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Item 7. Management’s Discussion and Analysis

2021-03-23 compared with 2020-02-27 · 404 added, 455 removed, 293 unchanged (75% of the section changed)

4 unchanged sentences

The following discussion is designed to provide a better understanding of our financial statements, 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 consolidated financial statements and the notes thereto included in Item 8 of this Annual Report on Form 10-K.

The following discussion should be read in conjunction with the consolidated financial statements and the notes thereto included or incorporated by reference in Item 8 of this Annual Report on Form 10-K.

Historical results and percentage relationships among any amounts in the financial statements are not necessarily indicative of trends in operating results for any future periods.

The Asset Sale and Externalization Transactions

On April 3, 2018, we entered into an asset purchase agreement, or the Asset Purchase Agreement, with BSP Asset Acquisition I, LLC, or the Asset Buyer (an affiliate of Benefit Street Partners L.L.C.), pursuant to which we agreed to sell our December 31, 2017 investment portfolio to the Asset Buyer for gross proceeds of $981.2 million in cash, subject to certain adjustments to take into account portfolio activity and other matters occurring since December 31, 2017, such transaction referred to herein as the Asset Sale Transaction.

Also on April 3, 2018, we entered into a stock purchase and transaction agreement, or the Externalization Agreement, with Barings LLC, or Barings, through which Barings agreed to become the investment adviser to the Company in exchange for (1) a payment by Barings of $85.0 million, or approximately $1.78 per share, directly to our stockholders, (2) an investment by Barings of $100.0 million in newly issued shares of our common stock at net asset value, or NAV, and (3) a commitment from Barings to purchase up to $50.0 million of shares of our common stock in the open market at prices up to and including our then-current net asset value per share for a two-year period, after which Barings agreed to use any remaining funds from the $50.0 million to purchase additional newly issued shares of our common stock at the greater of our then-current net asset value per share and market price (collectively, the Externalization Transaction).

The Asset Sale Transaction and the Externalization Transaction are collectively referred to as the Transactions.

The Transactions were approved by our stockholders at our July 24, 2018 special meeting of stockholders, or the 2018 Special Meeting.

The Asset Sale Transaction closed on July 31, 2018.

The gross cash proceeds received from the Asset Buyer and certain affiliates of the Asset Buyer in connection with the Asset Sale Transaction were approximately $793.3 million, after adjustments to take into account portfolio activity and other matters occurring since December 31, 2017, as described in greater detail in the Asset Purchase Agreement.

Adjustments to the purchase price included, among other things, approximately $208.8 million of principal payments and prepayments, sales proceeds and distributions related to the investment portfolio that were received and retained by us between December 31, 2017 and the closing of the Asset Sale Transaction, offset by approximately $29.5 million of loans and equity investments originated by us between December 31, 2017 and the closing of the Asset Sale Transaction.

In connection with the closing of the Asset Sale Transaction, we caused notices to be issued to the holders of our December 2022 Notes and March 2022 Notes (each as defined in our consolidated financial statements for the fiscal year ended December 31, 2019 and notes thereto) regarding the redemption of all $80.5 million in aggregate principal amount of the December 2022 Notes and all $86.3 million in aggregate principal amount of the March 2022 Notes, in each case, on August 30, 2018.

The December 2022 Notes and the March 2022 Notes were redeemed at 100% of their principal amount ($25.00 per Note), plus the accrued and unpaid interest thereon from June 15, 2018 to, but excluding, August 30, 2018.

In furtherance of the redemption, on July 31, 2018, we irrevocably deposited with The Bank of New York Mellon Trust Company, N.A., as trustee under the indenture and supplements thereto relating to the December 2022 Notes and the March 2022 Notes, funds in trust for the purposes of redeeming all of the issued and outstanding December 2022 Notes and March 2022 Notes and paying all sums due and payable under the indenture and supplements thereto.

As a result, our obligations under the indenture and supplements thereto relating to the December 2022 Notes and the March 2022 Notes were satisfied and discharged as of July 31,

2018, except with respect to those obligations that the indenture expressly provides shall survive the satisfaction and discharge of the indenture.

In addition, in connection with the closing of the Asset Sale Transaction, we terminated our senior secured credit facility entered into in May 2015 (and subsequently amended in May 2017), or the May 2017 Credit Facility.

Our former wholly-owned subsidiaries, Triangle Mezzanine Fund LLLP, or Triangle SBIC, Triangle Mezzanine Fund II LP, or Triangle SBIC II, and Triangle Mezzanine Fund III LP, or Triangle SBIC III, were specialty finance limited partnerships that were formed to make investments primarily in lower middle-market companies located throughout the United States.

Each of Triangle SBIC, Triangle SBIC II and Triangle SBIC III held licenses to operate as Small Business Investment Companies, or SBICs, under the authority of the United States Small Business Administration, or SBA.

In connection with the closing of the Asset Sale Transaction, we repaid all of our outstanding SBA-guaranteed debentures and surrendered the SBIC licenses held by Triangle SBIC, Triangle SBIC II, and Triangle SBIC III.

The Externalization Transaction closed on August 2, 2018.

Effective as of the Externalization Closing, we changed our name from Triangle Capital Corporation to Barings BDC, Inc.

and on August 3, 2018 began trading on the New York Stock Exchange, or NYSE, under the symbol "BBDC."

In connection with the closing of the Externalization Transaction, we entered into an investment advisory agreement, or the Advisory Agreement, and an administration agreement, or the Administration Agreement, with Barings, pursuant to which Barings serves as our investment adviser and administrator and manages our investment portfolio which initially consisted primarily of the cash proceeds received in connection with the Asset Sale Transaction.

On August 2, 2018, we issued 8,529,917 shares of our common stock to Barings at a price of $11.723443 per share, or an aggregate of $100.0 million in cash.

Furthermore, on August 7, 2018, we launched a $50.0 million issuer tender offer, or the Tender Offer.

Pursuant to the Tender Offer, we purchased 4,901,961 shares of our common stock at a purchase price of $10.20 per share, for an aggregate cost of approximately $50.0 million, excluding fees and expenses relating to the Tender Offer.

The shares of common stock purchased in the Tender Offer represented approximately 8.7% of our issued and outstanding shares as of September 6, 2018.

On September 24, 2018, or the Effective Date, Barings entered into a Rule 10b5-1 Purchase Plan, or the 10b5-1 Plan, that qualifies for the safe harbors provided by Rules 10b5-1 and 10b-18 under the Exchange Act.

Pursuant to the 10b5-1 Plan, an independent broker made purchases of shares of our common stock on the open market on behalf of Barings in accordance with purchase guidelines specified in the 10b5-1 Plan.

The 10b5-1 Plan was established in accordance with Barings obligation under the Externalization Agreement to enter into a trading plan pursuant to which Barings committed to purchase $50.0 million in value of shares in open market transactions through an independent broker.

The maximum aggregate purchase price of all shares purchased under the 10b5-1 Plan was $50.0 million.

On February 11, 2019, Barings fulfilled its obligations under the 10b5-1 Plan to purchase an aggregate amount of $50.0 million in shares of our common stock and the 10b5-1 Plan terminated in accordance with its terms.

Upon completion of the 10b5-1 Plan, Barings had purchased 5,084,302 shares of our common stock pursuant to the 10b5-1 Plan and owned a total of 13,639,681 shares of our common stock, or 26.6% of the total shares outstanding.

MVC Capital, Inc.

On December 23, 2020, we completed our acquisition of MVC Capital, Inc., a Delaware corporation (“MVC”) (the “MVC Acquisition”) pursuant to the terms and conditions of that certain Agreement and Plan of Merger (the “Merger Agreement”), dated as of August 10, 2020, with MVC, Mustang Acquisition Sub, Inc., a Delaware corporation and our wholly owned subsidiary (“Acquisition Sub”), and Barings LLC, our external investment adviser and our administrator (“Barings”).

To effect the acquisition, Acquisition Sub merged with and into MVC, with MVC surviving the merger as our wholly owned subsidiary (the “First Merger”).

Immediately thereafter, MVC merged with and into us, with us as the surviving company (the “Second Merger” and, together with the First Merger, the “Merger”).

Pursuant to the Merger Agreement, MVC stockholders received the right to the following merger consideration in exchange for each share of MVC common stock issued and outstanding immediately prior to the effective time of the First Merger (other than shares of MVC common stock issued and outstanding immediately prior to the effective time of the First Merger that were held by a subsidiary of MVC or held, directly or indirectly, by us or the Acquisition Sub), in accordance with the Merger Agreement:

(i) an amount in cash from Barings, without interest, equal to $0.39492, and (ii) 0.9790836 shares of our common stock, which ratio gave effect to the Euro-dollar exchange rate adjustment mechanism in the Merger Agreement, plus cash in lieu of fractional shares.

We issued approximately 17,354,332 shares of our common stock to MVC’s then-existing stockholders in connection with the Merger, thereby resulting in our then-existing stockholders owning approximately 73.4% of the combined company and MVC's then-existing stockholders owning approximately 26.6% of the combined company.

In connection with the MVC Acquisition, on December 23, 2020, following the closing of the Merger, we entered into (1) an amended and restated investment advisory agreement (the “Amended and Restated Advisory Agreement”) with Barings, effective January 1, 2021, and (2) a credit support agreement (the “Credit Support Agreement”) with Barings, pursuant to which Barings has agreed to provide credit support to us in the amount of up to $23.0 million relating to the net cumulative realized and unrealized losses on the acquired MVC investment portfolio over a 10-year period.

See “Business—MVC Capital, Inc.

Acquisition” and “Business—Management Agreements – Investment Advisory Agreement” in Item 1 of Part I of this Annual Report on Form 10-K, as well as “Note 2 .

Agreements and Related Party Transactions” and “Note.

6 Derivative Instruments” in the Notes to our Consolidated Financial Statements included in this Annual Report on Form 10-K for more information.

In addition, in connection with the closing of the Merger, our board of directors (the “Board”) affirmed our commitment to open-market purchases of shares of our common stock in an aggregate amount of up to $15.0 million at then-current market prices at any time shares trade below 90% of our then most recently disclosed net asset value per share.

Any repurchases pursuant to the authorized program will occur during the 12-month period commencing upon the filing of our quarterly report on Form 10-Q for the quarter ending March 31, 2021 and are expected to be made in accordance with a repurchase plan that qualifies for the safe harbors provided by Rules 10b5-1 and 10b-18 under the Exchange Act, as well as subject to compliance with the covenants in our borrowing arrangements, including under our $800 million senior secured revolving credit facility with ING Capital LLC (as amended,

restated and otherwise modified from time to time, (the "February 2019 Credit Facility"), and certain other regulatory requirements.

Overview of Our Business

We are a Maryland corporation incorporated on October 10, 2006.

Prior to the Externalization Transaction, we were internally managed by our executive officers under the supervision of the Board.

During this period, we did not pay management or advisory fees, but instead incurred the operating costs associated with employing executive management and investment and portfolio management professionals.

On August 2, 2018, we entered into the Advisory Agreement and became an externally-managed BDC managed by Barings.

In August 2018, in connection with the closing of an externalization transaction through which Barings agreed to become our external investment adviser, we entered into an investment advisory agreement (the "Original Advisory Agreement") and an administration agreement (the "Administration Agreement") with Barings.

In connection with the MVC Acquisition, we entered into the Amended and Restated Advisory Agreement on December 23, 2020, following approval of the Amended and Restated Advisory Agreement by our stockholders at our December 23, 2020 special meeting of stockholders.

The terms of the Amended and Restated Advisory Agreement became effective on January 1, 2021.

Under the terms of the Amended and Restated Advisory Agreement and the Administration Agreement, Barings serves as our investment adviser and administrator and manages our investment portfolio and performs (or oversees, or arranges for, the performance of) the administrative services necessary for our operation.

An externally-managed BDC generally does not have any employees, and its investment and management functions are provided by an outside investment adviser and administrator under an advisory agreement and administration agreement.

Instead of directly compensating employees, we pay Barings for investment and management services pursuant to the terms of the Advisory Agreement and the Administration Agreement.

Under the terms of the Advisory Agreement, the fees paid to Barings for managing our affairs will be determined based upon an objective and fixed formula, as compared with

the subjective and variable nature of the costs associated with employing management and employees in an internally-managed BDC structure, which include bonuses that cannot be directly tied to Company performance because of restrictions on incentive compensation under the 1940 Act.

Prior to the Transactions, our business was to provide capital to lower middle-market companies located primarily in the United States.

We focused on investments in companies with a history of generating revenues and positive cash flows, an established market position and a proven management team with a strong operating discipline.

Our target portfolio company had annual revenues between $20.0 million and $300.0 million and annual earnings before interest, taxes, depreciation and amortization, as adjusted, or Adjusted EBITDA, between $5.0 million and $75.0 million.

We invested primarily in senior and subordinated debt securities of privately held companies, generally secured by security interests in portfolio company assets.

In addition, we generally invested in one or more equity instruments of the borrower, such as direct preferred or common equity interests.

Our investments generally ranged from $5.0 million to $50.0 million per portfolio company.

Beginning August 2, 2018, Barings shifted our investment focus to invest 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.

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.

Instead of directly compensating employees, we pay Barings for investment and management services pursuant to the terms of the Amended and Restated Advisory Agreement (and, prior to January 1, 2021, pursuant to the terms of the Original Advisory Agreement) and the Administration Agreement.

Under the terms of the Amended and Restated Advisory Agreement (and, prior to January 1, 2021, under the terms of the Original Advisory Agreement), the fees paid to Barings for managing our affairs are determined based upon an objective and fixed formula, as compared with the subjective and variable nature of the costs associated with employing management and employees in an internally-managed BDC structure, which include bonuses that cannot be directly tied to Company performance because of restrictions on incentive compensation under the 1940 Act.

Beginning in August 2018, Barings shifted our investment focus to invest in syndicated senior secured loans, bonds and other fixed income securities.

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

Barings’ existing SEC co-investment exemptive relief under the 1940 Act (the "Exemptive Relief") permits us and Barings’ affiliated private 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.

Barings employs fundamental credit analysis, and targets investments in businesses with relatively low levels of cyclicality and operating risk.

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Our senior secured, middle-market, private debt investments generally have terms of between five and seven years.

Our senior secured, middle-market, private debt investments generally bear interest between LIBOR (or the applicable currency rate for investments in foreign currencies) plus 450 basis points and LIBOR plus 650 basis points per annum.

Our senior secured, middle-market, first lien private debt investments generally bear interest between LIBOR (or the applicable currency rate for investments in foreign currencies) plus 450 basis points and LIBOR plus 650 basis points per annum.

Our subordinated middle-market, private debt investments generally bear interest between LIBOR (or the applicable currency rate for investments in foreign currencies) plus 700 basis points and LIBOR plus 900 basis points per annum if floating rate, and between 8% and 15% if fixed rate.

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 December 31, 2019 , the weighted average yield on our syndicated senior secured loan portfolio and our middle-market 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 December 31, 2018 , the weighted average yield on our syndicated senior secured loan portfolio and our middle-market private debt portfolio was approximately 5.8% and 7.6%, respectively.

As of December 31, 2018 , 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 6.0% as of December 31, 2018 .

The weighted average yields across our investment portfolio depend on the relative seniority of our investments within the capital structures of our portfolio companies and on our security interests in portfolio company assets.

Historically, prior to the Transactions, from the time of our initial public offering, or IPO, in 2007,

we primarily focused on investments in subordinated debt securities, which generally produce higher yields than more senior securities due to the risks inherent in investing in less senior positions.

Beginning in 2016, we began to shift our focus toward larger and less cyclical portfolio companies and began steering our portfolio composition with a focus on a balance between senior and subordinated securities.

On August 2, 2018, Barings shifted our investment focus to invest initially in syndicated senior secured loans, bonds and other fixed income securities.

Over 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.

This shift toward predominately senior securities is intended to reduce our credit risks in exchange for lower-yielding investments, which in turn has resulted in a decrease in the weighted average yield on our investment portfolio.

As of December 31, 2020 and December 31, 2019, the weighted average yield on the principal amount of our outstanding debt investments other than non-accrual debt investments was approximately 7.1% and 6.2%, respectively.

The weighted average yield on the principal amount all of our outstanding investments (including equity and equity-linked investments and short-term investments but excluding non-accrual debt investments) was approximately 6.4% and 5.8% as of December 31, 2020 and December 31, 2019, respectively.

The weighted average yield on the principal amount all of our outstanding investments (including equity and equity-linked investments, short-term investments and non-accrual debt investments) was approximately 6.5% and 5.8% as of December 31, 2020 and December 31, 2019, respectively.

COVID-19 Developments

The spread of the Coronavirus and the COVID-19 pandemic, and the related effect on the U.S.

and global economies, has had 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.

Barings has taken proactive steps around COVID-19 to address the potential impacts on their people, clients, communities and everyone they come in contact with, directly or through their premises.

Protecting their employees and supporting the communities in which they live and work is a priority.

Barings continues to operate with the majority of employees globally working remotely while maintaining service levels to our partners and clients.

In the U.S., the firm’s global headquarters in Charlotte reopened in June 2020;

currently, all other offices in the U.S.

remain closed.

In Europe, the majority of Barings' office locations are currently closed while in Asia all offices remain open.

Barings has established a return-to-office taskforce that continues to plan for the safe return of employees to all office locations when the global situation allows.

Barings’ cybersecurity policies are applied consistently when working remotely or in the office.

While we have been carefully monitoring the COVID-19 pandemic and its impact on our business and the business of our portfolio companies, we have continued to fund our existing debt commitments.

In addition, we have continued to make and originate, and expect to continue to make and originate, new loans.

We cannot predict the full impact of the COVID-19 pandemic, including its duration in the United States and worldwide and the magnitude of the economic impact of the outbreak, including with respect to the travel restrictions, business closures and other quarantine measures imposed on service providers and other individuals by various local, state, and federal governmental authorities, as well as non-U.S.

governmental authorities.

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 could experience financial distress and possibly default on their financial obligations to us and their other capital providers.

We also expect that some of our portfolio companies may significantly curtail business operations, furlough or lay off employees and terminate service providers, and defer capital expenditures if subjected to prolonged and severe financial distress, which would likely impair their business on a permanent basis.

These developments would likely result in a decrease in the value of our investment in any such portfolio company.

The COVID-19 pandemic and the related disruption and financial distress experienced by our portfolio companies may have material adverse effects on our investment income, particularly our interest income, received from our investments.

In connection with the adverse effects of the COVID-19 pandemic, we may need to restructure our investments in some of our portfolio companies, which could result in reduced interest payments, an increase in the amount of PIK interest we receive, or result in permanent impairments on our investments.

If we restructure a portfolio investment included in the borrowing base under the February 2019 Credit Facility in certain ways, including but not limited to a reduction in interest income received from any such investment or modification of a loan to accrue certain levels of PIK interest instead of cash, then such modifications could result in a reduction in the borrowing base under the February 2019 Credit Facility.

In addition, if a portfolio investment included in the borrowing base under the February 2019 Credit Facility defaults on its obligations or if any such portfolio investment is placed on non-accrual, then there will be a reduction in the borrowing base under the February 2019 Credit Facility.

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 February 2019 Credit Facility, the August 2025 Notes and the November Notes (each as defined below under "—Liquidity and Capital Resources"), as well as the February Notes (as defined below under "—Recent Developments").

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

As of December 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.

In addition, the February 2019 Credit Facility and the note purchase agreements governing the August 2025 Notes, the November Notes and the February Notes, as applicable, contain affirmative and negative covenants and events of default relating to, among other things, minimum stockholders’ equity, minimum obligors’ net worth, maximum net debt to equity, minimum asset coverage, minimum liquidity and maintenance of RIC and BDC status, as well as cross-default provisions relating to other indebtedness.

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

In addition, we were not in default under the February 2019 Credit Facility, the August 2025 Notes or the November Notes as of December 31, 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, maximum net debt to equity, and minimum asset coverage.

If we fail to satisfy the covenants in the February 2019 Credit Facility or in the note purchase agreements governing the August 2025 Notes, the November Notes or the February Notes or are unable to cure any event of default or obtain a waiver from the applicable lender or noteholders, it could result in foreclosure by the lenders under the credit facility or otherwise accelerate our repayment obligations under the February 2019 Credit Facility or under the note purchase agreements governing the August 2025 Notes, the November Notes and the February Notes 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 December 31, 2020, approximately $1,204.5 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 connection with the COVID-19 pandemic, the U.S.

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

A prolonged reduction in interest rates will reduce our gross investment income and could result in a decrease in our net investment income if such decreases in LIBOR are not offset by a corresponding increase in the spread over LIBOR that we earn on any portfolio investments, a decrease in in our operating expenses, including with respect to our income incentive fee, or a decrease in the interest rate of our floating interest rate liabilities tied to LIBOR.

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

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.

In these circumstances, there may be developments outside our control requiring us to adjust our plan of operation.

As such, 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, our financial condition and the results of operations and financial condition of our portfolio companies.

Portfolio Composition

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As of December 31, 2020, we had investments in 146 portfolio companies and two money market funds with an aggregate cost of $1,486.1 million.

As of December 31, 2018 , we had investments in 139 portfolio companies and one money market fund with an aggregate cost of $1,173.9 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 December 31, 2020 and 2019, none of our portfolio investments represented greater than 10% of the total fair value of our investment portfolio.

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

Percentage of

Total Portfolio

Percentage of

Cost Percentage of

Total Portfolio Fair Value Percentage of

Total Portfolio

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Senior debt and 1st lien notes $ 1,167,436,742 79 % $ 1,171,250,512 79 %

1,070,031,715

1,050,863,369

Subordinated debt and 2nd lien notes 137,776,808 9 138,767,120 9

Structured products 30,071,808 2 32,508,845 2

Equity shares 44,693,645 3 44,651,114 3

Investment in joint venture

Equity warrants 1,235,383 — 1,300,197 —

Investments in joint ventures/PE fund 39,282,532 3 41,759,922 3

Short-term investments 65,558,227 4 65,558,227 4

$ 1,486,055,145 100 % $ 1,495,795,937 100 %

1,173,643,807

December 31, 2019:

Senior debt and 1st lien notes $ 1,070,031,715 90 % $ 1,050,863,369 90 %

1,120,401,043

1,068,436,847

Subordinated debt and 2nd lien notes 15,339,180 1 15,220,969 1

Equity shares 515,825 — 760,716 —

Investment in joint venture 10,158,270 1 10,229,813 1

Short-term investments 96,568,940 8 96,568,940 8

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

1,121,855,745

Investment Activity

During the year ended December 31, 2019 , we purchased $18.1 million in syndicated senior secured loans, made 39 new middle-market debt investments totaling $409.6 million, consisting of 38 senior secured, middle-market, private debt investments and one second lien, middle-market, private debt investment, made equity investments in our joint venture totaling $10.2 million and made additional debt investments in five existing portfolio companies totaling $12.2 million.

We had seven syndicated senior secured loans repaid at par totaling total $34.4 million, had four middle-market portfolio company loans repaid at par totaling $44.0 million, received $28.2 million of syndicated senior secured loan principal payments and received $6.3 million of middle-market portfolio company principal payments.

In addition, we sold $318.5 million of syndicated senior secured loans, recognizing a net realized loss on these transactions of $3.5 million, sold $4.8 million of a middle-market portfolio company debt investment and sold $36.1 million of middle-market portfolio company debt investments to our joint venture.

During the year ended December 31, 2020, we made 76 new investments totaling $743.2 million, purchased $185.0 million of investments as part of the MVC Acquisition, made investments in existing portfolio companies totaling $114.6 million, made a new joint venture equity investment totaling $10.0 million and made an additional investment in one existing joint venture equity portfolio company totaling $10.0 million.

We had 18 loans repaid at par totaling total $76.4 million and received $15.3 million of portfolio company principal payments.

In addition, we sold $468.4 million of loans, recognizing a net realized loss on these transactions of $39.5 million, and sold $126.1 million of middle-market portfolio company debt investments to our joint venture realizing a loss on these transactions of $1.4 million.

In addition, one 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 $0.8 million in escrow distributions from legacy portfolio companies, which were recognized as realized gains and recognized a realized loss of $1.1 million relating to indemnification claims for a legacy Triangle Capital Corporation portfolio company.

During the year ended December 31, 2019, we made 43 new investments totaling $425.9 million, made investments in existing portfolio companies totaling $14.0 million and made one new joint venture equity investment totaling $10.2 million.

We had 11 loans repaid at par totaling total $78.5 million and received $34.4 million of portfolio company principal payments.

In addition, we sold $323.3 million of loans, recognizing a net realized loss on these transactions of $3.5 million and sold $36.1 million of middle-market portfolio company debt investments to our joint venture.

In addition, certain terms of one broadly syndicated loan investment were amended.

GAAP, this amendment was considered a material modification and as a result, we recognized a loss of approximately $0.2 million related to the amendment.

Lastly, we received $0.5 million in escrow distributions from four portfolio companies, which were recognized as realized gains, and recognized a net loss of $0.5 million related to royalty payments due from a legacy Triangle Capital portfolio company.

During the year ended December 31, 2018 , subsequent to the Transactions, we purchased $1,314.6 million in syndicated senior secured loans and made new investments in nineteen middle-market portfolio companies totaling $237.2 million, consisting of 17 senior secured private debt investments, two second lien private debt investments and two minority equity instruments.

In addition, we invested $45.2 million, net, in money market fund investments during the year ended December 31, 2018 , subsequent to the Transactions.

In addition, during the year ended December 31, 2018 , subsequent to the Transactions, we received $14.2 million of principal payments and sold $405.2 million of syndicated senior secured loans, recognizing a net loss on the sales of $0.1 million.

As previously disclosed, as part of the Asset Sale Transaction we received gross cash proceeds from the Asset Buyer and certain affiliates of the Asset Buyer of approximately $793.3 million, after adjustments to take into account portfolio activity and other matters occurring since December 31, 2017, as described in greater detail in the Asset Purchase Agreement.

We recognized a net realized loss on the Asset Sale Transaction of approximately $115.9 million and a net realized loss on the repayments and sales that occurred between December 31, 2017 and the closing of the Asset Sale Transaction of approximately $43.8 million.

Total portfolio investment activity for the years ended December 31, 2020 and 2019 was as follows:

December 31, 2019

December 31, 2020 Senior Debt

and 1 st Lien

Subordinated Debt and 2 nd Lien Notes

Investment in Joint Venture

Structured Products Equity

Shares Equity Warrants Investments

in Joint Ventures/

PE Fund 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

1,068,436,847

1,121,855,745

New investments 815,145,050 8,244,226 33,018,233 1,286,365 101,602 20,000,000 1,182,185,606 2,059,981,082

1,363,734,649

Investments acquired in MVC merger 9,720,000 122,082,933 — 42,980,466 1,133,781 9,124,262 — 185,041,442

Proceeds from sales of investments (588,450,883) (2,940,255) (3,000,000) 221,094 — — (1,213,197,945) (1,807,367,989)

(1,221,633,628

Loan origination fees received (19,013,021) (180,224) — — — — — (19,193,245)

Principal repayments received (86,295,211) (5,104,857) (336,069) — — — — (91,736,137)

Payment in kind interest earned 453,896 41,753 — — — — — 495,649

Accretion of loan premium/discount 1,635,917 111,923 58,132 — — — — 1,805,972

Accretion of deferred loan origination revenue 2,672,194 44,571 — — — — — 2,716,765

Realized loss

Realized (gain) loss (38,462,897) 137,542 331,511 (310,105) — — 1,626 (38,302,323)

Unrealized appreciation (depreciation) 22,982,098 1,108,539 2,437,038 (287,422) 64,814 2,405,847 — 28,710,914

Fair value, end of period $ 1,171,250,512 $ 138,767,120 $ 32,508,845 $ 44,651,114 $ 1,300,197 $ 41,759,922 $ 65,558,227 $ 1,495,795,937

1,050,863,369

1,173,643,807

December 31, 2018

December 31, 2019 Senior Debt

and 1 st Lien

Debt and 2 nd

Short-term Investments

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

1,016,284,346

New investments 429,318,922 10,615,730 — 10,158,270 913,641,727 1,363,734,649

1,563,590,508

1,363,333,538

2,945,804,259

Investment reclass

Proceeds from sales of investments (359,386,754) — 49,854 — (862,296,728) (1,221,633,628)

(1,318,109,597

(1,759,563,439

Proceeds from sale of portfolio to Asset Buyer

Loan origination fees received (8,457,796) (148,551) — — — (8,606,347)

Principal repayments received (109,909,128) (2,980,874) — — — (112,890,002)

PIK interest earned

PIK interest payments received

Accretion of loan premium/discount 278,897 797 — — — 279,694

Accretion of deferred loan origination revenue 1,534,936 74,231 1,609,167

Realized gain (loss)

Realized loss (3,748,409) — (49,854) — (3,798,263)

Unrealized appreciation (depreciation) 32,795,854 (19,496) 244,891 71,543 — 33,092,792

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

1,068,436,847

1,121,855,745

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 December 31, 2019 and December 31, 2018 , we had no non-accrual assets.

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 December 31, 2020, the fair value of our non-accrual asset was $3.0 million, which comprised 0.2% of the total fair value of our portfolio, and the cost of our non-accrual asset was $3.0 million, which comprised 0.2% of the total cost of our portfolio.

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

A summary of our non-accrual asset as of December 31, 2020 is provided below:

Jedson Engineering, Inc.

In connection with the MVC Acquisition, we purchased our debt investment in Jedson Engineering, Inc, or Jedson.

Effective with the monthly payment due December 31, 2020, we placed our debt investment in Jedson on non-accrual status.

As a result, under U.S.

GAAP, we will not recognize interest income on our debt investment in Jedson for financial reporting purposes.

As of December 31, 2020, the cost of our debt investment in Jedson was $3.0 million and the fair value of such investment was $3.0 million.

Discussion and Analysis of Financial Condition and Results of Operations

Set forth below is a comparison of the results of operations and changes in financial condition for the years ended December 31, 2020 and 2019.

The comparison of, and changes between, the fiscal years ended December 31, 2019 and 2018 can be found within “Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations” included in Part II of our annual report on Form 10-K for the fiscal year ended December 31, 2019, which is incorporated herein by reference.

Results of Operations

Comparison of years ended December 31, 2020 and 2019

Operating results for the years ended December 31, 2019 , 2018 and 2017 were as follows:

Operating results for the years ended December 31, 2020 and 2019:

Year Ended December 31,

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Net operating expenses 39,972,665 45,096,749

Net investment income (loss)

Net investment income before taxes 31,058,403 30,551,596

Income taxes, including excise tax expense 70,599 —

Net investment income after taxes 30,987,804 30,551,596

Net realized losses (38,289,580) (3,810,448)

Net unrealized appreciation (depreciation)

Net unrealized appreciation 18,549,588 32,088,004

Loss on extinguishment of debt (3,088,728) (297,188)

Benefit from (provision) for taxes 17,709 (340,330)

Net increase (decrease) in net assets resulting from operations

Net increase in net assets resulting from operations $ 8,176,793 $ 58,191,634

Net increases or decreases in net assets resulting from operations vary substantially from period to period due to various factors.

The net decrease in net assets resulting from operations for the year ended December 31, 2018 was primarily due to the net realized loss related to the Asset Sale Transaction and certain one-time compensation expenses and direct costs related to the Transactions.

See further discussion regarding the Transactions above in

"The Asset Sale and Externalization Transactions" section.

As a result, yearly comparisons of net increases or decreases in net assets resulting from operations may not be meaningful.

7 unchanged sentences

Total investment income $ 71,031,068 $ 75,648,345

The change in total investment income for the year ended December 31, 2019 , as compared to the year ended December 31, 2018 , was related to the shift in our investment focus subsequent to the Transactions.

During the year ended December 31, 2019 , our investment portfolio was primarily comprised of syndicated senior secured loans and senior secured, middle-market, private debt investments, which are lower yielding debt investments as compared to our investment portfolio prior to the Transactions, which was comprised primarily of senior and subordinated debt securities of privately-held, lower middle-market companies.

Beginning August 2, 2018, Barings shifted our investment focus to invest in syndicated senior secured loans, bonds and other fixed income securities.

As of December 31, 2018 , we had investments in 139 portfolio companies, which included 19 middle-market debt investments and 120 syndicated senior secured loans as compared to investments in 147 portfolio companies as of December 31, 2019 , which included 53 middle-market debt investments, 93 syndicated senior secured loans and one joint venture equity investment.

The weighted average yield on our debt investments (excluding short-term investments) was 6.2% as of both December 31, 2019 and December 31, 2018 .

In addition, total investment income for the year ended December 31, 2019 was negatively impacted by a $2.5 million decrease in non-recurring fee income and a $0.8 million decrease in non-recurring dividend income.

Non-recurring fee income was $0.9 million for the year ended December 31, 2019 , as compared to $3.4 million for the year ended December 31, 2018 , and non-recurring dividend income was less than $0.1 million for the year ended December 31, 2019 , as compared to $0.9 million for the year ended December 31, 2018 .

In addition, interest income on cash decreased by $2.0 million from the year ended December 31, 2018 to the year ended December 31, 2019 .

The decrease in interest income (including PIK interest income) for the year ended December 31, 2018 , was primarily attributable to the Asset Sale Transaction and the shift in the composition of our investment portfolio.

Subsequent to the Externalization Transaction, our investment portfolio has been primarily comprised of syndicated senior secured loans and senior secured private debt investments which are lower yielding debt investments as compared to our investment portfolio as of December 31, 2017 .

The weighted average yield on our debt investments was 6.2% (exclusive of short-term investments) as of December 31, 2018 as compared to 11.0% (exclusive of non-accrual investments) as of December 31, 2017 .

In addition, total investment income for the year ended December 31, 2018 was negatively impacted by a $3.9 million decrease in non-recurring fee income and an $1.8 million decrease in non-recurring dividend income.

Non-recurring fee income was $3.4 million for the year ended December 31, 2018 , as compared to $7.3 million for the year ended December 31, 2017 , and non-recurring dividend income was $0.9 million for the year ended December 31, 2018 , as compared to $2.7 million for the year ended December 31, 2017 .

Partially offsetting these decreases was an increase in interest income on cash of $1.3 million in the year ended December 31, 2018 .

The change in total investment income for the year ended December 31, 2020, as compared to the year ended December 31, 2019, was primarily due to a decrease in LIBOR from December 31, 2019 to December 31, 2020, partially offset by an increase in the average size of our portfolio and an increase in fee income and payment-in-kind interest income.

The increase in the average size of our portfolio was largely due to the increased middle-market investment opportunities and the investments acquired as part of the MVC Acquisition;

however, as the MVC Acquisition did not close until late in the fourth quarter of 2020, we did not receive investment income from the acquired MVC portfolio for a significant portion of 2020.

The weighted average yield on the principal amount of our outstanding debt investments, other than non-accrual debt investments was 7.1% as of December 31, 2020, as compared to 6.2% as of December 31, 2019.

Operating Expenses

5 unchanged sentences

Total operating expenses $ 39,972,665 $ 45,096,749

Base management fee waived

Net operating expenses

Interest and Other Financing Fees

The increase in interest and other financing fees for the year ended December 31, 2019 as compared to the year ended December 31, 2018 was primarily attributable to an increase in our average borrowings outstanding in those periods, partially offset by lower average interest rates on borrowings.

Interest and other financing fees during the year ended December 31, 2019 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 year ended December 31, 2018 were primarily attributed to borrowings under our SBA-guaranteed debentures, the May 2017 Credit Facility and both the March 2022 Notes and the December 2022 Notes.

In connection with the Transactions, the SBA-guaranteed debentures and the May 2017 Credit Facility were repaid and the March 2022 Notes and the December 2022 Notes were redeemed.

The decrease in interest and other financing fees expense from the year ended December 31, 2017 to the year ended December 31, 2018 was primarily attributable to the repayment of our SBA-guaranteed debentures, the repayment of our May 2017 Credit Facility and the redemption of both the March 2022 Notes and the December 2022 Notes, partially offset by interest and fees incurred related to borrowings under the August 2018 Credit Facility.

Interest and other financing fees during the year ended December 31, 2020 were attributable to borrowings under Barings BDC Senior Funding I, LLC's ("BSF") credit facility initially entered into in August 2018 with Bank of America, N.A.

(the "August 2018 Credit Facility"), the February 2019 Credit Facility, our May 2019 $449.3 million term debt securitization (the "Debt Securitization"), the August 2025 Notes and the November Notes (each as defined below under "Liquidity and Capital Resources").

The decrease in interest and other financing fees for the year ended December 31, 2020 as compared to the year ended December 31, 2019, was primarily attributable to the decrease in interest rates as result of decreases in LIBOR and GBP LIBOR, as well as a reduction in the applicable margin on borrowings under the February 2019 Credit Facility from 2.25% to 2.00% in July 2020 as a result of our investment grade credit rating.

Base Management Fees

Under the Advisory Agreement, we pay Barings a base management fee, or the Base Management Fee, quarterly in arrears on a calendar quarter basis.

Under the terms of the Amended and Restated Advisory Agreement (and, prior to January 1, 2021, under the terms of the Original Advisory Agreement), we pay Barings a base management fee (the "Base Management Fee"), quarterly in arrears on a calendar quarter basis.

The Base Management Fee is calculated based on the average value of our gross assets, excluding cash and cash equivalents, at the end of the two most recently completed calendar quarters prior to the quarter for which such fees are being calculated.

Base Management Fees for any partial month or quarter are appropriately pro-rated.

Prior to the Externalization Transaction we were an internally-managed BDC and did not pay any base management fees.

See Note 2 to our consolidated financial statements for the year ended December 31, 2019 for additional information regarding the Advisory Agreement and the fee arrangement thereunder.

For the year ended December 31, 2019 , the Base Management Fee determined in accordance with the terms of the Advisory Agreement was approximately $12.1 million .

For the year ended December 31, 2018 , the Base Management Fee determined in accordance with the terms of the Advisory Agreement was approximately $4.2 million .

For the quarter ended September 30, 2018, the calculation of the Base Management Fee under the terms of the Advisory Agreement was based on the average of our gross assets, excluding cash and cash equivalents, as of March 31, 2018 and June 30, 2018, both of which were dates prior to the consummation of the Transactions.

For the quarter ended December 31, 2018, the calculation of the Base Management Fee under the terms of the Advisory Agreement was based on the average of our gross assets, excluding cash and cash equivalents, as of June 30, 2018, which was prior to the Transactions, and September 30, 2018.

In light of this fact, and in order to ensure that Barings did not earn a Base Management Fee on assets that it did not manage prior to the Transactions, Barings calculated the Base Management Fee for the quarter ended September 30, 2018 based on our average gross assets as of August 2, 2018 and September 30, 2018, excluding (i) cash and cash equivalents, (ii) short-term investments, (iii) unsettled purchased investments and (iv) assets subject to participation agreements (the “Q3 2018 Adjusted Management Fee”).

For the quarter ended December 31, 2018, Barings calculated the Base Management Fee based on our average gross assets as of September 30, 2018 and

December 31, 2018, excluding (i) cash and cash equivalents, (ii) short-term investments, (iii) unsettled purchased investments and (iv) assets subject to participation agreements (the “Q4 2018 Adjusted Management Fee,” and together with the Q3 2018 Adjusted Management Fee,” the “FY 2018 Adjusted Management Fee”).

Barings voluntary agreed to waive the difference between the $4.2 million Base Management Fee calculated under the terms of the Advisory Agreement and the FY 2018 Adjusted Management Fee, which resulted in a net Base Management Fee of approximately $2.7 million for the year ended December 31, 2018 after taking into account a waiver of approximately $1.5 million based on the calculations noted above.

See Note 2 to our Consolidated Financial Statements for the year ended December 31, 2020 for additional information regarding the terms of the Amended and Restated Advisory Agreement (and, prior to January 1, 2021, the terms of the Original Advisory Agreement) and the fee arrangement thereunder.

For the years ended December 31, 2020 and December 31, 2019, the Base Management Fee determined in accordance with the terms of the Original Advisory Agreement was approximately $14.3 million and $12.1 million, respectively.

The increase between periods was primarily due to the increase in the base management fee rate to 1.375% for the year ended December 31, 2020, pursuant to the terms of the Original Advisory Agreement, as compared to 1.125% for the year December 31, 2019.

Compensation Expenses

Prior to the Transactions, compensation expenses were primarily influenced by headcount and levels of business activity.

Prior to the externalization transaction with Barings in August 2018, compensation expenses were primarily influenced by headcount and levels of business activity.

Our compensation expenses included salaries, discretionary compensation, equity-based compensation and benefits.

Discretionary compensation was significantly impacted by our level of total investment income, our investment results, including investment realizations, prevailing labor markets and the external environment.

In connection with the Transactions, all but two employees were terminated.

The compensation expenses for the year ended December 31, 2019 related to salaries, benefits and discretionary compensation of these remaining employees.

Compensation expenses for the year ended December 31, 2018 related predominantly to the Transactions, and the subsequent change of control and related termination of our employees.

In the year ended December 31, 2018 , we recognized approximately $27.6 million in one-time compensation expenses associated with the Transactions which included severance expenses, pro-rata incentive compensation, transaction-related bonuses, expenses related to the acceleration of vesting of restricted stock grants and deferred compensation grants, and other expenses associated with the obligations under our existing severance agreements and severance policy.

Discretionary compensation was significantly impacted by our level of total investment income, our investment results, including investment realizations, prevailing labor

markets and the external environment.

In connection with the externalization transactions, all but two employees were terminated and remained employees until February 2020.

General and Administrative Expenses

On August 2, 2018, we entered into the Administration Agreement with Barings.

We entered into the Administration Agreement with Barings in August 2018.

Under the terms of the Administration Agreement, Barings performs (or oversees, or arranges for, the performance of) the administrative services necessary for our operations.

We are required to reimburse Barings for the costs and expenses incurred by Barings in performing its obligations and providing personnel and facilities under the Administration Agreement.

Prior to the Externalization Transaction, we operated as an internally-managed BDC and incurred these expenses directly.

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

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

General and administrative expenses increased for the year ended December 31, 2018 as compared to the year ended December 31, 2017 primarily as a result of transaction advisory fees, increased legal expenses and other direct costs associated with the Transactions.

These direct costs related to the Transactions totaled approximately $11.8 million for year ended December 31, 2018 .

See further discussion regarding the Transactions above under "The Asset Sale and Externalization Transactions."

We will reimburse Barings for the costs and expenses incurred by it in performing its obligations and providing personnel and facilities under the Administration Agreement in an amount to be negotiated and mutually agreed to by us and Barings quarterly in arrears;

provided that the agreed-upon quarterly expense amount will not exceed the amount of expenses that would otherwise be reimbursable by us under the Administration Agreement for the applicable quarterly period, and Barings will not be entitled to the recoupment of any amounts in excess of the agreed-upon quarterly expense amount.

See Note 2 to our Consolidated Financial Statements for additional information regarding the Administration Agreement.

For the years ended December 31, 2020 and 2019, the amount of administration expense incurred and invoiced by Barings for expenses was approximately $1.6 million and $2.3 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 Gains (Losses)

7 unchanged sentences

Net realized losses $ (38,289,580) $ (3,810,448)

In the year ended December 31, 2019 , we recognized a net realized loss totaling $3.8 million, which consisted primarily of a net loss on our syndicated senior secured loan portfolio of $3.8 million and a net loss of $0.5 million related to royalty payments due from a legacy Triangle Capital portfolio company, partially offset by $0.5 million in escrow distributions we received from six portfolio companies, which were recognized as realized gains.

For the year ended December 31, 2018 , we recognized net realized losses totaling $158.4 million , which consisted primarily of a net loss on the Asset Sale Transaction of approximately $115.9 million, a net loss on the repayments, sales and write-offs that occurred between December 31, 2017 and the closing of the Asset Sale Transaction of approximately $43.8 million and net losses on the syndicated senior secured loan portfolio of $0.1 million.

These net losses were partially offset by gains on escrows received of $0.3 million and a gain on foreign currency transactions of $1.1 million.

For the year ended December 31, 2017, we recognized net realized losses totaling $51.6 million, which consisted primarily of net losses on the write-offs of three control investments totaling $19.9 million, a net loss on the restructuring of one control investment totaling $25.3 million, net losses on the write-off of two affiliate investments totaling $9.5 million and net losses on the restructurings/write-offs of five non-control/non-affiliate investments totaling $17.7 million, partially offset by net gains on the sales of sixteen non-control/non-affiliate investments totaling $14.0 million, net gains on the sales of six affiliate investments totaling $5.5 million and a gain on foreign currency transactions of $1.3 million.

In the year ended December 31, 2020, we recognized a net realized loss totaling $38.3 million, which consisted primarily of a net loss on our loan portfolio of $38.0 million and a net loss of $1.1 million related to an indemnification claim in connection with a legacy Triangle Capital Corporation portfolio company, partially offset by $0.8 million in escrow distributions we received from portfolio companies, which were recognized as realized gains.

For the year ended December 31, 2019, we recognized a net realized loss totaling $3.8 million, which consisted primarily of a net loss on our loan portfolio of $3.8 million and a net loss of $0.5 million related to royalty payments due from a legacy Triangle Capital Corporation portfolio company, partially offset by $0.5 million in escrow distributions we received from six portfolio companies, which were recognized as realized gains.

Net Unrealized Appreciation and Depreciation

Net unrealized appreciation and depreciation during the year ended December 31, 2019 , 2018 and 2017 was as follows:

Net unrealized appreciation and depreciation during the years ended December 31, 2020 and 2019 was as follows:

Year Ended December 31,

2 unchanged sentences

Control investments 29,368 —

Net unrealized appreciation (depreciation) on investments

Net unrealized appreciation on investments 28,710,914 33,092,792

Foreign currency transactions (10,161,326) (1,004,788)

Net unrealized appreciation (depreciation)

Net unrealized appreciation $ 18,549,588 $ 32,088,004

For the year ended December 31, 2020, we recorded net unrealized appreciation totaling $18.5 million consisting of net unrealized depreciation on our current portfolio of $27.9 million, net unrealized depreciation related to foreign currency transactions of $10.2 million and net unrealized appreciation reclassification adjustments of $56.6 million related to realized gains and losses recognized during the year.

The net unrealized depreciation on our current portfolio of $27.9 million was driven primarily by the credit or fundamental performance of middle-market debt investments of $6.1 million and the broad market moves for the entire investment portfolio of $29.5 million, partially offset by the positive impact of foreign currency exchange rates on middle-market debt investments of $7.7 million.

For the year ended December 31, 2019, we recorded net unrealized appreciation totaling $32.1 million consisting of net unrealized appreciation on our current portfolio of $9.2 million, net unrealized depreciation related to foreign currency transactions of $1.0 million and net unrealized appreciation reclassification adjustments of $23.9 million related to realized gains and losses recognized during the year.

For the year ended December 31, 2018 , we recorded net unrealized appreciation totaling $53.7 million consisting of net unrealized depreciation on our current portfolio of $52.1 million and net unrealized appreciation reclassification adjustments of $105.8 million related to realized gains and losses recognized during the period, including those attributable to the Asset Sale Transaction.

For the year ended December 31, 2017, we recorded net unrealized depreciation totaling $48.4 million, consisting of net unrealized depreciation on our then-current portfolio of $102.8 million and net unrealized appreciation reclassification adjustments of $54.4 million related to realized gains and losses.

Supplemental Financial Information

We report our financial results in accordance with U.S.

On a supplemental basis, the information in the table below presents our results of operations for the year ended December 31, 2018 for (i) the period from January 1, 2018 through August 2, 2018, the date of the Externalization Transaction, and (ii) for the period from August 3, 2018 through December 31, 2018.

January 1, 2018 through

August 2, 2018

August 3, 2018 through

December 31, 2018

Year Ended Ended

December 31, 2018 (1)

Investment income:

Interest income

Dividend income

Fee and other income

Payment-in-kind interest income

Interest income from cash

Total investment income

Operating expenses:

Interest and other financing fees

Base management fee

Compensation expenses

General and administrative expenses

Total operating expenses

Base management fee waived

Net operating expenses

Net investment income (loss)

Realized and unrealized gains (losses) on investments and foreign currency transactions:

Net realized gains (losses)(2)

Net unrealized appreciation (depreciation)(3)

Net realized and unrealized losses

Loss on extinguishment of debt

Benefit from (provision for) taxes

Net decrease in net assets resulting from operations

Net investment income (loss) per share—basic and diluted

Net decrease in net assets resulting from operations per share—basic and diluted

Weighted average shares outstanding—basic and diluted

(1) Amounts from our Consolidated Statement of Operations for the year ended December 31, 2018 , representing the sums of the amounts for (i) the period from January 1, 2018 through August 2, 2018 and (ii) the period from August 3, 2018 through December 31, 2018, excluding per share amounts and weighted average shares outstanding.

(2) Net realized gains of $3.9 million for the period from August 3, 2018 through December 31, 2018 included a net realized gain on the Asset Sale of $3.6 million and a realized gain from escrow payments of $0.3 million, partially offset by a net realized loss on the sales of syndicated senior secured loans of $0.1 million.

(3) Net unrealized depreciation of $55.7 million for the period from August 3, 2018 through December 31, 2018 includes $52.1 million in net unrealized depreciation on our current portfolio and $3.6 million of net unrealized depreciation reclassification adjustments related to the net realized gain on the Asset Sale of $3.6 million discussed in footnote (2) above.

Liquidity and Capital Resources

We believe that our current cash on hand, our short-term investments, sales of our syndicated senior secured loans, our available borrowing capacity under the August 2018 Credit Facility and the February 2019 Credit Facility (each as defined below under "Financing Transactions") and our anticipated cash flows from operations will be adequate to meet our cash needs for our daily operations for at least the next twelve months.

We believe that our current cash and foreign currencies on hand, our short-term investments, our available borrowing capacity under the February 2019 Credit Facility and the August 2020 NPA and our anticipated cash flows from operations will be adequate to meet our cash needs for our daily operations for at least the next twelve months.

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

For the year ended December 31, 2020, we experienced a net increase in cash in the amount of $70.5 million.

During that period, our operating activities used $218.1 million in cash, consisting primarily of purchases of portfolio investments of $881.2 million, the acquisition of MVC (net of cash received) of $96.7 million and purchases of short-term investments of $1,182.2 million, partially offset by proceeds from sales of investments totaling $684.5 million and proceeds from the sales of short-term investments of $1,213.2 million.

In addition, financing activities provided net cash of $288.6 million, consisting primarily of net borrowings under the August 2018 Credit Facility and the February 2019 Credit Facility of $356.2 million, net proceeds from the August 2025 Notes and the November Notes issuances of $224.3, net proceeds from the issuance of common stock as part of the acquisition of MVC of $160.4 million, partially offset by repayments of the Debt Securitization of $318.2 million, purchases of shares under the share repurchase plan of $7.1 million, repayment of the notes acquired as part of the acquisition of MVC of $95.5 million and dividends paid in the amount of $31.3 million.

At December 31, 2020, we had $92.5 million of cash on hand.

For the year ended December 31, 2019, we experienced a net increase in cash in the amount of $9.6 million.

During that period, our operating activities used $31.5 million in cash, consisting primarily of purchases of portfolio investments of $473.7 million and purchases of short-term investments of $913.6 million, partially offset by proceeds from sales of investments totaling $449.9 million and proceeds from the sales of short-term investments of $862.3 million.

1 unchanged sentence

At December 31, 2019, we had $22.0 million of cash on hand.

For the year ended December 31, 2018, we experienced a net decrease in cash in the amount of $179.4 million.

During that period, our operating activities used $198.3 million in cash, consisting primarily of purchases of portfolio investments of $1,553.9 million, purchases of short-term investments of $1,363.3 million, partially offset by the sale of our investment portfolio to the Asset Buyer for $793.3 million, proceeds from sales of investments totaling $606.8 million and proceeds from the sales of short-term investments of $1,318.1 million.

In addition, financing activities provided net cash of $18.8 million, consisting primarily of borrowings under the May 2017 Credit Facility and the August 2018 Credit Facility of $574.1 million and net proceeds from the issuance of common stock to Barings of $99.8 million, partially offset by repayment of SBA-guaranteed debentures of $250.0 million, redemption of the December 2022 Notes and March 2022 Notes for $166.8 million in aggregate, repayments under the May 2017 Credit Facility of $160.0 million, purchases of shares of our common stock in the Tender Offer and related expenses of $51.0 million and cash dividends and distributions paid in the amount of $21.1 million.

At December 31, 2018, we had $12.4 million of cash on hand.

For the year ended December 31, 2017, we experienced a net increase in cash and cash equivalents in the amount of $84.8 million.

During that period, our operating activities provided $8.0 million in cash, consisting primarily of repayments received from portfolio companies and proceeds from the sales of investments totaling $403.7 million, which in addition to the cash provided by other operating activities, was partially offset by new portfolio investments of $483.7 million.

In addition, financing activities provided cash of $76.8 million, consisting primarily of proceeds from the public stock offering of $132.0 million and net borrowings under the May 2017 Credit Facility of $27.5 million, partially offset by cash dividends paid in the amount of $77.1 million.

At December 31, 2017, we had $191.8 million of cash on hand.

Financing Transactions

In connection with the Asset Sale Transaction, we repaid all of our outstanding SBA-guaranteed debentures and surrendered the SBIC licenses held by Triangle SBIC, Triangle SBIC II, and Triangle SBIC III.

Upon the repayment of the SBA-guaranteed debentures, we recognized a loss on the extinguishment of debt of $3.5 million.

Also in connection with the closing of the Asset Sale Transaction, we terminated the May 2017 Credit Facility, which resulted in a loss on the extinguishment of debt of $4.1 million.

In October 2012, we issued $70.0 million in aggregate principal amount of the December 2022 Notes, and in November 2012, we issued $10.5 million of the December 2022 Notes pursuant to the exercise of an over-allotment option.

In connection with the closing of the Asset Sale Transaction, we caused notices to be issued to the holders of the December 2022 Notes regarding the redemption of the December 2022 Notes.

The December 2022 Notes were redeemed in full on August 30, 2018 for a total redemption price of $80.5 million, which resulted in a loss on the extinguishment of debt of $1.4 million.

Prior to the redemption, the December 2022 Notes bore interest at a rate of

6.375% per year payable quarterly on March 15, June 15, September 15 and December 15 of each year, beginning December 15, 2012.

In February 2015, we issued $86.3 million in aggregate principal amount of the March 2022 Notes.

The net proceeds from the sale of the March 2022 Notes, after underwriting discounts and offering expenses, were $83.4 million.

In connection with the closing of the Asset Sale Transaction, we also caused notices to be issued to the holders of the March 2022 Notes regarding the redemption of all the March 2022 Notes.

The March 2022 Notes were redeemed in full on August 30, 2018 for a total redemption price of $86.3 million, which resulted in a loss on the extinguishment of debt of $1.5 million.

Prior to the redemption, the March 2022 Notes bore interest at a rate of 6.375% per year payable quarterly on March 15, June 15, September 15 and December 15 of each year, beginning March 15, 2015.

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 August 3, 2018, BSF entered into a credit facility, or the August 2018 Credit Facility (as subsequently amended in December 2018), 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.

August 2018 Credit Facility

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

On August 3, 2018, BSF entered into the August 2018 Credit Facility (as subsequently amended in December 2018 and February 2020), with Bank of America, N.A., as 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 (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 (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.

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 October 29, 2019, we further reduced our Class A-1 Loan Commitments, and therefore total commitments, under the August 2018 Credit Facility from $177.0 million to $150.0 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.

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.

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.

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, 2020, or upon earlier termination of the August 2018 Credit Facility.

As of December 31, 2019 , BSF was in compliance with all covenants under the August 2018 Credit Facility and had borrowings of $107.2 million outstanding under the August 2018 Credit Facility with an interest rate of 2.940% .

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 December 31, 2019 , the total fair value of the borrowings outstanding under the August 2018 Credit Facility was $107.2 million .

See Note 5 to our consolidated financial statements for the year ended December 31, 2019 for additional information regarding the August 2018 Credit Facility.

On February 21, 2019, we entered into a credit facility, or the February 2019 Credit Facility (as subsequently amended in December 2019), with ING Capital LLC, or ING, as administrative agent, and the lenders party thereto.

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.

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 and could not be less than zero.

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 4 to our Consolidated Financial Statements for additional information regarding the August 2018 Credit Facility.

February 2019 Credit Facility

On February 21, 2019, we entered into the February 2019 Credit Facility (as subsequently amended in December 2019), with ING Capital LLC ("ING"), as administrative agent, and the lenders party thereto.

The initial commitments under the February 2019 Credit Facility total $800.0 million.

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We can borrow foreign currencies directly under the February 2019 Credit Facility.

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.

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, after one year, 1.00% if we receive an investment grade credit rating), (ii) the applicable LIBOR rate plus 2.25% (or, after one year, 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, after one year, 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, after one year, 2.20% if the Company receives an investment grade credit rating).

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 1.00% (or 1.25% if we no longer maintain an investment grade credit rating), (ii) the applicable LIBOR rate plus 2.00% (or 2.25% if we no longer maintain 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 2.00% (or 2.25% if we no longer maintain an investment grade credit rating), or (iv) for borrowings denominated in Australian dollars, the applicable Australian dollars Screen Rate, plus 2.20% (or 2.45% if we no longer maintain 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) 1.0%.

The applicable currency rate depends on the currency and term of the draw under the February 2019 Credit Facility.

We pay a commitment fee of (i) for the period beginning on the closing date of the February 2019 Credit Facility to and including the date that is six months after the closing date of the February 2019 Credit Facility, 0.375% per annum on undrawn amounts, and (ii) for the period beginning on the date that is six months after the closing date of the February 2019 Credit Facility, (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 December 31, 2019 , we were in compliance with all covenants under the February 2019 Credit Facility and had U.S.

dollar borrowings of $195.0 million outstanding under the February 2019 Credit Facility with a weighted interest rate of 4.054% , borrowings denominated in Swedish kronas of 12.8kr million ( $1.4 million ) with an interest rate of 2.25% , borrowings denominated in British pounds sterling of £4.7 million ( $6.3 million ) with an interest rate of 3.0% , and borrowings denominated in Euros of €38.0 million ( $42.7 million ) with an interest rate of 2.25% .

The applicable LIBOR and currency rates depend on the currency and term of the draw under the February 2019 Credit Facility, and cannot be less than zero.

In addition, we (i) paid a commitment fee of 0.375% per annum on undrawn amounts for the period beginning on the closing date of the February 2019 Credit Facility to and including the date that was six months after the closing date of the February 2019 Credit Facility, and (ii) thereafter 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.

In connection with entering into the February 2019 Credit Facility, we incurred financing fees of approximately $6.4 million, which will be amortized over the life of the February 2019 Credit Facility.

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

dollar borrowings of $472.0 million outstanding under the February 2019 Credit Facility with a weighted average interest rate of 2.188% (weighted average one month LIBOR of 0.188%), borrowings denominated in Swedish kronas of 12.8kr million ($1.6 million U.S.

dollars) with an interest rate of 2.000% (one month STIBOR of 0.000%), borrowings denominated in British pounds sterling of £69.3 million ($94.8 million U.S.

dollars) with a weighted average interest rate of 2.063% (weighted average one month GBP LIBOR of 0.063%), borrowings denominated in Australian dollars of A$36.6 million ($28.2 million U.S.

dollars) with a weighted average interest rate of 2.250% (weighted average one month AUD Screen Rate of 0.050%) and borrowings denominated in Euros of €100.6 million ($123.1 million U.S.

dollars) with a weighted average interest rate of 2.00% (weighted average one month EURIBOR of 0.000%).

The borrowings denominated in foreign currencies were translated into U.S.

dollars based on the spot rate at the relevant balance sheet date.

The impact resulting from changes in foreign exchange rates on the February 2019 Credit Facility borrowings is included in "Net unrealized appreciation (depreciation) - foreign currency transactions" in our Consolidated Statements of Operations.

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 December 31, 2020 , the total fair value of the borrowings outstanding under the February 2019 Credit Facility was $719.7 million.

See Note 4 to our Consolidated Financial Statements for additional information regarding the February 2019 Credit Facility.

Term Debt Securitization

On May 9, 2019, we completed the Debt Securitization.

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The notes offered in the Debt Securitization (collectively, the "2019 Notes"), were issued by Barings BDC Static CLO Ltd.

2019-I, or BBDC Static CLO Ltd., and Barings BDC Static CLO 2019-I, LLC, our wholly-owned and consolidated subsidiaries.

2019-I, ("BBDC Static CLO Ltd.") and Barings BDC Static CLO 2019-I, LLC, our wholly-owned and consolidated subsidiaries.

BBDC Static CLO Ltd.

and Barings BDC Static CLO 2019-I, LLC are collectively referred to herein as the Issuers.

The 2019 Notes are secured by a diversified portfolio of senior secured loans and participation interests therein.

The Debt Securitization was executed through a private placement of approximately $296.8 million of AAA(sf) Class A-1 Senior Secured Floating Rate 2019 Notes, or the Class A-1 2019 Notes, which bear interest at the three-month LIBOR plus 1.02%;

$51.5 million of AA(sf) Class A-2 Senior Secured Floating Rate 2019 Notes, or the Class A-2 2019 Notes, which bear interest at the three-month LIBOR plus 1.65%;

and $101.0 million of Subordinated 2019 Notes which do not bear interest and are not rated.

The 2019 Notes

were secured by a diversified portfolio of senior secured loans and participation interests therein.

The Debt Securitization was executed through a private placement of approximately $296.8 million of AAA(sf) Class A-1 Senior Secured Floating Rate 2019 Notes (the "Class A-1 2019 Notes"), which bore interest at the three-month LIBOR plus 1.02%;

$51.5 million of AA(sf) Class A-2 Senior Secured Floating Rate 2019 Notes (the "Class A-2 2019 Notes"), which bore interest at the three-month LIBOR plus 1.65%;

and $101.0 million of Subordinated 2019 Notes which did not bear interest and were not rated.

We retained all of the Subordinated 2019 Notes issued in the Debt Securitization in exchange for our sale and contribution to BBDC Static CLO Ltd.

of the initial closing date portfolio, which included senior secured loans and participation interests.

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.

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

however the 2019 Notes could 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.

The Class A-1 2019 Notes and Class A-2 2019 Notes are the secured obligations of the Issuers, the Subordinated 2019 Notes are the unsecured obligations of BBDC Static CLO Ltd., and the indenture governing the 2019 Notes includes customary covenants and events of default.

The 2019 Notes have not been, and will not be, registered under the Securities Act of 1933, as amended, or the Securities Act, or any state securities or “blue sky” laws and may not be offered or sold in the United States absent registration with the Securities and Exchange Commission or an applicable exemption from registration.

We serve as collateral manager to BBDC Static CLO Ltd.

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 year ended December 31, 2019 , $30.0 million of the Class A-1 2019 Notes were repaid.

As of December 31, 2019 , we had borrowings of $266.7 million outstanding under the Class A-1 2019 Notes with an interest rate of 3.021% and borrowings of $51.5 million outstanding under the Class A-2 2019 Notes with an interest rate of 3.651% .

The fair value determination 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 December 31, 2019 , the total fair value of the Class A-1 2019 Notes and the Class A-2 2019 Notes was $266.8 million and $51.5 million , respectively.

The Class A-1 2019 Notes and Class A-2 2019 Notes were the secured obligations of the Issuers, the Subordinated 2019 Notes were the unsecured obligations of BBDC Static CLO Ltd., and the indenture governing the 2019 Notes included customary covenants and events of default.

The 2019 Notes were not registered under the Securities Act or any state securities or “blue sky” laws and could not be offered or sold in the United States absent registration with the Securities and Exchange Commission (the "SEC") or an applicable exemption from registration.

We served as collateral manager to BBDC Static CLO Ltd.

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

The Class A-1 2019 Notes and the Class A-2 2019 Notes issued in connection with the Debt Securitization had floating rate interest provisions based on the three-month LIBOR that reset quarterly, except that LIBOR for the first interest accrual period was calculated by reference to an interpolation between the rate for deposits with a term equal to the next shorter period of time for which rates were available and the rate appearing for deposits with a term equal to the next longer period of time for which rates were available.

During the year ended December 31, 2019, $30.0 million of Class A-1 2019 Notes were repaid.

During the year ended December 31, 2020, the remaining 2019 Notes were repaid in full, with the final repayment on October 15, 2020.

See Note 4 to our Consolidated Financial Statements for additional information regarding the Debt Securitization.

August 2025 Notes

On August 3, 2020, we entered into a Note Purchase Agreement (the “August 2020 NPA”) with Massachusetts Mutual Life Insurance Company governing the issuance of (1) $50.0 million in aggregate principal amount of Series A senior unsecured notes due August 2025 (the “Series A Notes due 2025”) with a fixed interest rate of 4.66% per year, and (2) up to $50.0 million in aggregate principal amount of additional senior unsecured notes due August 2025 with a fixed interest rate per year to be determined (the “Additional Notes” and, collectively with the Series A Notes due 2025, the “August 2025 Notes”), in each case, to qualified institutional investors in a private placement.

An aggregate principal amount of $25.0 million of the Series A Notes due 2025 was issued on September 24, 2020 and an aggregate principal amount of $25.0 million of the Series A Notes due 2025 was issued on September 29, 2020, both of which will mature on August 4, 2025 unless redeemed, purchased or prepaid prior to such date by us in accordance with their terms.

Interest on the August 2025 Notes will be due semiannually in March and September, beginning in March 2021.

In addition, we are obligated to offer to repay the August 2025 Notes at par (plus accrued and unpaid interest to, but not including, the date of prepayment) if certain change in control events occur.

Subject to the terms of the August 2020 NPA, we may redeem the August 2025 Notes in whole or in part at any time or from time to time at our option at par plus accrued interest to the prepayment date and, if redeemed on or before November 3, 2024, a make-whole premium.

The August 2025 Notes are guaranteed by certain of our subsidiaries, and are our general unsecured obligations that rank pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by us.

On November 4, 2020, we amended the August 2020 NPA to reduce the aggregate principal amount of unissued Additional Notes from $50.0 million to $25.0 million.

The August 2020 NPA contains certain representations and warranties, and various covenants and reporting requirements customary for senior unsecured notes issued in a private placement, including, without limitation, affirmative and negative covenants such as information reporting, maintenance of our status as a BDC within the meaning of the 1940 Act, certain restrictions with respect to transactions with affiliates, fundamental changes, changes of line of business, permitted liens, investments and restricted payments, minimum shareholders’ equity, maximum net debt to equity ratio and minimum asset coverage ratio.

The August 2020 NPA also contains customary events of default with customary cure and notice periods, including, without limitation, nonpayment, incorrect representation in any material respect, breach of covenant, cross-default under our other indebtedness or that of our subsidiary guarantors, certain judgements and orders, and certain events of bankruptcy.

Upon the occurrence of an event of default, the holders of at least 66-2/3% in principal amount of the August 2025 Notes at the time outstanding may declare all August 2025 Notes then outstanding to be immediately due and payable.

As of December 31, 2020 , we were in compliance with all covenants under the August 2020 NPA.

The August 2025 Notes were offered in reliance on Section 4(a)(2) of the Securities Act.

The August 2025 Notes have not and will not be registered under the Securities Act or any state securities laws and, unless so registered, may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, as applicable.

As of December 31, 2020, the fair value of the outstanding August 2025 Notes was $50.0 million.

The fair value determination of the August 2025 Notes was based on a market yield approach and current interest rates, which are Level 3 inputs to the market yield model.

November Notes

On November 4, 2020,we entered into a Note Purchase Agreement (the “November 2020 NPA”) governing the issuance of (1) $62.5 million in aggregate principal amount of Series B senior unsecured notes due November 2025 (the “Series B Notes”) with a fixed interest rate of 4.25% per year and (2) $112.5 million in aggregate principal amount of Series C senior unsecured notes due November 2027 (the “Series C Notes,” and, collectively with the Series B Notes, the “November Notes”) with a fixed interest rate of 4.75% per year, in each case, to qualified institutional investors in a private placement.

Each stated interest rate is subject to a step up of (x) 0.75% per year, to the extent the applicable November Notes do not satisfy certain investment grade conditions and/or (y) 1.50% per year, to the extent the ratio of our secured debt to total assets exceeds specified thresholds, measured as of each fiscal quarter end.

The November Notes were delivered and paid for on November 5, 2020.

The Series B Notes will mature on November 4, 2025, and the Series C Notes will mature on November 4, 2027 unless redeemed, purchased or prepaid prior to such date by us in accordance with their terms.

Interest on the November Notes will be due semiannually in May and November, beginning in May 2021.

In addition, we are obligated to offer to repay the November Notes at par (plus accrued and unpaid interest to, but not including, the date of prepayment) if certain change in control events occur.

Subject to the terms of the November 2020 NPA, we may redeem the Series B Notes and the Series C Notes in whole or in part at any time or from time to time at our option at par plus accrued interest to the prepayment date and, if redeemed on or before May 4, 2025, with respect to the Series B Notes, or on or before May 4, 2027, with respect to the Series C Notes, a make-whole premium .

The November Notes are guaranteed by certain of our subsidiaries, and are our general unsecured obligations that rank pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by us.

The November 2020 NPA contains certain representations and warranties, and various covenants and reporting requirements customary for senior unsecured notes issued in a private placement, including, without limitation, affirmative and negative covenants such as information reporting, maintenance of our status as a BDC within the meaning of the 1940 Act, certain restrictions with respect to transactions with affiliates, fundamental changes, changes of line of business, permitted liens, investments and restricted payments, minimum shareholders’ equity, maximum net debt to equity ratio and minimum asset coverage ratio.

The November 2020 NPA also contains customary events of default with customary cure and notice periods, including, without limitation, nonpayment, incorrect representation in any material respect, breach of covenant, cross-default under our other indebtedness or that of our subsidiary guarantors, certain judgements and orders, and certain events of bankruptcy.

Upon the occurrence of an event of default, the holders of at least 66-2/3% in principal amount of the November Notes at the

time outstanding may declare all November Notes then outstanding to be immediately due and payable.

As of December 31, 2020, we were in compliance with all covenants under the November 2020 NPA.

The November Notes were offered in reliance on Section 4(a)(2) of the Securities Act.

The November Notes have not and will not be registered under the Securities Act or any state securities laws and, unless so registered, may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, as applicable.

As of December 31, 2020, the fair value of the outstanding Series B Notes and the Series C Notes was $62.5 million and $112.5 million, respectively.

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

Share Repurchase Plan

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, or the Share Repurchase Plan.

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 (the "2019 Share Repurchase Plan").

The Board authorized us to repurchase in 2019 up to a maximum of 5.0% of the amount of shares outstanding under the following targets:

a maximum of 2.5% of the amount of shares of our common stock outstanding if shares trade below NAV per share but in excess of 90% of NAV per share;

a maximum of 5.0% of the amount of shares of our common stock outstanding if shares trade below 90% of NAV per share.

• a maximum of 2.5% of the amount of shares of our common stock outstanding if shares traded below NAV per share but in excess of 90% of NAV per share;

• a maximum of 5.0% of the amount of shares of our common stock outstanding if shares traded below 90% of NAV per share.

The 2019 Share Repurchase Plan was executed in accordance with applicable rules under the Exchange Act, including Rules 10b5-1 and 10b-18 thereunder, as well as certain price, market volume and timing constraints specified in the 2019 Share Repurchase Plan.

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During the year ended December 31, 2019, we repurchased a total of 2,333,261 shares of our common stock in the open market under the 2019 Share Repurchase Plan at an average price of $10.01 per share, including broker commissions.

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

Under the 2020 Share Repurchase Program, we were 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 traded below NAV per share, subject to liquidity and regulatory constraints.

Purchases under the 2020 Share Repurchase Program were made in open-market transactions and included transactions being executed by a broker selected us that had 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.

During the year ended December 31, 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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The most significant estimate inherent in the preparation of our financial statements is the valuation of investments and the related amounts of unrealized appreciation and depreciation of investments recorded.

We have a valuation policy, as well as established and documented processes and methodologies for determining the fair values of portfolio company investments on a recurring (at least quarterly) basis in accordance with the 1940 Act and FASB ASC Topic 820, Fair Value Measurements and Disclosures, or ASC Topic 820.

FASB ASC Topic 820, Fair Value Measurements and Disclosures, or ASC Topic 820.

Our current valuation policy and processes were established by Barings and were approved by the Board.

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For example, a Level 3 fair value measurement may include inputs that are observable (Levels 1 and 2) and unobservable (Level 3).

Therefore, unrealized appreciation and depreciation related to such investments categorized as Level 3 investments within the tables below may include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3).

Our investment portfolio includes certain debt and equity instruments of privately held companies for which quoted prices or other inputs falling within the categories of Level 1 and Level 2 are generally not available.

Therefore, unrealized appreciation and depreciation related to such investments categorized as Level 3 investments within the tables in the notes to our consolidated financial statements may include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3).

Our investment portfolio includes certain debt and equity instruments of privately held companies for which quoted prices or other observable inputs falling within the categories of Level 1 and Level 2 are generally not available.

In such cases, we determine the fair value of our investments in good faith primarily using Level 3 inputs.

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Barings has established a pricing committee that is, subject to the oversight of the Board, responsible for the approval, implementation and oversight of the processes and methodologies that relate to the pricing and valuation of assets we hold.

Barings uses internal pricing models, in accordance with internal pricing procedures established by the Pricing Committee, to price an asset in the event an acceptable price cannot be obtained from an approved external source.

Barings reviews its valuation methodologies on an ongoing basis and updates are made accordingly to meet changes in the marketplace.

Barings has established internal controls to ensure its valuation process is operating in an effective manner.

Barings (1) maintains valuation and pricing procedures that describe the specific methodology used for valuation and (2) approves and documents exceptions and overrides of valuations.

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

Independent Valuation Review

We have engaged an independent valuation firm to provide third-party valuation consulting services at the end of each fiscal quarter, which consist of certain limited procedures that we identified and requested the valuation firm to perform (hereinafter referred to as the "Procedures").

The Procedures generally consist of a review of the quarterly fair values of our middle-market investments, and are generally performed with respect to each investment every quarter beginning in the quarter after the investment is made.

In certain instances, we may determine that it is not cost-effective, and as a result is not in the stockholders' best interests, to request the independent valuation firm to perform the Procedures on certain investments.

Such instances include, but are not limited to, situations where the fair value of the investment in the portfolio company is determined to be insignificant relative to the total investment portfolio.

The total number of senior secured, middle-market investments and the percentage of our total senior secured, middle-market investment portfolio on which the Procedures were performed are summarized below by period:

For the quarter ended:

Percent of total

investments at

fair value(1)

September 30, 2018(2)

December 31, 2018

March 31, 2019

June 30, 2019

September 30, 2019

December 31, 2019

Exclusive of the fair value of new middle-market investments made during the quarter and certain middle-market investments repaid subsequent to the end of the reporting period.

The Company did not engage any independent valuation firms to perform the Procedures for the third quarter of 2018 as the Company's investment portfolio consisted primarily of newly-originated investments.

Upon completion of the Procedures, the valuation firm concluded that, with respect to each investment reviewed by the valuation firm, the fair value of those investments subjected to the Procedures appeared reasonable.

Finally, the Board determined in good faith that our investments were valued at fair value in accordance with our valuation policies and procedures and the 1940 Act based on, among other things, the input of Barings, our Audit Committee and the independent valuation firm.

Barings uses independent third-party providers to price the portfolio, but in the event an acceptable price cannot be obtained from an approved external source, Barings will utilize alternative methods in accordance with internal pricing procedures established by Barings' pricing committee.

At least annually, Barings conducts reviews of the primary pricing vendors to validate that the inputs used in the vendors’ pricing process are deemed to be market observable.

While Barings is not provided access to proprietary models of the vendors, the reviews have included on-site walkthroughs of the pricing process, methodologies and control procedures for each asset class and level for which prices are provided.

The review also includes an examination of the underlying inputs and assumptions for a sample of individual securities across asset classes, credit rating levels and various durations, a process Barings continues to perform annually.

In addition, the

pricing vendors have an established challenge process in place for all security valuations, which facilitates identification and resolution of prices that fall outside expected ranges.

Barings believes that the prices received from the pricing vendors are representative of prices that would be received to sell the assets at the measurement date (i.e.

exit prices).

Our money market fund investments are generally valued using Level 1 inputs and our equity investments listed on an exchange or on the NASDAQ National Market System are valued using Level 1 inputs, using the last quoted sale price of that day.

Our syndicated senior secured loans and structured products are generally valued using Level 2 inputs, which are generally valued at the bid quotation obtained from dealers in loans by an independent pricing service.

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

Independent Valuation

For the year ended December 31, 2019, we engaged an independent valuation firm to provide third-party valuation consulting services at the end of each fiscal quarter, which consisted of certain limited procedures that we identified and requested the valuation firm to perform (hereinafter referred to as the "Procedures").

The Procedures generally consisted of a review of the quarterly fair values of our middle-market investments, and were generally performed with respect to each investment every quarter beginning in the quarter after the investment was made.

Beginning with the first quarter of 2020, we revised our valuation process to require that the Procedures generally be performed with respect to each middle-market investment at least once in every calendar year and for new investments, at least once in the twelve-month period subsequent to the initial investment.

In addition, the Procedures will generally be performed with respect to an investment where there has been a significant change in the fair value or performance of the investment.

Investment Valuation Inputs and Techniques

In addition, the Procedures were generally performed with respect to an investment where there was a significant change in the fair value or performance of the investment.

Beginning with the fourth quarter of 2020, the fair value of bank loans and equity investments that are not syndicated or for which market quotations are not readily available, including middle-market bank loans, are generally submitted to independent providers to perform an independent valuation on those bank loans and equity investments as of the end of each quarter.

Such bank loans and equity investments are initially held at cost, as that is a reasonable approximation of fair value on the acquisition date, and monitored for material changes that could affect the valuation (for example, changes in interest rates or the credit quality of the borrower).

At the quarter end following the initial acquisition, such bank loans and equity investments are generally sent to a valuation provider which will determine the fair value of each investment.

The independent valuation providers apply various methods (synthetic rating analysis, discounting cash flows, and re-underwriting analysis) to establish the rate of return a market participant would require (the “discount rate”) as of the valuation date, given market conditions, prevailing lending standards and the perceived credit quality of the issuer.

Future expected cash flows for each investment are discounted back to present value using these discount rates in the discounted cash flow analysis.

A range of values will be provided by the valuation provider and Barings will determine the point within that range that it will use in making valuation recommendations to the Board, and will report to the Board on its rationale for each such determination.

Barings continues to use its internal valuation model as a comparison point to validate the price range provided by the valuation provider and, where applicable, in determining the point within that range that it will use in making valuation recommendations to the Board.

If Barings’ pricing committee disagrees with the price range provided, it may make a fair value recommendation to the Board that is outside of the range provided by the independent valuation provider, and will notify the Board of any such override and the reasons therefore.

In certain instances, we may determine that it is not cost-effective, and as a result is not in the stockholders' best interests, to request an independent valuation firm to perform an independent valuation on certain investments.

Pursuant to these procedures, the Board determines in good faith whether our investments were valued at fair value in accordance with our valuation policies and procedures and the 1940 Act based on, among other things, the input of Barings, our Audit Committee and the independent valuation firm.

The SEC recently adopted new Rule 2a-5 under the 1940 Act.

This establishes requirements for determining fair value in good faith for purposes of the 1940 Act.

We will comply with the new rule’s valuation requirements on or before the SEC’s compliance date in 2022.

Valuation Techniques

Our valuation techniques are based upon both observable and unobservable pricing inputs.

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Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument.

We determine the estimated fair value of our loans and investments using primarily an income approach.

Generally, an independent pricing service provider is the preferred source of pricing a loan, however, to the extent the independent pricing service provider price is unavailable or not relevant and reliable, we may use broker quotes.

An independent pricing service provider is the preferred source of pricing a loan, however, to the extent the independent pricing service provider price is unavailable or not relevant and reliable, we will utilize alternative approaches such as broker quotes or manual prices.

We attempt to maximize the use of observable inputs and minimize the use of unobservable inputs.

The availability of observable inputs can vary from investment to investment and is affected by a wide variety of factors, including the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets and other characteristics particular to the security.

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.

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.

We seek to obtain two prices from the pricing services with one price representing the primary source and the other representing an independent control valuation.

We evaluate the prices obtained from brokers or independent pricing service providers based on available market information, including trading activity of the subject or similar securities, or by performing a comparable security analysis to ensure that fair values are reasonably estimated.

We also perform back-testing of valuation information obtained from independent pricing service providers and brokers against actual prices received in transactions.

In addition to ongoing monitoring and back-testing, we perform due diligence procedures surrounding independent pricing service providers to understand their methodology and controls to support their use in the valuation process.

Income Approach

We utilize an Income Approach model in valuing our private debt investment portfolio, which consists of middle-market senior secured loans with floating reference rates.

As independent pricing service provider and broker quotes have not historically been consistently relevant and reliable, the fair value is determined using an internal index-based pricing model that takes into account both the movement in the spread of one or more performing credit indices as well as changes in the credit profile of the borrower.

The implicit yield for each debt investment is calculated at the date the investment is made.

This calculation takes into account the acquisition price (par less any upfront fee) and the relative maturity assumptions of the underlying asset.

As of each balance sheet date, the implied yield for each investment is reassessed, taking into account changes in the discount margin of the baseline index, probabilities of default and any changes in the credit profile of the issuer of the security, such as fluctuations in operating levels and leverage.

If there is an observable price available on a comparable security/issuer, it is used to calibrate the internal model.

The implied yield used within the model is considered a significant unobservable input.

As such, these assets are generally classified within Level 3.

If the valuation process for a particular debt investment results in a value above par, the value is typically capped at the greater of the principal amount plus any prepayment penalty in effect or 100% of par on the basis that a market participant is likely unwilling to pay a greater amount than that at which the borrower could refinance.

Fair value measurements using the Income Approach model can be sensitive to changes in one or more of the inputs.

Assuming all other inputs to the Income Approach model remain constant, any increase (decrease) in the discount margin of the baseline index for a particular debt security would result in a lower (higher) fair value for that security.

Assuming all other inputs to the Income Approach model remain constant, any improvement (decline) in the credit profile of the issuer of a particular debt security would result in a higher (lower) fair value for that security.

Enterprise Value Waterfall Approach

In valuing equity securities, we estimate fair value using an "Enterprise Value Waterfall" valuation model.

We estimate the enterprise value of a portfolio company and then allocate the enterprise value to the portfolio company’s securities in order of their relative liquidation preference.

In addition, the model assumes that any outstanding debt or other securities that are senior to our equity securities are required to be repaid at par.

Generally, the waterfall proceeds flow from senior debt tranches of the capital structure to junior and subordinated debt, followed by each class or preferred stock and finally the common stock.

Additionally, we may estimate the fair value of a debt security using the Enterprise Value Waterfall approach when we do not expect to receive full repayment.

To estimate the enterprise value of the portfolio company, we primarily use a valuation model based on a transaction multiple, which generally is the original transaction multiple, and measures of the portfolio company’s financial performance.

In addition, we consider other factors, including but not limited to (i) offers from third parties to purchase the portfolio company, (ii) the implied value of recent investments in the equity securities of the portfolio company, (iii) publicly available information regarding recent sales of private companies in comparable transactions and (iv) when management believes there are comparable companies that are publicly traded, we perform a review of these publicly traded companies and the market multiple of their equity securities.

non-performing assets, we may utilize the liquidation or collateral value of the portfolio company's assets in our estimation of enterprise value.

The significant Level 3 inputs to the Enterprise Value Waterfall model are (i) an appropriate transaction multiple and (ii) a measure of the portfolio company’s financial performance, which generally is either earnings before interest, taxes, depreciation and amortization, as adjusted, or Adjusted EBITDA, or revenues.

Such inputs can be based on historical operating results, projections of future operating results or a combination thereof.

The operating results of a portfolio company may be unaudited, projected or pro forma financial information and may require adjustments for certain non-recurring items.

In determining the operating results input, we utilize the most recent portfolio company financial statements and forecasts available as of the valuation date.

Management also consults with the portfolio company’s senior management to obtain updates on the portfolio company’s performance, including information such as industry trends, new product development, loss of customers and other operational issues.

Additionally, we consider some or all of the following factors:

financial standing of the issuer of the security;

comparison of the business and financial plan of the issuer with actual results;

the size of the security held;

pending reorganization activity affecting the issuer, such as merger or debt restructuring;

ability of the issuer to obtain needed financing;

changes in the economy affecting the issuer;

financial statements and reports from portfolio company senior management and ownership;

the type of security, the security’s cost at the date of purchase and any contractual restrictions on the disposition of the security;

information as to any transactions or offers with respect to the security and/or sales to third parties of similar securities;

the issuer’s ability to make payments and the type of collateral;

the current and forecasted earnings of the issuer;

statistical ratios compared to lending standards and to other similar securities;

pending public offering of common stock by the issuer of the security;

special reports prepared by analysts;

any other factors we deem pertinent with respect to a particular investment.

Fair value measurements using the Enterprise Value Waterfall model can be sensitive to changes in one or more of the inputs.

Assuming all other inputs to the Enterprise Value Waterfall model remain constant, any increase (decrease) in either the transaction multiple, Adjusted EBITDA or revenues for a particular equity security would result in a higher (lower) fair value for that security.

Valuation of Investment in Jocassee

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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 our ownership percentage.

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

Valuation of Investments in MVC Private Equity Fund LP

We estimate the fair value of our investment in MVC Private Equity Fund LP (the "MVC PE Fund") using the net asset value of the MVC PE Fund and our ownership percentage.

The net asset value of the MVC PE Fund LP is determined in accordance with the specialized accounting guidance for investment companies.

Revenue Recognition

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Interest income, including amortization of premium and accretion of discount, is recorded on the accrual basis to the extent that such amounts are expected to be collected.

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.

The cessation of recognition of such interest will negatively impact the reported fair value of the investment.

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Year Ended December 31,

2020 2019 2018

Recurring Fee Income:

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Payment-in-Kind (PIK) Interest Income

As of December 31, 2019 , we held one loan that contained PIK interest provisions.

We currently hold, and expect to hold in the future, some loans in our portfolio that contain PIK interest provisions.

PIK interest, computed at the contractual rate specified in each loan agreement, is periodically added to the principal balance of the loan, rather than being paid to us in cash, and is recorded as interest income.

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federal income tax purposes, even though we have not yet collected the cash.

Generally, when current cash 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 PIK 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.

We write off any previously accrued and uncollected PIK interest when it is determined that the PIK interest is no longer collectible.

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overall market changes;

global pandemics;

legislative reform;

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Changes in interest rates can also affect, among other things, our ability to acquire and originate loans and securities and the value of our investment portfolio.

Our net investment income is affected by fluctuations in various interest rates, including LIBOR, GBP LIBOR, EURIBOR and STIBOR.

Our net investment income is affected by fluctuations in various interest rates, including LIBOR, AUD Screen Rate, CDOR, GBP LIBOR, EURIBOR and STIBOR.

Our risk management systems and procedures are designed to identify and analyze our risk, to set appropriate policies and limits and to continually monitor these risks.

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As of December 31, 2020, we were not a party to any interest rate hedging arrangements.

As of December 31, 2019 , all of our debt portfolio investments (principal amount of approximately $1,196.2 million as of December 31, 2019 ) 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.

A hypothetical 200 basis point increase or decrease in the interest rates on our variable-rate debt investments could increase or decrease, as applicable, our investment income by a maximum of $24.1 million on an annual basis.

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.

A hypothetical 200 basis point increase or decrease in the interest rates on the August 2018 Credit Facility could increase or decrease, as applicable, our interest expense by a maximum of $2.1 million on an annual basis (based on the amount of outstanding borrowings under the August 2018 Credit Facility as of December 31, 2019 ).

BSF is required to pay commitment fees on the unused portion of the August 2018 Credit Facility beginning the ninetieth day after the closing date.

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

receive an investment grade credit rating) or (iv) for borrowings denominated in Australian dollars, the applicable Australian dollars Screen Rate, plus 2.45% (or, after one year, 2.20% if the Company receives an investment grade credit rating).

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 1.00% (or 1.25% if we no longer maintain an investment grade credit rating), (ii) the applicable LIBOR rate plus 2.00% (or 2.25% if we no longer maintain 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 2.00% (or 2.25% if we no longer maintain an investment grade credit rating) or (iv) for borrowings denominated in Australian dollars, the applicable Australian dollars Screen Rate, plus 2.20% (or 2.45% if we no longer maintain an investment grade credit rating).

The applicable currency rate depends on the currency and term of the draw under the February 2019 Credit Facility.

The applicable LIBOR and currency rates depend on the currency and term of the draw under the February 2019 Credit Facility, and cannot be less than zero.

A hypothetical 200 basis point increase or decrease in the interest rates on the February 2019 Credit Facility could increase or decrease, as applicable, our interest expense by a maximum of $14.4 million on an annual basis (based on the amount of outstanding borrowings under the February 2019 Credit Facility as of December 31, 2020).

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 based on the three-month LIBOR that reset quarterly, except that LIBOR for the first interest accrual period was calculated by reference to an interpolation between the rate for deposits with a term equal to the next shorter period of time for which rates were available and the rate appearing for deposits with a term equal to the next longer period of time for which rates were available.

A hypothetical 200 basis point increase or decrease in the interest rates on the 2019 Notes could increase or decrease, as applicable, our interest expense by a maximum of $6.4 million on an annual basis (based on the aggregate amount of outstanding borrowings under the 2019 Notes as of December 31, 2019 ).

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.

In July 2017, the head of the United Kingdom Financial Conduct Authority announced the desire to phase out the use of LIBOR by the end of 2021.

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In addition, any further changes or reforms to the determination or supervision of LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR, which could have an adverse impact on the market value for or value of any LIBOR-linked securities, loans, and other financial obligations or extensions of credit held by or due to us and could have a material adverse effect on our business, financial condition and results of operations.

See "Risk Factors — Risks Relating to Our Business and Structure — We are subject to risks associated with the current interest rate environment and, to the extent we use debt to finance our investments, changes in interest rates will affect our cost of capital and net investment income" included in Item 1A of Part I of this Annual Report on Form 10-K for more information regarding utilization of LIBOR.

Because we have previously borrowed, and plan to borrow in the future, money to make investments, our net investment income will be dependent upon the difference between the rate at which we borrow funds and the rate at which we invest the funds borrowed.

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We may also have exposure to foreign currencies related to certain investments.

Such investments are translated into United States dollars based on the spot rate at each balance sheet date, exposing us to movements in the exchange rate.

Such investments are translated into U.S.

dollars based on the spot rate at the relevant balance sheet date, exposing us to movements in the

exchange rate.

In order to reduce our exposure to fluctuations in exchange rates, we generally borrow in local foreign currencies under the February 2019 Credit Facility to finance such investments.

As of December 31, 2019 , we had borrowings denominated in Swedish kronas of 12.8kr million ( $1.4 million ) with an interest rate of 2.25% , borrowings denominated in British pounds sterling of £4.7 million ( $6.3 million ) with an interest rate of 3.0% , and borrowings denominated in Euros of €38.0 million ( $42.7 million ) with an interest rate of 2.25% .

As of December 31, 2020, we had borrowings denominated in Swedish kronas of 12.8kr million ($1.6 million U.S.

dollars) with an interest rate of 2.000%, borrowings denominated in British pounds sterling of £69.3 million ($94.8 million U.S.

dollars) with a weighted average interest rate of 2.063%, borrowings denominated in Australian dollars A$36.6 million ($28.2 million U.S.

dollars) with a weighted average interest rate of 2.250% and borrowings denominated in Euros of €100.6 million ($123.1 million U.S.

dollars) with a weighted interest rate of 2.000%.

Off-Balance Sheet Arrangements

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The balance of unused commitments to extend financing as of December 31, 2020 was as follows:

Portfolio Company

Investment Type

December 31, 2019

Anju Software, Inc.(1)

Delayed Draw Term Loan

Arch Global Precision, LLC

Delayed Draw Term Loan

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

Delayed Draw Term Loan

Campaign Monitor (UK) Limited(1)

Delayed Draw Term Loan

Contabo Finco S.À R.L (2)

EUR Capex Term Loan

Dart Buyer, Inc.

Delayed Draw Term Loan

Heartland, LLC

Portfolio Company(1) Investment Type December 31,

ADE Holding(3) Committed Capex Line $ 91,814

Anju Software, Inc.(2) Delayed Draw Term Loan 1,981,371

Arch Global Precision, LLC Delayed Draw Term Loan 4,193,475

Beacon Pointe Advisors, LLC Delayed Draw Term Loan 363,636

British Engineering Services Holdco Limited(4) Acquisition Facility 7,006,008

British Engineering Services Holdco Limited(4) Bridge Revolver 618,177

Centralis Finco S.a.r.l.(3) Acquisition Facility 495,950

Classic Collision (Summit Buyer, LLC) Delayed Draw Term Loan 1,672,446

CM Acquisitions Holdings Inc.(2) Delayed Draw Term Loan 1,551,602

Contabo Finco S.À R.L(3) Delayed Draw Term Loan 228,211

CSL Dualcom(4) Delayed Draw Term Loan 1,007,182

Dart Buyer, Inc.(2) Delayed Draw Term Loan 2,430,569

DreamStart Bidco SAS(3) Acquisition Facility 995,640

F24 (Stairway BidCo GmbH)(3) Delayed Draw Term Loan 323,840

FitzMark Buyer, Inc.(2) Delayed Draw Term Loan 1,470,588

Foundation Risk Partners, Corp.

Delayed Draw Term Loan 4,984,771

Heilbron (f/k/a Sucsez (Bolt Bidco B.V.))(3)

Accordion Facility

Jocassee Partners LLC

Joint Venture

Heartland, LLC(2) Delayed Draw Term Loan 5,347,666

Heilbron (f/k/a Sucsez (Bolt Bidco B.V.))(3) Accordion Facility 10,225,081

IGL Holdings III Corp.(2) Delayed Draw Term Loan 5,914,219

INOS 19-090 GmbH(3) Acquisition Facility 2,727,980

Jocassee Partners LLC Joint Venture 30,000,000

Kano Laboratories LLC(2) Delayed Draw Term Loan 4,543,950

Kene Acquisition, Inc.

Delayed Draw Term Loan 322,928

LAC Intermediate, LLC(1)

Delayed Draw Term Loan

Modern Star Holdings Bidco Pty Limited(5) Capex Term Loan 2,315,967

Murphy Midco Limited(4) Delayed Draw Term Loan 3,301,472

Options Technology Ltd.

Delayed Draw Term Loan 2,604,080

Premier Technical Services Group(4)

Acquisition Facility

Process Equipment, Inc.(1)

Delayed Draw Term Loan

Professional Datasolutions, Inc.

Delayed Draw Term Loan

PSC UK Pty Ltd.(5)

GBP Acquisition Facility

Smile Brands Group, Inc.(1)

Delayed Draw Term Loan

Springbrook Software (SBRK Intermediate, Inc.)

Delayed Draw Term Loan

The Hilb Group, LLC

Delayed Draw Term Loan

Transportation Insight, LLC

Delayed Draw Term Loan

Truck-Lite Co., LLC

Delayed Draw Term Loan

Validity Inc.(1)

Pacific Health Supplies Bidco Pty Limited(5) CapEx Term Loan 1,535,025

Premier Technical Services Group(4) Acquisition Facility 1,197,505

PSC UK Pty Ltd.(4) GBP Acquisition Facility 535,157

Questel Unite(3) Cap Acquisition Facility 10,300,913

Radwell International, LLC(2) Delayed Draw Term Loan 3,235,947

Rep Seko Merger Sub LLC Delayed Draw Term Loan 1,454,546

Portfolio Company(1) Investment Type December 31,

Safety Products Holdings, LLC(2) Delayed Draw Term Loan 6,467,345

Smile Brands Group, Inc.(2) Delayed Draw Term Loan 2,148,691

Springbrook Software (SBRK Intermediate, Inc.) Delayed Draw Term Loan 3,489,026

SSCP Pegasus Midco Limited(4) Delayed Draw Term Loan 13,389,546

The Hilb Group, LLC Delayed Draw Term Loan 5,545,939

Transit Technologies LLC(2) Delayed Draw Term Loan 6,035,305

USLS Acquisition, Inc.(2) Delayed Draw Term Loan 450,466

Utac Ceram(3) Delayed Draw Term Loan 743,327

W2O Holdings, Inc.

Delayed Draw Term Loan 5,989,298

Total unused commitments to extend financing $ 159,236,659

(1) The Company's estimate of the fair value of the current investments in these portfolio companies includes an analysis of the fair value of any unfunded commitments.

(2) Represents a commitment to extend financing to a portfolio company where one or more of the Company's current investments in the portfolio company are carried at less than cost.

The Company's estimate of the fair value of the current investments in this portfolio company includes an analysis of the fair value of any unfunded commitments.

(3) Actual commitment amount is denominated in Euros.

Commitment was translated into U.S.

dollars using the December 31, 2019 spot rate.

Actual commitment amount is denominated in Euros (€2,321,187).

Commitment was translated into U.S.

dollars using the December 31, 2019 spot rate.

Actual commitment amount is denominated in British pounds sterling (£979,743).

Commitment was translated into U.S.

dollars using the December 31, 2019 spot rate.

Actual commitment amount is denominated in British pounds sterling (£762,941).

dollars based on the spot rate at the relevant balance sheet date.

(4) Actual commitment amount is denominated in British pounds sterling.Commitment was translated into U.S.

dollars based on the spot rate at the relevant balance sheet date.

(5) Actual commitment amount is denominated in Australian dollars.

Commitment was translated into U.S.

dollars using the December 31, 2019 spot rate.

dollars based on the spot rate at the relevant balance sheet date.

In the normal course of business, we guarantee certain obligations in connection with our portfolio companies (in particular, certain controlled portfolio companies).

Under these guarantee arrangements, payments may be required to be made to third parties if such guarantees are called upon or if the portfolio companies were to default on their related obligations, as applicable.

As of December 31, 2020, we had guaranteed €9.9 million ($12.1 million U.S.

dollars) relating to credit facilities among Erste Bank and MVC Automotive Group Gmbh, or MVC Auto.

We would be required to make payments to Erste Bank if MVC Auto were to default on their related payment obligations.

None of the credit facility guarantees are recorded as a liability on our Consolidated Balance Sheets.

As such, the credit facility liabilities are considered in the valuation of our investments in MVC Auto.

The guarantees denominated in foreign currencies were translated into U.S.

dollars based on the spot rate at the relevant balance sheet date.

In addition, we agreed to cash collateralize a $3.5 million letter of credit for Security Holdings B.V.

The $3.5 million cash collateralization is reflected as "Restricted cash" on the accompanying Consolidated Balance Sheets.

Contractual Obligations

As of December 31, 2020, our future fixed commitments for cash payments were as follows:

August 2018 Credit Facility borrowings

Interest and fees on August 2018 Credit Facility(1)

Total 2021 2022-2023 2024-2025 2026-Future

August 2025 Notes $ 50,000,000 $ — $ — $ 50,000,000 $ —

Interest due on August 2025 Notes 10,698,583 2,330,000 4,660,000 3,708,583 —

Series B November Notes 62,500,000 — — 62,500,000 —

Interest due on Series B November Notes 12,860,677 2,656,250 5,312,500 4,891,927 —

Series C November Notes 112,500,000 — — — 112,500,000

Interest due on Series C November Notes 36,560,156 5,343,750 10,687,500 10,687,500 9,841,406

February 2019 Credit Facility borrowings 719,660,707 — — 719,660,707 —

Interest and fees on February 2019 Credit Facility(2)

Debt Securitization

Interest on Debt Securitization(3)

Unused commitments to extend financing

Interest and fees on February 2019 Credit Facility Borrowings(1) 49,642,227 15,915,524 31,558,594 2,168,109 —

Total $ 1,054,422,350 $ 26,245,524 $ 52,218,594 $ 853,616,826 $ 122,341,406

(1) Amounts represent (i) credit facility commitment fees calculated on the unused amount, which was $80.3 million as of December 31, 2020, (ii) interest expense calculated at a rate of 2.141% of outstanding credit facility borrowings, which were $719.7 million as of December 31, 2020 and (iii) annual fees of the credit facility administrative agent.

Amounts represent (i) credit facility commitment fees calculated on the unused amount, which was $555.2 million as of December 31, 2019 , (ii) interest expense calculated at a blended rate of 3.70% of outstanding credit facility borrowings, which were $245.3 million as of December 31, 2019 and (iii) annual fees of the credit facility administrative agent.

Amounts represent interest expense calculated at a blended rate of 3.12% of amounts outstanding under the Debt Securitization, which were $318.2 million as of December 31, 2019 .

Recent Developments

Subsequent to December 31, 2019 , we made approximately $107.5 million of new middle-market private debt and equity commitments, of which approximately $73.4 million closed and funded.

The $73.4 million of investments consist of ten first lien senior secured debt investments with a weighted average yield of 6.5%, one mezzanine note with a yield of 8.0% and one equity investment.

On January 13, 2020, we provided notice to the lenders under the August 2018 Credit Facility that we would reduce total commitments under the August 2018 Credit Facility from $150.0 million to $80.0 million.

effective January 21, 2020.

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

For further discussion, see the section entitled “Other Information” in Item 9B of Part II of this Annual Report on Form 10-K.

Subsequent to December 31, 2020, we made approximately $224.1 million of new commitments, of which $202.2 million closed and funded.

The $202.2 million of investments consist of $162.2 million of first lien senior secured debt investments, a $14.5 million second lien senior secured debt investment, and $25.6 million of equity and joint venture investments.

The weighted average yield of the debt investments was 6.7%.

In addition, we funded $27.1 million of previously committed delayed draw term loans.

On February 7, 2021, the Board declared a quarterly distribution of $0.19 per share payable on March 17, 2021 to holders of record as of March 10, 2021.

On February 27, 2020, the Board approved an open-market share repurchase program for fiscal year 2020 (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 may include transactions pursuant to a repurchase plan administered in accordance with Rules 10b5-1 and 10b-18 under the Exchange Act.

Purchases may be made from time to time at our discretion, and the timing and amount of any share repurchases will be determined based on share price, market conditions, legal requirements, and other factors.

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

Our repurchase activity will be disclosed in our periodic reports for the relevant fiscal periods.

There is no assurance that the market price of our shares, either absolutely or relative to net asset value, will increase as a result of any share repurchases, or that the 2020 Share Repurchase Program will enhance stockholder value over the long term.

On February 25, 2021, we entered into a Note Purchase Agreement (the “February 2021 NPA”) governing the issuance of (1) $80.0 million in aggregate principal amount of Series D senior unsecured notes due February 26, 2026 (the “Series D Notes”) with a fixed interest rate of 3.41% per year and (2) $70.0 million in aggregate principal amount of Series E senior unsecured notes due February 26, 2028 (the “Series E Notes” and, collectively with the Series D Notes, the “February Notes”) with a fixed interest rate of 4.06% per year, in each case, to qualified institutional investors in a private placement.

Each stated interest rate is subject to a step up of (x) 0.75% per year, to the extent the applicable February Notes do not satisfy certain investment grade rating conditions and/or (y) 1.50% per year, to the extent the ratio of our secured debt to total assets exceeds specified thresholds, measured as of each fiscal quarter end.

The February Notes were delivered and paid for on February 26, 2021.

We intend to use the net proceeds from the offering of the February Notes for general corporate purposes, including to make investments and make distributions permitted by the February 2021 NPA.

The Series D Notes will mature on February 26, 2026, and the Series E Notes will mature on February 26, 2028 unless redeemed, purchased or prepaid prior to such date by us in accordance with the terms of the February 2021 NPA.

Interest on the February Notes will be due semiannually in February and August of each year, beginning in August 2021.

In addition, we are obligated to offer to repay the February Notes at par (plus accrued and unpaid interest to, but not including, the date of prepayment) if certain change in control events occur.

Subject to the terms of the February 2021 NPA, we may redeem the Series D Notes and the Series E Notes in whole or in part at any time or from time to time at our option at par plus accrued interest to the prepayment date and, if redeemed on or before August 26, 2025, with respect to the Series D Notes, or on or before August 26, 2027, with respect to the Series E Notes, a make-whole premium.

The February 2021 NPA contains certain representations and warranties, and various covenants and reporting requirements customary for agreements of this type, including, without limitation, information reporting, maintenance of our status as a BDC within the meaning of the 1940 Act, and certain restrictions with respect to transactions with affiliates, fundamental changes, changes of line of business, permitted liens, investments and restricted payments.

In addition, the February 2021 NPA contains the following financial covenants:

(a) maintaining a minimum obligors’ net worth, measured as of each fiscal quarter end;

(b) not permitting our asset coverage ratio, as of the date of the incurrence of any debt for borrowed money or the making of any cash dividend to shareholders, to be less than the statutory minimum then applicable to us under the 1940 Act;

and (c) not permitting our net debt to equity ratio to exceed 2.0x, measured as of each fiscal quarter end.

The February 2021 NPA also contains customary events of default with customary cure and notice periods, including, without limitation, nonpayment, incorrect representation in any material respect, breach of covenant, cross-default under other indebtedness or that of our subsidiary guarantors, certain judgements and orders, and certain events of bankruptcy.

Upon the occurrence of certain events of default, the holders of at least 66-2/3% in principal amount of the February Notes at the time outstanding may declare all February Notes then outstanding to be immediately due and payable.

Our obligations under the February 2021 NPA are guaranteed by certain of our subsidiaries, and are general unsecured obligations that rank pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by us.

The February Notes were offered in reliance on Section 4(a)(2) of the Securities Act.

The February Notes have not and will not be registered under the Securities Act or any state securities laws and, unless so registered, may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, as applicable.

Quantitative and Qualitative Disclosures About Market Risk.

5 unchanged sentences

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What changed 10-K

Item 7. Management’s Discussion and Analysis