What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-09 compared with 2021-08-05 · 175 added, 158 removed, 491 unchanged (40% 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 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 is designed to provide a better understanding of our unaudited consolidated financial statements for the three and nine months ended September 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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risks associated with possible disruption due to terrorism in our operations or the economy generally;

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

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

and risks related to our pending acquisition of Sierra Income Corporation.

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 filing of this Quarterly Report.

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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.

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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 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.

As of September 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 7.3% 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 6.1% and 6.4% as of September 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 6.1% and 6.5% as of September 30, 2021 and December 31, 2020, respectively.

COVID-19 Developments

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

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

In the 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.

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 continues to operate with the majority of employees in the United States working remotely while maintaining service levels to our partners and clients.

In the United States, all offices are open for associates who wish to work from an office location.

In Europe and Asia-Pac a hybrid working model is now in place with the majority of associates working from office locations on average 2-3 days per week.

Barings’ return-to-office taskforce continues to plan for the safe return of associates to all office locations but is no longer targeting a set date for this given the continued uncertainty around COVID-related case numbers.

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

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

As of September 30, 2021, our asset coverage ratio was 171.8%.

Pending Sierra Income Corporation Acquisition

On September 21, 2021, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among us, Mercury Acquisition Sub, Inc., a Maryland corporation and our direct wholly owned subsidiary (“Acquisition Sub”), Sierra Income Corporation, a Maryland corporation (“Sierra”), 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 Sierra, with Sierra continuing as the surviving company and as our wholly owned subsidiary (the “First Merger”) and, immediately thereafter, Sierra will merge with and into us, with Barings BDC, Inc.

continuing as the surviving company (the “Second Merger” and, together with the First Merger, the “Merger”).

Both the Board and the board of directors of Sierra, 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) of the Internal Revenue Code of 1986, as amended (the “Code”).

In the First Merger, each share of Sierra common stock issued and outstanding immediately prior to the effective time of the First Merger (excluding any shares cancelled pursuant to the Merger Agreement) will be converted into the right to receive (i) $0.9783641 per share in cash, without interest, from Barings (such amount of cash, the “Cash Consideration”) and (ii) 0.44973 (such ratio, as may be adjusted pursuant to the Merger Agreement, the “Exchange Ratio”) of a validly issued, fully paid and non-assessable share of our common stock (the “Share Consideration” and, together with the Cash Consideration, the “Merger Consideration”).

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

We and Sierra have agreed to convene and hold stockholder meetings for the purpose of obtaining the approvals required of our and Sierra’s stockholders, respectively, and our Board and the board of directors of Sierra have agreed to recommend that their respective stockholders approve the applicable proposals (as described below).

The Merger Agreement provides that Sierra shall not, and shall cause its subsidiaries and instruct its representatives not to, directly or indirectly, 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 Sierra board of directors may, subject to certain conditions, change its recommendation to the Sierra stockholders or, on payment of a termination fee of $11.0 million to us and the reimbursement of up to $2.0 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 be inconsistent with the directors’ duties under applicable law.

Consummation of the First Merger, which is currently anticipated to occur during the first quarter of fiscal year 2022, is subject to certain customary closing conditions, including (1) approval of the First Merger by the holders of at least a majority of the outstanding shares of Sierra common stock entitled to vote thereon, (2) approval of the issuance of our common stock to be issued in the First Merger by a majority of the votes cast by our stockholders on the matter at our stockholders meeting, (3) approval of the issuance of our common stock in connection with the First Merger 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, (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 Merger, (6) approval for listing on the New York Stock Exchange of our common stock to be issued as consideration in the First Merger, (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, or early termination thereof).

Barings, as party to the Merger Agreement, agreed to vote all shares of our common stock over which it has voting power (other than in its fiduciary capacity) in favor of the proposals to be submitted by us to our stockholders for approval relating to the Merger.

In addition, we and Sierra will take steps necessary to provide for the repayment at closing of Sierra’s existing loan agreement.

The Merger Agreement also contains certain termination rights in favor of us and Sierra, including if the First Merger is not completed on or before March 31, 2022 or if the requisite approvals of our stockholders or Sierra stockholders are not obtained.

Further, we will enter into an amendment and restatement of the Amended and Restated Advisory Agreement, effective as of the closing of the Merger, to raise the annualized hurdle rate thereunder from 8.0% to 8.25%.

Following the closing of the Merger, we will also enter into a credit support agreement with Barings, for the benefit of the combined company, to protect against net cumulative unrealized and realized losses of up to $100.0 million on the acquired Sierra investment portfolio over the next ten years.

Portfolio Investment Composition

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.

The total value of our investment portfolio was $1,652.5 million as of September 30, 2021, as compared to $1,495.8 million as of December 31, 2020.

As of September 30, 2021, we had investments in 170 portfolio companies and two money market fund with an aggregate cost of $1,633.7 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 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:

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

Cost Percentage of

Portfolio Fair Value Percentage of

June 30, 2021:

September 30, 2021:

Senior debt and 1 st lien notes

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Investment Activity

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.

During the nine months ended September 30, 2021, we made 59 new investments totaling $529.9 million, made investments in existing portfolio companies totaling $156.3 million, made a net new joint venture equity investment totaling $9.3 million, additional investments in joint venture equity portfolio companies totaling $30.0 million and made 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.

We had 24 loans repaid at par totaling $196.3 million and received $32.2 million of portfolio company principal payments.

In addition, we sold $89.5 million of loans, recognizing a net realized gain on these transactions of $3.3 million, and sold $338.4 million of middle-market portfolio company debt investments to one of our joint ventures and realized a gain on these transactions of $0.3 million.

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.

Lastly, we received proceeds related to the sale of equity investments totaling $7.4 million and recognized a net realized gain on such sales totaling $0.7 million.

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 $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.

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.

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

Six Months Ended

June 30, 2021:

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

Nine Months Ended

September 30, 2021:

Notes Subordinated Debt and 2nd Lien Notes Structured Products Equity

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Fair value, end of period $ 1,162,119,382 $ 190,426,410 $ 20,794,178 $ 141,945,560 $ 898,443 $ 86,298,947 $ 50,000,000 $ 1,652,482,920

Six Months Ended

June 30, 2020:

Nine Months Ended

September 30, 2020:

Notes Subordinated Debt and 2nd Lien Notes Structured Products Equity

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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 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.

As of September 30, 2021, we had one asset on non-accrual, the fair value of which was $11.0 million, which comprised 0.7% of the total fair value of our portfolio, and the cost of which was $10.1 million, which comprised 0.6% of the total cost of our portfolio.

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

A summary of our non-accrual asset as of September 30, 2021 is provided below:

Legal Solutions Holdings

In connection with the MVC Acquisition, we purchased our debt investment in Legal Solutions Holdings, or Legal Solutions.

During the quarter ended September 30, 2021, we placed our debt investment in Legal Solutions on non-accrual status.

As a result, under U.S.

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

As of September 30, 2021, the cost of our debt investment in Legal Solutions was $10.1 million and the fair value of such investment was $11.0 million.

Results of Operations

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,

Three and Nine months ended September 30, 2021 and September 30, 2020

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

Nine Months Ended Nine Months Ended

September 30,

2021 September 30,

2020 September 30,

2021 September 30,

Total investment income $ 34,983,825 $ 16,329,142 $ 98,730,541 $ 51,148,504

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Net investment income 14,882,552 7,960,166 43,796,306 21,783,364

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

Income taxes, including excise tax provision 25,533 7,561 7,495 7,561

Net investment income after taxes 14,857,019 7,952,605 43,788,811 21,775,803

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

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

Net realized losses (3,761,700) (20,506,085) (1,579,460) (37,323,454)

Net unrealized appreciation 3,315,063 55,947,382 23,998,631 1,594,639

Loss on extinguishment of debt — (216,474) — (660,066)

Benefit from taxes (1,700) (2,532) (1,290) 17,467

Benefit from (provision for) taxes — 199 (1,290) 17,666

Net increase (decrease) in net assets resulting from operations $ 14,410,382 $ 43,177,627 $ 66,214,187 $ (14,587,851)

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Ended Three Months

Ended Six Months Ended Six Months Ended

2021 June 30,

2020 June 30,

2021 June 30,

Ended Nine Months Ended Nine Months Ended

September 30,

2021 September 30,

2020 September 30,

2021 September 30,

Investment income:

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Total investment income $ 34,983,825 $ 16,329,142 $ 98,730,541 $ 51,148,504

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.

The change in investment income for the three and nine months ended September 30, 2021, as compared to the three and nine months ended September 30, 2020, was primarily due to an increase in the average size of our portfolio, acceleration of unamortized OID and unamortized loan origination fee income associated with repayments of loans, an increase in payment-in-kind (“PIK”) interest income and dividends from portfolio companies and joint venture investments.

For the three and nine months ended September 30, 2021, acceleration of unamortized OID income and unamortized loan origination fees totaled $1.9 million and $4.6 million, respectively, as compared to $30,549 and $0.3 million, respectively, for the three and nine months ended September 30, 2020.

For the three and nine months ended September 30, 2021, PIK interest income was $3.0 million and $9.6 million respectively, as compared to $0.3 million and $0.6 million, respectively, for the three and nine months ended September 30, 2020.

For the three and nine months ended September 30, 2021, dividends from portfolio companies and joint venture investments were $2.9 million and $3.3 million, respectively.

The amount of our outstanding debt investments was $1,407.0 million as of September 30, 2021, as compared to $929.3 million as of September 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.

The weighted average yield on the principal amount of our outstanding debt investments other than non-accrual debt investments was 7.3% as of September 30, 2021, as compared to 6.2% as of September 30, 2020.

Operating Expenses

Ended Three Months

Ended Six Months Ended Six Months Ended

2021 June 30,

2020 June 30,

2021 June 30,

Ended Nine Months Ended Nine Months Ended

September 30,

2021 September 30,

2020 September 30,

2021 September 30,

Operating expenses:

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Interest and Other Financing Fees

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.

Interest and other financing fees during the three and nine months ended September 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 nine months ended September 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 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.

The increase in interest and other financing fees for the three and nine months ended September 30, 2021 as compared to the three and nine months ended September 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 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%.

For the three and nine months ended September 30, 2021, the amount of Base Management Fee incurred was approximately $5.3 million and $14.1 million, respectively.

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.

The increase in the Base Management Fee for the three and nine months ended September 30, 2021 versus the corresponding 2020 periods is primarily related to the average value of gross assets increasing from $981.9 million as of the end of the two most recently completed calendar quarters prior to September 30, 2020 to $1,687.6 million as of the end of the two most recently completed calendar quarters prior to September 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 nine months ended September 30, 2021, the Base Management Fee rate was 1.250%.

For both the three and nine months ended September 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 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.

For the three and nine months ended September 30, 2021, the amount of income-based fee incurred was $4.4 million and $10.7 million, respectively.

We did not incur any income-based fee for the three or nine months ended September 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 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.

For the three and nine months ended September 30, 2021, the amount of administration expense incurred and invoiced by Barings for expenses was approximately $0.8 million and $1.8 million, respectively.

For the three and nine months ended September 30, 2020, the amount of administration expense incurred and invoiced by the Adviser for expenses was approximately $0.3 million and $0.9 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 and six months ended June 30, 2021 and 2020 were as follows:

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

Ended Three Months

Ended Six Months Ended Six Months Ended

2021 June 30,

2020 June 30,

2021 June 30,

Ended Nine Months Ended Nine Months Ended

September 30,

2021 September 30,

2020 September 30,

2021 September 30,

Net realized gain (losses):

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Net realized gains (losses) $ (3,761,700) $ (20,506,085) $ (1,579,460) $ (37,323,454)

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

In the three months ended September 30, 2021, we recognized net realized losses totaling $3.8 million, which consisted primarily of a net loss on foreign currency transactions of $4.7 million, partially offset by a net gain on our loan portfolio of $0.9 million.

In the nine months ended September 30, 2021, we recognized net realized losses totaling $1.6 million, which consisted primarily of a net loss on foreign currency transactions of $5.9 million, partially offset by a net gain on our loan portfolio of $4.3 million.

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

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Net Unrealized Appreciation (Depreciation)

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

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

Ended Three Months

Ended Six Months Ended Six Months Ended

2021 June 30,

2020 June 30,

2021 June 30,

Ended Nine Months Ended Nine Months Ended

September 30,

2021 September 30,

2020 September 30,

2021 September 30,

Net unrealized appreciation (depreciation):

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Net unrealized appreciation (depreciation) $ 3,315,063 $ 55,947,382 $ 23,998,631 $ 1,594,639

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.

During the three months ended September 30, 2021, we recorded net unrealized appreciation totaling $3.3 million, consisting of net unrealized appreciation related to foreign currency transactions of $10.9 million, partially offset by net unrealized depreciation on our current portfolio of $4.7 million and unrealized depreciation reclassification adjustments of $2.9

million related to the net realized gains on the sales / repayments of certain investments.

The net unrealized depreciation on our current portfolio of $4.7 million was driven primarily by the impact of foreign currency exchange rates on investments of $6.9 million and the credit or fundamental performance of investments of $0.2 million, partially offset by broad market moves for investments of $2.4 million.

During the nine months ended September 30, 2021, we recorded net unrealized appreciation totaling $24.0 million, consisting of net unrealized appreciation on our current portfolio of $13.8 million, unrealized appreciation related to foreign currency transactions of $14.3 million and unrealized appreciation of $0.7 million on the credit support agreement with Barings, net of unrealized depreciation reclassification adjustments of $4.7 million related to the net realized gains on the sales / repayments of certain investments.

The net unrealized appreciation on our current portfolio of $13.8 million was driven primarily by broad market moves for investments of $24.0 million and the credit or fundamental performance of investments of $1.9 million, partially offset by the impact of foreign currency exchange rates on investments of $12.1 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.

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 and net unrealized appreciation reclassification adjustments of $28.4 million related to the net realized losses on the sales / repayments of certain investments, net of net unrealized depreciation related to foreign currency transactions of $2.1 million.

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 appreciation reclassification adjustments of $51.4 million related to the net realized losses on the sales / repayments of certain investments, partially offset by net unrealized depreciation on our current portfolio of $48.1 million and net unrealized depreciation related to foreign currency transactions of $1.8 million.

The net unrealized depreciation on our current portfolio of $48.1 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.

Liquidity and Capital Resources

1 unchanged sentence

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 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.

For the nine months ended September 30, 2021, we experienced a net decrease in cash in the amount of $51.1 million.

During that period, our operating activities used $115.9 million in cash, consisting primarily of purchases of portfolio investments of $816.8 million and purchases of short-term investments of $297.6 million, partially offset by proceeds from sales or repayments of portfolio investments totaling $648.3 million and sales of short-term investments of $313.1 million.

In addition, our financing activities provided $64.8 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 $45.8 million and dividends paid in the amount of $39.2 million.

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.

As of September 30, 2021, we had $41.4 million of cash and foreign currencies on hand.

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

During that period, our operating activities provided $4.8 million in cash, consisting primarily of proceeds from sales or repayments of portfolio investments totaling $417.0 million and sales of short-term investments of $583.2 million, partially offset by purchases of portfolio investments of $316.7 million and purchases of short-term investments of $697.1 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 August 2025 Notes issuance of $49.5 million.

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

Financing Transactions

5 unchanged sentences

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, Barings BDC Senior Funding I, LLC 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 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.

4 unchanged sentences

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 June 30, 2021, we were in compliance with all covenants under the February 2019 Credit Facility and had U.S.

As of September 30, 2021, we were in compliance with all covenants under the February 2019 Credit Facility and had U.S.

dollar borrowings of $382.0 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.

7 unchanged sentences

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

As of September 30, 2021, the total fair value of the borrowings outstanding under the February 2019 Credit Facility was $662.7 million.

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

2 unchanged sentences

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 is 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.

5 unchanged sentences

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 June 30, 2021, we were in compliance with all covenants under the August 2020 NPA.

As of September 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 June 30, 2021, the fair value of the outstanding August 2025 Notes was $50.0 million.

As of September 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.

4 unchanged sentences

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.

Interest on the November Notes is 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.

5 unchanged sentences

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 June 30, 2021, we were in compliance with all covenants under the November 2020 NPA.

As of September 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 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.

As of September 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.

4 unchanged sentences

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.

Interest on the February Notes is 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.

8 unchanged sentences

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 June 30, 2021, we were in compliance with all covenants under the February 2021 NPA.

As of September 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 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.

As of September 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.

3 unchanged sentences

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.

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.

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 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.

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

Distributions to Stockholders

2 unchanged sentences

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.

We have elected to be treated as a RIC under the Code, and intend to make the required distributions to our stockholders as specified therein.

In order to maintain our tax treatment as a RIC and to obtain RIC tax benefits, we must meet certain minimum distribution, source-of-income and asset diversification requirements.

12 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.

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.

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.

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

2 unchanged sentences

Recent Developments

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.

Subsequent to September 30, 2021, we made approximately $238.5 million of new commitments, of which $164.4 million closed and funded.

The $164.4 million of investments consist of $124.9 million of first lien senior secured debt investments, $14.5 million of second lien senior secured and subordinated debt investments and $25.0 million of equity investments.

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

In addition, we funded $3.8 million of previously committed delayed draw term loans.

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.

Effective on November 4, 2021, we increased our aggregate commitments under the February 2019 Credit Facility to $875.0 million from $800.0 million pursuant to the accordion feature under the February 2019 Credit Facility, which allows for an increase in the total commitments to an aggregate of $1.2 billion subject to certain conditions and the satisfaction of specified financial covenants.

On November 9, 2021, the Board declared a quarterly distribution of $0.22 per share payable on December 1, 2021 to holders of record as of November 24, 2021.

Critical Accounting Policies and Use of Estimates

19 unchanged sentences

A financial instrument is categorized within the ASC Topic 820 valuation hierarchy based upon the lowest level of input to the valuation process that is significant to the fair value measurement.

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).

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).

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.

23 unchanged sentences

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.

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.

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.

The SEC has 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.

26 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 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

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

Nine Months Ended

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

Recurring Fee Income:

22 unchanged sentences

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

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

As of September 30, 2021 and December 31, 2020, we believed that we had adequate financial resources to satisfy our unfunded commitments.

The balances of unused commitments to extend financing as of September 30, 2021 and December 31, 2020 were as follows:

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

Acclime Holdings HK Limited(1)(2) Delayed Draw Term Loan $ 3,750,000 $ —

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

3 unchanged sentences

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

Bidwax(1)(3) Acquisition Capex Facility 711,540 —

BigHand UK Bidco Limited(1)(4) Acquisition Capex Facility 376,644 —

Bounteous, Inc.(1)(2) Delayed Draw Term Loan 613,636 —

British Engineering Services Holdco Limited(1)(4) Acquisition Facility — 7,006,008

5 unchanged sentences

Contabo Finco S.À R.L(1)(3) Delayed Draw Term Loan 216,163 228,211

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

Coyo Uprising GmbH(1)(2)(3) Delayed Draw Term Loan 910,613 —

CSL Dualcom(1)(4) Delayed Draw Term Loan 993,478 1,007,182

1 unchanged sentence

DreamStart Bidco SAS(1)(3) Acquisition Facility 943,074 995,640

Dune Group(1)(2)(3) Delayed Draw Term Loan 1,390,740 —

Dwyer Instruments, Inc.(1)(2) Delayed Draw Term Loan 1,217,712 —

Eclipse Business Capital, LLC(1) Revolver 13,636,364 —

EPS NASS Parent, Inc.(1) Delayed Draw Term Loan 583,051 —

8 unchanged sentences

IGL Holdings III Corp.(1)(2) Delayed Draw Term Loan 3,408,219 5,914,219

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

Innovad Group II BV(1)(2)(3) Delayed Draw Term Loan 1,859,447 —

5 unchanged sentences

LivTech Purchaser, Inc.(1)(2) Delayed Draw Term Loan 81,977 —

MC Group Ventures Corporation(1) Delayed Draw Term Loan 817,249 —

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

Modern Star Holdings Bidco Pty Limited(1)(2)(5) Capex Term Loan 2,168,002 2,315,967

2 unchanged sentences

OG III B.V.(1)(2)(3) Acquisition Capex Facility 905,556 —

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)(2)(5) CapEx Term Loan 1,274,275 1,535,025

PDQ.Com Corporation(1)(2) Delayed Draw Term Loan 289,389 —

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

1 unchanged sentence

Protego Bidco B.V.(1)(2)(3) Delayed Draw Term Loan 860,413 —

Protego Bidco B.V.(1)(3) Revolver 1,548,591 —

PSC UK Pty Ltd.(1)(4) Acquisition Facility 527,876 535,157

QPE7 SPV1 BidCo Pty Ltd(1)(5) Acquisition Capex Facility 732,210 —

Questel Unite(1)(2)(3) Cap Acquisition Facility — 10,300,913

1 unchanged sentence

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

Reward Gateway (UK) Ltd(1)(2)(4) Acquisition Facility 2,247,224 —

Safety Products Holdings, LLC(1)(2) Delayed Draw Term Loan — 6,467,345

27 unchanged sentences

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

As of September 30, 2021 and December 31, 2020, we had guaranteed €9.9 million ($11.5 million U.S.

dollars and $12.1 million U.S.

7 unchanged sentences

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.

The letter of credit expired on April 30, 2021, and as of September 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