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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
⌧
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
◻
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
OR
For the transition period from: to
Commission File Number: 001-33723
Main Street Capital Corporation
(Exact name of registrant as specified in its charter)
Maryland
(State or other jurisdiction of
incorporation or organization)
1300 Post Oak Boulevard, 8th Floor
Houston, TX
(Address of principal executive offices)
41-2230745
(I.R.S. Employer
Identification No.)
77056
(Zip Code)
Securities registered pursuant to Section 12(b) of the Act:
(713) 350-6000
(Registrant’s telephone number including area code)
Title of Each Class
Common Stock, par value $0.01 per share
Trading Symbol
MAIN
Name of Each Exchange on Which
Registered
New York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ⌧ No ◻
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ◻ No ⌧
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ⌧ No ◻
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ◻ No ◻
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the
Exchange Act.
Large accelerated filer ⌧
Accelerated filer ◻
Non-accelerated filer ◻
Smaller reporting company ◻
Emerging growth company ◻
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ⌧
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ◻ No ⌧
The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of June 30, 2021, was approximately $1,948.5 million based
upon the last sale price for the registrant’s common stock on that date.
The number of shares outstanding of the issuer’s common stock as of February 25, 2022 was 71,692,388.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrants’ definitive Proxy Statement for its 2022 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission, are
incorporated by reference in this Annual Report on Form 10-K in response to Part III.
Table of Contents
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
TABLE OF CONTENTS
PART I
PART II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
[Reserved.]
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Consolidated Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
PART III
Principal Accountant Fees and Services
Exhibits and Consolidated Financial Statement Schedules
PART IV
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Signatures
Page
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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements regarding the plans and objectives of management for
future operations and which relate to future events or our future performance or financial condition. Any such forward-looking statements
may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to
be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-
looking statements, which involve assumptions and describe our future plans, strategies and expectations, are generally identifiable by use
of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend” or “project” or the negative of these
words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that
may be incorrect, and we cannot assure you that the projections included in these forward-looking statements will come to pass. Our actual
results could differ materially from those expressed or implied by the forward-looking statements as a result of various factors, including,
without limitation, the factors discussed in Item 1A entitled “Risk Factors” in Part I of this Annual Report on Form 10-K and elsewhere in
this Annual Report on Form 10-K and in other filings we may make with the Securities and Exchange Commission (“SEC”) from time to
time. Other factors that could cause actual results to differ materially include changes in the economy and future changes in laws or
regulations and conditions in our operating areas.
We have based the forward-looking statements included in this Annual Report on Form 10-K on information available to us on the
date of this Annual Report on Form 10-K, and we assume no obligation to update any such forward-looking statements, unless we are
required to do so by applicable law. However, you are advised to refer to any additional disclosures that we may make directly to you or
through reports that we in the future may file with the SEC, including subsequent annual reports on Form 10-K, quarterly reports on Form
10-Q and current reports on Form 8-K.
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Item 1. Business
ORGANIZATION
PART I
Main Street Capital Corporation (“MSCC”) is a principal investment firm primarily focused on providing customized debt and
equity financing to lower middle market (“LMM”) companies and debt capital to middle market (“Middle Market”) companies. The
portfolio investments of MSCC and its consolidated subsidiaries are typically made to support management buyouts, recapitalizations,
growth financings, refinancings and acquisitions of companies that operate in a variety of industry sectors. MSCC seeks to partner with
entrepreneurs, business owners and management teams and generally provides “one stop” financing alternatives within its LMM portfolio.
MSCC and its consolidated subsidiaries invest primarily in secured debt investments, equity investments, warrants and other securities of
LMM companies based in the United States and in secured debt investments of Middle Market companies generally headquartered in the
United States.
MSCC was formed in March 2007 to operate as an internally managed business development company (“BDC”) under the
Investment Company Act of 1940, as amended (the “1940 Act”). MSCC wholly owns several investment funds, including Main Street
Mezzanine Fund, LP (“MSMF”) and Main Street Capital III, LP (“MSC III” and, together with MSMF, the “Funds”), and each of their
general partners. The Funds are each licensed as a Small Business Investment Company (“SBIC”) by the United States Small Business
Administration (“SBA”). Because MSCC is internally managed, all of the executive officers and other employees are employed by MSCC.
Therefore, MSCC does not pay any external investment advisory fees, but instead directly incurs the operating costs associated with
employing investment and portfolio management professionals.
MSC Adviser I, LLC (the “External Investment Manager”) was formed in November 2013 as a wholly owned subsidiary of MSCC
to provide investment management and other services to parties other than MSCC and its subsidiaries or their portfolio companies
(“External Parties”) and receives fee income for such services. MSCC has been granted no-action relief by the SEC to allow the External
Investment Manager to register as a registered investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers
Act”). Since the External Investment Manager conducts all of its investment management activities for External Parties, it is accounted for
as a portfolio investment of MSCC and is not included as a consolidated subsidiary of MSCC in MSCC’s consolidated financial statements.
MSCC has elected to be treated for U.S. federal income tax purposes as a regulated investment company (“RIC”) under
Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a result, MSCC generally will not pay corporate-level
U.S. federal income taxes on any net ordinary taxable income or capital gains that it distributes to its stockholders.
MSCC has certain direct and indirect wholly owned subsidiaries that have elected to be taxable entities (the “Taxable
Subsidiaries”). The primary purpose of the Taxable Subsidiaries is to permit MSCC to hold equity investments in portfolio companies
which are “pass-through” entities for tax purposes.
Unless otherwise noted or the context otherwise indicates, the terms “we,” “us,” “our,” the “Company” and “Main Street” refer to
MSCC and its consolidated subsidiaries, which include the Funds and the Taxable Subsidiaries.
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The following diagram depicts our organizational structure:
Main Street Capital Corporation ("MSCC")
100%
100%
100%
Main Mezzanine
Management, L.L.C.
("MSMF GP")
Main Street Capital
III GP, L.L.C.
("MSC III GP")
Other Holding
Companies*
99.6%
0.4%
1%
99%
100%
Main Street Mezzanine
Fund, LP ("MSMF")
Main Street Capital
III, LP ("MSC III")
MSC Adviser 1, L.L.C.
("External Investment
Manager")**
* Other Holding Companies includes the Taxable Subsidiaries and other entities formed for operational purposes. Each of these
companies is directly or indirectly wholly owned by MSCC.
** The External Investment Manager is accounted for as a portfolio investment at fair value, as opposed to a consolidated subsidiary, and
is indirectly wholly owned by MSCC.
CORPORATE INFORMATION
Our principal executive offices are located at 1300 Post Oak Boulevard, 8th Floor, Houston, Texas 77056. We maintain a website
on the Internet at www.mainstcapital.com. We make available free of charge on our website our annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports as soon as reasonably practicable after such
material is electronically filed with or furnished to the SEC. Information contained on our website is not incorporated by reference into this
Annual Report on Form 10-K, and you should not consider that information to be part of this Annual Report on Form 10-K. Our annual
reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports and other public
filings are also available free of charge on the EDGAR Database on the SEC’s website at www.sec.gov.
OVERVIEW OF OUR BUSINESS
Our principal investment objective is to maximize our portfolio’s total return by generating current income from our debt
investments and current income and capital appreciation from our equity and equity-related investments, including warrants, convertible
securities and other rights to acquire equity securities in a portfolio company. We seek to achieve our investment objective through our
LMM, Private Loan, and Middle Market investment strategies. Our LMM investment strategy involves investments in companies that
generally have annual revenues between $10 million and $150 million and our LMM portfolio investments generally range in size from $5
million to $75 million. Our Middle Market investment strategy involves investments in companies that are generally larger in size than our
LMM companies, with annual revenues typically between $150 million and $1.5 billion, and our Middle Market investments generally
range in size from $3 million to $25 million. Our private loan (“Private Loan”) investment strategy involves investments in companies that
are consistent with the size of the companies in our LMM and Middle Market investment strategies, and our Private Loan investments
generally range in size from $10 million to $75 million.
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We seek to fill the financing gap for LMM businesses, which, historically, have had limited access to financing from commercial
banks and other traditional sources. The underserved nature of the LMM creates the opportunity for us to meet the financing needs of LMM
companies while also negotiating favorable transaction terms and equity participations. Our ability to invest across a company’s capital
structure, from secured loans to equity securities, allows us to offer portfolio companies a comprehensive suite of financing options, or a
“one stop” financing solution. Providing customized, “one stop” financing solutions is important to LMM portfolio companies. We
generally seek to partner directly with entrepreneurs, management teams and business owners in making our investments. Our LMM
portfolio debt investments are generally secured by a first lien on the assets of the portfolio company and typically have a term of between
five and seven years from the original investment date.
Private Loan investments consist generally of loans that have been originated directly by us or through strategic relationships with
other investment funds on a collaborative basis and are often referred to in the debt markets as “club deals.” Private Loan investments are
typically similar in size, structure, terms and conditions to investments we hold in our LMM portfolio and Middle Market portfolio. Our
Private Loan portfolio debt investments are generally secured by a first priority lien on the assets of the portfolio company and typically
have a term of between three and seven years from the original investment date.
Our Middle Market portfolio investments primarily consist of direct investments in or secondary purchases of interest-bearing
syndicated loans or debt securities in privately held companies based in the United States that are generally larger in size than the
companies included in our LMM portfolio. Our Middle Market portfolio debt investments are generally secured by a first priority lien on
the assets of the portfolio company and typically have an expected duration of between three and seven years from the original investment
date.
Our other portfolio (“Other Portfolio”) investments primarily consist of investments that are not consistent with the typical profiles
for our LMM, Private Loan or Middle Market portfolio investments, including investments which may be managed by third parties. In our
Other Portfolio, we may incur indirect fees and expenses in connection with investments managed by third parties, such as investments in
other investment companies or private funds.
Subject to changes in our cash and overall liquidity, our Investment Portfolio (as defined below) may also include short-term
portfolio investments that are atypical of our LMM, Middle Market and Private Loan portfolio investments in that they are intended to be a
short-term deployment of capital. These assets are typically expected to be liquidated in one year or less and are not expected to be a
significant portion of the overall Investment Portfolio.
Our external asset management business is conducted through the External Investment Manager. The External Investment
Manager earns management fees based on the assets of the funds under management and may earn incentive fees, or a carried interest,
based on the performance of the funds managed.
Our portfolio investments are generally made through MSCC, the Taxable Subsidiaries and the Funds. MSCC, the Taxable
Subsidiaries and the Funds share the same investment strategies and criteria, although they are subject to different regulatory regimes (see
“Regulation”). An investor’s return in MSCC will depend, in part, on the Taxable Subsidiaries’ and the Funds’ investment returns as they
are wholly owned subsidiaries of MSCC.
The level of new portfolio investment activity will fluctuate from period to period based upon our view of the current economic
fundamentals, our ability to identify new investment opportunities that meet our investment criteria, and our ability to consummate the
identified opportunities. The level of new investment activity, and associated interest and fee income, will directly impact future investment
income. In addition, the level of dividends paid by portfolio companies and the portion of our portfolio debt investments on non-accrual
status will directly impact future investment income. While we intend to grow our portfolio and our investment income over the long term,
our growth and our operating results may be more limited during depressed economic periods. However, we intend to appropriately manage
our cost structure and liquidity position based on applicable economic conditions and our investment outlook. The level of realized gains or
losses and unrealized appreciation or depreciation on our investments will also fluctuate depending upon portfolio activity, economic
conditions and the performance of our individual portfolio companies. The changes in realized gains and losses and unrealized appreciation
or depreciation could have a material impact on our operating results.
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Because we are internally managed, we do not pay any external investment advisory fees, but instead directly incur the operating
costs associated with employing investment and portfolio management professionals. We believe that our internally managed structure
provides us with a better alignment of interests between our management team and our employees and our shareholders and a beneficial
operating expense structure when compared to other publicly traded and privately held investment firms which are externally managed, and
our internally managed structure allows us the opportunity to leverage our non-interest operating expenses as we grow our Investment
Portfolio (as defined below). For the years ended December 31, 2021 and 2020, the ratio of our total operating expenses, excluding interest
expense, as a percentage of our quarterly average total assets was 1.5% and 1.3%, respectively. The ratio of our total operating expenses,
including interest expense, as a percentage of our quarterly average total assets was 3.4% and 3.2%, respectively, for the years ended
December 31, 2021 and 2020. For further information on our expense ratio refer to Note F to the consolidated financial statements included
in “Item 8.– Consolidated Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.
Through the External Investment Manager, we serve as the sole investment adviser and administrator to MSC Income pursuant to
an Investment Advisory and Administrative Services Agreement entered into between the External Investment Manager and MSC Income
(the “Advisory Agreement”). Under the Advisory Agreement, the External Investment Manager earns a 1.75% annual base management fee
and a 20% incentive fee on MSC Income’s pre-investment fee net investment income above a specified hurdle rate in exchange for
providing advisory services to MSC Income.
Additionally, the External Investment Manager has entered into an Investment Management Agreement with MS Private Loan
Fund I, LP, a private investment fund with a strategy to co-invest with Main Street in Private Loan portfolio investments (the “Private Loan
Fund”), pursuant to which the External Investment Manager provides investment advisory and management services to the Private Loan
Fund in exchange for an asset-based fee and certain incentive fees.
The External Investment Manager earns management fees based on the assets of the funds and accounts under management and
may earn incentive fees, or a carried interest, based on the performance of the funds and accounts managed. The total contribution of the
External Investment Manager to our net investment income consists of the combination of the expenses allocated to the External Investment
Manager and the dividend income earned from the External Investment Manager. For the years ended December 31, 2021, 2020 and 2019,
the total contribution of the External Investment Manager to our net investment income was $16.5 million, $9.9 million and $11.7 million,
respectively. During the year ended December 31, 2021, the External Investment Manager earned $17.7 million in base management fee
income and $0.6 million in incentive fees compared to $10.7 million of base management fees and no incentive fees in 2020 and
$11.1 million of base management fees and $2.0 million in incentive fees in 2019 for the investment advisory services provided to MSC
Income, the Private Loan Fund and other clients.
We have entered into an agreement with the External Investment Manager to share employees in connection with its asset
management business generally, and specifically for its relationship with MSC Income and its other clients. Through this agreement, we
share employees with the External Investment Manager, including their related infrastructure, business relationships, management expertise
and capital raising capabilities, and we allocate the related expenses to the External Investment Manager pursuant to the sharing agreement.
Our total expenses for the years ended December 31, 2021, 2020 and 2019 are net of expenses allocated to the External Investment Manager
of $10.3 million, $7.4 million and $6.7 million, respectively.
We have received an exemptive order from the SEC permitting co-investments among us, MSC Income and other funds and
clients advised by the External Investment Manager in certain negotiated transactions where co-investing would otherwise be prohibited
under the 1940 Act. We have made co-investments with, and in the future intend to continue to make co-investments with MSC Income, the
Private Loan Fund and other clients advised by the External Investment Manager, in accordance with the conditions of the order. The order
requires, among other things, that we and the External Investment Manager consider whether each such investment opportunity is
appropriate for us and the External Investment Manager’s advised clients, as applicable, and if it is appropriate, to propose an allocation of
the investment opportunity between such parties. Because the External Investment Manager may receive performance-based fee
compensation from funds and clients advised by the External Investment Manager, this may provide the
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Company and the External Investment Manager an incentive to allocate opportunities to other participating funds and clients instead of us.
However, both we and the External Investment Manager have policies and procedures in place to manage this conflict, including oversight
by the independent members of our Board of Directors.
RECENT DEVELOPMENTS
In February 2022, we declared a supplemental cash dividend of $0.075 per share payable in March 2022. This supplemental cash
dividend is in addition to the previously announced regular monthly cash dividends that we declared for the first quarter of 2022 of $0.215
per share for each of January, February and March 2022.
During February 2022, we declared regular monthly dividends of $0.215 per share for each month of April, May and June of
2022. These regular monthly dividends equal a total of $0.645 per share for the second quarter of 2022, representing a 4.9% increase from
the regular monthly dividends paid in the second quarter of 2021. Including the supplemental dividends declared for March 2022 and the
regular monthly dividends declared for the first quarter and second quarter of 2022, we will have paid $33.540 per share in cumulative
dividends since our October 2007 initial public offering.
On February 23, 2022, our Board of Directors unanimously approved the application to the Company of the 150% minimum asset
coverage ratio set forth in Section 61(a)(2) of the 1940 Act. As a result, the minimum asset coverage ratio applicable to the Company will
be reduced from 200% to 150%, effective as of February 23, 2023, unless approved earlier by a vote of our stockholders, in which case the
150% minimum asset coverage ratio will be effective on the day after such approval. The Board also authorized the submission of a
proposal for stockholders to accelerate the application of the 150% minimum asset coverage ratio to the Company at the 2022 Annual
Meeting of Stockholders.
BUSINESS STRATEGIES
Our principal investment objective is to maximize our portfolio’s total return by generating current income from our debt
investments and current income and capital appreciation from our equity and equity-related investments, including warrants, convertible
securities and other rights to acquire equity securities in a portfolio company. We have adopted the following business strategies to achieve
our investment objective:
● Deliver Customized Financing Solutions in the Lower Middle Market. We offer LMM portfolio companies customized debt
and equity financing solutions that are tailored to the facts and circumstances of each situation. We believe our ability to
provide a broad range of customized financing solutions to LMM companies sets us apart from other capital providers that
focus on providing a limited number of financing solutions. Our ability to invest across a company’s capital structure, from
senior secured loans to subordinated debt to equity securities, allows us to offer LMM portfolio companies a comprehensive
suite of financing options, or a “one stop” financing solution.
●
●
Focus on Established Companies. We generally invest in companies with established market positions, experienced
management teams and proven revenue streams. We believe that those companies generally possess better risk-adjusted return
profiles than newer companies that are building their management teams or are in the early stages of building a revenue base.
We also believe that established companies in our targeted size range also generally provide opportunities for capital
appreciation.
Leverage the Skills and Experience of our Investment Team. Our investment team has significant experience in lending to and
investing in LMM and Middle Market companies. The members of our investment team have broad investment backgrounds,
with prior experience at private investment funds, investment banks and other financial services companies and currently
include six certified public accountants and two Chartered Financial Analyst® charter holders. The expertise of our investment
team in analyzing, valuing, structuring, negotiating and closing transactions should provide us with competitive advantages by
allowing us to consider customized financing solutions and non-traditional or complex structures for our portfolio companies.
Also, the reputation of our investment team has and should continue
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to enable us to generate additional revenue in the form of management and incentive fees in connection with us providing
advisory services to other investment funds.
●
Invest Across Multiple Companies, Industries, Regions and End Markets. We seek to maintain a portfolio of investments that is
appropriately balanced among various companies, industries, geographic regions and end markets. This portfolio balance is
intended to mitigate the potential effects of negative economic events for particular companies, regions, industries and end
markets.
● Capitalize on Strong Transaction Sourcing Network. Our investment team seeks to leverage its extensive network of referral
sources for portfolio company investments. We have developed a reputation in our marketplace as a responsive, efficient and
reliable source of financing, which has created a growing stream of proprietary deal flow for us.
● Grow our Asset Management Business. Our asset management business provides us with a recurring source of income,
additional income diversification from sources of income directly tied to invested capital and the opportunity for greater
stockholder returns through the utilization of our existing investment expertise, strong historical track record and favorable
reputation. We seek to grow our asset management business within our internally managed BDC structure in order to increase
the value of this unique benefit to our stakeholders. We expect such growth to come organically through the expansion of the
investment capital that we manage for third parties and the potential extension of our asset management business to new
investment strategies, and potentially through mergers and acquisition activities.
●
Benefit from Lower, Fixed, Long-Term Cost of Capital. The SBIC licenses held by the Funds have allowed them to issue SBA-
guaranteed debentures. SBA-guaranteed debentures carry long-term fixed interest rates that are generally lower than interest
rates on comparable bank loans and other debt. Because lower-cost SBA leverage is, and will continue to be, a significant part
of our capital base through the Funds, our relative cost of debt capital should be lower than many of our competitors. In
addition, the SBIC leverage that we receive through the Funds represents a stable, long-term component of our capital structure
with proper matching of duration and cost compared to our LMM portfolio investments. We also maintain an investment grade
rating from Standard & Poor’s Ratings Services which provides us the opportunity and flexibility to obtain additional, attractive
long-term financing options to supplement our capital structure, including the unsecured notes with fixed interest rates we
issued in 2017, 2019, 2020 and 2021.
INVESTMENT CRITERIA
Our investment team has identified the following investment criteria that it believes are important in evaluating prospective
portfolio companies. Our investment team uses these criteria in evaluating investment opportunities. However, not all of these criteria have
been, or will be, met in connection with each of our investments:
●
●
Proven Management Team with Meaningful Equity Stake. We look for operationally-oriented management with direct industry
experience and a successful track record. In addition, we expect the management team of each LMM portfolio company to have
meaningful equity ownership in the portfolio company to better align our respective economic interests. We believe
management teams with these attributes are more likely to manage the companies in a manner that both protects our debt
investment and enhances the value of our equity investment.
Established Companies with Positive Cash Flow. We seek to invest in established companies with sound historical financial
performance. We typically focus on LMM companies that have historically generated earnings before interest, taxes,
depreciation and amortization (“EBITDA”) of $3 million to $20 million and commensurate levels of free cash flow. We also
pursue investments in debt securities of Middle Market companies that are generally established companies with sound
historical financial performance that are generally larger in size than LMM companies. We generally do not invest in start-up
companies or companies with speculative business plans.
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● Defensible Competitive Advantages/Favorable Industry Position. We primarily focus on companies having competitive
advantages in their respective markets and/or operating in industries with barriers to entry, which may help to protect their
market position and profitability.
●
Exit Alternatives. We exit our debt investments primarily through the repayment of our investment from internally generated
cash flow of the portfolio company and/or a refinancing. In addition, we seek to invest in companies whose business models
and expected future cash flows may provide alternate methods of repaying our investment, such as through a strategic
acquisition by other industry participants or a recapitalization.
INVESTMENT PORTFOLIO
The “Investment Portfolio”, as used herein, refers to all of our investments in LMM portfolio companies, Private Loan portfolio
investments, investments in Middle Market portfolio companies, Other Portfolio investments and our investment in the External Investment
Manager. Our LMM portfolio investments primarily consist of secured debt, direct equity investments and equity warrants in privately held,
LMM companies based in the United States. Our Private Loan portfolio investments primarily consist of investments in interest-bearing
debt securities in companies that are consistent with the size of the companies in our LMM portfolio and Middle Market portfolio, but are
investments that we originate directly at Main Street or on a collaborative basis with other investment funds, and are often referred to in the
debt markets as “club deals.” Our Middle Market portfolio investments primarily consist of direct investments in or secondary purchases of
interest-bearing debt securities in privately held companies based in the United States that are generally larger in size than the companies
included in our LMM portfolio. Our Other Portfolio investments primarily consist of investments that are not consistent with the typical
profiles for our LMM, Private Loan and Middle Market portfolio investments, including investments which may be managed by third
parties. In our Other Portfolio, we may incur indirect fees and expenses in connection with investments managed by third parties, such as
investments in other investment companies or private funds.
Debt Investments
Historically, we have made LMM debt investments principally in the form of single tranche debt. Single tranche debt financing
involves issuing one debt security that blends the risk and return profiles of both first lien secured and subordinated debt. We believe that
single tranche debt is more appropriate for many LMM companies given their size in order to reduce structural complexity and potential
conflicts among creditors.
Our LMM debt investments generally have a term of five to seven years from the original investment date, with limited required
amortization prior to maturity, and provide for monthly or quarterly payment of interest at interest rates generally between 10% and 14%
per annum, payable currently in cash. Interest rate terms can include either fixed or floating rate terms. In addition, certain LMM debt
investments may have a form of interest that is not paid currently but is accrued and added to the loan balance and paid at maturity. We
refer to this form of interest as payment-in-kind, or PIK, interest. We typically structure our LMM debt investments with the maximum
seniority and collateral that we can reasonably obtain while seeking to achieve our total return target. In most cases, our LMM debt
investment will be collateralized by a first priority lien on substantially all the assets of the portfolio company. In addition to seeking a
senior lien position in the capital structure of our LMM portfolio companies, we seek to limit the downside potential of our LMM debt
investments by negotiating covenants that are designed to protect our LMM debt investments while affording our portfolio companies as
much flexibility in managing their businesses as is reasonable. Such restrictions may include affirmative and negative covenants, default
penalties, lien protection, change of control or change of management provisions, key-man life insurance, guarantees, equity pledges,
personal guaranties, where appropriate, and put rights. In addition, we typically seek board representation or observation rights in all of our
LMM portfolio companies. Interest rate terms can include either fixed or floating rate terms.
While we will continue to focus our LMM debt investments primarily on single tranche debt investments, we also anticipate
structuring some of our debt investments as mezzanine loans. We expect that these mezzanine loans will be primarily junior secured or
unsecured, subordinated loans that provide for relatively high interest rates, payable currently in cash, and will provide us with significant
interest income. We also anticipate that these mezzanine loans will
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afford us the additional opportunity for income and gains through PIK interest and equity warrants and other similar equity instruments
issued in conjunction with these mezzanine loans. These loans typically will have interest-only payments in the early years, with
amortization of principal deferred to the later years of the mezzanine loan term. Typically, our mezzanine loans will have maturities of three
to five years. We will generally target interest rates of 12% to 14%, payable currently in cash, for our mezzanine loan investments with
higher targeted total returns from equity warrants or PIK interest.
Our Private Loan portfolio investments primarily consist of investments in interest-bearing debt securities in companies that are
consistent with the size of companies in our LMM portfolio or our Middle Market portfolio, but are investments which have been
originated directly by Main Street or through strategic relationships with other investment funds on a collaborative basis. Our Private Loan
portfolio debt investments are generally secured by a first priority lien and typically have a term of between three and seven years from the
original investment date.
We also pursue debt investments in Middle Market companies. Our Middle Market portfolio investments primarily consist of
direct investments or secondary purchases of interest-bearing debt securities in privately held companies based in the United States that are
generally larger in size than the companies included in our LMM portfolio. Our Middle Market portfolio debt investments are generally
secured by a first priority lien on the assets of the portfolio company and typically have a term of between three and seven years from the
original investment date. The debt investments in our Middle Market portfolio have rights and protections that are similar to those in our
LMM debt investments, which may include affirmative and negative covenants, default penalties, lien protection, change of control
provisions, guarantees and equity pledges. The Middle Market debt investments generally have floating interest rates at the London
Interbank Offered Rate (“LIBOR”) plus a margin, and are typically subject to LIBOR floors.
Warrants
In connection with our LMM debt investments, we occasionally receive equity warrants to establish or increase our equity interest
in the portfolio company. Warrants we receive in connection with a debt investment typically require only a nominal cost to exercise, and
thus, as a portfolio company appreciates in value, we may achieve additional investment return from this equity interest. We typically
structure the warrants to provide provisions protecting our rights as a minority-interest holder, as well as secured or unsecured put rights, or
rights to sell such securities back to the portfolio company, upon the occurrence of specified events. In certain cases, we also may obtain
registration rights in connection with these equity interests, which may include demand and “piggyback” registration rights.
Direct Equity Investments
We also seek to make direct equity investments to align our interests with key management and stockholders of our LMM
portfolio companies, and to allow for participation in the appreciation in the equity values of our LMM portfolio companies. We usually
make our direct equity investments in connection with debt investments in our LMM portfolio companies. In addition, we may have both
equity warrants and direct equity positions in some of our LMM portfolio companies. We seek to maintain fully diluted equity positions in
our LMM portfolio companies of 5% to 50%, and may have controlling equity interests in some instances. We have a value orientation
toward our direct equity investments and have traditionally been able to purchase our equity investments at reasonable valuations.
INVESTMENT PROCESS
Our management team’s investment committee is responsible for all aspects of our investment processes. The current members of
our investment committee are Dwayne L. Hyzak, our Chief Executive Officer, David Magdol, our President and Chief Investment Officer,
and Vincent D. Foster, our Senior Advisor and Chairman of the Board.
The investment processes for LMM, Private Loan and Middle Market portfolio investments are outlined below. Our investment
strategy involves a “team” approach, whereby potential transactions are screened by several members of our investment team before being
presented to the investment committee. Our investment committee meets on an as-needed basis depending on transaction volume. We
generally categorize our investment process into seven distinct stages:
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Deal Generation/Origination
Deal generation and origination is maximized through long-standing and extensive relationships with industry contacts, brokers,
commercial and investment bankers, entrepreneurs, service providers such as lawyers, financial advisors and accountants, and current and
former portfolio companies and investors. Our investment team has focused its deal generation and origination efforts on LMM, Private
Loan and Middle Market investments, and we have developed a reputation as a knowledgeable, reliable and active source of capital and
assistance in these markets.
Screening
During the screening process, if a transaction initially meets our investment criteria, we will perform preliminary due diligence,
taking into consideration some or all of the following information:
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a comprehensive financial model based on quantitative analysis of historical financial performance, projections and pro forma
adjustments to determine the estimated internal rate of return;
a brief industry and market analysis;
direct industry expertise imported from other portfolio companies or investors;
preliminary qualitative analysis of the management team’s competencies and backgrounds;
potential investment structures and pricing terms; and
regulatory compliance.
Upon successful screening of a proposed LMM transaction, the investment team makes a recommendation to our investment
committee. If our investment committee concurs with moving forward on the proposed LMM transaction, we typically issue a non-binding
term sheet or letter of intent to the company. Upon successful screening of a proposed Private Loan transaction, the investment team makes
a recommendation to our investment committee. If our investment committee concurs with moving forward on the proposed Private Loan
transaction, we typically issue a non-binding term sheet to the company. For Middle Market portfolio investments, the initial term sheet is
typically issued by the borrower, through the syndicating bank, and is screened by the investment team which makes a recommendation to
our investment committee.
Term Sheet
For proposed LMM transactions, the non-binding term sheet or letter of intent will include the key economic terms based upon our
analysis performed during the screening process, as well as a proposed timeline and our qualitative expectation for the transaction. While
the term sheet or letter of intent for LMM investments is non-binding, we typically receive an expense deposit in order to move the
transaction to the due diligence phase. Upon execution of a term sheet, we begin our formal due diligence process.
For proposed Private Loan transactions, the non-binding term sheet will include the key economic terms based upon our analysis
performed during the screening process, as well as a proposed timeline and our qualitative expectation for the transaction. Upon execution
of a term sheet, we begin our formal due diligence process.
For proposed Middle Market transactions, the initial term sheet will include key economic terms and other conditions proposed by
the borrower and its representatives and the proposed timeline for the investment, which are reviewed by our investment team to determine
if such terms and conditions are in agreement with our investment objectives.
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Due Diligence
Due diligence on a proposed LMM investment is performed by a minimum of three of our investment professionals, whom we
refer to collectively as the investment team, and certain external resources, who together conduct due diligence to understand the
relationships among the prospective portfolio company’s business plan, operations and financial performance. Our LMM due diligence
review includes some or all of the following:
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site visits with management and key personnel;
detailed review of historical and projected financial statements;
operational reviews and analysis;
interviews with customers and suppliers;
detailed evaluation of company management, including background checks;
review of material contracts;
in-depth industry, market and strategy analysis;
regulatory compliance analysis; and
review by legal, environmental or other consultants, if applicable.
Due diligence on a proposed Private Loan or Middle Market investment is generally performed on materials and information
obtained from certain external resources and assessed internally by a minimum of three of our investment professionals, who work to
understand the relationships among the prospective portfolio company’s business plan, operations and financial performance using the
accumulated due diligence information. Our typical Private Loan and Middle Market due diligence review includes some or all of the
following:
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detailed review of historical and projected financial statements;
site visits or other discussions with management and key personnel;
in-depth industry, market, operational and strategy analysis;
regulatory compliance analysis; and
detailed review of the company’s management team and their capabilities.
During the due diligence process, significant attention is given to sensitivity analyses and how the company might be expected to
perform given downside, base-case and upside scenarios. In certain cases, we may decide not to make an investment based on the results of
the diligence process.
Document and Close
Upon completion of a satisfactory due diligence review of a proposed LMM portfolio investment, the investment team presents
the findings and a recommendation to our investment committee. The presentation contains information which can include, but is not
limited to, the following:
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company history and overview;
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transaction overview, history and rationale, including an analysis of transaction strengths and risks;
analysis of key customers and suppliers and key contracts;
a working capital analysis;
an analysis of the company’s business strategy;
a management and key equity investor background check and assessment;
third-party accounting, legal, environmental or other due diligence findings;
investment structure and expected returns;
anticipated sources of repayment and potential exit strategies;
pro forma capitalization and ownership;
an analysis of historical financial results and key financial ratios;
sensitivities to management’s financial projections;
regulatory compliance analysis findings; and
detailed reconciliations of historical to pro forma results.
Upon completion of a satisfactory due diligence review of a proposed Private Loan or Middle Market portfolio investment, the
investment team presents the findings and a recommendation to our investment committee. The presentation contains information which
can include, but is not limited to, the following:
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company history and overview;
transaction overview, history and rationale, including an analysis of transaction strengths and risks;
analysis of key customers and suppliers;
an analysis of the company’s business strategy;
investment structure and expected returns;
anticipated sources of repayment and potential exit strategies;
pro forma capitalization and ownership;
regulatory compliance analysis findings; and
an analysis of historical financial results and key financial ratios.
If any adjustments to the transaction terms or structures are proposed by the investment committee, such changes are made and
applicable analyses are updated prior to approval of the transaction. Approval for the transaction must be made by the affirmative vote from
a majority of the members of the investment committee, with the committee
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member managing the transaction, if any, abstaining from the vote. Upon receipt of transaction approval, the investment team will re-
confirm regulatory compliance, process and finalize all required legal documents, and fund the investment.
Post-Investment
We continuously monitor the status and progress of the portfolio companies. We generally offer managerial assistance to our
portfolio companies, giving them access to our investment experience, direct industry expertise and contacts. The same investment team
that was involved in the investment process will continue its involvement in the portfolio company post-investment. This provides for
continuity of knowledge and allows the investment team to maintain a strong business relationship with key management of our portfolio
companies for post-investment assistance and monitoring purposes.
As part of the monitoring process of LMM portfolio investments, the investment team will analyze monthly and quarterly financial
statements versus the previous periods and year, review financial projections, meet and discuss issues or opportunities with management,
attend board meetings and review all compliance certificates and covenants. While we maintain limited involvement in the ordinary course
operations of our LMM portfolio companies, we maintain a higher level of involvement in non-ordinary course financing or strategic
activities and any non-performing scenarios.
As part of the monitoring process of our Private Loan and Middle Market portfolio investments, the investment team will analyze
monthly and quarterly financial statements versus the previous periods and year, review financial projections and review all compliance
certificates and covenants. Depending upon the nature of our Private Loan portfolio investments, our investment team may also attend
board meetings, and meet and discuss issues or opportunities with the portfolio company’s management team or private equity owners,
however, due to the larger size and nature of our “lender only” relationship with these Private Loan and Middle Market companies in
comparison to our LMM portfolio companies, it is not necessary or practical to have as much direct management interface.
We utilize an internally developed investment rating system to rate the performance of each LMM portfolio company and to
monitor our expected level of returns on each of our LMM investments in relation to our expectations for the portfolio company. The
investment rating system takes into consideration various factors, including, but not limited to, each investment’s expected level of returns,
the collectability of our debt investments and the ability to receive a return of the invested capital in our equity investments, comparisons to
competitors and other industry participants, the portfolio company’s future outlook and other factors that are deemed to be significant to the
portfolio company.
Exit Strategies/Refinancing
While we generally exit most investments through the refinancing or repayment of our debt and redemption or sale of our equity
positions, we typically assist our LMM portfolio companies in developing and planning exit opportunities, including any sale or merger of
our portfolio companies. We may also assist in the structure, timing, execution and transition of the exit strategy. The refinancing or
repayment of Private Loan investments and Middle Market debt investments typically do not require our assistance due to the additional
resources available to these larger Private Loan and Middle Market companies.
DETERMINATION OF NET ASSET VALUE AND INVESTMENT PORTFOLIO VALUATION PROCESS
We determine the net asset value per share of our common stock on a quarterly basis. The net asset value per share is equal to our
total assets minus total liabilities divided by the total number of shares of common stock outstanding.
We are required to report our investments at fair value. As a result, the most significant determination inherent in the preparation
of our consolidated financial statements is the valuation of our Investment Portfolio and the related amounts of unrealized appreciation and
depreciation. We follow the provisions of the Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 820, Fair
Value Measurements and Disclosures (“ASC 820”). ASC 820 defines fair value, establishes a framework for measuring fair value,
establishes a fair value hierarchy based on the
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quality of inputs used to measure fair value and enhances disclosure requirements for fair value measurements. ASC 820 requires us to
assume that the portfolio investment is to be sold in the principal market to independent market participants, which may be a hypothetical
market. Market participants are defined as buyers and sellers in the principal market that are independent, knowledgeable and willing and
able to transact.
We determine in good faith the fair value of our Investment Portfolio pursuant to a valuation policy in accordance with ASC 820
and a valuation process approved by our Board of Directors and in accordance with the 1940 Act. Our valuation policies and processes are
intended to provide a consistent basis for determining the fair value of our Investment Portfolio. See “Note B.1. — Valuation of the
Investment Portfolio” in the notes to consolidated financial statements for a detailed discussion of our investment portfolio valuation
process and procedures.
Due to the inherent uncertainty in the valuation process, our determination of fair value for our Investment Portfolio may differ
materially from the values that would have been determined had a ready market for the securities existed. In addition, changes in the market
environment, portfolio company performance and other events that may occur over the lives of the investments may cause the gains or
losses ultimately realized on these investments to be materially different than the valuations currently assigned. We determine the fair value
of each individual investment and record changes in fair value as unrealized appreciation or depreciation.
The 1940 Act requires valuation of a portfolio security at “market value” if market quotations for the security are “readily
available.” Portfolio securities for which market quotations are not readily available must be valued at fair value as determined in good faith
by the board of directors. In December 2020, the SEC adopted Rule 2a-5 under the 1940 Act, which sets forth the specific requirements for
determining fair value in good faith. Specifically, Rule 2a-5, among other things, permits a BDC’s board of directors to designate its
executive officers or investment adviser as a valuation designee to determine the fair value for its investment portfolio, subject to the active
oversight of the board.
Our Board of Directors adopted policies and procedures pursuant to Rule 2a-5 (the “Valuation Procedures”) and designated a
group of our executive officers to serve as the Board’s valuation designee thereunder (the “Valuation Committee”) effective April 1, 2021.
Pursuant to Valuation Procedures we undertake a multi-step valuation process each quarter in connection with determining the fair value of
our investments.
The following outlines our valuation process as established under the Valuation Procedures:
● Our quarterly valuation process begins with an initial valuation of each portfolio investment performed by the valuation
team consisting of several professionals who apply the appropriate valuation methodology depending on the type of
investment.
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Each valuation model is then reviewed by the investment team responsible for monitoring the portfolio investment for
accuracy, with any recommended changes reviewed by the valuation team.
● Updated valuation conclusions are then reviewed by and discussed with the Valuation Committee at quarterly valuation
meetings. Valuation meetings are generally attended by the Valuation Committee, the valuation team, members of
investment team responsible for each investment and members of the compliance team. Valuation models and valuation
conclusions are adjusted as necessary following such meetings.
● A nationally recognized independent financial advisory services firm analyzes and provides observations,
recommendations and an assurance certification regarding the determinations of the fair value for the majority of our
portfolio companies on a rotational basis.
● After incorporating commentary by the Valuation Committee and review of recommendations provided by the independent
financial advisory services firm, valuation results are finalized and approved by the Valuation Committee.
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The Board of Directors oversees the valuation process through its Audit Committee in accordance with Rule 2a-5 pursuant
to the Valuation Procedures.
Determination of fair value involves subjective judgments and estimates. The notes to our consolidated financial statements refer
to the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on our financial results and
financial condition.
COMPETITION
We compete for investments with a number of investment funds (including private equity funds, mezzanine funds, BDCs, and
SBICs), as well as traditional financial services companies such as commercial banks and other sources of financing. Many of the entities
that compete with us are larger and have more resources available to them. We believe we are able to be competitive with these entities
primarily on the basis of our focus toward the underserved LMM, the experience and contacts of our management team, our responsive and
efficient investment analysis and decision-making processes, our comprehensive suite of customized financing solutions and the investment
terms we offer.
We believe that some of our competitors make senior secured loans, junior secured loans and subordinated debt investments with
interest rates and returns that are comparable to or lower than the rates and returns that we target. Therefore, we do not seek to compete
primarily on the interest rates and returns that we offer to potential portfolio companies. For additional information concerning the
competitive risks we face, see “Risk Factors — Risks Related to Our Business and Structure — We face increasing competition for
investment opportunities.”
HUMAN CAPITAL
Our employees are vital to our success as a principal investment firm. As a human-capital intensive business, the long-term
success of our company depends on our people. We strive to attract, develop and retain our employees by offering unique employment
opportunities, superior advancement and promotion opportunities, attractive compensation and benefit structures and a close-knit culture.
The departure of our key investment and other personnel could cause our operating results to suffer.
Our LMM business segment depends heavily on the business owners and management teams of our portfolio companies and their
respective employees, contractors and service providers. In our investment process for LMM portfolio investments, the analysis of these
individuals is a critical part of our overall investment underwriting process and as a result we carefully review the qualifications and
experience of the portfolio company’s business owners and management team and their employment practices. We strive to partner with
business owners and management teams whose business practices reflect our core values.
We strive to recruit talented and driven individuals who share our values. We have competitive programs dedicated to attracting
and retaining new talent and enhancing the skills of our employees. Our recruiting efforts utilize strong relationships with a variety of
sources from which we recruit. Among other opportunities, we offer selected students investment analyst internships, which are expected to
lead to permanent roles for high performing and high potential interns. Through our internship program, individuals who want to become
investment analysts have the opportunity to see the full investment process from origination to closing, as well as post-closing portfolio
management activities. We routinely recruit from within, promoting current employees who have shown the technical ability, attitude,
interest and the initiative to take on greater responsibility.
We have designed a compensation structure, including an array of benefit plans and programs, that we believe is attractive to our
current and prospective employees. We also offer formal and informal training and mentorship programs that provide employees with
access to senior level executives. Through our annual goal setting and performance review processes, our employees are annually evaluated
by supervisors and our senior management team to ensure employees continue to develop and advance as expected. We are committed to
having a diverse workforce, and an inclusive work environment is a natural extension of our culture. We also maintain a Women’s
Initiative that provides employees with opportunities to network internally at Main Street and externally with other women in the financial
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services industry. Our employees have access to several programs designed to enable our employees to balance work, family and family-
related situations including flexible working arrangements and parental leave for birth and adoption placement. We are committed to
creating and maintaining an atmosphere where all employees feel welcomed, valued, respected and heard so that they feel motivated and
encouraged to contribute fully to their careers, our company and our communities.
We seek to maintain a close-knit culture, which we believe is an important factor in employee retention, which is reinforced by
our Community Building Committee. Our Community Building Committee, which is composed of a substantial cross section of employees
across our organization, develops programs and initiatives that promote an open and inclusive atmosphere and encourage employee
outreach with our community, in each case based upon feedback received from our employees. Initiatives generated by our Community
Building Committee include employee wellbeing and engagement activities along with volunteer and donation opportunities with local
charitable organizations. We encourage you to visit our website for more information about charitable organizations receiving our ongoing
support. Nothing on our website, however, shall be deemed incorporated by reference into this Annual Report on Form 10-K.
We monitor and evaluate various turnover and attrition metrics throughout our management team. Our annualized voluntary
turnover is relatively low, a record which we attribute to our strong corporate culture, commitment to career development and attractive
compensation and benefit programs.
As of December 31, 2021, we had approximately 80 employees, 46 of whom we characterize as investment and portfolio
management professionals, and the others include operations professionals and administrative staff. None of our employees are represented
by a collective bargaining agreement. As necessary, we will hire additional investment professionals and administrative personnel. All but
two of our employees are located in our Houston, Texas office.
REGULATION
Regulation as a Business Development Company
We have elected to be regulated as a BDC under the 1940 Act. The 1940 Act contains prohibitions and restrictions relating to
transactions between BDCs and their affiliates, principal underwriters and affiliates of those affiliates or underwriters. The 1940 Act
requires that a majority of the members of the board of directors of a BDC be persons other than “interested persons,” as that term is
defined in the 1940 Act. In addition, the 1940 Act provides that we may not change the nature of our business so as to cease to be, or to
withdraw our election as, a BDC unless approved by a majority of our outstanding voting securities.
The 1940 Act defines “a majority of the outstanding voting securities” as the lesser of (i) 67% or more of the voting securities
present at a meeting if the holders of more than 50% of our outstanding voting securities are present or represented by proxy or (ii) more
than 50% of our outstanding voting securities.
Qualifying Assets
Under the 1940 Act, a BDC may not acquire any asset other than assets of the type listed in Section 55(a) of the 1940 Act, which
are referred to as qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s
total assets. The principal categories of qualifying assets relevant to our business are any of the following:
(1)
Securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer
(subject to certain limited exceptions) is an eligible portfolio company (as defined below), or from any person who is, or
has been during the preceding 13 months, an affiliated person of an eligible portfolio company, or from any other person,
subject to such rules as may be prescribed by the SEC.
(2)
Securities of any eligible portfolio company that we control.
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(3)
(4)
(5)
(6)
Securities purchased in a private transaction from a U.S. issuer that is not an investment company or from an affiliated
person of the issuer, or in transactions incident thereto, if the issuer is in bankruptcy and subject to reorganization or if the
issuer, immediately prior to the purchase of its securities was unable to meet its obligations as they came due without
material assistance other than conventional lending or financing arrangements.
Securities of an eligible portfolio company purchased from any person in a private transaction if there is no ready market
for such securities and we already own 60% of the outstanding equity of the eligible portfolio company.
Securities received in exchange for or distributed on or with respect to securities described in (1) through (4) above, or
pursuant to the exercise of warrants or rights relating to such securities.
Cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the
time of investment.
In addition, a BDC must have been organized and have its principal place of business in the United States and must be operated
for the purpose of making investments in the types of securities described in (1), (2) or (3) above.
An eligible portfolio company is defined in the 1940 Act as any issuer which:
(a)
(b)
is organized under the laws of, and has its principal place of business in, the United States;
is not an investment company (other than a small business investment company wholly owned by the BDC) or a company
that would be an investment company but for certain exclusions under the 1940 Act; and
(c)
satisfies any of the following:
(i)
(ii)
(iii)
does not have any class of securities that is traded on a national securities exchange or has a class of securities
listed on a national securities exchange but has an aggregate market value of outstanding voting and non-voting
common equity of less than $250 million;
is controlled by a BDC or a group of companies including a BDC and the BDC has an affiliated person who is a
director of the eligible portfolio company; or
is a small and solvent company having total assets of not more than $4 million and capital and surplus of not less
than $2 million.
Managerial Assistance to Portfolio Companies
As noted above, a BDC must be operated for the purpose of making investments in the type of securities described in (1), (2) or (3)
above under the heading entitled “— Qualifying Assets.” In addition, BDCs must generally offer to make available to such issuer of the
securities (other than small and solvent companies described above) significant managerial assistance; except that, where we purchase such
securities in conjunction with one or more other persons acting together, one of the other persons in the group may make available such
managerial assistance. Making available managerial assistance means, among other things, any arrangement whereby the BDC, through its
directors, officers or employees, offers to provide, and, if accepted, does so provide, significant guidance and counsel concerning the
management, operations or business objectives and policies of a portfolio company.
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Temporary Investments
Pending investment in “qualifying assets,” as described above, our investments may consist of cash, cash equivalents, U.S.
government securities and high-quality debt securities maturing in one year or less from time of investment therein, so that 70% of our
assets are qualifying assets.
Senior Securities
Under the provisions of the 1940 Act, we are permitted, as a BDC, to issue senior securities only in amounts such that our asset
coverage, as defined in the 1940 Act, equals at least 200% of all debt and/or senior stock immediately after each such issuance. However,
2018 legislation modified the 1940 Act by allowing a BDC to increase the maximum amount of leverage it may incur from an asset
coverage ratio of 200% to an asset coverage ratio of 150%, if certain requirements are met. We are permitted to increase our leverage
capacity if stockholders representing at least a majority of the votes cast, when quorum is met, approve a proposal to do so. If we receive
such stockholder approval, we would be permitted to increase our leverage capacity on the first day after such approval. Alternatively, we
may increase the maximum amount of leverage we may incur to an asset coverage ratio of 150% if the “required majority” of our
independent directors as defined in Section 57(o) of the 1940 Act approve such increase with such approval becoming effective after one
year. On February 23, 2022, our Board of Directors unanimously approved the application of the modified asset coverage requirements set
described above. As a result, our asset coverage requirement for senior securities will be changed from 200% to 150%, effective February
23, 2023. The Board has also recommended that a proposal to approve the application of the 150% minimum asset coverage requirement
be submitted for approval at our 2022 Annual Meeting of Stockholders. If stockholders approve this proposal, the Company would become
subject to the 150% minimum asset coverage ratio the day after the 2022 Annual Meeting of Stockholders.
We have received exemptive relief from the SEC to permit us to exclude the SBA-guaranteed debentures of the Funds from our
200% asset coverage test under the 1940 Act. As such, our ratio of total consolidated assets to outstanding indebtedness may be less than
200%. This provides us with increased investment flexibility but also increases our risks related to leverage.
In addition, while any senior securities remain outstanding (other than senior securities representing indebtedness issued in
consideration of a privately arranged loan which is not intended to be publicly distributed), we must generally include provisions in the
documents governing new senior securities to prohibit any cash distribution to our stockholders or the repurchase of such securities or
shares unless we meet the applicable asset coverage ratios at the time of the distribution or repurchase. We may also borrow amounts up to
5% of the value of our total assets for temporary or emergency purposes without regard to asset coverage. For a discussion of the risks
associated with leverage, see “Risk Factors — Risks Related to Leverage,” including, without limitation, “— Because we borrow money,
the potential for gain or loss on amounts invested in us is magnified and may increase the risk of investing in us.”
Common Stock
We are not generally able to issue and sell our common stock at a price below net asset value per share. We may, however, sell our
common stock, warrants, options or rights to acquire our common stock, at a price below the current net asset value of the common stock if
our Board of Directors determines that such sale is in our best interests and that of our stockholders, and our stockholders approve such
sale. In any such case, the price at which our securities are to be issued and sold may not be less than a price which, in the determination of
our Board of Directors, closely approximates the market value of such securities (less any distributing commission or discount). We did not
seek stockholder authorization to sell shares of our common stock below the then current net asset value per share of our common stock at
our 2021 Annual Meeting of Stockholders, and have not sought such stockholder authorization since 2012, because our common stock
price had been trading significantly above the net asset value per share of our common stock since 2011. Our stockholders have previously
approved a proposal that authorizes us to issue securities to subscribe to, convert to, or purchase shares of our common stock in one or more
offerings. We may also make rights offerings to our stockholders at prices per share less than the net asset value per share, subject to
applicable requirements of the 1940 Act. See “Risk Factors — Risks Related to our Securities — Stockholders may incur dilution if we sell
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shares of our common stock in one or more offerings at prices below the then current net asset value per share of our common stock or
issue securities to subscribe to, convert to or purchase shares of our common stock.”
Code of Ethics
We have adopted a code of ethics pursuant to Rule 17j-1 under the 1940 Act that establishes procedures for personal investments
and restricts certain personal securities transactions. Personnel subject to the code may invest in securities for their personal investment
accounts, including securities that may be purchased or held by us, so long as such investments are made in accordance with the code’s
requirements. The code of ethics is available on the EDGAR Database on the SEC’s website at http://www.sec.gov.
Proxy Voting Policies and Procedures
We vote proxies relating to our portfolio securities in a manner in which we believe is consistent with the best interest of our
stockholders. We review on a case-by-case basis each proposal submitted to a stockholder vote to determine its impact on the portfolio
securities held by us. Although we generally vote against proposals that we expect would have a negative impact on our portfolio securities,
we may vote for such a proposal if there exists compelling long-term reasons to do so.
Our proxy voting decisions are made by the investment team which is responsible for monitoring each of our investments. To
ensure that our vote is not the product of a conflict of interest, we require that anyone involved in the decision-making process discloses to
our chief compliance officer any potential conflict regarding a proxy vote of which he or she is aware.
Stockholders may obtain information, without charge, regarding how we voted proxies with respect to our portfolio securities by
making a written request for proxy voting information to: Chief Compliance Officer, 1300 Post Oak Boulevard, 8th Floor, Houston, Texas
77056.
Other 1940 Act Regulations
We are also prohibited under the 1940 Act from knowingly participating in certain transactions with our affiliates without the
prior approval of our Board of Directors who are not interested persons and, in some cases, prior approval by the SEC.
We are required to provide and maintain a bond issued by a reputable fidelity insurance company to protect us against larceny and
embezzlement. Furthermore, as a BDC, we are prohibited from protecting any director or officer against any liability to us or our
stockholders arising from willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such
person’s office.
We are required to adopt and implement written policies and procedures reasonably designed to prevent violation of the federal
securities laws, review these policies and procedures no less frequently than annually for their adequacy and the effectiveness of their
implementation, and to designate a chief compliance officer to be responsible for administering the policies and procedures.
We may be periodically examined by the SEC for compliance with the 1940 Act.
Small Business Investment Company Regulations
Each of the Funds is licensed by the SBA to operate as a SBIC under Section 301(c) of the Small Business Investment Act of
1958. MSMF obtained its SBIC license in 2002 and MSC III obtained its license in 2016.
SBICs are designed to stimulate the flow of private capital to eligible small businesses. Under SBIC regulations, SBICs may make
loans to eligible small businesses, invest in the equity securities of such businesses and
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provide them with consulting and advisory services. Each of the Funds has typically invested in secured debt, acquired warrants and/or
made equity investments in qualifying small businesses.
The Funds are subject to regulation and oversight by the SBA, including requirements with respect to reporting financial
information, such as the extent of capital impairment if applicable, on a regular basis and annual examinations conducted by the SBA. The
SBA, as a creditor, will have a superior claim to the Funds’ assets over our securities holders in the event the Funds are liquidated or the
SBA exercises its remedies under the SBA-guaranteed debentures issued by the Funds upon an event of default.
Under present SBIC regulations, eligible small businesses generally include businesses that (together with their affiliates) have a
tangible net worth not exceeding $19.5 million or have average annual net income after U.S. federal income taxes not exceeding $6.5
million (average net income to be computed without benefit of any carryover loss) for the two most recent fiscal years. In addition, an
SBIC must devote 25% of its investment activity to “smaller” enterprises as defined by the SBA. A smaller enterprise generally includes
businesses that have a tangible net worth not exceeding $6 million and have average annual net income after U.S. federal income taxes not
exceeding $2 million (average net income to be computed without benefit of any net carryover loss) for the two most recent fiscal years.
SBIC regulations also provide alternative size standard criteria to determine eligibility for designation as an eligible small business or
smaller enterprise, which criteria depend on the primary industry in which the business is engaged and are based on such factors as the
number of employees and gross revenue. However, once an SBIC has invested in a company, it generally may continue to make follow-on
investments in the company, regardless of the size of the portfolio company at the time of the follow-on investment, up to the time of the
portfolio company’s initial public offering.
The SBA prohibits an SBIC from providing funds to small businesses for certain purposes, such as relending and investment
outside the United States, to businesses engaged in certain prohibited industries, and to certain “passive” (non-operating) companies. In
addition, without prior SBA approval, an SBIC may not invest an amount equal to more than approximately 30% of the SBIC’s regulatory
capital, as defined by the SBA, in any one portfolio company and its affiliates.
The SBA places certain limitations on the financing terms of investments by SBICs in portfolio companies (such as limiting the
permissible interest rate on debt securities held by an SBIC in a portfolio company). Included in such limitations are SBIC regulations
which allow an SBIC to exercise control over a small business for a period of seven years from the date on which the SBIC initially
acquires its control position. This control period may be extended for an additional period of time with the SBA’s prior written approval.
The SBA restricts the ability of an SBIC to lend money to any of its officers, directors and employees or to invest in affiliates
thereof. The SBA also prohibits, without prior SBA approval, a “change of control” of an SBIC or transfers that would result in any person
(or a group of persons acting in concert) owning 10% or more of a class of equity of a licensed SBIC. A “change of control” is any event
which would result in the transfer of the power, direct or indirect, to direct the management and policies of an SBIC, whether through
ownership, contractual arrangements or otherwise.
The SBIC licenses allow the Funds to incur leverage by issuing SBA-guaranteed debentures, subject to the issuance of a capital
commitment and certain approvals by the SBA and customary procedures. SBA-guaranteed debentures carry long-term fixed rates that are
generally lower than rates on comparable bank and other debt. Under applicable regulations, an SBIC may generally have outstanding
debentures guaranteed by the SBA in amounts up to twice the amount of the privately raised funds of the SBIC. Debentures guaranteed by
the SBA have a maturity of ten years, require semiannual payments of interest, do not require any principal payments prior to maturity, and
are not subject to prepayment penalties. As of December 31, 2021, we, through the Funds, had $350.0 million of outstanding SBA-
guaranteed debentures, which had an annual weighted-average interest rate of approximately 2.9%.
SBICs must invest idle funds that are not being used to make loans in investments permitted under SBIC regulations in the
following limited types of securities: (i) direct obligations of, or obligations guaranteed as to principal and interest by, the United States
government, which mature within 15 months from the date of the investment; (ii) repurchase agreements with federally insured institutions
with a maturity of seven days or less (and the securities
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underlying the repurchase obligations must be direct obligations of or guaranteed by the federal government); (iii) certificates of deposit
with a maturity of one year or less, issued by a federally insured institution; (iv) a deposit account in a federally insured institution that is
subject to a withdrawal restriction of one year or less; (v) a checking account in a federally insured institution; or (vi) a reasonable petty
cash fund.
SBICs are periodically examined and audited by the SBA’s staff to determine their compliance with SBIC regulations and are
periodically required to file certain financial information and other documents with the SBA.
Neither the SBA nor the U.S. government or any of its agencies or officers has approved any ownership interest to be issued by us
or any obligation that we or any of our subsidiaries may incur.
Securities Exchange Act of 1934 and Sarbanes-Oxley Act Compliance
We are subject to the reporting and disclosure requirements of the Securities Exchange Act of 1934 (the “Exchange Act”),
including the filing of quarterly, annual and current reports, proxy statements and other required items. In addition, we are subject to the
Sarbanes-Oxley Act of 2002, which imposes a wide variety of regulatory requirements on publicly-held companies and their insiders. For
example:
●
●
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pursuant to Rule 13a-14 of the Exchange Act, our Chief Executive Officer and Chief Financial Officer are required to certify
the accuracy of the consolidated financial statements contained in our periodic reports;
pursuant to Item 307 of Regulation S-K, our periodic reports are required to disclose our conclusions about the effectiveness of
our disclosure controls and procedures;
pursuant to Rule 13a-15 of the Exchange Act, our management is required to prepare a report regarding its assessment of our
internal control over financial reporting, and our independent registered public accounting firm separately audits our internal
control over financial reporting; and
pursuant to Item 308 of Regulation S-K and Rule 13a-15 of the Exchange Act, our periodic reports must disclose whether there
were significant changes in our internal control over financial reporting or in other factors that could significantly affect these
controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and
material weaknesses.
The New York Stock Exchange Corporate Governance Regulations
The New York Stock Exchange (“NYSE”) has adopted corporate governance regulations that listed companies must comply with.
We believe we are in compliance with such corporate governance listing standards. We intend to monitor our compliance with all future
listing standards and to take all necessary actions to ensure that we stay in compliance.
Investment Adviser Regulations
The External Investment Manager, which is wholly owned by us, is subject to regulation under the Advisers Act. The Advisers Act
establishes, among other things, recordkeeping and reporting requirements, disclosure requirements, limitations on transactions between the
adviser’s account and an advisory client’s account, limitations on transactions between the accounts of advisory clients, and general anti-
fraud prohibitions. The External Investment Manager may be examined by the SEC from time to time for compliance with the Advisers Act.
Taxation as a Regulated Investment Company
MSCC has elected to be treated for U.S. federal income tax purposes as a RIC under Subchapter M of the Code. MSCC’s taxable
income includes the taxable income generated by MSCC and certain of its subsidiaries, including the Funds, which are treated as
disregarded entities for tax purposes. As a RIC, MSCC generally will not pay corporate-level
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U.S. federal income taxes on any income that we distribute to our stockholders as dividends. To qualify as a RIC, we must, among other
things, meet certain source-of-income and asset diversification requirements (as described below). In addition, in order to obtain RIC tax
treatment, we must distribute to our stockholders, for each taxable year, at least 90% of our “investment company taxable income,” which
is generally our net ordinary taxable income plus the excess of realized net short-term capital gains over realized net long-term capital
losses, and 90% of our tax-exempt income (the “Annual Distribution Requirement”). As part of maintaining RIC status, undistributed
taxable income (subject to a 4% non-deductible U.S. federal excise tax) pertaining to a given fiscal year may be distributed up to 12 months
subsequent to the end of that fiscal year, provided such dividends are declared on or prior to the later of (i) filing of the U.S. federal income
tax return for the applicable fiscal year or (ii) the fifteenth day of the ninth month following the close of the year in which such taxable
income was generated.
For any taxable year in which we qualify as a RIC and satisfy the Annual Distribution Requirement, we will not be subject to U.S.
federal income tax on the portion of our income or capital gains we distribute (or are deemed to distribute) to stockholders. We will be
subject to U.S. federal income tax at the regular corporate rates on any income or capital gains not distributed (or deemed distributed) to our
stockholders.
We are subject to a 4% non-deductible U.S. federal excise tax on certain undistributed income unless we distribute in a timely
manner an amount at least equal to the sum of (1) 98% of our net ordinary taxable income for each calendar year, (2) 98.2% of our capital
gain net income for the one-year period ending December 31 in that calendar year and (3) any taxable income recognized, but not
distributed, in preceding years on which we paid no U.S. federal income tax (the “Excise Tax Avoidance Requirement”). Dividends
declared and paid by us in a year will generally differ from taxable income for that year as such dividends may include the distribution of
current year taxable income, exclude amounts carried over into the following year, and include the distribution of prior year taxable income
carried over into and distributed in the current year. For amounts we carry over into the following year, we will be required to pay the 4%
U.S. federal excise tax on the excess of 98% of our annual investment company taxable income and 98.2% of our capital gain net income
over our distributions for the year.
In order to qualify as a RIC for U.S. federal income tax purposes, we must, among other things:
●
●
continue to qualify as a BDC under the 1940 Act at all times during each taxable year;
derive in each taxable year at least 90% of our gross income from dividends, interest, payments with respect to certain
securities, loans, gains from the sale of stock or other securities, net income from certain “qualified publicly traded
partnerships,” or other income derived with respect to our business of investing in such stock or securities (the “90% Income
Test”); and
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diversify our holdings so that at the end of each quarter of the taxable year:
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at least 50% of the value of our assets consists of cash, cash equivalents, U.S. government securities, securities of other
RICs, and other securities if such other securities of any one issuer do not represent more than 5% of the value of our
assets or more than 10% of the outstanding voting securities of the issuer; and
no more than 25% of the value of our assets is invested in the securities, other than U.S. government securities or securities
of other RICs, (i) of one issuer, (ii) of two or more issuers that are controlled, as determined under applicable Code rules,
by us and that are engaged in the same or similar or related trades or businesses or (iii) of certain “qualified publicly traded
partnerships” (collectively, the “Diversification Tests”).
In order to comply with the 90% Income Test, we formed the Taxable Subsidiaries as wholly owned taxable subsidiaries for the
primary purpose of permitting us to own equity interests in portfolio companies which are “pass-through” entities for tax purposes. Absent
the taxable status of the Taxable Subsidiaries, a portion of the gross income from such portfolio companies would flow directly to us for
purposes of the 90% Income Test. To the extent such income did not consist of income derived from securities, such as dividends and
interest, it could jeopardize our ability
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to qualify as a RIC and, therefore, cause us to incur significant U.S. federal income taxes. The Taxable Subsidiaries are consolidated with
Main Street for generally accepted accounting principles in the United States of America (“U.S. GAAP”) purposes and are included in our
consolidated financial statements, and the portfolio investments held by the Taxable Subsidiaries are included in our consolidated financial
statements. The Taxable Subsidiaries are not consolidated with MSCC for income tax purposes and may generate income tax expense, or
benefit, as a result of their ownership of the portfolio investments. The income tax expense, or benefit, if any, and any related tax assets and
liabilities, are reflected in our consolidated financial statements.
The External Investment Manager is accounted for as a portfolio investment for U.S. GAAP purposes and is an indirect wholly
owned subsidiary of MSCC, owned through a Taxable Subsidiary. The External Investment Manager is owned by a Taxable Subsidiary in
order to comply with the 90% Income Test, since the External Investment Manager’s income would likely not consist of income derived
from securities, such as dividends and interest, and as result, it could jeopardize our ability to qualify as a RIC and, therefore, cause us to
incur significant U.S. federal income taxes. As a result of its ownership by a Taxable Subsidiary, the External Investment Manager is a
disregarded entity for tax purposes. The External Investment Manager has also entered into a tax sharing agreement with its Taxable
Subsidiary owner. Since the External Investment Manager is accounted for as a portfolio investment of MSCC and is not included as a
consolidated subsidiary of MSCC in MSCC’s consolidated financial statements, and as a result of the tax sharing agreement with its
Taxable Subsidiary owner, for its stand-alone financial reporting purposes the External Investment Manager is treated as if it is taxed at
normal corporate tax rates based on its taxable income and, as a result of its activities, may generate income tax expense or benefit. The
income tax expense, or benefit, if any, and the related tax assets and liabilities, of the External Investment Manager are reflected in the
External Investment Manager’s separate financial statements.
We may be required to recognize taxable income in circumstances in which we do not receive cash. For example, if we hold debt
obligations that are treated under applicable tax rules as having original issue discount (such as debt instruments issued with warrants and
debt securities invested in at a discount to par), we must include in income each year a portion of the original issue discount that accrues
over the life of the obligation, regardless of whether cash representing such income is received by us in the same taxable year. We may also
have to include in income other amounts that we have not yet received in cash such as PIK interest, cumulative dividends or amounts that
are received in non-cash compensation such as warrants or stock. Because any original issue discount or other amounts accrued will be
included in our investment company taxable income for the year of accrual, we may be required to make a distribution to our stockholders
in order to satisfy the Annual Distribution Requirement, even though we will not have received any corresponding cash amount.
Although we do not presently expect to do so, we are authorized to borrow funds and to sell assets in order to satisfy distribution
requirements. However, under the 1940 Act, we are not permitted to make distributions to our stockholders in certain circumstances while
our debt obligations and other senior securities are outstanding unless certain “asset coverage” tests are met. See “Regulation — Regulation
as a Business Development Company — Senior Securities.” Moreover, our ability to dispose of assets to meet our distribution requirements
may be limited by (1) the illiquid nature of our portfolio and/or (2) other requirements relating to our status as a RIC, including the
Diversification Tests. If we dispose of assets in order to meet the Annual Distribution Requirement or the Excise Tax Avoidance
Requirement, we may make such dispositions at times that, from an investment standpoint, are not advantageous.
We may distribute taxable dividends that are payable in part in our stock. Under certain applicable provisions of the Code and the
U.S. Department of the Treasury (“Treasury”) regulations, distributions payable by us in cash or in shares of stock (at the stockholders
election) would satisfy the Annual Distribution Requirement. The Internal Revenue Service has issued guidance indicating that this rule
will apply even where the total amount of cash that may be distributed is limited to no more than 20% of the total distribution. According to
this guidance, if too many stockholders elect to receive their distributions in cash, each such stockholder would receive a pro rata share of
the total cash to be distributed and would receive the remainder of their distribution in shares of stock. Taxable stockholders receiving such
dividends will be required to include the full amount of the dividend (whether received in cash, our stock, or a combination thereof) as (i)
ordinary income (including any qualified dividend income that, in the case of a noncorporate stockholder, may be eligible for the same
reduced maximum tax rate applicable to long-term capital gains to the extent such distribution is properly reported by us as qualified
dividend income and such stockholder satisfies certain minimum
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holding period requirements with respect to our stock) or (ii) long-term capital gain (to the extent such distribution is properly reported as a
capital gain dividend), to the extent of our current and accumulated earnings and profits for U.S. federal income tax purposes. As a result, a
U.S. stockholder may be required to pay tax with respect to such dividends in excess of any cash received. If a U.S. stockholder sells the
stock it receives in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the dividend,
depending on the market price of our stock at the time of the sale. Furthermore, with respect to non-U.S. stockholders, we may be required
to withhold U.S. tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in stock. In
addition, if a significant number of our stockholders determine to sell shares of our stock in order to pay taxes owed on dividends, it may
put downward pressure on the trading price of our stock.
Failure to Qualify as a RIC
If we fail to satisfy the 90% Income Test or the Diversification Tests for any taxable year, we may nevertheless continue to qualify
as a RIC for such year if certain relief provisions are applicable (which may, among other things, require us to pay certain corporate-level
U.S. federal taxes or to dispose of certain assets).
If we were unable to qualify for treatment as a RIC and the foregoing relief provisions are not applicable, we would be subject to
tax on all of our taxable income at regular corporate rates. We would not be able to deduct distributions to stockholders, nor would they be
required to be made. If we were subject to tax on all of our taxable income at regular corporate rates, then distributions we make after being
subject to such tax would be taxable to our stockholders and, provided certain holding period and other requirements were met, could
qualify for treatment as “qualified dividend income” eligible for the maximum 20% rate (plus a 3.8% Medicare surtax, if applicable)
applicable to qualified dividends to the extent of our current and accumulated earnings and profits. Subject to certain limitations under the
Code, corporate taxpayers would be eligible for a dividends-received deduction on distributions they receive. Distributions in excess of our
current and accumulated earnings and profits would be treated first as a return of capital to the extent of the stockholder’s tax basis, and any
remaining distributions would be treated as a capital gain. To requalify as a RIC in a subsequent taxable year, we would be required to
satisfy the RIC qualification requirements for that year and dispose of any earnings and profits from any year in which we failed to qualify
as a RIC. Subject to a limited exception applicable to RICs that qualified as such under Subchapter M of the Code for at least one year prior
to disqualification and that requalify as a RIC no later than the second year following the nonqualifying year, we could be subject to tax on
any unrealized net built-in gains in the assets held by us during the period in which we failed to qualify as a RIC that are recognized within
the subsequent five years, unless we made a special election to pay corporate-level U.S. federal income tax on such built-in gain at the time
of our requalification as a RIC.
Item 1A. Risk Factors
Investing in our securities involves a number of significant risks. In addition to the other information contained in this Annual
Report on Form 10-K, you should consider carefully the following information before making an investment in our securities. The risks set
out below are not the only risks we face. Additional risks and uncertainties not presently known to us or not presently deemed material by
us might also impair our operations and performance. If any of the following events occur, our business, financial condition and results of
operations could be materially and adversely affected. In such case, our net asset value, the trading price of our common stock and the
value of our other securities could decline, and you may lose all or part of your investment.
SUMMARY OF RISK FACTORS
The following is a summary of the principal risk factors associated with an investment in our securities. Further details regarding
each risk included in the below summary list can be found further below.
Risks Related to our Business and Structure
● Because our Investment Portfolio is recorded at fair value, there is and will continue to be uncertainty as to the value of our portfolio
investments.
● Our financial condition and results of operations depends on our ability to effectively manage and deploy capital.
● We face increasing competition for investment opportunities.
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● We are dependent upon our key investment personnel for our future success.
● Our success depends on attracting and retaining qualified personnel in a competitive environment.
● Our business model depends to a significant extent upon strong referral relationships.
● Our Board of Directors may change our operating policies and strategies without prior notice or stockholder approval, the effects of
which may be adverse.
● We may not be able to pay distributions to our stockholders, our distributions may not grow over time, and a portion of distributions
paid to our stockholders may be a return of capital, which is a distribution of the stockholders’ invested capital.
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Risks Related to our Investments
● Our investments in portfolio companies involve higher levels of risk, and we could lose all or part of our investment.
● We may be exposed to higher risks with respect to our investments that include original issue discount or PIK interest.
● The lack of liquidity in our investments may adversely affect our business.
● We may not have the funds or ability to make additional investments in our portfolio companies.
● There may be circumstances where our debt investments could be subordinated to claims of other creditors or we could be subject to
lender liability claims.
● We generally will not control our portfolio companies.
● Defaults by our portfolio companies will harm our operating results.
● Any unrealized depreciation we experience in our portfolio may be an indication of future realized losses, which could reduce our
income and gains available for distribution.
● Prepayments of our debt investments by our portfolio companies could adversely impact our results of operations and reduce our return
on equity.
● Changes relating to the LIBOR calculation process, the phase-out of LIBOR and the use of replacement rates for LIBOR may adversely
affect the value of our portfolio securities.
● We are subject to risks associated with the current interest rate environment and changes in interest rates will affect our cost of capital
and net investment income and the value of our investments.
● We may be subject to risks associated with “covenant-lite” loans.
● Changes in interest rates may affect our cost of capital, net investment income.
● We may not realize gains from our equity investments.
Risks Related to Leverage
● Because we borrow money, the potential for gain or loss on amounts invested in us is magnified and may increase the risk of investing in
us.
● All of our assets are subject to security interests under our senior securities and if we default on our obligations under our senior
securities, we may suffer adverse consequences, including foreclosure on our assets.
● We have received Board approval that will allow us to incur additional leverage, which could increase the risk of investing in our
securities.
Risks Related to our Investment Management Activities
● Our executive officers and employees, through the External Investment Manager, may manage other investment funds that operate in the
same or a related line of business as we do, and may invest in such funds, which may result in significant conflicts of interest.
● We, through the External Investment Manager, derive revenues from managing third-party funds pursuant to management agreements
that may be terminated.
Risks Related to BDCs
● Failure to comply with applicable laws or regulations and changes in laws or regulations governing our operations may adversely affect
our business or cause us to alter our business strategy.
● Operating under the constraints imposed on us as a BDC and RIC may hinder the achievement of our investment objectives.
Risks Related to our Securities
● Investing in our securities may involve a high degree of risk.
● Shares of closed-end investment companies, including BDCs, may trade at a discount to their net asset value.
● Our outstanding unsecured notes (the “Notes”) are unsecured and therefore effectively subordinated to any current or future secured
indebtedness.
● If we default on our obligations to pay our other indebtedness, we may not be able to make payments on the Notes.
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Risks Related to our SBIC Funds
● We, through the Funds, issue debt securities guaranteed by the SBA and sold in the capital markets. As a result of its guarantee of the
debt securities, the SBA has fixed dollar claims on the assets of the Funds that are superior to the claims of our securities holders.
Federal Income Tax Risks
● We will be subject to corporate-level U.S. federal income tax if we are unable to qualify as a RIC under Subchapter M of the Code.
● We may have difficulty paying the distributions required to maintain RIC tax treatment under the Code if we recognize income before or
without receiving cash representing such income.
General Risk Factors
● Deterioration in the economy and financial markets could impair our portfolio companies’ financial positions and operating results and
affect the industries in which we invest, which could, in turn, harm our operating results.
● We are highly dependent on information systems and systems failures could significantly disrupt our business, which may, in turn,
negatively affect the market price of our common stock and our ability to pay dividends.
RISKS RELATED TO OUR BUSINESS AND STRUCTURE
Because our Investment Portfolio is recorded at fair value, there is and will continue to be uncertainty as to the value of our portfolio
investments.
Under the 1940 Act, we are required to carry our portfolio investments at market value or, if there is no readily available market
value, at fair value as determined by us pursuant to procedures established and overseen by our Board of Directors. Typically, there is not a
public market for the securities of the privately held LMM or Private Loan companies in which we invest. As a result, we value these
securities quarterly at fair value based on inputs from management and a nationally recognized independent financial advisory services firm
(on a rotational basis) pursuant to Valuation Procedures approved by our Board of Directors. In addition, the market for investments in
Middle Market companies is generally not a liquid market, and therefore, we primarily use a combination of observable inputs in non-
active markets for which sufficient observable inputs were not available to determine the fair value of these investments and unobservable
inputs, pursuant to our Valuation Procedures. See “Note B.1. — Valuation of the Investment Portfolio” in the notes to consolidated financial
statements for a more detailed description of our investment portfolio valuation process and procedures.
The determination of fair value and consequently, the amount of unrealized gains and losses in our portfolio, are to a certain
degree, subjective and dependent on a valuation process approved by our Board of Directors. Certain factors that may be considered in
determining the fair value of our investments include external events, such as private mergers, sales and acquisitions involving comparable
companies. Because such valuations, and particularly valuations of securities in privately held companies, are inherently uncertain, may
fluctuate over short periods of time and may be based on estimates, our determinations of fair value may differ materially from the values
that would have been used if a ready market for these securities existed. Due to this uncertainty, our fair value determinations may cause our
net asset value on a given date to materially understate or overstate the value that we may ultimately realize on one or more of our
investments. As a result, investors purchasing our securities based on an overstated net asset value would pay a higher price than the value
of our investments might warrant. Conversely, investors selling our securities during a period in which the net asset value understates the
value of our investments may receive a lower price for their securities than the value of our investments might warrant.
Our financial condition and results of operations depends on our ability to effectively manage and deploy capital.
Our ability to achieve our investment objective of maximizing our portfolio’s total return by generating current income from our
debt investments and current income and capital appreciation from our equity and equity-related investments, including warrants,
convertible securities and other rights to acquire equity securities in a portfolio company, depends on our ability to effectively manage and
deploy capital, which depends, in turn, on our investment
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team’s ability to identify, evaluate and monitor, and our ability to finance and invest in, companies that meet our investment criteria.
Accomplishing our investment objective on a cost-effective basis is largely a function of our investment team’s handling of the
investment process, its ability to provide competent, attentive and efficient services and our access to investments offering acceptable terms.
In addition to monitoring the performance of our existing investments, members of our investment team are also called upon, from time to
time, to provide managerial assistance to some of our portfolio companies. These demands on their time may distract them or slow the rate
of investment.
Even if we are able to grow and build upon our investment operations, any failure to manage our growth effectively could have a
material adverse effect on our business, financial condition, results of operations and prospects. The results of our operations will depend
on many factors, including the availability of opportunities for investment, readily accessible short and long-term funding alternatives in the
financial markets and economic conditions. Furthermore, if we cannot successfully operate our business or implement our investment
policies and strategies as described herein, it could negatively impact our ability to pay dividends.
We face increasing competition for investment opportunities.
We compete for investments with other investment funds (including private equity funds, debt funds, mezzanine funds,
collateralized loan obligation funds, or CLOs, BDCs and SBICs), as well as traditional financial services companies such as commercial
banks and other sources of funding. Many of our competitors are substantially larger and have considerably greater financial, technical and
marketing resources than we do. For example, some competitors may have a lower cost of capital and access to funding sources that are not
available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments than we have. These
characteristics could allow our competitors to consider a wider variety of investments, establish more relationships and offer better pricing
and more flexible structuring than we are able to do. We may lose investment opportunities if we do not match our competitors’ pricing,
terms and structure. If we are forced to match our competitors’ pricing, terms and structure, we may not be able to achieve acceptable
returns on our investments or may bear substantial risk of capital loss. A significant part of our competitive advantage stems from the fact
that the market for investments in LMM companies is underserved by traditional commercial banks and other financing sources. A
significant increase in the number and/or the size of our competitors in this target market could force us to accept less attractive investment
terms. Furthermore, many of our competitors are not subject to the regulatory restrictions that the 1940 Act imposes on us as a BDC.
We are dependent upon our key investment personnel for our future success.
We depend on the members of our investment team, particularly Dwayne L. Hyzak, David L. Magdol, Jesse E. Morris, K. Colton
Braud, III, Damian T. Burke, Samuel A. Cashiola, Diego Fernandez and Nicholas T. Meserve for the identification, review, final selection,
structuring, closing and monitoring of our investments. These employees have significant investment expertise and relationships that we
rely on to implement our business plan. Although we have entered into non-compete arrangements with all of our executive officers and
other key employees, we cannot guarantee that any employees will remain employed with us. If we lose the services of the individuals
mentioned above, we may not be able to operate our business as we expect, and our ability to compete could be harmed, which could cause
our operating results to suffer.
Our success depends on attracting and retaining qualified personnel in a competitive environment.
Our growth will require that we retain new investment and administrative personnel in a competitive market. Our ability to attract
and retain personnel with the requisite credentials, experience and skills depends on several factors including, but not limited to, our ability
to offer competitive wages, benefits and professional growth opportunities. Many of the entities, including investment funds (such as
private equity funds, debt funds and mezzanine funds) and traditional financial services companies, with which we compete for experienced
personnel have greater resources than we have.
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The competitive environment for qualified personnel may require us to take certain measures to ensure that we are able to attract
and retain experienced personnel. Such measures may include increasing the attractiveness of our overall compensation packages, altering
the structure of our compensation packages through the use of additional forms of compensation, or other steps. The inability to attract and
retain experienced personnel would have a material adverse effect on our business.
Our business model depends to a significant extent upon strong referral relationships.
We expect that members of our management team will maintain their relationships with intermediaries, financial institutions,
investment bankers, commercial bankers, financial advisors, attorneys, accountants, consultants and other individuals within our network,
and we will rely to a significant extent upon these relationships to provide us with potential investment opportunities. If our management
team fails to maintain its existing relationships or develop new relationships with sources of investment opportunities, we will not be able to
grow our Investment Portfolio. In addition, individuals with whom members of our management team have relationships are not obligated
to provide us with investment opportunities, and, therefore, there is no assurance that such relationships will generate investment
opportunities for us.
Our Board of Directors may change our operating policies and strategies without prior notice or stockholder approval, the effects of
which may be adverse.
Our Board of Directors has the authority to modify or waive our current operating policies, investment criteria and strategies
without prior notice and without stockholder approval. We cannot predict the effect any changes to our current operating policies,
investment criteria and strategies would have on our business, net asset value, operating results and value of our stock. However, the effects
might be adverse, which could negatively impact our ability to pay interest and principal payments to holders of our debt instruments and
dividends to our stockholders and cause our investors to lose all or part of their investment in us.
We may not be able to pay distributions to our stockholders, our distributions may not grow over time, and a portion of distributions
paid to our stockholders may be a return of capital, which is a distribution of the stockholders’ invested capital.
We intend to pay distributions to our stockholders out of assets legally available for distribution. We cannot assure you that we
will achieve investment results that will allow us to pay a specified level of cash distributions, previously projected distributions for future
periods, or year-to-year increases in cash distributions. Our ability to pay distributions might be adversely affected by, among other things,
the impact of one or more of the risk factors described herein. In addition, the inability to satisfy the asset coverage test applicable to us as a
BDC could limit our ability to pay distributions. All distributions will be paid at the discretion of our Board of Directors and will depend on
our earnings, our financial condition, maintenance of our RIC status, compliance with applicable BDC regulations, compliance with our
debt covenants and such other factors as our Board of Directors may deem relevant from time to time. We cannot assure you that we will
pay distributions to our stockholders in the future.
When we make distributions, we will be required to determine the extent to which such distributions are paid out of current or
accumulated taxable earnings, recognized capital gains or capital. To the extent there is a return of capital, investors will be required to
reduce their basis in our stock for U.S. federal income tax purposes, which may result in higher tax liability when the shares are sold, even
if they have not increased in value or have lost value. In addition, any return of capital will be net of any sales load and offering expenses
associated with sales of shares of our common stock. In the future, our distributions may include a return of capital.
We are subject to risks related to corporate social responsibility.
Our business faces increasing public scrutiny related to environmental, social and governance (“ESG”) activities. We risk damage
to our brand and reputation if we fail to act responsibly in a number of areas, such as diversity and inclusion, environmental stewardship,
support for local communities, corporate governance and transparency and considering ESG factors in our investment processes. Adverse
incidents with respect to ESG activities could impact the
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value of our brand, the cost of our operations and relationships with investors, all of which could adversely affect our business and results of
operations. Additionally, new regulatory initiatives related to ESG could adversely affect our business.
RISKS RELATED TO OUR INVESTMENTS
Our investments in portfolio companies involve higher levels of risk, and we could lose all or part of our investment.
Investing in our portfolio companies exposes us indirectly to a number of significant risks. Among other things, these companies:
● may have limited financial resources and may be unable to meet their obligations under their debt instruments that we hold,
which may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of us realizing any
guarantees from subsidiaries or affiliates of our portfolio companies that we may have obtained in connection with our
investment, as well as a corresponding decrease in the value of the equity components of our investments;
● may have shorter operating histories, narrower product lines, smaller market shares and/or significant customer concentrations
than larger businesses, which tend to render them more vulnerable to competitors’ actions and market conditions, as well as
general economic downturns;
●
●
●
are more likely to depend on the management talents and efforts of a small group of persons; therefore, the death, disability,
resignation, termination or significant under-performance of one or more of these persons could have a material adverse impact
on our portfolio company and, in turn, on us;
generally have less predictable operating results, may from time to time be parties to litigation, may be engaged in rapidly
changing businesses with products subject to a substantial risk of obsolescence, and may require substantial additional capital
to support their operations, finance expansion or maintain their competitive position; and
generally have less publicly available information about their businesses, operations and financial condition. We are required to
rely on the ability of our management team and investment professionals to obtain adequate information to evaluate the
potential returns from investing in these companies. If we are unable to uncover all material information about these companies,
we may not make a fully informed investment decision, and may lose all or part of our investment.
In addition, in the course of providing significant managerial assistance to certain of our portfolio companies, certain of our
officers and directors may serve as directors on the boards of such companies. To the extent that litigation arises out of our investments in
these companies, our officers and directors may be named as defendants in such litigation, which could result in an expenditure of funds
(through our indemnification of such officers and directors) and the diversion of management time and resources.
We may be exposed to higher risks with respect to our investments that include original issue discount or PIK interest.
Our investments may include original issue discount and contractual PIK interest, which represents contractual interest added to a
loan balance and due at the end of such loan’s term. To the extent original issue discount or PIK interest constitute a portion of our income,
we are exposed to typical risks associated with such income being required to be included in taxable and accounting income prior to receipt
of cash, including the following:
●
original issue discount and PIK instruments may have higher yields, which reflect the payment deferral and credit risk
associated with these instruments;
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●
●
●
for accounting purposes, cash distributions to investors representing original issue discount income are not derived from paid in
capital, although they may be effectively paid from any offering proceeds during any given period; thus, although the source
for the cash used to pay a distribution of original issue discount income may come from the cash invested by investors, the 1940
Act does not require that investors be given notice of this fact;
original issue discount and PIK instruments may have unreliable valuations because their continuing accruals require
continuing judgments about the collectability of the deferred payments and the value of the collateral; and
original issue discount and PIK instruments may represent a higher credit risk than coupon loans; even if the conditions for
income accrual under generally accepted accounting principles in the United States of America are satisfied, a borrower could
still default when actual payment is due upon the maturity of such loan.
The lack of liquidity in our investments may adversely affect our business.
We generally invest in companies whose securities are not publicly traded and whose securities will be subject to legal and other
restrictions on resale or will otherwise be less liquid than publicly traded securities. The illiquidity of these investments may make it
difficult for us to sell these investments when desired. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we
may realize significantly less than the value at which we had previously recorded these investments. As a result, we do not expect to
achieve liquidity in our investments in the near-term. Our investments are usually subject to contractual or legal restrictions on resale or are
otherwise illiquid because there is usually no established trading market for such investments. The illiquidity of most of our investments
may make it difficult for us to dispose of them at a favorable price and, as a result, we may suffer losses.
We may not have the funds or ability to make additional investments in our portfolio companies.
We may not have the funds or ability to make additional investments in our portfolio companies. After our initial investment in a
portfolio company, we may be called upon from time to time to provide additional funds to such company or have the opportunity to
increase our investment through the extension of additional loans, the exercise of a warrant to purchase equity securities, or the funding of
additional equity investments. There is no assurance that we will make, or will have sufficient funds to make, follow-on investments. Any
decisions not to make a follow-on investment or any inability on our part to make such an investment may have a negative impact on a
portfolio company in need of such an investment, may result in a missed opportunity for us to increase our participation in a successful
operation, may reduce our ability to protect an existing investment or may reduce the expected yield on the investment.
There may be circumstances where our debt investments could be subordinated to claims of other creditors or we could be subject to
lender liability claims.
Our portfolio companies may have, or may be permitted to incur, other debt that ranks equally with, or senior to, the debt in which
we invest. By their terms, such debt instruments may entitle the holders to receive payment of interest or principal on or before the dates on
which we are entitled to receive payments with respect to the debt instruments in which we invest. Also, in the event of insolvency,
liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of debt instruments ranking senior to our investment
in that portfolio company would typically be entitled to receive payment in full before we receive any distribution. After repaying such
senior creditors, such portfolio company may not have any remaining assets to use for repaying its obligation to us. In the case of debt
ranking equally with debt instruments in which we invest, we would have to share on an equal basis any distributions with other creditors
holding such debt in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company.
Even if our investment is structured as a senior-secured loan, principles of equitable subordination, as defined by existing case law,
could lead a bankruptcy court to subordinate all or a portion of our claim to that of other creditors and transfer any lien securing such
subordinated claim to the bankruptcy estate. The principles of equitable
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subordination defined by case law have generally indicated that a claim may be subordinated only if its holder is guilty of misconduct or
where the senior loan is re-characterized as an equity investment and the senior lender has actually provided significant managerial
assistance to the bankrupt debtor. We may also be subject to lender liability claims for actions taken by us with respect to a borrower’s
business or instances where we exercise control over the borrower. It is possible that we could become subject to a lender liability claim,
including as a result of actions taken in rendering significant managerial assistance or actions to compel and collect payments from the
borrower outside the ordinary course of business.
We are a non-diversified investment company within the meaning of the 1940 Act, and therefore we are not limited with respect to the
proportion of our assets that may be invested in securities of a single issuer.
We are classified as a non-diversified investment company within the meaning of the 1940 Act, which means that we are not
limited by the 1940 Act with respect to the proportion of our assets that we may invest in securities of a single issuer. Under the 1940 Act, a
“diversified” investment company is required to invest at least 75% of the value of its total assets in cash and cash items, government
securities, securities of other investment companies and other securities limited in respect of any one issuer to an amount not greater than
5% of the value of the total assets of such company and no more than 10% of the outstanding voting securities of such issuer. As a non-
diversified investment company, we are not subject to this requirement. To the extent that we assume large positions in the securities of a
small number of issuers, our net asset value may fluctuate to a greater extent than that of a diversified investment company as a result of
changes in the financial condition or the market’s assessment of the issuer. We may also be more susceptible to any single economic or
regulatory occurrence than a diversified investment company. Beyond our RIC asset diversification requirements, we do not have fixed
guidelines for diversification, and our investments could be concentrated in relatively few portfolio companies. See “Risk Factors —
Federal Income Tax Risks — We will be subject to corporate-level U.S. federal income tax if we are unable to qualify as a RIC under
Subchapter M of the Code.”
We generally will not control our portfolio companies.
We do not, and do not expect to, control the decision making in many of our portfolio companies, even though we may have board
representation or board observation rights, and our debt agreements may contain certain restrictive covenants. As a result, we are subject to
the risk that a portfolio company in which we invest will make business decisions with which we disagree and the management of such
company will take risks or otherwise act in ways that do not serve our interests as debt investors or minority equity holders. Due to the lack
of liquidity for our investments in non-traded companies, we may not be able to dispose of our interests in our portfolio companies as
readily as we would like or at an appropriate valuation. As a result, a portfolio company may make decisions that would decrease the value
of our portfolio holdings.
Defaults by our portfolio companies will harm our operating results.
A portfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to non-payment
of interest and other defaults and, potentially, termination of its loans and foreclosure on its secured assets, which could trigger cross-
defaults under other agreements and jeopardize a portfolio company’s ability to meet its obligations under the debt or equity securities that
we hold. We may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms, which may include the
waiver of certain financial covenants, with a defaulting portfolio company.
Any unrealized depreciation we experience in our portfolio may be an indication of future realized losses, which could reduce our
income and gains available for distribution.
As a BDC, we are required to carry our investments at market value or, if no market value is ascertainable, at the fair value as
determined in accordance with our Valuation Procedures adopted pursuant to Rule 2a-5 under the 1940 Act. Decreases in the market values
or fair values of our investments will be recorded as unrealized depreciation. Any unrealized depreciation in our portfolio could be an
indication of a portfolio company’s inability to meet its repayment obligations to us with respect to affected loans or a potential impairment
of the value of affected equity investments.
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This could result in realized losses in the future and ultimately in reductions of our income and gains available for distribution in future
periods.
Prepayments of our debt investments by our portfolio companies could adversely impact our results of operations and reduce our return
on equity.
We are subject to the risk that the investments we make in our portfolio companies may be repaid prior to maturity. When this
occurs, we will generally reinvest these proceeds in temporary investments, pending their future investment in new portfolio companies.
These temporary investments will typically have substantially lower yields than the debt being prepaid and we could experience significant
delays in reinvesting these amounts. Any future investment in a new portfolio company may also be at lower yields than the debt that was
repaid. As a result, our results of operations could be materially adversely affected if one or more of our portfolio companies elect to prepay
amounts owed to us. Additionally, prepayments could negatively impact our return on equity, which could result in a decline in the market
price of our securities.
Changes relating to the LIBOR calculation process, the phase-out of LIBOR and the use of replacement rates for LIBOR may adversely
affect the value of our portfolio securities.
On March 5, 2021, the U.K.’s Financial Conduct Authority publicly announced that all U.S. Dollar LIBOR settings will either
cease to be provided by any administrator or no longer be representative (i) immediately after December 31, 2021 for one-week and two-
month U.S. Dollar LIBOR settings and (ii) immediately after June 30, 2023 for the remaining U.S. Dollar LIBOR settings. In addition, as a
result of supervisory guidance from U.S. regulators, some U.S. regulated entities will cease to enter into new LIBOR contracts after January
1, 2022. At this time, no consensus exists as to what rate or rates will become accepted alternatives to LIBOR, although the Alternative
Reference Rates Committee, a steering committee convened by the Board of Governors of the Federal Reserve System and the Federal
Reserve Bank of New York and comprised of large U.S. financial institutions, has recommended the use of the Secured Overnight
Financing Rate, SOFR. There are many uncertainties regarding a transition from LIBOR to SOFR or any other alternative benchmark rate
that may be established, including, but not limited to, the timing of any such transition, the need to amend all contracts with LIBOR as the
referenced rate and, given the inherent differences between LIBOR and SOFR or any other alternative benchmark rate, how any transition
may impact the cost and performance of impacted securities, variable rate debt and derivative financial instruments. In addition, SOFR or
another alternative benchmark rate may fail to gain market acceptance, which could adversely affect the return on, value of and market for
securities, variable rate debt and derivative financial instruments linked to such rates.
As such, if LIBOR in its current form does not survive and a replacement rate is not widely agreed upon or if a replacement rate is
significantly different from LIBOR, it could cause a disruption in the credit markets generally. Such a disruption could also negatively
impact the market value and/or transferability of our portfolio company investments. We could also be materially and adversely impacted to
the extent we are unable to successfully implement an acceptable replacement rate in leverage utilized by us or if there is a prolonged period
of mismatch on the interest rates on the interest rates payable on our leverage and our portfolio investments as a result of the continued
publication of LIBOR. The transition from LIBOR to SOFR or other alternative reference rates may also introduce operational risks in our
accounting, financial reporting, loan servicing, liability management and other aspects or our business. Further, if LIBOR does not survive
and a replacement rate is not widely agreed upon, the mismatch on the interest rates payable by any leverage incurred by us and the interest
rate payable on the portfolio company investments could result in a decrease in our net investment income and distributions we are able to
pay to our stockholders.
We are subject to risks associated with the current interest rate environment and changes in interest rates will affect our cost of capital,
net investment income and the value of our investments.
To the extent we borrow money or issue debt securities or preferred stock to make investments, our net investment income will
depend, in part, upon the difference between the rate at which we borrow funds or pay interest or dividends on such debt securities or
preferred stock and the rate at which we invest these funds. In addition, many of our debt investments and borrowings have floating interest
rates that reset on a periodic basis, and many of our investments are subject to interest rate floors. As a result, a change in market interest
rates could have a material adverse effect on
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our net investment income, in particular with respect to increases from current levels to the level of the interest rate floors on certain
investments. In periods of rising interest rates, our cost of funds will increase because the interest rates on the amounts borrowed under our
credit facility are floating and are not subject to interest rate floors, which could reduce our net investment income to the extent any debt
investments have either fixed interest rates, or floating interest rates subject to an interest rate floor above current levels, and as a result such
interest rates on these debt investments will not increase until interest rates exceed the applicable floor.
Some of our portfolio companies have debt investments which bear interest at variable rates and may be negatively affected by
changes in market interest rates. An increase in market interest rates would increase the interest costs and reduce the cash flows of our
portfolio companies that have variable rate debt instruments, a situation which could reduce the value of our investments in these portfolio
companies. The value of our securities could also be reduced from an increase in market interest rates as rates available to investors could
make an investment in our securities less attractive than alternative investments. Conversely, decreases in market interest rates could
negatively impact the interest income from our variable rate debt investments. A decrease in market interest rates may also have an adverse
impact on our returns by requiring us to accept lower yields on our debt investments and by increasing the risk that our portfolio companies
will prepay our debt investments, resulting in the need to redeploy capital at potentially lower rates. See further discussion and analysis at
“Item 7A. Quantitative and Qualitative Disclosures about Market Risk”.
We may be subject to risks associated with “covenant-lite” loans.
Some of the loans in which we invest may be “covenant-lite” loans, which means the loans contain fewer maintenance covenants
than other loans (in some cases, none) and do not include terms which allow the lender to monitor the performance of the borrower and
declare a default if certain criteria are breached. Generally, “covenant-lite” loans provide borrower companies more freedom to negatively
impact lenders because their covenants are incurrence-based, which means they are only tested and can only be breached following an
affirmative action of the borrower, rather than by a deterioration in the borrower’s financial condition. To the extent we invest in covenant-
lite loans, we may have fewer rights against a borrower and may have a greater risk of loss on such investments as compared to investments
in loans with finance maintenance covenants.
We may not realize gains from our equity investments.
Certain investments that we have made in the past and may make in the future include warrants or other equity securities.
Investments in equity securities involve a number of significant risks, including the risk of further dilution as a result of additional
issuances, inability to access additional capital and failure to pay current distributions. Investments in preferred securities involve special
risks, such as the risk of deferred distributions, credit risk, illiquidity and limited voting rights. In addition, we may from time to time make
non-control, equity investments in portfolio companies. Our goal is ultimately to realize gains upon our disposition of such equity interests.
However, the equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to
realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to
offset any other losses we experience. We also may be unable to realize any value if a portfolio company does not have a liquidity event,
such as a sale of the business, recapitalization or public offering, which would allow us to sell the underlying equity interests. We often seek
puts or similar rights to give us the right to sell our equity securities back to the portfolio company issuer; however, we may be unable to
exercise these put rights for the consideration provided in our investment documents if the issuer is in financial distress.
Our investments in foreign securities may involve significant risks in addition to the risks inherent in U.S. investments.
Our investment strategy contemplates potential investments in debt securities of foreign companies. Investing in foreign
companies may expose us to additional risks not typically associated with investing in securities of U.S. companies. These risks include
changes in exchange control regulations, political and social instability, expropriation, imposition of foreign taxes, less liquid markets and
less available information than is generally the case in the U.S., higher transaction costs, less government supervision of exchanges, brokers
and issuers, less developed bankruptcy laws,
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difficulty in enforcing contractual obligations, lack of uniform accounting and auditing standards and greater price volatility.
Although most of our investments will be U.S. dollar denominated, any investments denominated in a foreign currency will be
subject to the risk that the value of a particular currency will change in relation to one or more other currencies. Among the factors that may
affect currency values are trade balances, the level of short-term interest rates, differences in relative values of similar assets in different
currencies, long-term opportunities for investment and capital appreciation, and political developments.
RISKS RELATED TO LEVERAGE
Because we borrow money, the potential for gain or loss on amounts invested in us is magnified and may increase the risk of investing
in us.
Borrowings, also known as leverage, magnify the potential for loss on investments in our indebtedness and gain or loss on
investments in our equity capital. As we use leverage to partially finance our investments, you will experience increased risks of investing
in our securities. Accordingly, any event that adversely affects the value of an investment would be magnified to the extent we use
leverage. Such events could result in a substantial loss to us, which would be greater than if leverage had not been used. In addition, our
investment objectives are dependent on the continued availability of leverage at attractive relative interest rates.
We may also borrow from banks and other lenders and may issue debt securities or enter into other types of borrowing
arrangements in the future. Lenders of these senior securities will have fixed dollar claims on our assets that are superior to the claims of
our common stockholders, and we would expect such lenders to seek recovery against our assets in the event of a default. We have the
ability to pledge up to 100% of our assets and can grant a security interest in all of our assets under the terms of any debt instruments we
could enter into with lenders. The terms of our existing indebtedness require us to comply with certain financial and operational covenants,
and we expect similar covenants in future debt instruments. Failure to comply with such covenants could result in a default under the
applicable credit facility or debt instrument if we are unable to obtain a waiver from the applicable lender or holder, and such lender or
holder could accelerate repayment under such indebtedness and negatively affect our business, financial condition, results of operations and
cash flows. In addition, under the terms of any credit facility or other debt instrument we enter into, in the event of a default, we are likely to
be required by its terms to use the net proceeds of any investments that we sell to repay a portion of the amount borrowed under such
facility or instrument before applying such net proceeds to any other uses. See “Management’s Discussion and Analysis of Financial
Condition and Results of Operations — Liquidity and Capital Resources — Capital Resources” for a discussion regarding our outstanding
indebtedness.
If the value of our assets decreases, leveraging would cause net asset value to decline more sharply than it otherwise would have
had we not leveraged our business. Similarly, any decrease in our income would cause net investment income to decline more sharply than
it would have had we not leveraged our business. Such a decline could negatively affect our ability to pay common stock dividends,
scheduled debt payments or other payments related to our securities.
Illustration. The following table illustrates the effect of leverage on returns from an investment in our common stock
assuming various annual returns, net of expenses. The calculations in the table below are hypothetical and actual returns may be
higher or lower than those appearing below.
Assumed Return on Our Portfolio(1)
(net of expenses)
Corresponding Net Return to Common Stock Holder(2)
(10.0) %
(24.2) %
(5.0)%
(13.9) %
0.0 %
(3.6)%
5.0 %
6.7 %
10.0 %
17.0 %
(1) Assumes, as of December 31, 2021, $3,690.3 million in total assets, $1,805.0 million in debt outstanding, $1,788.8 million in net
assets, and a weighted-average interest rate of 3.3%. Actual interest payments may be different.
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(2)
In order for us to cover our annual interest payments on indebtedness, we must achieve annual returns on our December 31, 2021 total
assets of at least 1.7%.
Our ability to achieve our investment objective may depend in part on our ability to access additional leverage on favorable terms
and there can be no assurance that such additional leverage can in fact be achieved. If we are unable to obtain leverage or if the interest rates
of such leverage are not attractive, we could experience diminished returns. The number of leverage providers and the total amount of
financing available could decrease or remain static.
All of our assets are subject to security interests under our senior securities and if we default on our obligations under our senior
securities, we may suffer adverse consequences, including foreclosure on our assets.
Substantially all of our assets are currently pledged as collateral under our senior securities, including any credit facilities or notes.
If we default on our obligations under our senior securities, our lenders may have the right to foreclose upon and sell, or otherwise transfer,
the collateral subject to their security interests or their superior claim. In such event, we may be forced to sell our investments to raise funds
to repay our outstanding borrowings in order to avoid foreclosure and these forced sales may be at times and at prices we would not
consider advantageous. Moreover, such deleveraging of our company could significantly impair our ability to effectively operate our
business in the manner in which we have historically operated. As a result, we could be forced to curtail or cease new investment activities
and lower or eliminate the dividends that we have historically paid to our stockholders. In addition, if the lenders exercise their right to sell
the assets pledged under our senior securities, such sales may be completed at distressed sale prices, thereby diminishing or potentially
eliminating the amount of cash available to us after repayment of the amounts outstanding under the senior securities.
