Crescent Capital BDC, Inc. 10-K

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is traded on NASDAQ under the symbol “CCAP.” Prior to the listing of the Common Stock on NASDAQ on February 3, 2020, our Common Stock was offered and sold in transactions exempt from registration under the Securities Act under Section 4(a)(2) and Regulation D, as well as under Regulation S under the Securities Act. The following table sets forth, for each fiscal quarter since the listing of the Common Stock on NASDAQ, the range of high and low sales prices of the Common Stock as reported on NASDAQ, the premium (discount) of sales price to our net asset value, or NAV, and the distributions declared by us for each fiscal quarter. Price Range Period Net Asset Value (1) High Low High Sales Price Premium (Discount) to Net Asset Value (2) Low Sales Price Premium (Discount) to Net Asset Value (2) Cash Dividend Per Share (3) Year ended December 31, 2020 First Quarter $ 16.52 $ 17.10 $ 6.21 3.5 % (62.4 )% $ 0.41 Second Quarter $ 18.12 $ 13.25 $ 8.68 (26.9 )% (52.1 )% $ 0.41 Third Quarter $ 19.07 $ 13.81 $ 11.65 (27.6 )% (38.9 )% $ 0.41 Fourth Quarter $ 19.88 $ 15.25 $ 12.40 (23.3 )% (37.6 )% $ 0.41 (1) Net asset value per share is determined as of the last day in the relevant quarter and therefore does not reflect the net asset value per share disclosed to the market on the date of the high and low closing sales prices. The net asset values shown are based on outstanding shares at the end of the relevant quarter. (2) Calculated as the respective high or low closing sales price less net asset value, divided by net asset value (in each case, as of the applicable quarter). (3) Represents the dividend or distribution declared in the relevant quarter. The last reported price for our common stock on February 23, 2021 was $16.10 per share, which represented a 19.0% discount to our NAV as of December 31, 2020. Stock Performance Graph This graph compares the stockholder return on our common stock from February 3, 2020 (the date our common stock commenced trading on NASDAQ) to December 31, 2020 with that of the Standard & Poor’s 500 Stock Index, Standard & Poor’s BDC Index and Russell 2000 Financial Services Index. This graph assumes that on February 3, 2020, $100 was invested in our common stock, Standard & Poor’s 500 Stock Index, Standard & Poor’s BDC Index and Russell 2000 Financial Services Index. The graph also assumes the reinvestment of all cash dividends prior to any tax effect. 46 The graph and other information furnished under this Part II Item 5 of this Annual Report on Form 10-K shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C under, or to the liabilitie s of Section 18 of, the Exchange Act. The stock price performance included in the below graph is not necessarily indicative of future stock performance. Holders As of December 31, 2020, there were 195 holders of record of our common stock (excluding Cede & Co). Distribution Policy To the extent that we have taxable income available, we distribute quarterly dividends to our stockholders. The amount of our dividends, if any, are determined by our Board of Directors. Dividends and distributions are recorded on the record date. The amount to be paid out as a dividend is determined by the Board each quarter and is generally based upon the earnings estimated by management. Distributions will generally be paid from net investment income. Net realized capital gains, if any, are distributed at least annually, although we may decide to retain such capital gains for investment. If we do not generate sufficient net investment income during a year, all or part of a distribution may constitute a return of capital. The specific tax characteristics of our dividends and other distributions will be reported to stockholders after the end of each calendar year. Any dividends to our stockholders will be declared out of assets legally available for distribution. We have elected to be treated as a BDC under the 1940 Act. We have also elected to be treated as a RIC under the Internal Revenue Code. So long as we maintain our status as a RIC, we will generally not pay corporate-level U.S. federal income or excise taxes on any ordinary income or capital gains that we distribute at least annually to our stockholders as dividends. As a result, any tax liability related to income earned and distributed by us represents obligations of our stockholders and will not be reflected in our consolidated financial statements. In order for us not to be subject to federal excise taxes, we must distribute annually an amount at least equal to the sum of (i) 98% of our ordinary income (taking into account certain deferrals and elections), (ii) 98.2% of our net capital gains from the current year and (iii) any undistributed ordinary income and net capital gains from preceding years. At our discretion, we may carry forward taxable income in excess of calendar year dividends and pay a 4% excise tax on this income. If we choose to do so, this generally would increase expenses and reduce the amount available to be distributed to stockholders. We will accrue excise tax on estimated undistributed taxable income as required. We intend to make distributions in cash unless a stockholder elects to receive dividends and/or long-term capital gains distributions in additional shares of common stock. We can offer no assurance that we will achieve results that will permit the payment of any cash distributions and, if we issue senior securities, we will be prohibited from making distributions if doing so causes us to fail to maintain the asset coverage ratios stipulated by the 1940 Act or if distributions are limited by the terms of any of our borrowings. 47 The following tables summarize our dividends declared and payable for the years ended December 31, 2020, 2019, and 2018: ( $ in millions except per share amounts ) Date Declared Record Date Payment Date Per Share Amount Total Amount November 4, 2020 December 31, 2020 January 15, 2021 $ 0.41 $ 11.5 August 7, 2020 September 30, 2020 October 15, 2020 $ 0.41 $ 11.5 May 11, 2020 June 30, 2020 July 15, 2020 $ 0.41 $ 11.5 March 3, 2020 March 31, 2020 April 15, 2020 $ 0.41 $ 10.6 November 8, 2019 December 30, 2019 January 17, 2020 $ 0.41 $ 8.6 September 27, 2019 September 27, 2019 October 18, 2019 $ 0.41 $ 8.0 June 28, 2019 June 28, 2019 July 18, 2019 $ 0.41 $ 6.7 March 29, 2019 March 29, 2019 April 12, 2019 $ 0.41 $ 6.0 December 31, 2018 December 31, 2018 January 15, 2019 $ 0.40 $ 5.3 September 27, 2018 September 28, 2018 October 12, 2018 $ 0.38 $ 4.5 June 19, 2018 June 20, 2018 July 13, 2018 $ 0.37 $ 3.9 March 29, 2018 March 30, 2018 April 13, 2018 $ 0.32 $ 3.0 Dividend Reinvestment Plan We have adopted a dividend reinvestment plan that will provide for reinvestment of our dividends and other distributions on behalf of our stockholders, unless a stockholder elects to receive cash. As a result, if our Board authorizes, and we declare, a cash dividend or other distribution, then stockholders who are participating in the dividend reinvestment plan, will have their cash dividends and distributions automatically reinvested in additional shares of Common Stock, rather than receiving cash dividends and distributions. Recent Sales of Unregistered Securities and Use of Proceeds Except as previously reported us on our Current Reports on Form 8-K, we did not sell any securities during the period covered by this Form 10-K that were not registered under the Securities Act. ITEM 6. SELECTED FINANCIAL DATA None. 48 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management’s Discussion and Analysis should be read in conjunction with ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in “ITEM 1A. RISK FACTORS.” Actual results may differ materially from those contained in any forward-looking statements. OVERVIEW We are a specialty finance company focused on lending to middle-market companies and were incorporated under the laws of the State of Delaware on February 5, 2015 (“Inception”). On January 30, 2020, we changed our state of incorporation from the State of Delaware to the State of Maryland. We have elected to be treated as a BDC under the 1940 Act. In addition, we have elected to be treated for U.S. federal income tax purposes as a RIC under Subchapter M of the Code. As such, we are required to comply with various regulatory requirements, such as the requirement to invest at least 70% of our assets in “qualifying assets,” source of income limitations, asset diversification requirements, and the requirement to distribute annually at least 90% of our taxable income and tax-exempt interest. We are managed by the Adviser, an investment adviser that is registered with the SEC under the 1940 Act. The Administrator provides the administrative services necessary for us to operate. Company management consists of investment and administrative professionals from the Adviser and Administrator along with our Board. The Adviser directs and executes our investment operations and capital raising activities subject to oversight from the Board, which sets our broad policies. The Board has delegated investment management of our investment assets to the Adviser. The Board consists of five directors, four of whom are independent. Our primary investment objective is to maximize the total return to our stockholders in the form of current income and capital appreciation through debt and related equity investments. We seek to achieve our investment objectives by investing primarily in secured debt (including senior secured first lien, unitranche and senior secured second-lien debt) and unsecured debt (including senior unsecured, mezzanine and subordinated debt), as well as related equity securities of private U.S. middle-market companies. We may purchase interests in loans or make debt investments, either (i) directly from our target companies as primary market or private credit investments ( i.e. , private credit transactions), or (ii) primary or secondary market bank loan or high yield transactions in the broadly syndicated “over-the-counter” market ( i.e. , broadly syndicated loans and bonds). Although our focus is to invest in less liquid private credit transactions, we may from time to time invest in more liquid broadly syndicated loans and bonds to complement our private credit transactions. “First lien” investments are senior loans on a lien basis to other liabilities in the issuer’s capital structure that have the benefit of a first-priority security interest in assets of the issuer. The security interest ranks above the security interest of any second-lien lenders in those assets. “Unitranche first lien” investments are loans that may extend deeper in a company’s capital structure than traditional first lien debt and may provide for a waterfall of cash flow priority among different lenders in the unitranche loan. In certain instances, we may find another lender to provide the “first out” portion of such loan and retain the “last out” portion of such loan, in which case, the “first out” portion of the loan would generally receive priority with respect to payment of principal, interest and any other amounts due thereunder over the “last out” portion that we would continue to hold. In exchange for the greater risk of loss, the “last out” portion earns a higher interest rate. “Second lien” investments are loans with a second priority lien on all existing and future assets of the portfolio company. The security interest ranks below the security interests of any first lien and unitranche first lien lenders in those assets. “Mezzanine” or “unsecured debt” investments are loans that generally rank senior to a borrower’s equity securities and junior in right of payment to such borrower’s other senior indebtedness. Alcentra Acquisition On August 12, 2019, we entered into the Merger Agreement to acquire Alcentra Capital, in a cash and stock transaction. The board of directors of both companies each unanimously approved the Alcentra Acquisition and on January 29, 2020, Alcentra Capital’s stockholders approved the merger and our stockholders approved the issuance of shares of our common stock to Alcentra Capital’s stockholders. On January 31, 2020, we completed the Alcentra Acquisition, pursuant to the terms and conditions of the Merger Agreement. To effect the acquisition, Acquisition Sub merged with and into Alcentra Capital, with Alcentra Capital surviving the merger as our wholly owned subsidiary. Immediately thereafter and as a single integrated transaction, Alcentra Capital consummated the Second Merger, whereby it merged with and into us, with Crescent Capital BDC surviving the merger. Pursuant to the Merger Agreement, Alcentra Capital stockholders received the right to the following merger consideration in exchange for each share of Alcentra Capital common stock outstanding immediately prior to January 31, 2020, (a) $3.1784 per share in cash consideration (less the $0.8000 final dividend declared by Alcentra Capital) and (b) stock consideration at the fixed exchange ratio of 0.4041 shares of Common Stock. This resulted in our then-existing stockholders owning approximately 82% of us and Alcentra Capital’s then-existing stockholders owning approximately 18% of us. 49 The aggregate cash consideration was comprised of (i) $19.3 million in cash, or $1.5023 per share, from us (less $10.3 million or $0.8000 per share in final dividends paid by Alcentra Capital on January 31, 2020) and (ii) $21.6 million in cash, or $1.6761 per share, in transaction support provided by the Adviser. CRITICAL ACCOUNTING POLICIES Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Changes in the economic environment, financial markets and any other parameters used in determining such estimates could cause actual results to differ materially. The critical accounting policies should be read in connection with our risk factors as disclosed herein. In addition to the discussion below, our critical accounting policies are further described in Note 2. Summary of Significant Accounting Policies to our consolidated financial statements. Investment Valuation We apply Financial Accounting Standards Board ASC 820, Fair Value Measurement (“ASC 820”), as amended, which establishes a framework for measuring fair value in accordance with GAAP and required disclosures of fair value measurements. ASC 820 determines fair value to be the price that would be received for an investment in a current sale, which assumes an orderly transaction between market participants on the measurement date. Market participants are defined as buyers and sellers in the principal or most advantageous market (which may be a hypothetical market) that are independent, knowledgeable, and willing and able to transact. In accordance with ASC 820, we consider our principal market to be the market that has the greatest volume and level of activity. ASC 820 specifies a fair value hierarchy that prioritizes and ranks the level of observability of inputs used in the determination of fair value. In accordance with ASC 820, these levels are summarized below: Level 1—Valuations based on quoted prices in active markets for identical assets or liabilities that we have the ability to access. Level 2—Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. Level 3—Valuations based on inputs that are unobservable and significant to the overall fair value measurement. Investments in investment companies are valued at fair value. Fair values are generally determined utilizing the net asset value (“NAV”) supplied by, or on behalf of, management of each investment company, which is net of management and incentive fees or allocations charged by the investment company and is in accordance with the “practical expedient”, as defined by ASC 820. NAVs received by, or on behalf of, management of each investment company are based on the fair value of the investment company’s underlying investments in accordance with policies established by management of each investment company, as described in each of their financial statements and offering memorandum. Investments which are valued using NAV as a practical expedient are excluded from the above hierarchy. Investments for which market quotations are readily available are typically valued at those market quotations. To validate market quotations, we utilize a number of factors to determine if the quotations are representative of fair value, including the source and number of the quotations. Debt and equity securities that are not publicly traded or whose market prices are not readily available are valued at fair value as determined in good faith by the Board, based on, among other things, the input of the Adviser, our Audit Committee and independent third-party valuation firms engaged at the direction of the Board. The Board oversees and supervises a multi-step valuation process, which includes, among other procedures, the following: • The valuation process begins with each investment being initially valued by the investment professionals responsible for the portfolio investment in conjunction with the portfolio management team. • The Adviser’s management and Crescent’s alternative investment valuation committee reviews the preliminary valuations with the investment professionals. Agreed upon valuation recommendations are presented to the Audit Committee. • The Audit Committee reviews the valuations presented and recommends values for each investment to the Board. • The Board reviews the recommended valuations and determines the fair value of each investment. In connection with debt and equity securities that are valued at fair value in good faith by the Board, the Board will periodically engage independent third-party valuation firms to estimate a range of fair values for a sample of investments, which are used to corroborate management’s fair value estimates. In addition to using the above inputs in investment valuations, we apply the valuation policy approved by our Board that is consistent with ASC 820. Consistent with the valuation policy, we evaluate the source of inputs, including any markets in which our investments are trading (or any markets in which securities with similar attributes are trading), in determining fair value. When a security is valued 50 based on prices provided by reputable dealers or pricing services (that is, broker quotes), we subject those prices to various criteria in making the determination as to whether a particular investment would qualify for classification as a Level 2 or Level 3 investment. For example, we review pricing methodologies provided by dealers or pricing services in order to determine if observable market information is being used, versus unobservable inputs. Some additional factors considered include the number of prices obtained as well as an assessment as to their quality. Transfers between levels, if any, are recognized at the beginning of the period in which the transfers occur. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period. Additionally, the fair value of such investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that may ultimately be realized. Further, such investments are generally less liquid than publicly traded securities and may be subject to contractual and other restrictions on resale. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we could realize amounts that are different from the amounts presented and such differences could be material. In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the unrealized gains or losses reflected herein. See Note 4. Investments and Note 5. Fair Value of Financial Instruments for additional information on our investment portfolio. Interest and Dividend Income Recognition Interest income is recorded on an accrual basis and includes the amortization of purchase discounts and premiums. Discounts and premiums to par value on securities purchased are accreted or amortized into interest income over the contractual life of the respective securities using the effective yield method. The amortized cost of investments represents the original cost adjusted for the accretion and amortization of discounts and premiums, if any. Upon prepayment of a loan or debt security, any prepayment premiums, unamortized upfront loan origination fees and unamortized discounts are recorded as interest income. Dividend income from common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly-traded portfolio companies. Dividend income from preferred equity securities is recorded on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Each distribution received from an equity investment is evaluated to determine if the distribution should be recorded as dividend income or a return of capital. Generally, we will not record distributions from equity investments as dividend income unless there is sufficient current or accumulated earnings prior to the distribution. Distributions that are classified as a return of capital are recorded as a reduction of capital are recorded as a reduction in the cost basis of the investment. Certain investments have contractual payment-in-kind (“PIK”) interest or dividends. PIK represents accrued interest or accumulated dividends that are added to the loan principal or cost basis of the investment on the respective interest or dividend payment dates rather than being paid in cash and generally becomes due at maturity or upon being called by the issuer. PIK is recorded as interest or dividend income, as applicable. If at any point we believe PIK is not expected to be realized, the investment generating PIK will be placed on non-accrual status. Accrued PIK interest or dividends are generally reversed through interest or dividend income, respectively, when an investment is placed on non-accrual status. Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected in full. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest is paid current and, in management’s judgment, are likely to remain current. Management may determine to not place a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection. Income Taxes We have elected to be treated as a BDC under the 1940 Act. We also have elected to be treated as a RIC under the Internal Revenue Code. So long as we maintain our status as a RIC, we will generally not pay corporate-level U.S. federal income or excise taxes on any ordinary income or capital gains that we distribute at least annually to our stockholders as dividends. As a result, any tax liability related to income earned and distributed by us represents obligations of our stockholders and will not be reflected in our consolidated financial statements. We evaluate tax positions taken or expected to be taken in the course of preparing our consolidated financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are reversed and recorded as a tax benefit or expense in the current year. All penalties and interest associated with income taxes are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, on-going analyses of tax laws, regulations and interpretations thereof. We account for income taxes in conformity with ASC 740 — Income Taxes (“ASC 740”). ASC 740 provides guidelines for how uncertain tax positions should be recognized, measured, presented and disclosed in financial statements. 51 In order for us not to be subject to federal excise taxes, we must distribute annually an amount at least equal to the sum of (i) 98% of our ordinary income (taking into account certain deferrals and elections), (ii) 98.2% of our net capital gains from the current year and (iii) any undistributed ordinary income and net capital gains from preceding years. We, at our discretion, may carry forward taxable income in excess of calendar year dividends and pay a 4% excise tax on this income. If we choose to do so, this generally would increase expenses and reduce the amount available to be distributed to stockholders. We accrue excise tax on estimated undistributed taxable income as required on a quarterly basis. CBDC Universal Equity, Inc. is a taxable entity (“Taxable Subsidiary”). The Taxable Subsidiary permits us to hold equity investments in portfolio companies which are “pass through” entities for tax purposes and continue to comply with the “source income” requirements contained in RIC tax provisions of the Code. The Taxable Subsidiary is not consolidated with us for income tax purposes and may generate income tax expense, benefit, and the related tax assets and liabilities, as a result of their ownership of certain portfolio investments. The income tax expense, or benefit, if any, and related tax assets and liabilities are reflected in our consolidated financial statements. We intend to comply with the applicable provisions of the Code, pertaining to regulated investment companies and to make distributions of taxable income sufficient to relieve it from substantially all federal income taxes. As of December 31, 2020, we are subject to examination by U.S. federal tax authorities for returns filed for the three most recent calendar years and by state tax authorities for returns filed for the four most recent calendar years. We may generate qualified net interest income or qualified net short-term capital gains that may be exempt from U.S. withholding tax when distributed to foreign stockholders. A RIC is permitted to designate distributions of qualified net interest income and qualified short-term capital gains as exempt from U.S. withholding tax when paid to non-U.S. shareholders with proper documentation. As of December 31, 2020, the percentage of 2020 income estimated as qualified interest income for tax purposes was 98.0%. New Accounting Pronouncements In March 2020, the FASB issued Accounting Standard Update (“ASU”) No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This ASU provides optional exceptions for applying GAAP to contract modifications, hedging relationships and other transactions affected reference rate reform if certain criteria are met. ASU 2020-04 is elective and can be adopted between March 12, 2020 and December 31, 2022. We do not expect that the adoption of this guidance will have a material impact on our consolidated financial statements. The SEC issued final rules that, among other things, amended the financial disclosure requirements of Regulation S-X for acquired and disposed businesses and the significance tests for a “significant subsidiary” as applicable to BDCs and amended certain forms used by BDCs. The amendments are intended to assist BDCs in making more meaningful determinations as to whether a subsidiary or an acquired or disposed entity is significant and improve the financial disclosure requirements applicable to acquisitions and dispositions of investment companies and BDCs. The Company early adopted the updated rules for the year ended December 31, 2020 which did not result in any new significant subsidiaries being identified. COMPONENTS OF OPERATIONS Investments We expect our investment activity to vary substantially from period to period depending on many factors, the general economic environment, the amount of capital we have available to us, the level of merger and acquisition activity for middle-market companies, including the amount of debt and equity capital available to such companies and the competitive environment for the type of investments we make. In addition, as part of our risk strategy on investments, we may reduce certain levels of investments through partial sales or syndication to additional investors. We may not invest in any assets other than “qualifying assets” specified in the 1940 Act, unless, at the time the investments are made, at least 70% of our total assets are qualifying assets (with certain limited exceptions). Qualifying assets include investments in “eligible portfolio companies.” Pursuant to rules adopted by the SEC, “eligible portfolio companies” include certain companies that do not have any securities listed on a national securities exchange and public companies whose securities are listed on a national securities exchange but whose market capitalization is less than $250 million. The Investment Adviser Our investment activities are managed by the Adviser, which is responsible for originating prospective investments, conducting research and due diligence investigations on potential investments, analyzing investment opportunities, negotiating and structuring our investments and monitoring our investments and portfolio companies on an ongoing basis. The Adviser has entered into a resource sharing agreement with Crescent, pursuant to which Crescent provides the Adviser with experienced investment professionals (including the members of the Adviser’s investment committee) and access to Crescent’s resources so as to enable the Adviser to fulfill its obligations under the Investment Advisory Agreement. Through the resource sharing agreement, the Adviser intends to capitalize on the deal origination, credit underwriting, due diligence, investment structuring, execution, portfolio management and monitoring experience of Crescent’s investment professionals. On January 5, 2021, Sun Life Financial Inc. (together with its subsidiaries 52 and joint ventures, “Sun Life”) acquired a majority interest in Crescent (the “Sun Life Transaction”). There were no changes to our investment objective, strategies and process or to the Crescent team responsible for the investment operations as a result of the Sun Life Transaction. Revenues We generate revenue primarily in the form of interest income on debt investments, capital gains and distributions, if any, on equity securities that we may acquire in portfolio companies. Certain investments may have contractual PIK interest or dividends. PIK represents accrued interest or accumulated dividends that are added to the loan principal of the investment on the respective interest or dividend payment dates rather than being paid in cash and generally becomes due at maturity or upon being called by the issuer. PIK is recorded as interest or dividend income, as applicable. Dividend income from common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly-traded portfolio companies. Dividend income from preferred equity securities is recorded on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. We may receive other income, which may include income such as consent, waiver, amendment, underwriting, and arranger fees associated with our investment activities as well as any fees for managerial assistance services rendered to the portfolio companies. Such fees are recognized as income when earned or the services are rendered. We also generate revenue in the form of commitment or origination fees. Loan origination fees, original issue discount and market discount or premium are capitalized, and we accrete or amortize such amounts into income over the life of the loan using the effective yield method. Expenses Our primary operating expenses include the payment of management fees and incentive fees to the Adviser under the Investment Advisory Agreement, as amended, our allocable portion of overhead expenses under the administration agreement with our Administrator (the “Administration Agreement”), operating costs associated with our sub-administration agreement with State Street Bank and Trust Company and other operating costs described below. The management and incentive fees compensate the Adviser for its work in identifying, evaluating, negotiating, closing and monitoring our investments. We bear all other out-of-pocket costs and expenses of our operations and transactions, including: • the cost of calculating our net asset value, including the cost of any third-party valuation services; • fidelity bond, directors’ and officers’ liability insurance and other insurance premiums; • fees and expenses associated with independent audits and outside legal costs; • independent directors’ fees and expenses; • administration fees and expenses, if any, payable under the Administration Agreement (including payments based upon our allocable portion of the Administrator’s overhead in performing its obligations under the Administration Agreement, rent and the allocable portion of the cost of certain professional services provided to us, including but not limited to, our compliance professionals, our legal counsel and other professionals); • U.S. federal, state and local taxes; • the cost of effecting sales and repurchases of shares of our common stock and other securities; • fees payable to third parties relating to making investments, including out-of-pocket fees and expenses associated with performing due diligence and reviews of prospective investments; • out-of-pocket fees and expenses associated with marketing efforts; • federal and state registration fees and any stock exchange listing fees; • brokerage commissions; • costs associated with our reporting and compliance obligations under the 1940 Act and other applicable U.S. federal and state securities laws; • debt service and other costs of borrowings or other financing arrangements; and • all other expenses reasonably incurred by us in connection with making investments and administering our business. We expect our general and administrative expenses to be relatively stable or decline as a percentage of total assets during periods of asset growth and to increase during periods of asset declines. 53 Leverage Our financing facilities allow us to borrow money and lever our investment portfolio, subject to the limitations of the 1940 Act, with the objective of increasing our yield. This is known as “leverage” and could increase or decrease returns to our stockholders. The use of leverage involves significant risks. Prior to the Small Business Credit Availability Act being signed into law, a BDC generally was not permitted to incur indebtedness unless immediately after such borrowing it has an asset coverage for total borrowings of at least 200%. The Small Business Credit Availability Act, signed into law on March 23, 2018, contains a provision that grants a BDC the option, subject to certain conditions and disclosure obligations, to reduce the asset coverage requirement to 150%. On March 3, 2020, our Board of Directors approved, and on May 4, 2020, at an annual meeting of our stockholders, our stockholders approved, the application to us of the reduced asset coverage requirements in Section 61(a) of the 1940 Act. The application of the reduced asset coverage requirement, which became effective on May 4, 2020, permits us, provided certain requirements are satisfied, to double the maximum amount of leverage that it is permitted to incur by reducing the asset coverage requirement applicable to us from 200% to 150% (i.e., we are permitted to borrow up to two dollars for every dollar we have in assets less all liabilities and indebtedness not represented by senior securities issued by us) in order to issue senior securities. Short-term credits necessary for the settlement of securities transactions and arrangements with respect to securities lending will not be considered borrowings for these purposes. The amount of leverage that we employ depends on our Adviser’s and our Board’s assessment of market conditions and other factors at the time of any proposed borrowing. PORTFOLIO INVESTMENT ACTIVITY We seek to create a broad and diversified portfolio that generally includes senior secured first lien, unitranche, senior secured second lien and subordinated loans and minority equity securities of U.S. middle market companies. The size of our individual investments will vary proportionately with the size of our capital base. We generally invest in securities that have been rated below investment grade by independent rating agencies or that would be rated below investment grade if they were rated. These securities have speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal. In addition, many of our debt investments have floating interest rates that reset on a periodic basis and typically do not fully pay down principal prior to maturity. As of December 31, 2020 and 2019, our portfolio at fair value was comprised of the following: December 31, 2020 December 31, 2019 ($ in millions) Investment Type Fair Value Percentage Fair Value Percentage Senior Secured First Lien $ 373.6 36.1 % $ 351.3 48.3 % Unitranche First Lien 413.6 40.0 218.3 30.1 Unitranche First Lien - Last Out 14.9 1.5 16.2 2.2 Senior Secured Second Lien 104.7 10.1 58.9 8.1 Unsecured Debt 3.0 0.3 7.4 1.0 Equity & Other 69.3 6.7 21.4 3.0 LLC/LP Equity Interests 54.9 5.3 53.0 7.3 Total investments $ 1,034.0 100.0 % $ 726.5 100.0 % 54 The following table shows our investment activity by investment type: Year Ended ($ in millions) December 31, 2020 (1) December 31, 2019 New investments at cost: Senior Secured First Lien $ 110.8 $ 140.7 Unitranche First Lien 204.2 166.9 Unitranche First Lien - Last Out — 16.0 Senior Secured Second Lien 17.9 4.4 Unsecured Debt 0.8 — Equity & Other 9.2 5.4 LLC/LP Equity Interests 9.5 44.9 Total $ 352.4 $ 378.3 Proceeds from investments sold or repaid: Senior Secured First Lien $ 165.3 $ 78.4 Unitranche First Lien 57.0 41.3 Unitranche First Lien - Last Out 0.2 0.2 Senior Secured Second Lien 24.2 14.2 Unsecured Debt 6.5 — Equity & Other 0.5 2.0 LLC/LP Equity Interests 5.3 9.7 Total $ 259.0 $ 145.8 Net increase (decrease) in portfolio $ 93.4 $ 232.5 (1) Excludes $195.7 million of assets at cost acquired in connection with the Alcentra Acquisition. The assets acquired, at cost, were comprised of $82.2 million of senior secured first lien, $45.0 million of unitranche first lien, $53.0 million of senior secured second lien, $1.2 million of unsecured debt and $14.3 million of equity investments. The following table presents certain selected information regarding our investment portfolio as of December 31, 2020 and December 31, 2019: December 31, 2020 December 31, 2019 Weighted average yield on income producing securities (at cost) (1) 8.0 % 8.1 % (2) Percentage of debt bearing a floating rate (at fair value) 98.4 % 97.9 % Percentage of debt bearing a fixed rate (at fair value) 1.6 % 2.1 % Number of portfolio companies 132 98 (1) Yield excludes investments on non-accrual status. (2) Prior period updated to conform to current period methodology. The following table shows the amortized cost of our performing and non-accrual debt and income producing debt securities as of December 31, 2020 and 2019. December 31, 2020 December 31, 2019 Amortized Cost Percentage Amortized Cost Percentage Performing $ 899.2 98.3 % $ 645.4 98.1 % Non-accrual 15.6 1.7 12.6 1.9 Total income producing debt securities $ 914.8 100.0 % $ 658.0 100.0 % Loans are generally placed on non-accrual status when there is reasonable doubt that principal or interest will be collected in full. Non-accrual loans are restored to accrual status when past due principal and interest is paid current and, in management’s judgment, are likely to remain current. Management may determine to not place a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection. 55 As of December 31, 2020, we had investments in two portfolio companies with three investment positions on non-accrual status, which represented 1.7% and 1.3% of the total debt investments at cost and fair value, respectively. As of December 31, 2019, we had an investment in one portfolio company with three investment positions on non-accrual status, which represented 1.9% and 1.0% of total debt investments at cost and fair value, respectively. The remaining debt investments were performing and current on their interest payments as of December 31, 2020 and 2019. The Adviser monitors our portfolio companies on an ongoing basis. The Adviser monitors the financial trends of each portfolio company to determine if it is meeting its business plans and to assess the appropriate course of action for each company. The Adviser has a number of methods of evaluating and monitoring the performance and fair value of our investments, which may include the following: • assessment of success of the portfolio company in adhering to its business plan and compliance with covenants; • review of monthly and quarterly financial statements and financial projections for portfolio companies. • contact with portfolio company management and, if appropriate, the financial or strategic sponsor, to discuss financial position, requirements and accomplishments; • comparisons to other companies in the industry; and • attendance and participation in board meetings. As part of the monitoring process, the Adviser regularly assesses the risk profile of each of our investments and, on a quarterly basis, grades each investment on a risk scale of 1 to 5. Risk assessment is not standardized in our industry and our risk assessment may not be comparable to ones used by our competitors. Our assessment is based on the following categories: 1 Involves the least amount of risk in our portfolio. The investment/borrower is performing above expectations since investment, and the trends and risk factors are generally favorable, which may include the financial performance of the borrower or a potential exit. 2 Involves an acceptable level of risk that is similar to the risk at the time of investment. The investment/borrower is generally performing as expected, and the risk factors are neutral to favorable. 3 Involves an investment/borrower performing below expectations and indicates that the investment’s risk has increased somewhat since investment. The borrower’s loan payments are generally not past due and more likely than not the borrower will remain in compliance with debt covenants. An investment rating of 3 requires closer monitoring. 4 Involves an investment/borrower performing materially below expectations and indicates that the loan’s risk has increased materially since investment. In addition to the borrower being generally out of compliance with debt covenants, loan payments may be past due (but generally not more than 180 days past due). Placing loans on non-accrual status should be considered for investments rated 4. 5 Involves an investment/borrower performing substantially below expectations and indicates that the loan’s risk has substantially increased since investment. Most or all of the debt covenants are out of compliance and payments are substantially delinquent. Loans rated 5 are not anticipated to be repaid in full and the fair market values of the loans are generally reduced to the anticipated recovery amounts. Loans with an investment rating of 5 are generally placed on non-accrual status. The following table shows the distribution of our investments on the 1 to 5 investment performance rating scale at fair value as of December 31, 2020 and 2019. Investment performance ratings are accurate only as of those dates and may change due to subsequent developments relating to a portfolio company’s business or financial condition, market conditions or developments, and other factors. ($ in millions) December 31, 2020 December 31, 2019 Investment Performance Rating Investments at Fair Value Percentage of Total Portfolio Investments at Fair Value Percentage of Total Portfolio 1 $ 9.8 0.9 % $ 19.1 2.6 % 2 895.1 86.6 653.1 89.9 3 117.0 11.3 47.8 6.6 4 12.1 1.2 6.5 0.9 5 — — — — Total $ 1,034.0 100.0 % $ 726.5 100.0 % 56 RESULTS OF OPERATIONS Operating results for the years ended December 31, 2020 and 2019 were as follows: For the years ended December 31, 2020 December 31, 2019 ($ in millions) Total investment income $ 77.1 $ 53.5 Total net expenses 27.2 21.8 Net investment income $ 49.9 $ 31.7 Net realized gain (loss) on investments (1) (15.3 ) (7.2 ) Net unrealized appreciation (depreciation) on investments (1) (2) 24.1 5.0 Net realized and unrealized gains (losses) on investments $ 8.8 $ (2.2 ) Realized loss on asset acquisition (3.8 ) — Benefit/(Provision) for taxes on realized and unrealized appreciation (depreciation) on investments (0.2 ) (0.2 ) Net increase (decrease) in net assets resulting from operations $ 54.7 $ 29.3 (1) Includes gains and losses related to foreign currency transactions and translation. (2) Includes gains and losses related to foreign currency forward contracts. Investment Income For the years ended December 31, 2020 December 31, 2019 ($ in millions) Interest from investments $ 71.1 $ 47.7 Dividend Income 4.9 5.0 Other income 1.1 0.8 Total $ 77.1 $ 53.5 Interest income, which includes amortization of upfront fees, increased from $47.7 million for the year ended December 31, 2019 to $71.1 million for the year ended December 31, 2020, due to an increase in the size of our portfolio related to the Alcentra Acquisition and organic net deployment. Included in interest from investments for the years ended December 31, 2020 and 2019 are $2.3 million and $1.4 million of accelerated accretion of OID, respectively. Dividend income remained relatively flat for the years ended December 31, 2020 and 2019. Other income which includes amendment fees, amortization of loan administration fees and other fees increased modestly as a result of a growing investment portfolio. 57 Expenses For the years ended December 31, 2020 December 31, 2019 ($ in millions) Interest and other debt financing costs $ 15.5 $ 13.4 Management fees 11.4 9.2 Incentive fees 8.6 4.8 Professional fees 1.5 0.9 Directors’ fees 0.4 0.3 Organization expenses — 0.1 Other general and administrative expenses 2.6 2.2 Total expenses $ 40.0 $ 30.9 Management fee waiver (4.7 ) (4.5 ) Incentive fee waiver (8.6 ) (4.8 ) Net expenses $ 26.7 $ 21.6 Income and excise taxes 0.5 0.2 Total $ 27.2 $ 21.8 Interest and other debt financing costs Interest and other debt financing costs include interest, amortization of deferred financing costs including upfront commitment fees and unused fees on our credit facilities. For the years ended December 31, 2020 and 2019 interest and debt financing costs were $15.5 million and $13.4 million, respectively. The increase between the periods is due to an increase in the debt outstanding in connection with financing needs of a growing investment portfolio. The increase in the debt outstanding was partially offset by a decrease in the average benchmark rates during the year ended December 31, 2020. Base Management Fees For the years ended December 31, 2020 and 2019, we incurred management fees of $6.7 million and $4.7 million, respectively, which are net of a waived amounts of $4.7 million and $4.5 million, respectively. As of December 31, 2020 and 2019, $1.9 million and $1.3 million of management fees, respectively, remained payable. The increase in net management fees is driven by growing assets under management. The Adviser has voluntarily waived its right to receive management fees on our investment in GACP II LP for any period in which GACP II LP remains in the investment portfolio. For the years ended December 31, 2020 and 2019, $0.1 million and $0.1 million of management fees waived were attributable to our investment in GACP II LP. Incentive Fees For the years ended December 31, 2020 and 2019 we incurred income incentive fees of $8.6 million and $4.8 million, of which $8.6 million and $4.8 million, respectively, were waived. $0 was payable as of December 31, 2020 and 2019, respectively. For the years ended December 31, 2020 and 2019 we accrued no incentive fee on cumulative unrealized capital appreciation. Professional Fees and Other General and Administrative Expenses Professional fees generally include expenses from independent auditors, tax advisors, legal counsel and third party valuation agents. Other general and administrative expenses generally include expenses from the sub-administration agreement, insurance premiums, overhead and staffing costs allocated from the Administrator and other miscellaneous general and administrative costs associated with our operations and investment activity. For the years ended December 31, 2020 and 2019, professional fees were $1.5 million and $0.9 million, respectively. For the years ended December 31, 2020 and 2019, other general and administrative expenses were $2.6 million and $2.2 million, respectively. The net increase in expenses was due to an increase in costs associated with servicing a growing investment portfolio. Organization expenses We agreed to repay the Adviser for initial organization costs and equity offering costs incurred prior to the commencement of our operations up to a maximum of $1.5 million on a pro rata basis over the first $350.0 million of invested capital not to exceed 3 years from the initial capital commitment on June 26, 2015. The initial 3 year term was later extended to June 30, 2019, with shareholder approval. To the extent such costs related to equity offerings, these costs were charged as a reduction of capital upon the issuance of common shares. To the extent such costs related to organization costs, these costs were expensed in the Consolidated Statements of Operations upon the issuance of common shares. The Adviser was responsible for organization and private equity offerings costs in excess of $1.5 million. During the reimbursement period which began on June 26, 2015 and expired on June 30, 2019, the Adviser had allocated to us $0.8 million of equity offering costs and $0.6 million of organization costs. 58 Income and Excise Taxes For the years ended December 31, 2020 and 2019, we expensed income and excise taxes of $0.5 million and $0.2 million, respectively. As of December 31, 2020 and 2019, $0.4 million and $0.1 million of excise taxes remained payable, respectively. Net Realized and Unrealized Gains and Losses We value our portfolio investments quarterly and any changes in fair value are recorded as unrealized appreciation (depreciation) on investments. For the years ended December 31, 2020 and 2019, net realized gains (losses) and net unrealized appreciation (depreciation) on our investment portfolio were comprised of the following: For the years ended December 31, 2020 December 31, 2019 ($ in millions) Realized losses on non-controlled and non-affiliated investments $ (11.6 ) $ (0.6 ) Realized gains on non-controlled and non-affiliated investments 0.7 1.4 Realized losses on non-controlled and affiliated investments (5.6 ) (7.9 ) Realized gains on non-controlled and affiliated investments 1.3 — Realized losses on controlled and affiliated investments — — Realized gains on controlled and affiliated investments — — Realized losses on foreign currency transactions (0.3 ) (0.6 ) Realized gains on foreign currency transactions 0.2 0.5 Net realized gains (losses) on investments $ (15.3 ) $ (7.2 ) Change in unrealized depreciation on non-controlled and non-affiliated investments $ (1.7 ) $ (1.2 ) Change in unrealized appreciation on non-controlled and non-affiliated investments 8.4 4.5 Change in unrealized depreciation on foreign currency translation (0.5 ) (0.8 ) Change in unrealized appreciation on foreign currency translation 0.6 1.4 Change in unrealized depreciation on non-controlled and affiliated investments (0.4 ) (0.9 ) Change in unrealized appreciation on non-controlled and affiliated investments 20.7 0.9 Change in unrealized depreciation on controlled and affiliated investments (1.3 ) — Change in unrealized appreciation on controlled and affiliated investments (0.4 ) 0.4 Change in unrealized depreciation on foreign currency forwards (1.3 ) (0.1 ) Change in unrealized appreciation on foreign currency forwards — 0.8 Net unrealized appreciation (depreciation) $ 24.1 $ 5.0 Realized loss on asset acquisition (3.8 ) — Net realized and unrealized gains (losses) on investments and asset acquisition $ 5.0 $ (2.2 ) Hedging We may, but are not required to, enter into interest rate, foreign exchange or other derivative agreements to hedge interest rate, currency, credit or other risks. Generally, we do not intend to enter into any such derivative agreements for speculative purposes. Any derivative agreements entered into for speculative purposes are not expected to be material to our business or results of operations. These hedging activities, which are in compliance with applicable legal and regulatory requirements, may include the use of various instruments, including futures, options and forward contracts. We bear the costs incurred in connection with entering into, administering and settling any such derivative contracts. There can be no assurance any hedging strategy we employ will be successful. During the years ended December 31, 2020 and 2019, our average U.S. Dollar notional exposure to foreign currency forward contracts were $35.8 million and $23.3 million, respectively. 59 For the years ended December 31, 2019 and 2018 The comparison of the fiscal years ended December 31, 2019 and 2018 can be found in our annual report on Form 10-K for the fiscal year ended December 31, 2019 located within Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, which is incorporated by reference herein. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES The primary uses of our cash and cash equivalents are for (1) investments in portfolio companies and other investments; (2) the cost of operations (including paying the Adviser); (3) debt service, repayment, and other financing costs; and (4) cash distributions to the holders of our common stock. We expect to generate additional liquidity from (1) borrowings from our SPV Asset Facility, Corporate Revolving Facility, Unsecured Notes, and from other banks, lenders, or future issuances of debt and equity securities; and, (2) cash flows from operations. As of December 31, 2020, we had $14.8 million in cash and cash equivalents and restricted cash and cash equivalents and $139.9 million of undrawn capacity on our senior unsecured notes and revolving credit and special purpose vehicle asset facilities, subject to borrowing base and other limitations. As of December 31, 2020, the undrawn capacity under our facilities is in excess of our unfunded commitments. As of December 31, 2020, we were in compliance with our asset coverage requirements under the 1940 Act. In addition, we were in compliance with all the financial covenant requirements of our credit facilities as of December 31, 2020. However, any continued increase in realized losses or 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, increase the risk of breaching the relevant covenants requirements. Any breach of these requirements may adversely affect the access to sufficient debt and equity capital. We expect that the market and business disruption created by the COVID-19 pandemic will continue to impact certain aspects of our liquidity, and we are therefore continuously and critically monitoring our operating results, liquidity and anticipated capital requirements. It is impossible at this time to determine the full scope of this outbreak, or any future outbreaks, how long any such outbreak, market disruption or uncertainties may last, the effect any governmental actions will have or the full potential impact on our liquidity and overall performance . Capital Share Activity Between June 26, 2015, commencement of operations, and January 31, 2020, the date of Alcentra Acquisition, we entered into subscription agreements (collectively, the “Subscription Agreements”) with several investors, including Crescent, providing for the private placement of our common shares. Pursuant to the Subscription Agreements, between June 26, 2015 and January 31, 2020, we issued 23,127,335 common shares for aggregate proceeds of $456.3 million, of which $10.0 million was from Crescent. Proceeds from the issuances were used to fund our investing activities and for other general corporate purposes. Subsequently, on January 31, 2020, we issued 5,203,016 shares in connection with the Alcentra Acquisition. Upon closing of the Alcentra Acquisition, all unfunded commitments of stockholders subscribing in private offering were terminated. During the years ended December 31, 2020 and 2019 we issued 30,128 shares and 76,969 shares of our common stock, respectively, to investors who have opted into our dividend reinvestment plan for proceeds of $0.6 million and $1.5 million, respectively. Debt Debt consisted of the following as of December 31, 2020 and 2019: December 31, 2020 Aggregate Principal Amount Committed Drawn Amount Amount Available (1) Carrying Value (2) Weighted Average Debt Outstanding Weighted Average Interest Rate SPV Asset Facility $ 350.0 $ 260.2 $ 89.8 $ 260.2 $ 235.3 2.63 % Corporate Revolving Facility 200.0 149.9 50.1 149.9 150.4 2.93 % Unsecured Notes 50.0 50.0 — 50.0 15.0 6.49 % InterNotes ® 16.4 16.4 — 16.4 20.4 6.40 % Total Debt $ 616.4 $ 476.5 $ 139.9 $ 476.5 $ 421.1 3.26 % 60 December 31, 2019 Aggregate Principal Amount Committed Drawn Amount Amount Available (1) Carrying Value (2) Weighted Average Debt Outstanding Weighted Average Interest Rate SPV Asset Facility $ 250.0 $ 220.7 $ 29.3 $ 220.7 $ 201.0 4.03 % Corporate Revolving Facility 200.0 104.7 95.3 104.7 74.9 4.26 % Total Debt $ 450.0 $ 325.4 $ 124.6 $ 325.4 $ 275.9 4.10 % (1) The amount available is subject to any limitations related to the respective debt facilities’ borrowing bases and foreign currency translation adjustments. (2) Amount presented excludes netting of deferred financing costs. SPV Asset Facility On March 28, 2016, Crescent Capital BDC Funding, LLC (“CCAP SPV”), a wholly owned subsidiary of CCAP, entered into a loan and security agreement, as amended (the “SPV Asset Facility”) with us as the collateral manager, seller and equity holder, CCAP SPV as the borrower, the banks and other financial institutions from time to time party thereto as lenders, and Wells Fargo Bank, National Association (“Wells Fargo”), as administrative agent, collateral agent, and lender. We consolidate CCAP SPV in our consolidated financial statements and no gain or loss is recognized from the transfer of assets to and from CCAP SPV. Between February 8, 2017 and March 10, 2020, we have entered into multiple amendments to the SPV Asset Facility to, among other things, increase the facility limit from $75 million to $350 million. The maximum commitment amount under the SPV Asset Facility is $350 million, and may be increased with the consent of Wells Fargo or reduced upon our request. Proceeds of the Advances under the SPV Asset Facility may be used to acquire portfolio investments, to make distributions to us in accordance with the SPV Asset Facility, and to pay related expenses. The maturity date is the earlier of (a) the date the borrower voluntarily reduces the commitments to zero, (b) March 10, 2025 (the Facility Maturity Date) and (c) the date upon which Wells Fargo declares the obligations due and payable after the occurrence of an Event of Default. Borrowings under the SPV Asset Facility bear interest at LIBOR plus a margin with no LIBOR floor. The margin is between 1.65% and 2.20% as determined by the proportion of liquid and illiquid loans pledged to the SPV Asset Facility. We pay unused facility fees of 0.50% per annum on committed but undrawn amounts under the SPV Asset Facility. The SPV Asset Facility includes customary covenants, including certain limitations on the incurrence of additional indebtedness and liens, as well as usual and customary events of default for revolving credit facilities of this nature. The facility size is subject to availability under the borrowing base, which is based on the amount of CCAP SPV’s assets from time to time, and satisfaction of certain conditions, including an asset coverage test and certain concentration limits. Corporate Revolving Facility On August 20, 2019, we entered into the “Corporate Revolving Facility” with Ally Bank (“Ally”), as Administrative Agent and Arranger. Proceeds of the advances under the Revolving Credit Agreement may be used to acquire portfolio investments, to make distributions to us in accordance with the Revolving Credit Agreement and to pay related expenses. The maximum principal amount of the Corporate Revolving Facility is $200 million, subject to availability under the borrowing base. Borrowings under the Corporate Revolving Facility bear interest at LIBOR plus a 2.35% margin, which includes a 0.05% utilization fee, with no LIBOR floor. We pay unused facility fees of 0.50% per annum on committed but undrawn amounts under the Corporate Revolving Facility. Interest is payable quarterly in arrears. Any amounts borrowed under the Corporate Revolving Facility, and all accrued and unpaid interest, will be due and payable, on August 20, 2024. The Corporate Revolving Facility replaced the prior corporate revolving facility with Capital One, National Association. The maximum principal amount of the prior corporate revolving facility was $85 million, subject to availability under the borrowing base. Borrowings under the prior corporate revolving facility bore interest at LIBOR plus a 1.55% margin with no LIBOR floor. We paid unused facility fees of 0.20% per annum on committed but undrawn amounts. Interest was payable monthly in arrears. We paid down in full and terminated the prior corporate revolving facility on August 20, 2019. Unsecured Notes On July 30, 2020, we completed a private offering of $50.0 million aggregate principal amount of 5.95% senior unsecured notes due July 30, 2023 (the “Unsecured Notes”). The Unsecured Notes have a delayed draw feature. The initial issuance of $25.0 million of Unsecured Notes closed July 30, 2020. The issuance of the remaining $25.0 million of Unsecured Notes closed on October 28, 2020. 61 The Unsecured Notes will mature on July 30, 2023 and may be redeemed in whole or in part, at our option, at any time or from time to time at par plus a “make-whole” premium, if applicable. Interest on the Unsecured Notes is due and payable semiannually in arrears on January 30 th and July 30 th of each year, commencing on January 30, 2021. As of December 31, 2020, we were in compliance with the terms of the note purchase agreement governing the Unsecured Notes. Costs incurred in connection with issuing the Unsecured Notes are recorded as deferred financing costs and are being amortized over the life of the Unsecured Notes on an effective yield basis. InterNotes ® On January 31, 2020, in connection with the Alcentra Acquisition, we assumed direct unsecured fixed interest rate obligations or “InterNotes ® ”. The majority of InterNotes ® were issued by Alcentra Corporation between January 2015 and January 2016. Each series of notes has been issued by a separate trust administered by U.S. Bank. As of December 31, 2020, the outstanding InterNotes ® bear interest at fixed interest rates ranging between 6.25% and 6.75% and offer a variety of maturities ranging between February 15, 2021 and April 15, 2022. The summary of costs incurred in connection with the SPV Asset Facility, Corporate Revolving Facility, InterNotes ® , Unsecured Notes, and prior corporate revolving facility for the years ended December 31, 2020 and 2019, were as follows: ($ in millions) For the years ended December 31, 2020 December 31, 2019 Borrowing interest expense $ 13.4 $ 12.1 Unused facility fees 0.8 0.2 Amortization of financing costs 1.3 1.1 Total interest and credit facility expenses $ 15.5 $ 13.4 Weighted average outstanding balance $ 421.1 $ 275.9 To the extent we determine that additional capital would allow us to take advantage of additional investment opportunities, if the market for debt financing presents attractively priced opportunities, or if our Board otherwise determines that leveraging our portfolio would be in our best interest and the best interests of our stockholders, we may enter into new debt financing opportunities in addition to our existing debt. The pricing and other terms of any such opportunities would depend upon market conditions and the performance of our business, among other factors. In accordance with applicable SEC staff guidance and interpretations, effective May 5, 2020 with shareholder approval, we, as a BDC, are permitted to borrow amounts such that our asset coverage ratio is at least 150% after such borrowing (if certain requirements are met), rather than 200%, as previously required. Short-term credits necessary for the settlement of securities transactions and arrangements with respect to securities lending will not be considered borrowings for these purposes. The amount of leverage that we employ depends on our Adviser’s and our Board’s assessment of market conditions and other factors at the time of any proposed borrowing. As of December 31, 2020 and 2019, our asset coverage ratio was 217% and 225%, respectively. We may also refinance or repay any of our indebtedness at any time based on our financial condition and market conditions. See Note 6. Debt to our consolidated financial statements for more detail on the debt facilities. STOCK REPURCHASE PROGRAM On January 31, 2020, we entered into a $20.0 million repurchase plan which allowed us to purchase shares in the open market any time our common stock traded below 90% of the most recently disclosed net asset value per share. The plan was subject to compliance with our liquidity, covenant, leverage and regulatory requirements. Pursuant to the terms of the repurchase plan, repurchases began on March 2, 2020. On April 9, 2020, our Board of Directors unanimously approved the termination of the stock repurchase program. For the year ended December 31, 2020, we repurchased 192,415 shares at an average price per share, including commissions, of $11.48. There were no stock repurchased for the years ended December 31, 2019. OFF BALANCE SHEET ARRANGEMENTS Our investment portfolio may contain investments that are in the form of lines of credit or unfunded commitments which require us to provide funding when requested by portfolio companies in accordance with the terms of the underlying agreements. Unfunded commitments to provide funds to portfolio companies are not reflected on our Consolidated Statements of Assets and Liabilities. 62 These commitments are subject to the same underwriting and ongoing portfolio maintenance as are the on-balance sheet financial instruments that we hold. Since these commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. As of December 31, 2020 and 2019, we had aggregate unfunded commitments totaling $80.8 million and $82.7 million, respectively. The foreign denominated commitments were converted to USD at each balance sheet date. RECENT DEVELOPMENTS On January 5, 2021, Sun Life Financial Inc. acquired a majority interest in Crescent. Consummation of the Sun Life Transaction resulted in a change of control of Crescent. There were no changes to our investment objective, strategies and process or to the Crescent team responsible for the investment operations as a result of the Sun Life Transaction. On February 15, 2021, $5.4 million of InterNotes® matured and were redeemed at par. We provided notice to redeem the remaining $11.0 million of InterNotes® which is expected to be paid off on March 19, 2021. On February 17, 2021, we completed a private offering of $135.0 million aggregate principal amount of 4.00% senior unsecured notes due February 17, 2026 (the “2026 Unsecured Notes”). The 2026 Unsecured Notes have a delayed draw feature. The initial issuance of $50.0 million of Unsecured Notes closed February 17, 2021. The issuance of the remaining $85.0 million of 2026 Unsecured Notes is expected to close on or before May 17, 2021. On February 22, 2021, our Board of Directors declared a regular cash dividend of $0.41 per share, which will be paid on April 15, 2021 to stockholders of record as of March 31, 2021. On February 22, 2021, the Adviser notified the Board of Directors of its intent to voluntarily waive incentive fees to the extent net investment income falls short of the declared dividend on a full dollar basis. The waiver will become effective upon expiration of the current waivers on July 31, 2021 and will continue through December 31, 2022.