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• Shares of closed-end investment companies, including BDCs, frequently trade at a discount to their net asset value, and may trade at premiums that may prove to be unsustainable.
+Added: • Sales of shares of the Company’s common stock after the completion of the Sierra Merger may cause the market price of the Company’s common stock to decline.
+Added: • The Company may be unable to realize the benefits anticipated by the Sierra Merger, including estimated cost savings, or it may take longer than anticipated to realize such benefits.
Risks Relating to Our Business and Structure
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Our future success depends on the continued availability of the members of Barings’ investment committee and the other investment professionals available to Barings.
−Removed: We do not have employment agreements with these individuals or other key personnel of Barings, and we cannot provide any assurance that unforeseen business, medical, personal or other circumstances would not lead any such individual to terminate his or her relationship with Barings.
+Added: We do not have employment agreements with these individuals or other key personnel of Barings, and we cannot provide any assurance that unforeseen business, medical, personal or other circumstances would not lead any such individual to terminate his or
+Added: her relationship with Barings.
If these individuals do not maintain their existing relationships with Barings and its affiliates or do not develop new relationships with other sources of investment opportunities, we may not be able to identify appropriate replacements or grow our investment portfolio.
−Removed: The loss of any member of Barings’ investment committee or of other investment professionals of Barings and its affiliates would limit our ability to achieve our
−Removed: investment objectives and operate as we anticipate, which could have a material adverse effect on our financial condition, results of operations and cash flows.
+Added: The loss of any member of Barings’ investment committee or of other investment professionals of Barings and its affiliates would limit our ability to achieve our investment objectives and operate as we anticipate, which could have a material adverse effect on our financial condition, results of operations and cash flows.
Our financial condition and results of operations will depend on our ability to manage and deploy capital effectively.
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As a result, investors purchasing our securities based on an overstated net asset value would pay a higher price than the value of our investments might warrant.
−Removed: Conversely, investors selling shares during a period in which the net asset value understates the value of our investments will receive a lower price for their shares than the value of our investments might warrant.
+Added: Conversely, investors selling shares
+Added: during a period in which the net asset value understates the value of our investments will receive a lower price for their shares than the value of our investments might warrant.
We operate in a highly competitive market for investment opportunities, which could reduce returns and result in losses.
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Barings may exercise significant influence over us in connection with its ownership of our common stock.
−Removed: As of March 23, 2021, Barings, our external investment adviser, beneficially owns approximate ly 20.9% of our outstanding common stock.
+Added: As of February 23, 2022, Barings, our external investment adviser, beneficially owns approximately 20.9% o f our outstanding common stock.
As a result, Barings may be able to significantly influence the outcome of matters submitted for stockholder action, including the election of directors, approval of significant corporate transactions, such as amendments to our governing documents, business combinations, consolidations and mergers.
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For example, a BDC may invest alongside such accounts consistent with guidance promulgated by the SEC staff permitting the BDC and such other accounts to purchase interests in a single class of privately placed securities so long as certain conditions are met, including that the BDC’s investment adviser, acting on the BDC’s behalf and on behalf of other clients, negotiates no term other than price.
−Removed: Co-investment with such other accounts is not permitted or appropriate under this guidance when there is an opportunity to invest in different securities of the same issuer or where the different investments could be expected to result in a conflict between the BDC’s interests and those of other accounts.
The 1940 Act generally prohibits BDCs from making certain negotiated co-investments with certain affiliates absent an order from the SEC permitting the BDC to do so.
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In situations where co-investment with other affiliated funds or accounts is not permitted or appropriate, Barings will need to decide which account will proceed with the investment in accordance with its allocation policies and procedures.
−Removed: Although Barings will endeavor to allocate investment opportunities in a fair and equitable manner in accordance with its allocation policies and procedures, it is possible that, in the future, we may not be
−Removed: given the opportunity to participate in investments made by investment funds managed by Barings or an investment manager affiliated with Barings if such investment is prohibited by the 1940 Act.
−Removed: These restrictions, and similar restrictions that limit our ability to transact business with our officers or directors or their affiliates, including funds managed by Barings, may limit the scope of investment opportunities that would otherwise be available to us.
+Added: Although Barings will endeavor to allocate investment opportunities in a fair and equitable manner in accordance with its allocation policies and procedures, it is possible that, in the future, we may not be given the opportunity to participate in investments made by investment funds managed by Barings or an investment manager affiliated with Barings if such investment is prohibited by the 1940 Act.
+Added: These restrictions, and similar
+Added: restrictions that limit our ability to transact business with our officers or directors or their affiliates, including funds managed by Barings, may limit the scope of investment opportunities that would otherwise be available to us.
We are subject to risks associated with investing alongside other third parties, including our joint ventures.
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The fee structure under the Amended and Restated Advisory Agreement may induce Barings to pursue speculative investments and incur leverage, which may not be in the best interests of our stockholders.
−Removed: On December 23, 2020, we entered into the Amended and Restated Advisory Agreement, which became effective on January 1, 2021.
−Removed: Pursuant to the Amended and Restated Advisory Agreement, the base management fee will be payable even if the value of your investment declines.
+Added: Under the Amended and Restated Advisory Agreement, the base management fee will be payable even if the value of your investment declines.
The base management fee is calculated based on our gross assets, including assets purchased with borrowed funds or other forms of leverage (but excluding cash or cash equivalents ).
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Barings' liability is limited under the Amended and Restated Advisory Agreement, and we are required to indemnify Barings against certain liabilities, which may lead Barings to act in a riskier manner on our behalf than it would when acting for its own account.
−Removed: Pursuant to the Amended and Restated Advisory Agreement, Barings and its officers, managers, partners, agents, employees, controlling persons, members and any other person or entity affiliated with Barings will not be liable to us, and we have agree to indemnify them, for their acts under the Amended and Restated Advisory Agreement, absent fraud, willful misfeasance, bad faith, gross negligence or reckless disregard in the performance of their duties.
+Added: Pursuant to the Amended and Restated Advisory Agreement, Barings and its officers, managers, partners, agents, employees, controlling persons, members and any other person or entity affiliated with Barings will not be liable to us, and we have agree to indemnify them, for their acts under the Amended and Restated Advisory Agreement, absent fraud, willful misfeasance, bad faith, gross negligence or reckless disregard in the performance of
+Added: their duties.
These protections may lead Barings to act in a riskier manner when acting on our behalf than it would when acting for its own account.
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We generally seek approval from our stockholders so that we have the flexibility to issue up to a specified percentage of our then-outstanding shares of our common stock at a price below net asset value.
−Removed: Pursuant to approval granted at an annual meeting of stockholders held on April 30, 2020, we are permitted to issue and sell shares of our common stock at a price below our then-current net asset value per share in one or more offerings, subject to certain limitations and determinations that must be made by the Board (including, without limitation, that the number of shares issued and sold pursuant to such authority does not exceed 25% of our then-outstanding common stock immediately prior to each such offering).
−Removed: Such stockholder approval expires on April 30, 2021.
+Added: Pursuant to approval granted at an annual meeting of stockholders held on May 20, 2021, we are permitted to issue and sell shares of our common stock at a price below our then-current net asset value per share in one or more offerings, subject to certain limitations and determinations that must be made by the Board (including, without limitation, that the number of shares issued and sold pursuant to such authority does not exceed 30% of our then-outstanding common stock immediately prior to each such offering).
+Added: Such stockholder approval expires on May 20, 2022.
Our financing agreements contain various covenants, which, if not complied with, could accelerate our repayment obligations thereunder, thereby materially and adversely affecting our liquidity, financial condition, results of operations and ability to pay distributions.
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This decline could negatively affect our ability to make dividend payments on our common stock.
−Removed: Because we incur additional leverage, general interest rate fluctuations may have a more significant negative impact on our investments than they would have absent such additional leverage and, accordingly, may have a material adverse effect on our operating results.
+Added: Because we incur leverage, general interest rate fluctuations may have a more significant negative impact on our investments than they would have absent such leverage and, accordingly, may have a material adverse effect on our operating results.
A portion of our income will depend upon the difference between the rate at which we borrow funds and the interest rate on the debt securities in which we invest.
Because we borrow money to make investments and may issue debt securities, preferred stock or other securities, our net investment income is dependent upon the difference between the rate at which we borrow funds or pay interest or dividends on such debt securities, preferred stock or other securities and the rate at which we invest these funds.
+Added: As such, a significant increase in market interest rates could both reduce the value of our portfolio investments and increase our cost of capital, which would reduce our net investment income.
+Added: Conversely, a decrease in interest rates may have an adverse impact on our returns by requiring us to seek lower yields on our debt investments and by increasing the risk that our portfolio companies will prepay our debt investments, resulting in the need to redeploy capital at potentially lower rates.
Typically, our interest earning investments accrue and pay interest at variable rates, and our interest-bearing liabilities accrue interest at variable or potentially fixed rates.
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Corresponding return to common stockholder assuming actual asset coverage as of December 31, 2021(1)
+Added: (35.6) % (21.0) % (6.5) % 8.1 % 22.7 %
Corresponding return to common stockholder assuming 150% asset coverage as of December 31, 2021(2)
+Added: (37.3) % (22.1) % (6.8) % 8.4 % 23.7 %
(1) Assumes $2,160.9 million in total assets, $1,407.0 million in debt outstanding, $741.9 million in net assets and an average cost of funds of 3.412%, which was the weighted average borrowing cost of our outstanding borrowings at December 31, 2021.
−Removed: The assumed amount of debt outstanding for this example includes $719.7 million of outstanding borrowings under the February 2019 Credit Facility as of December 31, 2020, $50.0 million aggregate principal amount of August 2025 Notes (as defined below under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” included in Item 7 of Part II of this Annual Report on Form 10-K) outstanding, $175.0 million aggregate principal amount of November Notes (as defined below under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” included in Item 7 of Part II of this Annual Report on Form 10-K) outstanding, and assumed additional borrowings of $1.5 million to settle our payable from unsettled transactions as of December 31, 2020.
+Added: The assumed amount of debt outstanding for this example includes $655.2 million of outstanding borrowings under the February 2019 Credit Facility as of December 31, 2021, $50.0 million aggregate principal amount of August 2025 Notes (as defined below under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” included in Item 7 of Part II of this Annual Report on Form 10-K) outstanding, $175.0 million aggregate principal amount of November Notes (as defined below under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” included in Item 7 of Part II of this Annual Report on Form 10-K) outstanding, $150.0 million aggregate principal amount of February Notes (as defined below under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” included in Item 7 of Part II of this Annual Report on Form 10-K) outstanding, $350.0 million aggregate principal amount of November 2026 Notes (as defined below under "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources" included in Item 7 of Part II of this Annual Report on Form 10-K) outstanding, and assumed additional borrowings of $26.8 million to settle our payable from unsettled transactions as of December 31, 2021.
(2) Assumes $2,264.6 million in total assets, $1,483.9 million in debt outstanding and $741.9 million in net assets as of December 31, 2021, and an average cost of funds of 3.412%, which was the weighted average borrowing cost of our borrowings at December 31, 2021.
−Removed: Based on our total outstanding indebtedness of $944.7 million as of December 31, 2020, assumed additional borrowings of $1.5 million to settle our payable from unsettled transactions as of December 31, 2020 and an average cost of funds of 2.725%, which was the weighted average borrowing cost of our outstanding borrowings at December 31, 2020, our investment portfolio must experience an annual return of at least 1.54% to cover annual interest payments on our outstanding indebtedness.
+Added: Based on our total outstanding indebtedness of $1,380.2 million as of December 31, 2021, assumed additional borrowings of $26.8 million to settle our payable from unsettled transactions as of December 31, 2021 and an average cost of funds of 3.412%, which was the weighted average borrowing cost of our outstanding borrowings at
+Added: December 31, 2021, our investment portfolio must experience an annual return of at least 2.22% to cover annual interest payments on our outstanding indebtedness.
Based on outstanding indebtedness of $1483.9 million calculated assuming a 150% asset coverage ratio and an average cost of funds of 3.412%, which was the weighted average borrowing cost of our outstanding borrowings at December 31, 2021, our investment portfolio must experience an annual return of at least 2.24% to cover annual interest payments on our outstanding indebtedness.
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• The asset diversification requirement will be satisfied if we meet certain asset diversification requirements at the end of each quarter of our taxable year.
−Removed: To satisfy this requirement, at least 50.0% of
−Removed: the value of our assets must consist of cash, cash equivalents, U.S.
−Removed: government securities, securities of other RICs, and other acceptable securities, provided such other securities of any one issuer do not represent more than 5% of the value of our assets or more than 10% of the outstanding voting securities of the issuer;
+Added: To satisfy this requirement, at least 50.0% of the value of our assets must consist of cash, cash equivalents, U.S.
+Added: government securities, securities of other RICs, and other acceptable securities, provided such other securities of any one issuer do not represent more than 5% of the value of our assets or more than 10% of the outstanding voting securities
+Added: of the issuer;
and no more than 25.0% of the value of our assets can be invested in the securities, other than U.S.
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We may also have to include in income other amounts that we have not yet received in cash, such as deferred loan origination fees that are paid after origination of the loan or are paid in non-cash compensation such as PIK interest.
−Removed: We anticipate that a portion of our income may constitute original issue discount or other income required to be included in taxable
−Removed: income prior to receipt of cash.
+Added: We anticipate that a portion of our income may constitute original issue discount or other income required to be included in taxable income prior to receipt of cash.
Further, we may elect to amortize market discounts and include such amounts in our taxable income in the current year, instead of upon disposition, as an election not to do so would limit our ability to deduct interest expenses for U.S.
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There is no assurance that any future share repurchase plans will result in future repurchases of our common stock or enhance long-term stockholder value, and repurchases, if any, could affect our stock price and increase its volatility and will diminish our cash reserves.
−Removed: In February 2019, pursuant to authorization from our Board, we adopted the share repurchase plan (the "2019 Share Repurchase Plan") for the purpose of repurchasing in 2019 up to a maximum of 5.0% of our outstanding shares of our common stock on the open market.
−Removed: Under the 2019 Share Repurchase Plan, we could repurchase a maximum of 2.5% of the amount of shares of our common stock outstanding if shares traded below net asset value per share but in excess of 90% of net asset value per share;
−Removed: and a maximum of 5.0% of the amount of shares of our common stock outstanding if shares traded below 90% of net asset value per share.
−Removed: We were not obligated to repurchase any specific number or dollar amount of our common stock under the 2019 Share Repurchase Plan, and we could modify, suspend or discontinue the 2019 Share Repurchase Plan at any time.
−Removed: During the year ended December 31, 2019, we repurchased a total of 2,333,261 shares of our common stock in the open market under the 2019 Share Repurchase Plan at an average price of $10.01 per share, including broker commissions.
−Removed: On February 27, 2020, the Board approved an open-market share repurchase program for the 2020 fiscal year (the "2020 Share Repurchase Program").
−Removed: 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 net asset value per share, subject to liquidity and regulatory constraints.
−Removed: There was no assurance that we would purchase shares at any specific discount levels or in any specific amounts.
−Removed: During the year ended December 31, 2020, we repurchased a total of 989,050 shares of our common stock in the open market under the 2020 Share Repurchase Program at an average price of $7.21 per share, including broker commissions.
On December 23, 2020, as part of the MVC Acquisition, the Board affirmed its commitment under the Merger Agreement to open-market purchases of shares of our common stock in an aggregate amount of up to $15.0 million at then-current market prices at any time shares trade below 90% of our then most recently disclosed net asset value per share.
−Removed: Any repurchases pursuant to the authorized program will occur during the 12-month period commencing upon the filing of our quarterly report on Form 10-Q for the quarter ending March 31, 2021 and are expected to be made in accordance with a Rule 10b5-1 purchase plan that qualifies for the safe harbors provided by Rules 10b5-1 and 10b-18 under the Exchange Act, as well as subject to compliance with our covenant and regulatory requirements.
+Added: 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, regulatory and contractual requirements .
+Added: During the year ended December 31, 2021, we did not repurchase any shares under the authorized program.
There can be no assurance that any future share repurchases will occur, or, if they occur, that they will enhance stockholder value.
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In addition, stockholder activism, which could take many forms or arise in a variety of situations, including making public demands that we consider strategic alternatives, engaging in public campaigns to attempt to influence our corporate governance and/or our management, and commencing proxy contests to attempt to elect the activists' representatives or others to the Board, has increased in the BDC space in recent years.
−Removed: For example, we and certain of our former executive officers have been named defendants in a class-action lawsuit asserting claims under Section 10(b) and Section 20(a) of the Exchange Act, and, due to the potential volatility of our stock price and for a variety of other reasons, we may in the future become the target of further securities litigation or stockholder activism.
−Removed: See “Legal Proceedings” in Item 3 of Part I of this Annual Report on Form 10-K for more information.
+Added: For example, we and certain of our former executive officers have previously been named defendants in a class-action lawsuit asserting claims under Section 10(b) and Section 20(a) of the Exchange Act, and, due to the potential volatility of our stock price and for a variety of other reasons, we may in the future become the target of further securities litigation or stockholder activism.
Securities litigation and stockholder activism, including potential proxy contests, may result in substantial costs and divert management’s and the Board's attention and resources from our business.
2 unchanged sentences
Further, our stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any securities litigation and stockholder activism.
−Removed: We may be unable to realize the benefits anticipated by the MVC Acquisition, including estimated cost savings, or it may take longer than anticipated to realize such benefits.
−Removed: The realization of certain benefits anticipated as a result of the MVC Acquisition will depend in part on the integration of MVC’s investment portfolio with our portfolio and the integration of MVC’s business with our business.
−Removed: There can be no assurance that MVC’s investment portfolio or business can be operated profitably or integrated successfully into our operations in a timely fashion or at all.
−Removed: The dedication of management resources to
−Removed: such integration may divert attention from the day-to-day business, and there can be no assurance that there will not be substantial costs associated with the transition process or there will not be other material adverse effects as a result of these integration efforts.
−Removed: Such effects, including incurring unexpected costs or delays in connection with such integration and failure of MVC’s investment portfolio to perform as expected, could have a material adverse effect on our financial results.
−Removed: We also expect to achieve certain cost savings from the MVC Acquisition when the two companies have fully integrated their portfolios.
−Removed: It is possible that the estimates of the potential cost savings could ultimately be incorrect.
−Removed: If the estimates turn out to be incorrect or if we are not able to successfully combine MVC’s investment portfolio or business with our operations, the anticipated cost savings may not be fully realized, or realized at all, or may take longer to realize than expected.
Risks Relating to Our Investments
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In addition, in the course of providing significant managerial assistance to certain of our portfolio companies, certain of our officers and directors or certain of Barings' investment professionals may serve as directors on the boards of such companies.
−Removed: We or Barings may in the future be subject to litigation that arises out of our investments in these companies, and our officers and directors or Barings and/or its investment professionals may be named as defendants in such litigation, which could result in an expenditure of funds (through our indemnification of such officers and directors) and the diversion of our officers', directors' and Barings' time and resources.
+Added: We or Barings may in the future be subject to litigation that arises out of our investments
+Added: in these companies, and our officers and directors or Barings and/or its investment professionals may be named as defendants in such litigation, which could result in an expenditure of funds (through our indemnification of such officers and directors) and the diversion of our officers', directors' and Barings' time and resources.
The lack of liquidity in our investments may adversely affect our business.
1 unchanged sentence
The illiquidity of these investments may make it difficult for us to sell these investments when desired.
−Removed: In addition, if we
−Removed: are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we had previously recorded these investments.
+Added: In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we had previously recorded these investments.
Price declines and illiquidity in the corporate debt markets may adversely affect the fair value of our portfolio investments, reducing our net asset value through increased net unrealized depreciation.
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Our portfolio companies may have, or be permitted to incur, other debt that ranks equally with, or senior to, the debt securities in which we invest.
−Removed: Such subordinated investments are subject to greater risk of default than senior obligations as a
−Removed: result of adverse changes in the financial condition of the obligor or in general economic conditions.
+Added: Such subordinated investments are subject to greater risk of default than senior obligations as a result of adverse changes in the financial condition of the obligor or in general economic conditions.
If we make a subordinated investment in a portfolio company, the portfolio company may be highly leveraged, and its relatively high debt-to-equity ratio may create increased risks that its operations might not generate sufficient cash flow to service all of its debt obligations.
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There is also a risk that such collateral securing our investments may decrease in value over time, may be difficult to sell in a timely manner, may be difficult to appraise and may fluctuate in value based upon the success of the portfolio company and market conditions.
−Removed: If such proceeds are not sufficient to repay amounts outstanding under the loan obligations secured by our second priority liens, then we, to the extent not repaid from the proceeds from the sale of the collateral, will only have an unsecured claim against the company’s remaining assets, if any.
+Added: If such proceeds are not sufficient to repay amounts outstanding under the loan obligations secured by our second priority liens, then we, to the extent not
+Added: repaid from the proceeds from the sale of the collateral, will only have an unsecured claim against the company’s remaining assets, if any.
Covenant-Lite Loans may expose us to different risks, including with respect to liquidity, price volatility, ability to restructure loans, credit risks and less protective loan documentation, than is the case with loans that contain financial maintenance covenants.
−Removed: A significant number of high yield loans in the market, in particular the broadly syndicated loan market, may consist of covenant-lite loans, or “Covenant-Lite Loans.” A significant portion of the loans in which we may invest or get exposure to through our investments may be deemed to be Covenant-Lite Loans and it is possible that such
−Removed: loans may comprise a majority of our portfolio.
+Added: A significant number of high yield loans in the market, in particular the broadly syndicated loan market, may consist of covenant-lite loans, or “Covenant-Lite Loans.” A significant portion of the loans in which we may invest or get exposure to through our investments may be deemed to be Covenant-Lite Loans and it is possible that such loans may comprise a majority of our portfolio.
Such loans do not require the borrower to maintain debt service or other financial ratios and do not include terms which allow the lender to monitor the performance of the borrower and declare a default if certain criteria are breached.
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Moreover, for a variety of reasons, we may not seek to (or be able to) establish a perfect correlation between such hedging instruments and the portfolio holdings being hedged.
−Removed: Any such imperfect correlation may prevent us from achieving the intended hedge and expose us to risk of loss.
+Added: Any such imperfect correlation may prevent us from
+Added: achieving the intended hedge and expose us to risk of loss.
In addition, it may not be possible to hedge fully or perfectly against currency fluctuations affecting the value of securities denominated in non-U.S.
27 unchanged sentences
Additionally, prepayments could negatively impact our return on equity, which could result in a decline in the market price of our securities.
+Added: Any unrealized losses we experience on our loan portfolio may be an indication of future realized losses, which could reduce our income available for distribution.
+Added: As a BDC, we are required to carry our investments at market value or, if no market value is ascertainable, at the fair value as determined in good faith by the Board.
+Added: Decreases in the market values or fair values of our investments will be recorded as unrealized depreciation.
+Added: Any unrealized losses in our loan portfolio could be an indication of a portfolio company’s inability to meet its repayment obligations to us with respect to the affected loans.
+Added: This could result in realized losses in the future and ultimately in reductions of our income available for distribution in future periods.
+Added: Defaults by our portfolio companies may harm our operating results.
+Added: A portfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults and, potentially, termination of its loans and foreclosure on its secured assets, which could trigger cross-defaults under other agreements and jeopardize a portfolio company’s ability to meet its obligations under the debt or equity securities that we hold.
+Added: We may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms, which may include the waiver of certain financial covenants, with a defaulting portfolio company.
We may not realize gains from our equity investments.
17 unchanged sentences
Furthermore, debtors may be entitled to the protection of a number of state and federal consumer credit laws with respect to the assets underlying these securities, which may give the debtor the right to avoid or reduce payment.
+Added: Our investments in collateralized loan obligation vehicles are subject to additional risks.
+Added: We may invest in debt and equity interests of collateralized loan obligation (“CLO”) vehicles.
+Added: Generally, there may be less information available to us regarding the underlying debt investments held by such CLOs than if we had invested directly in the debt of the underlying companies.
+Added: As a result, we and our stockholders may not know the details of the underlying holdings of the CLO vehicles in which we may invest.
+Added: As a BDC, we may not acquire equity and junior debt investments in CLO vehicles unless, at the time of and after giving effect to such acquisition, at least 70% of our total assets are “qualifying assets.” CLO vehicles that we expect to invest in are typically very highly leveraged, and therefore, the junior debt and equity tranches that we expect to invest in are subject to a higher degree of risk of total loss.
+Added: In particular, investors in CLO vehicles indirectly bear risks of the underlying debt investments held by such CLO vehicles.
+Added: We will generally have the right to receive payments only from the CLO vehicles, and will generally not have direct rights against the underlying borrowers or the entity that sponsored the CLO vehicle.
+Added: While the CLO vehicles we intend to target generally enable the investor to acquire interests in a pool of leveraged corporate loans without the expenses associated with directly holding the same investments, we will generally pay a proportionate share of the CLO vehicles’ administrative and other expenses.
+Added: Although it is difficult to predict whether the prices of indices and securities underlying CLO vehicles will rise or fall, these prices (and, therefore, the prices of the CLO vehicles) will be influenced by the same types of political and economic events that affect issuers of securities and capital markets generally.
+Added: The failure by a CLO vehicle in which we invest to satisfy certain financial covenants, specifically those with respect to adequate collateralization and/or interest coverage tests, could lead to a reduction in its payments to us.
+Added: In the event that a CLO vehicle failed those tests, holders of debt senior to us may be entitled to additional payments that would, in turn, reduce the payments we would otherwise be entitled to receive.
+Added: If any of these occur, it could materially and adversely affect our operating results and cash flows.
+Added: In addition to the general risks associated with investing in debt securities, CLO vehicles carry additional risks, including, but not limited to:
+Added: (i) the possibility that distributions from collateral securities will not be adequate to make interest or other payments;
+Added: (ii) the quality of the collateral may decline in value or default;(iii) the fact that our investments in CLO tranches will likely be subordinate to other senior classes of note tranches thereof;
+Added: and (iv) the complex structure of the security may not be fully understood at the time of investment and may produce disputes with the CLO vehicle or unexpected investment results.
+Added: Our net asset value may also decline over time if our principal recovery with respect to CLO equity investments is less than the price we paid for those investments.
+Added: Investments in structured vehicles, including equity and junior debt instruments issued by CLO vehicles, involve risks, including credit risk and market risk.
+Added: Changes in interest rates and credit quality may cause significant price fluctuations.
+Added: Additionally, changes in the underlying leveraged corporate loans held by a CLO vehicle may cause payments on the instruments we hold to be reduced, either temporarily or permanently.
+Added: Structured investments, particularly the subordinated interests in which we intend to invest, may be less liquid than many other types of securities and may be more volatile than the leveraged corporate loans underlying the CLO vehicles we intend to target.
+Added: Fluctuations in interest rates may also cause payments on the tranches of CLO vehicles that we hold to be reduced, either temporarily or permanently.
+Added: Any interests we acquire in CLO vehicles will likely be thinly traded or have only a limited trading market and may be subject to restrictions on resale.
+Added: Securities issued by CLO vehicles are generally not listed on any U.S.
+Added: national securities exchange and no active trading market may exist for the securities of CLO vehicles in which we may invest.
+Added: Although a secondary market may exist for our investments in CLO vehicles, the market for our investments in CLO vehicles may be subject to irregular trading activity, wide bid/ask spreads and extended trade settlement periods.
+Added: As a result, these types of investments may be more difficult to value.
+Added: In addition, our investments in CLO warehouse facilities are short term investments and therefore may be subject to a greater risk relating to market conditions and economic recession or downturns.
+Added: We may be subject to risks associated with syndicated loans.
+Added: From time to time, we may acquire interests in syndicated loans.
+Added: Under the documentation for syndicated loans, a financial institution or other entity typically is designated as the administrative agent and/or collateral agent.
+Added: This agent is granted a lien on any collateral on behalf of the other lenders and distributes payments on the indebtedness as they are received.
+Added: The agent is the party responsible for administering and enforcing the loan and generally may take actions only in accordance with the instructions of a majority or two-thirds in commitments and/or principal amount of the associated indebtedness.
+Added: In most cases, we do not expect to hold a sufficient amount of the indebtedness to be able to compel any actions by the agent.
+Added: Consequently, we would only be able to direct such actions if instructions from us were made in conjunction with other holders of associated indebtedness that together with us compose the requisite percentage of the related indebtedness then entitled to take action.
+Added: Conversely, if holders of the required amount of the associated indebtedness other than us desire to take certain actions, such actions may be taken even if we did not support such actions.
+Added: Furthermore, if an investment is subordinated to one or more senior loans made to the applicable obligor, our ability to exercise such rights may be subordinated to the exercise of such rights by the senior lenders.
+Added: Accordingly, we may be precluded from directing such actions unless we act together with other holders of the indebtedness.
+Added: If we are unable to direct such actions, we cannot assure you that the actions taken will be in our best interests.
+Added: If an investment is a syndicated revolving loan or delayed drawdown loan, other lenders may fail to satisfy their full contractual funding commitments for such loan, which could create a breach of contract, result in a lawsuit by the obligor against the lenders and adversely affect the fair market value of our investment.
+Added: There is a risk that a loan agent in respect of one of our loans may become bankrupt or insolvent.
+Added: Such an event would delay, and possibly impair, any enforcement actions undertaken by holders of the associated indebtedness, including attempts to realize upon the collateral securing the associated indebtedness and/or direct the agent to take actions against the related obligor or the collateral securing the associated indebtedness and actions to realize on proceeds of payments made by obligors that are in the possession or control of any other financial institution.
+Added: In addition, we may be unable to remove the agent in circumstances in which removal would be in our best interests.
+Added: Moreover, agented loans typically allow for the agent to resign with certain advance notice.
+Added: Our special situations investments involve a high degree of credit and market risk.
+Added: Our special situations investments, which consist of investments in the securities and debt of financially troubled issuers or borrowers and operationally troubled issuers or borrowers, involve a high degree of credit and market risk.
+Added: Although the Company may invest in select companies that, in the view of Barings, have the potential over the long-term for capital growth, there can be no assurance that such financially troubled issuers or operationally troubled issuers can be successfully transformed into profitable operating companies.
+Added: There is a possibility that the Company may incur substantial or total losses on investments or that such investments may not show any return for a considerable period of time.
+Added: Under such circumstances, the returns generated from the investments may not compensate investors adequately for the risks assumed.
+Added: The level of analytical sophistication, both financial and legal, necessary for successful investment in companies experiencing significant business and financial difficulties is unusually high.
+Added: There can be no assurance that Barings will correctly evaluate the value of a company’s assets or the prospects for a successful reorganization or similar action.
+Added: During an economic downturn or recession, securities of financially troubled or operationally troubled issuers and borrowers are more likely to go into default than securities of other issuers.
+Added: In addition, it may be difficult to obtain information about such issuers and borrowers.
+Added: Securities and debt of financially troubled issuers or borrowers and operationally troubled issuers or borrowers are less liquid and more volatile than securities of companies not experiencing financial or operational difficulties.
+Added: The market prices of such securities are subject to erratic and abrupt market movements, and the spread between bid and asked prices may be greater than normally expected.
+Added: In addition, it is anticipated that many investments may not be widely traded and that the Company’s investment in such securities may be substantial relative to the market for such securities.
+Added: As a result, the Company may experience delays and incur losses and other costs in connection with the sale of investments.
+Added: Troubled company and other asset-based investments require active monitoring and may, at times, require participation in business strategy or reorganization proceedings by Barings.
+Added: To the extent that Barings becomes involved in such proceedings, the Company may have a more active participation in the affairs of the issuer than that
+Added: assumed generally by an investor.
+Added: In addition, involvement by Barings in an issuer’s reorganization proceedings could result in the imposition of restrictions limiting the Company’s ability to liquidate its position in the issuer or increase the likelihood of the Company being involved in litigation.
Risks Relating to Our Securities
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In any such case, the price at which our securities are to be issued and sold may not be less than a price that, in the determination of our board of directors, closely approximates the market value of such securities (less any commission or discount).
−Removed: If our common stock trades at a discount to net asset value, this restriction could adversely affect our
−Removed: ability to raise capital.
−Removed: Pursuant to approval granted at an annual meeting of stockholders held on April 30, 2020, we are permitted to issue and sell shares of our common stock at a price below our then-current net asset value per share in one or more offerings, subject to certain limitations and determinations that must be made by the Board (including, without limitation, that the number of shares issued and sold pursuant to such authority does not exceed 25% of our then-outstanding common stock immediately prior to each such offering).
−Removed: Such stockholder approval expires on April 30, 2021.
+Added: If our common stock trades at a discount to net asset value, this restriction could adversely affect our ability to raise capital.
+Added: Pursuant to approval granted at an annual meeting of stockholders held on May 20, 2021, we are permitted to issue and sell shares of our common stock at a price below our then-current net asset value per share in one or more offerings, subject to certain limitations and determinations that must be made by the Board (including, without limitation, that the number of shares issued and sold pursuant to such authority does not exceed 30% of our then-outstanding common stock immediately prior to each such offering).
+Added: Such stockholder approval expires on May 20, 2022.
Investing in our securities may involve an above average degree of risk.
25 unchanged sentences
We cannot assure you that we will be able to identify any investments that meet our investment objective or that any investment that we make will produce a positive return.
−Removed: We may be unable to invest the net proceeds from any offering on
−Removed: acceptable terms within the time period that we anticipate or at all, which could harm our financial condition and operating results.
+Added: We may be unable to invest the net proceeds from any offering on acceptable terms within the time period that we anticipate or at all, which could harm our financial condition and operating results.
We anticipate that, depending on market conditions, it may take a substantial period of time to invest substantially all of the net proceeds from any offering in securities meeting our investment objective.
7 unchanged sentences
If this occurs and continues, it could impair our ability to raise additional capital through the sale of securities should we desire to do so.
−Removed: If we sell common stock at a discount to our net asset value per share, stockholders who do not participate in such sale will experience immediate dilution in an amount that may be material.
−Removed: If we sell or otherwise issue shares of our common stock at a discount to net asset value, it will pose a risk of dilution to our stockholders.
−Removed: In particular, stockholders who do not purchase additional shares at or below the discounted price in proportion to their current ownership will experience an immediate decrease in net asset value per share (as well as in the aggregate net asset value of their shares if they do not participate at all).
−Removed: These stockholders will also experience a disproportionately greater decrease in their participation in our earnings and assets and their voting power than the increase we experience in our assets, potential earning power and voting interests from such issuances or sale.
+Added: If we sell common stock at a discount to our net asset value per share, stockholders will experience immediate dilution in an amount that may be material.
+Added: Any sale of common stock at a price below net asset value would result in an immediate dilution to existing common stockholders.
+Added: During periods of time in which we have authority from stockholders to issue shares of common stock at a price below net asset value, such shares of common stock could be issued at a price that is substantially below the net asset value per share, and the resulting dilution could be substantial.
+Added: This dilution would include reduction in the net asset value per share as a result of the issuance of shares at a price below the net asset value per share and a proportionately greater decrease in a stockholder’s interest in the earnings and assets of the Company and voting interest in the Company than the increase in the assets, potential earnings and voting interests of the Company resulting from such issuance.
In addition, such issuances or sales may adversely affect the price at which our common stock trades.
−Removed: Pursuant to approval granted at an annual meeting of stockholders held on April 30, 2020, we are permitted to issue and sell shares of our common stock at a price below our then-current net asset value per share in one or more offerings, subject to certain limitations and determinations that must be made by the Board (including, without limitation, that the number of shares issued and sold pursuant to such authority does not exceed 25% of our then-outstanding common stock immediately prior to each such offering).
−Removed: Such stockholder approval expires on April 30, 2021.
+Added: Pursuant to approval granted at an annual meeting of stockholders held on May 20, 2021, we are permitted to issue and sell shares of our common stock at a price below our then-current net asset value per share in one or more offerings, subject to certain limitations and determinations that must be made by the Board (including, without limitation, that the number of shares issued and sold pursuant to such authority does not exceed 30% of our then-outstanding common stock immediately prior to each such offering).
+Added: Such stockholder approval expires on May 20, 2022.
Provisions of the Maryland General Corporation Law and our charter and bylaws could deter takeover attempts and have an adverse impact on the price of our common stock.
2 unchanged sentences
In addition, our charter classifies the Board in three classes serving staggered three-year terms and provides that a director may be removed only for cause by the vote of at least two-thirds of the votes entitled to be cast for the election of directors generally.
−Removed: our bylaws provide that, subject to the satisfaction of certain procedural and informational requirements by the stockholders requesting the meeting, a special meeting of stockholders will be called by our secretary to act upon any matter that may properly be considered at a meeting of stockholders only upon the written request of the stockholders entitled to cast at least a majority of all the votes entitled to be cast on such matter at the meeting.
+Added: In addition, our bylaws provide that, subject to the satisfaction of certain procedural and informational requirements by the stockholders requesting the meeting, a special meeting of stockholders will be called by our secretary to act upon any matter that may properly be considered at a meeting of stockholders only upon the written request of the stockholders entitled to cast at least a majority of all the votes entitled to be cast on such matter at the meeting.
In addition, subject to the provisions of the 1940 Act, our charter permits the Board, without stockholder action, to authorize the issuance of shares of stock in one or more classes or series, including preferred stock.
6 unchanged sentences
If the dividend rate on the preferred stock, or the interest rate on the debt securities, were to approach the net rate of return on our investment portfolio, the benefit of leverage to the holders of our common stock would be reduced.
−Removed: If the dividend rate on the preferred stock, or the interest rate on the debt securities, were to exceed the net rate of return on our portfolio, the use of leverage would result in a lower rate of return to the holders of common stock than if we had not issued the preferred stock or debt securities.
+Added: If the dividend rate on the preferred stock, or the interest rate on the debt securities, were to exceed the net rate of return on our portfolio, the
+Added: use of leverage would result in a lower rate of return to the holders of common stock than if we had not issued the preferred stock or debt securities.
Any decline in the net asset value of our investment would be borne entirely by the holders of our common stock.
12 unchanged sentences
— Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities — Distribution Policy” of this Annual Report on Form 10-K for further discussion of distributions.
−Removed: The above-referenced restrictions on distributions may also inhibit our ability to make required interest payments to holders of our current debt including the August 2025 Notes, the November Notes and the February Notes (as defined below under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Recent Developments” included in Item 7 of Part II of this Annual Report on Form 10-K), and any future debt we may issue, which may cause a default under the terms of the relevant debt agreements.
+Added: The above-referenced restrictions on distributions may also inhibit our ability to make required interest payments to holders of our current debt including the August 2025 Notes, the November Notes, the February Notes and the November 2026 Notes (each as defined below under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Recent Developments” included in Item 7 of Part II of this Annual Report on Form 10-K), and any future debt we may issue, which may cause a default under the terms of the relevant debt agreements.
Such a default could materially increase our cost of raising capital, as well as cause us to incur penalties under the terms of our debt agreements.
3 unchanged sentences
In this circumstance, you may not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as your debt securities being redeemed.
−Removed: Subject to the terms of the August 2020 NPA (as defined below under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” included in Item 7 of Part II of this Annual Report on Form 10-K) , we may redeem the August 2025 Notes in whole or in part at any time or from time to time at our option at par plus accrued interest to the prepayment date and, if redeemed on or before November 3, 2024, a make-whole premium.
+Added: Subject to the terms of the August 2020 NPA (as defined below under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” included in Item 7 of Part II of this Annual Report on Form 10-K) , we may redeem the August 2025 Notes in whole or in part at any time
+Added: or from time to time at our option at par plus accrued interest to the prepayment date and, if redeemed on or before November 3, 2024, a make-whole premium.
Subject to the terms of the November 2020 NPA (as defined below under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” included in Item 7 of Part II of this Annual Report on Form 10-K) , we may redeem the Series B Notes and the Series C Notes in whole or in part at any time or from time to time at our option at par plus accrued interest to the prepayment date and, if redeemed on or before May 4, 2025, with respect to the Series B Notes, or on or before May 4, 2027, with respect to the Series C Notes, a make-whole premium.
Subject to the terms of the February 2021 NPA (as defined below under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Recent Developments” included in Item 7 of Part II of this Annual Report on Form 10-K) , we may redeem the Series D Notes and the Series E Notes in whole or in part at any time or from time to time at our option at par plus accrued interest to the prepayment date and, if redeemed on or before August 26, 2025, with respect to the Series D Notes, or on or before August 26, 2027, with respect to the Series E Notes, a make-whole premium.
−Removed: If we choose to redeem any of the August 2025 Notes, the November Notes or the February Notes when the fair market value of the August 2025 Notes, the November Notes or the February Notes is above par value, you would experience a loss of any potential premium.
−Removed: We may not be able to prepay the August 2025 Notes, the November Notes or the February Notes upon a change in control.
−Removed: The note purchase agreements governing the August 2025 Notes, the November Notes and the February Notes require us to offer to prepay all of the issued and outstanding notes upon the occurrence of certain change in control events, which could have a material adverse effect on our business, financial condition and results of operations.
+Added: Subject to the terms of the indenture governing the November 2026 Notes (as defined below under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” included in Item 7 of Part II of this Annual Report on Form 10-K), we may redeem the November 2026 Notes in whole or in part at our option at any time or from time to time at the redemption prices set forth in the indenture.
+Added: If we choose to redeem any of the August 2025 Notes, the November Notes, the February Notes or the November 2026 Notes when the fair market value of the August 2025 Notes, the November Notes, the February Notes or the November 2026 Notes is above par value, you would experience a loss of any potential premium.
+Added: We may not be able to prepay the August 2025 Notes, the November Notes, the February Notes or the November 2026 Notes upon a change in control.
+Added: The note purchase agreements governing the August 2025 Notes, the November Notes and the February Notes, and the indenture governing the November 2026 Notes, require us to offer to prepay all of the respective issued and outstanding notes upon the occurrence of certain change in control events, which could have a material adverse effect on our business, financial condition and results of operations.
Upon a change in control event, holders of the notes may require us to prepay for cash some or all of the notes at a prepayment price equal to 100% of the aggregate principal amount of the notes being prepaid, plus accrued and unpaid interest to, but not including, the date of prepayment.
14 unchanged sentences
In addition, in order to satisfy the annual distribution requirement applicable to RICs, we have the ability to declare a large portion of a dividend in shares of our common stock instead of in cash.
−Removed: As long as a portion of such dividend is paid in cash (which portion may be as low as 20% of the aggregate declared dividend) and certain requirements are met, the entire distribution will be treated as a dividend for U.S.
+Added: As long as a portion of such dividend is paid in cash (which portion may be as low as 20% of the declared dividend, and 10% of the declared dividend through June 30, 2022) and certain requirements are met, the entire distribution will be treated as a dividend for U.S.
federal income tax purposes.
6 unchanged sentences
Credit ratings are not a recommendation to buy, sell or hold any security, and may be revised or withdrawn at any time by the issuing organization in its sole discretion.
−Removed: We undertake no obligation to maintain our credit ratings or to advise any holders of our unsecured notes of any changes in our credit ratings, except as may be required under the terms of any applicable indenture or other governing document, including the August 2020 NPA, the November 2020 NPA and the February 2021 NPA.
+Added: We undertake no obligation to maintain our credit ratings or to advise any holders of our unsecured notes of any changes in our credit ratings, except as may be required under the terms of any applicable indenture or other governing document, including the August 2020 NPA, the November 2020 NPA, the February 2021 NPA and the indenture governing the November 2026 Notes.
There can be no assurance that our credit ratings will remain for any given period of time or that such credit ratings will not be lowered or withdrawn entirely by the rating agency if in their judgment future circumstances relating to the basis of the credit ratings, such as adverse changes in our business or operations, so warrant.
Any downgrades to us or our securities could increase our cost of capital or otherwise have a negative effect on our results of operations and financial condition.
−Removed: In this regard, the fixed rates of the November Notes and the February Notes are subject to increase in the event that a Below Investment Grade Event (as defined in relevant note purchase agreement) occurs, which risk is increased as a result of the impact of the COVID-19 pandemic.
−Removed: The conditions of the financial markets and
−Removed: prevailing interest rates have fluctuated in the past and are likely to fluctuate in the future, which could have an adverse effect on the market prices and value of our unsecured notes.
+Added: In this regard, the fixed rates of the November Notes and the February Notes are subject to increase in the event that a Below Investment Grade Event (as defined in relevant note purchase agreement) occurs.
+Added: The conditions of the financial markets and prevailing interest rates have fluctuated in the past and are likely to fluctuate in the future, which could have an adverse effect on the market prices and value of our unsecured notes.
+Added: Risks Relating to the Sierra Merger
+Added: Sales of shares of the Company’s common stock after the completion of the Sierra Merger may cause the market price of the Company’s common stock to decline.
+Added: Based on the number of outstanding shares of Sierra’s common stock as of the close of business on September 20, 2021, the Company would issue approximately 46.0 million shares of the Company’s common stock pursuant to the Sierra Merger Agreement.
+Added: Former Sierra stockholders may decide not to hold the shares of the Company’s common stock that they receive pursuant to the Sierra Merger Agreement.
+Added: In addition, the Company’s stockholders may decide not to hold their shares of the Company’s common stock after completion of the Sierra Merger.
+Added: In each case, such sales of the Company’s common stock could have the effect of depressing the market price for the Company’s common stock and may take place promptly following the completion of the Sierra Merger.
+Added: The Company’s stockholders will experience a reduction in percentage ownership and voting power in the combined company as a result of the Sierra Merger.
+Added: The Company’s stockholders will experience a substantial reduction in their respective percentage ownership interests and effective voting power in respect of the combined company relative to their respective ownership interests in the Company prior to the Sierra Merger.
+Added: Consequently, the Company’s stockholders should expect to exercise less influence over the management and policies of the combined company following the Sierra Merger than they currently exercise over the management and policies of the Company.
+Added: If the Sierra Merger is consummated, based on the number of shares of the Company’s common stock and Sierra’s common stock issued and outstanding on September 20, 2021, it is expected that current stockholders of the Company will own approximately 58.7% of the Company’s outstanding common stock and former Sierra stockholders will own approximately 41.3% of the Company’s outstanding common stock.
+Added: In addition, both prior to and after completion of the Sierra Merger, subject to certain restrictions in the Sierra Merger Agreement and the approval of the Company’s stockholders, the Company may issue additional shares of its common stock (including, subject to certain restrictions under the 1940 Act, at prices below the Company’s then-current net asset value (“NAV”) per share), all of which would further reduce the percentage ownership of the combined company held by current stockholders.
+Added: In addition, the issuance or sale by the Company of shares of its common stock at a discount to NAV poses a risk of economic dilution to stockholders.
+Added: The NAV per share of the Company’s common stock will be diluted if the Company issues shares at a price below the then-current NAV per share in connection with the Sierra Merger.
+Added: At the special meeting of the Company’s stockholders to be held in connection with the Sierra Merger and subject to certain determinations required to be made by the Company’s board of directors, the Company’s stockholders will be asked to approve the Company’s ability to issue shares of its common stock at a price below the then-current NAV per share in connection with the Sierra Merger in the event that at the time of such issuance, the Company’s then-current NAV per share is greater than the value of the shares of Sierra’s common stock being exchanged.
+Added: Under the Sierra Merger Agreement, the Sierra Exchange Ratio was fixed on September 21, 2021, at the signing of the Sierra Merger Agreement, subject to certain adjustments pursuant to the Sierra Merger Agreement.
+Added: The Sierra Exchange Ratio was determined taking into account the NAV per share of each of the Company’s common stock and Sierra’s common stock as of June 30, 2021 and is not subject to adjustment based on changes in the NAV per share of the Company’s common stock or Sierra’s common stock.
+Added: In that regard, regardless of the date on which the Sierra Merger is consummated and the resulting date on which the shares of the Company’s common stock are issued, the Sierra Exchange Ratio upon which the shares of the Company’s common stock will be issued will not change (except for certain customary anti-dilution adjustments).
+Added: Consequently, if, on the date that the Company’s common stock is issued in connection with the Sierra Merger, the per share value of Sierra’s common stock were to decrease from its per share value as of June 30, 2021 and the NAV of the Company’s common stock were to remain the same, then the Company could be deemed to be issuing shares at a price below its then-current NAV per share.
+Added: As a result, it is not known at this time whether the Company will be issuing shares of its common stock at a price below the then-current NAV per share to Sierra stockholders in connection with the Sierra Merger.
+Added: The determination of whether the Company is issuing shares of its common stock at a price below the then-current NAV per share will be made at or around the time of the closing of the Sierra Merger.
+Added: If the Company were to issue shares of its common stock below its then-current NAV per share in connection with the Sierra Merger, such sales would result in an immediate dilution to the NAV per share of the Company’s common stock.
+Added: This dilution would occur as a result of the issuance of shares at a price below the then-current NAV per share of the Company’s common stock and a proportionately greater decrease in the stockholders’ interest in the Company’s earnings and assets and their voting interest in the Company than the increase in the Company’s assets resulting from such issuance.
+Added: Because the NAV of shares of the Company’s common stock at or around the time of the Sierra Merger is not currently known, the actual dilutive effect cannot be predicted.
+Added: The Company may be unable to realize the benefits anticipated by the Sierra Merger, including estimated cost savings, or it may take longer than anticipated to realize such benefits.
+Added: The realization of certain benefits anticipated as a result of the Sierra Merger will depend in part on the integration of Sierra’s investment portfolio with the Company’s and the integration of Sierra’s business with the Company’s.
+Added: There can be no assurance that Sierra’s investment portfolio or business can be operated profitably or integrated successfully into the Company’s operations in a timely fashion or at all.
+Added: The dedication of management resources to such integration may divert attention from the day-to-day business of the combined company and there can be no assurance that there will not be substantial costs associated with the transition process or there will not be other material adverse effects as a result of these integration efforts.
+Added: Such effects, including incurring unexpected costs or delays in connection with such integration and failure of Sierra’s investment portfolio to perform as expected, could have a material adverse effect on the financial results of the combined company.
+Added: The Company also expects to achieve certain cost savings from the Sierra Merger when the two companies have fully integrated their portfolios.
+Added: It is possible that the estimates of the potential cost savings could ultimately be incorrect.
+Added: The cost savings estimates also assume the Company will be able to combine the operations of the Company and Sierra in a manner that permits those cost savings to be fully realized.
+Added: If the estimates turn out to be incorrect or if the Company is not able to successfully combine Sierra’s investment portfolio or business with the operations of the Company, the anticipated cost savings may not be fully realized, or realized at all, or may take longer to realize than expected.
+Added: The announcement and pendency of the proposed Sierra Merger could adversely affect both the Company’s and Sierra’s business, financial results and operations.
+Added: The announcement and pendency of the proposed Sierra Merger could cause disruptions in and create uncertainty surrounding both the Company’s and Sierra’s business, including affecting relationships with their respective borrowers and future borrowers, which could have a significant negative impact on the Company’s future revenues and results of operations, regardless of whether the Sierra Merger is completed.
+Added: In addition, the Company and Sierra have diverted, and will continue to divert, significant management resources towards the completion of the Sierra Merger, which could have a significant negative impact on each of their future revenues and results of operations.
+Added: Sierra and the Company are also subject to restrictions on the conduct of each of their businesses prior to the completion of the Sierra Merger as provided in the Sierra Merger Agreement, generally requiring Sierra and the Company to conduct their business only in the ordinary course and subject to specific limitations, including, among other things, certain restrictions on their respective ability to make certain investments and acquisitions, sell, transfer or dispose of their respective assets, amend their respective organizational documents and, in the case of Sierra, enter into or modify certain material contracts.
+Added: These restrictions could prevent Sierra or the Company from pursuing otherwise attractive business opportunities, industry developments and future opportunities and may otherwise have a significant negative impact on the Company’s future investment income and results of operations.
+Added: If the Sierra Merger does not close, neither the Company nor Sierra will benefit from the expenses incurred in their pursuit of the Sierra Merger and, under certain circumstances, Sierra may be required to pay an $11.0 million termination fee and to reimburse expenses incurred in connection with the Sierra Merger by the Company and Barings, subject to a maximum expense reimbursement payment of $2.0 million.
+Added: For various reasons, the Sierra Merger may not be completed.
+Added: If the Sierra Merger is not completed, Sierra and the Company will have incurred substantial expenses for which no ultimate benefit will have been received.
+Added: Both companies have incurred out-of-pocket expenses in connection with the Sierra Merger for investment banking, legal and accounting fees and financial printing and other related charges, much of which will be incurred even if the Sierra Merger is not completed.
+Added: The Sierra Merger Agreement provides that, upon the valid termination of the Sierra Merger Agreement under certain circumstances, Sierra may be required to pay or cause to be paid to the Company a termination fee of $11.0 million and to pay the Company’s and Barings’ expenses incurred in connection with the Sierra Merger, subject to a maximum reimbursement payment of $2.0 million.
+Added: The termination of the Sierra Merger Agreement could negatively impact the Company.
+Added: The Sierra Merger may not be completed.
+Added: For example, either Sierra or the Company may terminate the Sierra Merger Agreement if the Sierra Merger is not completed by March 31, 2022 (so long as the party seeking termination has not been the primary cause of the delay).
+Added: If the Sierra Merger Agreement is terminated, there may be various consequences, including:
+Added: • the Company’s businesses may have been adversely impacted by the failure to pursue other beneficial opportunities due to the focus of management on the Sierra Merger, without realizing any of the anticipated benefits of completing the Sierra Merger;
+Added: • the market price of the Company's common stock might decline to the extent that the market price prior to termination reflects a market assumption that the Sierra Merger will be completed.
+Added: Except in specified circumstances, if the Sierra Merger is not completed by March 31, 2022, either Sierra or the Company may choose not to proceed with the Sierra Merger.
+Added: Either Sierra or the Company may terminate the Sierra Merger Agreement if the effective time of the First Sierra Merger has not occurred by March 31, 2022.
+Added: However, this right to terminate the Sierra Merger Agreement will not be available to Sierra or the Company if the failure of such party to perform any of its obligations under the Sierra Merger Agreement has been the primary cause of or resulted in the failure of the Sierra Merger to be complete on or before such date.
+Added: The Sierra Merger is subject to closing conditions, including stockholder approvals, that, if not satisfied or waived, will result in the Sierra Merger not being completed, which may result in material adverse consequences to the Company’s business and operations.
+Added: While there can be no assurances as to the exact timing, or that the Sierra Merger will be completed at all, the Company and Sierra are working to complete the Sierra Merger in the first quarter of 2022.
+Added: The Sierra Merger is subject to closing conditions, including required regulatory approvals (including the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder) and certain approvals of the Company’s and Sierra’s respective stockholders that, if not satisfied, will prevent the Sierra Merger from being completed.
+Added: The closing condition that the Company’s stockholders approve the issuance of shares of the Company’s common stock in connection with the Sierra Merger and the issuance of shares of the Company’s common stock in connection with the Sierra Merger at a price below its then-current NAV may not be waived and must be satisfied for the Sierra Merger to be completed.
+Added: The Company currently expects that all directors and executive officers of the Company will vote their shares of the Company’s common stock in favor of the proposals presented at the special meeting of the Company’s stockholders to be held in connection with the Sierra Merger.
+Added: Additionally, Barings, as a party to the Sierra Merger Agreement, agreed to vote all shares of the Company’s common stock over which it has voting power (other than in its fiduciary capacity) in favor of the proposals presented at the Company’s special meeting of stockholders.
+Added: Furthermore, the closing condition that Sierra stockholders approve the Sierra Merger may not be waived and must also be satisfied for the Sierra Merger to be completed.
+Added: If the closing conditions to the Sierra Merger are not satisfied, including receipt of the required approvals by the stockholders of the Company and of Sierra, and the Sierra Merger is not completed, the resulting failure to complete the Sierra Merger could have a material adverse impact on the Company’s business and operations.
+Added: Sierra and the Company will be subject to contractual restrictions while the Sierra Merger is pending, including restrictions on pursuing alternatives to the Sierra Merger.
+Added: Uncertainty about the effect of the Sierra Merger may have an adverse effect on the Company and Sierra and, consequently, on the combined company following completion of the Sierra Merger.
+Added: These uncertainties may impair the Company’s and Sierra’s abilities to motivate key personnel until the Sierra Merger is consummated and could cause those who deal with the Company and Sierra to seek to change their existing business relationships with the Company and Sierra, respectively.
+Added: In addition, the Sierra Merger Agreement restricts the Company and Sierra from taking actions that they might otherwise consider to be in their best interests without the consent of the other party.
+Added: These restrictions may prevent the Company and Sierra from pursuing certain business opportunities that may arise
+Added: prior to the completion of the Sierra Merger, including restrictions on them pursuing alternatives to the Sierra Merger.
+Added: Subject to applicable law, each party may waive one or more conditions to the Sierra Merger without resoliciting approval from its respective stockholders.
+Added: Certain conditions to the Company’s and Sierra’s obligations to complete the Sierra Merger may be waived, in whole or in part, to the extent legally allowed, either unilaterally or by agreement of the Company and Sierra.
+Added: In the event that any such waiver does not require resolicitation of stockholders, the parties to the Sierra Merger Agreement will have the discretion to complete the Sierra Merger without seeking further stockholder approval.
+Added: Accordingly, the terms and conditions as set forth in the Sierra Merger Agreement and described herein, including certain protections to the Company and Sierra, may be waived.
+Added: The conditions requiring the approval of the Company’s stockholders and approval of Sierra’s stockholders, however, cannot be waived.
+Added: The market price of the Company’s common stock after the Sierra Merger may be affected by factors different from those affecting the Company’s common stock or Sierra’s common stock currently.
+Added: The businesses of the Company and Sierra differ in some respects and, accordingly, the results of operations of the combined company and the market price of the Company’s common stock after the Sierra Merger may be affected by factors different from those currently affecting the independent results of operations of each of the Company and Sierra.
+Added: These factors include:
+Added: • a larger stockholder base;
+Added: • a different portfolio composition;
+Added: • a different capital structure
+Added: Accordingly, the historical trading prices and financial results of the Company may not be indicative of these matters for the combined company following the Sierra Merger.
+Added: The Sierra Merger may trigger certain “change of control” provisions and other restrictions in certain of the Company’s and Sierra’s contracts and the failure to obtain any required consents or waivers could adversely impact the combined company.
+Added: Certain agreements of the Company and Sierra or their controlled affiliates will or may require the consent of one or more counterparties in connection with the Sierra Merger.
+Added: The failure to obtain any such consent may permit such counter-parties to terminate, or otherwise increase their rights or the Company’s or Sierra’s obligations under, any such agreement because the Sierra Merger may violate an anti-assignment, change of control or similar provision.
+Added: If this happens, the Company or Sierra may have to seek to replace that agreement with a new agreement or seek a waiver or amendment to such agreement.
+Added: The Company cannot assure you that it or Sierra will be able to replace, amend or obtain a waiver under any such agreement on comparable terms or at all.
+Added: If any such agreement is material, the failure to obtain consents, amendments or waivers under, or to replace on similar terms or at all, any of these agreements could adversely affect the financial performance or results of operations of the combined company following the Sierra Merger, including preventing the Company from operating a material part of Sierra’s business.
+Added: In addition, the consummation of the Sierra Merger may violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event that, with or without notice or lapse of time or both, would constitute a default) under, or result in the termination, cancellation, acceleration or other change of any right or obligation (including any payment obligation) under the Company’s or Sierra’s agreements.
+Added: Any such violation, conflict, breach, loss, default or other effect could, either individually or in the aggregate, have a material adverse effect on the financial condition, results of operations, assets or business of the combined company following completion of the Sierra Merger.
+Added: The combined company may not be able to obtain financing for additional capital requirements.
+Added: Following completion of the Sierra Merger, the combined company may seek significant ongoing capital funding and, although the Company anticipates that the combined company will be able to obtain such funding through cash generated from operations and subsequent debt, equity or hybrid offerings, there can be no assurances that the combined company will be able to obtain financing on acceptable terms or at all.
+Added: The Company has incurred and expects to incur substantial transaction fees and costs in connection with the Sierra Merger, whether or not the Sierra Merger is completed.
+Added: The Company has incurred and expects to incur additional material non-recurring expenses in connection with the Sierra Merger and completion of the transactions contemplated by the Sierra Merger Agreement.
+Added: The Company has incurred significant legal, advisory and financial services fees in connection with the process of negotiating and evaluating the terms of the Sierra Merger.
+Added: Additional significant unanticipated costs may be incurred in the course of coordinating the businesses of Sierra and the Company after completion of the Sierra Merger.
+Added: Even if the Sierra Merger is not completed, the Company will need to pay certain costs relating to the Sierra Merger incurred prior to the date the Sierra Merger was abandoned, such as legal, accounting, financial advisory, filing and printing fees.
+Added: Such costs may be significant and could have an adverse effect on the Company’s future results of operations, cash flows and financial condition.
+Added: Litigation filed against Sierra or the Company in connection with the Sierra Merger could result in substantial costs and could delay or prevent the Sierra Merger from being completed.
+Added: From time to time, Sierra and the Company may be subject to legal actions, including securities class action lawsuits and derivative lawsuits, as well as various regulatory, governmental and law enforcement inquiries, investigations and subpoenas in connection with the Sierra Merger.
+Added: These or any similar securities class action lawsuits and derivative lawsuits, regardless of their merits, may result in substantial costs and divert management time and resources.
+Added: An adverse judgment in such cases could have a negative impact on the Company’s liquidity and financial condition or could prevent the Sierra Merger from being completed.
General Risk Factors
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These conditions may reoccur for a prolonged period of time or materially worsen in the future.
−Removed: In June 2016, the United Kingdom held a referendum in which voters approved an exit from the European Union.
−Removed: The United Kingdom formally left the European Union on January 31, 2020, and the United Kingdom reached the end of the transition period in December 2020.
−Removed: There will likely continue to be considerable uncertainty as to the United Kingdom's post-transition and post-withdrawal framework, in particular as to the arrangements which will apply to its relationships with the European Union and with other countries.
−Removed: The new Trade and Cooperation Agreement reached between the European Union and United Kingdom in late 2020 is untested and may lead to ongoing political and economic uncertainty and periods of exacerbated volatility in both the United Kingdom and in wider European and global markets for some time.
−Removed: This process and/or the uncertainty associated with it may adversely affect the return on investments economically tied to the United Kingdom or European Union (including investments made pursuant to the European Direct Lending strategy).
−Removed: This may be due to, among other things:
−Removed: (i) increased uncertainty and volatility in the United Kingdom, European Union and other financial markets;
−Removed: (ii) fluctuations in asset values;
−Removed: (iii) fluctuations in exchange rates;
−Removed: (iv) increased illiquidity of investments located, listed or traded within the United Kingdom, the European Union or elsewhere;
−Removed: (v) changes in the willingness or ability of financial and other counterparties to enter into transactions, or the price at which and terms on which they are prepared to transact;
−Removed: and/or (vi) changes in legal and regulatory regimes to which our investments are or become subject.
+Added: The United Kingdom (the “UK”) formally left the European Union (the “EU”) on January 31, 2020 (commonly known as “Brexit”), followed by an implementation period, during which EU law continued to apply in the UK and the UK maintained its EU single market access rights and EU customs union membership.
+Added: The implementation period expired on December 31, 2020.
+Added: Consequently, the UK has become a third country vis-à-vis the EU, without access to the single market or membership of the EU customs union.
+Added: During the implementation period, on December 30, 2020, the UK and the EU signed a trade and cooperation agreement (the “TCA”) to govern their ongoing relationship.
+Added: The TCA was officially ratified by the UK Parliament on December 30, 2020, and was ratified by the EU Parliament and Council on April 27, 2021.
+Added: It is anticipated that further details of the relationship between the UK and the EU will continue to be negotiated even after formal ratification of the TCA.Over time, UK
+Added: regulated firms and other UK businesses may be adversely affected by the terms of the TCA (assuming it is formally ratified by the EU), as compared with the position prior to the expiration of the implementation period on December 31, 2020.
+Added: For example, the TCA introduces new customs checks, as well as new restrictions on the provision of cross-border services and on the free movement of employees.
+Added: These changes have the potential to materially impair the profitability of a business, and to require it to adapt or even relocate.
+Added: Although it is probable that any adverse effects flowing from the UK’s withdrawal from the EU will principally affect the UK (and those having an economic interest in, or connected to, the UK), given the size and global significance of the UK’s economy, the impact of the withdrawal is unpredictable and likely to be an ongoing source of instability, produce significant currency fluctuations, and/or have other adverse effects on international markets, international trade agreements and/or other existing cross-border cooperation arrangements (whether economic, tax, fiscal, legal, regulatory or otherwise).
+Added: The withdrawal of the UK from the EU could therefore adversely affect us.
+Added: In addition, although it seems less likely following the expiration of the transition period than at the time of the UK’s referendum, the withdrawal of the UK from the EU could have a further destabilizing effect if any other member states were to consider withdrawing from the EU, presenting similar and/or additional potential risks and consequences to our business and financial results.
Market conditions may in the future make it difficult to extend the maturity of or refinance our existing indebtedness and any failure to do so could have a material adverse effect on our business.
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We generally seek approval from our stockholders so that we have the flexibility to issue up to a specified percentage of our then-outstanding shares of our common stock at a price below net asset value.
−Removed: Pursuant to approval granted at an annual meeting of stockholders held on April 30, 2020, we are permitted to issue and sell shares of our common stock at a price below our then-current net asset value per share in one or more offerings, subject to certain limitations and determinations that must be made by the Board (including, without limitation, that the number of shares issued and sold pursuant to such authority does not exceed 25% of our then-outstanding common stock immediately prior to each such offering).
−Removed: Such stockholder approval expires on April 30, 2021.
+Added: Pursuant to approval granted at an annual meeting of stockholders held on May 20, 2021, we are permitted to issue and sell shares of our common stock at a price below our then-current net asset value per share in one or more offerings, subject to certain limitations and determinations that must be made by the Board (including, without limitation, that the number of shares issued and sold pursuant to such authority does not exceed 30% of our then-outstanding common stock immediately prior to each such offering).
+Added: Such stockholder approval expires on May 20, 2022.
Many of the portfolio companies in which we make investments may be susceptible to economic slowdowns or recessions and may be unable to repay the loans we made to them during these periods.
−Removed: Therefore, our non-performing assets may increase and the value of our portfolio may decrease during these periods as we are required to record our investments at their current fair value.
+Added: Therefore, our non-
+Added: performing assets may increase and the value of our portfolio may decrease during these periods as we are required to record our investments at their current fair value.
Adverse economic conditions also may decrease the value of collateral securing some of our loans and the value of our equity investments.
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For example, many countries have experienced outbreaks of infectious illnesses in recent decades, including swine flu, avian influenza, SARS and COVID-19.
−Removed: Since the initial outbreak of COVID-19 in December 2019, a large and growing number of cases have been confirmed around the world.
+Added: Since the initial outbreak of COVID-19, a large and growing number of cases have been confirmed around the world.
The COVID-19 outbreak has resulted in numerous deaths and the imposition of both local and more widespread “work from home” and other quarantine measures, border closures and other travel restrictions, causing social unrest and commercial disruption on a global scale.
−Removed: In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic.
−Removed: The ongoing spread of COVID-19 has had, and will continue to have, a material adverse impact on local economies in the affected jurisdictions and also on the global economy, as cross-border commercial activity and market sentiment are increasingly impacted by the outbreak and government and other measures seeking to contain its spread.
+Added: The spread of COVID-19, including the multiple variants thereof, has had, and will continue to have, a material adverse impact on local economies in the affected jurisdictions and also on the global economy, as cross-border commercial activity and market sentiment are increasingly impacted by the outbreak and government and other measures seeking to contain its spread.
With respect to U.S.
−Removed: and global credit markets and the economy in general, this outbreak has resulted in,
−Removed: and until fully resolved is likely to continue to result in, the following (among other things):
+Added: and global credit markets and the economy in general, this outbreak has resulted in, and until fully resolved is likely to continue to result in, the following (among other things):
(i) restrictions on travel and the temporary closure of many corporate offices, retail stores, and manufacturing facilities and factories, resulting in significant disruption to the business of many companies, including supply chains and demand, as well as layoffs of employees;
3 unchanged sentences
and (v) rapidly evolving proposals and actions by state and federal governments to address the problems being experienced by markets, businesses and the economy in general, which may not adequately address the underlying problems.
−Removed: In addition to these developments having adverse consequences in the businesses in which we invest, the operations of the Adviser (including those relating to the Company) have been, and could continue to be, adversely impacted, including through quarantine measures and travel restrictions imposed on Barings personnel or service providers based or temporarily located in affected countries, or any related health issues of such personnel or service providers.
+Added: In addition to these developments having adverse consequences in the businesses in which we invest, the operations of Barings (including those relating to the Company) have been, and could continue to be, adversely impacted, including through quarantine measures and travel restrictions imposed on Barings personnel or service providers based or temporarily located in affected countries, or any related health issues of such personnel or service providers.
Any of the foregoing events could materially and adversely affect our ability to source, manage and divest its investments and its ability to fulfill its investment objectives.
1 unchanged sentence
Although it is impossible to predict the precise nature and consequences of these events, or of any political or policy decisions and regulatory changes occasioned by emerging events or uncertainty on applicable laws or regulations that impact us and our portfolio companies and investments, it is clear that these types of events are impacting and will, for at least some time, continue to impact us and our portfolio companies.
−Removed: Any potential impact to our results of operations will depend to a large extent on future developments and new information that could emerge regarding the duration and severity of the COVID-19 pandemic and the actions taken by authorities and other entities to contain the spread or treat its impact, all of which are beyond our control.
+Added: Any potential impact to our results of operations will depend to a large extent on future developments and new information that could emerge regarding the duration and severity of the COVID-19 pandemic and the actions taken by authorities and other entities to
+Added: contain the spread or treat its impact, all of which are beyond our control.
These potential impacts, while uncertain, could adversely affect our and our portfolio companies' operating results.
14 unchanged sentences
There have been ongoing discussion and commentary regarding potential significant changes to U.S.
−Removed: trade policies, treaties and tariffs, creating significant uncertainty about the future relationship between the United States
−Removed: and other countries with respect to trade policies, treaties and tariffs.
+Added: trade policies, treaties and tariffs, creating significant uncertainty about the future relationship between the United States and other countries with respect to trade policies, treaties and tariffs.
These developments, or the perception that more of them could occur, may have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global trade and, in particular, trade between the impacted nations and the United States.
9 unchanged sentences
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.