What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-10 compared with 2022-05-10 · 96 added, 83 removed, 511 unchanged (26% of the section changed)

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● our ability to consummate new investments and the impact of such investments;

● our ability to continue to effectively manage our business due to the significant disruptions caused by the current pandemic caused by the novel coronavirus (commonly known as “COVID-19”);

● our business prospects and the prospects of our prospective portfolio companies, including as a result of the current COVID-19 pandemic;

● our ability to continue to effectively manage our business and our business prospects and the prospects of our prospective portfolio companies, due to the significant disruptions caused by the current pandemic caused by the novel coronavirus (commonly known as “COVID-19”);

● the ability of our portfolio companies to achieve their objectives;

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We use words such as “may,” “might,” “will,” “intends,” “should,” “could,” “can,” “would,” “expects,” “believes,” “estimates,” “anticipates,” “predicts,” “potential,” “plan” and similar expressions to identify forward-looking statements.

Our actual results could differ materially from those projected in the forward-looking statements for any reason,

including the factors set forth in “Item 1A-Risk Factors” in our annual report on Form 10-K and elsewhere in this quarterly report on Form 10-Q.

Our actual results could differ materially from those projected in the forward-looking statements for any reason, including the factors set forth in “Item 1A-Risk Factors” in our annual report on Form 10-K and elsewhere in this quarterly report on Form 10-Q.

We have based the forward-looking statements included in this quarterly report on Form 10-Q on information available to us on the date of this quarterly report on Form 10-Q, and we assume no obligation to update any such forward-looking statements.

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Our investment objective is to generate attractive risk-adjusted returns primarily by originating and investing in senior secured loans, including first lien and second lien facilities, to performing lower middle market companies across a broad range of industries.

Such loans typically carry a floating interest rate based on a risk-free index rate such as the London Interbank Offered Rate, or LIBOR, or the Secured Overnight Financing Rate, or SOFR, plus a spread and typically have a term of three to six years.

Such loans typically carry a floating interest index rate such as the London Interbank Offered Rate, or LIBOR, or the Secured Overnight Financing Rate, or SOFR, plus a spread and typically have a term of three to six years.

While we focus principally on originating senior secured loans to lower middle market companies, we may also opportunistically make investments at other levels of a company’s capital structure, including mezzanine loans or equity interests, and in companies outside of the lower middle market, to the extent we believe the investment presents an opportunity to achieve an attractive risk-adjusted return.

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Our investment activities are managed by WhiteHorse Advisers and are supervised by our board of directors, a majority of whom are independent of us, WhiteHorse Advisers and its affiliates.

Under our investment advisory agreement with WhiteHorse Advisers, or the Investment Advisory Agreement, we have agreed to pay WhiteHorse Advisers an annual base management fee based on our average consolidated gross assets as well as an incentive fee

based on our investment performance.

We have also entered into an administration agreement, or the Administration Agreement, with H.I.G.

WhiteHorse Administration, LLC, or WhiteHorse Administration.

Under our Administration Agreement, we have agreed to reimburse WhiteHorse Administration for our allocable portion (subject to the review and approval of our independent directors) of overhead and other expenses incurred by WhiteHorse Administration in performing its obligations under the Administration Agreement.

Under our Administration Agreement, we have agreed to reimburse WhiteHorse Administration for our allocable portion (subject to the review and

approval of our independent directors) of overhead and other expenses incurred by WhiteHorse Administration in performing its obligations under the Administration Agreement.

COVID-19 Developments

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If we fail to satisfy the covenants of the Credit Facility or are unable to cure any event of default or obtain a waiver from the applicable lender, it could result in foreclosure by the lenders under the Credit Facility, which would accelerate our repayment obligations under the Credit Facility and thereby result in a material adverse effect on our business, liquidity, financial condition, results of operations and ability to pay distributions to our stockholders.

As of March 31, 2022, we were in compliance with all covenants and other requirements of the Credit Facility.

As of June 30, 2022, we were in compliance with all covenants and other requirements of the Credit Facility.

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

As of March 31, 2022, nearly all of our debt investments at fair value were at floating rates, which are generally based on a risk-free index rate such as LIBOR or SOFR, and many of which are subject to certain floors.

As of June 30, 2022, nearly all of our debt investments at fair value were at floating rates, which are generally based on a floating index rate such as LIBOR or SOFR, and many of which are subject to certain floors.

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

Our management team has sought strategies that will help us weather periods of economic decline.

We have attempted to avoid deeply cyclical sectors and have only made loans where we believed a repeat of the Great Recession would allow us to recover 100% of our loans.

We have attempted to avoid deeply cyclical sectors and have only made loans where we believed a repeat of the financial crisis in 2008 would allow us to recover 100% of our loans.

Additionally, we have taken a conservative position on the Company’s liquidity, making sure we have a top-tier leverage partner and very significant cushion against default.

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Treasury-backed repurchase transactions.

As of March 31, 2022, SOFR is utilized as the floating benchmark rate on investments to four of our portfolio companies.

As of March 31, 2022, SOFR is utilized as the floating benchmark rate on the Credit Facility for USD denominated borrowings above $285.0 million.

We expect any new credit facilities that we enter into subsequent to March 31, 2022 will reference a benchmark interest rate other than LIBOR, such as SOFR.

As of June 30, 2022, SOFR is utilized as the floating benchmark rate on investments to thirteen of our portfolio companies.

As of June 30, 2022, SOFR is utilized as the floating benchmark rate on the Credit Facility for USD denominated borrowings above $285.0 million.

We expect any new credit facilities that we enter into subsequent to June 30, 2022 will reference a benchmark interest rate other than LIBOR, such as SOFR.

Other jurisdictions have also proposed their own alternative to LIBOR, including the Sterling Overnight Index Average for Sterling markets, the Euro Short Term Rate for Euros and Tokyo Overnight Average Rate for Japanese Yens.

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We generate revenue in the form of interest payable on the debt securities that we hold and capital gains and distributions, if any, on the portfolio company investments that we originate or acquire.

Our debt investments, whether in the form of senior secured loans or mezzanine loans, typically have terms of three to six years and bear interest at a fixed or floating rate based on a spread over LIBOR or an equivalent risk-free index rate.

Interest on debt securities is generally payable monthly or quarterly, with the amortization of principal generally being deferred for several years from the date of the initial investment.

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Recent Developments

For the period April 1, 2022 through May 9, 2022, we contributed one additional asset of senior secured debt facilities to the STRS JV.

Consolidated Results of Operations

Comparison of the Three Months Ended March 31, 2022 and March 31, 2021

Set forth below are the consolidated results of operations for the three months ended March 31, 2022 and 2021.

The consolidated results of operations described below may not be indicative of the results we report in future periods.

Net investment income and net increase in net assets can vary substantially from period to period due to various reasons, including the level of new investments and the recognition of realized gains and losses and unrealized appreciation and depreciation.

As a result, period to period comparisons of net increases in net assets resulting from operations may not be meaningful.

Consolidated operating results for the three months ended March 31, 2022 and 2021 are as follows:

Three months ended March 31,

($ in thousands, except per share data)

Comparison of the Three and Six Months Ended June 30, 2022 and June 30, 2021

Set forth below are the consolidated results of operations for the three and six months ended June 30, 2022 and 2021.

Three months ended June 30,

Six months ended June 30,

($ in thousands)

Total investment income

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Net investment income

Net realized (losses)/gains on investments and foreign currency transactions

Net realized gains/(losses) on investments and foreign currency transactions

Net change in unrealized gains/(losses) on investments and foreign currency transactions

Net increase in net assets resulting from operations

The consolidated results of operations described below may not be indicative of the results we report in future periods.

As a result, period to period comparisons of net increases in net assets resulting from operations may not be meaningful.

Consolidated operating results for the three and six months ended June 30, 2022 and 2021 are as follows:

Net Investment Income

Net investment income for the three months ended March 31, 2022 and 2021 totaled $8.5 million and $7.6 million, respectively.

Net investment income increased by $0.9 million for the three months ended March 31, 2022 from the three months ended March 31, 2021, as described below under “Investment Income” and “Operating Expenses”.

Net investment income for the three and six months ended June 30, 2022 totaled $7.9 million and $16.4 million, respectively.

Net investment income for the three and six months ended June 30, 2021 totaled $6.1 million and $13.7 million, respectively.

Net investment income increased by $1.8 million and $2.7 million for the three and six months ended June 30, 2022 from the three and six months ended June 30, 2021, as described below under “Investment Income” and “Operating Expenses”.

Investment Income

Investment income increased by $2.1 million for the three months ended March 31, 2022 from the three months ended March 31, 2021 primarily attributable to higher interest income earned from investments in portfolio companies due to a larger investment portfolio.

Investment income generated from our STRS JV subordinated notes and equity investments increased by $0.5 million as a result of a larger investment portfolio.

The increase of investment income was partially offset by lower fee income of $0.3 million as a result of lower non-recurring fees.

We expect to generate some level of non-recurring fee income during most quarters from prepayments, amendments and other sources.

Investment income increased by $2.7 million and $4.7 million for the three and six months ended June 30, 2022 from the three and six months ended June 30, 2021 primarily attributable to higher interest income earned from investments in portfolio companies due to a larger investment portfolio.

Investment income generated from our STRS JV subordinated notes and equity investments increased by $1.0 million and $1.4 million for the three and six months ended June 30, 2022 from the three and six months ended June 30, 2021 as a result of a larger investment portfolio and the increased economic interest to 66.67% from 60.0%, starting in February 2022.

The investment income increase was partially offset by lower dividend income of $0.6 million and $0.7 million for the three and six months ended June 30, 2022 from the three and six months ended June 30, 2021 primarily due to higher dividends received from Arcole Holding Corporation in 2021.

Operating Expenses

The following table summarizes our expenses for the three months ended March 31, 2022 and 2021:

Three months ended March 31,

The following table summarizes our expenses for the three and six months ended June 30, 2022 and 2021:

Three months ended June 30,

Six months ended June 30,

($ in thousands)

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Total expenses, including excise tax

Interest expense increased $1.0 million for the three months ended March 31, 2022 from the three months ended March 31, 2021, primarily due to a higher borrowing base.

This was partially offset by lower interest rates resulting from a decrease in LIBOR and weighted average spread.

Base management fees increased by $0.6 million for the three months ended March 31, 2022 from the three months ended March 31, 2021, primarily due to higher gross assets.

Performance-based incentive fees decreased by $0.6 million for the three months ended March 31, 2022 from the three months ended March 31, 2021, mainly attributable to a reversal of capital gains incentive fee accrual of $0.6 million.

Interest expense increased $1.1 million and $2.1 million for the three and six months ended June 30, 2022 from the three and six months ended June 30, 2021, primarily due to a higher borrowing base and higher weighted average interest rates.

Base management fees increased by $0.6 million and $1.2 million for the three and six months ended June 30, 2022 from the three and six months ended June 30, 2021 due to higher gross assets.

Performance-based incentive fees decreased by $0.8 million and $1.4 million for the three and six months ended June 30, 2022 from the three and six months ended June 30, 2021, mainly attributable to the impact of the reversal of capital gains incentive fee accrual for the three and six months ended June 30, 2022.

General and administrative expenses increased by $0.2 million and $0.3 million for the three and six months ended June 30, 2022 from the three and six months ended June 30, 2021, primarily due to higher professional fees.

Excise Tax Expense

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To the extent that we determine that our estimated current year annual taxable income may exceed estimated current year distributions, we accrue excise tax, if any, on estimated excess taxable income as taxable income is earned.

Excise tax was $0.2 million for both the three months ended March 31, 2022 and the three months ended March 31, 2021.

As of March 31, 2022 and December 31, 2021, we accrued a net federal excise tax expense of $0.2 million and $1.0 million, respectively.

Excise tax was $0.2 million and $0.4 million for the three and six months ended June 30, 2022.

Excise tax was $0.4 million and $0.6 million for the three and six months ended June 30, 2021.

As of June 30, 2022 and December 31, 2021, we accrued a net federal excise tax expense of $0.4 million and $1.0 million, respectively.

Net Realized and Unrealized Gains (Losses) on Investments

The following shows the breakdown of net realized gains and losses on investments for the three months ended March 31, 2022 and 2021:

The following shows the breakdown of net realized gains and losses on investments for the three and six months ended June 30, 2022 and 2021:

Three months ended

Six months ended

($ in millions)

March 31, 2022

March 31, 2021

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

AG Kings Holdings Inc.

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Manchester Acquisition Sub LLC (d/b/a Draslovka Holding AS)

RCS Capital Corporation (2)

RLJ Pro-Vac, Inc.

Vero Parent, Inc.

Vessco Holdings, LLC

Total net realized (losses)/gains on investments

(1) Escrow receivable amounts were recognized in connection with realization events.

(1) Escrow receivable amounts were recognized in connection with cash proceeds received from realization events.

(2) Amount represents a recovery from a previously realized equity investment.

(3) Includes various investments with aggregate realized gains or losses less than $50,000.

The following shows the breakdown in the changes in unrealized appreciation and depreciation of investments for the three months ended March 31, 2022 and 2021:

The following shows the breakdown in the changes in unrealized appreciation and depreciation of investments for the three and six months ended June 30, 2022 and 2021:

Three months ended

Six months ended

($ in millions)

March 31, 2022

March 31, 2021

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Gross unrealized appreciation on investments (1)

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Total unrealized appreciation (depreciation) on investments

(1) The three months ended March 31, 2022 includes unrealized appreciation from the AG Kings Holdings Inc.

(1) The three and six months ended June 30, 2022 includes unrealized appreciation from the AG Kings Holdings Inc.

escrow receivable of $0.4 million and $1.2 million, respectively.

The three and six months ended June 30, 2021 includes unrealized appreciation from the AG Kings Holdings Inc.

escrow receivable of $1.0 million.

During the three months ended March 31, 2022, the realization from Grupo HIMA San Pablo, Inc.

During the six months ended June 30, 2022, the realization from Grupo HIMA San Pablo, Inc.

generated a net realized and unrealized loss of $6.9 million.

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In the future, we may obtain borrowings under other credit facilities and from issuances of senior securities to the extent permitted by the 1940 Act.

We may also borrow funds 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 debt financing opportunities or if our board of directors determines that leveraging our portfolio would be in our best interest and the best interests of our stockholders.

We may also borrow funds 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 debt financing opportunities or if our board of directors determines that leveraging our portfolio would be in our best interest and the best interests of our stockholders.

Our board of directors may decide to issue common stock, such as through at-the-market offerings, direct placements or otherwise, to finance our operations rather than issuing debt or other senior securities.

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Any sale or other issuance of shares of our common stock at a price below net asset value per share results in immediate dilution to our stockholders’ interests in our common stock and a reduction in our net asset value per share.

If we were to

issue additional shares of our common stock during the next 12 months, we do not intend to issue shares below the then-current net asset value per share.

If we were to issue additional shares of our common stock during the next 12 months, we do not intend to issue shares below the then-current net asset value per share.

Restricted cash and cash equivalents include amounts that are collected and held by the trustee appointed as custodian of the assets securing the Credit Facility.

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These instruments may include commitments to extend credit and involve elements of liquidity and credit risk in excess of the amount recognized on the consolidated statements of assets and liabilities.

As of March 31, 2022 and December 31, 2021, we had commitments to fund approximately $43.1 million and $53.1 million, respectively, of revolving lines of credit or delayed draw facilities to our portfolio companies.

As of June 30, 2022 and December 31, 2021, we had commitments to fund approximately $34.5 million and $53.1 million, respectively, of revolving lines of credit or delayed draw facilities to our portfolio companies.

We reasonably believe that we have sufficient assets to adequately cover and allow us to satisfy our outstanding unfunded commitments.

Our operating activities provided cash and cash equivalents of $15.1 million during the three months ended March 31, 2022, primarily from the net proceeds received from realizations and repayments on our investments, partially offset by acquisition of investments and cash used from the net change in working capital.

Our financing activities used cash and cash equivalents of $16.6 million during the three months ended March 31, 2022, primarily due to repayments on the Credit Facility and the payment of distributions to stockholders.

Our operating activities provided cash and cash equivalents of $66.0 million during the three months ended March 31, 2021, primarily from the net proceeds received from realizations and repayments on our investments partially offset by acquisition of investments as well and cash used from the net change in working capital.

Our financing activities used cash and cash equivalents of $57.5 million during the three months ended March 31, 2021, primarily due to the payment of distributions to stockholders.

As of March 31, 2022, we had cash and cash equivalent resources of $21.3 million, including $18.8 million of restricted cash.

As of March 31, 2022, we had approximately $51.2 million undrawn and available to be drawn under the Credit Facility based on the collateral and portfolio quality requirements stipulated in the related credit agreement.

Our operating activities provided cash and cash equivalents of $64.2 million during the six months ended June 30, 2022, primarily from the net proceeds received from realizations and repayments on our investments, partially offset by acquisition of investments and cash used from the net change in working capital.

Our financing activities used cash and cash equivalents of $68.4 million during the six months ended June 30, 2022, primarily due to repayments on the Credit Facility and the payment of distributions to stockholders.

Our operating activities provided cash and cash equivalents of $40.6 million during the six months ended June 30, 2021, primarily from the net proceeds received from realizations and repayments on our investments, partially offset by acquisition of investments and cash used from the net change in working capital.

Our financing activities used cash and cash equivalents of $38.8 million during the six months ended June 30, 2021, primarily due to repayments on the Credit Facility and the payment of distributions to stockholders, offset by proceeds from sales of common stock.

As of June 30, 2022, we had cash and cash equivalent resources of $18.6 million, including $9.4 million of restricted cash.

As of June 30, 2022, we had approximately $96.3 million undrawn and available to be drawn under the Credit Facility based on the collateral and portfolio quality requirements stipulated in the related credit agreement.

As of December 31, 2021, we had cash and cash equivalent resources of $22.5 million, including $10.3 million of restricted cash.

As of December 31, 2021, we had approximately $43.4 million undrawn and available to be drawn under the Credit Facility based on the collateral and portfolio quality requirements stipulated in the related credit agreement.

In January 2019, we and STRS Ohio formed a joint venture, STRS JV, that invests primarily in senior secured loans, including first lien and second lien facilities, to performing lower middle market companies across a broad range of industries that typically carry a floating interest rate based on the LIBOR or an equivalent risk-free index rate and have a term of three to six years.

In January 2019, we and STRS Ohio formed a joint venture, STRS JV, that invests primarily in senior secured loans, including first lien and second lien facilities, to performing lower middle market companies across a broad range of industries that typically carry a floating interest index rate based on the LIBOR or an equivalent index rate and have a term of three to six years.

STRS JV invests in portfolio companies in the same industries in which we may directly invest.

STRS JV was formed as a Delaware limited liability company and is not consolidated by either us or STRS Ohio for financial reporting purposes.

STRS JV was formed as a Delaware limited liability company and is not consolidated by either us or STRS Ohio

for financial reporting purposes.

On July 19, 2019 STRS JV formally launched operations.

As of March 31, 2022, STRS JV had total assets of $332.2 million.

As of June 30, 2022, STRS JV had total assets of $336.5 million.

As of December 31, 2021, STRS JV had total assets of $273.5 million.

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In February 2022, we increased our capital commitment to the STRS JV in the amount of an additional $25.0 million, which brings our total capital commitment to the STRS JV to $100.0 million, comprised of $80.0 million of subordinated notes and $20.0 million of LLC equity interests.

As of March 31, 2022, our and STRS Ohio’s economic ownership in STRS JV were approximately 66.67% and 33.33%, respectively.

As of March 31, 2022, our investment in STRS JV consisted of equity contributions and subordinated note advances of $20.0 million and $80.0 million, respectively, both of which were fully funded.

As of June 30, 2022, our and STRS Ohio’s economic ownership in STRS JV were approximately 66.67% and 33.33%, respectively.

As of June 30, 2022, our investment in STRS JV consisted of equity contributions and subordinated note advances of $20.0 million and $80.0 million, respectively, both of which were fully funded.

As of December 31, 2021, our and STRS Ohio’s economic ownership in STRS JV were approximately 60% and 40%, respectively.

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provided that two individuals are present that were elected, designated or appointed by each member.

Below is a summary of STRS JV’s portfolio as of March 31, 2022 and December 31, 2021:

Below is a summary of STRS JV’s portfolio as of June 30, 2022 and December 31, 2021:

($ in thousands)

As of March 31, 2022

As of June 30, 2022

As of December 31, 2021

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Total of five largest portfolio company investments (1)

(1) Weighted average effective yield is computed by dividing (a) annualized interest income (including interest income resulting from the amortization of fees and discounts) by (b) the weighted average cost of investment.

(1) At fair value.

(2) Weighted average effective yield is computed by dividing (a) annualized interest income (including interest income resulting from the amortization of fees and discounts) by (b) the weighted average cost of investment.

STRS JV’s investments consisted of the following:

As of March 31, 2022

As of June 30, 2022

As of December 31, 2021

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Industry ($ in thousands)

As of March 31, 2022

As of June 30, 2022

As of December 31, 2021

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Environmental & Facilities Services

Household Appliances

Industrial Machinery

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Trading Companies & Distributors

See Note 4 to our consolidated financial statements for further discussion on STRS JV’s portfolio and selected balance sheet information as of March 31, 2022 and December 31, 2021 and selected statement of operations information for the three months ended March 31, 2022 and 2021.

See Note 4 to our consolidated financial statements for further discussion on STRS JV’s portfolio and selected balance sheet information as of June 30, 2022 and December 31, 2021 and selected statement of operations information for the three and six months ended June 30, 2022 and 2021.

Capital Raises

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and (iii) increase the minimum funding amount from $217.0 million to $234.5 million.

As of March 31, 2022, the Credit Facility provided for borrowings in an aggregate principal amount up to $335.0 million with an accordion feature which allows for the expansion of the borrowing limit up to $375.0 million, subject to consent from the Lender and other customary conditions.

As of March 31, 2022, the required minimum outstanding borrowings under the Credit Facility were $234.5 million.

As of June 30, 2022, the Credit Facility provided for borrowings in an aggregate principal amount up to $335.0 million with an accordion feature which allows for the expansion of the borrowing limit up to $375.0 million, subject to consent from the Lender and other customary conditions.

As of June 30, 2022, the required minimum outstanding borrowings under the Credit Facility were $234.5 million.

Under the Credit Facility, there are two coverage tests that WhiteHorse Credit must meet on specified compliance dates in order to permit WhiteHorse Credit to make new borrowings and to make distributions in the ordinary course:

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Any new investment management agreement would also be subject to approval by our stockholders.

As of March 31, 2022, there was $283.8 million in outstanding borrowings under the Credit Facility and, based on collateral and portfolio requirements stipulated in the Credit Facility agreement, approximately $51.2 million was available to be drawn on such date.

The Credit Facility is secured by all of the assets of WhiteHorse Credit, which included loans with a fair value of $662.5 million as of March 31, 2022.

As of June 30, 2022, there was $238.7 million in outstanding borrowings under the Credit Facility and, based on collateral and portfolio requirements stipulated in the Credit Facility agreement, approximately $96.3 million was available to be drawn on such date.

The Credit Facility is secured by all of the assets of WhiteHorse Credit, which included loans with a fair value of $626.7 million as of June 30, 2022.

As of December 31, 2021, there was $291.6 million in outstanding borrowings under the Credit Facility and, based on collateral and portfolio requirements stipulated in the Credit Facility agreement, approximately $43.4 million was available to be drawn on such date.

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Portfolio Investments and Yield

As of March 31, 2022, our investment portfolio consisted primarily of senior secured loans across 111positions in 68 companies with an aggregate fair value of $800.4 million.

As of March 31, 2022, the majority of our portfolio was comprised of senior secured loans to lower middle market borrowers and nearly all of those loans were variable-rate investments (primarily indexed to LIBOR) with three fixed-rate loan investments representing 0.4% based on fair value.

As of March 31, 2022, our portfolio had an average investment size of $6.4 million based on fair value and average debt investment size of $7.7 million, with investment sizes ranging from zero to $23.8 million and a weighted average effective yield of 9.2% (and a weighted average effective yield on income-producing debt investments of 9.3%).

As of June 30, 2022, our investment portfolio consisted primarily of senior secured loans across 105 positions in 68 companies with an aggregate fair value of $766.5 million.

As of June 30, 2022, the majority of our portfolio was comprised of senior secured loans to lower middle market borrowers and nearly all of those loans were variable-rate investments (primarily indexed to LIBOR) with three fixed-rate loan investments representing 0.4% based on fair value.

As of June 30, 2022, our portfolio had an average investment size of $6.4 million based on fair value and average debt investment size of $7.9 million, with investment sizes ranging from zero to $23.5 million and a weighted average effective yield of 9.9% (and a weighted average effective yield on income-producing debt investments of 9.9%).

As of December 31, 2021, our investment portfolio consisted primarily of senior secured loans across 127 positions in 76 companies with an aggregate fair value of $819.2 million.

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As of December 31, 2021, our portfolio had an average investment size of $5.9 million based on fair value and average debt investment size of $6.8 million, with investment sizes ranging from zero to $24.0 million and a weighted average effective yield of 9.0% (and a weighted average effective yield on income-producing debt investments of 9.1%).

For the three months ended March 31, 2022, we invested $103.6 million in new and existing portfolio companies, offset by repayments and sales of $121.0 million.

For the six months ended June 30, 2022, we invested $170.5 million in new and existing portfolio companies, offset by repayments and sales of $222.2 million.

Proceeds from sales totaled $97.6 million while repayments included $6.0 million of scheduled repayments and $118.6 million of unscheduled repayments.

For the three months ended March 31, 2021, we invested $72.4 million in new and existing portfolio companies, offset by repayments and sales of $149.6 million.

For the six months ended June 30, 2021, we invested $190.8 million in new and existing portfolio companies, offset by repayments and sales of $219.3 million.

Proceeds from sales totaled $87.8 million while repayments included $6.0 million of scheduled repayments and $125.5 million of unscheduled repayments.

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The following table shows the distribution of our investments on the 1 to 5 investment performance rating scale at fair value:

As of March 31, 2022

As of June 30, 2022

As of December 31, 2021

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federal income tax.

During the three months ended March 31, 2022, we declared to stockholders distributions of $0.355 for total distributions of $8.2 million.

During the three months ended March 31, 2021, we declared to stockholders distributions of $0.355 per share, for total distributions of $7.3 million.

During the three and six months ended June 30, 2022 we declared to stockholders distributions of $0.355 and $0.71 for total distributions of $8.3 million and $16.5 million.

During the three and six months ended June 30, 2021 we declared to stockholders distributions of $0.355 and $0.71 per share, respectively for total distributions of $7.4 million and $14.7 million, respectively.

The timing and amount of our quarterly distributions, if any, are determined by our board of directors.

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Thus, the source of a distribution to our stockholders may be the original capital invested by the stockholder rather than our income or gains.

During the three months ended March 31, 2022, we estimate that distributions to stockholders included $8.2 million of ordinary income, for tax purposes, based on earnings for the fiscal year ended December 31, 2021 and current earnings for the three months ended March 31, 2022.

The specific tax characteristics of the distribution will be reported to stockholders on or after the end of the calendar year 2022 and in our periodic reports with the SEC.

During the six months ended June 30, 2022, we estimate that distributions to stockholders included $16.5 million of ordinary income, for tax purposes, based on earnings for the fiscal year ended December 31, 2021 and current earnings for the six months ended June 30, 2022 The specific tax characteristics of the distribution will be reported to stockholders on or after the end of the calendar year 2022 and in our periodic reports with the SEC.

Stockholders should read any written disclosure accompanying a distribution payment carefully and should not assume that the source of any distribution is only ordinary income or gains.

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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