenders were terminated.

As a result of these terminations, all obligations of BSF under the August 2018 Credit Facility and Security Agreement were fully discharged.

All borrowings under the August 2018 Credit Facility bore interest, subject to BSF’s election, on a per annum basis equal to (i) the applicable base rate plus the applicable spread or (ii) the applicable LIBOR rate plus the applicable spread.

The applicable base rate was equal to the greater of (i) the federal funds rate plus 0.5%, (ii) the prime rate or (iii) one-month LIBOR plus 1.0%.

The applicable LIBOR rate depended on the term of the borrowing under the August 2018 Credit Facility, which could be either one month or three months.

BSF was required to pay commitment fees on the unused portion of the August

2018 Credit Facility.

BSF could prepay any borrowing at any time without premium or penalty, except that BSF could have been liable for certain funding breakage fees if prepayments occurred prior to expiration of the relevant interest period.

BSF could also permanently reduce all or a portion of the commitment amount under the August 2018 Credit Facility without penalty.

See Note 5 to our Unaudited Consolidated Financial Statements for additional information regarding the August 2018 Credit Facility.

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The February 2019 Credit Facility, which is structured as a revolving credit facility, is secured primarily by a material portion of our assets and guaranteed by certain of our subsidiaries.

Following the termination of the August 2018 Credit Facility on June 30, 2020 BSF became a subsidiary guarantor and its assets will secure the February 2019 Credit Facility.

The revolving period of the February 2019 Credit Facility ends on February 21, 2023, followed by a one-year repayment period with a final maturity date of February 21, 2024.

Borrowings under the February 2019 Credit Facility bear interest, subject to our election, on a per annum basis equal to (i) the applicable base rate plus 1.25% (or 1.00% if we receive an investment grade credit rating), (ii) the applicable LIBOR rate plus 2.25% (or 2.00% if we receive an investment grade credit rating), (iii) for borrowings denominated in certain foreign currencies other than Australian dollars, the applicable currency rate for the foreign currency as defined in the credit agreement plus 2.25% (or 2.00% if we receive an investment grade credit rating), or (iv) for borrowings denominated in Australian dollars, the applicable Australian dollars Screen Rate, plus 2.45% (or 2.20% if the Company receives an investment grade credit rating).

The applicable base rate is equal to the greatest of (i) the prime rate, (ii) the federal funds rate plus 0.5%, (iii) the Overnight Bank Funding Rate plus 0.5%, (iv) the adjusted three-month applicable currency rate plus 1.0% and (v) 1%.

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We pay a commitment fee of (x) 0.5% per annum on undrawn amounts if the unused portion of the February 2019 Credit Facility is greater than two-thirds of total commitments or (y) 0.375% per annum on undrawn amounts if the unused portion of the February 2019 Credit Facility is equal to or less than two-thirds of total commitments.

As of March 31, 2020 , we were in compliance with all covenants under the February 2019 Credit Facility and had U.S.

As of June 30, 2020, we were in compliance with all covenants under the February 2019 Credit Facility and had U.S.

dollar borrowings of $265.0 million outstanding under the February 2019 Credit Facility with a weighted average interest rate of 2.438%, borrowings denominated in Swedish kronas of 12.8kr million ($1.4 million U.S.

dollars) with an interest rate of 2.25%, borrowings denominated in British pounds sterling of £9.3 million ($11.5 million U.S.

dollars) with an interest rate of 2.531% , and borrowings denominated in Euros of €49.0 million ( $53.8 million U.S.

dollars) with an interest rate of 2.375%, borrowings denominated in Euros of €38.0 million ($55.0 million U.S.

dollars) with an interest rate of 2.25% and borrowings denominated in Canadian dollars of C$13.6 million ($10.0 million U.S.

dollars) with an interest rate of 2.78%.

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The fair values of the borrowings outstanding under the February 2019 Credit Facility are based on a market yield approach and current interest rates, which are Level 3 inputs to the market yield model.

As of March 31, 2020 , the total fair value of the borrowings outstanding under the February 2019 Credit Facility was $291.6 million .

As of June 30, 2020, the total fair value of the borrowings outstanding under the February 2019 Credit Facility was $342.9 million.

See Note 5 to our Unaudited Consolidated Financial Statements for additional information regarding the February 2019 Credit Facility.

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The 2019 Notes are scheduled to mature on April 15, 2027;

however the 2019 Notes may be redeemed by the Issuers, at our direction as holder of the Subordinated 2019 Notes, on any business day after May 9, 2020.

however the 2019 Notes may be redeemed by the Issuers, at our direction as holder of the Subordinated 2019 Notes, on any

business day after May 9, 2020.

In connection with the sale and contribution, we made customary representations, warranties and covenants to the Issuers.

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under a collateral management agreement and we have agreed to irrevocably waive all collateral management fees payable pursuant to the collateral management agreement.

During the three months ended March 31, 2020 , $27.0 million of the Class A-1 2019 Notes were repaid.

As of March 31, 2020 , we had borrowings of $239.7 million outstanding under the Class A-1 2019 Notes with an interest rate of 2.851% and borrowings of $51.5 million outstanding under the Class A-2 2019 Notes with an interest rate of 3.481% .

During the three months ended June 30, 2020, $64.8 million of the Class A-1 2019 Notes were repaid.

As of June 30, 2020, we had borrowings of $174.9 million outstanding under the Class A-1 2019 Notes with an interest rate of 2.239% and borrowings of $51.5 million outstanding under the Class A-2 2019 Notes with an interest rate of 2.869%.

The fair value determinations of the 2019 Notes were based on market yield approach and current interest rates, which are Level 3 inputs to the market yield model.

As of March 31, 2020 , the total fair value of the Class A-1 2019 Notes and the Class A-2 2019 Notes

was $234.2 million and $50.3 million , respectively.

As of June 30, 2020, the total fair value of the Class A-1 2019 Notes and the Class A-2 2019 Notes was $174.2 million and $51.2 million, respectively.

See Note 5 to our Unaudited Consolidated Financial Statements for additional information regarding the Debt Securitization.

Share Repurchases

On February 27, 2020, the Board approved an open-market share repurchase program for the 2020 fiscal year, or the 2020 Share Repurchase Program.

Under the 2020 Share Repurchase Program, we are authorized during fiscal year 2020 to repurchase up to a maximum of 5.0% of the amount of shares outstanding as of February 27, 2020 if shares trade below NAV per share, subject to liquidity and regulatory constraints.

Purchases under the 2020 Share Repurchase Program may be made in open-market transactions and include transactions being executed by a broker selected us that has been delegated the authority to repurchase shares on our behalf in the open market in accordance with applicable rules under the Exchange Act, including Rules 10b5-1 and 10b-18 thereunder, and pursuant to, and under the terms and limitations of, the 2020 Share Repurchase Program.

There is no assurance that we will purchase shares at any specific discount levels or in any specific amounts.

During the three months ended March 31, 2020 , we repurchased a total of 661,981 shares of our common stock in the open market under the 2020 Share Repurchase Program at an average price of $7.23 per share, including broker commissions.

On February 25, 2019, we adopted a share repurchase plan, pursuant to Board approval, for the purpose of repurchasing shares of our common stock in the open market during the 2019 fiscal year, or the 2019 Share Repurchase Plan.

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A broker selected by us was delegated the authority to repurchase shares on our behalf in the open market, pursuant to, and under the terms and limitations of, the 2019 Share Repurchase Plan.

During the three months ended March 31, 2019, we repurchased a total of 593,405 shares of our common stock in the open market under the 2019 Share Repurchase Plan at an average price of $9.88 per share, including broker commissions.

During the six months ended June 30, 2019, we repurchased a total of 969,789 shares of our common stock in the open market under the 2019 Share Repurchase Plan at an average price of $9.95 per share, including broker commissions.

On February 27, 2020, the Board approved an open-market share repurchase program for the 2020 fiscal year, or the 2020 Share Repurchase Program.

There is no assurance that we will purchase shares at any specific discount levels or in any specific amounts.

During the six months ended June 30, 2020, we repurchased a total of 989,050 shares of our common stock in the open market under the 2020 Share Repurchase Program at an average price of $7.21 per share, including broker commissions.

Distributions to Stockholders

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If such requirements are met, then we are generally required to pay income taxes only on the portion of our taxable income and gains we do not distribute (actually or constructively) and certain built-in gains.

We have historically met our minimum distribution requirements and continually monitor our distribution requirements with the goal of ensuring compliance with the Code.

We have historically met our minimum distribution requirements and continually monitor our distribution requirements with the goal of ensuring compliance with the

We can offer no assurance that we will achieve results that will permit the payment of any level of cash distributions and our ability to make distributions will be limited by the asset coverage requirement and related provisions under the 1940 Act and contained in any applicable indenture and related supplements.

In addition, in order to satisfy the annual distribution requirement applicable to RICs, we may declare a significant portion of our dividends in shares of our common stock instead of in cash.

As long as a portion of such dividend is paid in cash (which portion may be as low as 20% of such dividend under published guidance from the Internal Revenue Service) and certain requirements are met, the entire distribution will be treated as a dividend for U.S.

As long as a portion of such dividend is paid in cash (which portion may be as low as 10% of such dividend, for dividends declared on or before December 31, 2020, and after that, 20% of such dividend under published guidance from the Internal Revenue Service) and certain requirements are met, the entire distribution will be treated as a dividend for U.S.

federal income tax purposes.

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The minimum distribution requirements applicable to RICs require us to distribute to our stockholders each year at least 90% of our investment company taxable income, or ICTI, as defined by the Code.

Depending on the level of ICTI earned in a tax year, we may choose to carry forward ICTI in excess of current year distributions into the next tax year and pay a 4% U.S.

Depending on the level of ICTI and net capital gain, if any, earned in a tax year, we may choose to carry forward income in excess of current year distributions into the next tax year and pay a 4% U.S.

federal excise tax on such excess.

Any such carryover ICTI must be distributed before the end of the next tax year through a dividend declared prior to filing the final tax return related to the year which generated such ICTI.

Any such carryover income must be distributed before the end of the next tax year through a dividend declared prior to filing the final tax return related to the year which generated such income.

ICTI generally differs from net investment income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses.

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Recent Developments

Subsequent to March 31, 2020 , we made new investments in one middle-market portfolio company totaling $10.0 million, consisting of senior secured debt at a yield of 9.3% and a minority equity investment.

In addition, the Company funded $1.6 million of previously committed delayed draw term loans.

In addition, subsequent to March 31, 2020, the spread of the Coronavirus and the COVID-19 pandemic, and the related effect on the U.S.

and global economies, has continued to have adverse consequences for the business operations of some of our portfolio companies and has adversely affected, and threatens to continue to adversely affect, our operations and the operations of Barings, including with respect to us.

Given the dynamic nature of this situation, we cannot reasonably estimate the impacts of COVID-19 on our financial condition, results of operations or cash flows in the future.

However, to the extent our portfolio companies are adversely impacted by the effects of the COVID-19 pandemic, it may have a material adverse impact on our future net investment income, the fair value of our portfolio investments, and the results of operations and financial condition of our portfolio companies.

On April 16, 2020, we provided notice to the lender under the August 2018 Credit Facility that we would reduce total commitments under the August 2018 Credit Facility from $80.0 million to $30.0 million effective April 23, 2020.

On April 30, 2020 our Board declared a quarterly distribution of $0.16 per share payable on June 17, 2020 to holders of record as of June 10, 2020.

Subsequent to June 30, 2020, we made approximately $60.6 million of new private debt commitments, of which $15.7 million closed and funded.

The $15.7 million of investments consist of two first lien senior secured debt investments with a weighted average yield of 14.0%.

In addition, we funded $5.7 million of previously committed delayed draw term loans.

On August 3, 2020, we entered into a Note Purchase Agreement (the “Note Purchase Agreement”) with Massachusetts Mutual Life Insurance Company governing the issuance of (i) $50,000,000 in aggregate principal amount of Series A senior unsecured notes (the “Series A Notes”) due August 2025 with a fixed interest rate of 4.66% per year, and (ii) up to $50,000,000 in aggregate principal amount of additional senior unsecured notes (the “Additional Notes” and, collectively with the Series A Notes, the “August 2025 Notes”) due August 2025 with a fixed interest rate per year to be determined, in each case, to qualified institutional investors in a private placement.

An aggregate principal amount of $25,000,000 of the Series A Notes is expected to be issued in September 2020 (subject to the satisfaction of customary closing conditions contained in the Note Purchase Agreement) and will mature on August 4, 2025, and an aggregate principal amount of $25,000,000 of the Series A Notes is expected to be issued in December 2020 (subject to the satisfaction of customary closing conditions contained in the Note Purchase Agreement) and mature on August 4, 2025, in each case unless redeemed, purchased or prepaid prior to such date by us or our affiliates in accordance with their terms.

Interest on the August 2025 Notes will be due semiannually.

In addition, we are obligated to offer to repay the August 2025 Notes at par if certain change in control events occur.

The August 2025 Notes will be our general unsecured obligations that rank pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by us.

See "Part II.

Other Information" of this Quarterly Report on Form 10-Q for more information.

On August 5, 2020 our Board declared a quarterly distribution of $0.16 per share payable on September 16, 2020 to holders of record as of September 9, 2020.

Critical Accounting Policies and Use of Estimates

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In certain cases, quoted prices or other observable inputs exist, and if so, we assess the appropriateness of the use of these third-party quotes in determining fair value based on (i) our understanding of the level of actual transactions used by the broker to develop the quote and whether the quote was an indicative price or binding offer and (ii) the depth and consistency of broker quotes and the correlation of changes in broker quotes with underlying performance of the portfolio company.

There is no single standard for determining fair value in good faith, as fair value depends upon the specific circumstances of each individual investment.

There is no single technique for determining fair value in good faith, as fair value depends upon the specific circumstances of each individual investment.

The recorded fair values of our Level 3 investments may differ significantly from fair values that would have been used had an active market for the securities existed.

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In addition, the Pricing Committee performs an annual review of valuation methodologies.

Our money market fund investments are generally valued using Level 1 inputs and our syndicated senior secured loans are generally valued using Level 2 inputs.

Our money market fund investments are generally valued using Level 1 inputs and our syndicated senior secured loans and structured product investments are generally valued using Level 2 inputs.

Our senior secured, middle-market, private debt investments are generally valued using Level 3 inputs.

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For the quarter ended:

Percent of total

companies Percent of total

investments at

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March 31, 2020 30 62%

June 30, 2020 33 53%

(1) Exclusive of the fair value of new middle-market investments made during the quarter for which the Procedures were not performed and certain middle-market investments repaid subsequent to the end of the reporting period.

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Market Approach

We value our syndicated senior secured loans using values provided by independent pricing services that have been approved by the Barings' Pricing Committee.

We value our syndicated senior secured loans and structured product investments using values provided by independent pricing services that have been approved by the Barings' Pricing Committee.

The prices received from these pricing service providers are based on yields or prices of securities of comparable quality, type, coupon and maturity and/or indications as to value from dealers and exchanges.

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The net asset value of Jocassee is determined in accordance with the specialized accounting guidance for investment companies.

Valuation of Investment in Thompson Rivers

We estimate the fair value of our investment in Thompson Rivers LLC using the net asset value of Thompson Rivers LLC and its ownership percentage.

The net asset value of Thompson Rivers LLC is determined in accordance with the specialized accounting guidance for investment companies.

Off-Balance Sheet Arrangements

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Since commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements.

The balances of unused commitments to extend financing as of March 31, 2020 and December 31, 2019 were as follows:

Portfolio Company

Investment Type

The balances of unused commitments to extend financing as of June 30, 2020 and December 31, 2019 were as follows:

Portfolio Company Investment Type June 30,

2020 December 31, 2019

ADE Holding(1)(2)

Committed Capex Line

Anju Software, Inc.(1)

Delayed Draw Term Loan

Arch Global Precision, LLC(1)

Delayed Draw Term Loan

Armstrong Transport Group (Pele Buyer, LLC)(1)

Delayed Draw Term Loan

Beacon Pointe Advisors, LLC(1)

Delayed Draw Term Loan

Classic Collision (Summit Buyer, LLC)(1)

Delayed Draw Term Loan

CM Acquisitions Holdings Inc.(1)

Delayed Draw Term Loan

Contabo Finco S.À R.L (1)(3)

Delayed Draw Term Loan

Dart Buyer, Inc.(1)

Delayed Draw Term Loan

DreamStart Bidco SAS(1)(4)

Acquisition Facility

Heartland, LLC(1)

Delayed Draw Term Loan

Heilbron (f/k/a Sucsez (Bolt Bidco B.V.))(1)(5)

Accordion Facility

Jocassee Partners LLC(1)

Joint Venture

Kene Acquisition, Inc.(1)

Delayed Draw Term Loan

LAC Intermediate, LLC(1)

Delayed Draw Term Loan

Options Technology Ltd.(1)

Delayed Draw Term Loan

Premier Technical Services Group(1)(6)

Acquisition Facility

Process Equipment, Inc.(1).

Delayed Draw Term Loan

ADE Holding(1)(2) Committed Capex Line $ 5,019,358 $ —

Anju Software, Inc.(1) Delayed Draw Term Loan 1,981,371 1,981,371

Arch Global Precision, LLC(1) Delayed Draw Term Loan 9,360,435 1,012,661

Armstrong Transport Group (Pele Buyer, LLC)(1) Delayed Draw Term Loan 712,567 712,567

Beacon Pointe Advisors, LLC(1) Delayed Draw Term Loan 363,636 —

Centralis Finco S.a.r.l.(1)(3) Acquisition Facility 1,146,522 —

Classic Collision (Summit Buyer, LLC)(1) Delayed Draw Term Loan 11,793,854 —

CM Acquisitions Holdings Inc.(1) Delayed Draw Term Loan 1,859,111 1,859,111

Contabo Finco S.À R.L(1)(4) Delayed Draw Term Loan 209,485 1,013,849

Dart Buyer, Inc.(1) Delayed Draw Term Loan 2,430,569 4,294,503

DreamStart Bidco SAS(1)(5) Acquisition Facility 3,290,175 —

Heartland, LLC(1) Delayed Draw Term Loan 8,729,695 8,729,695

Heilbron (f/k/a Sucsez (Bolt Bidco B.V.))(1)(6) Accordion Facility — 2,605,531

Jocassee Partners LLC(1) Joint Venture 35,000,000 40,000,000

Kene Acquisition, Inc.(1) Delayed Draw Term Loan 322,928 1,076,427

LAC Intermediate, LLC(1) Delayed Draw Term Loan 2,731,482 4,367,284

Options Technology Ltd.(1) Delayed Draw Term Loan 2,918,447 2,918,447

Premier Technical Services Group(1)(7) Acquisition Facility 1,082,438 1,297,915

Process Equipment, Inc.(1) Delayed Draw Term Loan — 654,493

Professional Datasolutions, Inc.

Delayed Draw Term Loan

PSC UK Pty Ltd.(1)(7)

GBP Acquisition Facility

Smile Brands Group, Inc.(1)

Delayed Draw Term Loan

Springbrook Software (SBRK Intermediate, Inc.)(1)

Delayed Draw Term Loan

The Hilb Group, LLC(1)

Delayed Draw Term Loan

Transit Technologies LLC(1)

Delayed Draw Term Loan

Transportation Insight, LLC(1)

Delayed Draw Term Loan

Truck-Lite Co., LLC(1)

Delayed Draw Term Loan

Validity, Inc.(1)

Delayed Draw Term Loan

(PDI)(1) Delayed Draw Term Loan — 1,666,994

PSC UK Pty Ltd.(1)(8) GBP Acquisition Facility 415,737 1,010,706

Smile Brands Group, Inc.(1) Delayed Draw Term Loan 422,242 927,046

Springbrook Software (SBRK Intermediate, Inc.)(1) Delayed Draw Term Loan 3,896,663 3,896,663

The Hilb Group, LLC(1) Delayed Draw Term Loan 2,099,113 2,904,066

Thompson Rivers LLC(1) Joint Venture 8,500,000 —

Transit Technologies LLC(1) Delayed Draw Term Loan 6,785,305 —

Transportation Insight, LLC(1) Delayed Draw Term Loan — 2,464,230

Truck-Lite Co., LLC(1) Delayed Draw Term Loan 2,884,615 3,205,128

Validity, Inc.(1) Delayed Draw Term Loan — $ 898,298

Total unused commitments to extend financing $ 113,955,748 $ 89,496,985

2 unchanged sentences

(2) Actual commitment amount is denominated in Euros (€4,469,000) which was translated into U.S.

dollars using the March 31, 2020 spot rate.

March 31, 2020 commitment amount is denominated in Euros (€233,145) which was translated into U.S.

dollars using the March 31, 2020 spot rate.

December 31, 2019 commitment amount is denominated in Euros (€903,207) which was translated into U.S.

dollars using the June 30, 2020 spot rate.

(3) Actual commitment amount is denominated in Euros (€1,020,809) which was translated into U.S.

dollars using the June 30, 2020 spot rate.

(4) June 30, 2020 commitment amount is denominated in Euros (€186,516) which was translated into U.S.

dollars using the June 30, 2020 spot rate.

December 31, 2019 commitment amount was denominated in Euros (€903,207) which was translated into U.S.

dollars using the December 31, 2019 spot rate.

(5) Actual commitment amount is denominated in Euros (€2,929,417) which was translated into U.S.

dollars using the March 31, 2020 spot rate.

March 31, 2020 commitment amount is denominated in Euros (€1,444,294) which was translated into U.S.

dollars using the March 31, 2020 spot rate.

December 31, 2019 commitment amount is denominated in Euros (€2,321,187) which was translated into U.S.

dollars using the June 30, 2020 spot rate.

(6) December 31, 2019 commitment amount was denominated in Euros (€2,321,187) which was translated into U.S.

dollars using the December 31, 2019 spot rate.

March 31, 2020 commitment amount is denominated in British pounds sterling (£921,261) which was translated into U.S.

dollars using the March 31, 2020 spot rate.

December 31, 2019 commitment amount is denominated in British pounds sterling (£979,743) which was translated into U.S.

(7) June 30, 2020 commitment amount is denominated in British pounds sterling (£876,042) which was translated into U.S.

dollars using the June 30, 2020 spot rate.

December 31, 2019 commitment amount was denominated in British pounds sterling (£979,743) which was translated into U.S.

dollars using the December 31, 2019 spot rate.

March 31, 2020 commitment amount is denominated in British pounds sterling (£183,462) which was translated into U.S.

dollars using the March 31, 2020 spot rate.

December 31, 2019 commitment amount is denominated in British pounds sterling (£762,941) which was translated into U.S.

(8) June 30, 2020 commitment amount is denominated in British pounds sterling (£336,466) which was translated into U.S.

dollars using the June 30, 2020 spot rate.

December 31, 2019 commitment amount was denominated in British pounds sterling (£762,941) which was translated into U.S.

dollars using the December 31, 2019 spot rate.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis