What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-02 compared with 2022-02-03 · 68 added, 180 removed, 286 unchanged (46% of the section changed)

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We commenced operations on April 8, 2004 upon completion of our initial public offering that raised $870 million in net proceeds from selling 62 million shares of common stock at a price of $15.00 per share (20.7 million shares at a price of $45.00 per share adjusted for the one-for-three reverse stock split).

Since then, and through December 31, 2021, we have raised approximately $2.21 billion in net proceeds from additional offerings of common stock and we have repurchased common stock for $243.4 million.

Since then, and through June 30, 2022, we have raised approximately $2.21 billion in net proceeds from additional offerings of common stock and we have repurchased common stock for $245.8 million.

Apollo Investment Management, L.P.

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COVID-19 Developments

There is an ongoing global outbreak of COVID-19, which has spread to over 200 countries and territories, including every state in the United States.

The global impact of the outbreak has been rapidly evolving, and as cases of COVID-19, including new variants, have continued to be identified in additional countries, many countries have reacted, and continue to react, by instituting quarantines and restrictions on travel, closing financial markets and/or restricting trading, and limiting operations of non-essential businesses.

Such actions have created disruption in global supply chains, and adversely impacted many industries.

Supply chain disruptions could significantly impact the businesses of our portfolio companies and lead to increased costs, inventory shortages, shipping delays and an inability to meet customer demands.

The outbreak has had a continued adverse impact on economic and market conditions and has triggered a period of global economic slowdown.

Although vaccines have been widely distributed in the U.S., certain U.S.

states are planning on reopening and we believe the economy is beginning to rebound in certain respects, the uncertainty surrounding the COVID-19 pandemic, including uncertainty regarding new variants of COVID-19, the efficacy of existing vaccines against new variants and acceptance of vaccines and other factors have and may continue to contribute to significant volatility in the global markets.

The impact of the COVID-19 pandemic has rapidly evolved around the globe, causing disruption in the U.S.

and global economies.

Although the global economy continued reopening in early 2022 and robust economic activity has supported a continued recovery, certain geographies, most notably China, have experienced setbacks.

The uncertainty surrounding the COVID-19 pandemic, including uncertainty regarding new variants of COVID-19 that have emerged and other factors have and may continue to contribute to significant volatility in the global markets.

While vaccine availability and uptake has increased, the longer-term macro-economic effects on global supply chains, inflation, labor shortages and wage increases continue to impact many industries, including the collateral underlying certain of our loans.

COVID-19 and the current financial, economic and capital markets environment, and future developments in these and other areas present uncertainty and risk with respect to our performance, financial condition, results of operations and ability to pay distributions.

LIBOR Developments

On July 27, 2017, the U.K Financial Conduct Authority (“FCA”) announced that it would phase out LIBOR as a benchmark by the end of 2021.

As of December 31, 2021, all non-U.S.

dollar LIBOR publications have been phased out.

The phase out of a majority of the U.S.

dollar publications is delayed until June 30, 2023.

The Alternative Reference Rates Committee (“ARRC”) of the Federal Reserve Bank of New York previously confirm that this constitutes a “benchmark transition event” and established “benchmark replacement dates” in ARRC standard LIBOR transition provisions that exist in many U.S.

law contracts using LIBOR.

The publication of all EUR and CHF LIBOR settings, the Spot Next/Overnight, 1 week, 2 month and 12 month JPY and GBP LIBOR settings, and the 1 week and 2 months USD LIBOR settings has ceased.

The publication of the overnight, 1 month, 3 month, 6 month, and 12 months USD LIBOR settings will cease after June 30, 2023.

The FCA plans to consult the market on creating “synthetic” 1 month, 3 month and 6 month rates for GBP and JPY LIBOR, to be published for a limited time.

The New York State legislation was signed into law to aid “tough legacy” LIBOR contracts.

Other legislative solutions are being pursued at the Federal level, in the U.K.

and in Europe.

Federal banking agencies have also issued guidance encouraging banking and global organizations to cease reference to USD LIBOR as soon as practicable and, in any event, by December 31, 2021.

Benchmarks Regulation imposed conditions under which only compliant benchmarks may be used in new contracts after 2021.

The ARRC has identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative rate for LIBOR.

SOFR is a measure of the cost of borrowing cash overnight, collateralized by the U.S.

Treasury securities, and is based on directly observable U.S.

Treasury-backed repurchase transactions.

However, the COVID-19 pandemic may adversely impact the timing of many firms’ transition planning, and we continue to assess the potential impact of the COVID-19 pandemic on our transition plans.

Although SOFR appears to be the preferred replacement rate for U.S.

dollar LIBOR, it is not possible at this time to predict the effect of any such changes, any establishment of alternative reference rates, whether the COVID-19 pandemic will have further effect on LIBOR transition timelines or plans, or other reforms to LIBOR that may be enacted in the United States, United Kingdom or elsewhere.

The discontinuation of LIBOR could have a significant impact on our business.

We anticipate significant operational challenges for the transition away from LIBOR, including, but not limited to, amending existing loan agreements with borrowers on investments that may have not been modified with fallback language and adding effective fallback language to new agreements in the event that LIBOR is discontinued before maturity.

Beyond these challenges, we anticipate there may be additional risks to our current processes and information systems that we will need to identify and evaluate.

Due to the uncertainty of the replacement for LIBOR, the potential effect of any such event on our cost of capital and net investment income cannot yet be determined.

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

Our investment objective is to generate current income and capital appreciation.

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Our portfolio also includes equity interests such as common stock, preferred stock, warrants or options.

Our level of investment activity can and does vary substantially from period to period depending on many factors, including the amount of debt and equity capital available to middle-market companies, the level of merger and acquisition activity for such companies, the general economic environment, the competitive environment for the types of investments we make and, market disruptions due to COVID-19.

As a BDC, we must not acquire any assets other than “qualifying assets” specified in the 1940 Act unless, at the time the acquisition is made, at least 70% of our total assets are qualifying assets (with certain limited exceptions).

As of December 31, 2021, non-qualifying assets represented approximately 13.0% of the total assets of the Company.

As of June 30, 2022, non-qualifying assets represented approximately 9.3% of the total assets of the Company.

We generate revenue primarily in the form of interest and dividend income from the securities we hold and capital gains, if any, on investment securities that we may acquire in portfolio companies.

Our debt investments, whether in the form of mezzanine or senior secured loans, generally have a stated term of five to ten years and bear interest at a fixed rate or a floating rate usually determined on the basis of a benchmark, such as the LIBOR, the federal funds rate, or the prime rate.

Interest on debt securities is generally payable quarterly or semiannually and while U.S.

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Portfolio and Investment Activity

Our portfolio and investment activity during the three and nine months ended December 31, 2021 and 2020 was as follows:

Three Months Ended December 31, Nine Months Ended December 31,

Our portfolio and investment activity during the three months ended June 30, 2022 and 2021 was as follows:

Three Months Ended June 30,

(in millions)* 2022 2021

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* Totals may not foot due to rounding.

Our portfolio composition and weighted average yields as of December 31, 2021 and March 31, 2021 were as follows:

December 31, 2021 March 31, 2021

Our portfolio composition and weighted average yields as of June 30, 2022 and March 31, 2022 were as follows:

June 30, 2022 March 31, 2022

Portfolio composition, at fair value:

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Total secured debt 95 % 94 %

Unsecured debt 1 % 1 %

Structured products and other 0 % 0 %

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Secured debt portfolio (2) 8.6 % 8.1 %

Unsecured debt portfolio (2) 5.3 % 5.3 %

Total debt portfolio (2) 8.6 % 8.1 %

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Interest rate type, at fair value (4):

Fixed rate amount $0.0 billion —

Fixed rate amount $0.0 billion $0.0 billion

Floating rate amount $2.1 billion $2.0 billion

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Interest rate type, at amortized cost (4):

Fixed rate amount $0.0 billion —

Fixed rate amount $0.0 billion $0.0 billion

Floating rate amount $2.1 billion $2.0 billion

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(4) The interest rate type information is calculated using the Company’s corporate debt portfolio and excludes aviation, oil and gas, structured credit, renewables, shipping, commodities and investments on non-accrual status.

Since the initial public offering of Apollo Investment in April 2004 and through December 31, 2021, invested capital totaled $22.8 billion in 579 portfolio companies.

Since the initial public offering of Apollo Investment in April 2004 and through June 30, 2022, invested capital totaled $23.2 billion in 592 portfolio companies.

Over the same period, Apollo Investment completed transactions with more than 100 different financial sponsors.

Recent Developments

On February 3, 2022, the Company’s Board of Directors approved a new stock repurchase plan (the “Repurchase Plan”) to acquire up to $25 million of the Company’s common stock.

The new Repurchase Plan is in addition to the Company's existing share repurchase authorization, of which approximately $5.8 million of repurchase capacity remains.

Accordingly, the Company now has approximately $30.8 million available for stock repurchases under its repurchase program.

On August 1, 2022, the Board of Directors approved an offering directly to an investor of 1,932,641 shares of the Company’s common stock, par value $0.001 per share at a purchase price of $15.5228 per share, which is the net asset value per share of the Company’s common stock as of June 30, 2022.

On August 1, 2022, the Board of Directors approved changing the Company’s name from Apollo Investment Corporation to MidCap Financial Investment Corporation, effective August 12, 2022.

The Company’s common stock will begin to trade under the ticker “MFIC” on the NASDAQ Global Stock Market on or about August 12, 2022.

On August 1, 2022, pursuant to Section 15(c) of the Investment Company Act of 1940, as amended, the Board of Directors also approved the Fourth Amended and Restated Investment Advisory Agreement between the Company and Apollo Investment Management, L.P (the “New Advisory Agreement”).

Under the New Advisory Agreement, the base management fee was reduced to 1.75% of the Company’s net assets from 1.50% on the Company’s gross assets (and 1.00% on gross assets exceeding a 200% of net assets), effective as of January 1, 2023.

The incentive fee on income was also reduced to 17.5% from 20%, effective as of January 1, 2023.

The performance threshold remains 7% and there was no change to the total return requirement, other than accounting for the change in the incentive fee for the period following January 1, 2023, or catch-up provision.

The incentive fee on capital gains was also reduced to 17.5% from 20%.

On August 1, 2022, the Company made the following senior management and Board of Director changes:

Widra, who served as Chief Executive Officer since 2018 and as President from 2016 to 2018, has been named Executive Chairman of the Board of Directors.

Widra will continue to serve as Apollo’s Head of Direct Origination.

• Tanner Powell, who served as President of the Company and Chief Investment Officer for AIM since 2018, has been promoted to Chief Executive Officer of the Company.

• Ted McNulty, who is a Managing Director in Apollo’s Direct Origination business, has been promoted to President of the Company and Chief Investment Officer for AIM.

• Kristin Hester, who has served as the General Counsel of the Company since 2020, has been promoted to Chief Legal Officer and Secretary of the Company.

• Joseph Glatt who served as the Company’s Chief Legal Officer and Secretary since 2011, was promoted to a new role as Partner in Apollo’s U.S.

Financial Institutions Group.

• John Hannan, who has served as Chairman of the Board of Directors since 2006, will now serve as Vice Chairman of the Board of Directors.

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 GAAP.

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, expenses, gains and losses.

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Because of the inherent uncertainties of valuation, the values reflected in the financial statements may differ materially from the values that would be received upon an actual disposition of such investments.

As of December 31, 2021, $2.59 billion or 99.93% of the Company’s investments were classified as Level 3.

As of June 30, 2022, $2.53 billion or 99.4% of the Company’s investments were classified as Level 3.

The high proportion of Level 3 investments relative to our total investments is directly related to our investment philosophy and target portfolio, which consists primarily of long-term secured debt, as well as unsecured and mezzanine positions of private middle-market companies.

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When readily available, broker quotations and/or quotations provided by pricing services are considered in the valuation process of independent valuation firms.

During the nine months ended December 31, 2021, there were no significant changes to the Company’s valuation techniques and related inputs considered in the valuation process.

During the three months ended June 30, 2022, there were no significant changes to the Company’s valuation techniques and related inputs considered in the valuation process.

Investment Income Recognition

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Results of Operations

Operating results for the three and nine months ended December 31, 2021 and 2020 were as follows:

Three Months Ended December 31, Nine Months Ended December 31,

Operating results for the three months ended June 30, 2022 and 2021 were as follows:

Three Months Ended June 30,

(in millions)* 2022 2021

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Total investment income $ 53.4 $ 50.6

Management and performance-based incentive fees $ 14.6 $ 9.0 $ 37.7 $ 27.7

Management and performance-based incentive fees, net of amounts waived $ 10.3 $ 8.8

Interest and other debt expenses, net of reimbursements 16.2 12.7

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Total Investment Income

For the three months ended December 31, 2021 as compared to the three months ended December 31, 2020

The increase in total investment income for the three months ended December 31, 2021 compared to the three months ended December 31, 2020 was primarily driven by the increase in total interest income (including PIK) of $0.9 million.

The increase in total interest income (including PIK) was primarily due to a higher income bearing investment portfolio.

Furthermore there was an increase in prepayment fees and income recognized from the acceleration of discount, premium, or deferred fees on repaid investments, which totaled $2.4 million for the three months ended December 31, 2020 and $4.0 million for the three months ended December 31, 2021.

This was partially offset by the $0.6 million decrease in dividend income.

Furthermore, there was also an increase in other income of $0.4 million due to higher bridge fees.

For the nine months ended December 31, 2021 as compared to the nine months ended December 31, 2020

The decrease in total investment income for the nine months ended December 31, 2021 compared to the nine months ended December 31, 2020 was primarily driven by the decrease in total interest income (including PIK) of $9.6 million.

The decrease in total interest income (including PIK) was primarily due to a decrease in the portfolio of second lien secured debt.

This was partially offset by an increase in prepayment fees and income recognized from the acceleration of discount, premium, or deferred fees on repaid investments, which totaled $4.7 million for the nine months ended December 31, 2020 and $8.7 million for the for the nine months ended December 31, 2021.

The $0.2 million increase in dividend income was primarily due to an increase in dividends received from MSEA Tankers LLC.

Furthermore, there was an increase in other income of $2.0 million due to higher amendment fees and bridge fees.

For the three months ended December 31, 2021 as compared to the three months ended December 31, 2020

The increase in net expenses for the three months ended December 31, 2021 compared to the three months ended December 31, 2020 was primarily due to the increase in management and performance-based incentive fees.

The increase of $5.6 million in management and performance-based incentive fees was due to an increase in performance based incentive fees and an increase in the investment portfolio.

Furthermore, there was an increase in interest and other debt expenses, which was attributed to increase in the average debt outstanding and net leverage from $1.53 billion and 1.43x, respectively during the three months ended December 31, 2020, to $1.58 billion and 1.52x, respectively during the three months ended December 31, 2021.

Additionally there was increase in the total annualized cost of debt, from 3.42% for the three months ended December 31, 2020 to 3.55% for the three months ended December 31, 2021.

For the nine months ended December 31, 2021 as compared to the nine months ended December 31, 2020

The increase in net expenses for the nine months ended December 31, 2021 compared to the nine months ended December 31, 2020 was primarily due to the increase in management and performance-based incentive fees.

The increase of $10.0 million in management and performance-based incentive fees was due to an increase in performance based incentive fees and an increase in the investment portfolio.

Furthermore there was a decrease in interest and other debt expenses, which was attributed to a decrease in the average debt outstanding, from $1.66 billion during the nine months ended December 31, 2020, to $1.53 billion during the nine months ended December 31, 2021.

This was partially offset by an increase in the total annualized cost of debt from 3.38% for the nine months ended December 31, 2020 to 3.54% for the nine months ended December 31, 2021.

The increase in total investment income for the three months ended June 30, 2022 compared to the three months ended June 30, 2021 was primarily driven by the increase in total interest income (including PIK) of $3.6 million.

The increase in total interest income (including PIK) was due to a higher income-bearing investment portfolio and a increase in the average yield for the total debt portfolio, from 7.9% for the three months ended June 30, 2021 to 8.3% for the three months ended June 30, 2022.

This was partially offset by a decrease in prepayment fees and income recognized from the acceleration of discount, premium, or deferred fees on repaid investments, which totaled $4.0 million for the three months ended June 30, 2021 and $1.9 million for the three months ended June 30, 2022.

There was also an decrease in other income of $0.7 million due to lower amendment fees.

The increase in net expenses for the three months ended June 30, 2022 compared to the three months ended June 30, 2021 was primarily driven by the increase in interest and other debt expenses of $3.6 million.

The increase in interest and other debt expenses was attributed to a increased in average debt outstanding and net leverage, from $1.46 billion and 1.39x, respectively during the three months ended June 30, 2021, to $1.62 billion and 1.58x, respectively during the three months ended June 30, 2022.

Further there was an increase in total annualized cost of debt from 3.48% for the three months ended June 30, 2021 to 4.02% for the three months ended June 30, 2022.

The increase of $1.5 million in management and performance-based incentive fees (net of amounts waived) due to an increase in performance based incentive fee.

Net Realized Gains (Losses)

For the three months ended December 31, 2021 as compared to the three months ended December 31, 2020

During the three months ended December 31, 2021, we recognized gross realized gains of $0.6 million and gross realized losses of $1.3 million, resulting in net realized losses of $0.6 million.

Significant realized gains (losses) for the three months ended December 31, 2021 are summarized below:

(in millions) Net Realized Gain (Loss)

Sequential Brands Group, Inc.

During the three months ended December 31, 2020, we recognized gross realized gains of $4.6 million and gross realized losses of $11.3 million, resulting in net realized losses of $6.7 million.

Significant realized gains (losses) for the three months ended December 31, 2020 are summarized below:

(in millions) Net Realized Gain (Loss)

AMP Solar Group, Inc.

KLO Holdings, LLC (4.8)

Garden Fresh (2.5)

Learfield Communications (1.9)

FiscalNote (1.5)

For the nine months ended December 31, 2021 as compared to the nine months ended December 31, 2020

During the nine months ended December 31, 2021, we recognized gross realized gains of $4.0 million and gross realized losses of $69.4 million, resulting in net realized losses of $65.3 million.

Significant realized gains (losses) for the nine months ended December 31, 2021 are summarized below:

(in millions) Net Realized Gain (Loss)

Niacet Corporation $ 1.1

Spotted Hawk (44.4)

Glacier Oil & Gas Corp.

(f/k/a Miller Energy Resources, Inc.) (20.9)

Sequential Brands Group, Inc.

During the nine months ended December 31, 2020, we recognized gross realized gains of $5.3 million and gross realized losses of $23.5 million, resulting in net realized losses of $18.1 million.

Significant realized gains (losses) for the nine months ended December 31, 2020 are summarized below:

(in millions) Net Realized Gain (Loss)

AMP Solar Group, Inc.

KLO Holdings, LLC (8.5)

ZPower, LLC (6.1)

Garden Fresh (2.5)

Learfield Communications (1.9)

FiscalNote (1.5)

During the three months ended June 30, 2022, we recognized gross realized gains of $0.5 million and gross realized losses of $0.2 million, resulting in net realized gains of $0.3 million.

During the three months ended June 30, 2021, we recognized gross realized gains of $0.3 million and gross realized losses of $0.2 million, resulting in net realized gains of $0.1 million.

Net Change in Unrealized Gains (Losses)

For the three months ended December 31, 2021 as compared to the three months ended December 31, 2020

During the three months ended December 31, 2021, we recognized gross unrealized gains of $26.9 million and gross unrealized losses of $28.2 million, including the impact of transferring unrealized to realized gains (losses), resulting in net change in unrealized losses of $1.3 million.

Significant changes in unrealized gains (losses) for the three months ended December 31, 2021 are summarized below:

During the three months ended June 30, 2022, we recognized gross unrealized gains of $10.8 million and gross unrealized losses of $28.9 million, including the impact of transferring unrealized to realized gains (losses), resulting in net change in unrealized losses of $18.1 million.

Significant changes in unrealized gains (losses) for the three months ended June 30, 2022 are summarized below:

(in millions) Net Change in Unrealized Gain (Loss)

ChyronHego Corporation $ 6.3

Spotted Hawk $ 3.3

Glacier Oil & Gas Corp.

(f/k/a Miller Energy Resources, Inc.) 2.8

Merx Aviation Finance, LLC 3.4

Sequential Brands Group, Inc.

Dynamic Product Tankers (Prime), LLC (10.3)

Spotted Hawk (3.9)

Ambrosia Buyer Corp.

MSEA Tankers LLC (1.6)

During the three months ended December 31, 2020, we recognized gross unrealized gains of $49.6 million and gross unrealized losses of $38.0 million, including the impact of transferring unrealized to realized gains (losses), resulting in net change in unrealized gains of $11.6 million.

Significant changes in unrealized gains (losses) for the three months ended December 31, 2020 are summarized below:

(in millions) Net Change in Unrealized Gain (Loss)

ChyronHego Corporation 1.1

KLO Holdings, LLC 5.2

Garden Fresh 2.5

Merx Aviation Finance, LLC (14.1)

NFA Group (2.9)

MSEA Tankers LLC 2.0

Learfield Communications 1.9

CARE Fertility 1.8

PIB Group 1.5

AMP Solar Group, Inc.

Spotted Hawk (9.5)

Ambrosia Buyer Corp.

Renew Financial LLC (f/k/a Renewable Funding, LLC) (2.4)

Glacier Oil & Gas Corp.

(f/k/a Miller Energy Resources, Inc.) (2.2)

Dynamic Product Tankers (Prime), LLC (1.8)

Sonar Entertainment (1.1)

For the nine months ended December 31, 2021 as compared to the nine months ended December 31, 2020

During the nine months ended December 31, 2021, we recognized gross unrealized gains of $115.2 million and gross unrealized losses of $40.8 million, including the impact of transferring unrealized to realized gains (losses), resulting in net change in unrealized gains of $74.4 million.

Significant changes in unrealized gains (losses) for the nine months ended December 31, 2021 are summarized below:

Carbonfree Chemicals SPE I LLC (f/k/a Maxus Capital Carbon SPE I LLC) (1.5)

Golden Bear (1.1)

The Club Company (1.1)

During the three months ended June 30, 2021, we recognized gross unrealized gains of $25.2 million and gross unrealized losses of $18.5 million, including the impact of transferring unrealized to realized gains (losses), resulting in net change in unrealized gains of $6.7 million.

Significant changes in unrealized gains (losses) for the three months ended June 30, 2021 are summarized below:

(in millions) Net Change in Unrealized Gain (Loss)

Spotted Hawk $ 37.3

Glacier Oil & Gas Corp.

(f/k/a Miller Energy Resources, Inc.) 24.0

Carbonfree Chemicals SPE I LLC (f/k/a Maxus Capital Carbon SPE I LLC) $ 9.8

ChyronHego Corporation 6.8

Paper Source 3.0

Merx Aviation Finance, LLC 2.7

Sequential Brands Group, Inc.

US Legal Support 1.5

Genesis Healthcare, Inc.

Dynamic Product Tankers (Prime), LLC (19.8)

Ambrosia Buyer Corp.

MSEA Tankers LLC (4.1)

Niacet Corporation (1.1)

During the nine months ended December 31, 2020, we recognized gross unrealized gains of $91.3 million and gross unrealized losses of $88.1 million, including the impact of transferring unrealized to realized gains (losses), resulting in net change in unrealized losses of $3.2 million.

Significant changes in unrealized gains (losses) for the nine months ended December 31, 2020 are summarized below:

(in millions) Net Change in Unrealized Gain (Loss)

KLO Holdings, LLC $ 11.6

ZPower, LLC 4.8

NFA Group 4.8

ChyronHego Corporation 3.2

CARE Fertility 3.1

CT Technologies Intermediate Holdings, Inc 3.0

PIB Group 3.0

MSEA Tankers LLC 2.3

Spotted Hawk 1.2

Dynamic Product Tankers (Prime), LLC (5.4)

Merx Aviation Finance, LLC (9.1)

Carbonfree Chemicals SPE I LLC (f/k/a Maxus Capital Carbon SPE I LLC) (8.9)

Ambrosia Buyer Corp.

Glacier Oil & Gas Corp.

(f/k/a Miller Energy Resources, Inc.) (4.0)

Paper Source (2.3)

Renew Financial LLC (f/k/a Renewable Funding, LLC) (1.8)

Sonar Entertainment (1.2)

Solarplicity Group Limited (f/k/a AMP Solar UK) (1.1)

Ambrosia Buyer Corp.

Merx Aviation Finance, LLC (1.2)

Liquidity and Capital Resources

The Company’s liquidity and capital resources are generated and generally available through periodic follow-on equity and debt offerings, our Senior Secured Facility (as defined in Note 6 to the financial statements), our senior secured notes, our senior unsecured notes, investments in special purpose entities in which we hold and finance particular investments on a non-recourse basis, as well as from cash flows from operations, investment sales of liquid assets and repayments of senior and subordinated loans and income earned from investments.

We believe that our current cash and cash equivalents on hand, our short-term investments, our available borrowing capacity under our Senior Secured Facility and our anticipated cash flows from operations will be adequate to meet our cash needs for our daily operations for at least the next twelve months.

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

We believe that our current cash and cash equivalents on hand, our short-term investments, proceeds from the sale of our 2025 Notes and 2026 Notes, our available borrowing capacity under our Senior Secured Facility and our anticipated cash flows from operations will be adequate to meet our cash needs for our daily operations for at least the next twelve months.

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

Cash Equivalents

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See Note 6 to the financial statements for information on the Company’s debt.

The following table shows the contractual maturities of our debt obligations as of December 31, 2021:

The following table shows the contractual maturities of our debt obligations as of June 30, 2022:

Payments Due by Period

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____________________

(1) As of December 31, 2021, aggregate lender commitments under the Senior Secured Facility totaled $1.81 billion and $692.3 million of unused capacity.

As of December 31, 2021, there were $0.2 million of letters of credit issued under the Senior Secured Facility as shown as part of total commitments in Note 8 to the financial statements.

(1) As of June 30, 2022, aggregate lender commitments under the Senior Secured Facility totaled $1.81 billion and $655.8 million of unused capacity.

As of June 30, 2022, there were $27.0 million of letters of credit issued under the Senior Secured Facility as shown as part of total commitments in Note 8 to the financial statements.

Stockholders’ Equity

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Distributions

Distributions paid to stockholders during the three and nine months ended December 31, 2021 totaled $23.4 million ($0.36 per share) and $70.3 million ($1.08 per share), respectively.

Distributions paid to stockholders during the three and nine months ended December 31, 2020 totaled $23.5 million ($0.36 per share) and $82.2 million ($1.26 per share), respectively.

Distributions paid to stockholders during the three months ended June 30, 2022 and 2021 totaled $22.9 million ($0.36 per share) and $23.5 million ($0.36 per share), respectively.

For income tax purposes, distributions made to stockholders are reported as ordinary income, capital gains, non-taxable return of capital, or a combination thereof.

Although the tax character of distributions paid to stockholders through December 31, 2021 may include return of capital, the exact amount cannot be determined at this point.

Although the tax character of distributions paid to stockholders through June 30, 2022 may include return of capital, the exact amount cannot be determined at this point.

The final determination of the tax character of distributions will not be made until we file our tax return for the tax year ended March 31, 2023.

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With respect to the distributions to stockholders, income from origination, structuring, closing, commitment and other upfront fees associated with investments in portfolio companies is treated as taxable income and accordingly, distributed to stockholders.

For the three and nine months ended December 31, 2021, PIK income totaled $1.0 million and $3.5 million on total investment income of $55.0 million and $158.4 million respectively.

For the three and nine months ended December 31, 2020, PIK income totaled $1.6 million and $4.8 million on total investment income of $54.4 million and $165.9 million respectively.

For the three months ended June 30, 2022 and 2021, PIK income totaled $0.96 million and $1.5 million on total investment income of $53.4 million and $50.6 million, respectively.

In order to maintain the Company’s status as a RIC, this non-cash source of income must be paid out to stockholders annually in the form of distributions, even though the Company has not yet collected the cash.

3 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis