What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-02-23 compared with 2021-03-23 · 324 added, 234 removed, 463 unchanged (55% of the section changed)

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MVC Capital, Inc.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

See “Business—MVC Capital, Inc.

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

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

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

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

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

Any repurchases pursuant to the authorized program will occur during the 12-month period 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, including covenants under our $875 million senior secured revolving credit facility with ING Capital LLC (as amended, restated and otherwise modified from time to time, the "February 2019 Credit Facility").

Pending Sierra Income Corporation Acquisition

On September 21, 2021, we entered into an Agreement and Plan of Merger (the “Sierra Merger Agreement”) by and among us, Mercury Acquisition Sub, Inc., a Maryland corporation and our direct wholly owned subsidiary (“Sierra Acquisition Sub”), Sierra Income Corporation, a Maryland corporation (“Sierra”), and Barings.

The Sierra Merger Agreement provides that, on the terms and subject to the conditions set forth in the Sierra Merger Agreement, Sierra Acquisition Sub will merge with and into Sierra, with Sierra continuing as the surviving company and as our wholly owned subsidiary (the “First Sierra Merger”) and, immediately thereafter, Sierra will merge with and into us, with Barings BDC, Inc.

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

Both the Board and the board of directors of Sierra, including all of the respective independent directors, have approved the Sierra Merger Agreement and the transactions contemplated therein.

The parties to the Sierra Merger Agreement intend the Sierra Merger to be treated as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”).

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

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

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

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

However, the Sierra board of directors may, subject to certain conditions, change its recommendation to the Sierra stockholders or, on payment of a termination fee of $11.0 million to us and the reimbursement of up to $2.0 million in expenses incurred by us and Barings, terminate the Sierra Merger Agreement and enter into an Alternative Acquisition Agreement (as defined in the Sierra Merger Agreement) for a Superior Proposal (as defined in the Sierra Merger Agreement) if it determines in good faith, after consultation with its outside legal counsel, that failure to do so would be inconsistent with the directors’ duties under applicable law.

Consummation of the First Sierra Merger, which is currently anticipated to occur during the first quarter of fiscal year 2022, is subject to certain customary closing conditions, including (1) approval of the First Sierra Merger by the holders of at least a majority of the outstanding shares of Sierra common stock entitled to vote thereon, (2) approval of the issuance of our common stock to be issued in the First Sierra Merger by a majority of the votes cast by our stockholders on the matter at our stockholders meeting, (3) approval of the issuance of our common stock in connection with the First Sierra Merger at a price below the then-current net asset value per share of our common stock, if applicable, by the vote specified in Section 63(2)(A) of the Investment Company Act of 1940, as amended (the “1940 Act”), (4) the absence of certain legal impediments to the consummation of the Sierra Merger, (5) effectiveness of the registration statement for our common stock to be issued as consideration in the First Sierra Merger, (6) approval for listing on the NYSE of our common stock to be issued as consideration in the First Sierra Merger, (7) subject to certain materiality standards, the accuracy of the representations and warranties and compliance with the covenants of each party to the Sierra Merger Agreement, and (8) required regulatory approvals

(including expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, or early termination thereof).

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

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

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

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

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

Overview of Our Business

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

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

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

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

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

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

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

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

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

Barings believes this strategy and approach

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

We generate revenues in the form of interest income, primarily from our investments in debt securities, loan origination and other fees and dividend income.

Fees generated in connection with our debt investments are recognized over the life of the loan using the effective interest method or, in some cases, recognized as earned.

Our syndicated senior secured loans generally bear interest between LIBOR plus 300 basis points and LIBOR plus 400 points.

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

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

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

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

The weighted average yield on the principal amount of all of our outstanding investments (including equity and equity-linked investments and short-term investments but excluding non-accrual debt investments) was approximately 6.1% and 6.4% as of December 31, 2021 and December 31, 2020, respectively.

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

COVID-19 Developments

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

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

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

currently, all other offices in the U.S.

remain closed.

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

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

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

In the United States, Barings offices remained accessible throughout the fourth quarter of 2021 for employees who had a business need to work from an office location.

All US-based employees have adopted a hybrid working pattern and started returning to office locations effective January 2022.

In Europe, the majority of employees shifted to working remotely in the fourth quarter of 2021.

In Asia-Pac, the majority of employees are working from office locations on average 2-3 days per week.

Barings’ return-to-office taskforce continues to monitor the COVID-19 situation globally and are prepared to adapt office working patterns as required to ensure the safety of their employees and clients who visit Barings office locations.

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

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governmental authorities.

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

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

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

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

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

Some of our portfolio

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

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

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

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

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

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

Any reduction in the borrowing base under the February 2019 Credit Facility could have a material adverse effect on our results of operations, financial condition and available liquidity.

In addition, any decreases in

our net investment income would increase the portion of our cash flows dedicated to servicing our existing borrowings under the February 2019 Credit Facility, the August 2025 Notes and the November Notes (each as defined below under "—Liquidity and Capital Resources"), as well as the February Notes (as defined below under "—Recent Developments").

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

As of December 31, 2020, we are permitted under the 1940 Act, as a BDC, to borrow amounts such that our asset coverage, as defined in the 1940 Act, equals at least 150% after such borrowing.

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

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

In addition, we were not in default under the February 2019 Credit Facility, the August 2025 Notes or the November Notes as of December 31, 2020.

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

If we fail to satisfy the covenants in the February 2019 Credit Facility or in the note purchase agreements governing the August 2025 Notes, the November Notes or the February Notes or are unable to cure any event of default or obtain a waiver from the applicable lender or noteholders, it could result in foreclosure by the lenders under the credit facility or otherwise accelerate our repayment obligations under the February 2019 Credit Facility or under the note purchase agreements governing the August 2025 Notes, the November Notes and the February Notes and thereby have a material adverse effect on our business, liquidity, financial condition, results of operations and ability to pay distributions to our stockholders.

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

As of December 31, 2020, approximately $1,204.5 million (principal amount) of our debt portfolio investments bore interest at variable rates, which generally are LIBOR-based (or based on an equivalent applicable currency rate), and many of which are subject to certain floors.

In connection with the COVID-19 pandemic, the U.S.

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

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

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

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

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The total value of our investment portfolio was $1,800.6 million as of December 31, 2021, as compared to $1,495.8 million as of December 31, 2020.

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

As of December 31, 2021, we had investments in 212 portfolio companies with an aggregate cost of $1,787.8 million.

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

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

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

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

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

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

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

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

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Investment Activity

During the year ended December 31, 2021, we made 112 new investments totaling $1,069.4 million, made investments in existing portfolio companies totaling $234.0 million, made a new joint venture equity investment totaling $13.7 million, made additional investments in existing joint venture equity portfolio companies totaling $79.4 million and made an $89.8 million equity co-investment alongside certain affiliates in a portfolio company focused on directly originated, senior-secured asset-based loans to middle-market companies.

We had 34 loans repaid at par totaling total $282.8 million and received $36.1 million of portfolio company principal payments.

In addition, we sold $252.9 million of loans, recognizing a net realized gain on these transactions of $2.5 million, and sold $536.4 million of investments to our joint venture, realizing a loss on these transactions of $1.4 million.

Lastly, we received proceeds related to the sale of equity investments totaling $8.6 million and recognized a net realized gain on such sales totaling $1.6 million.

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

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

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

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

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

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

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

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

Total portfolio investment activity for the years ended December 31, 2021 and 2020 was as follows:

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New investments 1,104,331,866 160,737,734 19,815,398 108,111,475 163,000 93,134,271 297,560,982 1,783,854,726

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

Proceeds from sales of investments (765,417,430) (13,683,500) (10,068,420) (8,269,168) (450,000) — (363,118,408) (1,161,006,926)

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Principal repayments received (275,645,832) (39,272,993) (4,007,677) — — — — (318,926,502)

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

Payment in kind interest 3,112,247 8,503,991 — — — — — 11,616,238

Accretion of loan premium/discount 2,032,636 2,582,431 31,218 — — — — 4,646,285

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Debt and 2 nd

Shares Investment in Joint Venture Short-term Investments Total

Structured Products Equity

Shares Equity Warrants Investment in Joint Venture Short-term Investments Total

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

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

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

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

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

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

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

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

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

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

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

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Non-Accrual Assets

and will generally cease recognizing interest income on that loan for financial reporting purposes until all principal and interest have been brought current through payment or due to a restructuring such that the interest income is deemed to be collectible.

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

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

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

Jedson Engineering, Inc.

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

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

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

As of December 31, 2021, we had two assets on non-accrual, the fair value of which was $36.0 million, which comprised 2.0% of the total fair value of our portfolio, and the cost of which was $50.9 million, which comprised 2.9% of the total cost of our portfolio.

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

A summary of our non-accrual assets as of December 31, 2021 is provided below:

Legal Solutions Holdings

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

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

As a result, under U.S.

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

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

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

As of December 31, 2021, the cost of our debt investment in Legal Solutions was $10.1 million and the fair value of such investment was $5.9 million.

Custom Alloy Corporation

In connection with the MVC Acquisition, we purchased our debt investment in Custom Alloy Corporation, or Custom Alloy.

During the quarter ended December 31, 2021, we placed our debt investment in Custom Alloy on non-accrual status.

As a result, under U.S.

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

As of December 31, 2021, the cost of our debt investment in Custom Alloy was $40.8 million and the fair value of such investment was $30.0 million.

Discussion and Analysis of Financial Condition and Results of Operations

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Total investment income $ 135,335,374 $ 71,031,068

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

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

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

The change in total investment income for the year ended December 31, 2021, as compared to the year ended December 31, 2020, was primarily due to an increase in the average size of our portfolio, acceleration of unamortized OID and unamortized loan origination fee income associated with repayments of loans, an increase in payment-in-kind (“PIK”) interest income and increased dividends from portfolio companies and joint venture investments.

For the year ended December 31, 2021, acceleration of unamortized OID income and unamortized loan origination fees totaled $6.2 million, as compared to $0.5 million for the year ended December 31, 2020.

For the year ended December 31, 2021, PIK interest income was $11.0 million, as compared to $1.3 million for the year ended December 31, 2020.

For the year ended December 31, 2021, dividends from portfolio companies and joint venture investments were $8.9 million, as compared to $2,603 for the year ended December 31, 2020.

of our outstanding debt investments was $1,554.5 million as of December 31, 2021, as compared to $1,399.9 million as of December 31, 2020.

The weighted average yield on the principal amount of our outstanding debt investments, other than non-accrual debt investments was 7.2% as of December 31, 2021, as compared to 7.1% as of December 31, 2020.

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Base management fee 19,516,741 14,317,693

Incentive management fees 14,741,949 —

Compensation expenses — 48,381

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Interest and Other Financing Fees

Interest and other financing fees during the year ended December 31, 2021 were attributable to borrowings under the February 2019 Credit Facility, the August 2025 Notes, the November Notes, the February Notes and the November 2026 Notes (each as defined below under “Liquidity and Capital Resources”).

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

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

Interest and other financing fees during the year ended December 31, 2019 were attributable to borrowings under the August 2018 Credit Facility, the February 2019 Credit Facility and the Debt Securitization.

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

The increase in interest and other financing fees for the year ended December 31, 2021 as compared to the year ended December 31, 2020, was primarily attributable to the issuance of the February Notes and the November 2026 Notes and increased borrowings under the February 2019 Credit Facility, partially offset by the repayment of the Debt Securitization and the repayment of the borrowings under the August 2018 Credit Facility.

Base Management Fees

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

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

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

For the years ended December 31, 2021 and December 31, 2020, the Base Management Fee was approximately $19.5 million and $14.3 million, respectively.

The increase between periods was primarily due to the increase in our average gross assets, partially offset by a decrease in the Base Management Fee rate.

The Base Management Fee rate was 1.250% for the year ended December 31, 2021, as compared to 1.375% for the year ended December 31, 2020.

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

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

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

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

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

For the year ended December 31, 2021, the amount of income-based fee incurred was $14.7 million.

We did not incur any income-based fee for the year ended December 31, 2020 .

Compensation Expenses

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

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

markets and the external environment.

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

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

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Affiliate investments (100,931) —

Control investments — —

Net realized losses on investments (38,302,323) (3,798,263)

Net realized gains (losses) on investments 2,645,505 (38,302,323)

Foreign currency transactions (6,024,567) 12,743

Net realized losses $ (3,379,062) $ (38,289,580)

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

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

In the year ended December 31, 2021, we recognized a net realized loss totaling $3.4 million, which consisted primarily of a net loss on foreign currency transactions of $6.0 million, partially offset by a net gains on our loan portfolio of $2.6 million.

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

Net Unrealized Appreciation and Depreciation

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Net unrealized appreciation on investments 3,029,097 28,710,914

Credit support agreement 1,800,000 —

Foreign currency transactions 17,275,899 (10,161,326)

Net unrealized appreciation $ 22,104,996 $ 18,549,588

For the year ended December 31, 2021, we recorded net unrealized appreciation totaling $22.1 million consisting of net unrealized appreciation on our current portfolio of $11.4 million, net unrealized appreciation related to foreign currency transactions of $17.3 million and unrealized appreciation of $1.8 million on the credit support agreement with Barings, net of unrealized depreciation reclassification adjustments of $8.4 million related to realized gains and losses recognized during the year.

The net unrealized appreciation on our current portfolio of $11.4 million was driven primarily by broad market moves for investments of $31.5 million partially offset by the credit or fundamental performance of investments of $5.9 million and the impact of foreign currency exchange rates on investments of $14.2 million.

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

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

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

Liquidity and Capital Resources

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

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

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

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

For the year ended December 31, 2021, we experienced a net decrease in cash in the amount of $8.2 million.

During that period, our operating activities used $396.6 million in cash, consisting primarily of purchases of portfolio investments of $1,461.1 million and purchases of short-term investments of $297.6 million, partially offset by proceeds from sales or repayments of portfolio investments totaling $943.9 million and proceeds from the sales of short-term investments of $363.1 million.

In addition, our financing activities provided net cash of $388.3 million, consisting of net proceeds of $343.1 million from the issuance of the November 2026 Notes and $149.8 million from the issuance of the February Notes (both as defined below under “Financing Transactions”), partially

offset by net repayments under the February 2019 Credit Facility of $50.8 million and dividends paid in the amount of $53.6 million.

At December 31, 2021, we had $84.3 million of cash and foreign currencies on hand.

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

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At December 31, 2021, we had $92.5 million of cash on hand.

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

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

In addition, financing activities provided net cash of $41.1 million, consisting primarily of net proceeds from our $449.3 million term debt securitization, or the Debt Securitization, of $348.3 million, partially offset by net repayments under the August 2018 Credit Facility and the February 2019 Credit Facility of $218.6 million, repayments of the Debt Securitization of $30.0 million, purchases of shares under the share repurchase plan of $23.4 million, financing fees paid of $8.3 million and dividends paid in the amount of $26.9 million.

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

Financing Transactions

August 2018 Credit Facility

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

On August 3, 2018, BSF entered into the August 2018 Credit Facility (as subsequently amended in December 2018 and February 2020), with Bank of America, N.A., as administrative agent and Class A-1 Lender, Société Générale, as Class A

Lender, and Bank of America Merrill Lynch, as sole lead arranger and sole book manager.

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

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

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

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

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

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

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

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

Effective January 21, 2020, we further reduced our Class A-1 Loan Commitments, and therefore total commitments, under the August 2018 Credit Facility from $150.0 million to $80.0 million.

Effective April 23, 2020, we further reduced our Class A-1 Loan Commitments, and therefore total commitments, under the August 2018 Credit Facility from $80.0 million to $30.0 million.

Finally, effective June 26, 2020, we further reduced our Class A-1 Loan Commitments, and therefore total commitments, under the August 2018 Credit Facility from $30.0 million to zero.

In connection with these reductions, the pro rata portion of the unamortized deferred financing costs related to the August 2018 Credit Facility was written off and recognized as a loss on extinguishment of debt in our Consolidated Statements of Operations.

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

On June 30, 2020, following the repayment of all borrowings, interest, and fees payable thereunder and at our election, the August 2018 Credit Facility was terminated, including all commitments and obligations of Bank of America, N.A.

to lend or make advances to BSF.

In addition, the Security Agreement was terminated and all security interests in the assets of BSF in favor of the lenders were terminated.

As a result of these terminations, all obligations of BSF under the August 2018 Credit Facility and Security Agreement were fully discharged.

All borrowings under the August 2018 Credit Facility bore interest, subject to BSF’s election, on a per annum basis equal to (i) the applicable base rate plus the applicable spread or (ii) the applicable LIBOR rate plus the applicable spread.

The applicable base rate was equal to the greater of (i) the federal funds rate plus 0.5%, (ii) the prime rate or (iii) one-month LIBOR plus 1.0%.

The applicable LIBOR rate depended on the term of the borrowing under the August 2018 Credit Facility, which could be either one month or three months and could not be less than zero.

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

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

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

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

February 2019 Credit Facility

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

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

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

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

The February 2019 Credit Facility, which is structured as a revolving credit facility,

is secured primarily by a material portion of our assets and guaranteed by certain of our subsidiaries.

The February 2019 Credit Facility, which is structured as a revolving credit facility, is secured primarily by a material portion of our assets and guaranteed by certain of our subsidiaries.

Following the termination of the August 2018 Credit Facility on June 30, 2020, BSF became a subsidiary guarantor and its assets will secure the February 2019 Credit Facility.

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

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

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

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

The 2019 Notes

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

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

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

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

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

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

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

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November Notes

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

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

Series B Notes, the “November Notes”) with a fixed interest rate of 4.75% per year, in each case, to qualified institutional investors in a private placement.

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

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

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

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

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

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

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

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

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

As of December 31, 2021, we were in compliance with all covenants under the November 2020 NPA.

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

February Notes

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

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

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

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

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

In addition, we are obligated to offer to repay the February Notes at par (plus accrued and unpaid

interest to, but not including, the date of prepayment) if certain change in control events occur.

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

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

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

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

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

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

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

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

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

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

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

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

As of December 31, 2021, the fair value of the outstanding Series D Notes and the Series E Notes was $79.2 million and $68.7 million, respectively.

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

November 2026 Notes

On November 23, 2021, we entered into an Indenture (the “Base Indenture”) and a Supplemental Indenture (the “First Supplemental Indenture” and, together with the Base Indenture, the “Indenture”) with U.S.

Bank National Association (the “Trustee”).

The First Supplemental Indenture relates to our issuance of $350.0 million aggregate principal amount of its 3.300% notes due 2026 (the “November 2026 Notes”).

The November 2026 Notes will mature on November 23, 2026 and may be redeemed 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.

The November 2026 Notes bear interest at a rate of 3.300% per year payable semi-annually on May 23 and November 23 of each year, commencing on May 23, 2022.

The November 2026 Notes are our general unsecured obligations that rank senior in right of payment to all of our existing and future indebtedness that is expressly subordinated in right of payment to the November 2026 Notes, rank pari passu with all existing and future unsecured unsubordinated indebtedness issued by us, rank effectively junior to any of our secured indebtedness (including unsecured indebtedness that we later secure) to the extent of the value of the assets securing such indebtedness, and rank structurally junior to all existing and future indebtedness (including trade payables) incurred by our subsidiaries, financing vehicles or similar facilities.

The Indenture contains certain covenants, including covenants requiring us to comply with the asset coverage requirements of Section 18(a)(1)(A) as modified by Section 61(a)(1) and (2) of the 1940 Act, whether or not it is subject to those requirements, and to provide financial information to the holders of the November 2026 Notes and

the Trustee if we are no longer subject to the reporting requirements under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

These covenants are subject to important limitations and exceptions that are described in the Indenture.

In addition, on the occurrence of a “change of control repurchase event,” as defined in the Indenture, we will generally be required to make an offer to purchase the outstanding November 2026 Notes at a price equal to 100% of the principal amount of such November 2026 Notes plus accrued and unpaid interest to the repurchase date.

The November 2026 Notes were offered to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act and to certain non-U.S.

persons outside the United States pursuant to Regulation S under the Securities Act.

The November 2026 Notes have not been registered under the Securities Act or any state securities laws and may not be offered or sold in the United States absent registration or an applicable exemption from such registration requirements.

As of December 31, 2021, the fair value of the outstanding November 2026 Notes was $346.8 million.

The fair value determinations of the November 2026 Notes were based on a market yield approach and current interest rates, which are Level 3 inputs to the market yield model.

Share Repurchase Plan

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

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

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

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

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

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

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

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

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

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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.

In addition, in connection with the closing of the MVC Acquisition on December 23, 2020, we committed to make open-market purchases of shares of our common stock in an aggregate amount of up to $15.0 million at then-current market prices at any time shares trade below 90% of our then most recently disclosed NAV per share.

During the year ended December 31, 2021, we did not repurchase any shares under the authorized program.

Distributions to Stockholders

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

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

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

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

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

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

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

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

We can offer no assurance that we will achieve results that will permit the payment of any level of cash distributions and our ability to make distributions will be limited by the asset coverage requirement

and related provisions under the 1940 Act and contained in any applicable indenture or financing agreement and related supplements.

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

As long as a portion of such dividend is paid in cash (which portion may be as low as 20% of such dividend (and 10% of the dividend declared through June 30, 2022) under published guidance from the Internal Revenue Service) and certain requirements are met, the entire distribution will be treated as a dividend for U.S.

federal income tax purposes.

As a result, a stockholder generally would be subject to tax on 100% of the fair market value of the dividend on the date the dividend is received by the stockholder in the same manner as a cash dividend, even though most of the dividend was paid in shares of our common stock.

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

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

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

federal excise tax on such excess.

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A discussion of our critical accounting policies follows.

We describe our most significant accounting policies in Note 1 to our Consolidated Financial Statements.

Investment Valuation

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

As of December 31, 2021, our investment portfolio, valued at fair value in accordance with the Board-approved valuation policies, represented approximately 243% of our total net assets, as compared to approximately 208% of our total net assets as of December 31, 2020.

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

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

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

While Barings is not provided access to

proprietary models of the vendors, the reviews have included on-site walkthroughs of the pricing process, methodologies and control procedures for each asset class and level for which prices are provided.

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

In addition, the

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

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

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

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Independent Valuation

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

An independent pricing service provider is the preferred source of pricing a loan, however, to the extent the independent pricing service provider price is

unavailable or not relevant and reliable, we will utilize alternative approaches such as broker quotes or manual prices.

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

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

Valuation of Investment in Jocassee

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

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

Valuation of Investment in Thompson Rivers

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

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

Valuation of Investments in MVC Private Equity Fund LP

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

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

Valuation of Investments in Jocassee, Thompson Rivers, Waccamaw River and MVC Private Equity Fund LP

As Jocassee, Thompson Rivers, Waccamaw River and MVC Private Equity Fund LP are investment companies with no readily determinable fair values, we estimate the fair value of our investments in these entities using net asset value of each company and our ownership percentage as a practical expedient.

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

Revenue Recognition

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

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

Our net investment income is affected by fluctuations in various

interest rates, including LIBOR, EURIBOR, GBP LIBOR, BBSY, STIBOR, CDOR, and SONIA.

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

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As of December 31, 2021, we were not a party to any interest rate hedging arrangements.

In connection with the COVID-19 pandemic, the U.S.

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

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

As of December 31, 2021, approximately $1,307.5 million (principal amount) of our debt portfolio investments bore interest at variable rates, which generally are LIBOR-based (or based on an equivalent applicable currency rate), and many of which are subject to certain floors.

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We pay a commitment fee of (x) 0.5% per annum on undrawn amounts if the unused portion of the February 2019 Credit Facility is greater than two-thirds of total commitments or (y) 0.375% per annum on undrawn amounts if the unused portion of the February 2019 Credit Facility is equal to or less than two-thirds of total commitments.

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

There is currently no definitive information regarding the future utilization of LIBOR or of any particular replacement rate.

As such, the potential effect of any such event on our cost of capital and net investment income cannot yet be determined.

In July 2017, the head of the U.K.

Financial Conduct Authority (the “FCA”), announced that the FCA will no longer persuade or compel banks to submit rates for the calculation of LIBOR after 2021.

In March 2021, the FCA confirmed that all LIBOR settings will either cease to be provided by any administrator or no longer be representative:

(a) immediately after December 31, 2021, in the case of sterling, euro, Swiss franc, and Japanese yen, and the one week and two month U.S.

dollar settings;

and (b) immediately after June 30, 2023, in the case of the remaining U.S.

dollar settings .

In addition, as a result of supervisory guidance from U.S.

regulators, some U.S.

regulated entities will cease to enter into new LIBOR contracts after January 1, 2022.

At this time, no consensus exists as to what rate or rates will become accepted alternatives to LIBOR, although the Alternative Reference Rates Committee, a steering committee convened by the Board of Governors of the Federal Reserve System and the Federal Reserve Bank of New York and comprised of large U.S.

financial institutions, has recommended the use of the Secured Overnight Financing Rate, SOFR.

There are many uncertainties regarding a transition from LIBOR to SOFR or any other alternative benchmark rate that may be established, including, but not limited to, the timing of any such transition, the need to amend all contracts with LIBOR as the referenced rate and, given the inherent differences between LIBOR and SOFR or any other alternative benchmark rate, how any transition may impact the cost and performance of impacted securities, variable rate debt and derivative financial instruments.

In addition, SOFR or another alternative benchmark rate may fail to gain market acceptance, which could adversely affect the return on, value of and market for securities, variable rate debt and derivative financial instruments linked to such rates.

The effects of a transition from LIBOR to SOFR or any other alternative benchmark rate on our cost of capital

and net investment income cannot yet be determined definitively.

All of our loan agreements with our portfolio companies include fallback language in the event that LIBOR becomes unavailable.

This language generally either includes a clearly defined alternative reference rate after LIBOR’s discontinuation or provides that the administrative agent may identify a replacement reference rate, typically with the consent of (or prior consultation with) the borrower.

In certain cases, the administrative agent will be required to obtain the consent of either a majority of the lenders under the facility, or the consent of each lender, prior to identifying a replacement reference rate.

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

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Such investments are translated into U.S.

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

exchange rate.

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

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

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dollars) with a weighted interest rate of 2.000%.

Off-Balance Sheet Arrangements

Unused Commitments

In the normal course of business, we are party to financial instruments with off-balance sheet risk, consisting primarily of unused commitments to extend financing to our portfolio companies.

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Portfolio Company Investment Type December 31, 2021

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

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

Acclime Holdings HK Limited(1) Delayed Draw Term Loan $ 1,178,571

Acclime Holdings HK Limited(1) Delayed Draw Term Loan 110,119

Air Comm Corporation, LLC(1) Delayed Draw Term Loan 10,801

Air Comm Corporation, LLC(1) Delayed Draw Term Loan 1,448,107

Amtech Software(1)(2) Delayed Draw Term Loan 2,727,273

Amtech Software(1)(2) Revolver 681,818

AnalytiChem Holding GmbH(1)(2)(3) Delayed Draw Term Loan 6,207,333

Aquavista Watersides 2 LTD(1)(4) Bridge Revolver 503,472

Aquavista Watersides 2 LTD(1)(4) Acquisition Facility 3,146,698

Arch Global Precision, LLC(1) Delayed Draw Term Loan —

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

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

Astra Bidco Limited(1)(2)(4) Delayed Draw Term Loan 2,571,405

Avance Clinical Bidco Pty Ltd(1)(5) Delayed Draw Term Loan 3,497,352

Azalea Buyer, Inc.(1)(2) Delayed Draw Term Loan 961,538

Azalea Buyer, Inc.(1)(2) Revolver 480,769

Bariacum S.A(1)(3) Acquisition Facility 2,160,679

Portfolio Company Investment Type December 31, 2021

Beyond Risk Management, Inc.(1)(2) Delayed Draw Term Loan 2,573,333

BigHand UK Bidco Limited(1)(2)(4) Acquisition Facility 378,348

Bounteous, Inc.(1) Delayed Draw Term Loan 2,840,367

Brightpay Limited(1)(2)(3) Delayed Draw Term Loan 431,799

Brightpay Limited(1)(2)(3) Delayed Draw Term Loan 143,933

BrightSign LLC(1) Revolver 1,328,991

British Engineering Services Holdco Limited(1)(4) Bridge Revolver 612,525

CAi Software, LLC(1)(2) Revolver 942,986

Canadian Orthodontic Partners Corp.(1)(2)(6) Acquisition Facility 166,685

Centralis Finco S.a.r.l.(1)(3) Acquisition Facility 460,949

Ceres Pharma NV(1)(3) Delayed Draw Term Loan 2,148,974

Classic Collision (Summit Buyer, LLC)(1) Delayed Draw Term Loan 392,619

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

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

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

Coastal Marina Holdings, LLC(1) PIK Tranche B Term Loan 1,311,220

Coastal Marina Holdings, LLC(1) Tranche A Term Loan 3,575,892

Command Alkon (Project Potter Buyer, LLC)(1) Delayed Draw Term Loan 6,018,078

Coyo Uprising GmbH(1)(3) Delayed Draw Term Loan 893,523

Crash Champions, LLC(1)(2) Delayed Draw Term Loan 5,420,303

CSL Dualcom(1)(4) Acquisition Term Loan 997,972

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

DecksDirect, LLC(1)(2) Revolver 218,182

DreamStart Bidco SAS(1)(3) Acquisition Facility 616,916

Dune Group(1)(3) Delayed Draw Term Loan 664,587

Dwyer Instruments, Inc.(1) Delayed Draw Term Loan 691,712

Eclipse Business Capital, LLC(1) Revolver 11,818,182

EMI Porta Holdco LLC(1)(2) Delayed Draw Term Loan 12,457,627

EMI Porta Holdco LLC(1)(2) Revolver 2,966,102

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

eShipping, LLC(1)(2) Delayed Draw Term Loan 2,548,131

eShipping, LLC(1)(2) Revolver 1,231,597

F24 (Stairway BidCo GmbH)(1)(2)(3) Delayed Draw Term Loan 405,130

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

Foundation Risk Partners, Corp.

Delayed Draw Term Loan 4,984,771

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

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

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

FragilePak LLC(1) Delayed Draw Term Loan 2,354,167

Heartland Veterinary Partners, LLC(1)(2) Delayed Draw Term Loan 657,143

Heavy Construction Systems Specialists, LLC(1) Revolver 2,631,772

HW Holdco, LLC (Hanley Wood LLC)(1)(2) Delayed Draw Term Loan 1,563,022

IGL Holdings III Corp.(1) Delayed Draw Term Loan 1,217,221

Innovad Group II BV(1)(2)(3) Delayed Draw Term Loan 1,824,551

INOS 19-090 GmbH(1)(2)(3) Acquisition Facility 2,535,457

Jocassee Partners LLC Joint Venture 20,000,000

ITI Intermodal, Inc.(1)(2) Delayed Draw Term Loan 103,058

ITI Intermodal, Inc.(1)(2) Revolver 124,006

Jaguar Merger Sub Inc.(1)(2) Delayed Draw Term Loan 1,960,784

Jaguar Merger Sub Inc.(1)(2) Revolver 490,196

Kano Laboratories LLC(1)(2) Delayed Draw Term Loan 153,064

Kene Acquisition, Inc.

Delayed Draw Term Loan 322,928

Portfolio Company Investment Type December 31, 2021

Kano Laboratories LLC(1)(2) Delayed Draw Term Loan 4,543,950

LAF International(1)(2)(3) Acquisition Facility 341,160

Lambir Bidco Limited(1)(3) Bridge Revolver 940,651

Lambir Bidco Limited(1)(3) Delayed Draw Term Loan 1,881,303

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

Marmoutier Holding B.V.(1)(3) Delayed Draw Term Loan 405,082

Marmoutier Holding B.V.(1)(3) Revolver 162,033

MC Group Ventures Corporation(1) Delayed Draw Term Loan 817,250

Modern Star Holdings Bidco Pty Limited(1)(5) Capex Term Loan 1,038,302

Murphy Midco Limited(1)(4) Delayed Draw Term Loan 2,617,027

Options Technology Ltd.

Delayed Draw Term Loan 2,604,080

Narda Acquisitionco., Inc.(1)(2) Revolver 1,310,680

Navia Benefit Solutions, Inc.(1) Delayed Draw Term Loan 1,260,800

Nexus Underwriting Management Limited(1)(4) Revolver 103,483

Nexus Underwriting Management Limited(1)(4) Acquisition Facility 540,919

OA Buyer, Inc.(1)(2) Revolver 1,331,244

OG III B.V.(1)(2)(3) Acquisition CapEx Facility 686,294

Omni Intermediate Holdings, LLC(1) Delayed Draw Term Loan 816,892

Omni Intermediate Holdings, LLC(1) Delayed Draw Term Loan 4,356,757

OSP Hamilton Purchaser, LLC(1)(2) Revolver 186,567

Pacific Health Supplies Bidco Pty Limited(1)(2)(5) CapEx Term Loan 1,282,566

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

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

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

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

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

PDQ.Com Corporation(1)(2) Delayed Draw Term Loan 10,947,692

Polara Enterprises, L.L.C.(1)(2) Revolver 545,234

Policy Services Company, LLC(1)(2) Delayed Draw Term Loan 6,944,079

Premium Invest(1)(2)(3) Acquisition Facility 1,933,240

Protego Bidco B.V.(1)(2)(3) Delayed Draw Term Loan 844,265

QPE7 SPV1 BidCo Pty Ltd(1)(5) Acquisition Term Loan 373,449

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

Portfolio Company(1) Investment Type December 31,

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

Reward Gateway (UK) Ltd(1)(2)(4) Acquisition Facility 1,061,336

Riedel Beheer B.V.(1)(3) Revolver 229,711

Riedel Beheer B.V.(1)(3) Delayed Draw Term Loan 153,141

Scaled Agile, Inc.(1)(2) Delayed Draw Term Loan 416,188

Scaled Agile, Inc.(1)(2) Revolver 335,821

Security Holdings B.V.(1)(3) Delayed Draw Term Loan 2,274,399

Security Holdings B.V.(1)(3) Revolver 1,137,200

Smartling, Inc.(1)(2) Delayed Draw Term Loan 2,352,941

Smartling, Inc.(1)(2) Revolver 1,176,471

Smile Brands Group, Inc.(1)(2) Delayed Draw Term Loan 654,691

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SSCP Pegasus Midco Limited(1)(4) Delayed Draw Term Loan 5,251,478

Superjet Buyer, LLC(1) Revolver 1,825,293

Syntax Systems Ltd(1)(2) Revolver 568,965

Syntax Systems Ltd(1)(2) Delayed Draw Term Loan 1,933,077

Techone B.V.(1)(3) Delayed Draw Term Loan 1,620,901

Portfolio Company Investment Type December 31, 2021

Techone B.V.(1)(3) Revolver 432,240

Tencarva Machinery Company, LLC(1)(2) Delayed Draw Term Loan 885,903

Tencarva Machinery Company, LLC(1)(2) Revolver 1,128,585

The Caprock Group, Inc.

(aka TA/TCG Holdings, LLC)(1)(2) Delayed Draw Term Loan 2,811,186

The Caprock Group, Inc.

(aka TA/TCG Holdings, LLC)(1)(2) Revolver 826,620

The Hilb Group, LLC(1)(2) Delayed Draw Term Loan 2,773,208

Transit Technologies LLC(1)(2) Delayed Draw Term Loan 1,857,017

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

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

W2O Holdings, Inc.

Delayed Draw Term Loan 5,989,298

Truck-Lite Co., LLC(1)(2) Delayed Draw Term Loan 4,539,745

Turbo Buyer, Inc.(1)(2) Delayed Draw Term Loan 2,070,000

Waccamaw River(2) Joint Venture 11,280,000

W2O Holdings, Inc.(1) Delayed Draw Term Loan 3,831,517

Woodland Foods, Inc.(1)(2) Revolver 2,069,868

Total unused commitments to extend financing $ 234,657,529

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

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

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

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

(3) Actual commitment amount is denominated in Euros.

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

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

(4) Actual commitment amount is denominated in British pounds sterling.

Commitment was translated into U.S.

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

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

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

Commitment was translated into U.S.

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

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

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

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

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

As of December 31, 2021 and 2020, we had guaranteed €9.9 million ($11.3 million U.S.

dollars and $12.1 million U.S.

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

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

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

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

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

Contractual Obligations

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

Total 2021 2022-2023 2024-2025 2026-Future

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

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

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

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

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

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

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

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

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

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

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

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

The letter of credit expired on April 30, 2021, and as of December 31, 2021, none of the Company’s cash was restricted.

Recent Developments

Subsequent to December 31, 2021, we made approximately $126.3 million of new commitments, of which $104.8 million closed and funded.

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

The $104.8 million of investments consists of $75.8 million of first lien senior secured debt investments and $28.9 million of equity and joint venture investments.

The weighted average yield of the debt investments was 6.3%.

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

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

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

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

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

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

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

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

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

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

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

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

In addition, we funded $7.9 million of previously committed revolvers and delayed draw term loans.

On February 1, 2022, the Board declared a quarterly distribution of $0.23 per share payable on February 23, 2022 to holders of record as of February 16, 2022.

Quantitative and Qualitative Disclosures About Market Risk.

5 unchanged sentences

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What changed 10-K

Item 7. Management’s Discussion and Analysis