What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-05-14 compared with 2020-11-16 · 99 added, 165 removed, 300 unchanged (47% of the section changed)

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As used in this Quarterly Report on Form 10-Q, “we,” “us,” “our” or similar terms include CĪON Investment Corporation and its consolidated subsidiaries.

In addition, the term "portfolio companies" refers to companies in which we have invested, either directly or indirectly through our consolidated subsidiaries.

The following discussion should be read in conjunction with our unaudited consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2020.

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Operating Expenses

Our primary operating expenses are the payment of advisory fees under the investment advisory agreement and interest expense on our financing arrangements.

Our primary operating expenses are the payment of advisory fees and subordinated incentive fees on income under the investment advisory agreement and interest expense on our financing arrangements.

Our investment advisory fees compensate CIM for its work in identifying, evaluating, negotiating, executing, monitoring and servicing our investments.

We bear all other expenses of our operations and transactions.

Recent Developments - COVID-19

Recent Developments

The rapid spread of COVID-19, and associated impacts on the U.S.

and global economies and the financial and credit markets, has negatively impacted, and is likely to continue to negatively impact, our business operations and the business operations of some of our portfolio companies.

We cannot at this time fully predict the impact of COVID-19 on our business or the business of our portfolio companies, its duration or magnitude or the extent to which it will negatively impact our portfolio companies’ operating results or our own results of operations or financial condition, including, without limitation, our ability to pay distributions.

and global economies and the financial and credit markets, initially had negatively impacted, and may again negatively impact, our business operations and the business operations of some of our portfolio companies.

We expect that certain of our portfolio companies will continue to experience economic distress for the foreseeable future and may significantly limit business operations if subjected to prolonged economic distress.

These developments could result in a decrease in the value of our investments.

COVID-19 has already had adverse effects on our investment income and we expect that such adverse effects will continue for some time.

These developments could result in a decrease in the value of certain of our investments.

COVID-19 initially had adverse effects on our investment income and may again have adverse effects in the future.

These adverse effects may require us to restructure certain of our investments, which could result in further reductions to our investment income or in impairments on our investments.

In addition, disruptions in the capital markets have resulted in illiquidity in certain market areas.

These market disruptions and illiquidity are likely to have an adverse effect on our business, financial condition, results of operations and cash flows.

These market disruptions and illiquidity initially had an adverse effect on our business, financial condition, results of operations and cash flows.

Unfavorable economic conditions caused by COVID-19 can also be expected to increase our funding costs and limit our access to the capital markets.

These events have limited our investment originations, which is likely to continue for the immediate future, and have also had a material negative impact on our operating results.

These events initially limited our investment originations, which may occur again in the future, and may also have a material negative impact on our operating results.

We will continue to carefully monitor the impact of COVID-19 on our business and the business of our portfolio companies.

Because the full effects of COVID-19 are not capable of being known at this time, we cannot estimate the impacts of COVID-19 on our future financial condition, results of operations or cash flows, including its effects on us with respect to our compliance with covenants in our financing arrangements with lenders.

We do, however, expect that it will continue to have a negative impact on our business and the financial condition of our portfolio companies.

Portfolio Investment Activity for the Three Months Ended September 30, 2020 and 2019 and the Year Ended December 31, 2019

The following table summarizes our investment activity, excluding short term investments and PIK securities, for the three months ended September 30, 2020 and 2019 and the year ended December 31, 2019:

We do, however, expect that it will continue to have a negative impact on our business and the financial condition of certain of our portfolio companies.

More Term Loan

On April 14, 2021, we entered into the Term Loan Agreement with More, as lender.

The More Term Loan provides for an unsecured term loan to us in an aggregate principal amount of $30,000.

On April 20, 2021, we drew down $30,000 of borrowings under the More Term Loan.

After the deduction of fees and other financing expenses, we received net borrowings of approximately $29,000, which we intend to use for working capital and other general corporate purposes.

See Note 14 to our consolidated financial statements contained in this report for additional information regarding the More Term Loan.

Portfolio Investment Activity for the Three Months Ended March 31, 2021 and 2020 and the Year Ended December 31, 2020

The following table summarizes our investment activity, excluding short term investments and PIK securities, for the three months ended March 31, 2021 and 2020 and the year ended December 31, 2020:

Three Months Ended

September 30, Year Ended December 31,

March 31, Year Ended

Net Investment Activity 2021 2020 2020

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Senior secured second lien debt — — 4,375

Unsecured debt — — 4,900

Equity 1,644 88 7,266

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Net portfolio activity $ (5,640) $ (34,767) $ (183,534)

The following tables summarize the composition of our investment portfolio at amortized cost and fair value as of September 30, 2020, December 31, 2019 and September 30, 2019:

September 30, 2020

The following tables summarize the composition of our investment portfolio at amortized cost and fair value as of March 31, 2021 and December 31, 2020:

March 31, 2021

Investments Cost(1) Investments Fair

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Senior secured second lien debt 171,480 151,506 10.1 %

Collateralized securities and structured products - debt 7,212 7,212 0.4 %

Collateralized securities and structured products - equity 15,305 12,131 0.8 %

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(3) The gross annual portfolio yield does not represent and may be higher than an actual investment return to shareholders because it excludes our expenses and all sales commissions and dealer manager fees and does not consider the cost of leverage.

September 30, 2019

Investments Cost(1) Investments Fair

Value Percentage of

Senior secured first lien debt $ 1,473,789 $ 1,417,752 80.9 %

Senior secured second lien debt 289,712 268,656 15.3 %

Collateralized securities and structured products - debt 10,051 9,950 0.6 %

Collateralized securities and structured products - equity 16,503 14,981 0.9 %

Equity 52,363 40,755 2.3 %

Subtotal/total percentage 1,842,418 1,752,094 100.0 %

Short term investments(2) 23,060 23,060

Total investments $ 1,865,478 $ 1,775,154

Number of portfolio companies 135

Average annual EBITDA of portfolio companies $81.6 million

Median annual EBITDA of portfolio companies $56.0 million

Purchased at a weighted average price of par 96.63 %

Gross annual portfolio yield based upon the purchase price(3) 9.27 %

(1) Represents amortized cost for debt investments and cost for equity investments.

Amortized cost represents the original cost adjusted for the amortization of premiums and/or accretion of discounts, as applicable, on our investments.

(2) Short term investments represent an investment in a fund that invests in highly liquid investments with average original maturity dates of three months or less.

The following table summarizes the composition of our investment portfolio by the type of interest rate as of September 30, 2020 and December 31, 2019, excluding short term investments of $53,024 and $29,527, respectively:

September 30, 2020 December 31, 2019

Interest Rate Allocation Investments Cost Investments Fair

Value Percentage of

Portfolio Investments Cost Investments Fair

Value Percentage of

The following table summarizes the composition of our investment portfolio by the type of interest rate as of March 31, 2021 and December 31, 2020, excluding short term investments of $87,593 and $73,597, respectively:

March 31, 2021 December 31, 2020

Interest Rate Allocation Investments Cost Investments Fair Value Percentage of

Portfolio Investments Cost Investments Fair Value Percentage of

Floating interest rate investments $ 1,349,948 $ 1,306,343 85.1 % $ 1,347,194 $ 1,284,282 85.9 %

Fixed interest rate investments 127,637 128,162 8.4 % 126,962 124,816 8.3 %

Non-income producing investments 65,733 43,922 2.9 % 51,887 45,213 2.6 %

Non-income producing equity 66,827 65,400 4.3 % 66,086 52,505 3.5 %

Other income producing investments 35,274 34,143 2.2 % 37,413 34,171 2.3 %

Total investments $ 1,579,686 $ 1,534,048 100.0 % $ 1,577,655 $ 1,495,774 100.0 %

The following table shows the composition of our investment portfolio by industry classification and the percentage, by fair value, of the total assets in such industries as of September 30, 2020, December 31, 2019 and September 30, 2019:

September 30, 2020 December 31, 2019 September 30, 2019

Industry Classification Investments at

Fair Value Percentage of

Investment Portfolio Investments at

Fair Value Percentage of

Investment Portfolio Investments at

Fair Value Percentage of

The following table shows the composition of our investment portfolio by industry classification and the percentage, by fair value, of the total assets in such industries as of March 31, 2021 and December 31, 2020:

March 31, 2021 December 31, 2020

Industry Classification Investments Fair Value Percentage of

Investment Portfolio Investments Fair Value Percentage of

Investment Portfolio

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Beverage, Food & Tobacco 83,083 5.4 % 69,975 4.7 %

Telecommunications 60,692 4.0 % 61,577 3.6 % 62,646 3.6 %

High Tech Industries 71,486 4.7 % 55,619 3.7 %

Capital Equipment 65,871 4.3 % 65,752 4.4 %

Retail 53,583 3.5 % 53,599 3.1 % 60,649 3.5 %

Diversified Financials 52,420 3.5 % 66,897 3.9 % 24,931 1.4 %

Banking, Finance, Insurance & Real Estate 51,349 3.3 % 41,211 2.8 %

Construction & Building 38,719 2.6 % 37,096 2.1 % 33,026 1.9 %

Aerospace & Defense 35,457 2.3 % 30,378 1.8 % 25,505 1.4 %

Telecommunications 46,284 3.0 % 46,638 3.1 %

Oil & Gas 41,328 2.7 % 28,136 1.9 %

Forest Products & Paper 20,305 1.3 % 24,217 1.4 % 24,605 1.4 %

Consumer Goods:

Non-Durable 20,153 1.3 % 33,609 1.9 % 41,832 2.4 %

Aerospace & Defense 36,513 2.4 % 35,751 2.4 %

Construction & Building 34,626 2.3 % 34,653 2.3 %

Hotel, Gaming & Leisure 31,428 2.0 % 21,920 1.5 %

Retail 28,751 1.9 % 29,312 2.0 %

Diversified Financials 24,697 1.6 % 37,214 2.5 %

Forest Products & Paper 21,717 1.4 % 21,686 1.4 %

Transportation:

Cargo 18,821 1.2 % 19,001 1.3 %

Consumer Goods:

Non-Durable 16,202 1.1 % 15,757 1.1 %

Metals & Mining 10,033 0.7 % 10,147 0.7 %

Automotive 9,873 0.7 % 10,013 0.6 % 8,021 0.4 %

Consumer Goods:

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Our investment portfolio may contain senior secured investments that are in the form of lines of credit, delayed draw term loans, revolving credit facilities, or unfunded commitments, which may require us to provide funding when requested in accordance with the terms of the underlying agreements.

As of September 30, 2020, December 31, 2019 and September 30, 2019, our unfunded co mmitments amounted to $60,521, $83,694 and $64,885, respectively.

As of November 12, 2020, our unfunded commitments amounted to $55,806.

As of March 31, 2021 and December 31, 2020, our unfunded commitments amounted to $75,738 and $43,130 , respectively.

As of May 10, 2021, our unfunded commitments amounte d to $79,985.

Since these commitments may expire without being drawn upon, unfunded commitments do not necessarily represent future cash requirements or future earning assets for us.

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For investments rated 3, 4, or 5, CIM enhances its level of scrutiny over the monitoring of such portfolio company.

The following table summarizes the composition of our investment portfolio based on the 1 to 5 investment rating scale at fair value as of September 30, 2020, December 31, 2019 and September 30, 2019, excluding short term investments of $53,024, $29,527 and $23,060, respectively:

September 30, 2020 December 31, 2019 September 30, 2019

The following table summarizes the composition of our investment portfolio based on the 1 to 5 investment rating scale at fair value as of March 31, 2021 and December 31, 2020, excluding short term investments of $87,593 and $73,597, respectively:

March 31, 2021 December 31, 2020

Investment Rating Investments

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Fair Value Percentage of

Investment Portfolio Investments

Fair Value Percentage of

Investment Portfolio

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Current Investment Portfolio

The following table summarizes the composition of our investment portfolio at fair value as of November 12, 2020:

The following table summarizes the composition of our investment portfolio at fair value as of May 10, 2021:

Investments Fair

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(2) The gross annual portfolio yield does not represent and may be higher than an actual investment return to shareholders because it excludes our expenses and all sales commissions and dealer manager fees and does not consider the cost of leverage.

Results of Operations for the Three Months Ended September 30, 2020 and 2019

Our results of operations for the three months ended September 30, 2020 and 2019 were as follows:

Results of Operations for the Three Months Ended March 31, 2021 and 2020

Our results of operations for the three months ended March 31, 2021 and 2020 were as follows:

Three Months Ended

September 30,

Investment income $ 36,303 $ 45,748

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Net change in unrealized appreciation (depreciation) on investments 36,243 (123,377)

Net increase (decrease) in net assets from operations $ 31,087 $ (2,222)

Net increase (decrease) in net assets resulting from operations $ 49,714 $ (105,912)

Investment Income

For the three months ended September 30, 2020 and 2019, we generated investment income of $38,887 and $49,775, respectively, consisting primarily of interest income on investments in senior secured debt, and collateralized securities and structured products of 118 and 139 portfolio companies held during each respective period.

Our average investment portfolio size, excluding our short term investments, decreased $257,069, from $1,785,539 for the three months ended September 30, 2019 to $1,528,471 for the three months ended September 30, 2020.

Additionally, the decrease in LIBOR during the three months ended September 30, 2020 from the three month ended September also contributed to the decrease in interest income.

For the three months ended March 31, 2021 and 2020, we generated investment income of $36,303 and $45,748, respectively, consisting primarily of interest income on investments in senior secured debt, collateralized securities and structured products, and unsecured debt of 107 and 136 portfolio companies held during each respective period.

Our average investment portfolio size, excluding our short term investments, decreased $143,343, from $1,658,254 for the three months ended March 31, 2020 to $1,514,911 for the three months ended March 31, 2021.

Additionally, the decrease in LIBOR during the three months ended March 31, 2021 from the three months ended March 31, 2020 also contributed to the decrease in interest income.

Operating Expenses

The composition of our operating expenses for the three months ended September 30, 2020 and 2019 was as follows:

The composition of our operating expenses for the three months ended March 31, 2021 and 2020 was as follows:

Three Months Ended

September 30,

Management fees $ 7,783 $ 8,451

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Total operating expenses $ 18,704 $ 24,087

The decrease in subordinated incentive fee on income was primarily the result of lower investment income generated on our investments during the three months ended September 30, 2020 as compared to the three months ended September 30, 2019.

The decrease in interest expense was primarily the result of lower LIBOR rates during the three months ended September 30, 2020 as compared to the three months ended September 30, 2019.

The decrease in interest expense was also the result of lower average borrowings on our financing arrangements during the three months ended September 30, 2020 as compared to the three months ended September 30, 2019, which also resulted in a decrease in total assets and therefore a decrease in management fees during the three months ended September 30, 2020.

The composition of our general and administrative expenses for the three months ended September 30, 2020 and 2019 was as follows:

The decrease in subordinated incentive fee on income was primarily due to the decrease in interest income during the three months ended March 31, 2021 as compared to the three months ended March 31, 2020.

The decrease in interest expense was primarily the result of a decrease in LIBOR during the three months ended March 31, 2021 as compared to the three months ended March 31, 2020.

The decrease in interest expense was also the result of lower average borrowings on our financing arrangements during the three months ended March 31, 2021 as compared to the three months ended March 31, 2020, which also resulted in a decrease in total assets and a decrease in management fees during the three months ended March 31, 2021.

The composition of our general and administrative expenses for the three months ended March 31, 2021 and 2020 was as follows:

Three Months Ended

September 30,

Valuation expense $ 241 $ 168

Printing and marketing expense 241 17

Transfer agent expense 239 325

Accounting and administrative costs 224 191

Professional fees $ 1,265 $ 297

Insurance expense 131 108

Dues and subscriptions 124 82

Director fees and expenses 105 119

Other expenses 21 14

Total general and administrative expense $ 1,524 $ 1,155

Net Investment Income

Our net investment income totaled $21,420 and $21,662 for the three months ended September 30, 2020 and 2019, respectively.

The decrease in net investment income was primarily due to a decrease in investment income, partially offset by a decrease in our subordinated incentive fees and interest expense for the three months ended September 30, 2020 as compared to the three months ended September 30, 2019.

Net Realized Loss on Investments and Foreign Currency

Our net realized loss on investments and foreign currency totaled ($42,511) and ($316) for the three months ended September 30, 2020 and 2019, respectively.

This change was driven primarily by realized losses on the restructure of certain investments during the three months ended September 30, 2020 as compared to the three months ended September 30, 2019.

Net Change in Unrealized Appreciation (Depreciation) on Investments

The net change in unrealized appreciation (depreciation) on our investments totaled $52,178 and ($23,568) for the three months ended September 30, 2020 and 2019, respectively.

This change was driven primarily by certain previously unrealized losses being realized during the three months ended September 30, 2020 and the continued recovery of loan prices.

Net Increase (Decrease) in Net Assets from Operations

For the three months ended September 30, 2020 and 2019, we recorded a net increase (decrease) in net assets resulting from operations of $31,087 and ($2,222), respectively, as a result of our operating activity for the respective periods.

Results of Operations for the Nine Months Ended September 30, 2020 and 2019

Our results of operations for the nine months ended September 30, 2020 and 2019 were as follows:

Nine Months Ended

September 30,

Investment income $ 120,443 $ 150,465

Net operating expenses 63,446 85,603

Net investment income 56,997 64,862

Net realized loss on investments and foreign currency (57,693) (3,650)

Net change in unrealized depreciation on investments (57,542) (38,871)

Net (decrease) increase in net assets from operations $ (58,238) $ 22,341

Investment Income

For the nine months ended September 30, 2020 and 2019, we generated investment income of $120,443 and $150,465, respectively, consisting primarily of interest income on investments in senior secured debt and collateralized securities and structured products of 134 and 164 portfolio companies held during each respective period.

Our average investment portfolio size, excluding our short term investments, decre ased $176,221, from $1,802,434 for the nine months ended September 30, 2019 to $1, 626,213 for the nine months ended September 30, 2020, as the non-income producing equity portion of our portfolio increased from $34,625 as of September 30, 2019 to $115,204 as of September 30, 2020 and the size of our investment portfolio as a whole decreased.

Additionally, the decrease in LIBOR during the nine months ended September 30, 2020 from the nine month ended September also contributed to the decrease in interest income.

Operating Expenses

The composition of our operating expenses for the nine months ended September 30, 2020 and 2019 was as follows:

Nine Months Ended

September 30,

Management fees $ 24,160 $ 27,597

Administrative services expense 1,793 1,433

Subordinated incentive fee on income 3,308 14,475

General and administrative 4,709 3,741

Interest expense 29,476 38,357

Total operating expenses $ 63,446 $ 85,603

The decrease in subordinated incentive fee on income was primarily the result of lower investment income generated on our investments during the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019.

The decrease in interest expense was primarily the result of lower LIBOR rates during the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019.

The decrease in interest expense was also the result of lower average borrowings on our financing arrangements during the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019, which also resulted in a decrease in total assets and therefore a decrease in management fees during the nine months ended September 30, 2020.

The composition of our general and administrative expenses for the nine months ended September 30, 2020 and 2019 was as follows:

Nine Months Ended

September 30,

Professional fees $ 1,108 $ 801

Transfer agent expense 422 395

Valuation expense 252 276

Accounting and administrative costs 507 394

Printing and marketing expense 359 73

Accounting and administration costs 237 146

Dues and subscriptions 169 82

Insurance expense 132 108

Director fees and expenses 103 116

Dues and subscriptions 273 241

Due diligence fees — 61

Printing and marketing expense 44 15

Other expenses 65 35

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Net Investment Income

Our net investment income totaled $56,997 and $64,862 for the nine months ended September 30, 2020 and 2019, respectively.

The decrease in net investment income was primarily due to a decrease in investment income during the nine months ended September 30, 2020, which was partially offset by a decrease in subordinated incentive fees and interest expense.

Our net investment income totaled $17,599 and $21,661 for the three months ended March 31, 2021 and 2020, respectively.

The decrease in our investment income during the three months ended March 31, 2021 as compared to the three months ended March 31, 2020 was offset by a decrease in our operating expenses during the same period.

Net Realized Loss on Investments and Foreign Currency

Our net realized loss on investments and foreign currency totaled ($57,693) and ($3,650) for the nine months ended September 30, 2020 and 2019, respectively.

This change was driven primarily by realized losses on the restructure of certain investments during the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019.

Net Change in Unrealized Depreciation on Investments

The net change in unrealized depreciation on our investments totaled ($57,542) and ($38,871) for the nine months ended September 30, 2020 and 2019, respectively.

This change was driven primarily by unrealized losses on certain underperforming investments during the nine months ended September 30, 2020.

Net (Decrease) Increase in Net Assets from Operations

For the nine months ended September 30, 2020 and 2019, we recorded a net (decrease) increase in net assets resulting from operations of ($58,238) and $22,341, respectively, as a result of our operating activity for the respective periods.

Our net realized loss on investments and foreign currency totaled $(4,128) and $(4,196) for the three months ended March 31, 2021 and 2020, respectively, which were driven primarily by realized losses on the liquidation of our investment in certain portfolio companies during both periods.

Net Change in Unrealized Appreciation (Depreciation) on Investments

The net change in unrealized appreciation (depreciation) on our investments totaled $36,243 and $(123,377) for the three months ended March 31, 2021 and 2020, respectively.

This change was driven primarily by tightening credit spreads and increased multiples in equity markets during the three months ended March 31, 2021 that positively impacted the fair value of certain of our investments, as compared to the outbreak and spread of COVID-19 around the world during the three months ended March 31, 2020, which caused significant uncertainty and volatility in the U.S.

and global economies as well as in the financial and credit markets and negatively impacted the fair value of certain of our investments.

Net Increase (Decrease) in Net Assets Resulting from Operations

For the three months ended March 31, 2021 and 2020, we recorded a net increase (decrease) in net assets resulting from operations of $49,714 and $(105,912), respectively, as a result of our operating activity for the respective periods.

This “Results of Operations” discussion should also be read in conjunction with “Recent Developments - COVID-19” above.

Net Asset Value per Share, Annual Investment Return and Total Return Since Inception

Our net asset value per share was $7.62 and $8.40 on September 30, 2020 and December 31, 2019, respectively.

After considering (i) the overall changes in net asset value per share, (ii) paid distributions of approximately $0.2712 per share during the nine months ended September 30, 2020, and (iii) the assumed reinvestment of those distributions in accordance with our distribution reinvestment plan then in effect, the total investment return-net asset value was (6.12)% for the nine month period ended September 30, 2020.

Our net asset value per share was $8.06 and $7.75 on March 31, 2021 and December 31, 2020, respectively.

After considering (i) the overall changes in net asset value per share, (ii) paid distributions of approximately $0.1324 per share during the three months ended March 31, 2021, and (iii) the assumed reinvestment of those distributions in accordance with our distribution reinvestment plan then in effect, the total investment return-net asset value was 5.73% for the three-month period ended March 31, 2021.

Total investment return-net asset value does not represent and may be higher than an actual return to shareholders because it excludes all sales commissions and dealer manager fees.

Total investment return-net asset value is a measure of the change in total value for shareholders who held our common stock at the beginning and end of the period, including distributions paid or payable during the period, and is described further in Note 13 to our consolidated financial statements included in this report.

Initial shareholders who subscribed to the offering in December 2012 with an initial investment of $10,000 and an initial purchase price equal to $9.00 per share (public offering price excluding sales load) have seen an annualized return of 5.65% and a cumulative total return of 53.51% through September 30, 2020 (see chart below).

Initial shareholders who subscribed to the offering in December 2012 with an initial investment of $10,000 and an initial purchase price equal to $10.00 per share (the initial public offering price including sales load) have seen an annualized return of 4.23% and a cumulative total return of 38.16% through September 30, 2020.

Initial shareholders who subscribed to the offering in December 2012 with an initial investment of $10,000 and an initial purchase price equal to $9.00 per share (public offering price excluding sales load) have seen an annualized return of 6.70% and a cumulative total return of 71.27% through March 31, 2021 (see chart below).

Initial shareholders who subscribed to the offering in December 2012 with an initial investment of $10,000 and an initial purchase price equal to $10.00 per share (the initial public offering price including sales load) have seen an annualized return of 5.36% and a cumulative total return of 54.14% through March 31, 2021.

Over the same time period, the S&P/LSTA Leveraged Loan Index, a primary measure of senior debt covering the U.S.

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(1) Cumulative performance:

December 17, 2012 to September 30, 2020

December 17, 2012 to March 31, 2021

The calculations for the Growth of $10,000 Initial Investment are based upon (i) an initial investment of $10,000 in our common stock at the beginning of the period, at a share price of $10.00 per share (including sales load) and $9.00 per share (excluding sales load), (ii) assumes reinvestment of monthly distributions in accordance with our distribution reinvestment plan then in effect, (iii) the sale of the entire investment position at the net asset value per share on the last day of the period, and (iv) the distributions declared and payable to shareholders, if any, on the last day of the period.

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On March 23, 2018, an amendment to Section 61(a) of the 1940 Act was signed into law to permit BDCs to reduce the minimum "asset coverage" ratio from 200% to 150% and, as a result, to potentially increase the ratio of a BDC's debt to equity from a maximum of 1-to-1 to a maximum of 2-to-1, so long as certain approval and disclosure requirements are satisfied.

We currently have not determined whether to seek to utilize such additional leverage.

We generated cash from the net proceeds from our continuous public offerings.

Our initial continuous public offering commenced on July 2, 2012 and ended on December 31, 2015.

Our follow-on continuous public offering commenced on January 25, 2016 and ended on January 25, 2019.

We intend to seek the approval of our shareholders to reduce our minimum “asset coverage” ratio from 200% to 150% in accordance with the 1940 Act.

The outbreak and spread of COVID-19 have caused severe stress and uncertainty in the U.S.

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and (ii) temporarily suspend the payment of distributions to shareholders commencing with the month ended April 30, 2020, whether in cash or pursuant to our distribution reinvestment plan, as amended and restated.

On July 15, 2020, the board of directors determined to recommence the payment of distributions to shareholders in August 2020.Distributions in respect of future months will be reevaluated by management and our board of directors based on circumstances and expectations existing at the time of consideration.

On March 19, 2020, our board of directors, including the independent directors, determined to temporarily suspend our share repurchase program commencing with the second quarter of 2020 and included the third quarter of 2020.

On November 13, 2020, the Company recommenced its share repurchase program for the fourth quarter of 2020.

Share repurchases for future quarters will be reevaluated by our board of directors based on circumstances and expectations existing at the time of consideration.

As of September 30, 2020 and November 12, 2020, we had $53,024 and $143,745 in short term investments, respectively, invested in a fund that primarily invests in U.S.

On July 15, 2020, our board of directors determined to recommence the payment of distributions to shareholders in August 2020.

Distributions in respect of future months will be evaluated by management and our board of directors based on circumstances and expectations existing at the time of consideration.

On March 19, 2020, our board of directors, including the independent directors, also determined to temporarily suspend our share repurchase program commencing with the second quarter of 2020.

On November 13, 2020, we recommenced our share repurchase program for the fourth quarter of 2020.

Share repurchases for future quarters will be evaluated by our board of directors based on circumstances and expectations existing at the time of consideration.

As of March 31, 2021 and December 31, 2020, we had $87,593 and $73,597 in short term investments, respectively, invested in a fund that primarily invests in U.S.

government securities.

JPM Credit Facility

As of September 30, 2020 and November 12, 2020, our outstanding borrowings under the Second Amended JPM Credit Facility were $625,000 and the aggregate unfunded principal amount in connection with the Second Amended JPM Credit Facility was $75,000.

For a detailed discussion of our Second Amended JPM Credit Facility, refer to Note 8 to our consolidated financial statements included in this report.

As of September 30, 2020 and November 12, 2020, our outstanding borrowings under the Amended UBS Facility were $100,000 and no additional principal amount was available for borrowing under the amended UBS Facility.

As of March 31, 2021 and May 10, 2021, our outstanding borrowings under the Third Amended JPM Credit Facility were $500,000 and the aggregate unfunded principal amount in connection with the Third Amended JPM Credit Facility was $75,000.

For a detailed discussion of our Third Amended JPM Credit Facility, refer to Note 8 to our consolidated financial statements included in this report.

As of March 31, 2021 and May 10, 2021, our outstanding borrowings under the Amended UBS Facility were $100,000 and the aggregate unfunded principal amount in connection with the Amended UBS Facility was $50,000.

For a detailed discussion of our Amended UBS Facility, refer to Note 8 to our consolidated financial statements included in this report.

As of March 31, 2021 and May 10, 2021, we had $125,000 in aggregate principal amount of 2026 Notes outstanding.

For a detailed discussion of our 2026 Notes, refer to Note 8 to our consolidated financial statements included in this report.

More Term Loan

On April 14, 2021, we entered into the More Term Loan.

As of May 10, 2021, our outstanding borrowings under the More Term Loan were $30,000 and there was no unfunded principal amount in connection with the More Term Loan.

For a detailed discussion of our More Term Loan, refer to Note 14 to our consolidated financial statements included in this report.

Unfunded Commitments

As of September 30, 2020 and November 12, 2020, our unfunded commitments amounted to $60,521 and $55,806, respectively.

As of March 31, 2021 and May 10, 2021, our unfunded commitments amounted to $75,738 and $79,985, respectively.

For a detailed discussion of our unfunded commitments, refer to Note 11 to our consolidated financial statements included in this report.

RIC Status and Distributions

To qualify for and maintain RIC tax treatment, we must, among other things, distribute in respect of each taxable year at least 90% of our net ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any.

We will incur certain excise taxes imposed on RICs to the extent we do not distribute in respect of each calendar year an amount at least equal to the sum of (1) 98.0% of our net ordinary income (taking into account certain deferrals and elections) for the calendar year, (2) 98.2% of our capital gains in excess of capital losses, or capital gain net income (adjusted for certain ordinary losses), for the one-year period ending on October 31 of the calendar year and (3) any net ordinary income and capital gain net income from preceding years that were not distributed during such years and on which we paid no federal income tax.

For an additional discussion of our RIC status and distributions, refer to Note 2 and Note 5, respectively, of our consolidated financial statements included in this report.

Recent Accounting Pronouncements

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Contractual Obligations

On August 26, 2016, 34th Street entered into the JPM Credit Facility with JPM, as amended and restated on September 30, 2016, July 11, 2017, November 28, 2017 May 23, 2018 and May 15, 2020.

On August 26, 2016, 34th Street entered into the JPM Credit Facility with JPM, as amended and restated on September 30, 2016, July 11, 2017, November 28, 2017, May 23, 2018, May 15, 2020 and February 26, 2021.

See Note 8 to our consolidated financial statements for a more detailed description of the JPM Credit Facility.

On May 19, 2017, Murray Hill Funding II entered into the UBS Facility with UBS, as amended on December 1, 2017, May 19, 2020 and November 12, 2020.

On May 19, 2017, Murray Hill Funding II entered into the UBS Facility with UBS, as amended on December 1, 2017, May 19, 2020, November 12, 2020 and December 17, 2020.

See Note 8 to our consolidated financial statements for a more detailed description of the UBS Facility.

On February 11, 2021, we entered into the Note Purchase Agreement with purchasers of the 2026 Notes.

See Note 8 to our consolidated financial statements for a more detailed description of the 2026 Notes.

On April 14, 2021, we entered into the More Term Loan with More.

See Note 14 to our consolidated financial statements for a more detailed description of the More Term Loan.

Commitments and Contingencies and Off-Balance Sheet Arrangements

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis