What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-05 compared with 2021-05-06 · 191 added, 139 removed, 458 unchanged (42% of the section changed)

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

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

The following discussion is designed to provide a better understanding of our unaudited consolidated financial statements for the three and six months ended June 30, 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.

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

As of March 31, 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.

As of June 30, 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 7.4% 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 6.7% and 6.4% as of June 30, 2021 and December 31, 2020, respectively.

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 6.7% and 6.5% as of June 30, 2021 and December 31, 2020, respectively.

COVID-19 Developments

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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 the United States, all offices are open.

In Europe, the regional headquarters in London is open as are the majority of other offices in Europe.

In Asia, all offices remain open.

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governmental authorities.

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

We are unable to predict the extent and 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.

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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.

BGPF is part of Barings’ $296.2 billion Global Fixed Income Platform that invests in liquid, private and structured credit.

BGPF manages private funds and separately managed accounts, along with multiple public vehicles.

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(v) performs due diligence on prospective portfolio companies and (vi) provides us with such other investment advisory, research and related services as we may, from time to time, reasonably require for the investment of our funds.

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 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.

Under the terms of the Administration Agreement, Barings performs (or oversees, or arranges 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 also, on our behalf and subject to the Board’s oversight, arranges for the services of, and oversees, 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.

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

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

As of June 30, 2021, our asset coverage ratio was 171.1%.

Portfolio Investment Composition

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.

The total value of our investment portfolio was $1,575.1 million as of June 30, 2021, as compared to $1,495.8 million as of December 31, 2020.

As of June 30, 2021, we had investments in 163 portfolio companies and one money market fund with an aggregate cost of $1,548.8 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:

As of both June 30, 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 June 30, 2021 and December 31, 2020, our investment portfolio consisted of the following investments:

Cost Percentage of

Portfolio Fair Value Percentage of

March 31, 2021:

June 30, 2021:

Senior debt and 1 st lien notes

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Investment Activity

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.

During the six months ended June 30, 2021, we made 40 new investments totaling $390.9 million, made investments in existing portfolio companies totaling $112.9 million, made a net new joint venture equity investment totaling $5.5 million and additional investments in joint venture equity portfolio companies totaling $30.0 million.

We had 13 loans repaid at par totaling $92.6 million and received $25.6 million of portfolio company principal payments.

In addition, we sold $57.0 million of loans, recognizing a net realized gain on these transactions of $2.4 million, and sold $250.4 million of middle-market portfolio company debt investments to one of our joint ventures and realized a gain on these transactions of $1.4 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 $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:

Lastly, we received proceeds related to the sale of equity investments totaling $5.9 million and recognized a net realized loss on such sales totaling $0.5 million.

During the six months ended June 30, 2020, we made 31 new investments totaling $126.9 million, made investments in existing portfolio companies totaling $33.2 million, made a new joint venture equity investment totaling $1.5 million and additional investments in joint venture equity portfolio companies totaling $5.0 million.

We had 12 loans repaid at par totaling total $52.0 million and received $6.4 million of portfolio company principal payments.

In addition, we sold $105.5 million of loans, recognizing a net realized loss on these transactions of $16.4 million, and sold $30.8 million of debt investments to our joint venture.

In addition, one broadly syndicated loan investment was restructured.

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

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

Total portfolio investment activity for the six months ended June 30, 2021 and 2020 was as follows:

Six Months Ended

June 30, 2021:

Notes Subordinated Debt and 2nd Lien Notes Structured Products Equity

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Principal repayments received (91,579,875) (24,847,271) (2,307,299) — — — — (118,734,445)

Payment-in-kind interest earned 828,659 7,007,695 — — — — — 7,836,354

Payment-in-kind interest 1,564,886 7,569,986 — — — — — 9,134,872

Accretion of loan discounts 1,267,506 2,527,550 26,879 — — — — 3,821,935

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Fair value, end of period $ 1,218,866,771 $ 186,866,059 $ 24,834,070 $ 52,002,551 $ 1,488,768 $ 80,476,958 $ 10,574,196 $ 1,575,109,373

Three Months Ended

March 31, 2020:

Six Months Ended

June 30, 2020:

Notes Subordinated Debt and 2nd Lien Notes Structured Products Equity

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

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

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

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Realized gain (loss) (17,016,092) — 1,841 241,428 — 16,979 $ (16,755,844)

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

Unrealized appreciation (depreciation) (53,139,679) (1,346,538) 744,762 (202,605) (795,968) (353) $ (54,740,381)

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

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

As of June 30, 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

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

2021 March 31,

Three and Six months ended June 30, 2021 and June 30, 2020

Operating results for the three and six months ended June 30, 2021 and 2020 were as follows:

Six Months Ended Six Months Ended

2021 June 30,

2020 June 30,

2021 June 30,

Total investment income $ 33,153,488 $ 16,139,764 $ 63,746,721 $ 34,819,362

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Ended Three Months

2021 March 31,

Ended Six Months Ended Six Months Ended

2021 June 30,

2020 June 30,

2021 June 30,

Investment income:

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Total investment income $ 33,153,488 $ 16,139,764 $ 63,746,721 $ 34,819,362

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.

The change in investment income for the three and six months ended June 30, 2021, as compared to the three and six months ended June 30, 2020, was primarily due to an increase in the average size of our portfolio and acceleration of unamortized OID and unamortized loan origination fee income associated with repayments of loans.

For the three and six months ended June 30, 2021, acceleration of unamortized OID income and unamortized loan origination fees totaled $2.2 million and $2.6 million, respectively, as compared to $20,118 and $0.2 million, respectively for the three and six months ended June 30, 2020.

The amount of our outstanding debt investments was $1,463.6 million as of June 30, 2021, as compared to $1,053.9 million as of June 30, 2020.

This 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 other than non-accrual debt investments was 7.4% as of June 30, 2021, as compared to 5.3% as of June 30, 2020.

Operating Expenses

Ended Three Months

2021 March 31,

Ended Six Months Ended Six Months Ended

2021 June 30,

2020 June 30,

2021 June 30,

Operating expenses:

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Interest and Other Financing Fees

Interest and other financing fees during the three months ended March 31, 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.

Interest and other financing fees during the three and six months ended June 30, 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 and six months ended June 30, 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.

The increase in interest and other financing fees for the three and six months ended June 30, 2021 as compared to the three and six months ended June 30, 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

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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.

For the three and six months ended June 30, 2021, the amount of Base Management Fee incurred was approximately $4.9 million and $8.8 million, respectively.

For the three and six months ended June 30, 2020, the amount of Base Management Fee incurred was approximately $3.6 million and $7.5 million, respectively.

The increase in the Base Management Fee for the three and six months ended June 30, 2021 versus the corresponding 2020 periods is primarily related to the average value of gross assets increasing from $1,052.2 million as of the end of the two most recently completed calendar quarters prior to June 30, 2020 to $1,565.2 million as of the end of the two most recently completed calendar quarters prior to June 30, 2021.The increase in the Base Management Fee attributable to the increase in our average gross assets was partially offset by a decrease in the Base Management Fee rate.

For both the three and six months ended June 30, 2021, the Base Management Fee rate was 1.250%.

For both the three and six months ended June 30, 2020, the Base Management Fee rate was 1.375%.

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

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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.

For the three and six months ended June 30, 2021, the amount of income-based fee incurred was $3.5 million and $6.2 million, respectively.

We did not incur any income-based fee for the three or six months ended June 30, 2020.

General and Administrative Expenses

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

For the three months ended March 31, 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.

For the three and six months ended June 30, 2021, the amount of administration expense incurred and invoiced by Barings for expenses was approximately $0.5 million and $1.0 million, respectively.

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

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

Net Realized Gains (Losses)

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

Net realized gains (losses) during the three and six months ended June 30, 2021 and 2020 were as follows:

Ended Three Months

2021 March 31,

Ended Six Months Ended Six Months Ended

2021 June 30,

2020 June 30,

2021 June 30,

Net realized gain (losses):

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Net realized gains (losses) $ 342,660 $ (16,514,997) $ 2,182,240 $ (16,817,369)

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.

In the three months ended June 30, 2021, we recognized net realized gains totaling $0.3 million, which consisted primarily of a net gain on our loan portfolio of $0.6 million partially offset by a net loss on foreign currency transactions of $0.2 million.

In the six months ended June 30, 2021, we recognized net realized gains totaling $2.2 million, which consisted primarily of a net gain on our loan portfolio of $3.4 million partially offset by a net loss on foreign currency transactions of $1.2 million.

In the three months ended June 30, 2020, we recognized net realized losses totaling $16.5 million, which consisted

primarily of a net loss on our loan portfolio of $16.7 million, partially offset by a net gain on foreign currency transactions of

$0.1 million, and by $0.1 million in escrow distributions we received from legacy portfolio companies, which were recognized

as realized gains.

In the six months ended June 30, 2020, we recognized net realized losses totaling $16.8 million, which

consisted primarily of a net loss on our loan portfolio of $17.0 million and a net loss on foreign currency transactions of $0.1

million, partially offset by $0.2 million in escrow distributions we received from legacy portfolio companies, which were

recognized as realized gains.

Net Unrealized Appreciation (Depreciation)

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

Net unrealized appreciation (depreciation) during the three and six months ended June 30, 2021 and 2020 was as follows:

Ended Three Months

2021 March 31,

Ended Six Months Ended Six Months Ended

2021 June 30,

2020 June 30,

2021 June 30,

Net unrealized appreciation (depreciation):

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Net unrealized appreciation (depreciation) $ 14,409,413 $ 65,043,310 $ 20,683,568 $ (54,352,743)

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.

During the three months ended June 30, 2021, we recorded net unrealized appreciation totaling $14.4 million, consisting of net unrealized appreciation on our current portfolio of $12.1 million, unrealized appreciation of $2.3 million on the credit support agreement with Barings and unrealized appreciation reclassification adjustments of $0.7 million related to the net

realized gains on the sales / repayments of certain investments, net of unrealized depreciation related to foreign currency transactions of $0.6 million.

The net unrealized appreciation on our current portfolio of $12.1 million was driven primarily by broad market moves for investments of $7.8 million and the credit or fundamental performance of investments of $5.1 million, partially offset by the impact of foreign currency exchange rates on investments of $0.8 million.

During the six months ended June 30, 2021, we recorded net unrealized appreciation totaling $20.7 million, consisting of net unrealized appreciation on our current portfolio of $18.5 million, unrealized appreciation related to foreign currency transactions of $3.4 million and unrealized appreciation of $0.7 million on the credit support agreement with Barings, net of unrealized depreciation reclassification adjustments of $1.9 million related to the net realized gains on the sales / repayments of certain investments.

The net unrealized appreciation on our current portfolio of $18.5 million was driven primarily by broad market moves for investments of $21.7 million and the credit or fundamental performance of investments of $2.0 million, partially offset by the impact of foreign currency exchange rates on investments of $5.2 million.

During the three months ended June 30, 2020, we recorded net unrealized appreciation totaling $65.0 million, consisting

of net unrealized appreciation on our current portfolio of $43.8 million, net unrealized depreciation related to foreign currency

transactions of $1.4 million and net unrealized appreciation reclassification adjustments of $22.7 million related to the net

realized losses on the sales / repayments of certain syndicated secured loans.

The net unrealized appreciation on the Company’s

current portfolio of $43.8 million was driven by broad market moves for liquid syndicated secured loans and structured

products totaling $31.6 million, broad market moves for middle-market debt investments of $5.1 million, the credit or

fundamental performance of middle-market debt investments totaling $2.9 million, the impact of foreign currency exchange

rates on middle-market debt investments of $1.3 million, and net unrealized appreciation on the Company’s total equity and

joint venture investments of $3.0 million.

During the six months ended June 30, 2020, we recorded net unrealized depreciation totaling $54.4 million, consisting of

net unrealized depreciation on our current portfolio of $77.8 million, net unrealized appreciation related to foreign currency

transactions of $0.4 million and net unrealized appreciation reclassification adjustments of $23.0 million related to the net

realized losses on the sales / repayments of certain syndicated secured loans.

The net unrealized depreciation on the Company’s

current portfolio of $77.8 million was driven by broad market moves for liquid syndicated secured loans and structured

products totaling $51.0 million, broad market moves for middle-market debt investments of $20.4 million, the credit or

fundamental performance of middle-market debt investments totaling $5.3 million and net unrealized depreciation on the

Company’s total equity and joint venture investments of $1.0 million.

Liquidity and Capital Resources

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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.

For the six months ended June 30, 2021, we experienced a net decrease in cash in the amount of $61.8 million.

During that period, our operating activities used $139.0 million in cash, consisting primarily of purchases of portfolio investments of $538.0 million and purchases of short-term investments of $217.6 million, partially offset by proceeds from sales of portfolio investments totaling $322.4 million and sales of short-term investments of $272.5 million.

In addition, our financing activities provided $77.2 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 $47.1 million and dividends paid in the amount of $25.5 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 $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.

As of June 30, 2021, we had $30.7 million of cash and foreign currencies on hand.

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

period, our operating activities provided $120.0 million in cash, consisting primarily of proceeds from sales of portfolio

investments totaling $239.7 million and sales of short-term investments of $442.5 million, partially offset by purchases of

portfolio investments of $171.5 million and purchases of short-term investments of $404.0 million.

In addition, our financing

activities used $123.5 million of cash, consisting primarily of net repayments under the August 2018 Credit Facility and the February 2019 Credit Facility of $9.1 million, repayments of the Debt Securitization of $91.8 million, share repurchases of $7.1

million and dividends paid in the amount of $15.5 million.

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

Financing Transactions

8 unchanged sentences

Borrowings under the February 2019 Credit Facility bear interest, subject to our election, on a per annum basis equal to (i) the applicable base rate plus 1.00% (or 1.25% if we no longer maintain an investment grade credit rating), (ii) the applicable LIBOR rate plus 2.00% (or 2.25% if we no longer maintain an investment grade credit rating), (iii) for borrowings denominated in certain foreign currencies other than Australian dollars, the applicable currency rate for the foreign currency as defined in the credit agreement plus 2.00% (or 2.25% if we no longer maintain an investment grade credit rating), or (iv) for borrowings denominated in Australian dollars, the applicable Australian dollars Screen Rate, plus 2.20% (or 2.45% if we no longer maintain an investment grade credit rating).

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

plus 1.0% and (v) 1.0%.

The applicable 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.

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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.

As of June 30, 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 an interest rate of 2.125% (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 £68.3 million ($94.4 million U.S.

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

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

As of June 30, 2021, the total fair value of the borrowings outstanding under the February 2019 Credit Facility was $668.5 million.

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

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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.

Interest on the August 2025 Notes will be due semiannually

in March and September, beginning in March 2021.

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

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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.

As of June 30, 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.

As of June 30, 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.

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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.

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.

As of June 30, 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.

As of June 30, 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.

1 unchanged sentence

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.

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.

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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.

As of June 30, 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.

As of June 30, 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.

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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.

Purchases under the 2020 Share Repurchase Program were made in open-market transactions and included transactions being executed by a broker selected by 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 and six months ended June 30, 2020, we repurchased a total of 327,069 and 989,050 shares, respectively, of our common stock in the open market under the 2020 Share Repurchase Program at an average price of $7.17 and $7.21 per share, respectively, 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.

Any repurchases pursuant to the authorized program will occur during the 12-month period that commenced upon the filing of our quarterly report on Form 10-Q for the quarter ended March 31, 2021, which occurred on May 6, 2021, and will be made in accordance with applicable legal, contractual and regulatory requirements.

During the three and six months ended June 30, 2021, we did not repurchase any shares under the authorized program.

Distributions to Stockholders

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

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

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

8 unchanged sentences

We may be required to recognize ICTI in certain circumstances in which we do not receive cash.

For example, if we hold debt obligations that are treated under applicable tax rules as having original issue discount (such as debt instruments issued with warrants), we must include in ICTI each year a portion of the original issue discount that accrues over the life of the obligation, regardless of whether cash representing such income is received by us in the same taxable year.

the same taxable year.

We may also have to include in ICTI other amounts that we have not yet received in cash, such as (i) PIK interest income and (ii) interest income from investments that have been classified as non-accrual for financial reporting purposes.

3 unchanged sentences

Recent Developments

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%.

Subsequent to June 30, 2021, we made approximately $185.6 million of new commitments, of which $150.3 million closed and funded.

The $150.3 million of investments consist of $53.9 million of first lien senior secured debt investments, $6.6 million of second lien senior secured and subordinated debt investments and an $89.8 million equity co-investment alongside certain affiliates in a portfolio company focused on directly originated, senior-secured asset-based loans to middle-market companies.

The weighted average yield of the debt investments was 7.5%.

In addition, we funded $18.4 million of previously committed delayed draw term loans.

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.

On August 5, 2021, the Board declared a quarterly distribution of $0.21 per share payable on September 15, 2021 to holders of record as of September 8, 2021.

Critical Accounting Policies and Use of Estimates

20 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 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).

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.

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

Barings uses 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.

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.

13 unchanged sentences

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.

Barings uses 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.

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.

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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.

Valuation of Investment in Jocassee

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, 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.

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, Thompson Rivers, Waccamaw River and MVC Private Equity Fund LP

We estimate the fair value of our investments in Jocassee, Thompson Rivers, Waccamaw River and MVC Private Equity Fund LP using the NAV of each company and our ownership percentage.

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

Revenue Recognition

14 unchanged sentences

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

Fee income for the three and six months ended June 30, 2021 and 2020 was as follows:

Six Months Ended

June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

Recurring Fee Income:

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

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

As of June 30, 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 June 30, 2021 and December 31, 2020 were as follows:

Portfolio Company Investment Type June 30, 2021 December 31, 2020

ADE Holding(1)(3) Committed Capex Line $ — $ 91,814

Anju Software, Inc.

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

Air Comm Corporation, LLC(1) Delayed Draw Term Loan 2,027,027 —

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

Arch Global Precision, LLC(1) Delayed Draw Term Loan 2,540,509 4,193,475

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British Engineering Services Holdco Limited(1)(4) Bridge Revolver 624,735 618,177

Canadian Orthodontic Partners Corp(1)(2)(6) Delayed Draw Term Loan 448,717 —

Centralis Finco S.a.r.l.(1)(3) Acquisition Facility 480,689 495,950

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

CM Acquisitions Holdings Inc.

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

CM Acquisitions Holdings Inc.(1) Delayed Draw Term Loan 1,247,359 1,551,602

Contabo Finco S.À R.L(1)(3) Delayed Draw Term Loan 221,189 228,211

Crash Champions, LLC(1)(2) Delayed Draw Term Loan 2,666,667 —

CSL Dualcom(1)(4) Delayed Draw Term Loan 1,017,866 1,007,182

Dart Buyer, Inc.

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

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

DreamStart Bidco SAS(1)(3) Acquisition Facility 965,004 995,640

EPS NASS Parent, Inc.(1)(2) Delayed Draw Term Loan 1,310,051 —

F24 (Stairway BidCo GmbH)(1)(3) Acquisition Facility 422,480 323,840

Fineline Technologies, Inc.(1) Delayed Draw Term Loan 180,000 —

FitzMark Buyer, Inc.

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

Foundation Risk Partners, Corp.

Delayed Draw Term Loan 4,716,805 4,984,771

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

Foundation Risk Partners, Corp.(1) Delayed Draw Term Loan 3,444,445 4,984,771

FragilePak LLC(1)(2) Delayed Draw Term Loan 4,687,500 —

Heartland, LLC(1) Delayed Draw Term Loan 4,850,912 5,347,666

1 unchanged sentence

Home Care Assistance, LLC(1) Delayed Draw Term Loan 741,299 —

IGL Holdings III Corp.

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

IGL Holdings III Corp.(1) Delayed Draw Term Loan 5,914,219 5,914,219

IM Square(1)(2)(3) Acquisition Facility 8,064,124 —

Innovad Group II BV(1)(3) Delayed Draw Term Loan 1,902,687 —

INOS 19-090 GmbH(1)(2)(3) Acquisition Facility 2,644,039 2,727,980

1 unchanged sentence

Kano Laboratories LLC(1) Delayed Draw Term Loan 4,543,950 4,543,950

Kene Acquisition, Inc.

Delayed Draw Term Loan — 322,928

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

LAF International(1)(2)(3) Acquisition Facility 355,770 —

3 unchanged sentences

Navia Benefit Solutions, Inc.(1) Delayed Draw Term Loan 1,600,000 —

Options Technology Ltd.

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

OG III B.V.(1)(2)(3) Acquisition Capex Facility 2,498,751 —

Portfolio Company Investment Type June 30, 2021 December 31, 2020

Options Technology Ltd.(1) Delayed Draw Term Loan — 2,604,080

Pacific Health Supplies Bidco Pty Limited(1)(5) CapEx Term Loan 1,324,375 1,535,025

Premier Technical Services Group(1)(4) Acquisition Facility 936,187 1,197,505

Premium Invest(1)(2)(3) Acquisition Facility 5,099,373 —

Protego Bidco B.V.(1)(3) Delayed Draw Term Loan 880,421 —

3 unchanged sentences

Radwell International, LLC(1) Delayed Draw Term Loan — 3,235,947

Portfolio Company(1) Investment Type March 31,

2021 December 31, 2020

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

Safety Products Holdings, LLC(1) Delayed Draw Term Loan 6,467,345 6,467,345

Security Holdings B.V.(1)(2) Delayed Draw Term Loan 2,371,801 —

Security Holdings B.V.(1)(2) Revolver 1,185,901 —

Smile Brands Group, Inc.(1) Delayed Draw Term Loan 2,148,691 2,148,691

6 unchanged sentences

Waccamaw River Joint Venture 19,475,000 —

W2O Holdings, Inc.

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

W2O Holdings, Inc.(1) Delayed Draw Term Loan 5,989,298 5,989,298

Total unused commitments to extend financing $ 164,428,050 $ 159,236,659

10 unchanged sentences

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

(6) Actual commitment amount is denominated in Canadian dollars.

Commitment was translated into U.S.

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

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

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

As of March 31, 2021 and December 31, 2020, we had guaranteed €9.9 million ($11.6 million U.S.

As of June 30, 2021 and December 31, 2020, we had guaranteed €9.9 million ($11.7 million U.S.

dollars and $12.1 million U.S.

5 unchanged sentences

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

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

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

In addition, as of December 31, 2020, the Company agreed to cash collateralize a $3.5 million letter of credit for Security Holdings B.V.

The $3.5 million cash collateralization was reflected as "Restricted cash" on the accompanying Audited Consolidated Balance Sheet as of December 31, 2020.

The letter of credit expired on April 30, 2021, and as of June 30, 2021, none of the Company’s cash was restricted.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis