What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-05-06 compared with 2020-11-09 · 358 added, 384 removed, 239 unchanged (76% of the section changed)

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

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

The following discussion is designed to provide a better understanding of our unaudited consolidated financial statements for the three months ended March 31, 2021, including a brief discussion of our business, key factors that impacted our performance and a summary of our operating results.

The following discussion should be read in conjunction with the Unaudited Consolidated Financial Statements and the notes thereto included in Item 1 of this Quarterly Report on Form 10-Q, and the Consolidated Financial Statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2020.

5 unchanged sentences

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

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

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

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

the length and duration of the COVID-19 outbreak in the United States as well as worldwide and the magnitude of the economic impact of that outbreak;

2 unchanged sentences

risks associated with possible disruption due to terrorism in our operations or the economy generally;

future changes in laws or regulations and conditions in our operating areas and risks related to the pending MVC Capital, Inc.

These statements are based on our current expectations, estimates, forecasts, information and projections about the industry in which we operate and the beliefs and assumptions of our management as of the date of this Quarterly Report.

and future changes in laws or regulations and conditions in our operating areas.

We assume no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless we are required to do so by law.

2 unchanged sentences

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

On August 2, 2018, we entered into an investment advisory agreement, or the Advisory Agreement, and an administration agreement, or the Administration Agreement, with Barings LLC, or Barings, and became an externally-managed BDC managed by Barings.

In August 2018, in connection with the closing of an externalization transaction through which Barings LLC (“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 completion of our acquisition of MVC Capital, Inc., a Delaware corporation, on December 23, 2020 (the “MVC Acquisition”), we entered into an amended and restated investment advisory agreement (the “Amended and Restated Advisory Agreement”) with Barings 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 Investment Company Act of 1940, as amended, or the 1940 Act.

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

Since that time, Barings has been transitioning our portfolio to senior secured private debt investments in 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.

The hold size of each position will generally be dependent upon a number of factors including total facility size, pricing and structure, and the number of other lenders in the facility.

Barings has experience managing levered vehicles, both public and private, and seeks to enhance our returns through the use of leverage with a prudent approach that prioritizes capital preservation.

The holding size of each position will generally be dependent upon a number of factors including total facility size, pricing and structure, and the number of other lenders in the facility.

Barings has experience managing levered vehicles, both public and private, and will seek to enhance our returns through the use of leverage with a prudent approach that prioritizes capital preservation.

Barings believes this strategy and approach offers attractive risk/return with lower volatility given the potential for fewer defaults and greater resilience through market cycles.

3 unchanged sentences

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 both September 30, 2020 and December 31, 2019, the weighted average yield on the principal amount of our outstanding debt investments was approximately 6.2%.

The weighted average yield on the principal amount all of our outstanding investments (including equity and equity-linked investments and short-term investments) was approximately 5.0% and 5.8% as of September 30, 2020 and December 31, 2019, respectively

As of March 31, 2021 and December 31, 2020, the weighted average yield on the principal amount of our outstanding debt investments other than non-accrual debt investments was approximately 7.2% and 7.1%, 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% as of both March 31, 2021 and December 31, 2020.

The weighted average yield on the principal amount all of our outstanding investments (including equity and equity-linked investments and short-term investments) was approximately 6.4% and 6.5% as of March 31, 2021 and December 31, 2020, respectively.

COVID-19 Developments

3 unchanged sentences

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

Having performed stress-testing on their systems and processes, Barings was operating a 100% remote-working model across the United States, Europe and Australia .

Over the past few months, Barings shifted to remote working and limited opening (inviting employees to return to the office on a volunteer basis only) and/or flexible working arrangements in Asia, Europe and U.S.

sites, while maintaining service levels to partners and clients.

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

In the United States, the firm’s global headquarters in Charlotte and the office in Hartford, Connecticut are currently the only offices that are open.

In Europe the regional headquarters in London is open while the majority of other offices in Europe are currently closed.

In Asia, all offices remain open.

Barings return-to-office taskforce continues to plan for the safe return of employees to all office locations with a target date for a widespread return of associates to all office locations globally planned for September 2021.

This date is subject to the continued success of the global vaccination program and reduction in COVID-19 case numbers.

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

3 unchanged sentences

governmental authorities.

Many public health experts have predicted that the COVID-19 pandemic will worsen in the fall and winter months as people in the U.S.

spend more time indoors where the virus can spread more easily.

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

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

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.

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

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 Debt Securitization and the August 2025 Notes (each as defined below under "Liquidity and Capital Resources").

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

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

In addition, the February 2019 Credit Facility and the August 2025 Notes contains affirmative and negative covenants and events of default relating to minimum stockholders’ equity, minimum obligors’ net worth, minimum asset coverage, minimum liquidity and maintenance of RIC and BDC status, as well as cross-default provisions relating to other indebtedness.

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

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

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

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

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

As of September 30, 2020, approximately $929.3 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.

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

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

2 unchanged sentences

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

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.

Relationship with Our Adviser, Barings

1 unchanged sentence

Barings’ primary investment capabilities include fixed income, private credit, real estate, equity, and alternative investments.

Subject to the overall supervision of our board of directors, or the Board, Barings’ Global Private Finance Group, or BGPF, manages our day-to-day operations, and provides investment advisory and management services to us.

Subject to the overall supervision of our board of directors (the “Board”), Barings’ Global Private Finance Group (“BGPF”) manages our day-to-day operations, and provides investment advisory and management services to us.

BGPF is part of Barings’ $244.2 b illion Global Fixed Income Platform that invests in liquid, private and structured credit.

6 unchanged sentences

Under the terms of the Administration Agreement, Barings has agreed to perform (or oversee, or arrange for, the performance of) the administrative services necessary for our operation, including, but not limited to, office facilities, equipment, clerical, bookkeeping and record keeping services at such office facilities and such other services as Barings, subject to review by the Board, will from time to time determine to be necessary or useful to perform its obligations under the Administration Agreement.

Barings will also, on our behalf and subject to the Board’s approval, arrange for the services of, and oversee, custodians, depositories, transfer agents, dividend disbursing agents, other stockholder servicing agents, accountants, attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and such other persons in any such other capacity deemed to be necessary or desirable.

Barings will also, on our behalf and subject to the Board’s oversight, arrange for the services of, and oversee, custodians, depositories, transfer agents, dividend disbursing agents, other stockholder servicing agents, accountants, attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and such other persons in any such other capacity deemed to be necessary or desirable.

Barings is responsible for the financial and other records that we are required to maintain and will prepare all reports and other materials required to be filed with the SEC or any other regulatory authority.

Stockholder Approval of Reduced Asset Coverage Ratio

On July 24, 2018, our stockholders voted at a special meeting of stockholders, or the Special Meeting, to approve a proposal to authorize us to be subject to a reduced asset coverage ratio of at least 150% under the 1940 Act.

On July 24, 2018, our stockholders voted at a special meeting of stockholders (the “2018 Special Meeting”) to approve a proposal to authorize us to be subject to a reduced asset coverage ratio of at least 150% under the 1940 Act.

As a result of the stockholder approval at the 2018 Special Meeting, effective July 25, 2018, our applicable asset coverage ratio under the 1940 Act has been decreased to 150% from 200%.

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

As of September 30, 2020, our asset coverage ratio was 176.0%.

Pending MVC Capital, Inc.

On August 10, 2020, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) among MVC Capital, Inc., a Delaware corporation (“MVC”), Mustang Acquisition Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Acquisition Sub”), and Barings.

The Merger Agreement provides that, on the terms and subject to the conditions set forth in the Merger Agreement, Acquisition Sub will merge with and into MVC, with MVC continuing as the surviving company and as a wholly-owned subsidiary of us (the “First Step”) and, immediately thereafter, MVC will merge with and into us, and we continue as the surviving company (the “Second Step” and, together with the First Step, the “Merger”).

The boards of directors of both us and MVC, including all of the respective independent directors, have approved the Merger Agreement and the transactions contemplated therein.

The parties to the Merger Agreement intend the Merger to be treated as a “reorganization” within the meaning of Section 368(a)(1)(A) of the Code.

In the First Step, each share of MVC's common stock issued and outstanding immediately prior to the effective time of the First Step (excluding any shares cancelled pursuant to the Merger Agreement) will be converted into the right to receive (i) $0.39492 per share in cash, without interest, from Barings (such amount of cash, the “Cash Consideration”) and (ii) 0.94024 (the “Exchange Ratio,” such ratio as may be adjusted pursuant to the Merger Agreement) of a validly issued, fully paid and non-assessable share of the Company's common stock, par value $0.001 per share (the “Share Consideration” and together with the Cash Consideration, the “Merger Consideration”).

Pursuant to the Merger Agreement, total value of the consideration to be received by MVC stockholders at closing is subject to adjustment as set forth in the Merger Agreement and may be different than the estimated total consideration described herein depending on a number of factors, including the number of outstanding shares of our and MVC common stock, the payment of tax dividends by MVC, undistributed investment company taxable income and undistributed net capital gains of MVC and changes of the Euro-to-U.S.

dollar exchange rate relating to certain of MVC’s investments between April 30, 2020 and the closing date.

The Merger Agreement contains representations, warranties and covenants, including, among others, covenants relating to the operation of each of our and MVC’s businesses during the period prior to the closing of the Merger.

We and MVC have agreed to convene and hold stockholder meetings for the purpose of obtaining the approvals required of our and MVC’s stockholders, respectively, and the boards of directors of us and MVC have agreed to recommend that their respective stockholders approve the applicable proposals.

The Merger Agreement provides that MVC shall not, and shall cause its representatives and subsidiaries not to, solicit proposals relating to alternative transactions, or, subject to certain exceptions, initiate or participate in discussions or negotiations regarding, or provide information with respect to, any proposal for an alternative transaction.

However, the MVC board of directors may, subject to certain conditions, change its recommendation to the MVC stockholders or, on payment of a termination fee of approximately $2.94 million to us and the reimbursement of up to $1.18 million in expenses incurred by us and Barings, terminate the Merger Agreement and enter into an Alternative Acquisition Agreement (as defined in the Merger Agreement) for a Superior Proposal (as defined in the Merger Agreement) if it determines in good faith, after consultation with its outside legal counsel, that failure to do so would reasonably be expected to be inconsistent with its fiduciary duties or obligations under applicable law.

Consummation of the First Step, which is currently anticipated to occur during the fourth quarter of fiscal year 2020, is subject to certain customary closing conditions, including (1) adoption of the Merger Agreement by a majority of the outstanding shares of MVC common stock, (2) approval of the issuance of Company's common stock in the First Step by a majority of the votes cast by our stockholders on the matter, (3) approval of the issuance of our common stock in connection with the First Step at a price below the then-current net asset value per share of our common stock, if applicable, by the vote specified in Section 63(2)(A) of the 1940 Act, as amended, (4) the absence of certain legal impediments to the consummation of the Merger, (5) effectiveness of the registration statement for our common stock to be issued as consideration in the First Step, (6) approval for listing on the New York Stock Exchange of our common stock to be issued as consideration in the First Step, (7) subject to certain materiality standards, the accuracy of the representations and warranties and compliance with the covenants of each party to the Merger Agreement, and (8) required regulatory approvals (including expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")).

Early termination of the waiting period under the HSR Act was granted on September 30, 2020.

In addition, the Company and MVC will take steps necessary to provide for the repayment at closing of MVC’s credit facilities and the redemption or assumption of MVC’s 6.25% senior notes due November 30, 2022.

The Merger Agreement also contains certain termination rights in favor of us and MVC, including if the First Step is not completed on or before February 10, 2021 or if the requisite approvals of our stockholders or MVC's stockholders are not obtained.

The Merger Agreement also provides that, upon the valid termination of the Merger Agreement under certain circumstances, we may be required to pay or cause to be paid to MVC a termination fee of approximately $4.70 million, or MVC may be required to pay or cause to be paid to us a termination fee of approximately $2.94 million.

As of March 31, 2021, our asset coverage ratio was 173.8%.

Portfolio Investment Composition

The total value of our investment portfolio was $1,116.3 million as of September 30, 2020, as compared to $1,173.6 million as of December 31, 2019.

As of September 30, 2020, we had investments in 115 portfolio companies, 11 structured product investments and four money market funds with an aggregate cost of $1,131.9 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 September 30, 2020 and December 31, 2019, none of our portfolio investments represented greater than 10% of the total fair value of our investment portfolio.

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

The total value of our investment portfolio was $1,602.1 million as of March 31, 2021, as compared to $1,495.8 million as of December 31, 2020.

As of March 31, 2021, we had investments in 150 portfolio companies and two money market funds with an aggregate cost of $1,588.6 million.

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 both March 31, 2021 and December 31, 2020, none of our portfolio investments represented greater than 10% of the total fair value of our investment portfolio.

As of March 31, 2021 and December 31, 2020, our investment portfolio consisted of the following investments:

Cost Percentage of

Portfolio Fair Value Percentage of

September 30, 2020:

March 31, 2021:

Senior debt and 1 st lien notes

1 unchanged sentence

Subordinated debt and 2nd lien notes 150,273,105 10 150,597,961 9

19,700,711 2 19,369,286 2

Structured products 23,163,888 1 26,153,607 2

Equity shares 42,543,214 3 39,617,746 2

Investments in joint ventures 18,258,270 2 19,158,075 2

Equity warrants 1,235,383 — 1,434,309 —

Investment in joint ventures / PE fund 68,782,532 4 72,576,383 5

Short-term investments 73,569,174 5 73,565,676 5

4 unchanged sentences

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

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

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

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

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

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

Investment 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 unchanged sentence

Investment Activity

During the nine months ended September 30, 2020, we made 47 new investments totaling $263.9 million, made investments in 18 existing portfolio companies totaling $39.8 million, made one new joint venture equity investment totaling $3.1 million and made an additional investment in one existing joint venture equity portfolio company totaling $5.0 million.

We had 15 loans repaid at par totaling total $58.5 million and received $10.0 million of portfolio company principal payments.

In addition, we sold $307.4 million of loans, recognizing a net realized loss on these transactions of $36.4 million, and sold $71.0 million of middle-market portfolio company debt investments to our joint venture and realized a loss on these transactions of $1.1 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 $0.3 million in escrow distributions from legacy portfolio companies, which were recognized as realized gains.

During the nine months ended September 30, 2019, we made 26 new investments totaling $245.9 million, six investments in existing portfolio companies totaling $12.2 million and made one new joint venture equity investment totaling $10.2 million.

During the three months ended March 31, 2021, we made 18 new investments totaling $172.2 million, made investments in existing portfolio companies totaling $73.2 million, made one new investment in a joint venture equity portfolio company totaling $4.5 million and made additional investments in existing joint venture equity portfolio companies totaling $25.0 million.

We had six loans repaid at par totaling $26.2 million and received $6.0 million of portfolio company principal payments.

In addition, we sold $57.1 million of loans, recognizing a net realized gain on these transactions of $2.4 million, and sold $94.7 million of middle-market portfolio company debt investments to one of our joint ventures and realized a gain on these transactions of $0.5 million.

Lastly, we received proceeds related to the sale of an equity investment totaling $5.9 million and recognized a net realized loss on such sale totaling $0.1 million.

During the three months ended March 31, 2020, we made 30 new investments totaling $111.2 million and made investments in existing portfolio companies totaling $20.9 million.

We had nine loans repaid at par totaling total $41.1 million, received $3.0 million of portfolio company principal payments.

In addition, we sold $148.4 million of loans, recognizing a net realized loss on these transactions of $0.9 million and sold $10.2 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 Corporation portfolio company.

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

Nine Months Ended

September 30, 2020:

In addition, we sold $39.6 million of syndicated senior secured loans, recognizing a net realized loss on these transactions of $0.2 million and sold $30.8 million of middle-market portfolio company debt investments to our joint venture.

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

Total portfolio investment activity for the three months ended March 31, 2021 and 2020 was as follows:

Three Months Ended

March 31, 2021:

Notes Subordinated Debt and 2nd Lien Notes Structured Products Equity

Shares Investments in Joint Ventures Short-term

Shares Equity Warrants Investments in Joint Ventures / PE Fund Short-term

Investments Total

10 unchanged sentences

Fair value, end of period $ 1,238,178,055 $ 150,597,961 $ 26,153,607 $ 39,617,746 $ 1,434,309 $ 72,576,383 $ 73,565,676 $ 1,602,123,737

Nine Months Ended

September 30, 2019:

Notes Subordinated debt and 2nd Lien Notes Equity

Three Months Ended

March 31, 2020:

Notes Subordinated Debt and 2nd Lien Notes Structured Products Equity

Shares Investment in Joint Venture Short-term

7 unchanged sentences

Accretion of deferred loan origination revenue 649,654 8,351 — — — — $ 658,005

Realized loss (1,090,219) — (56,068) — — (1,146,287)

Unrealized appreciation (depreciation) 24,897,740 124,484 179,835 (121,970) — 25,080,089

Realized gain (loss) (310,445) — — 152,467 — — $ (157,978)

Unrealized depreciation (113,033,296) (1,389,918) (2,816,526) (121,316) (3,833,223) — $ (121,194,279)

Fair value, end of period $ 939,164,683 $ 15,984,141 $ 8,704,946 $ 1,043,174 $ 6,396,590 $ 100,459,806 $ 1,071,753,340

1 unchanged sentence

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

As of both September 30, 2020 and December 31, 2019, we had no non-accrual assets.

As of March 31, 2021, we had no non-accrual assets.

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.

Results of Operations

Three and Nine months ended September 30, 2020 and September 30, 2019

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

Comparison of the three months ended March 31, 2021 and March 31, 2020

Operating results for the three months ended March 31, 2021 and 2020 were as follows:

Ended Three Months

Ended Nine Months Ended Nine Months Ended

September 30,

2020 September 30,

2019 September 30,

2020 September 30,

2021 March 31,

Total investment income $ 30,593,231 $ 18,679,598

1 unchanged sentence

Net investment income 14,356,096 7,294,069

Net realized losses (20,506,085) (983,499) (37,323,454) (1,063,250)

Income taxes, including excise tax benefit (18,038) —

Net investment income after taxes 14,374,134 7,294,069

Net realized gains (losses) 1,839,580 (302,372)

Net unrealized appreciation (depreciation) 6,274,155 (119,396,053)

Loss on extinguishment of debt — (137,390)

Benefit from (provision for) taxes (7,362) — 10,105 (499)

Benefit from taxes 410 19,999

Net increase (decrease) in net assets resulting from operations $ 22,488,279 $ (112,521,747)

Net increases (decreases) in net assets resulting from operations can vary substantially from period to period due to various factors, including recognition of realized gains and losses and unrealized appreciation and depreciation.

Net increases or decreases in net assets resulting from operations can vary substantially from period to period due to various factors, including recognition of realized gains and losses and unrealized appreciation and depreciation.

As a result, quarterly comparisons of net changes in net assets resulting from operations may not be meaningful.

1 unchanged sentence

Ended Three Months

Ended Nine Months Ended Nine Months Ended

September 30,

2020 September 30,

2019 September 30,

2020 September 30,

2021 March 31,

Investment income:

5 unchanged sentences

Total investment income $ 30,593,231 $ 18,679,598

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

These decreases were partially offset by increases in fee income

from September 30, 2019 to September 30, 2020 and the continued rotation of our portfolio from syndicated senior secured loans to senior secured private debt investments in middle-market businesses, structured products and special situation loans.

The weighted average yield on the principal amount of our outstanding debt investments was 6.2% as of September 30, 2020, as compared to 5.9% as of September 30, 2019.

The change in investment income for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020, was primarily due to an increase in the average size of our portfolio.

The amount of our outstanding debt investments was $1,451.9 million as of March 31, 2021, as compared to $1,119.9 million as of March 31, 2020, which increase is in part due to the acquisition of investment assets in the MVC Acquisition.

The weighted average yield on the principal amount of our outstanding debt investments was 7.2% as of March 31, 2021, as compared to 5.8% as of March 31, 2020.

Operating Expenses

Ended Three Months

Ended Nine Months Ended Nine Months Ended

September 30,

2020 September 30,

2019 September 30,

2020 September 30,

2021 March 31,

Operating expenses:

1 unchanged sentence

Base management fees 3,929,251 3,912,373

Incentive management fees 2,721,741 —

Compensation expenses — 48,410

2 unchanged sentences

Interest and Other Financing Fees

Interest and other financing fees during the three months ended September 30, 2020 were attributable to borrowings under the February 2019 Credit Facility, the Debt Securitization and the 2025 Notes (each as defined below under "Liquidity and Capital Resources").

Interest and other financing fees during the nine months ended September 30, 2020 were attributable to borrowings under the August 2018 Credit Facility, the February 2019 Credit Facility, the Debt Securitization and the 2025 Notes.

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

The decrease in interest and other financing fees for both the three and nine months ended September 30, 2020 as compared to the three and nine months ended September 30, 2019 was primarily attributable to the decrease in interest rates as result of decreases in LIBOR, STIBOR, GBP LIBOR and EURIBOR, 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.

Interest and other financing fees during the three months ended March 31, 2021 were attributable to borrowings under the February 2019 Credit Facility, the August 2025 Notes, the November Notes and the February Notes (each as defined below under “Liquidity and Capital Resources”).

Interest and other financing fees during the three months ended March 31, 2020 were attributable to borrowings under Barings BDC Senior Funding I, LLC’s credit facility entered into in August 2018 with Bank of America, N.A.

(the “August 2018 Credit Facility”), the February 2019 Credit Facility and our May 2019 $449.3 million term debt securitization (the “Debt Securitization”).

The increase in interest and other financing fees for the three months ended March 31, 2021 as compared to the three months ended March 31, 2020, was primarily attributable to the issuance of the August 2025 Notes, the November Notes and the February Notes and increased borrowings under the February 2019 Credit Facility, partially offset by the repayment of the Debt Securitization and the repayment of the borrowings under the August 2018 Credit Facility.

Base Management Fees

Under the Advisory Agreement, we pay Barings a 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.

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

For the three and nine months ended September 30, 2020, the amount of base management fee incurred was approximately $3.4 million and $10.9 million, respectively.

For the three and nine months ended September 30, 2019, the amount of base management fee incurred was approximately $3.3 million and $8.8 million, respectively.

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

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

See Note 2 to our Unaudited Consolidated Financial Statements 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 arrangements thereunder.

For both the three months ended March 31, 2021 and March 31, 2020, the amount of Base Management Fee incurred was approximately $3.9 million.

For the three months ended March 31, 2021 and March 31, 2020, the Base Management Fee rate was 1.250% and 1.375%, respectively.

Although the Base Management Fee rate decreased for the three months ended March 31, 2021 versus March 31, 2020, the average value of gross assets increased from $1,138.1 million as of the end of the two most recently completed calendar quarters prior to March 31, 2020 to $1,257.4 million as of the end of the two most recently completed calendar quarters prior to March 31, 2021, which resulted in a slight increase in fees between periods.

Incentive Fee (and, prior to January 1, 2021, under the terms of the Original Advisory Agreement)

Under the Amended and Restated Advisory Agreement (and, prior to January 1, 2021, under the terms of the Original Advisory Agreement), we pay Barings an incentive fee.

A portion of the incentive fee is based on our income and a portion is based on our capital gains.

The income-based fee will be determined and paid quarterly in arrears based on the amount by which (x) the aggregate pre-incentive fee net investment income in respect of the current calendar quarter and the eleven preceding calendar quarters beginning with the calendar quarter that commences on or after January 1, 2021, as the case may be (or the appropriate portion thereof in the case of any of our first eleven calendar quarters that commences on or after January 1, 2021) exceeds (y) the hurdle amount as calculated for the same period.

See Note 2 to our Unaudited Consolidated Financial Statements for additional information regarding the terms of the Amended and Restated Advisory Agreement and the fee arrangements thereunder.

For the three months ended March 31, 2021, the amount of income-based fee incurred was $2.7 million.

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.

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 Unaudited Consolidated Financial Statements for additional information regarding the Administration Agreement.

For the three and nine months ended September 30, 2020, the amount of administration expense incurred and invoiced by Barings for expenses was approximately $0.3 million and $0.9 million, respectively.

For the three and nine months ended September 30, 2019, the amount of administration expense incurred and invoiced by the Adviser for expenses was approximately $0.5 million and $1.9 million, respectively.

For the three months ended March 31, 2021, the amount of administration expense incurred and invoiced by Barings for expenses was approximately $0.5 million.

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

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)

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

Net realized gains (losses) during the three months ended March 31, 2021 and 2020 were as follows:

Ended Three Months

Ended Nine Months Ended Nine Months Ended

September 30,

2020 September 30,

2019 September 30,

2020 September 30,

2021 March 31,

Net realized gain (losses):

Non-Control / Non-Affiliate investments $ 2,891,040 $ (157,978)

Net realized losses on investments (19,477,823) (1,066,536) (36,233,667) (1,146,287)

Affiliate investments (76,631) —

Net realized gains (losses) on investments 2,814,409 (157,978)

Foreign currency transactions (974,829) (144,394)

Net realized losses $ (20,506,085) $ (983,499) $ (37,323,454) $ (1,063,250)

In the three months ended September 30, 2020, we recognized net realized losses totaling $20.5 million, which consisted primarily of a net loss on our loan portfolio of $19.5 million and a net loss on foreign currency transactions of $1.0 million.

In the nine months ended September 30, 2020, we recognized net realized losses totaling $37.3 million, which consisted primarily of a net loss on our loan portfolio of $36.5 million and a net loss on foreign currency transactions of $1.1 million, partially offset by $0.2 million in escrow distributions we received from legacy portfolio companies, which were recognized as realized gains.

In the three months ended September 30, 2019, we recognized net realized losses totaling $1.0 million, which consisted primarily of a net loss on our syndicated senior secured loan portfolio of $0.5 million and a net loss of $0.5 million related to royalty payments due from a legacy Triangle Capital portfolio company, partially offset by a net gain on foreign currency

transactions of $0.1 million.

In the nine months ended September 30, 2019, we recognized a net realized loss totaling $1.1 million, which consisted primarily of a net loss on our syndicated senior secured loan portfolio of $1.1 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 four portfolio companies, which were recognized as realized gains, and a net gain on foreign currency transactions of $0.1 million.

Net realized gains (losses) $ 1,839,580 $ (302,372)

In the three months ended March 31, 2021, we recognized net realized gains totaling $1.8 million, which consisted primarily of a net gain on our loan portfolio of $2.8 million partially offset by a net loss on foreign currency transactions of $1.0 million.

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

Net Unrealized Appreciation (Depreciation)

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

Net unrealized appreciation (depreciation) during the three months ended March 31, 2021 and 2020 was as follows:

Ended Three Months

Ended Nine Months Ended Nine Months Ended

September 30,

2020 September 30,

2019 September 30,

2020 September 30,

2021 March 31,

Net unrealized appreciation (depreciation):

1 unchanged sentence

Affiliate investments 2,444,697 (3,833,223)

Control investments (3,969,434) —

Net unrealized appreciation (depreciation) on investments 3,832,358 (121,194,279)

Credit support agreement (1,600,000) —

Foreign currency transactions 4,041,797 1,798,226

Net unrealized appreciation (depreciation) $ 6,274,155 $ (119,396,053)

During the three months ended September 30, 2020, we recorded net unrealized appreciation totaling $55.9 million, consisting of net unrealized appreciation on our current portfolio of $29.7 million, net unrealized depreciation related to foreign currency transactions of $2.1 million and net unrealized appreciation reclassification adjustments of $28.4 million related to the net realized losses on the sales / repayments of certain investments.

The net unrealized appreciation on our current portfolio of $29.7 million was driven primarily by the credit or fundamental performance of middle-market debt investments of $1.1 million, the impact of foreign currency exchange rates on middle-market debt investments of $1.9 million and the broad market moves for the entire investment portfolio of $26.7 million.

During the nine months ended September 30, 2020, we recorded net unrealized appreciation totaling $1.6 million, consisting of net unrealized depreciation on our current portfolio of $48.1 million, net unrealized depreciation related to foreign currency transactions of $1.8 million and net unrealized appreciation reclassification adjustments of $51.4 million related to the net realized losses on the sales / repayments of certain investments.

The net unrealized depreciation on our current portfolio of $48.0 million was driven primarily by the credit or fundamental performance of middle-market debt investments of $4.2 million and broad market moves for the entire investment portfolio of $45.7 million, partially offset by the impact of foreign currency exchange rates on middle-market debt investments of $1.9 million.

During the three months ended September 30, 2019, we recorded net unrealized depreciation totaling $1.8 million, consisting of net unrealized depreciation on our current portfolio of $3.1 million, net unrealized appreciation related to foreign currency transactions of $0.4 million and net unrealized appreciation reclassification adjustments of $0.9 million related predominately to the net realized losses on the sales / repayments of certain syndicated secured loans.

During the nine months ended September 30, 2019, we recorded net unrealized appreciation totaling $25.5 million, consisting of net unrealized appreciation on our current portfolio of $19.6 million, net unrealized appreciation related to foreign currency transactions of $0.4 million and net unrealized appreciation reclassification adjustments of $5.5 million related predominately to the net realized losses on the sales / repayments of certain syndicated secured loans.

During the three months ended March 31, 2021, we recorded net unrealized appreciation totaling $6.3 million, consisting of net unrealized appreciation on our current portfolio of $6.4 million and unrealized appreciation related to foreign currency transactions of $4.0 million, net of unrealized depreciation of $1.6 million on the credit support agreement with Barings and net of unrealized depreciation reclassification adjustments of $2.6 million related to the net realized gains on the sales / repayments of certain investments.

The net unrealized appreciation on our current portfolio of $6.4 million was driven primarily by broad market moves for investments of $13.8 million, partially offset by depreciation from the credit or fundamental performance of investments of $3.0 million and the impact of foreign currency exchange rates on investments of $4.4 million.

During the three months ended March 31, 2020, we recorded net unrealized depreciation totaling $119.4 million, consisting of net unrealized depreciation on our current portfolio of $121.6 million, and partially offset by net unrealized

appreciation related to foreign currency transactions of $1.8 million and net unrealized appreciation reclassification adjustments of $0.4 million related to the net realized losses on the sales / repayments of certain syndicated secured loans.

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

Liquidity and Capital Resources

We believe that our current cash and cash equivalents on hand, our short-term investments, sales of our syndicated senior secured loans, our available borrowing capacity under the February 2019 Credit Facility and August 2020 Notes (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.

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

For the nine months ended September 30, 2020, we experienced a net decrease in cash in the amount of $7.2 million.

We believe that our current cash and cash equivalents on hand, our short-term investments, our available borrowing capacity 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 the August 2020 NPA (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.

This “Liquidity and Capital Resources” section should be read in conjunction with “COVID-19 Developments” above, as well as with the notes to our Unaudited Consolidated Financial Statements.

For the three months ended March 31, 2021, we experienced a net decrease in cash in the amount of $52.0 million.

During that period, our operating activities used $85.1 million in cash, consisting primarily of purchases of portfolio investments of $276.5 million and purchases of short-term investments of $198.6 million, partially offset by proceeds from sales of portfolio investments totaling $188.2 million and sales of short-term investments of $190.5 million.

In addition, our financing activities provided $33.1 million of cash, consisting of net proceeds of $149.8 million from the issuance of the February Notes (as defined below under “Financing Transactions”), partially offset by net repayments under the February 2019 Credit Facility of $104.3 million and dividends paid in the amount of $12.4 million.

As of March 31, 2021, we had $40.5 million of cash and foreign currencies on hand.

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

During that period, our operating activities provided $36.0 million in cash, consisting primarily of proceeds from sales of portfolio investments totaling $155.9 million and sales of short-term investments of $218.0 million, partially offset by purchases of portfolio investments of $123.2 million and purchases of short-term investments of $221.9 million.

In addition, our financing activities used $12.0 million of cash, consisting primarily of repayments of the Debt Securitization of $139.9 million, share repurchases of $7.1 million and dividends paid in the amount of $23.2 million, partially offset by net borrowings under the August 2018 Credit Facility and the February 2019 Credit Facility of $108.7 million and net proceeds from the 2025 Notes issuance of $49.5 million.

As of September 30, 2020, we had $14.8 million of cash on hand.

For the nine months ended September 30, 2019, we experienced a net increase in cash in the amount of $0.4 million.

During that period, our operating activities used $16.2 million in cash, consisting primarily of purchases of portfolio investments of $294.2 million and purchases of short-term investments of $577.5 million, partially offset by proceeds from sales of investments totaling $251.1 million and sales of short-term investments of $571.1 million.

In addition, our financing activities provided $16.6 million of cash, consisting primarily of net proceeds from our $449.3 million term debt securitization, or the Debt Securitization, of $348.3 million, partially offset by net repayments under the August 2018 Credit Facility and the February 2019 Credit Facility of $277.8 million, repayments of the Debt Securitization of $7.5 million, purchases of shares in the share repurchase plan of $18.5 million, financing fees paid of $8.2 million and dividends paid in the amount of $19.6 million.

As of September 30, 2019, we had $12.8 million of cash on hand.

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

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

Financing Transactions

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

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

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

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

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

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

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

Effective February 28, 2019, we reduced our Class A Loan Commitments to $100.0 million, which reduced total commitments under the August 2018 Credit Facility to $600.0 million.

Effective May 9, 2019, we further reduced our Class A Loan Commitments under the August 2018 Credit Facility from $100.0 million to zero and reduced our Class A-1 Loan Commitments under the August 2018 Credit Facility from $500.0 million to $300.0 million, which collectively reduced total commitments under the August 2018 Credit Facility to $300.0 million.

Effective June 18, 2019, we further reduced our Class A-1 Loan Commitments, and therefore total commitments, under the August 2018 Credit Facility from $300.0 million to $250.0 million.

Effective August 14, 2019, we further reduced our Class A-1 Loan Commitments, and therefore total commitments, under the August 2018 Credit Facility from $250.0 million to $177.0 million.

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.

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.

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.

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.

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.

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

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

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

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

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.

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.

The February 2019 Credit Facility has an accordion feature that allows for an increase in the total commitments of up to $400.0 million, subject to certain conditions and the satisfaction of specified financial covenants.

The February 2019 Credit Facility has an accordion feature that allows for an increase in the total commitments by up to $400.0 million, subject to certain conditions and the satisfaction of specified financial covenants.

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.

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.

Following the termination of the August 2018 Credit Facility on June 30, 2020, Barings BDC Senior Funding I, LLC 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 1.00% (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%.

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

dollar borrowings of $325.0 million outstanding under the February 2019 Credit Facility with a weighted average interest rate of 2.188%, borrowings denominated in Swedish kronas of 12.8kr million ($1.4 million U.S.

dollars) with an interest rate of 2.00%, borrowings denominated in British pounds sterling of £40.3 million ($52.1 million U.S.

dollars) with a weighted average interest rate of 2.063% and borrowings denominated in Euros of €72.6 million ($85.1 million U.S.

dollars) with a weighted average interest rate of 2.00%.

plus 1.0% and (v) 1.0%.

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 pay a commitment fee of (i) 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 (ii) 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 March 31, 2021, we were in compliance with all covenants under the February 2019 Credit Facility and had U.S.

dollar borrowings of $357.0 million outstanding under the February 2019 Credit Facility with a weighted average interest rate of 2.125% (weighted average one month LIBOR of 0.125%), borrowings denominated in Swedish kronas of 12.8kr million ($1.5 million U.S.

dollars) with an interest rate of 2.000% (one month STIBOR of 0.000%), borrowings denominated in British pounds sterling of £85.3 million ($117.7 million U.S.

dollars) with an interest rate of 2.063% (one month GBP LIBOR of 0.063%), borrowings denominated in Australian dollars of A$36.6 million ($27.9 million U.S.

dollars) with an interest rate of 2.250% (one month AUD Screen Rate of 0.050%) and borrowings denominated in Euros of €91.1 million ($107.1 million U.S.

dollars) with an interest rate of 2.000% (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 Unaudited Consolidated Statements of Operations.

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 the our Unaudited 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 September 30, 2020, the total fair value of the borrowings outstanding under the February 2019 Credit Facility was $463.7 million.

As of March 31, 2021, the total fair value of the borrowings outstanding under the February 2019 Credit Facility was $611.1 million.

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

On May 9, 2019, we completed a $449.3 million term debt securitization, or the Debt Securitization.

Term debt securitizations are also known as collateralized loan obligations and are a form of secured financing, which is consolidated for financial reporting purposes and subject to our overall asset coverage requirement.

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.

BBDC Static CLO Ltd.

and Barings BDC

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

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, or 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, or 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 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 were 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 included customary covenants and events of default.

The 2019 Notes were not registered under the Securities Act of 1933, as amended, or 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 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 three months ended September 30, 2020, $48.1 million of the Class A-1 2019 Notes were repaid.

As of September 30, 2020, we had borrowings of $126.8 million outstanding under the Class A-1 2019 Notes with an interest rate of 1.295% and borrowings of $51.5 million outstanding under the Class A-2 2019 Notes with an interest rate of 1.925%.

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

As of September 30, 2020, the total fair value of the Class A-1 2019 Notes and the Class A-2 2019 Notes was $126.1 million and $51.0 million, respectively.

On October 15, 2020, the remaining 2019 Notes were repaid in full.

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

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

An aggregate principal amount of $25.0 million of the Series A Notes was issued on September 24, 2020 and an aggregate principal amount of $25.0 million of the Series A Notes 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 or our affiliates in accordance with their terms.

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 if certain change in control events occur.

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

The Note Purchase Agreement contains customary terms and conditions 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, minimum shareholders’ equity, maximum net debt to equity ratio and minimum asset coverage ratio.

The Note Purchase Agreement 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.

As of September 30, 2020, we were in compliance with all covenants of the Note Purchase Agreement.

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

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 March 31, 2021, 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 of 1933, as amended (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 March 31, 2021, 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 March 31, 2021, 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 March 31, 2021, 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.

February Notes

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.

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 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 February 2021 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, 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.

As of March 31, 2021, we were in compliance with all covenants under the February 2021 NPA.

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.

As of March 31, 2021, the fair value of the outstanding Series D Notes and the Series E Notes was $80.0 million and $70.0 million, respectively.

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

Share Repurchases

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

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 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.

The 2019 Share Repurchase Plan was designed to allow us to repurchase our shares both during our open window periods and at times when we otherwise might be prevented from doing so under applicable insider trading laws or because of self-imposed trading blackout periods.

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

During the nine months ended September 30, 2019, we repurchased a total of 1,865,522 shares of our common stock in the open market under the Share Repurchase Plan at an average price of $9.94 per share, including broker commissions.

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

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

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

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

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

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 three months ended March 31, 2020, we repurchased a total of 661.981 shares of our common stock in the open market under the 2020 Share Repurchase Program at an average price of $7.23 per share, including broker commissions.

In addition, in connection with the closing of the MVC Acquisition on December 23, 2020, we committed to make 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 NAV per share.

Any repurchases pursuant to the authorized program will occur during the 12-month period commencing upon the filing of this quarterly report on Form 10-Q for the quarter ended March 31, 2021 and will be made in accordance with applicable legal, contractual and regulatory requirements.

Distributions to Stockholders

We intend to pay quarterly distributions to our stockholders out of assets legally available for distribution.

We have adopted a dividend reinvestment plan (“DRIP”) that provides for reinvestment of dividends on behalf of our stockholders, unless a stockholder elects to receive cash.

As a result, when we declare a dividend, stockholders who have not opted out of the DRIP will have their dividends automatically reinvested in shares of our common stock, rather than receiving cash dividends.

We have elected to be treated as a RIC under the Internal Revenue Code of 1986, as amended, or the Code, and intend to make the required distributions to our stockholders as specified therein.

4 unchanged sentences

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

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

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

federal income tax purposes.

1 unchanged sentence

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

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

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

federal excise tax on such excess.

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

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

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

6 unchanged sentences

Recent Developments

Subsequent to September 30, 2020, we made approximately $155.4 million of new commitments, of which $130.6 million closed and funded.

The $130.6 million of investments consist of $128.5 million of first lien senior secured debt investments and a $2.1 million second lien senior secured term loan with a combined weighted average yield of 6.2%.

Subsequent to March 31, 2021, we made approximately $156.3 million of new commitments, of which $106.4 million closed and funded.

The $106.4 million of investments consist of $82.6 million of first lien senior secured debt investments, $20.9 million of second lien senior secured and subordinated debt investments and a $2.9 million equity investments with a combined weighted average yield on debt investments of 6.7%.

In addition, we funded $5.1 million of previously committed delayed draw term loans.

On October 15, 2020, the 2019 Notes were repaid in full.

On November 4, 2020,we entered into a Note Purchase Agreement (the “November NPA”) governing the issuance of (1) $62.5 million in aggregate principal amount of Series B senior unsecured notes (“Series B Notes”) due November 2025 with a fixed interest of 4.25% per year and (2) $112.5 million in aggregate principal amount of Series C senior unsecured notes (“Series C Notes” and, collectively with the Series B Notes, the “November Notes”) due November 2027 with a fixed interest 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 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 or its affiliates in accordance with their terms.

Interest on the November Notes will be due semiannually.

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

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

In connection with the November NPA, also on November 4, 2020, we amended the Note Purchase Agreement entered into on August 3, 2020 to reduce the aggregate principal amount of unissued Additional Notes from $50.0 million to $25.0 million.

On November 9, 2020 our Board declared a quarterly distribution of $0.17 per share payable on December 2, 2020 to holders of record as of November 25, 2020.

On May 6, 2021, the Board declared a quarterly distribution of $0.20 per share payable on June 16, 2021 to holders of record as of June 9, 2021.

Critical Accounting Policies and Use of Estimates

8 unchanged sentences

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.

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

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.

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

Under ASC Topic 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between a willing buyer and a willing seller at the measurement date.

8 unchanged sentences

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.

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

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

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

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

2 unchanged sentences

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 and structured product investments are generally valued using Level 2 inputs.

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

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 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.

Prior to the first quarter of 2020, the Procedures were generally performed with respect to each investment every quarter beginning in the quarter after the investment was 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.

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 product investments 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 are generally valued using Level 3 inputs.

Independent Valuation

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

Such 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 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.

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:

companies Percent of total

investments at

fair value(1)

March 31, 2019 18 100%

June 30, 2019 22 100%

September 30, 2019 28 100%

December 31, 2019 38 100%

March 31, 2020 30 62%

June 30, 2020 33 53%

September 30, 2020 66 100%

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

For September 30, 2020, the Procedures were performed on two of the seven investments made during the quarter.

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.

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 rule 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

2 unchanged sentences

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 and structured product investments using values provided by independent pricing services that have been approved by the Barings' Pricing Committee.

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

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 primarily 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.

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.

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.

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

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.

Valuation of Investment in Jocassee

We estimate the fair value of our investment in Jocassee Partners LLC, or Jocassee, using the net asset value of Jocassee and our ownership percentage.

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

We estimate the fair value of our investment in Jocassee Partners LLC, or Jocassee, using the NAV of Jocassee and our ownership percentage.

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

Valuation of Investment in Thompson Rivers

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

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

We estimate the fair value of our investment in Thompson Rivers LLC, or Thompson Rivers, using the NAV of Thompson Rivers and our ownership percentage.

The NAV of Thompson Rivers 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, or MVC PE Fund, using the NAV of the MVC PE Fund and our ownership percentage.

The NAV of the MVC PE Fund is determined in accordance with the specialized accounting guidance for investment companies.

Valuation of Investment in Waccamaw River

We estimate the fair value of our investment in Waccamaw River LLC, or Waccamaw River, using the NAV of Waccamaw River and our ownership percentage.

The NAV of Waccamaw River is determined in accordance with the specialized accounting guidance for investment companies.

Revenue Recognition

Interest and Dividend Income

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.

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

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

Dividend income is recorded on the ex-dividend date.

We may have to include interest income in our ICTI, including original issue discount income, from investments that have been classified as non-accrual for financial reporting purposes.

Interest income on non-accrual investments is not recognized for financial reporting purposes, but generally is recognized in ICTI.

As a result, we may be required to make a distribution to our stockholders in order to satisfy the minimum distribution requirements to maintain our RIC tax treatment, even though we will not have received and may not ever receive any corresponding cash amount.

Additionally, any loss recognized by us for U.S.

federal income tax purposes on previously accrued interest income will be treated as a capital loss.

Origination, facility, commitment, consent and other advance fees received in connection with the origination of a loan, or Loan Origination Fees, are recorded as deferred income and recognized as investment income over the term of the loan.

Upon prepayment of a loan, any unamortized Loan Origination Fees are recorded as investment income.

In the general course of our business, we receive certain fees from portfolio companies, which are non-recurring in nature.

Such fees include loan prepayment penalties, advisory, loan amendment and other fees, and are recorded as investment income when earned.

Fee income for the three months ended March 31, 2021 and 2020 was as follows:

Three Months Ended Three Months Ended

March 31, 2021 March 31, 2020

Recurring Fee Income:

Amortization of loan origination fees $ 1,078,090 $ 429,549

Management, valuation and other fees 581,395 175,755

Total Recurring Fee Income 1,659,485 605,304

Non-Recurring Fee Income:

Prepayment fees 49,517 84,151

Acceleration of unamortized loan origination fees 402,948 228,456

Advisory, loan amendment and other fees 21,225 43,082

Total Non-Recurring Fee Income 473,690 355,689

Total Fee Income $ 2,133,175 $ 960,993

Payment-in-Kind (PIK) Interest Income

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.

Thus, the actual collection of PIK interest may be deferred until the time of debt principal repayment.

PIK interest, which is a non-cash source of income at the time of recognition, is included in our taxable income and therefore affects the amount we are required to distribute to our stockholders to maintain our tax treatment as a RIC for U.S.

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.

We may have to include in our ICTI, PIK interest income from investments that have been classified as non-accrual for financial reporting purposes.

Interest income on non-accrual investments is not recognized for financial reporting purposes, but generally is recognized in ICTI.

As a result, we may be required to make a distribution to our stockholders in order to satisfy the minimum distribution requirements, even though we will not have received and may not ever receive any corresponding cash amount.

Off-Balance Sheet Arrangements

1 unchanged sentence

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

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

Portfolio Company Investment Type September 30,

As of March 31, 2021 and December 31, 2020, the Company believed that it had adequate financial resources to satisfy its unfunded commitments.

The balances of unused commitments to extend financing as of March 31, 2021 and December 31, 2020 were as follows:

Portfolio Company(1) Investment Type March 31,

2021 December 31, 2020

ADE Holding(3) Committed Capex Line $ 88,194 $ 91,814

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

Anju Software, Inc.

Delayed Draw Term Loan 1,981,371 1,981,371

Arch Global Precision, LLC Delayed Draw Term Loan 3,631,849 4,193,475

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

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

Bidwax(2)(3) Acquisition Capex Facility 3,760,958 —

BigHand UK Bidco Limited(4) Acquisition Capex Facility 1,843,756 —

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

British Engineering Services Holdco Limited(4) Bridge Revolver 623,944 618,177

Centralis Finco S.a.r.l.(3) Acquisition Facility 476,392 495,950

Classic Collision (Summit Buyer, LLC)(2) Delayed Draw Term Loan 454,562 1,672,446

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

CM Acquisitions Holdings Inc.

Delayed Draw Term Loan 1,551,602 1,551,602

Contabo Finco S.À R.L(3) Delayed Draw Term Loan 219,212 228,211

CSL Dualcom(4) Delayed Draw Term Loan 1,016,577 1,007,182

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

Dart Buyer, Inc.

Delayed Draw Term Loan 2,430,569 2,430,569

DreamStart Bidco SAS(3) Acquisition Facility 956,378 995,640

F24 (Stairway BidCo GmbH)(3) Acquisition Facility 418,703 323,840

Fineline Technologies, Inc.(2) Delayed Draw Term Loan 600,000 —

FitzMark Buyer, Inc.

Delayed Draw Term Loan 1,470,588 1,470,588

Foundation Risk Partners, Corp.

2 unchanged sentences

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

Home Care Assistance, LLC(2) Delayed Draw Term Loan 3,038,310 —

IGL Holdings III Corp.

Delayed Draw Term Loan 5,914,219 5,914,219

INOS 19-090 GmbH(2)(3) Acquisition Facility 2,620,403 2,727,980

Jocassee Partners LLC Joint Venture 25,000,000 30,000,000

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

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

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

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

Kene Acquisition, Inc.

Delayed Draw Term Loan — 322,928

LAF International(2)(3) Acquisition Facility 364,343 —

LivTech Purchaser, Inc.(2) Delayed Draw Term Loan 447,752 —

Modern Star Holdings Bidco Pty Limited(5) Capex Term Loan 2,285,953 2,315,967

Murphy Midco Limited(4) Delayed Draw Term Loan 3,332,269 3,301,472

Navia Benefit Solutions, Inc.(2) Delayed Draw Term Loan 4,000,000 —

Options Technology Ltd.

Delayed Draw Term Loan 2,604,080 2,604,080

Pacific Health Supplies Bidco Pty Limited(5) CapEx Term Loan 1,343,603 1,535,025

Premier Technical Services Group(4) Acquisition Facility 1,208,676 1,197,505

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

Professional Datasolutions, Inc.

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

PSC UK Pty Ltd.(9) GBP Acquisition Facility 189,350 1,010,706

Protego Bidco B.V.(2)(3) Delayed Draw Term Loan 3,836,870 —

Protego Bidco B.V.(2)(3) Revolver 2,302,121 —

PSC UK Pty Ltd.(4) Acquisition Facility 540,149 535,157

Questel Unite(2)(3) Cap Acquisition Facility 4,747,241 10,300,913

Radwell International, LLC Delayed Draw Term Loan 1,617,973 3,235,947

Portfolio Company(1) Investment Type March 31,

2021 December 31, 2020

Rep Seko Merger Sub LLC Delayed Draw Term Loan 1,454,545 1,454,546

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

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

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

Stairway BidCo GmbH(10) Delayed Draw Term Loan 2,134,276 —

SSCP Pegasus Midco Limited(4) Delayed Draw Term Loan 13,514,446 13,389,546

The Hilb Group, LLC(2) Delayed Draw Term Loan 5,105,694 5,545,939

Thompson Rivers LLC Joint Venture 6,900,000 —

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

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

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

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

Utac Ceram(2)(3) Delayed Draw Term Loan — 743,327

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

Waccamaw River Joint Venture 20,500,000 —

W2O Holdings, Inc.

Delayed Draw Term Loan 5,989,298 5,989,298

Total unused commitments to extend financing $ 166,491,854 $ 159,236,659

(1) Our 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 our current investments in the portfolio company are carried at less than cost.

Our estimate of the fair value of the current investments in this portfolio company includes an analysis of the fair value of any unfunded commitments.

(2) Actual commitment amount is denominated in Euros (€75,039) which was translated into U.S.