If our operating performance declines and we are not able to generate sufficient cash flow to service our debt obligations, we may
in the future need to refinance or restructure our debt, sell assets, reduce or delay capital investments, seek to raise additional capital or
seek to obtain waivers from the required lenders under our senior securities to avoid being in default. If we are unable to implement one or
more of these alternatives, we may not be able to meet our payment obligations under our senior securities. If we breach our covenants
under our senior securities and seek a waiver, we may not be able to obtain a waiver from the required lenders or debt holders. If this
occurs, we would be in default under our senior securities, the lenders or debt holders could exercise their rights as described above, and we
could be forced into bankruptcy or liquidation. If we are unable to repay debt, lenders having secured obligations could proceed against the
collateral securing the debt. Because certain of our senior securities have customary cross-default provisions, if the indebtedness under our
senior securities is accelerated, we may be unable to repay or finance the amounts due.
We have received Board approval that will allow us to incur additional leverage, which could increase the risk of investing in our
securities.
The 1940 Act generally prohibits us from incurring indebtedness unless immediately after such borrowing we have an asset
coverage for total borrowings of at least 200% (i.e., the amount of debt may not exceed 50% of the value of our assets). However,
legislation passed in March 2018 modified the 1940 Act by allowing a BDC to increase the maximum amount of leverage it may incur by
lowering the required asset coverage ratio of 200% to an asset coverage ratio of 150% (i.e., the amount of debt may not exceed 662/3% of
the value of our assets), if certain requirements are met.
On February 23, 2022, our Board of Directors unanimously approved the application of the modified asset coverage requirements
set described above. As a result, our asset coverage requirement for senior securities will be changed from 200% to 150%, effective
February 23, 2023. The Board has also recommended that a proposal to approve the application of the 150% minimum asset coverage
requirement be submitted for approval at our 2022 Annual Meeting of Stockholders. If stockholders approve this proposal, the Company
would become subject to the 150% minimum asset coverage ratio the day after the 2022 Annual Meeting of Stockholders. The Board values
the opinions of our stockholders and will reconvene to reconsider its approval of the modified asset coverage requirements if this proposal
is not approved by stockholders. There can be no assurance that the Board would rescind its approval if this proposal is not
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approved by stockholders. If this proposal is not approved by the stockholders and the Board does not rescind its approval, we will be
subject to the 150% asset coverage ratio, beginning February 23, 2023.
RISKS RELATED TO OUR INVESTMENT MANAGEMENT ACTIVITIES
Our executive officers and employees, through the External Investment Manager, may manage other investment funds that operate in
the same or a related line of business as we do, and may invest in such funds, which may result in significant conflicts of interest.
Our executive officers and employees, through the External Investment Manager, may manage other investment funds or assets
for other clients that operate in the same or a related line of business as we do, and which funds may be invested in by us and/or our
executive officers and employees. Accordingly, they may have obligations to , or pecuniary interests in, such other entities, and the
fulfillment of such obligations may not be in the best interests of us or our stockholders and may create conflicts of interest.
We have made and, in the future, intend to make co-investments with other funds or clients advised by the External Investment
Manager in accordance with the conditions of an exemptive relief order from the SEC permitting such co-investment transactions. The
order requires, among other things, that we and the External Investment Manager consider whether each such investment opportunity is
appropriate for us and the External Investment Manager’s advised clients and, if it is appropriate, to propose an allocation of the investment
opportunity between such other parties. As a consequence, it may be more difficult for us to maintain or increase the size of our Investment
Portfolio in the future. Although we will endeavor to allocate investment opportunities in a fair and equitable manner, including in
accordance with the conditions set forth in the order issued by the SEC when relying on such order, we may face conflicts in allocating
investment opportunities between us and other funds and accounts managed by the External Investment Manager. Because the External
Investment Manager may receive performance-based fee compensation from other funds and accounts it manages, this may provide the
Company and the External Investment Manager an incentive to allocate opportunities to other funds and accounts the External Investment
Manager manages, instead of us. We and the External Investment Manager have implemented an allocation policy to ensure the equitable
distribution of investment opportunities and, as a result, may be unable to participate in certain investments based upon such allocation
policy.
We, through the External Investment Manager, derive revenues from managing third-party funds pursuant to management agreements
that may be terminated.
The External Investment Manager earns management fees based on the assets of the funds or other clients under management and
may earn incentive fees, or a carried interest, based on the performance of the funds or accounts managed. The terms of fund investment
management agreements generally give the manager of the fund and the fund itself the right to terminate the management agreement in
certain circumstances. With respect to funds that are not exempt from regulation under the 1940 Act, the fund’s investment management
agreement must be approved annually by (a) such fund’s board of directors or by the vote of a majority of such fund’s stockholders and
(b) the majority of the independent members of such fund’s board of directors and, in certain cases, by its stockholders, as required by law.
The funds’ investment management agreements can also be terminated by the majority of such fund’s stockholders. Termination of any such
management agreements would reduce the fees we earn from the relevant funds or other clients through the External Investment Manager,
which could have a material adverse effect on our results of operations.
RISKS RELATED TO BDCs
Failure to comply with applicable laws or regulations and changes in laws or regulations governing our operations may adversely
affect our business or cause us to alter our business strategy.
We, the Funds, and our portfolio companies are subject to applicable local, state and federal laws and regulations. Failure to
comply with any applicable local, state or federal law or regulation could negatively impact our reputation and our business results. New
legislation may also be enacted or new interpretations, rulings or regulations could be adopted, including those governing the types of
investments we are permitted to make, any of which could harm us and our stockholders, potentially with retroactive effect. Additionally,
any changes to the laws and regulations
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governing our operations relating to permitted investments may cause us to alter our investment strategy in order to avail ourselves of new
or different opportunities. Such changes could result in material differences to the strategies and plans set forth herein and may result in our
investment focus shifting from the areas of expertise of our investment team to other types of investments in which our investment team
may have less expertise or little or no experience. Thus, any such changes, if they occur, could have a material adverse effect on our results
of operations and the value of your investment.
Failure to maintain our status as a BDC would reduce our operating flexibility.
If we do not remain a BDC, we might be regulated as a closed-end investment company under the 1940 Act, which would subject
us to substantially more regulatory restrictions under the 1940 Act and correspondingly decrease our operating flexibility.
Operating under the constraints imposed on us as a BDC and RIC may hinder the achievement of our investment objectives.
The 1940 Act and the Code impose numerous constraints on the operations of BDCs and RICs that do not apply to certain of the
other investment vehicles that we may compete with. BDCs are required, for example, to invest at least 70% of their total assets in certain
qualifying assets, including U.S. private or thinly traded public companies, cash, cash equivalents, U.S. government securities and other
high-quality debt instruments that mature in one year or less from the date of investment. Moreover, qualification for taxation as a RIC
requires satisfaction of source-of-income, asset diversification and distribution requirements. Operating under these constraints may hinder
our ability to take advantage of attractive investment opportunities and to achieve our investment objective. Any failure to do so could
subject us to enforcement action by the SEC, cause us to fail to satisfy the requirements associated with RIC status and subject us to entity-
level corporate income taxation, cause us to fail the 70% test described above or otherwise have a material adverse effect on our business,
financial condition or results of operations.
Regulations governing our operation as a BDC will affect our ability to, and the way in which we, raise additional capital.
Our business will require capital to operate and grow. We may acquire such additional capital from the following sources:
Senior Securities. We may issue debt securities or preferred stock and/or borrow money from banks or other financial
institutions, which we refer to collectively as senior securities. As a result of issuing senior securities, we will be exposed to
additional risks, including the following:
● Under the provisions of the 1940 Act, we are permitted, as a BDC, to issue senior securities only in amounts such that
our asset coverage, as defined in the 1940 Act, equals at least 200% (or 150% if certain requirements are met)
immediately after each issuance of senior securities. If the value of our assets declines, we may be unable to satisfy
this test. If that happens, we will be prohibited from issuing debt securities or preferred stock and/or borrowing money
from banks or other financial institutions and may not be permitted to declare a dividend or make any distribution to
stockholders or repurchase shares until such time as we satisfy this test.
● Any amounts that we use to service our debt or make payments on preferred stock will not be available for dividends
to our common stockholders.
●
It is likely that any senior securities or other indebtedness we issue will be governed by an indenture or other
instrument containing covenants restricting our operating flexibility. Additionally, some of these securities or other
indebtedness may be rated by rating agencies, and in obtaining a rating for such securities and other indebtedness, we
may be required to abide by operating and investment guidelines that further restrict operating and financial
flexibility.
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● We and, indirectly, our stockholders will bear the cost of issuing and servicing such securities and other indebtedness.
●
Preferred stock or any convertible or exchangeable securities that we issue in the future may have rights, preferences
and privileges more favorable than those of our common stock, including separate voting rights and could delay or
prevent a transaction or a change in control to the detriment of the holders of our common stock.
● Any unsecured debt issued by us would generally rank (i) pari passu with our current and future unsecured
indebtedness and effectively subordinated to all of our existing and future secured indebtedness, to the extent of the
value of the assets securing such indebtedness, and (ii) structurally subordinated to all existing and future indebtedness
and other obligations of any of our subsidiaries.
Additional Common Stock. We are not generally able to issue and sell our common stock at a price below net asset value
per share. We may, however, sell our common stock, warrants, options or rights to acquire our common stock, at a price below the
current net asset value of the common stock if our Board of Directors determines that such sale is in the best interests of our
stockholders, and our stockholders approve such sale. See “Risk Factors – Risks Related to our Securities — Stockholders may
incur dilution if we sell shares of our common stock in one or more offerings at prices below the then current net asset value per
share of our common stock or issue securities to subscribe to, convert to or purchase shares of our common stock” for a discussion
of the risks related to us issuing shares of our common stock below net asset value. Our stockholders have authorized us to issue
warrants, options or rights to subscribe for, convert to, or purchase shares of our common stock at a price per share below the net
asset value per share, subject to the applicable requirements of the 1940 Act. There is no expiration date on our ability to issue such
warrants, options, rights or convertible securities based on this stockholder approval. If we raise additional funds by issuing more
common stock or senior securities convertible into, or exchangeable for, our common stock, the percentage ownership of our
stockholders at that time would decrease, and they may experience dilution. Moreover, we can offer no assurance that we will be
able to issue and sell additional equity securities in the future, on favorable terms or at all.
RISKS RELATED TO OUR SECURITIES
Investing in our securities may involve a high degree of risk.
The investments we make in accordance with our investment objective may result in a higher amount of risk than alternative
investment options and a higher risk of volatility or loss of principal. Our investments in portfolio companies involve higher levels of risk,
and therefore, an investment in our securities may not be suitable for someone with lower risk tolerance.
Shares of closed-end investment companies, including BDCs, may trade at a discount to their net asset value.
Shares of closed-end investment companies, including BDCs, may trade at a discount to net asset value. This characteristic of
closed-end investment companies and BDCs is separate and distinct from the risk that our net asset value per share may decline. We cannot
predict whether our common stock will trade at, above or below net asset value. In addition, if our common stock trades below our net asset
value per share, we will generally not be able to issue additional common stock at the market price unless our stockholders approve such a
sale and our Board of Directors makes certain determinations. See “Risk Factors — Risks Related to our Securities — Stockholders may
incur dilution if we sell shares of our common stock in one or more offerings at prices below the then current net asset value per share of
our common stock or issue securities to subscribe to, convert to or purchase shares of our common stock” for a discussion related to us
issuing shares of our common stock below net asset value.
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The market price of our securities may be volatile and fluctuate significantly.
Fluctuations in the trading prices of our securities may adversely affect the liquidity of the trading market for our securities and, if
we seek to raise capital through future securities offerings, our ability to raise such capital. The market price and liquidity of the market for
our securities may be significantly affected by numerous factors, some of which are beyond our control and may not be directly related to
our operating performance. These factors include:
●
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●
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●
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significant volatility in the market price and trading volume of securities of BDCs or other companies in our sector, which are
not necessarily related to the operating performance of these companies;
changes in regulatory policies, accounting pronouncements or tax guidelines;
the exclusion of BDC common stock from certain market indices, such as what happened with respect to the Russell indices
and the Standard and Poor’s indices, could reduce the ability of certain investment funds to own our common stock and limit
the number of owners of our common stock and otherwise negatively impact the market price of our common stock;
inability to obtain any exemptive relief that may be required by us in the future from the SEC;
loss of our BDC or RIC status or any of the Funds’ status as an SBIC;
changes in our earnings or variations in our operating results;
changes in the value of our portfolio of investments;
any shortfall in our investment income or net investment income or any increase in losses from levels expected by investors or
securities analysts;
loss of a major funding source;
fluctuations in interest rates;
the operating performance of companies comparable to us;
departure of our key personnel;
proposed, or completed, offerings of our securities, including classes other than our common stock;
global or national credit market changes; and
general economic trends and other external factors.
Stockholders may incur dilution if we sell shares of our common stock in one or more offerings at prices below the then current net
asset value per share of our common stock or issue securities to subscribe to, convert to or purchase shares of our common stock.
The 1940 Act prohibits us from selling shares of our common stock at a price below the current net asset value per share of such
stock, with certain exceptions. One such exception is prior stockholder approval of issuances below net asset value provided that our Board
of Directors makes certain determinations. We did not seek stockholder authorization to sell shares of our common stock below the then
current net asset value per share of our common stock at our 2021 Annual Meeting of Stockholders, and have not sought such authorization
since 2012, because our common stock price per share had been trading significantly above the net asset value per share of our common
stock since 2011. We may, however, seek such authorization at future annual or special meetings of stockholders. Our stockholders have
previously approved a proposal to authorize us to issue securities to subscribe to, convert to, or purchase shares of our
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common stock in one or more offerings. Any decision to sell shares of our common stock below the then current net asset value per share of
our common stock or securities to subscribe to, convert to, or purchase shares of our common stock would be subject to the determination
by our Board of Directors that such issuance is in our and our stockholders’ best interests.
If we were to sell shares of our common stock below net asset value per share, such sales would result in an immediate dilution to
the net asset value per share. This dilution would occur as a result of the sale of shares at a price below the then current net asset value per
share of our common stock and a proportionately greater decrease in a stockholder’s interest in our earnings and assets and voting interest in
us than the increase in our assets resulting from such issuance. In addition, if we issue securities to subscribe to, convert to or purchase
shares of common stock, the exercise or conversion of such securities would increase the number of outstanding shares of our common
stock. Any such exercise would be dilutive on the voting power of existing stockholders and could be dilutive with regard to dividends and
our net asset value, and other economic aspects of the common stock.
Because the number of shares of common stock that could be so issued and the timing of any issuance is not currently known, the
actual dilutive effect cannot be predicted; however, the example below illustrates the effect of dilution to existing stockholders resulting
from the sale of common stock at prices below the net asset value of such shares.
Illustration: Example of Dilutive Effect of the Issuance of Shares Below Net Asset Value. Assume that Company XYZ has
1,000,000 total shares outstanding, $15,000,000 in total assets and $5,000,000 in total liabilities. The net asset value per share of the
common stock of Company XYZ is $10.00. The following table illustrates the reduction to net asset value, or NAV, and the dilution
experienced by Stockholder A following the sale of 40,000 shares of the common stock of Company XYZ at $9.50 per share, a
price below its NAV per share.
Reduction to NAV
Total Shares Outstanding
NAV per share
Dilution to Existing Stockholder
Shares Held by Stockholder A
Percentage Held by Stockholder A
Total Interest of Stockholder A in NAV
Prior to Sale
Below NAV
Following Sale
Below NAV
Percentage
Change
1,000,000
$10.00
10,000
1.00%
$100,000
1,040,000
$9.98
10,000(1)
0.96%
$99,808
4.0%
(0.2)%
0.0%
(3.8)%
(0.2)%
(1) Assumes that Stockholder A does not purchase additional shares in the sale of shares below
NAV.
Provisions of the Maryland General Corporation Law and our articles of incorporation and bylaws could deter takeover attempts and
have an adverse impact on the price of our common stock.
The Maryland General Corporation Law and our articles of incorporation and bylaws contain provisions that may have the effect
of discouraging, delaying or making difficult a change in control of our company or the removal of our incumbent directors. The existence
of these provisions, among others, may have a negative impact on the price of our common stock and may discourage third-party bids for
ownership of our company. These provisions may prevent any premiums being offered to you for our common stock.
We may in the future determine to issue preferred stock, which could adversely affect the market value of our common stock.
The issuance of shares of preferred stock with dividend or conversion rights, liquidation preferences or other economic terms
favorable to the holders of preferred stock could adversely affect the market price for our common stock by making an investment in the
common stock less attractive. In addition, the dividends on any preferred stock we issue must be cumulative. Payment of dividends and
repayment of the liquidation preference of preferred stock must take
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preference over any dividends or other payments to our common stockholders, and holders of preferred stock are not subject to any of our
expenses or losses and are not entitled to participate in any income or appreciation in excess of their stated preference (other than
convertible preferred stock that converts into common stock). In addition, under the 1940 Act, preferred stock constitutes a “senior
security” for purposes of the asset coverage test.
The Notes are unsecured and therefore effectively subordinated to any current or future secured indebtedness.
The Notes are not secured by any of our assets or any of the assets of our subsidiaries and rank equally in right of payment with all
of our existing and future unsubordinated, unsecured indebtedness. As a result, the Notes are effectively subordinated to any secured
indebtedness we or our subsidiaries have currently incurred and may incur in the future (or any indebtedness that is initially unsecured to
which we subsequently grant security) to the extent of the value of the assets securing such indebtedness. In any liquidation, dissolution,
bankruptcy or other similar proceeding, the holders of any of our existing or future secured indebtedness and the secured indebtedness of
our subsidiaries may assert rights against the assets pledged to secure that indebtedness in order to receive full payment of their
indebtedness before the assets may be used to pay other creditors, including the holders of the Notes.
The Notes are structurally subordinated to the indebtedness and other liabilities of our subsidiaries.
The Notes are obligations exclusively of Main Street Capital Corporation and not of any of our subsidiaries. None of our
subsidiaries is a guarantor of the Notes, and the Notes are not required to be guaranteed by any subsidiaries we may acquire or create in the
future. In addition, several of our subsidiaries, specifically the Funds, maintain significant indebtedness and as a result the Notes are
structurally subordinated to the indebtedness of these subsidiaries. The assets of such subsidiaries are not directly available to satisfy the
claims of our creditors, including holders of the Notes.
Except to the extent we are a creditor with recognized claims against our subsidiaries, all claims of other creditors of our
subsidiaries have priority over our equity interests in such subsidiaries (and therefore the claims of our creditors, including holders of the
Notes) with respect to the assets of such subsidiaries. Even if we are recognized as a creditor of one or more of our subsidiaries, our claims
would still be effectively subordinated to any security interests in the assets of any such subsidiary and to any indebtedness or other
liabilities of any such subsidiary senior to our claims. Consequently, the Notes are structurally subordinated to all indebtedness and other
liabilities of any of our subsidiaries and any subsidiaries that we may in the future acquire or establish. In addition, our subsidiaries may
incur substantial additional indebtedness in the future, all of which would be structurally senior to the Notes.
The Notes may or may not have an established trading market. If a trading market in the Notes is developed, it may not be maintained.
The Notes may or may not have an established trading market. If a trading market in the Notes is developed, it may not be
maintained. If the Notes are traded, they may trade at a discount to their initial offering price depending on prevailing interest rates, the
market for similar securities, our credit ratings, our financial condition or other relevant factors. Accordingly, we cannot assure you that a
liquid trading market has been or will develop for the Notes, that you will be able to sell your Notes at a particular time or that the price you
receive when you sell will be favorable. To the extent an active trading market does not develop or is not maintained, the liquidity and
trading price for the Notes may be harmed. Accordingly, you may be required to bear the financial risk of an investment in the Notes for an
indefinite period of time.
A downgrade, suspension or withdrawal of the credit rating assigned by a rating agency to us or the Notes, if any, or change in the debt
markets could cause the liquidity or market value of the Notes to decline significantly.
Our credit ratings are an assessment by rating agencies of our ability to pay our debts when due. Consequently, real or anticipated
changes in our credit ratings will generally affect the market value of the Notes. These credit ratings may not reflect the potential impact of
risks relating to the structure or marketing of the Notes. Credit ratings are not a recommendation to buy, sell or hold any security, and may
be revised or withdrawn at any time by the issuing organization in its sole discretion. We undertake no obligation to maintain our credit
ratings or to advise holders of
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Notes of any changes in our credit ratings. There can be no assurance that our credit ratings will remain for any given period of time or that
such credit ratings will not be lowered or withdrawn entirely by the rating agency if in their judgment future circumstances relating to the
basis of the credit ratings, such as adverse changes in our company, so warrant. Downgrades to the credit rating assigned to us or our
securities could increase our cost of capital or otherwise have a negative effect on our results of operations and financial condition. The
conditions of the financial markets and prevailing interest rates have fluctuated in the past and are likely to fluctuate in the future, which
could have an adverse effect on the market prices of the Notes.
The indentures under which the Notes were issued contain limited protection for holders of the Notes.
The indentures under which the Notes were issued offer limited protection to holders of the Notes. The terms of the indentures and
the Notes do not restrict our or any of our subsidiaries’ ability to engage in, or otherwise be a party to, a variety of corporate transactions,
circumstances or events that could have an adverse impact on investments in the Notes. In particular, the terms of the indentures and the
Notes do not place any restrictions on our or our subsidiaries’ ability to:
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issue securities or otherwise incur additional indebtedness or other obligations, including (1) any indebtedness or other
obligations that would be equal in right of payment to the Notes, (2) any indebtedness or other obligations that would be
secured and therefore rank effectively senior in right of payment to the Notes to the extent of the values of the assets securing
such debt, (3) indebtedness of ours that is guaranteed by one or more of our subsidiaries and which therefore is structurally
senior to the Notes and (4) securities, indebtedness or obligations issued or incurred by our subsidiaries that would be senior to
our equity interests in our subsidiaries and therefore rank structurally senior to the Notes with respect to the assets of our
subsidiaries, in each case other than an incurrence of indebtedness or other obligation that would cause a violation of
Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act or any successor provisions, but giving effect, in each
case, to any exemptive relief granted to us by the SEC (currently, this provision generally prohibits us from making additional
borrowings, including through the issuance of additional debt or the sale of additional debt securities, unless our asset coverage,
as defined in the 1940 Act, equals at least 200% (or 150% if certain requirements are met) after such borrowings);
pay dividends on, or purchase or redeem or make any payments in respect of, capital stock or other securities ranking junior in
right of payment to the Notes, including subordinated indebtedness;
sell assets (other than certain limited restrictions on our ability to consolidate, merge or sell all or substantially all of our
assets);
enter into transactions with affiliates;
create liens (including liens on the shares of our subsidiaries) or enter into sale and leaseback transactions;
● make investments; or
●
create restrictions on the payment of dividends or other amounts to us from our subsidiaries.
Furthermore, the terms of the indentures and the Notes do not protect holders of the Notes in the event that we experience changes
(including significant adverse changes) in our financial condition, results of operations or credit ratings, if any, as they do not require that
we or our subsidiaries adhere to any financial tests or ratios or specified levels of net worth, revenues, income, cash flow or liquidity.
Our ability to recapitalize, incur additional debt and take a number of other actions that are not limited by the terms of the Notes
may have important consequences for holders of the Notes, including making it more difficult for us to satisfy our obligations with respect
to the Notes or negatively affecting the trading value of the Notes.
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Other debt we issue or incur in the future could contain more protections for its holders than the indentures and the Notes,
including additional covenants and events of default. The issuance or incurrence of any such debt with incremental protections could affect
the market for and trading levels and prices of the Notes.
The optional redemption provision may materially adversely affect your return on the Notes.
The Notes are redeemable in whole or in part upon certain conditions at any time or from time to time at our option. We may
choose to redeem the Notes at times when prevailing interest rates are lower than the interest rate paid on the Notes. In this circumstance,
you may not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as the Notes being
redeemed.
We may not be able to repurchase the Notes upon a Change of Control Repurchase Event.
We may not be able to repurchase the Notes upon certain change in control events described in the agreement under which the
Notes were issued (each, a “Change of Control Repurchase Event”) because we may not have sufficient funds. Upon a Change of Control
Repurchase Event, holders of the Notes may require us to repurchase for cash some or all of the Notes at a repurchase price equal to 100%
of the aggregate principal amount of the Notes being repurchased, plus accrued and unpaid interest to, but not including, the repurchase
date. The terms of our Credit Facility provide that certain change of control events will constitute an event of default thereunder entitling
the lenders to accelerate any indebtedness outstanding under our Credit Facility at that time and to terminate the Credit Facility. Our and
our subsidiaries’ future financing facilities may contain similar restrictions and provisions. Our failure to purchase such tendered Notes
upon the occurrence of such Change of Control Repurchase Event would cause an event of default under the indentures governing the
Notes and a cross-default under the agreements governing certain of our other indebtedness, which may result in the acceleration of such
indebtedness requiring us to repay that indebtedness immediately. If a Change of Control Repurchase Event were to occur, we may not have
sufficient funds to repay any such accelerated indebtedness.
If we default on our obligations to pay our other indebtedness, we may not be able to make payments on the Notes.
Any default under the agreements governing our other indebtedness that is not waived by the required lenders or debt holders, and
the remedies sought by the holders of such indebtedness could make us unable to pay principal, premium, if any, and interest on the Notes
and substantially decrease the market value of the Notes. If we are unable to generate sufficient cash flow and are otherwise unable to obtain
funds necessary to meet required payments of principal, premium, if any, and interest on our indebtedness, or if we otherwise fail to comply
with the various covenants, including financial and operating covenants, in the instruments governing our indebtedness, we could be in
default under the terms of the agreements governing such indebtedness. In the event of such default, the holders of such indebtedness could
elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest, the lenders under the
Credit Facility or other debt we may incur in the future could elect to terminate their commitments, cease making further loans and institute
foreclosure proceedings against our assets, and we could be forced into bankruptcy or liquidation. Our ability to generate sufficient cash
flow in the future is, to some extent, subject to general economic, financial, competitive, legislative and regulatory factors as well as other
factors that are beyond our control. We cannot assure you that our business will generate cash flow from operations, or that future
borrowings will be available to us in an amount sufficient to enable us to meet our payment obligations under the Notes and our other debt
and to fund other liquidity needs.
RISKS RELATED TO OUR SBIC FUNDS
We, through the Funds, issue debt securities guaranteed by the SBA and sold in the capital markets. As a result of its guarantee of the
debt securities, the SBA has fixed dollar claims on the assets of the Funds that are superior to the claims of our securities holders.
We, through the Funds, have outstanding SBIC debentures guaranteed by the SBA. The debentures guaranteed by the SBA have a
maturity of ten years from the date of issuance and require semiannual payments of interest. We will need to generate sufficient cash flow to
make required interest payments on the debentures. If we are unable to meet the
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financial obligations under the debentures, the SBA, as a creditor, will have a superior claim to the assets of the Funds over our securities
holders in the event we liquidate or the SBA exercises its remedies under such debentures as the result of a default by us.
The Funds are licensed by the SBA, and therefore subject to SBIC regulations.
The Funds, our wholly owned subsidiaries, are licensed to act as SBICs and are regulated by the SBA. The SBA also places
certain limitations on the financing terms of investments by SBICs in portfolio companies and prohibits SBICs from providing funds for
certain purposes or to businesses in a few prohibited industries. Compliance with SBA requirements may cause the Funds to forego
attractive investment opportunities that are not permitted under SBIC regulations.
Further, the SBIC regulations require, among other things, that a licensed SBIC be periodically examined by the SBA and audited
by an independent auditor, in each case to determine the SBIC’s compliance with the relevant SBIC regulations. The SBA prohibits,
without prior SBA approval, a “change of control” of an SBIC or transfers that would result in any person (or a group of persons acting in
concert) owning 10% or more of a class of capital stock of a licensed SBIC. If the Funds fail to comply with applicable SBIC regulations,
the SBA could, depending on the severity of the violation, limit or prohibit their use of SBIC debentures, declare outstanding SBIC
debentures immediately due and payable, and/or limit them from making new investments. In addition, the SBA can revoke or suspend a
license for willful or repeated violation of, or willful or repeated failure to observe, any provision of the Small Business Investment Act of
1958 or any rule or regulation promulgated thereunder. Such actions by the SBA would, in turn, negatively affect us.
Each of the Funds, as an SBIC, may be unable to make distributions to us that will enable us to meet or maintain RIC status, which
could result in the imposition of an entity-level tax.
In order for us to continue to qualify for RIC tax treatment and to minimize corporate-level U.S. federal taxes, we will be required
to distribute substantially all of our net ordinary taxable income and net capital gain income, including taxable income from certain of our
subsidiaries, which includes the income from the Funds. We will be partially dependent on the Funds for cash distributions to enable us to
meet the RIC distribution requirements. The Funds may be limited by SBIC regulations from making certain distributions to us that may be
necessary to enable us to maintain our status as a RIC. We may have to request a waiver of the SBA’s restrictions for the Funds to make
certain distributions to maintain our eligibility for RIC status. We cannot assure you that the SBA will grant such waiver and if the Funds
are unable to obtain a waiver, compliance with the SBIC regulations may result in loss of RIC tax treatment and a consequent imposition of
an entity-level tax on us.
FEDERAL INCOME TAX RISKS
We will be subject to corporate-level U.S. federal income tax if we are unable to qualify as a RIC under Subchapter M of the Code.
To maintain RIC tax treatment under the Code, we must meet the following annual distribution, income source and asset
diversification requirements:
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The Annual Distribution Requirement for a RIC will be satisfied if we distribute to our stockholders on an annual basis at least
90% of our net ordinary taxable income and realized net short-term capital gains in excess of realized net long-term capital
losses, if any. Depending on the level of taxable income earned in a tax year, we may choose to carry forward taxable income in
excess of current year distributions into the next tax year and pay a 4% U.S. federal excise tax on such income. Any such
carryover taxable income must be distributed through a dividend declared prior to filing the final tax return related to the year
which generated such taxable income. For more information regarding tax treatment, see “Business — Regulation — Taxation
as a Regulated Investment Company.” Because we use debt financing, we are subject to certain asset coverage ratio
requirements under the 1940 Act and are (and may in the future become) subject to certain financial covenants under loan and
credit agreements that could, under certain circumstances, restrict us from making distributions necessary to satisfy the
distribution requirement. In
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●
●
addition, because we receive non-cash sources of income such as PIK interest which involves us recognizing taxable income
without receiving the cash representing such income, we may have difficulty meeting the distribution requirement. If we are
unable to obtain cash from other sources, we could fail to qualify for RIC tax treatment and thus become subject to corporate-
level U.S. federal income tax.
The source-of-income requirement will be satisfied if we obtain at least 90% of our gross income for each year from
distributions, interest, gains from the sale of stock or securities or similar sources.
The asset diversification requirement will be satisfied if we meet certain asset diversification requirements at the end of each
quarter of our taxable year. To satisfy this requirement, at least 50% of the value of our assets must consist of cash, cash
equivalents, U.S. government securities, securities of other RICs, and other acceptable securities; and no more than 25% of the
value of our assets can be invested in the securities, other than U.S. government securities or securities of other RICs, (i) of one
issuer, (ii) of two or more issuers that are controlled, as determined under applicable Code rules, by us and that are engaged in
the same or similar or related trades or businesses or (iii) of certain “qualified publicly traded partnerships.”
Failure to meet these requirements may result in our having to dispose of certain investments quickly in order to prevent the loss of
RIC status. Because most of our investments are in privately held companies, and therefore illiquid, any such dispositions could be made at
disadvantageous prices and could result in substantial losses. Moreover, if we fail to maintain RIC tax treatment for any reason and are
subject to corporate income tax, the resulting corporate taxes could substantially reduce our net assets, the amount of income available for
distribution and the amount of our distributions.
We may have difficulty paying the distributions required to maintain RIC tax treatment under the Code if we recognize income before
or without receiving cash representing such income.
We will include in income certain amounts that we have not yet received in cash, such as: (i) amortization of original issue
discount, which may arise if we receive warrants in connection with the origination of a loan such that ascribing a value to the warrants
creates original issue discount in the debt instrument, if we invest in a debt investment at a discount to the par value of the debt security or
possibly in other circumstances; (ii) contractual payment-in-kind, or PIK, interest, which represents contractual interest added to the loan
balance and due at the end of the loan term; (iii) contractual preferred dividends, which represents contractual dividends added to the
preferred stock and due at the end of the preferred stock term, subject to adequate profitability at the portfolio company; or
(iv) amortization of market discount, which is associated with loans purchased in the secondary market at a discount to par value. Such
amortization of original issue discounts, increases in loan balances as a result of contractual PIK arrangements, cumulative preferred
dividends, or amortization of market discount will be included in income before we receive the corresponding cash payments. We also may
be required to include in income certain other amounts before we receive such amounts in cash. Investments structured with these features
may represent a higher level of credit risk compared to investments generating income which must be paid in cash on a current basis.
Since, in certain cases, we may recognize taxable income before or without receiving cash representing such income, we may have
difficulty meeting the Annual Distribution Requirement necessary to maintain RIC tax treatment under the Code. Accordingly, we may
have to sell some of our investments at times and/or at prices we would not consider advantageous, raise additional debt or equity capital or
forgo new investment opportunities for this purpose. If we are not able to obtain cash from other sources, we may fail to qualify for RIC tax
treatment and thus become subject to corporate-level U.S. federal income tax. For additional discussion regarding the tax implications of a
RIC, please see “Business — Regulation — Taxation as a Regulated Investment Company.”
We may in the future choose to pay dividends in our own stock, in which case you may be required to pay tax in excess of the cash you
receive.
We may distribute taxable dividends that are payable in part in our stock. Under certain applicable provisions of the Code and the
Treasury regulations, distributions payable by us in cash or in shares of stock (at the stockholders’ election) would satisfy the Annual
Distribution Requirement. The Internal Revenue Service has issued guidance providing that a dividend payable in stock or in cash at the
election of the stockholders will be treated as a taxable
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dividend eligible for the dividends paid deduction provided that at least 20% of the total dividend is payable in cash and certain other
requirements are satisfied. Taxable stockholders receiving such dividends will be required to include the full amount of the dividend as
ordinary income (or as long-term capital gain to the extent such dividend is properly reported as a capital gain dividend) to the extent of our
current and accumulated earnings and profits for U.S. federal income tax purposes. As a result, a U.S. stockholder may be required to pay
tax with respect to such dividends in excess of any cash received. If a U.S. stockholder sells the stock it receives as a dividend in order to
pay this tax, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the market price
of our stock at the time of the sale. Furthermore, with respect to non-U.S. stockholders, we may be required to withhold U.S. tax with
respect to such dividends, including in respect of all or a portion of such dividend that is payable in stock. In addition, if a significant
number of our stockholders determine to sell shares of our stock in order to pay taxes owed on dividends, it may put downward pressure on
the trading price of our stock.
Stockholders may have current tax liability on dividends they elect to reinvest in our common stock but would not receive cash from
such dividends to pay such tax liability.
If stockholders participate in our dividend reinvestment plan, they will be deemed to have received, and for federal income tax
purposes will be taxed on, the amount reinvested in our common stock to the extent the amount reinvested was not a tax-free return of
capital. As a result, unless a stockholder is a tax-exempt entity, it may have to use funds from other sources to pay its tax liability on the
value of the dividend that they have elected to have reinvested in our common stock.
Legislative or regulatory tax changes could adversely affect our stockholders.
At any time, the federal income tax laws governing RICs or the administrative interpretations of those laws or regulations may be
amended. The Biden Administration has announced a number of tax law proposals, including American Families Plan and Made in America
Tax Plan, which include increases in the corporate and individual tax rates, and impose a minimum tax on book income and profits of
certain multinational corporations. Any of those new laws, regulations or interpretations may take effect retroactively and could adversely
affect the taxation of us or our stockholders. Therefore, changes in tax laws, regulations or administrative interpretations or any
amendments thereto could diminish the value of an investment in our shares or the value or the resale potential of our investments. If we do
not comply with applicable laws and regulations, we could lose any licenses that we then hold for the conduct of our business and may be
subject to civil fines and criminal penalties.
GENERAL RISK FACTORS
Events outside of our control, including public health crises, supply-chain disruptions and inflation, could negatively affect our
portfolio companies and our results of operations.
Periods of market volatility have occurred and could continue to occur in response to pandemics or other events outside of our
control. These types of events have adversely affected, and could continue to adversely affect, operating results for us and for our portfolio
companies. The COVID-19 pandemic had a significant adverse effect on the U.S. economy, particularly in the second quarter of 2020.
Although certain economic conditions in the United States improved in 2021, the pandemic continues to evolve, as recently experienced
with the rapid spread of the Omicron variant, and risks remain with respect to local, regional, national and global markets and economies
affected thereby, including the United States. With respect to U.S. and global credit markets and the economy in general, the pandemic has
resulted in, and until fully resolved is likely to continue to result in, the following (among other things): (i) restrictions on travel and the
temporary closure of many corporate offices, retail stores and manufacturing facilities and factories, resulting in significant disruption to the
business of many companies, including supply chains and demand, as well as layoffs of employees; (ii) increased draws by borrowers on
revolving lines of credit; (iii) increased requests by borrowers for amendments or waivers of their credit agreements to avoid default,
increased defaults by borrowers and/or increased difficulty in obtaining refinancing; (iv) volatility in credit markets, including greater
volatility in pricing and spreads; and (v) evolving proposals and actions by state and federal governments to address the problems being
experienced by markets, businesses and the economy in general, which may not adequately address the problems being
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faced. The COVID-19 pandemic is continuing as of the filing date of this Annual Report, and its extended duration may have further
adverse impacts on our portfolio companies after December 31, 2021, as well as the economy in general.
This pandemic has also caused, and may continue to cause, disruption to our portfolio companies’ global supply chain and
business operations. In particular, shortages in commodities and materials, including shortages and reductions in allocations of electronic
and other components from key suppliers, labor shortages and elevated levels of employee absenteeism, freight delays and other supply
chain constraints and disruptions have significantly delayed or disrupted, and may continue to adversely impact, both our portfolio
companies’ suppliers’ and third-party vendors and our portfolio companies’ ability to manufacture and deliver products and/or services to
their end-users and customers. Our portfolio companies have also experienced a significant increase in commodity, parts and material
component inflation in 2021 and 2022, as well as inflation in other costs, such as labor, packaging, freight and energy prices. Continued
supply chain disruptions and delays, as well as continued heightened inflation, could lead to continued periodic production interruptions
and other inefficiencies that could negatively impact our portfolio companies’ productivity, margin performance and results of operations,
which could result in a material adverse effect on our financial condition, results of operations and cash flows.
Although it is impossible to predict the precise nature and consequences of these events, or of any political or policy decisions and
regulatory changes occasioned by emerging events or uncertainty on applicable laws or regulations that impact us and our portfolio
companies and investments, it is clear that these types of events are impacting and will, for at least some time, continue to impact us and
our portfolio companies; in many instances the impact will be adverse and material. Any potential impact to our results of operations will
depend to a large extent on future developments and the ultimate duration and severity of the COVID-19 pandemic and the actions taken by
authorities and other entities to contain the spread or treat its impact, all of which are beyond our control. These potential impacts, while
uncertain, could adversely affect our and our portfolio companies' operating results and financial condition.
The COVID-19 pandemic and the related disruption and financial distress experienced by our portfolio companies may have
material adverse effects on our financial results, including investment income received from our investments and the underlying value of
those investments. The COVID-19 pandemic has adversely impacted the fair value of certain of our investments, including those reported
as of December 31, 2021, and the values reported may differ materially from the values that we may ultimately realize with respect to our
investments. We may need to restructure our investments in certain portfolio companies as a result of the adverse effects of the COVID-19
pandemic, which could reduce the amount or extend the time for payment of principal or the life of our investment or reduce the amount or
extend the time of payment of interest or dividends, among other things. Depending on the duration of the COVID-19 pandemic and the
extent of its continuing effects on our portfolio companies' operations and our operating results, any future dividends to our stockholders
may be for amounts less than our historical dividends, may be paid less frequently than historical practices and may also include return of
capital.
The 1940 Act generally prohibits us, as a BDC, from incurring indebtedness unless immediately after such borrowing we have an
asset coverage, as defined in the 1940 Act, of at least 200% (or 150% if certain requirements are met). In addition, the terms of our senior
securities may contain similar limitations or covenants requiring our compliance with the 1940 Act asset coverage requirements, and other
affirmative and negative covenants. A continued significant decrease in the value of our Investment Portfolio, due to the effects of the
COVID-19 pandemic or otherwise, resulting in significant reductions of our net asset value increases the risk of us not meeting the required
asset coverage requirement under the 1940 Act or breaching covenants under our senior securities. Any such result could have a material
adverse effect on our business, liquidity, financial condition, results of operations and ability to pay dividends to our stockholders and
attributes thereof.
We are currently operating in a period of capital markets disruption and economic uncertainty, and capital markets may experience
periods of disruption and instability in the future. These market conditions may materially and adversely affect debt and equity capital
markets in the United States and abroad, which may have a negative impact on our business and operations.
U.S. capital markets have experienced extreme volatility and disruption following the global outbreak of COVID-19 that began in
December 2019, as evidenced by the volatility in global stock markets as a result of, among
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other things, uncertainty surrounding the COVID-19 pandemic and the impact of supply chain disruptions. Despite actions of the U.S.
federal government and foreign governments, these events have contributed to unpredictable general economic conditions that are
materially and adversely impacting the broader financial and credit markets. These and future market disruptions and/or illiquidity would
be expected to have an adverse effect on our business, financial condition, results of operations and cash flows, as well as the businesses of
our portfolio companies, and the broader financial and credit markets.
At various times, such disruptions have resulted in, and may in the future result in, a lack of liquidity in parts of the debt capital
markets, significant write-offs in the financial services sector and the repricing of credit risk. Such conditions may occur for a prolonged
period of time again, and may materially worsen in the future, including as a result of U.S. government shutdowns, or future downgrades to
the U.S. government's sovereign credit rating or the perceived credit worthiness of the U.S. or other large global economies. In addition, the
current U.S. political environment and the resulting uncertainties regarding actual and potential shifts in U.S. foreign investment, trade,
taxation, economic, environmental and other policies under the current Administration, as well as the impact of geopolitical tension, such as
a deterioration in the bilateral relationship between the U.S. and China or an escalation in conflict between Russia and Ukraine, could lead
to disruption, instability and volatility in the global markets. Unfavorable economic conditions also would be expected to increase our
funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. These events have limited
and could continue to limit our investment originations, and limit our ability to grow and could have a material negative impact on our
operating results, financial condition, results of operations and cash flows and the fair values of our debt and equity investments.
In addition, the U.S. and global capital markets have in the past, and may in the future, experience periods of extreme volatility
and disruption during economic downturns and recessions. Trade wars and volatility in the U.S. repo market, the U.S. high yield bond
markets, the Chinese stock markets and global markets for commodities may affect other financial markets worldwide. In addition, while
recent government stimulus measures worldwide have reduced volatility in the financial markets, volatility may return as such measures are
phased out, and the long-term impacts of such stimulus on fiscal policy and inflation remain unknown. Increases to budget deficits, which
have been exacerbated by the COVID-19 pandemic, or direct and contingent sovereign debt may create concerns about the ability of certain
nations to service their sovereign debt obligations and any risks resulting from any such debt crisis in Europe, the U.S. or elsewhere could
have a detrimental impact on the global economy, sovereign and non-sovereign debt in certain countries and the financial condition of
financial institutions generally. Austerity measures that certain countries may agree to as part of any debt crisis or disruptions to major
financial trading markets may adversely affect world economic conditions, our business and the businesses of our portfolio companies.
Additionally, the Federal Reserve is expected to raise the Federal Funds Rate in 2022. These developments, along with the United
States government’s credit and deficit concerns, global economic uncertainties and market volatility and the impacts of COVID-19, could
cause interest rates to be volatile, which may negatively impact our ability to access the capital markets on favorable terms.
Deterioration in the economy and financial markets could impair our portfolio companies’ financial positions and operating results and
affect the industries in which we invest, which could, in turn, harm our operating results.
The broader fundamentals of the United States economy remain mixed. In the event that the United States economy contracts, it is
likely that the financial results of small to mid-sized companies, like those in which we invest, could experience deterioration or limited
growth from current levels, which could ultimately lead to difficulty in meeting their debt service requirements and an increase in defaults.
In addition, a decline in oil and natural gas prices would adversely affect the credit quality of our debt investments and the underlying
operating performance of our equity investments in energy-related businesses. Consequently, we can provide no assurance that the
performance of certain portfolio companies will not be negatively impacted by economic cycles, industry cycles or other conditions, which
could also have a negative impact on our future results.
Although we have been able to secure access to additional liquidity, the potential for volatility in the debt and equity capital
markets provides no assurance that debt or equity capital will be available to us in the future on favorable terms, or at all.
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We may experience fluctuations in our operating results.
We could experience fluctuations in our operating results due to a number of factors, including our ability or inability to make
investments in companies that meet our investment criteria, the interest rate payable on the debt securities we acquire, the level of portfolio
dividend and fee income, the level of our expenses, variations in and the timing of the recognition of realized and unrealized gains or losses,
the degree to which we encounter competition in our markets and general economic conditions. As a result of these factors, operating results
for any period should not be relied upon as being indicative of performance in future periods.
Terrorist attacks, acts of war, public health crises or natural disasters may affect any market for our securities, impact the businesses in
which we invest and harm our business, operating results and financial condition.
Terrorist acts, acts of war, public health crises (including the recent coronavirus outbreak) or natural disasters may disrupt our
operations, as well as the operations of the businesses in which we invest. Such acts have created, and continue to create, economic and
political uncertainties and have contributed to global economic instability. Future terrorist activities, military or security operations, public
health crises, or natural disasters could further weaken the domestic/global economies and create additional uncertainties, which may
negatively impact the businesses in which we invest directly or indirectly and, in turn, could have a material adverse impact on our
business, operating results and financial condition. Losses from terrorist attacks, public health crises and natural disasters are generally
uninsurable.
Technological innovations and industry disruptions may negatively impact us.
Technological innovations have disrupted traditional approaches in multiple industries and can permit younger companies to
achieve success and in the process disrupt markets and market practices. We can provide no assurance that new businesses and approaches
will not be created that would compete with us and/or our portfolio companies or alter the market practices in which we have been designed
to function within and on which we depend on for our investment return. New approaches could damage our investments, disrupt the
market in which we operate and subject us to increased competition, which could materially and adversely affect our business, financial
condition and results of investments.
We are highly dependent on information systems and systems failures could significantly disrupt our business, which may, in turn,
negatively affect the market price of our common stock and our ability to pay dividends.
Our business is highly dependent on our and third parties’ communications and information systems. Any failure or interruption of
those systems, including as a result of the termination of an agreement with any third-party service providers, could cause delays or other
problems in our activities. Our financial, accounting, data processing, backup or other operating systems and facilities may fail to operate
properly or become disabled or damaged as a result of a number of factors including events that are wholly or partially beyond our control
and adversely affect our business. There could be:
●
●
●
●
●
sudden electrical or telecommunications outages;
natural disasters such as earthquakes, tornadoes and hurricanes;
disease pandemics;
events arising from local or larger scale political or social matters, including terrorist acts; and
cyber attacks, including software viruses, ransomware, malware and phishing and vishing schemes.
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The failure in cyber security systems, as well as the occurrence of events unanticipated in our disaster recovery systems and
management continuity planning could impair our ability to conduct business effectively.
The occurrence of a disaster such as a cyber-attack, a natural catastrophe, an industrial accident, a terrorist attack or war, events
unanticipated in our disaster recovery systems, or a support failure from external providers, could have an adverse effect on our ability to
conduct business and on our results of operations and financial condition, particularly if those events affect our computer-based data
processing, transmission, storage, and retrieval systems or destroy data. If a significant number of our managers were unavailable in the
event of a disaster, our ability to effectively conduct our business could be severely compromised.
We depend heavily upon computer systems to perform necessary business functions. Despite our implementation of a variety of
security measures, our computer systems could be subject to cyber-attacks and unauthorized access, such as physical and electronic break-
ins or unauthorized tampering. Like other companies, we may experience threats to our data and systems, including malware and computer
virus attacks, unauthorized access, system failures and disruptions. If one or more of these events occurs, it could potentially jeopardize the
confidential, proprietary and other information processed and stored in, and transmitted through, our computer systems and networks, or
otherwise cause interruptions or malfunctions in our operations, which could result in damage to our reputation, financial losses, litigation,
increased costs, regulatory penalties and/or customer dissatisfaction or loss.
Third parties with which we do business (including, but not limited to, service providers, such as accountants, custodians, transfer
agents and administrators, and the issuers of securities in which we invest) may also be sources or targets of cyber security or other
technological risks. While we engage in actions to reduce our exposure resulting from outsourcing, we cannot control the cyber security
plans and systems put in place by these third parties and ongoing threats may result in unauthorized access, loss, exposure or destruction of
data, or other cybersecurity incidents, with increased costs and other consequences, including those described above. Privacy and
information security laws and regulation changes, and compliance with those changes, may also result in cost increases due to system
changes and the development of new administrative processes.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
We do not own any real estate or other physical properties materially important to our operations. Currently, we lease office space
in Houston, Texas for our corporate headquarters.
Item 3. Legal Proceedings
We may, from time to time, be involved in litigation arising out of our operations in the normal course of business or otherwise.
Furthermore, third parties may seek to impose liability on us in connection with the activities of our portfolio companies. While the
outcome of any current legal proceedings cannot at this time be predicted with certainty, we do not expect any current matters will
materially affect our financial condition or results of operations; however, there can be no assurance whether any pending legal proceedings
will have a material adverse effect on our financial condition or results of operations in any future reporting period.
Item 4. Mine Safety Disclosures
Not applicable.
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Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
PART II
COMMON STOCK AND HOLDERS
Our common stock is traded on the NYSE under the symbol “MAIN.”
The following table sets forth, for the periods indicated, the range of high and low closing prices of our common stock as reported
on the NYSE, and the sales price as a percentage of the net asset value per share of our common stock.
Year ending December 31, 2022
First Quarter (through February 24, 2022)
Year ended December 31, 2021
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
Year ended December 31, 2020
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
NAV(1)
High
Low
Price Range
$
$
$
$
$
*
25.29
24.27
23.42
22.65
22.35
21.52
20.85
20.73
$
$
$
41.08
46.61
42.81
43.41
39.56
32.59
33.01
35.82
45.00
44.88
41.35
40.20
38.14
31.35
27.39
28.66
17.34
15.74
Premium of
High Sales
Price to
NAV(2)
Premium
(Discount) of
Low Sales
Price to
NAV(2)
*
84 %
76 %
85 %
75 %
46 %
53 %
72 %
117 %
*
64 %
66 %
63 %
38 %
23 %
33 %
(17)%
(24)%
* Net asset value has not yet been determined for the first quarter of 2022.
(1) Net asset value per share, or NAV, is determined as of the last day in the relevant quarter and therefore may not reflect the net asset value
per share on the date of the high and low closing prices. The net asset values shown are based on outstanding shares at the end of each
period.
(2) Calculated for each quarter as (i) NAV subtracted from the respective high or low share price divided by (ii) NAV.
On February 24, 2022, the last sale price of our common stock on the NYSE was $41.67 per share, and there were approximately
434 holders of record of the common stock which did not include stockholders for whom shares are held in “nominee” or “street name.”
The net asset value per share of our common stock on December 31, 2021 was $25.29, and the premium of the February 24, 2022 closing
price of our common stock was 77% to this net asset value per share.
Shares of BDCs may trade at a market price that is less than the value of the net assets attributable to those shares. The possibility
that our shares of common stock will trade at a discount from net asset value per share or at premiums that are unsustainable over the long
term are separate and distinct from the risk that our net asset value per share will decrease. It is not possible to predict whether our common
stock will trade at, above, or below net asset value per share. Since our IPO in October 2007, our shares of common stock have traded at
prices both less than and exceeding our net asset value per share.
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DIVIDEND/DISTRIBUTION POLICY
We currently intend to distribute dividends or make distributions to our stockholders out of assets legally available for distribution.
Our dividends and other distributions, if any, will be determined by our Board of Directors from time to time. Our ability to declare
dividends depends on our earnings, our overall financial condition (including our liquidity position), maintenance of our RIC status and
such other factors as our Board of Directors may deem relevant from time to time. When we make distributions, we are required to
determine the extent to which such distributions are paid out of current or accumulated earnings, recognized capital gains or capital. To the
extent there is a return of capital (a distribution of the stockholders' invested capital), investors will be required to reduce their basis in our
stock for federal tax purposes. In the future, our distributions may include a return of capital.
We have adopted a dividend reinvestment and direct stock purchase plan (the “Plan”). The dividend reinvestment feature of the
Plan (the “DRIP”) provides for the reinvestment of dividends on behalf of our stockholders, unless a stockholder has elected to receive
dividends in cash. As a result, if we declare a cash dividend, our stockholders who have not “opted out” of the DRIP by the dividend record
date will have their cash dividend automatically reinvested into additional shares of MSCC common stock. The share requirements of the
DRIP may be satisfied through the issuance of new shares of common stock or through open market purchases of common stock by the
DRIP plan administrator. Newly issued shares will be valued based upon the final closing price of MSCC’s common stock on a valuation
date determined for each dividend by our Board of Directors. Shares purchased in the open market to satisfy the DRIP requirements will be
valued based upon the average price of the applicable shares purchased by the DRIP plan administrator, before any associated brokerage or
other costs. Our DRIP is administered by our transfer agent on behalf of our record holders and participating brokerage firms. Brokerage
firms and other financial intermediaries may decide not to participate in our DRIP but may provide a similar dividend reinvestment plan for
their clients.
SALES OF UNREGISTERED SECURITIES
During the year ended December 31, 2021, we issued a total of 404,384 shares of our common stock under the DRIP. These
issuances were not subject to the registration requirements of the Securities Act of 1933, as amended. The aggregate value of the shares of
our common stock issued under the DRIP during 2021 was approximately $16.3 million.
PURCHASES OF EQUITY SECURITIES
Upon vesting of restricted stock awarded pursuant to our employee equity compensation plan, shares may be withheld to meet
applicable tax withholding requirements. Any withheld shares are treated as common stock purchases by the Company in our consolidated
financial statements as they reduce the number of shares received by employees upon vesting (see “Purchase of vested stock for employee
payroll tax withholding” in the consolidated statements of changes in net assets for share amounts withheld).
STOCK PERFORMANCE GRAPH
The following graph compares the stockholder return on our common stock from October 5, 2007 to December 31, 2021 with the
S&P 500 Index, the Russell 2000 Index, the KBW Regional Bank Index and the Main Street Peer Group (as defined below). This
comparison assumes $100.00 was invested on October 5, 2007 (the date our common stock began to trade in connection with our initial
public offering) in our common stock and in the comparison groups and assumes the reinvestment of all cash dividends prior to any tax
effect. The comparisons in the graph below are based on historical data and are not intended to forecast the possible future performance of
our common stock.
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COMPARISON OF STOCKHOLDER RETURN(1)
Among Main Street Capital Corporation, the S&P 500 Index, the Russell 2000 Index, the KBW
Regional Bank Index, and the Main Street Peer Group(2)
(For the Period October 5, 2007 to December 31, 2021)
TOTAL RETURN PERFORMANCE SINCE IPO
(1) Total return includes reinvestment of dividends through December 31, 2021.
(2) The Main Street Peer Group is composed of Apollo Investment Corp., Ares Capital Corporation, Barings BDC, Inc., Blackrock Capital
Investment Corp., Crescent Capital BDC Inc, TCG BDC, Inc, Capital Southwest Corporation, Fidus Investment Corporation, FS KKR
Capital Corp., Gladstone Investment Corporation, Golub Capital BDC, Inc., Goldman Sachs BDC, Inc., Hercules Capital Inc., Monroe
Capital Corporation, Newtek Business Services Corp., New Mountain Finance Corporation, Oaktree Specialty Lending Corp., OFS
Capital Corporation, PennantPark Floating Rate Capital Ltd., PennantPark Investment Corp., Prospect Capital Corporation, Saratoga
Investment Corp., Stellus Capital Investment Corp., Solar Capital Ltd., Solar Senior Capital Ltd, BlackRock TCP Capital Corp.,
Triplepoint Venture Growth BDC Corp., Sixth Street Specialty Lending, Inc., and WhiteHorse Finance, Inc.
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Item 6. [Reserved.]
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto included
elsewhere in this Annual Report on Form 10-K.
Statements we make in the following discussion which express a belief, expectation or intention, as well as those that are not
historical fact, are forward-looking statements that are subject to risks, uncertainties and assumptions. Our actual results, performance or
achievements, or industry results, could differ materially from those we express in the following discussion as a result of a variety of
factors, including the risks and uncertainties we have referred to under the headings “Cautionary Statement Concerning Forward-Looking
Statements” and “Risk Factors” in Part I of this report.
COVID-19 UPDATE
The COVID-19 pandemic, and the related effect on the U.S. and global economies, has had, and threatens to continue to have,
adverse consequences for our business and operating results, and the businesses and operating results of our portfolio companies. During
the quarter ended December 31, 2021, we continued to work collectively with our employees and portfolio companies to navigate the
significant challenges created by the COVID-19 pandemic and the related labor and supply constraints, rising costs, and supply chain
disruptions. We remain focused on ensuring the safety of our employees and the employees of our portfolio companies, while also
managing our ongoing business activities. In this regard, we remain heavily engaged with our portfolio companies. As discussed below
under “Discussion and Analysis of Results of Operations,” our investment income, principally our interest and dividend income, was
negatively impacted by the economic effects of the COVID-19 pandemic in 2020. We continue to maintain access to multiple sources of
liquidity, including cash, unused capacity under our Credit Facility and, as discussed under Liquidity and Capital Resources, access to
capital markets for both equity and unsecured note issuances. As of December 31, 2021, we were in compliance with all debt covenants and
do not anticipate any issues with our ability to comply with all covenants in the future. Refer to “—Liquidity and Capital Resources” below
for further discussion as of December 31, 2021.
Neither our management nor our Board of Directors is able to predict the full impact of the COVID-19 pandemic, including its
duration and the magnitude of its economic and societal impact. As such, while we will continue to monitor the evolving situation and
guidance from U.S. authorities, including federal, state and local public health authorities, we are unable to predict with any certainty the
extent to which the outbreak will negatively affect our portfolio companies’ operating results and financial condition or the impact that such
disruptions may have on our results of operations and financial condition in the future.
INVESTMENT PORTFOLIO ACTIVITY
The following tables provide a summary of our investments in the LMM, Private Loan and Middle Market portfolios as of
December 31, 2021 and 2020 (this information excludes the Other Portfolio investments, short-term portfolio investments and the External
Investment Manager which are discussed further below):
Number of portfolio companies
Fair value
Cost
Debt investments as a % of portfolio (at cost)
Equity investments as a % of portfolio (at cost)
% of debt investments at cost secured by first priority lien
Weighted-average annual effective yield (b)
Average EBITDA (c)
56
LMM (a)
As of December 31, 2021
Private Loan
Middle Market
73
1,716.4
1,455.7
(dollars in millions)
75
1,141.8
1,157.5
$
$
70.9 %
29.1 %
99.0 %
11.2 %
6.2
$
95.7 %
4.3 %
98.7 %
8.2 %
41.3
$
$
$
$
$
$
36
395.2
440.9
93.3 %
6.7 %
98.7 %
7.5 %
76.0
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(a) At December 31, 2021, we had equity ownership in all of our LMM portfolio companies, and the average fully diluted equity ownership
in those portfolio companies was approximately 40%.
(b) The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of
December 31, 2021, including amortization of deferred debt origination fees and accretion of original issue discount but excluding fees
payable upon repayment of the debt instruments and any debt investments on non-accrual status. The weighted-average yield on our debt
portfolio as of December 31, 2021 including debt investments on non-accrual status was 10.6% for our LMM portfolio, 8.0% for our
Private Loan portfolio and 6.9% for our Middle Market portfolio. The weighted-average annual effective yield is not reflective of what
an investor in shares of our common stock will realize on its investment because it does not reflect changes in the market value of our
stock, our utilization of leverage, or debt capital, in our capital structure, our expenses or any sales load paid by an investor.
(c) The average EBITDA is calculated using a simple average for the LMM portfolio and a weighted-average for the Private Loan and
Middle Market portfolios. These calculations exclude certain portfolio companies, including three LMM portfolio companies, three
Private Loan portfolio companies and one Middle Market portfolio company, as EBITDA is not a meaningful valuation metric for our
investments in these portfolio companies, and those portfolio companies whose primary purpose is to own real estate.
Number of portfolio companies
Fair value
Cost
Debt investments as a % of portfolio (at cost)
Equity investments as a % of portfolio (at cost)
% of debt investments at cost secured by first priority lien
Weighted-average annual effective yield (b)
Average EBITDA (c)
LMM (a)
As of December 31, 2020
Private Loan
Middle Market
70
1,285.5
1,104.6
(dollars in millions)
63
740.4
769.0
$
$
65.8 %
34.2 %
98.1 %
11.6 %
5.3
$
93.8 %
6.2 %
95.4 %
8.7 %
58.1
$
$
$
$
$
$
42
445.6
488.9
93.0 %
7.0 %
92.4 %
7.9 %
76.5
(a) At December 31, 2020, we had equity ownership in approximately 99% of our LMM portfolio companies, and the average fully diluted
equity ownership in those portfolio companies was approximately 38%.
(b) The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of
December 31, 2020, including amortization of deferred debt origination fees and accretion of original issue discount but excluding fees
payable upon repayment of the debt instruments and any debt investments on non-accrual status. The weighted-average yield on our debt
portfolio as of December 31, 2020 including debt investments on non-accrual status was 10.4% for our LMM portfolio, 8.4% for our
Private Loan portfolio and 7.9% for our Middle Market portfolio. The weighted-average annual effective yield is not reflective of what
an investor in shares of our common stock will realize on its investment because it does not reflect changes in the market value of our
stock, our utilization of leverage, or debt capital, in our capital structure, our expenses or any sales load paid by an investor.
(c) The average EBITDA is calculated using a simple average for the LMM portfolio and a weighted-average for the Private Loan and
Middle Market portfolios. These calculations exclude certain portfolio companies, including three LMM portfolio companies, four
Private Loan portfolio companies and one Middle Market portfolio company, as EBITDA is not a meaningful valuation metric for our
investments in these portfolio companies, and those portfolio companies whose primary purpose is to own real estate.
For the years ended December 31, 2021 and 2020, we achieved an annualized total return on investments of 16.6% and 4.1%,
respectively. Total return on investments is calculated using the interest, dividend, and fee income, as well as the realized and unrealized
change in fair value of the Investment Portfolio for the specified period. Our total return on investments is not reflective of what an investor
in shares of our common stock will realize on its investment
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because it does not reflect changes in the market value of our stock, our utilization of leverage, or debt capital, in our capital structure, our
expenses or any sales load paid by an investor.
As of December 31, 2021, we had Other Portfolio investments in thirteen companies, collectively totaling approximately
$166.1 million in fair value and approximately $173.7 million in cost basis and which comprised approximately 4.7% and 5.3% of our
Investment Portfolio at fair value and cost, respectively. As of December 31, 2020, we had Other Portfolio investments in twelve
companies, collectively totaling approximately $96.6 million in fair value and approximately $124.7 million in cost basis and which
comprised approximately 3.6% and 5.0% of our Investment Portfolio at fair value and cost, respectively.
As of December 31, 2021, we had one short-term portfolio investment, which was a secured debt investment that had
approximately $2.0 million in both fair value and in cost basis and which comprised approximately 0.1% of our Investment Portfolio at both
fair value and cost. As of December 31, 2020, we held no short-term investments.
As previously discussed, the External Investment Manager is a wholly owned subsidiary that is treated as a portfolio investment.
As of December 31, 2021, this investment had a fair value of approximately $140.4 million and a cost basis of $29.5 million, which
comprised approximately 3.9% and 0.9% of our Investment Portfolio at fair value and cost, respectively. As of December 31, 2020, this
investment had a fair value of approximately $116.8 million and a cost basis of $29.5 million, which comprised approximately 4.3% and
1.2% of our Investment Portfolio at fair value and cost, respectively.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements and related disclosures in conformity with generally accepted accounting principles
(“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and
contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the periods reported. Actual results
could materially differ from those estimates. Critical accounting policies are those that require management to make subjective or complex
judgments about the effect of matters that are inherently uncertain and may change in subsequent periods. Changes that may be required in
the underlying assumptions or estimates in these areas could have a material impact on our current and future financial condition and results
of operations.
Management has discussed the development and selection of each critical accounting policy and estimate with the Audit
Committee of the Board of Directors. Our critical accounting policies and estimates include the Investment Portfolio Valuation and
Revenue Recognition policies described below. Our significant accounting policies are described in greater detail in Note B to the
consolidated financial statements included in “Item 8.– Consolidated Financial Statements and Supplementary Data” of this Annual Report
on Form 10-K.
Investment Portfolio Valuation
The most significant determination inherent in the preparation of our consolidated financial statements is the valuation of our
Investment Portfolio and the related amounts of unrealized appreciation and depreciation. We consider this determination to be a critical
accounting estimate, given the significant judgments and subjective measurements required. As of both December 31, 2021 and 2020, our
Investment Portfolio valued at fair value represented approximately 97% of our total assets. We are required to report our investments at
fair value. We follow the provisions of FASB ASC 820, Fair Value Measurements and Disclosures (“ASC 820”). ASC 820 defines fair
value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair
value and enhances disclosure requirements for fair value measurements. ASC 820 requires us to assume that the portfolio investment is to
be sold in the principal market to independent market participants, which may be a hypothetical market. Market participants are defined as
buyers and sellers in the principal market that are independent, knowledgeable and willing and able to transact. See “Note B.1.—Valuation
of the Investment Portfolio” in the notes to consolidated financial statements for a detailed discussion of our investment portfolio valuation
process and procedures.
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Due to the inherent uncertainty in the valuation process, our determination of fair value for our Investment Portfolio may differ
materially from the values that would have been determined had a ready market for the securities existed. In addition, changes in the market
environment, portfolio company performance and other events that may occur over the lives of the investments may cause the gains or
losses ultimately realized on these investments to be materially different than the valuations currently assigned. We determine the fair value
of each individual investment and record changes in fair value as unrealized appreciation or depreciation.
In December 2020, the SEC adopted Rule 2a-5 under the 1940 Act, which permits a BDC’s board of directors to designate its
executive officers or investment adviser as a valuation designee to determine the fair value for its investment portfolio, subject to the active
oversight of the board. Our Board of Directors has approved policies and procedures pursuant to Rule 2a-5 (the “Valuation Procedures”)
and has designated a group of our executive officers to serve as the Board’s valuation designee. We adopted the Valuation Procedures
effective April 1, 2021. We believe our Investment Portfolio as of December 31, 2021 and 2020 approximates fair value as of those dates
based on the markets in which we operate and other conditions in existence on those reporting dates .
Revenue Recognition
Interest and Dividend Income
We record interest and dividend income on the accrual basis to the extent amounts are expected to be collected. Dividend income
is recorded as dividends are declared by the portfolio company or at the point an obligation exists for the portfolio company to make a
distribution. In accordance with our valuation policies, we evaluate accrued interest and dividend income periodically for collectability.
When a loan or debt security becomes 90 days or more past due, and if we otherwise do not expect the debtor to be able to service all of its
debt or other obligations, we will generally place the loan or debt security on non-accrual status and cease recognizing interest income on
that loan or debt security until the borrower has demonstrated the ability and intent to pay contractual amounts due. If a loan or debt
security’s status significantly improves regarding the debtor’s ability to service the debt or other obligations, or if a loan or debt security is
sold or written off, we remove it from non-accrual status.
Fee Income
We may periodically provide services, including structuring and advisory services, to our portfolio companies or other third
parties. For services that are separately identifiable and evidence exists to substantiate fair value, fee income is recognized as earned, which
is generally when the investment or other applicable transaction closes. Fees received in connection with debt financing transactions for
services that do not meet these criteria are treated as debt origination fees and are deferred and accreted into income over the life of the
financing.
Payment-in-Kind (“PIK”) Interest and Cumulative Dividends
We hold certain debt and preferred equity instruments in our Investment Portfolio that contain PIK interest and cumulative
dividend provisions. The PIK interest, computed at the contractual rate specified in each debt agreement, is periodically added to the
principal balance of the debt and is recorded as interest income. Thus, the actual collection of this interest may be deferred until the time of
debt principal repayment. Cumulative dividends are recorded as dividend income, and any dividends in arrears are added to the balance of
the preferred equity investment. The actual collection of these dividends in arrears may be deferred until such time as the preferred equity is
redeemed or sold. To maintain RIC tax treatment (as discussed in “Note B.9. – Income Taxes” in the notes to the consolidated financial
statements), these non-cash sources of income may need to be paid out to stockholders in the form of distributions, even though we may not
have collected the PIK interest and cumulative dividends in cash. We stop accruing PIK interest and cumulative dividends and write off any
accrued and uncollected interest and dividends in arrears when we determine that such PIK interest and dividends in arrears are no longer
collectible. For the years ended December 31, 2021, 2020 and 2019 (i) approximately 2.6%, 2.8% and 2.0%, respectively, of our total
investment income was attributable to PIK interest income not paid currently in cash and (ii) approximately 0.6%, 0.8% and 1.0%,
respectively, of our total investment income was attributable to cumulative dividend income not paid currently in cash.
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INVESTMENT PORTFOLIO COMPOSITION
The following tables summarize the composition of our total combined LMM portfolio investments, Private Loan portfolio
investments and Middle Market portfolio investments at cost and fair value by type of investment as a percentage of the total combined
LMM portfolio investments, Private Loan portfolio investments and Middle Market portfolio investments as of December 31, 2021 and
2020 (this information excludes the Other Portfolio, short-term portfolio investments and the External Investment Manager, which are
discussed in the “Investment Portfolio Activity” section above).
Cost:
First lien debt
Equity
Second lien debt
Equity warrants
Other
Fair Value:
First lien debt
Equity
Second lien debt
Equity warrants
Other
December 31, 2021
December 31, 2020
82.5 %
16.2 %
0.6 %
0.3 %
0.4 %
100.0 %
77.0 %
19.0 %
2.7 %
0.5 %
0.8 %
100.0 %
December 31, 2021
December 31, 2020
74.3 %
24.6 %
0.5 %
0.2 %
0.4 %
100.0 %
70.0 %
26.4 %
2.4 %
0.4 %
0.8 %
100.0 %
Our LMM portfolio investments, Private Loan portfolio investments and Middle Market portfolio investments carry a number of
risks including: (1) investing in companies which may have limited operating histories and financial resources; (2) holding investments that
generally are not publicly traded and which may be subject to legal and other restrictions on resale; and (3) other risks common to investing
in below investment grade debt and equity investments in our Investment Portfolio. Please see “Risk Factors — Risks Related to our
Investments” for a more complete discussion of the risks involved with investing in our Investment Portfolio.
PORTFOLIO ASSET QUALITY
We utilize an internally developed investment rating system to rate the performance of each LMM portfolio company and to
monitor our expected level of returns on each of our LMM investments in relation to our expectations for the portfolio company. The
investment rating system takes into consideration various factors, including each investment’s expected level of returns, the collectability of
our debt investments and the ability to receive a return of the invested capital in our equity investments, comparisons to competitors and
other industry participants, the portfolio company’s future outlook and other factors that are deemed to be significant to the portfolio
company.
As of December 31, 2021, our total Investment Portfolio had nine investments on non-accrual status, which comprised
approximately 0.7% of its fair value and 3.3% of its cost. As of December 31, 2020, our total Investment Portfolio had seven investments
on non-accrual status, which comprised approximately 1.3% of its fair value and 3.6% of its cost.
The operating results of our portfolio companies are impacted by changes in the broader fundamentals of the United States
economy. In periods during which the United States economy contracts, as it did due to the impact of COVID-19, it is likely that the
financial results of small to mid-sized companies, like those in which we invest, could experience deterioration or limited growth from
current levels, which could ultimately lead to difficulty in meeting their debt service requirements, to an increase in defaults on our debt
investments or in realized losses on our investments and to difficulty in maintaining historical dividend payment rates and unrealized
appreciation on our equity investments. Consequently, we can provide no assurance that the performance of certain portfolio companies
will not be negatively impacted by future economic cycles or other conditions, which could also have a negative impact on our future
results.
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DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
Set forth below is a comparison of the results of operations and changes in financial condition for the years ended
December 31, 2021 and 2020. The comparison of, and changes between, the fiscal years ended December 31, 2020 and 2019 can be found
within “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations” included in Part II of our annual
report on Form 10-K for the fiscal year ended December 31, 2020, which is incorporated herein by reference.
Comparison of the years ended December 31, 2021 and 2020
Total investment income
Total expenses
Net investment income
Net realized gain (loss) from investments
Net realized loss on extinguishment of debt
Net unrealized appreciation (depreciation) from investments
Unrealized appreciation from SBIC debentures
Total net unrealized appreciation (depreciation)
Income tax benefit (provision)
Net increase in net assets resulting from operations
Year Ended
December 31,
Net Change
2021
2020
Amount
%
(dollars in thousands)
$
$
$
289,047
(106,382)
182,665
45,336
—
135,624
—
135,624
(32,863)
330,762
$
Year Ended
December 31,
222,614
(84,669)
137,945
(115,947)
(534)
(6,082)
460
(5,622)
13,541
29,383
$
$
66,433
(21,713)
44,720
161,283
534
141,706
(460)
141,246
(46,404)
301,379
30 %
26 %
32 %
NM
NM
NM
NM
NM
NM
NM
Net Change
2021
2020
Amount
%
(dollars in thousands, except per share amounts)
Net investment income
Share‑based compensation expense
Distributable net investment income(a)
Net investment income per share—Basic and diluted
Distributable net investment income per share—Basic and
diluted(a)
$
$
$
$
182,665
10,887
193,552
2.65
2.81
$
$
$
$
137,945
10,828
148,773
2.10
2.26
$
$
$
$
44,720
59
44,779
0.55
0.55
32 %
1 %
30 %
26 %
24 %
NM Net Change % not
meaningful
(a) Distributable net investment income is net investment income as determined in accordance with U.S. GAAP, excluding the impact of
share-based compensation expense which is non-cash in nature. We believe presenting distributable net investment income and related
per share amounts is useful and appropriate supplemental disclosure of information for analyzing our financial performance since share-
based compensation does not require settlement in cash. However, distributable net investment income is a non-U.S. GAAP measure
and should not be considered as a replacement to net investment income and other earnings measures presented in accordance with
U.S. GAAP. Instead, distributable net investment income should be reviewed only in connection with such U.S. GAAP measures in
analyzing our financial performance. A reconciliation of net investment income in accordance with U.S. GAAP to distributable net
investment income is presented in the table above.
Investment Income
Total investment income for the year ended December 31, 2021 was $289.0 million, a 30% increase from the $222.6 million of
total investment income for the prior year. The following table provides a summary of the changes in the comparable period activity.
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Year Ended
December 31,
Net Change
2021
2020
Amount
%
Interest Income
Dividend Income
Fee Income
Total Investment Income
$
$
193,667
81,153
14,227
289,047
$
$
$
(dollars in thousands)
173,676
36,373
12,565
222,614
$
19,991
44,780
1,662
66,433
12 % (a)
123 % (b)
13 % (c)
30 % (d)
(a) The increase in interest income was primarily due to (i) a $17.4 million increase related to higher average levels of Investment Portfolio
debt investments and (ii) a $2.5 million increase related to repayment, repricing and other activities related to certain Investment
Portfolio debt investments.
(b) The increase in dividend income from Investment Portfolio equity investments was primarily a result of (i) improved operating results,
financial condition and liquidity positions of certain of our portfolio companies following the impacts of the COVID-19 pandemic in
2020 and (ii) a $11.8 million increase related to elevated dividend income considered to be less consistent or non-recurring.
(c) The increase in fee income was primarily due to a $3.4 million increase in fees from origination of debt investments resulting from
higher new investment activity, partially offset by a $2.3 million decrease in fees from refinancing and prepayment of debt investments.
(d) The increase in total investment income includes the impact of certain income considered less consistent or non-recurring, including (i)
a $11.8 million increase in dividend income and (ii) a $0.3 million net increase in interest income and fee income related to accelerated
prepayment, repricing and other activity related to certain Investment Portfolio debt investments.
Expenses
Total expenses for the year ended December 31, 2021 were $106.4 million, a 26% increase from $84.7 million in the prior year.
The following table provides a summary of the changes in the comparable period activity.
Employee compensation expenses
Deferred compensation plan expense
Total compensation expense
G&A expense
Interest expense
Share-based compensation expense
Gross expenses
Allocation of expenses to the external investment
manager
Total expenses
$
$
Year Ended
December 31,
2021
$
33,002
1,440
34,442
12,494
58,836
10,887
116,659
$
17,504
1,477
18,981
12,702
49,587
10,828
92,098
(10,277)
106,382
$
(7,429)
84,669
$
15,498
(37)
15,461
(208)
9,249
59
24,561
(2,848)
21,713
89 % (a)
(3) %
81 %
(2) %
19 % (b)
1 %
27 %
38 % (c)
26 %
2020
Amount
(dollars in thousands)
Net Change
%
(a) The increase in employee compensation expenses was primarily due to an increase in our variable incentive compensation accruals
related to our improved operating results in 2021.
(b) The increase in interest expense is primarily related to increased leverage levels to support our investment activity in the year ended
December 31, 2021 as compared to the prior year. These borrowings included (i) an aggregate of $500.0 million in aggregate principal
amount of our 3.00% Notes issued in January and October 2021 and (ii) an additional $125.0 million aggregate principal amount which
we issued under our 5.20% Notes in July 2020, partially offset by decreased interest expense relating to our Credit Facility due to the
lower average balance outstanding and the lower average interest rate.
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(c) The increase in the allocation of expenses to the External Investment Manager primarily relates to the impact of the transaction in
October 2020, whereby the External Investment Manager became the sole investment adviser to MSC Income and the increased assets
under management by the External Investment Manager.
Net Investment Income
Net investment income for the year ended December 31, 2021 increased 32% to $182.7 million, or $2.65 per share, compared to
net investment income of $137.9 million, or $2.10 per share, for the prior year. The increase in net investment income was principally
attributable to the increase in total investment income, partially offset by higher operating expenses, both as discussed above. The increase
in net investment income per share reflects these changes, as well as the increase in weighted average shares outstanding for the year ended
December 31, 2021, primarily due to shares issued through the ATM Program (as defined in “—Liquidity and Capital Resources—Capital
Resources” below), shares issued pursuant to our equity incentive plans and shares issued pursuant to our dividend reinvestment plan. The
increase in net investment income on a per share basis includes the impacts of an increase of $0.17 per share due to the increase in
investment income from certain dividend income activity considered less consistent or non-recurring, as discussed above.
Distributable Net Investment Income
Distributable net investment income for the year ended December 31, 2021 increased 30% to $193.6 million, or $2.81 per share,
compared with $148.8 million, or $2.26 per share, in the prior year. The increase in distributable net investment income was primarily due
to the increased level of total investment income, partially offset by higher operating expenses, both as discussed above. The increase in
distributable net investment income on a per share basis for the year ended December 31, 2021 also reflects the impacts of the increase in
investment income from certain dividend activity considered less consistent or non-recurring and a greater number of average shares
outstanding compared to the prior year, both as discussed above.
Net Realized Gain (Loss) from Investments
The following table provides a summary of the primary components of the total net realized gain on investments of $45.3
million for the year ended December 31, 2021:
Full Exits
Partial Exits
Restructures
Net
Gain/(Loss)
# of
Investments
Net
Gain/(Loss)
# of
Investments
Net
Gain/(Loss)
# of
Investments
Other (a)
Net
Gain/(Loss)
Total (a)
Net
Gain/(Loss)
Year Ended December 31, 2021
LMM Portfolio
Private Loan Portfolio
Middle Market Portfolio
Other Portfolio
Short-term Portfolio
Total net realized gain/(loss)
$
$
51,019
5,547
(3,749)
(4,449)
-
48,368
7
2
3
1
-
13
$
$
-
-
6,153
5,920
-
12,073
(dollars in thousands)
-
-
1
4
-
5
$
$
(10,925)
-
(4,528)
-
-
(15,453)
1
-
1
-
-
2
$
$
(493) $
45
464
351
(19)
348
$
39,601
5,592
(1,660)
1,822
(19)
45,336
(a) Other activity includes realized gains and losses from transactions involving 27 portfolio companies which are not considered to be
significant individually or in the aggregate.
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The following table provides a summary of the primary components of the total net realized loss on investments of $115.9
million for the year ended December 31, 2020:
Full Exits
Partial Exits
Restructures
Net
Gain/(Loss)
# of
Investments
Net
Gain/(Loss)
# of
Investments
Net
Gain/(Loss)
# of
Investments
Other (a)
Net
Gain/(Loss)
Total (a)
Net
Gain/(Loss)
Year Ended December 31, 2020
LMM Portfolio
Private Loan Portfolio
Middle Market Portfolio
Other Portfolio
Total Net Realized Gain/(Loss)
$
$
(5,937)
(29,075)
(22,503)
-
(57,514)
5
2
6
-
13
$
$
(12,880)
-
-
-
(12,880)
(dollars in thousands)
$
5
-
-
-
5
$
-
(14,914)
(30,594)
-
(45,509)
-
2
4
-
6
$
$
(262) $
(627)
(58)
903
(44) $
(19,079)
(44,616)
(53,154)
903
(115,947)
(a) Other activity includes realized gains and losses from transactions involving 37 portfolio companies which are not considered to be
significant individually or in the aggregate.
Net Unrealized Appreciation (Depreciation)
The following table provides a summary of the total net unrealized appreciation of $135.6 million for the year ended
December 31, 2021:
Accounting reversals of net unrealized (appreciation) depreciation
recognized in prior periods due to net realized (gains / income) losses
recognized during the current period
Net unrealized appreciation (depreciation) relating to portfolio
investments
Total net unrealized appreciation (depreciation) relating to portfolio
investments
LMM(a)
Year Ended December 31, 2021
Private
Loan
Middle
Market
(dollars in millions)
Other
Total
$ (27.5) $
(3.7) $
1.5
$
4.2
$
(25.5)
107.2
17.2
(3.7)
40.4 (b)
161.1
$
79.7
$
13.5
$
(2.2) $
44.6
$ 135.6
(a)
Includes unrealized appreciation on 43 LMM portfolio investments and unrealized depreciation on 23 LMM portfolio investments.
(b)
Includes (i) $23.7 million of unrealized appreciation relating to the External Investment Manager and (ii) $16.3 million of net unrealized
appreciation relating to the Other Portfolio.
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The following table provides a summary of the total net unrealized depreciation of $5.6 million for the year ended
December 31, 2020:
Accounting reversals of net unrealized (appreciation) depreciation
recognized in prior periods due to net
realized (gains / income) losses recognized during the current period
Net unrealized appreciation (depreciation) relating to portfolio
investments
Total net unrealized appreciation (depreciation) relating to portfolio
investments
Unrealized appreciation relating to SBIC debentures (c)
Total net unrealized depreciation
LMM(a)
Year Ended December 31, 2020
Private
Loan
Middle
Market
(dollars in millions)
Other
Total
$
11.0
$
48.4
$
50.0
$
0.0
$
109.4
(34.7)
(34.6)
(43.1)
(3.0) (b)
(115.5)
$ (23.7) $
13.7
$
6.9
$
(3.0)
$
$
(6.1)
0.5
(5.6)
(a)
Includes unrealized appreciation on 31 LMM portfolio investments and unrealized depreciation on 34 LMM portfolio
investments.
(b)
Includes $16.5 million of net unrealized depreciation relating to the Other Portfolio, partially offset by $12.7 million of unrealized
appreciation relating to the External Investment Manager.
(c) Relates to unrealized depreciation on the SBIC debentures previously issued by Main Street Capital II, LP, a former wholly owned
SBIC whose activities have been wound down, which were accounted for on a fair value basis.
Income Tax Benefit (Provision)
The income tax provision for the year ended December 31, 2021 of $32.9 million principally consisted of (i) a deferred tax
provision of $27.1 million, which is primarily the result of the net activity relating to our portfolio investments held in our Taxable
Subsidiaries, including changes in loss carryforwards, changes in net unrealized appreciation/depreciation and other temporary and
permanent book-tax differences, and (ii) a current tax provision of $5.7 million related to a $2.6 million provision for excise tax on our
estimated undistributed taxable income and a $3.1 million provision for current U.S. federal and state income taxes.
The income tax benefit for the year ended December 31, 2020 of $13.5 million principally consisted of a deferred tax benefit of
$14.1 million, which is primarily the result of the net activity relating to our portfolio investments held in our Taxable Subsidiaries,
including changes in loss carryforwards, changes in net unrealized appreciation/depreciation and other temporary and permanent book-tax
differences, partially offset by a current tax provision of $0.5 million, primarily related to a $1.6 million provision for excise tax on our
estimated undistributed taxable income and a $1.1 million benefit for current U.S. federal and state income taxes.
Net Increase (Decrease) in Net Assets Resulting from Operations
The net increase in net assets resulting from operations for the year ended December 31, 2021 was $330.8 million, or $4.80 per
share, compared with $29.4 million, or $0.45 per share, during the year ended December 31, 2020. The tables above provide a summary of
the reasons for the change in Net Increase in Net Assets Resulting from Operations for the year ended December 31, 2021 as compared to
the year ended December 31, 2020.
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Liquidity and Capital Resources
This “Liquidity and Capital Resources” section should be read in conjunction with the “COVID-19 Update” section above.
Cash Flows
For the year ended December 31, 2021, we realized a net increase in cash and cash equivalents of $0.7 million, which is the net
result of $515.4 million of cash used in our operating activities and $516.1 million of cash provided by our financing activities.
The $515.4 million of cash used in our operating activities resulted primarily from cash uses totaling $1,763.8 million for the
funding of new and follow-on portfolio company investments and settlement of accruals for portfolio investments existing as of
December 31, 2020, partially offset by (i) cash proceeds totaling $1,054.5 million from the sales and repayments of debt investments and
sales of and return on capital from equity investments, (ii) cash flows that we generated from the operating profits earned totaling
$171.7 million, which is our distributable net investment income, excluding the non-cash effects of the accretion of unearned income,
payment-in-kind interest income, cumulative dividends and the amortization expense for deferred financing costs, and (iii) cash proceeds of
$22.2 million related to changes in other assets and liabilities.
The $516.1 million of cash provided by our financing activities principally consisted of (i) $500.0 million in cash proceeds from
the initial and follow-on issuances of the 3.00% Notes, (ii) $98.9 million in net cash proceeds from our ATM Program (described below)
and direct stock purchase plan, (iii) $80.2 million in cash proceeds from the issuance of SBIC debentures and (iv) $51.0 million in net
proceeds from the Credit Facility, partially offset by (i) $160.5 million in cash dividends paid to stockholders, (ii) $40.0 million in
repayment of SBIC debentures, (iii) $8.2 million for debt issuance premiums, net of payments of deferred debt issuance costs, SBIC
debenture fees and other costs, and (iv) $5.3 million for purchases of vested restricted stock from employees to satisfy their tax withholding
requirements upon the vesting of such restricted stock.
For the year ended December 31, 2020, we experienced a net decrease in cash and cash equivalents in the amount of $23.3 million,
which is the net result of $54.1 million of cash used in our operating activities and $30.8 million of cash provided by our financing
activities.
The $54.1 million of cash used in our operating activities resulted primarily from cash uses totaling $669.0 million for the funding
of new and follow-on portfolio company investments, including the transaction pursuant to which the External Investment Manager became
the sole investment adviser to MSC Income, and settlement of accruals for portfolio investments existing as of December 31, 2019, partially
offset by (i) cash proceeds totaling $478.0 million from the sales and repayments of debt investments and sales of and return on capital of
equity investments, (ii) cash flows we generated from the operating profits earned totaling $131.5 million, which is our distributable net
investment income, excluding the non-cash effects of the accretion of unearned income, payment-in-kind interest income, cumulative
dividends and the amortization expense for deferred financing costs, and (iii) cash proceeds of $5.4 million related to changes in other
assets and liabilities.
The $30.8 million of cash provided by our financing activities principally consisted of (i) $125.0 million in proceeds from the
follow-on issuance of the 5.20% Notes in July 2020, (ii) $84.4 million in net cash proceeds from our ATM Program (described below) and
direct stock purchase plan, (iii) $40.0 million in cash proceeds from the issuance of SBIC debentures and (iv) $0.7 million for debt issuance
premiums, net of payments of deferred debt issuance costs, SBIC debenture fees and other costs, partially offset by (i) $144.5 million in
cash dividends paid to stockholders, (ii) $42.0 million in repayment of SBIC debentures, (iii) $31.0 million in net repayments on the Credit
Facility and (iv) $1.9 million for purchases of vested restricted stock from employees to satisfy their tax withholding requirements upon the
vesting of such restricted stock.
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Capital Resources
As of December 31, 2021, we had $32.6 million in cash and cash equivalents and $535.0 million of unused capacity under the
Credit Facility, before considering the accordion feature discussed below, which we maintain to support our investment and operating
activities. As of December 31, 2021, our net asset value totaled $1,788.8 million, or $25.29 per share.
The Credit Facility provides additional liquidity to support our investment and operational activities. As of December 31, 2021,
the Credit Facility included total commitments of $855.0 million from a diversified group of 18 lenders, held a maturity date in April 2026
and contained an accordion feature which allowed us to increase the total commitments under the facility to up to $1,200.0 million from
new and existing lenders on the same terms and conditions as the existing commitments. As of December 31, 2021, borrowings under the
Credit Facility bore interest, subject to our election and resetting on a monthly basis on the first of each month, on a per annum basis at a
rate equal to the applicable LIBOR rate (0.1% as of December 31, 2021) plus (i) 1.875% (or the applicable base rate (Prime Rate of 3.25%
as of December 31, 2021) plus 0.875%) as long as we meet certain agreed upon excess collateral and maximum leverage requirements or
(ii) 2.0% (or the applicable base rate plus 1.0%) otherwise. We pay unused commitment fees of 0.25% per annum on the unused lender
commitments under the Credit Facility. The Credit Facility is secured by a first lien on the assets of MSCC and its subsidiaries, excluding
the equity ownership or assets of the Funds and the External Investment Manager. As of December 31, 2021, the Credit Facility contained
certain affirmative and negative covenants, including but not limited to: (i) maintaining minimum liquidity, (ii) maintaining an interest
coverage ratio of at least 2.0 to 1.0, (iii) maintaining a 1940 Act asset coverage ratio of at least 1.5 to 1.0, (iv) maintaining a minimum
tangible net worth and (v) maintaining a minimum asset coverage ratio of 200% with respect to the consolidated assets (with certain
limitations on the contribution of equity in financing subsidiaries as specified therein) of MSCC and the guarantors under the Credit Facility
to the secured debt of MSCC and the guarantors. As of December 31, 2021, we had $320.0 million in borrowings outstanding under the
Credit Facility, the interest rate on the Credit Facility was 2.0% (based on the LIBOR rate of 0.1% as of the most recent reset date of
January 1, 2022 plus 1.875%) and we were in compliance with all financial covenants of the Credit Facility.
Through the Funds, we have the ability to issue SBIC debentures guaranteed by the SBA at favorable interest rates and favorable
terms and conditions. Under existing SBIC regulations, SBA-approved SBICs under common control have the ability to issue debentures
guaranteed by the SBA up to a regulatory maximum amount of $350.0 million. Under existing SBA-approved commitments, we had
$350.0 million of outstanding SBIC debentures guaranteed by the SBA as of December 31, 2021 through our wholly owned SBICs, which
bear a weighted-average annual fixed interest rate of approximately 2.9%, paid semiannually, and mature ten years from issuance. The first
maturity related to our SBIC debentures occurs in 2023, and the weighted-average remaining duration is approximately 6.1 years as of
December 31, 2021. During the year ended December 31, 2021, Main Street issued $80.2 million of SBIC debentures and opportunistically
prepaid $40.0 million of existing SBIC debentures that were scheduled to mature over the next year as part of an effort to manage the
maturity dates of the oldest SBIC debentures. Debentures guaranteed by the SBA have fixed interest rates that equal prevailing 10-year
Treasury Note rates plus a market spread and have a maturity of ten years with interest payable semiannually. The principal amount of the
debentures is not required to be paid before maturity, but may be pre-paid at any time with no prepayment penalty. We expect to maintain
SBIC debentures under the SBIC program in the future, subject to periodic repayments and borrowings, in an amount up to the regulatory
maximum amount for affiliated SBIC funds.
In November 2017, we issued $185.0 million in aggregate principal amount of 4.50% unsecured notes due December 1, 2022 (the
“4.50% Notes”) at an issue price of 99.16%. The 4.50% Notes are unsecured obligations and rank pari passu with our current and future
unsecured obligations and rank pari passu with our current and future unsecured indebtedness; senior to any of our future indebtedness that
expressly provides it is subordinated to the 4.50% Notes; effectively subordinated to all of our existing and future secured indebtedness, to
the extent of the value of the assets securing such indebtedness, including borrowings under our Credit Facility; and structurally
subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries, including without limitation, the
indebtedness of the Funds. The 4.50% Notes may be redeemed in whole or in part at any time at our option subject to certain make-whole
provisions. The 4.50% Notes bear interest at a rate of 4.50% per year payable semiannually on June 1 and December 1 of each year. We
may from time to time repurchase the 4.50% Notes in accordance with the
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1940 Act and the rules promulgated thereunder. As of December 31, 2021, the outstanding principal balance of the 4.50% Notes was
$185.0 million.
The indenture governing the 4.50% Notes (the “4.50% Notes Indenture”) contains certain covenants, including covenants
requiring our compliance with (regardless of whether we are subject to) the asset coverage requirements set forth in Section 18(a)(1)(A) as
modified by Section 61(a)(1) of the 1940 Act, as well as covenants requiring us to provide financial information to the holders of the 4.50%
Notes and the trustee if we cease to be subject to the reporting requirements of the Exchange Act. These covenants are subject to limitations
and exceptions that are described in the 4.50% Notes Indenture. As of December 31, 2021, we were in compliance with these covenants.
In April 2019, we issued $250.0 million in aggregate principal amount of 5.20% unsecured notes due May 1, 2024 (the “5.20%
Notes”) at an issue price of 99.125%. Subsequently, in December 2019, we issued an additional $75.0 million in aggregate principal amount
of the 5.20% Notes at an issue price of 105.0%. Also, in July 2020, we issued an additional $125.0 million in aggregate principal amount of
the 5.20% Notes at an issue price of 102.674%. The 5.20% Notes issued in December 2019 and July 2020 have identical terms as, and are a
part of a single series with, the 5.20% Notes issued in April 2019. The aggregate net proceeds from the 5.20% Notes issuances were used to
repay a portion of the borrowings outstanding under the Credit Facility. The 5.20% Notes are unsecured obligations and rank pari passu
with our current and future unsecured indebtedness; senior to any of our future indebtedness that expressly provides it is subordinated to the
5.20% Notes; effectively subordinated to all of our existing and future secured indebtedness, to the extent of the value of the assets securing
such indebtedness, including borrowings under our Credit Facility; and structurally subordinated to all existing and future indebtedness and
other obligations of any of our subsidiaries, including without limitation, the indebtedness of the Funds. The 5.20% Notes may be redeemed
in whole or in part at any time at our option subject to certain make-whole provisions. The 5.20% Notes bear interest at a rate of 5.20%
per year payable semiannually on May 1 and November 1 of each year. We may from time to time repurchase the 5.20% Notes in
accordance with the 1940 Act and the rules promulgated thereunder. As of December 31, 2021, the outstanding principal balance of the
5.20% Notes was $450.0 million.
The indenture governing the 5.20% Notes (the “5.20% Notes Indenture”) contains certain covenants, including covenants
requiring our compliance with (regardless of whether we are subject to) the asset coverage requirements set forth in Section 18(a)(1)(A) as
modified by Section 61(a)(1) of the 1940 Act, as well as covenants requiring us to provide financial information to the holders of the 5.20%
Notes and the trustee if we cease to be subject to the reporting requirements of the Exchange Act. These covenants are subject to limitations
and exceptions that are described in the 5.20% Notes Indenture. As of December 31, 2021, we were in compliance with these covenants.
In January 2021, we issued $300.0 million in aggregate principal amount of 3.00% unsecured notes due July 14, 2026 (the “3.00%
Notes”) at an issue price of 99.004%. In October 2021, we issued an additional $200.0 million in aggregate principal amount of the 3.00%
Notes at an issue price of 101.741%. The 3.00% Notes issued in October 2021 have identical terms as, and are a part of a single series with,
the 3.00% Notes issued in January 2021. The 3.00% Notes are unsecured obligations and rank pari passu with our current and future
unsecured indebtedness; senior to any of our future indebtedness that expressly provides it is subordinated to the 3.00% Notes; effectively
subordinated to all of our existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness,
including borrowings under our Credit Facility; and structurally subordinated to all existing and future indebtedness and other obligations of
any of our subsidiaries, including without limitation, the indebtedness of the Funds. The 3.00% Notes may be redeemed in whole or in part
at any time at our option subject to certain make whole provisions. The 3.00% Notes bear interest at a rate of 3.00% per year payable
semiannually on January 14 and July 14 of each year. We may from time to time repurchase the 3.00% Notes in accordance with the 1940
Act and the rules promulgated thereunder. As of December 31, 2021, the outstanding principal balance of the 3.00% Notes was $500.0
million.
The indenture governing the 3.00% Notes (the “3.00% Notes Indenture”) contains certain covenants, including covenants
requiring our compliance with (regardless of whether we are subject to) the asset coverage requirements set forth in Section 18(a)(1)(A) as
modified by Section 61(a)(1) of the 1940 Act, as well as covenants requiring us to provide financial information to the holders of the 3.00%
Notes and the trustee if we cease to be subject to the reporting requirements of the Exchange Act. These covenants are subject to limitations
and exceptions that are described in the 3.00% Notes Indenture. As of December 31, 2021, we were in compliance with these covenants.
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We maintain a program with certain selling agents through which we can sell shares of our common stock by means of at-the-
market offerings from time to time (the “ATM Program”).
During the year ended December 31, 2021, we sold 2,332,795 shares of our common stock at a weighted-average price of $42.71
per share and raised $99.6 million of gross proceeds under the ATM Program. Net proceeds were $98.4 million after commissions to the
selling agents on shares sold and offering costs. As of December 31, 2021, sales transactions representing 36,136 shares had not settled and
are not included in shares issued and outstanding on the face of the consolidated balance sheet but are included in the weighted-average
shares outstanding in the consolidated statement of operations and in the shares used to calculate net asset value per share. As of
December 31, 2021, 3,380,577 shares remained available for sale under the ATM Program.
During the year ended December 31, 2020, we sold 2,645,778 shares of our common stock at a weighted-average price of $32.10
per share and raised $84.9 million of gross proceeds under the ATM Program. Net proceeds were $83.8 million after commissions to the
selling agents on shares sold and offering costs.
We anticipate that we will continue to fund our investment activities through existing cash and cash equivalents, cash flows
generated through our ongoing operating activities, utilization of available borrowings under our Credit Facility, and a combination of
future issuances of debt and equity capital. Our primary uses of funds will be investments in portfolio companies, operating expenses and
cash distributions to holders of our common stock.
We periodically invest excess cash balances into marketable securities and idle funds investments. The primary investment
objective of marketable securities and idle funds investments is to generate incremental cash returns on excess cash balances prior to
utilizing those funds for investment in our LMM, Private Loan and Middle Market portfolio investments. Marketable securities and idle
funds investments generally consist of debt investments, independently rated debt investments, certificates of deposit with financial
institutions, diversified bond funds and publicly traded debt and equity investments. We may also invest in short-term portfolio investments
that are atypical of our LMM, Private Loan and Middle Market portfolio investments in that they are intended to be a short-term
deployment of capital and are more liquid than investments within the other portfolios. Short-term portfolio investments consist primarily
of investments in secured debt investments and independently rated debt investments.
If our common stock trades below our net asset value per share, we will generally not be able to issue additional common stock at
the market price, unless our stockholders approve such a sale and our Board of Directors makes certain determinations. We did not seek
stockholder authorization to sell shares of our common stock below the then current net asset value per share of our common stock at our
2021 Annual Meeting of Stockholders, and have not sought such authorization since 2012, because our common stock price per share has
generally traded significantly above the net asset value per share of our common stock since 2011. We would therefore need future
approval from our stockholders to issue shares below the then current net asset value per share.
In order to satisfy the Code requirements applicable to a RIC, we intend to distribute to our stockholders, after consideration and
application of our ability under the Code to carry forward certain excess undistributed taxable income from one tax year into the next
tax year, substantially all of our taxable income. In addition, as a BDC, we generally are required to meet a coverage ratio of total assets to
total senior securities, which include borrowings and any preferred stock we may issue in the future, of at least 200% (or 150% if certain
requirements are met). This requirement limits the amount that we may borrow. In January 2008, we received an exemptive order from the
SEC to exclude SBA-guaranteed debt securities issued by the Funds and any other wholly owned subsidiaries of ours which operate as
SBICs from the asset coverage requirements of the 1940 Act as applicable to us, which, in turn, enables us to fund more investments with
debt capital.
Although we have been able to secure access to additional liquidity, including through the Credit Facility, public debt issuances,
leverage available through the SBIC program and equity offerings, there is no assurance that debt or equity capital will be available to us in
the future on favorable terms, or at all.
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Recently Issued or Adopted Accounting Standards
From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that are adopted by
us as of the specified effective date. We believe that the impact of recently issued standards and any that are not yet effective will not have
a material impact on our consolidated financial statements upon adoption. For a description of recently issued or adopted accounting
standards, see Note B.13 to the consolidated financial statements included in “Item 8. Consolidated Financial Statements and
Supplementary Data” of this Annual Report on Form 10-K.
Inflation
Inflation has not historically had a significant effect on our results of operations in any of the reporting periods presented herein.
However, our portfolio companies have experienced, specifically including over the last few quarters as a result of the COVID-19
pandemic and related supply chain and labor issues, and may continue to experience, the increasing impacts of inflation on their operating
results, including periodic escalations in their costs for labor, raw materials and third-party services and required energy consumption.
These issues and challenges related to inflation are receiving significant attention from our investment teams and the management teams of
our portfolio companies as we work to manage these growing challenges. Prolonged or more severe impacts of inflation to our portfolio
companies could continue to impact their operating profits and, thereby, increase their borrowing costs, and as a result negatively impact
their ability to service their debt obligations and/or reduce their available cash for distributions. In addition, these factors could have a
negative impact on the fair value of our investments in these portfolio companies. The combined impacts of these impacts in turn could
negatively affect our results of operations.
Off-Balance Sheet Arrangements
We may be a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs
of our portfolio companies. These instruments include commitments to extend credit and fund equity capital and involve, to varying
degrees, elements of liquidity and credit risk in excess of the amount recognized in the balance sheet. At December 31, 2021, we had a total
of $236.3 million in outstanding commitments comprised of (i) sixty-seven investments with commitments to fund revolving loans that had
not been fully drawn or term loans with additional commitments not yet funded and (ii) ten investments with equity capital commitments
that had not been fully called.
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Contractual Obligations
As of December 31, 2021, the future fixed commitments for cash payments in connection with our SBIC debentures, the 4.50%
Notes, the 5.20% Notes, the 3.00% Notes and rent obligations under our office lease for each of the next five years and thereafter are as
follows (dollars in thousands):
SBIC debentures
Interest due on SBIC
debentures
4.50% Notes due 2022
Interest due on 4.50% Notes
due 2022
5.20% Notes due 2024
Interest due on 5.20% Notes
due 2024
3.00% Notes due 2026
Interest due on 3.00% Notes
due 2026
Operating Lease Obligation (1)
Total
2022
2023
$
— $ 16,000
$
10,133
185,000
9,899
—
2024
63,800
8,455
—
8,325
—
23,400
—
—
—
—
450,000
23,400
—
11,700
—
2025
2026
Thereafter
$
-
$
— $
270,200
$
Total
350,000
7,228
—
—
—
—
—
7,228
—
—
—
—
500,000
15,565
—
—
—
—
—
58,508
185,000
8,325
450,000
58,500
500,000
15,017
790
$ 242,665
15,000
804
$ 65,103
15,000
818
$ 549,773
15,000
832
$ 23,060
15,000
846
$ 523,074
15,000
933
301,698
90,017
5,023
$ 1,705,373
$
(1) Operating Lease Obligation means a rent payment obligation under a lease classified as an operating lease and disclosed pursuant to
ASC 842, as may be modified or supplemented.
As of December 31, 2021, we had $320.0 million in borrowings outstanding under our Credit Facility, and the Credit Facility is
scheduled to mature in April 2026.
Related Party Transactions
As discussed further above, the External Investment Manager is treated as a wholly owned portfolio company of MSCC and is
included as part of our Investment Portfolio. At December 31, 2021, we had a receivable of $5.6 million due from the External Investment
Manager, which included $3.3 million related primarily to operating expenses incurred by us as required to support the External Investment
Manager’s business and amounts due from the External Investment Manager to Main Street under a tax sharing agreement (see further
discussion in Note B.9. and Note D in the notes to the consolidated financial statements included in “Item 8. Consolidated Financial
Statements and Supplementary Data” of this Annual Report on Form 10-K) and $2.3 million of dividends declared but not paid by the
External Investment Manager. We have entered into an agreement with the External Investment Manager to share employees in connection
with its asset management business generally, and specifically for the External Investment Manager’s relationship with MSC Income and
its other clients. See Note A.1 and Note D in the notes to the consolidated financial statements included in “Item 8. Consolidated Financial
Statements and Supplementary Data” of this Annual Report on Form 10-K for more information regarding the External Investment
Manager.
From time to time, we may make investments in clients of the External Investment Manager in the form of debt or equity capital
on terms approved by our Board of Directors. In January 2021, we entered into a Term Loan Agreement with MSC Income (the “Term
Loan Agreement”). The Term Loan Agreement was unanimously approved by our Board, including each director who is not an “interested
person,” as such term is defined in Section 2(a)(19) of the 1940 Act and the board of directors of MSC Income, including each director who
is not an “interested person” of MSC Income or the External Investment Manager. The Term Loan Agreement initially provided for a term
loan of $40.0 million to MSC Income, bearing interest at a fixed rate of 5.00% per annum, and maturing in January 2026. The Term Loan
Agreement was amended in July 2021 to provide for borrowings up to an additional $35.0 million, $20.0 million of which was funded upon
signing of the amendment and $15.0 million available in two additional advances during the six months following the amendment date.
Borrowings under the Term Loan Agreement were expressly subordinated and junior in
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right of payment to all secured indebtedness of MSC Income. In October 2021, MSC Income fully repaid all borrowings outstanding under
the Term Loan Agreement and the Term Loan Agreement was terminated.
In December 2020, the External Investment Manager entered into an Investment Management Agreement with the Private Loan
Fund, pursuant to which the External Investment Manager provides investment advisory and management services to the Private Loan Fund
in exchange for an asset-based fee and certain incentive fees. The Private Loan Fund is a private investment fund exempt from registration
under the 1940 Act that co-invests with Main Street in Main Street’s Private Loan investment strategy. In connection with the Private Loan
Fund’s initial closing in December 2020, we committed to contribute up to $10.0 million as a limited partner and will be entitled to
distributions on such interest. In addition, certain of our officers and employees (and certain of their immediate family members) made
capital commitments to the Private Loan Fund as limited partners and therefore have direct pecuniary interests in the Private Loan Fund. In
February 2022, we increased our commitment to the Private Loan Fund from $10.0 million to $15.0 million. Our investment in the Private
Loan Fund was unanimously approved by our Board, including each director who is not an “interested person,” as such term is defined in
Section 2(a)(19) of the 1940 Act.
Additionally, we provided the Private Loan Fund with a revolving line of credit pursuant to an Unsecured Revolving Promissory
Note, dated February 5, 2021 and amended November 30, 2021 and December 29, 2021 (as amended, the “Private Loan Fund Loan”), in an
aggregate amount equal to the amount of limited partner capital commitments to the Private Loan Fund up to $85.0 million. Borrowings
under the Private Loan Fund Loan bore interest at a fixed rate of 5.00% per annum and matured on February 28, 2022. The Private Loan
Fund Loan was unanimously approved by our Board of Directors, including each director who is not an “interested person,” as such term is
defined in Section 2(a)(19) of the 1940 Act. In February 2022, the Private Loan Fund fully repaid all borrowings outstanding under the
Private Loan Fund Loan and the Private Loan Fund Loan was terminated.
In November 2015, our Board of Directors approved and adopted the Main Street Capital Corporation Deferred Compensation
Plan (the “2015 Deferred Compensation Plan”). The 2015 Deferred Compensation Plan became effective on January 1, 2016 and replaced
the Deferred Compensation Plan for Non-Employee Directors previously adopted by the Board of Directors in June 2013 (the “2013
Deferred Compensation Plan”). Under the 2015 Deferred Compensation Plan, non-employee directors and certain key employees may
defer receipt of some or all of their cash compensation and directors’ fees, subject to certain limitations. Individuals participating in the
2015 Deferred Compensation Plan receive distributions of their respective balances based on predetermined payout schedules or other
events as defined by the plan and are also able to direct investments made on their behalf among investment alternatives permitted from
time to time under the plan, including phantom Main Street stock units. As of December 31, 2021, $15.8 million of compensation and
dividend reinvestments, plus net unrealized gains and losses and investment income and minus distributions had been deferred under the
2015 Deferred Compensation Plan (including amounts previously deferred under the 2013 Deferred Compensation Plan). Of this amount,
$7.3 million had been deferred into phantom Main Street stock units, representing 162,040 shares of our common stock. Any amounts
deferred under the plan represented by phantom Main Street stock units will not be issued or included as outstanding on the consolidated
statements of changes in net assets until such shares are actually distributed to the participant in accordance with the plan, but the related
phantom stock units are included in weighted-average shares outstanding with the related dollar amount of the deferral included in total
expenses in Main Street’s consolidated statements of operations as earned. The dividend amounts related to additional phantom stock units
are included in the statements of changes in net assets as an increase to dividends to stockholders offset by a corresponding increase to
additional paid-in capital.
Recent Developments
In February 2022, we declared a supplemental cash dividend of $0.075 per share payable in March 2022. This supplemental cash
dividend is in addition to the previously announced regular monthly cash dividends that we declared for the first quarter of 2022 of $0.215
per share for each of January, February and March 2022.
During February 2022, we declared regular monthly dividends of $0.215 per share for each month of April, May and June of
2022. These regular monthly dividends equal a total of $0.645 per share for the second quarter of 2022, representing a 4.9% increase from
the regular monthly dividends paid in the second quarter of 2021. Including the supplemental dividend declared for March 2022 and the
regular monthly dividends declared for the first and second
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quarter of 2022, we will have paid $33.540 per share in cumulative dividends since our October 2007 initial public offering.
On February 23, 2022, our Board of Directors unanimously approved the application to the Company of the 150% minimum asset
coverage ratio set forth in Section 61(a)(2) of the 1940 Act. As a result, the minimum asset coverage ratio applicable to the Company will
be reduced from 200% to 150%, effective as of February 23, 2023, unless approved earlier by a vote of our stockholders, in which case the
150% minimum asset coverage ratio will be effective on the day after such approval. The Board also authorized the submission of a
proposal for stockholders to accelerate the application of the 150% minimum asset coverage ratio to the Company at the 2022 Annual
Meeting of Stockholders.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We are subject to financial market risks, including changes in interest rates, and changes in interest rates may affect both our
interest expense on the debt outstanding under our Credit Facility and our interest income from portfolio investments. Our risk
management systems and procedures are designed to identify and analyze our risk, to set appropriate policies and limits and to continually
monitor these risks. Our investment income will be affected by changes in various interest rates, including LIBOR and prime rates, to the
extent that any debt investments include floating interest rates. See “Risk Factors — Risks Related to our Investments — Changes relating
to the LIBOR calculation process, the phase-out of LIBOR and the use of replacement rates for LIBOR may adversely affect the value of
our portfolio securities.”, “Risk Factors — Risks Related to our Investments — Changes in interest rates may affect our cost of capital, net
investment income and value of our investments.” and “Risk Factors — Risks Related to Leverage — Because we borrow money, the
potential for gain or loss on amounts invested in us is magnified and may increase the risk of investing in us.” for more information
regarding risks associated with our debt investments and borrowings that utilize LIBOR as a reference rate.
The majority of our debt investments are made with either fixed interest rates or floating rates that are subject to contractual
minimum interest rates for the term of the investment. As of December 31, 2021, approximately 70.9% of our debt investment portfolio (at
cost) bore interest at floating rates, 92.8% of which were subject to contractual minimum interest rates. Our interest expense will be affected
by changes in the published LIBOR rate in connection with our Credit Facility; however, the interest rates on our outstanding SBIC
debentures, 4.50% Notes, 5.20% Notes and 3.00% Notes, which collectively comprise the majority of our outstanding debt, are fixed for
the life of such debt. As of December 31, 2021, we had not entered into any interest rate hedging arrangements. Due to our limited use of
derivatives, we have claimed an exclusion from the definition of the term “commodity pool operator” under the Commodity Exchange Act
and, therefore, are not subject to registration or regulation as a pool operator under such Act. The following table shows the approximate
annualized increase or decrease in the components of net investment income due to hypothetical base rate changes in interest rates,
assuming no changes in our investments and borrowings as of December 31, 2021.
Basis Point Change
(150)
(100)
(50)
(25)
25
50
75
100
125
150
Increase
Increase
(Decrease) in Net
(Decrease)
Investment
in Interest
Income
Income
(dollars in thousands, except per share amounts)
(Increase)
Decrease
in Interest
Expense
Increase
(Decrease) in Net
Investment
Income per Share
$
$
(330)
(289)
(242)
(218)
381
787
1,514
4,766
8,994
13,455
$
320
320
320
320
(800)
(1,600)
(2,400)
(3,200)
(4,000)
(4,800)
$
(10)
31
78
102
(419)
(813)
(886)
1,566
4,994
8,655
—
—
—
—
(0.01)
(0.01)
(0.01)
0.02
0.07
0.12
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The hypothetical results assume that all LIBOR and prime rate changes would be effective on the first day of the period. However,
the contractual LIBOR and prime rate reset dates would vary throughout the period, on either a monthly or quarterly basis, for both our
investments and our Credit Facility. The hypothetical results would also be impacted by the changes in the amount of debt outstanding
under our Credit Facility (with an increase (decrease) in the debt outstanding under the Credit Facility resulting in an (increase) decrease in
the hypothetical interest expense).
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Item 8. Consolidated Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
Reports of Independent Registered Public Accounting Firm (PCAOB ID Number 248)
Consolidated Balance Sheets—As of December 31, 2021 and December 31, 2020
Consolidated Statements of Operations—For the years ended December 31, 2021, 2020 and 2019
Consolidated Statements of Changes in Net Assets—For the years ended December 31, 2021, 2020 and 2019
Consolidated Statements of Cash Flows— For the years ended December 31, 2021, 2020 and 2019
Consolidated Schedule of Investments—December 31, 2021
Consolidated Schedule of Investments—December 31, 2020
Notes to Consolidated Financial Statements
Consolidated Schedules of Investments in and Advances to Affiliates— For the years ended December 31, 2021 and 2020
76
81
82
83
84
86
108
130
175
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Board of Directors and Stockholders
Main Street Capital Corporation
Opinion on the financial statements
Report of Independent Registered Public Accounting Firm
We have audited the accompanying consolidated balance sheets of Main Street Capital Corporation (a Maryland corporation) and
subsidiaries (the “Company”), including the consolidated schedule of investments as of December 31, 2021 and 2020, the related
consolidated statements of operations, changes in net assets, and cash flows for each of the three years in the period ended December 31,
2021, and the related notes (collectively referred to as the “financial statements”) and the financial highlights for each of the five years in
the period ended December 31, 2021. In our opinion, the financial statements present fairly, in all material respects, the financial position of
the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period
ended December 31, 2021, and the financial highlights for each of the five years in the period ended December 31, 2021, in conformity
with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in the 2013
Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”),
and our report dated February 25, 2022 expressed an unqualified opinion.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the
amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.
Critical audit matters
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was
communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the
financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit
matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical
audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to it relates.
Fair Value Investments
As described further in Note C to the financial statements, the Company’s investments at fair value were $3,561,831 thousand at
December 31, 2021, of which $3,559,837 thousand were categorized as Level 3 investments within the fair value hierarchy. Management’s
valuation techniques for Level 3 investments includes a combination of
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investments measured using significant unobservable inputs and assumptions and investments measured using quoted prices by independent
sources. Level 3 investment values, for which quoted prices by independent sources are not available or appropriate, are generally based on
valuation techniques, such as the income and market approach, that require inputs that are significant to the overall fair value measurement
and are unobservable. The significant unobservable inputs disclosed by management include, among others, weighted-average cost of
capital (“WACC”) inputs and market multiples for equity investments, and risk adjusted discount rates, percentage of expected principal
recovery and third-party quotes for debt investments. Changes in these assumptions could have a significant impact on the determination of
fair value. As such, we identified fair value of Level 3 investments measured using significant unobservable inputs and assumptions as a
critical audit matter.
The principal considerations for our determination that fair value of Level 3 investments measured using significant unobservable
inputs is a critical audit matter are the significant management judgements used in developing complex valuation techniques and inherent
estimation uncertainty. Auditing these investments requires a high degree of auditor judgement and subjectivity, in addition to the use of
valuation professionals with specialized skills and knowledge, to evaluate the reasonableness of unobservable inputs and assumptions.
The primary procedures we performed to address this critical audit matter included:
●
Testing the design and operating effectiveness of controls over management’s process to determine investment fair value.
Specifically, we identified and tested key attributes of management’s fair value determination review. These attributes
addressed the relevance, adequacy and appropriateness of the data, assumptions, valuation methods, and mathematical accuracy
used to determine investment fair value as of the reporting date.
● With the assistance of internal valuation specialists to evaluate and test management’s process to develop the valuation
estimates, we performed substantive audit procedures to determine mathematical accuracy and to determine that the data,
valuation methods, and significant unobservable inputs and assumptions used to determine investment fair value as of the
Company’s reporting date were reasonable. We tested certain key inputs/assumptions tested for a sample of investments,
including the following, as applicable:
●
enterprise values,
● weighted average cost of capital (“WACC”),
●
●
●
discount rates,
forecasted cash flows and long-term growth rates,
discount for lack of marketability,
● market multiples,
● weighting between valuation techniques,
●
●
●
●
risk adjusted discount factor,
percentage of expected principal recovery,
third party quotes, in conjunction with other inputs, and
third-party appraisals.
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●
In testing the above, we considered available third-party market information and published studies, current economic
conditions and subsequent events, and other information that could be corroborated to source information.
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 2007.
Houston, Texas
February 25, 2022
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Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
Main Street Capital Corporation
Opinion on internal control over financial reporting
We have audited the internal control over financial reporting of Main Street Capital Corporation (a Maryland corporation) and
subsidiaries (the “Company”) as of December 31, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in
all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in the 2013
Internal Control—Integrated Framework issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2021, and our report dated
February 25, 2022 expressed an unqualified opinion on those financial statements.
Basis for opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal
Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting
based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing
such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.
Definition and limitations of internal control over financial reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ GRANT THORNTON LLP
Houston, Texas
February 25, 2022
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MAIN STREET CAPITAL CORPORATION
Consolidated Balance Sheets
(dollars in thousands, except shares and per share amounts)
ASSETS
Investments at fair value:
Control investments (cost: $1,107,597 and $831,490 as of December 31, 2021 and December 31, 2020,
respectively)
Affiliate investments (cost: $578,539 and $416,479 as of December 31, 2021 and December 31, 2020,
respectively)
Non‑Control/Non‑Affiliate investments (cost: $1,573,110 and $1,268,740 as of December 31, 2021 and
December 31, 2020, respectively)
Total investments (cost: $3,259,246 and $2,516,709 as of December 31, 2021 and
December 31, 2020, respectively)
Cash and cash equivalents
Interest receivable and other assets
Receivable for securities sold
Deferred financing costs (net of accumulated amortization of $9,462 and $8,477 as of December 31, 2021
and December 31, 2020, respectively)
Total assets
LIABILITIES
Credit facility
3.00% Notes due 2026 (par: $500,000 as of December 31, 2021)
5.20% Notes due 2024 (par: $450,000 as of both December 31, 2021 and December 31, 2020)
SBIC debentures (par: $350,000 and $309,800 as of December 31, 2021 and December 31, 2020,
respectively)
4.50% Notes due 2022 (par: $185,000 as of both December 31, 2021 and December 31, 2020)
Accounts payable and other liabilities
Payable for securities purchased
Interest payable
Dividend payable
Deferred tax liability, net
Total liabilities
Commitments and contingencies (Note K)
NET ASSETS
Common stock, $0.01 par value per share (150,000,000 shares authorized; 70,700,885 and 67,674,853
shares issued and outstanding as of December 31, 2021 and December 31, 2020, respectively)
Additional paid‑in capital
Total undistributed (overdistributed) earnings
Total net assets
Total liabilities and net assets
NET ASSET VALUE PER SHARE
December 31,
2021
December 31,
2020
$ 1,489,257
$ 1,113,725
549,214
366,301
1,523,360
1,204,840
3,561,831
32,629
56,488
35,125
2,684,866
31,919
49,761
—
4,217
$ 3,690,290
2,818
$ 2,769,364
$
$
320,000
497,609
451,272
269,000
—
451,817
342,731
184,444
40,469
5,111
14,926
15,159
29,723
1,901,444
303,972
183,836
20,833
—
8,658
13,889
2,592
1,254,597
707
1,736,346
51,793
1,788,846
$ 3,690,290
25.29
$
677
1,615,940
(101,850)
1,514,767
$ 2,769,364
22.35
$
The accompanying notes are an integral part of these consolidated financial statements
81
Table of Contents
MAIN STREET CAPITAL CORPORATION
Consolidated Statements of Operations
(dollars in thousands, except shares and per share amounts)
Twelve Months Ended December 31,
2020
2021
2019
INVESTMENT INCOME:
Interest, fee and dividend income:
Control investments
Affiliate investments
Non‑Control/Non‑Affiliate investments
Total investment income
EXPENSES:
Interest
Compensation
General and administrative
Share‑based compensation
Expenses allocated to the External Investment Manager
Total expenses
NET INVESTMENT INCOME
NET REALIZED GAIN (LOSS):
Control investments
Affiliate investments
Non‑Control/Non‑Affiliate investments
Realized loss on extinguishment of debt
Total net realized gain (loss)
NET UNREALIZED APPRECIATION (DEPRECIATION):
Control investments
Affiliate investments
Non‑Control/Non‑Affiliate investments
SBIC debentures
Total net unrealized appreciation (depreciation)
INCOME TAXES:
Federal and state income, excise and other taxes
Deferred taxes
Income tax benefit (provision)
$
$
122,277
51,278
115,492
289,047
(58,836)
(34,442)
(12,494)
(10,887)
10,277
(106,382)
182,665
6,494
17,181
21,661
—
45,336
99,420
21,989
14,215
—
135,624
(5,732)
(27,131)
(32,863)
330,762
2.65
4.80
$
$
$
81,155
32,435
109,024
222,614
(49,587)
(18,981)
(12,702)
(10,828)
7,429
(84,669)
137,945
(59,594)
2,203
(58,556)
(534)
(116,481)
37,924
(29,038)
(14,968)
460
(5,622)
(590)
14,131
13,541
29,383
2.10
0.45
$
$
$
$
92,414
34,732
116,227
243,373
(50,258)
(19,792)
(12,546)
(10,083)
6,672
(86,007)
157,366
4,797
(565)
(19,344)
(5,689)
(20,801)
(980)
990
(10,214)
4,450
(5,754)
(3,546)
2,304
(1,242)
129,569
2.50
2.06
68,960,923
65,705,963
62,960,591
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS
NET INVESTMENT INCOME PER SHARE—BASIC AND DILUTED
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS PER
SHARE—BASIC AND DILUTED
WEIGHTED AVERAGE SHARES
OUTSTANDING—BASIC AND DILUTED
$
$
$
The accompanying notes are an integral part of these consolidated financial statements
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Table of Contents
MAIN STREET CAPITAL CORPORATION
Consolidated Statements of Changes in Net Assets
(dollars in thousands, except shares)
Common Stock
Balances at December 31, 2018
Public offering of common stock, net of offering costs
Share‑based compensation
Purchase of vested stock for employee payroll tax withholding
Dividend reinvestment
Amortization of directors’ deferred compensation
Issuance of restricted stock, net of forfeited shares
Dividends to stockholders
Reclassification for certain permanent book-to-tax differences
Net increase resulting from operations
Balances at December 31, 2019
Public offering of common stock, net of offering costs
Share‑based compensation
Purchase of vested stock for employee payroll tax withholding
Dividend reinvestment
Amortization of directors’ deferred compensation
Issuance of restricted stock, net of forfeited shares
Dividends to stockholders
Reclassification for certain permanent book-to-tax differences
Net increase resulting from operations
Balances at December 31, 2020
Public offering of common stock, net of offering costs
Share‑based compensation
Purchase of vested stock for employee payroll tax withholding
Dividend reinvestment
Amortization of directors’ deferred compensation
Issuance of restricted stock, net of forfeited shares
Dividends to stockholders
Reclassification for certain permanent book-to-tax differences
Net increase resulting from operations
Balances at December 31, 2021
Total
Undistributed
Earnings
Total Net
Asset Value
Number of
Shares
61,264,861
2,259,729
—
(103,730)
441,927
390,150
—
—
Par
Value
$ 613
23
—
(1)
4
—
4
—
Additional
Paid‑In
Capital
$ 1,409,945
89,246
10,083
(3,941)
18,081
866
(4)
401
(12,242)
—
—
64,252,937
2,662,777
(89,447)
517,796
417,969
—
—
—
—
—
67,762,032
2,345,554
—
(134,238)
404,384
359,289
—
—
—
—
$ 643
27
—
(1)
4
—
4
—
—
—
$ 677
24
—
(1)
4
—
3
—
—
—
$ 1,512,435
84,354
10,828
(1,890)
16,230
853
(4)
385
(7,251)
$ 1,615,940
98,865
10,887
(5,302)
16,279
652
(3)
406
(1,378)
70,737,021
$ 707
$ 1,736,346
—
$
—
—
$
$
65,491
—
—
—
—
—
—
—
—
—
—
—
—
(183,990)
12,242
129,569
23,312
$ 1,476,049
89,269
10,083
(3,942)
18,085
866
—
(183,589)
—
129,569
$ 1,536,390
84,381
10,828
(1,891)
16,234
853
—
(161,411)
—
29,383
$ (101,850) $ 1,514,767
98,889
10,887
(5,303)
16,283
652
—
(178,091)
—
330,762
$ 1,788,846
(178,497)
1,378
330,762
51,793
—
—
—
—
—
—
(161,796)
7,251
29,383
The accompanying notes are an integral part of these consolidated financial statements
83
Table of Contents
MAIN STREET CAPITAL CORPORATION
Consolidated Statements of Cash Flows
(dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net increase in net assets resulting from operations
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net
cash provided by (used in) operating activities:
Investments in portfolio companies
Proceeds from sales and repayments of debt investments in portfolio companies
Proceeds from sales and return of capital of equity investments in portfolio companies
Net unrealized (appreciation) depreciation
Net realized (gain) loss
Accretion of unearned income
Payment-in-kind interest
Cumulative dividends
Share-based compensation expense
Amortization of deferred financing costs
Deferred tax (benefit) provision
Changes in other assets and liabilities:
Interest receivable and other assets
Interest payable
Accounts payable and other liabilities
Deferred fees and other
Net cash used in operating activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from public offering of common stock, net of offering costs
Proceeds from public offering of 5.20% Notes due 2024
Proceeds from public offering of 3.00% Notes due 2026
Dividends paid
Proceeds from issuance of SBIC debentures
Repayments of SBIC debentures
Redemption of 4.50% Notes due 2019
Proceeds from credit facility
84
Year Ended
December 31,
2020
2021
2019
$
330,762 $ 29,383 $ 129,569
(1,763,755)
920,828
133,644
(135,624)
(45,336)
(15,619)
(7,573)
(1,739)
10,887
2,998
27,131
(5,504)
6,268
20,289
6,970
(515,373)
98,889
-
500,000
(160,537)
80,200
(40,000)
-
1,100,000
(669,007)
443,573
34,439
5,622
116,481
(11,756)
(6,225)
(1,791)
10,828
2,513
(14,131)
4,599
1,366
(2,846)
2,868
(54,084)
84,381
125,000
-
(144,462)
40,000
(42,000)
-
399,000
(664,062)
439,363
38,536
5,754
20,801
(12,070)
(5,018)
(2,382)
10,083
3,717
(2,304)
(6,680)
1,251
7,436
2,172
(33,834)
89,269
325,000
-
(164,278)
-
(34,000)
(175,000)
639,000
Table of Contents
Repayments on credit facility
Debt issuance premiums (costs), net
Purchases of vested stock for employee payroll tax withholding
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
CASH AND CASH EQUIVALENTS AT END OF PERIOD
Supplemental cash flow disclosures:
Interest paid
Taxes paid
Operating non-cash activities:
Right-of-use assets obtained in exchange for operating lease liabilities
Non-cash financing activities:
Value of shares issued pursuant to the DRIP
Year Ended
December 31,
2020
(430,000)
729
(1,891)
30,757
2021
(1,049,000)
(8,166)
(5,303)
516,083
2019
(640,000)
(1,150)
(3,942)
34,899
710
31,919
32,629 $ 31,919 $
(23,327)
55,246
1,065
54,181
55,246
50,729 $ 45,582 $ 45,167
3,136 $ 2,300
2,233 $
- $
- $ 5,240
16,283 $ 16,234 $ 18,085
$
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements
85
Table of Contents
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments
December 31, 2021
(dollars in thousands)
Portfolio Company (1) (20)
Business Description
Type of Investment
(2) (3) (15)
Investment
Date (24)
Shares/Units
Rate
Maturity Date
Principal (4)
Cost (4)
Fair Value (18)
Control Investments (5)
Analytical Systems Keco Holdings, LLC
Manufacturer of Liquid
and Gas Analyzers
ASC Interests, LLC
Recreational and
Educational Shooting
Facility
ATS Workholding, LLC
(10) Manufacturer of
Machine Cutting Tools
and Accessories
Barfly Ventures, LLC
(10) Casual Restaurant
Group
Bolder Panther Group, LLC
Consumer Goods and
Fuel Retailer
Brewer Crane Holdings, LLC
Bridge Capital Solutions Corporation
Provider of Crane
Rental and Operating
Services
Financial Services and
Cash Flow Solutions
Provider
Café Brazil, LLC
California Splendor Holdings LLC
Casual Restaurant
Group
Processor of Frozen
Fruits
(9)
8/16/2019
12.00% (L+10.00%,
Floor 2.00%)
8/16/2024
$
4,945 $
4,736
$
4,736
Secured Debt
Preferred Member
Units
Preferred Member
Units
Warrants
Secured Debt
Secured Debt
Member Units
Secured Debt
Preferred Member
Units
(27)
8/16/2019
5/20/2021
8/16/2019
12/31/2019
8/1/2013
8/1/2013
3,200
2,427
420
1,500
8/16/2029
13.00%
13.00%
7/31/2022
7/31/2022
200
1,650
3,200
2,427
316
10,679
200
1,636
1,500
3,336
(14)
11/16/2017
5.00%
8/16/2023
4,794
4,635
11/16/2017
3,725,862
Secured Debt
Member Units
10/15/2020
10/26/2020
37
7.00%
10/31/2024
711
Secured Debt
Class A Preferred
Member Units
Class B Preferred
Member Units
(9)
(8)
(8)
12/31/2020
12/31/2020
10.50% (L+9.00%, Floor
1.50%)
14.00%
12/31/2020
140,000
8.00%
12/31/2025
39,000
38,687
39,000
10,194
10,194
14,000
62,881
23,170
72,364
Secured Debt
Preferred Member
Units
(9)
(8)
1/9/2018
1/9/2018
2,950
11.00% (L+10.00%,
Floor 1.00%)
1/9/2023
8,060
8,037
8,037
-
4,894
-
9,630
200
1,636
720
2,556
3,005
-
3,005
711
1,930
2,641
3,726
8,361
711
1,584
2,295
4,280
12,317
7,710
15,747
8,813
2,132
1,000
1,000
12,945
8,813
4,060
1,000
1,000
14,873
Secured Debt
Warrants
Secured Debt
Preferred Member
Units
(27)
(30)
7/25/2016
7/25/2016
7/25/2016
82
13.00%
13.00%
12/11/2024
7/25/2026
12/11/2024
8,813
1,000
(8) (30)
7/25/2016
17,742
Member Units
(8)
6/9/2006
1,233
1,742
2,570
(9)
3/30/2018
Secured Debt
Preferred Member
Units
(8) (19)
Preferred Member
Units
(8)
7/31/2019
3/30/2018
6,725
6,157
86
11.00% (L+10.00%,
Floor 1.00%)
15.00% PIK
3/30/2023
28,000
27,915
27,915
9,510
9,510
10,775
48,200
13,275
50,700
Table of Contents
Portfolio Company (1) (20)
CBT Nuggets, LLC
Centre Technologies Holdings, LLC
Chamberlin Holding LLC
Business Description
Produces and Sells IT
Training Certification
Videos
Provider of IT
Hardware Services and
Software Solutions
Roofing and
Waterproofing
Specialty Contractor
Charps, LLC
Pipeline Maintenance
and Construction
Unsecured Debt
Preferred Member
Units
Clad-Rex Steel, LLC
Specialty Manufacturer
of Vinyl-Clad Metal
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2021
(dollars in thousands)
Type of Investment
(2) (3) (15)
Investment
Date (24)
Shares/Units
Rate
Maturity Date
Principal (4)
Cost (4)
Fair Value (18)
Member Units
(8)
6/1/2006
416
1,300
50,620
(9)
1/4/2019
12.00% (L+10.00%,
Floor 2.00%)
1/4/2024
9,416
9,370
Secured Debt
Preferred Member
Units
1/4/2019
12,696
Secured Debt
Member Units
Member Units
(9)
(8)
(8) (30)
2/26/2018
2/26/2018
11/2/2018
4,347
1,047,146
9.00% (L+8.00%, Floor
1.00%)
2/26/2023
17,817
8/26/2020
10.00%
1/31/2024
5,694
4,599
(8)
2/3/2017
1,829
Secured Debt
Member Units
Secured Debt
Member Units
(9)
(8)
(30)
12/20/2016
12/20/2016
12/20/2016
12/20/2016
717
800
10.50% (L+9.50%, Floor
1.00%)
1/15/2024
10.00%
12/20/2036
10,480
1,081
5,840
15,210
17,738
11,440
1,322
30,500
1,963
6,562
10,401
7,280
1,071
210
18,962
8,864
5,840
14,704
17,817
24,140
1,540
43,497
5,694
13,990
19,684
10,401
10,250
1,071
530
22,252
CMS Minerals Investments
Cody Pools, Inc.
Oil & Gas Exploration
& Production
Designer of Residential
and Commercial Pools
Colonial Electric Company LLC
Provider of Electrical
Contracting Services
CompareNetworks Topco, LLC
Internet Publishing and
Web Search Portals
Copper Trail Fund Investments
Investment Partnership
(12)
(13)
Datacom, LLC
Technology and
Telecommunications
Provider
Member Units
(8) (30)
4/1/2016
100
1,838
1,974
Secured Debt
Preferred Member
Units
Secured Debt
Preferred Member
Units
(9)
3/6/2020
12.25% (L+10.50%,
Floor 1.75%)
12/17/2026
42,497
42,117
(8) (30)
3/6/2020
587
8,317
50,434
3/31/2021
12.00%
3/31/2026
24,570
24,351
(8)
3/31/2021
17,280
7,680
32,031
Secured Debt
Preferred Member
Units
(9)
(8)
1/29/2019
10.00% (L+9.00%, Floor
1.00%)
1/29/2024
6,477
6,452
1/29/2019
1,975
1,975
8,427
42,484
47,640
90,124
24,351
9,130
33,481
6,477
12,000
18,477
LP Interests
(CTMH, LP)
(31)
7/17/2017
38.8%
710
710
Secured Debt
Preferred Member
Units
3/31/2021
5.00%
12/31/2025
8,892
8,296
3/31/2021
9,000
2,610
7,668
2,610
87
Table of Contents
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2021
(dollars in thousands)
Portfolio Company (1) (20)
Business Description
Type of Investment
(2) (3) (15)
Investment
Date (24)
Shares/Units
Rate
Maturity Date
Principal (4)
Cost (4)
10,906
Fair Value (18)
10,278
Digital Products Holdings LLC
Direct Marketing Solutions, Inc.
Gamber-Johnson Holdings, LLC
Garreco, LLC
GRT Rubber Technologies LLC
Gulf Manufacturing, LLC
Gulf Publishing Holdings, LLC
Designer and
Distributor of
Consumer Electronics
Provider of Omni-
Channel Direct
Marketing Services
Manufacturer of
Ruggedized Computer
Mounting Systems
Manufacturer and
Supplier of Dental
Products
Manufacturer of
Engineered Rubber
Products
Manufacturer of
Specialty Fabricated
Industrial Piping
Products
Energy Industry
Focused Media and
Publishing
Harris Preston Fund Investments
Investment Partnership
(12)
(13)
Harrison Hydra-Gen, Ltd.
Manufacturer of
Hydraulic Generators
Jensen Jewelers of Idaho, LLC
Retail Jewelry Store
Johnson Downie Opco, LLC
Executive Search
Services
Secured Debt
Preferred Member
Units
(9)
(8)
4/1/2018
4/1/2018
3,857
11.00% (L+10.00%,
Floor 1.00%)
4/1/2023
16,853
16,801
Secured Debt
Preferred Stock
(9)
(8)
2/13/2018
2/13/2018
8,400
12.00% (L+11.00%,
Floor 1.00%)
2/13/2024
24,070
Secured Debt
Member Units
(9)
(8)
6/24/2016
6/24/2016
9,042
9.50% (L+7.50%, Floor
2.00%)
1/1/2025
21,598
Secured Debt
Member Units
(9)
(8)
7/15/2013
7/15/2013
1,200
9.00% (L+8.00%, Floor
1.00%, Ceiling 1.50%)
7/31/2022
4,196
Secured Debt
Member Units
(8)
12/19/2014
12/19/2014
5,879
8.10% (L+8.00%)
10/29/2026
38,885
9,501
26,302
23,911
8,400
32,311
21,535
17,692
39,227
4,196
1,200
5,396
38,672
13,065
51,737
16,801
9,835
26,636
24,048
18,350
42,398
21,598
49,700
71,298
4,196
2,270
6,466
38,885
46,190
85,075
Member Units
(8)
8/31/2007
438
2,980
5,640
Secured Debt
(9) (17) (19)
9/29/2017
Secured Debt
Member Units
(17) (19)
4/29/2016
4/29/2016
3,681
10.50% (5.25% Cash,
5.25% PIK) (L+9.50%,
Floor 1.00%)
12.50% (6.25% Cash,
6.25% PIK)
9/30/2020
257
257
4/29/2021
13,565
13,565
3,681
17,503
257
9,717
-
9,974
LP Interests (2717
MH, L.P.)
(31)
10/1/2017
49.3%
2,703
3,971
Common Stock
6/4/2010
107,456
718
3,530
Secured Debt
Member Units
(9)
(8)
11/14/2006
11/14/2006
627
10.00% (Prime+6.75%,
Floor 2.00%)
11/14/2023
2,550
Secured Debt
Preferred Equity
(9)
12/10/2021
12/10/2021
3,150
13.00% (L+11.50%,
Floor 1.50%)
12/10/2026
11,475
2,536
811
3,347
11,344
3,150
14,494
2,550
12,420
14,970
11,344
3,150
14,494
88
Table of Contents
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2021
(dollars in thousands)
Portfolio Company (1) (20)
KBK Industries, LLC
Kickhaefer Manufacturing Company, LLC
Market Force Information, LLC
MH Corbin Holding LLC
Business Description
Manufacturer of
Specialty Oilfield and
Industrial Products
Precision Metal Parts
Manufacturing
Provider of Customer
Experience
Management Services
Manufacturer and
Distributor of Traffic
Safety Products
MS Private Loan Fund I, LP
Investment Partnership
(12)
(13)
MSC Adviser I, LLC
(16) Third Party Investment
Advisory Services
Mystic Logistics Holdings, LLC
NAPCO Precast, LLC
Nebraska Vet AcquireCo, LLC
NexRev LLC
NRP Jones, LLC
NuStep, LLC
Logistics and
Distribution Services
Provider for Large
Volume Mailers
Precast Concrete
Manufacturing
Mixed-Animal
Veterinary and Animal
Health Product Provider
Provider of Energy
Efficiency Products &
Services
Manufacturer of Hoses,
Fittings and Assemblies
Designer, Manufacturer
and
Type of Investment
(2) (3) (15)
Investment
Date (24)
Shares/Units
Rate
Maturity Date
Principal (4)
Cost (4)
Fair Value (18)
Member Units
(8)
1/23/2006
325
783
13,620
Secured Debt
Member Units
Secured Debt
Member Units
(8) (30)
10/31/2018
10/31/2018
10/31/2018
10/31/2018
581
800
11.50%
9.00%
10/31/2023
10/31/2048
20,415
3,915
Secured Debt
Secured Debt
Member Units
(9)
(14) (19)
7/28/2017
7/28/2017
7/28/2017
743,921
12.00% (L+11.00%,
Floor 1.00%)
12.00% PIK
7/28/2023
7/28/2023
3,400
26,079
20,324
12,240
3,876
992
37,432
3,400
25,952
16,642
45,994
20,324
12,310
3,876
2,460
38,970
3,400
8,936
-
12,336
Secured Debt
Preferred Member
Units
Preferred Member
Units
3/15/2019
66,000
9/1/2015
4,000
8/31/2015
13.00%
3/31/2022
8,250
8,241
5,934
Unsecured Debt
LP Interests
(31)
2/11/2021
1/26/2021
12.1%
5.00%
2/28/2022
63,151
Member Units
(8)
11/22/2013
29,500
140,400
Secured Debt
Common Stock
(8)
8/18/2014
8/18/2014
5,873
12.00%
1/17/2022
6,378
Member Units
(8)
1/31/2008
2,955
6,377
2,720
9,097
6,378
8,840
15,218
2,975
13,560
Secured Debt
Secured Debt
Preferred Member
Units
Secured Debt
Preferred Member
Units
12/31/2020
12/31/2020
12.00%
12.00%
12/31/2025
12/31/2025
10,500
4,868
12/31/2020
6,987
10,412
4,829
6,987
22,228
2/28/2018
11.00%
2/28/2023
16,217
16,173
(8)
2/28/2018
86,400,000
Secured Debt
Member Units
(8)
12/21/2017
12/22/2011
65,962
12.00%
3/20/2023
2,080
89
4,400
6,000
18,641
63,151
2,500
65,651
-
-
5,934
63,151
2,581
65,732
10,412
4,829
7,700
22,941
14,045
2,690
16,735
2,080
6,440
8,520
6,880
23,053
2,080
3,717
5,797
Table of Contents
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2021
(dollars in thousands)
Portfolio Company (1) (20)
Business Description
Distributor of Fitness
Equipment
Type of Investment
(2) (3) (15)
Investment
Date (24)
Shares/Units
Rate
Maturity Date
Principal (4)
Cost (4)
Fair Value (18)
(9)
Secured Debt
Secured Debt
Preferred Member
Units
1/31/2017
1/31/2017
7.50% (L+6.50%, Floor
1.00%)
11.00%
1/31/2025
1/31/2025
1,720
17,240
1/31/2017
406
1,720
17,236
10,200
29,156
OMi Topco, LLC
Manufacturer of
Overhead Cranes
Secured Debt
Preferred Member
Units
(8)
4/1/2008
900
8/31/2021
12.00%
8/31/2026
18,000
17,831
Orttech Holdings, LLC
Pearl Meyer Topco LLC
PPL RVs, Inc.
Distributor of Industrial
Clutches, Brakes and
Other Components
Provider of Executive
Compensation
Consulting Services
Recreational Vehicle
Dealer
Principle Environmental, LLC
Noise Abatement
Service Provider
Quality Lease Service, LLC
River Aggregates, LLC
Provider of Rigsite
Accommodation Unit
Rentals and Related
Services
Processor of
Construction
Aggregates
Robbins Bros. Jewelry, Inc.
Bridal Jewelry Retailer
Tedder Industries, LLC
Televerde, LLC
Trantech Radiator Topco, LLC
Manufacturer of
Firearm Holsters and
Accessories
Provider of
Telemarketing and Data
Services
Transformer Cooling
Products and Services
Secured Debt
Preferred Stock
(9)
(8) (30)
7/30/2021
7/30/2021
10,000
12.00% (L+11.00%,
Floor 1.00%)
7/31/2026
24,375
Secured Debt
Member Units
(8)
4/27/2020
4/27/2020
13,800
12.00%
4/27/2025
32,674
Secured Debt
Secured Debt
Common Stock
(9)
(9)
(8)
Secured Debt
Secured Debt
Preferred Member
Units
Common Stock
10/31/2019
11/15/2016
6/10/2010
2/1/2011
7/1/2011
2/1/2011
1/27/2021
2,000
21,806
1,037
7.50% (L+7.00%, Floor
0.50%)
7.50% (L+7.00%, Floor
0.50%)
11/15/2022
750
726
11/15/2022
11,655
13.00%
13.00%
11/15/2026
11/15/2026
1,473
5,924
Member Units
6/8/2015
1,000
9,213
2,149
Member Units
(8) (30)
12/20/2013
1,500
369
3,280
Secured Debt
Preferred Equity
(9)
12/15/2021
12/15/2021
11,070
12.00% (L+11.00%,
Floor 1.00%)
12/15/2026
36,360
35,956
11,070
47,026
Secured Debt
Preferred Member
Units
8/31/2018
12.00%
8/31/2022
16,240
16,181
8/31/2018
505
8,579
24,760
35,956
11,070
47,026
16,181
8,579
24,760
Member Units
1/6/2011
460
1,290
7,280
90
1,720
17,240
13,500
32,460
18,000
20,210
38,210
24,151
10,000
34,151
32,674
26,970
59,644
726
11,655
14,360
26,741
1,465
5,808
11,160
710
19,143
1,080
18,911
24,151
10,000
34,151
32,438
13,000
45,438
11,655
2,150
14,531
1,465
5,808
5,709
1,200
14,182
Table of Contents
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2021
(dollars in thousands)
Portfolio Company (1) (20)
Business Description
UnionRock Energy Fund II, LP
Investment Partnership
(12)
(13)
Type of Investment
(2) (3) (15)
Secured Debt
Common Stock
(8)
Investment
Date (24)
5/31/2019
5/31/2019
Shares/Units
615
Rate
12.00%
Maturity Date
5/31/2024
Principal (4)
8,720
Cost (4)
8,663
4,655
13,318
Fair Value (18)
8,712
8,660
17,372
LP Interests
(8) (31)
6/15/2020
49.6%
3,828
6,122
Vision Interests, Inc.
VVS Holdco LLC
Manufacturer / Installer
of Commercial Signage
Omnichannel Retailer
of Animal Health
Products
Series A Preferred
Stock
12/23/2011
3,000,000
3,000
3,000
Ziegler’s NYPD, LLC
Casual Restaurant
Group
Subtotal Control Investments (83.3% of net
assets at fair value)
Secured Debt
Secured Debt
Preferred Equity
(9)(30)
(30)
(30)
12/1/2021
12/1/2021
12/1/2021
11,840
7.00% (L+6.00%, Floor
1.00%)
11.50%
12/1/2026
12/1/2026
1,200
30,400
Secured Debt
Secured Debt
Secured Debt
Preferred Member
Units
Warrants
(27)
6/1/2015
10/1/2008
10/1/2008
6/30/2015
7/1/2015
10,072
587
12.00%
6.50%
14.00%
10/1/2022
10/1/2022
10/1/2022
10/1/2025
625
1,000
2,750
1,170
30,100
11,840
43,110
625
1,000
2,750
2,834
600
7,809
1,169
30,100
11,840
43,109
625
1,000
2,750
2,130
-
6,505
$ 1,107,597
$
1,489,257
91
Table of Contents
Portfolio Company (1) (20)
Affiliate Investments (6)
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2021
(dollars in thousands)
Business Description
Type of Investment
(2) (3) (15)
Investment
Date (24)
Shares/Units
Rate
Maturity Date Principal (4)
Cost (4)
Fair Value (18)
AAC Holdings, Inc.
(11)
Substance Abuse
Treatment Service
Provider
AFG Capital Group, LLC
ATX Networks Corp.
(11)
BBB Tank Services, LLC
Provider of Rent-to-
Own Financing
Solutions and Services
Provider of Radio
Frequency Management
Equipment
Maintenance, Repair
and Construction
Services to the Above-
Ground Storage Tank
Market
Boccella Precast Products LLC
Manufacturer of Precast
Hollow Core Concrete
Brightwood Capital Fund Investments
(12) (13)
Investment Partnership
Buca C, LLC
Casual Restaurant
Group
Career Team Holdings, LLC
Provider of Workforce
Training and Career
Development Services
Secured Debt
Common Stock
Warrants
(19)
(27)
12/11/2020
12/11/2020
12/11/2020
593,928
554,353
18.00% (10.00%
Cash, 8.00% PIK)
6/25/2025
$
10,202 $
12/11/2025
$
10,011
3,148
-
13,159
9,794
2,079
1,940
13,813
Secured Debt
Preferred Member
Units
(8)
11/7/2014
186
4/25/2019
10.00%
5/25/2022
144
144
Secured Debt
Unsecured Debt
Common Stock
(9)
(19)
9/1/2021
9/1/2021
9/1/2021
8.50% (L+7.50%,
Floor 1.00%)
10.00% PIK
583
9/1/2026
9/1/2028
7,667
3,067
(9) (17)
4/8/2016
12.00% (L+11.00%,
Floor 1.00%)
4/8/2021
4,800
4,800
Unsecured Debt
Preferred Stock (non-
voting)
Member Units
(8) (14) (19)
12/17/2018
4/8/2016
800,000
15.00% PIK
Secured Debt
Member Units
(8)
9/23/2021
6/30/2017
2,160,000
10.00%
2/28/2027
320
LP Interests
(Brightwood Capital
Fund V, LP)
Secured Debt
Preferred Member
Units
Secured Debt
Class A Common
Units
(31)
7/12/2021
15.8%
1,000
1,000
(9) (17)
6/30/2015
10.25% (L+9.25%,
Floor 1.00%)
6/30/2020
19,491
19,491
14,370
(14) (19)
6/30/2015
6
6.00% PIK
4,770
24,261
-
14,370
12/17/2021
12.50%
12/17/2026
20,250
20,050
20,050
12/17/2021
450,000
4,500
24,550
1,500
4,500
24,550
460
144
7,740
7,884
7,092
1,963
-
9,055
2,508
-
-
2,508
320
4,830
5,150
1,200
1,344
7,092
1,963
-
9,055
162
800
5,762
320
2,256
2,576
Chandler Signs Holdings, LLC
(10)
Sign Manufacturer
Class A Units
1/4/2016
1,500,000
Classic H&G Holdings, LLC
Provider of Engineered
Packaging Solutions
92
Table of Contents
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2021
(dollars in thousands)
Portfolio Company (1) (20)
Business Description
Type of Investment
(2) (3) (15)
Secured Debt
Secured Debt
Preferred Member
Units
(9)
(8)
Investment
Date (24)
3/12/2020
3/12/2020
Shares/Units
Rate
7.00% (L+6.00%,
Floor 1.00%)
8.00%
3/12/2020
154
Maturity Date Principal (4)
Cost (4)
Fair Value (18)
3/12/2025
3/12/2025
4,000
19,274
4,000
19,139
5,760
28,899
4,000
19,274
15,260
38,534
Congruent Credit Opportunities Funds
(12) (13)
Investment Partnership
LP Interests
(Congruent Credit
Opportunities Fund
III, LP)
(8) (31)
2/4/2015
17.4%
10,256
9,959
DMA Industries, LLC
Distributor of
aftermarket ride control
products
Dos Rios Partners
(12) (13)
Investment Partnership
Secured Debt
Preferred Equity
11/19/2021
11/19/2021
5,944
12.00%
11/19/2026
21,200
20,993
5,944
26,937
20,993
5,944
26,937
LP Interests (Dos
Rios Partners, LP)
LP Interests (Dos
Rios Partners - A,
LP)
(31)
(31)
4/25/2013
20.2%
6,605
10,329
4/25/2013
6.4%
2,097
8,702
3,280
13,609
Dos Rios Stone Products LLC
(10)
Limestone and
Sandstone Dimension
Cut Stone Mining
Quarries
EIG Fund Investments
(12) (13)
Investment Partnership
Class A Preferred
Units
LP Interests (EIG
Global Private Debt
Fund-A, L.P.)
Flame King Holdings, LLC
Propane Tank and
Accessories Distributor
(30)
6/27/2016
2,000,000
2,000
640
(8) (31)
11/6/2015
5,000,000
594
547
Freeport Financial Funds
(12) (13)
Investment Partnership
Secured Debt
Secured Debt
Preferred Equity
(9)
(9)
10/29/2021
10/29/2021
10/29/2021
7.50% (L+6.50%,
Floor 1.00%)
12.00% (L+11.00%,
Floor 1.00%)
9,360
10/31/2026
6,400
6,324
10/31/2026
21,200
20,996
10,400
37,720
6,324
20,996
10,400
37,720
GFG Group, LLC.
LP Interests (Freeport
Financial SBIC Fund
LP)
LP Interests (Freeport
First Lien Loan Fund
III LP)
Secured Debt
Preferred Member
Units
Grower and Distributor
of a Variety of Plants
and Products to Other
Wholesalers, Retailers
and Garden Centers
(31)
3/23/2015
9.3%
5,974
6,078
(8) (31)
7/31/2015
6.0%
7,629
13,603
7,231
13,309
3/31/2021
12.00%
3/31/2026
12,545
12,435
(8)
3/31/2021
226
4,900
17,335
12,545
6,990
19,535
Harris Preston Fund Investments
(12) (13)
Investment Partnership
LP Interests (HPEP 3,
L.P.)
(31)
8/9/2017
8.2%
3,193
4,712
93
Table of Contents
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2021
(dollars in thousands)
Portfolio Company (1) (20)
Hawk Ridge Systems, LLC
(13)
Business Description
Value-Added Reseller
of Engineering Design
and Manufacturing
Solutions
Houston Plating and Coatings, LLC
Provider of Plating and
Industrial Coating
Services
I-45 SLF LLC
(12) (13)
Investment Partnership
Type of Investment
(2) (3) (15)
Investment
Date (24)
Shares/Units
Rate
Maturity Date Principal (4)
Cost (4)
Fair Value (18)
Secured Debt
Secured Debt
Preferred Member
Units
Preferred Member
Units
(9)
(8)
(30)
12/2/2016
12/2/2016
12/2/2016
12/2/2016
226
226
7.00% (L+6.00%,
Floor 1.00%)
8.00%
1/15/2026
1/15/2026
2,585
34,800
Unsecured
Convertible Debt
Member Units
(8)
5/1/2017
1/8/2003
322,297
8.00%
5/1/2022
3,000
2,585
34,672
2,850
150
40,257
3,000
2,352
5,352
2,585
34,800
14,680
770
52,835
2,960
3,210
6,170
Iron-Main Investments, LLC
Member Units (Fully
diluted 20.0%;
24.40% profits
interest) (8)
Consumer Reporting
Agency Providing
Employment
Background Checks
and Drug Testing
(8)
10/20/2015
19,000
14,387
Secured Debt
Secured Debt
Secured Debt
Secured Debt
Common Stock
(19)
8/3/2021
9/1/2021
8/3/2021
8/3/2021
8/3/2021
179,778
13.00%
12.50%
12.50%
12.50% PIK
8/1/2026
9/1/2026
11/30/2026
3/31/2022
4,600
3,200
20,000
8,944
L.F. Manufacturing Holdings, LLC
(10)
Manufacturer of
Fiberglass Products
Preferred Member
Units (non-voting)
Member Units
(8) (19)
1/1/2019
12/23/2013
2,179,001
14.00% PIK
OnAsset Intelligence, Inc.
Oneliance, LLC
Rocaceia, LLC (Quality Lease and Rental
Holdings, LLC)
Provider of
Transportation
Monitoring / Tracking
Products and Services
Construction Cleaning
Company
Provider of Rigsite
Accommodation Unit
Rentals and Related
Services
Secured Debt
Secured Debt
Secured Debt
Secured Debt
Unsecured Debt
Preferred Stock
Common Stock
Warrants
(19)
(19)
(19)
(19)
(19)
(14) (19)
(27)
5/20/2014
3/21/2014
5/10/2013
4/18/2011
6/5/2017
4/18/2011
4/15/2021
4/18/2011
12.00% PIK
12.00% PIK
12.00% PIK
12.00% PIK
10.00% PIK
7.00% PIK
12/31/2022
12/31/2022
12/31/2022
12/31/2022
12/31/2022
5/10/2023
912
635
4,699
935
954
2,055
4,286
192
Secured Debt
Preferred Stock
(9)
8/6/2021
8/6/2021
1,056
12.00% (L+11.00%,
Floor 1.00%)
8/6/2026
5,600
4,557
3,170
19,805
8,944
1,798
38,274
107
2,019
2,126
935
954
2,055
4,286
192
1,981
830
1,089
12,322
5,547
1,056
6,603
Secured Debt
Preferred Member
Units
(14) (17)
6/30/2015
12.00%
1/8/2018
30,369
29,865
1/8/2013
250
2,500
32,365
94
4,557
3,170
19,805
8,944
1,798
38,274
107
2,557
2,664
935
954
2,055
4,286
192
-
-
-
8,422
5,547
1,056
6,603
-
-
-
Table of Contents
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2021
(dollars in thousands)
Portfolio Company (1) (20)
SI East, LLC
Business Description
Rigid Industrial
Packaging
Manufacturing
Slick Innovations, LLC
Text Message
Marketing Platform
Sonic Systems International, LLC
(10)
Nuclear Power Staffing
Services
Superior Rigging & Erecting Co.
Provider of Steel
Erecting, Crane Rental
& Rigging Services
Secured Debt
Preferred Member
Units
The Affiliati Network, LLC
Performance Marketing
Solutions
UniTek Global Services, Inc.
(11)
Provider of Outsourced
Infrastructure Services
Secured Debt
(9) (19)
10/15/2018
Type of Investment
(2) (3) (15)
Investment
Date (24)
Shares/Units
Rate
Maturity Date Principal (4)
Cost (4)
Fair Value (18)
Secured Debt
Preferred Member
Units
(8)
8/31/2018
157
8/31/2018
10.25%
8/31/2023
65,850
65,738
65,850
Secured Debt
Common Stock
Warrants
(27)
9/13/2018
9/13/2018
9/13/2018
70,000
18,084
13.00%
9/13/2023
5,320
9/13/2028
Secured Debt
Common Stock
(9)
8/20/2021
8/20/2021
7,866
8.50% (L+7.50%,
Floor 1.00%)
8/20/2026
11,982
8/31/2020
12.00%
8/31/2025
21,500
21,332
21,332
8/31/2020
1,571
Secured Debt
Secured Debt
Preferred Stock
(8)
8/9/2021
8/9/2021
8/9/2021
1,280,000
7.00%
11.83%
8/9/2026
8/9/2026
280
12,961
8.50% (6.50% cash,
2.00% PIK) (2.00%
PIK, L+5.50% Floor
1.00%)
8.50% (6.50% cash,
2.00% PIK) (2.00%
PIK, L+5.50% Floor
1.00%)
8/20/2024
397
396
371
(9) (19)
8/27/2018
8/20/2024
1,986
1,974
Secured Debt
Secured Convertible
Debt
Preferred Stock
Preferred Stock
Preferred Stock
Preferred Stock
Common Stock
(19)
(8) (19)
(14) (19)
(14) (19)
(14) (19)
1/1/2021
8/29/2019
8/21/2018
1/15/2015
6/30/2017
4/1/2020
1,133,102
1,521,122
4,336,866
2,281,682
945,507
15.00% PIK
20.00% PIK
20.00% PIK
13.50% PIK
19.00% PIK
2/20/2025
1,197
1,218
66,956
11,570
77,420
5,248
700
181
6,129
11,757
1,070
12,827
5,320
1,510
400
7,230
11,757
1,070
12,827
4,500
25,832
262
12,834
6,400
19,496
4,500
25,832
262
12,834
6,400
19,496
1,197
1,757
2,188
7,924
3,667
-
19,103
1,032
4,000
5,032
1,852
2,375
2,833
1,498
-
-
-
8,929
-
-
-
Universal Wellhead Services Holdings, LLC
(10)
Volusion, LLC
Provider of Wellhead
Equipment, Designs,
and Personnel to the Oil
& Gas Industry
Provider of Online
Software-as-a-Service
eCommerce Solutions
Preferred Member
Units
Member Units
(14) (19) (30)
(30)
12/7/2016
12/7/2016
716,949
4,000,000
14.00% PIK
Subtotal Affiliate Investments (30.7% of net
assets at fair value)
Preferred Member
Units
Warrants
(27)
95
Secured Debt
Unsecured
Convertible Debt
(17)
1/26/2015
11.50%
1/26/2020
17,434
17,434
17,434
5/16/2018
1/26/2015
1/26/2015
4,876,670
1,831,355
8.00%
11/16/2023
409
409
409
1/26/2025
14,000
2,576
34,419
5,990
-
23,833
$
578,539
$
549,214
Table of Contents
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2021
(dollars in thousands)
Portfolio Company (1) (20)
Business Description
Type of Investment
(2) (3) (15)
Investment
Date (24)
Shares/Units
Rate
Maturity
Date
Principal (4)
Cost (4)
Fair Value (18)
Non-Control/Non-Affiliate Investments (7)
Acousti Engineering Company of Florida
(10)
ADS Tactical, Inc.
(11)
Interior Subcontractor
Providing Acoustical
Walls and Ceilings
Value-Added Logistics
and Supply Chain
Provider to the Defense
Industry
American Health Staffing Group, Inc.
(10)
Healthcare Temporary
Staffing
American Nuts, LLC
(10)
American Teleconferencing Services, Ltd.
(11)
Roaster, Mixer and
Packager of Bulk Nuts
and Seeds
Provider of Audio
Conferencing and
Video Collaboration
Solutions
ArborWorks, LLC
(10)
Vegetation Management
Services
Arrow International, Inc
(10)
Manufacturer and
Distributor of Charitable
Gaming Supplies
AVEX Aviation Holdings, LLC
(10)
Specialty Aircraft
Dealer
Berry Aviation, Inc.
(10)
Charter Airline Services
Secured Debt
Preferred Member
Units
Preferred Member
Units
Binswanger Enterprises, LLC
(10)
Glass Repair and
Installation Service
Provider
Secured Debt
Secured Debt
(9)
(9)
11/2/2020
5/26/2021
10.00% (L+8.50%, Floor
1.50%)
14.00% (L+12.50%, Floor
1.50%)
11/2/2025
$
12,111 $
12,005
$
12,111
11/2/2025
850
841
12,846
850
12,961
Secured Debt
(9)
3/29/2021
6.75% (L+5.75%, Floor
1.00%)
3/19/2026
22,136
21,734
22,012
Secured Debt
(9)
11/19/2021
7.00% (L+6.00%, Floor
1.00%)
11/19/2026
7,067
6,988
6,988
Secured Debt
(9)
12/21/2018
9.00% (L+8.00%, Floor
1.00%)
4/10/2025
12,017
11,854
12,017
Secured Debt
(9) (14) (17)
9/17/2021
Secured Debt
(9) (14)
5/19/2016
7.50% (L+6.50%, Floor
1.00%)
7.50% (L+6.50%, Floor
1.00%)
9/9/2021
2,980
2,980
6/28/2023
14,370
Secured Debt
Common Equity
(9)
11/9/2021
11/9/2021
234
8.00% (L+7.00%, Floor
1.00%)
11/9/2026
32,605
Secured Debt
(9) (23)
12/21/2020
12/21/2025
22,500
22,300
22,500
9.18% (L+7.93%, Floor
1.25%)
Secured Debt
Common Equity
(9)
12/15/2021
12/15/2021
360
7.50% (L+6.50%, Floor
1.00%)
12/15/2026
13,320
13,005
360
13,365
(19)
7/6/2018
12.00% (10.50% Cash,
1.50% PIK)
1/6/2024
4,694
4,674
(8) (19) (30)
11/12/2019
122,416
16.00% PIK
(14) (19) (30)
7/6/2018
1,548,387
8.00% PIK
Secured Debt
Member Units
(9)
3/10/2017
3/10/2017
1,050,000
9.50% (L+8.50%, Floor
1.00%)
3/10/2023
12,194
96
13,706
16,686
31,873
234
32,107
168
1,671
6,513
12,107
1,050
13,157
89
431
520
31,873
234
32,107
13,005
360
13,365
4,694
208
2,487
7,389
12,194
730
12,924
Table of Contents
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2021
(dollars in thousands)
Portfolio Company (1) (20)
Bluestem Brands, Inc.
(11)
Business Description
Multi-Channel Retailer
of General Merchandise
Brainworks Software, LLC
(10)
Advertising Sales and
Newspaper Circulation
Software
Brightwood Capital Fund Investments
(12) (13)
Investment Partnership
Burning Glass Intermediate Holding
Company, Inc.
(10)
Provider of Skills-
Based Labor Market
Analytics
Cadence Aerospace LLC
(10)
Aerostructure
Manufacturing
CAI Software LLC
Camin Cargo Control, Inc.
(11)
Cenveo Corporation
(11)
Chisholm Energy Holdings, LLC
(10)
Provider of Specialized
Enterprise Resource
Planning Software
Provider of Mission
Critical Inspection,
Testing and Fuel
Treatment Services
Provider of Digital
Marketing Agency
Services
Oil & Gas Exploration
& Production
Clarius BIGS, LLC
Computer Data Source, LLC
(10)
(10)
Prints & Advertising
Film Financing
Third Party
Maintenance Provider
to the Data Center
Ecosystem
Construction Supply Investments, LLC
(10)
Distribution Platform of
Specialty Construction
Type of Investment
(2) (3) (15)
Investment
Date (24)
Shares/Units
Rate
Maturity
Date
Principal (4)
Cost (4)
Fair Value (18)
Secured Debt
Common Stock
(9)
(8)
8/28/2020
10/1/2020
723,184
10.00% (L+8.50%, Floor
1.50%)
8/28/2025
5,357
5,357
1
5,358
5,337
1,515
6,852
Secured Debt
(9) (14) (17)
8/12/2014
12.50% (Prime+9.25%,
Floor 3.25%)
7/22/2019
7,817
7,817
4,201
LP Interests
(Brightwood Capital
Fund III, LP)
LP Interests
(Brightwood Capital
Fund IV, LP)
(8) (31)
7/21/2014
1.6%
7,200
4,269
(8) (31)
10/26/2016
0.6%
4,350
11,550
4,394
8,663
Secured Debt
Secured Debt
(9)
(9)
6/14/2021
6/14/2021
6.00% (L+5.00%, Floor
1.00%)
6.00% (L+5.00%, Floor
1.00%)
6/10/2026
465
429
6/10/2028
20,134
19,803
20,232
429
19,985
20,414
Secured Debt
(19) (35)
11/14/2017
9.28% Cash, 0.22% PIK
11/14/2023
28,540
28,399
26,767
Preferred Equity
Preferred Equity
12/13/2021
12/13/2021
1,788,527
596,176
1,789
-
1,789
1,789
-
1,789
Secured Debt
(9)
6/14/2021
7.50% (L+6.50%, Floor
1.00%)
6/4/2026
15,920
15,775
15,840
Common Stock
9/7/2018
322,907
6,183
2,852
Secured Debt
(9)
5/15/2019
7.75% (L+6.25%, Floor
1.50%)
5/15/2026
2,857
2,804
2,663
Secured Debt
(14) (17) (19)
9/23/2014
15.00% PIK
1/5/2015
2,756
2,756
33
Secured Debt
(9)
8/6/2021
8.50% (L+7.50%, Floor
1.00%)
8/6/2026
21,681
21,234
21,234
97
Table of Contents
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2021
(dollars in thousands)
Portfolio Company (1) (20)
Business Description
Materials to
Professional Concrete
and Masonry
Contractors
Darr Equipment LP
(10)
Heavy Equipment
Dealer
DTE Enterprises, LLC
(10)
Industrial Powertrain
Repair and Services
Dynamic Communities, LLC
(10)
Eastern Wholesale Fence LLC
(10)
Developer of Business
Events and Online
Community Groups
Manufacturer and
Distributor of
Residential and
Commercial Fencing
Solutions
EnCap Energy Fund Investments
(12) (13)
Investment Partnership
EPIC Y-Grade Services, LP
(11)
NGL Transportation &
Storage
Event Holdco, LLC
(10)
Event and Learning
Management Software
for Healthcare
Type of Investment
(2) (3) (15)
Investment
Date (24)
Shares/Units
Rate
Maturity
Date
Principal (4)
Cost (4)
Fair Value (18)
Member Units
(8)
12/29/2016
861,618
3,335
14,640
Secured Debt
Warrants
(19)
(29)
12/26/2017
4/15/2014
915,734
12.50% (11.50% Cash,
1.00% PIK)
6/22/2023
12/23/2023
4,685
4,685
474
5,159
4,227
160
4,387
Secured Debt
Class AA Preferred
Member Units (non-
voting)
Class A Preferred
Member Units
(9)
4/13/2018
9.50% (L+8.00%, Floor
1.50%)
4/13/2023
9,324
9,259
8,884
(8) (19)
4/13/2018
10.00% PIK
(14) (19)
4/13/2018
776,316
8.00% PIK
1,051
776
11,086
1,051
320
10,255
Secured Debt
(9)
7/17/2018
9.50% (L+8.50%, Floor
1.00%)
7/17/2023
5,681
5,638
5,569
Secured Debt
(9)
11/19/2020
8.00%, (L+7.00%, Floor
1.00%)
10/30/2025
31,810
31,238
31,810
LP Interests (EnCap
Energy Capital Fund
VIII, L.P.)
LP Interests (EnCap
Energy Capital Fund
VIII Co-
Investors, L.P.)
LP Interests (EnCap
Energy Capital Fund
IX, L.P.)
LP Interests (EnCap
Energy Capital Fund
X, L.P.)
LP Interests (EnCap
Flatrock Midstream
Fund II, L.P.)
LP Interests (EnCap
Flatrock Midstream
Fund III, L.P.)
(8) (31)
1/22/2015
0.1%
3,745
1,599
(31)
1/21/2015
0.4%
2,097
777
(8) (31)
1/22/2015
0.1%
4,047
2,284
(8) (31)
3/25/2015
0.1%
8,443
8,276
(31)
3/30/2015
0.8%
6,582
2,796
(8) (31)
3/27/2015
0.2%
6,082
30,996
5,064
20,796
Secured Debt
(9)
6/22/2018
7.00% (L+6.00%, Floor
1.00%)
6/30/2027
6,892
6,819
5,862
98
Table of Contents
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2021
(dollars in thousands)
Portfolio Company (1) (20)
Flip Electronics LLC
(10)
Fortna Acquisition Co., Inc.
(10)
Business Description
Organizations and
Systems
Distributor of Hard-to-
Find and Obsolete
Electronic Components
Process, Physical
Distribution and
Logistics Consulting
Services
Fuse, LLC
(11)
Cable Networks
Operator
GeoStabilization International (GSI)
(11)
GoWireless Holdings, Inc.
(11)
Geohazard Engineering
Services & Maintenance
Provider of Wireless
Telecommunications
Carrier Services
Grupo Hima San Pablo, Inc.
(11)
Tertiary Care Hospitals
GS HVAM Intermediate, LLC
(10)
Specialized Food
Distributor
GS Operating, LLC
(10)
Distributor of Industrial
and Specialty Parts
HDC/HW Intermediate Holdings
(10)
Managed Services and
Hosting Provider
Heartland Dental, LLC
(10)
Dental Support
Organization
HOWLCO LLC
(11) (13)
(21)
Provider of Accounting
and Business
Development Software
to Real Estate End
Markets
Hybrid Promotions, LLC
(10)
Wholesaler of Licensed,
Branded and Private
Label Apparel
Type of Investment
(2) (3) (15)
Investment
Date (24)
Shares/Units
Rate
Maturity
Date
Principal (4)
Cost (4)
Fair Value (18)
Secured Debt
(9)(30)
12/22/2021
8.00% (L+7.00%, Floor
1.00%)
12/22/2026
51,692
51,135
51,135
Secured Debt
(9) (33)
1/4/2021
9.09% (L+8.09%, Floor
1.00%)
1/2/2026
5,400
5,304
5,287
Secured Debt
7/23/2019
5.09% (L+5.00%)
4/8/2025
7,595
7,525
7,595
Secured Debt
Common Stock
6/30/2019
6/30/2019
10,429
12.00%
6/28/2024
1,810
1,810
256
2,066
1,672
-
1,672
Secured Debt
1/2/2019
5.35% (L+5.25%)
12/19/2025
20,710
20,615
20,606
Secured Debt
(9)
1/10/2018
7.50% (L+6.50%, Floor
1.00%)
12/22/2024
18,534
18,440
18,576
Secured Debt
Secured Debt
Secured Debt
(9) (14) (17)
(14) (17)
(17)
3/7/2013
3/7/2013
3/7/2013
9.25% (L+7.00%, Floor
1.50%)
13.75%
12.00%
4/30/2019
10/15/2018
12/24/2021
4,504
2,055
147
4,504
2,040
147
6,691
1,269
49
147
1,465
Secured Debt
(9)
10/18/2019
6.75% (L+5.75%, Floor
1.00%)
10/2/2024
13,243
13,167
13,243
Secured Debt
(9)
2/24/2020
8.00% (L+6.50%, Floor
1.50%)
2/24/2025
28,451
28,068
28,451
Secured Debt
(9)
12/21/2018
8.50% (L+7.50%, Floor
1.00%)
12/21/2023
3,449
3,419
3,059
Secured Debt
(9)
9/9/2020
7.50% (L+6.50%, Floor
1.00%)
4/30/2025
14,813
14,477
14,887
Secured Debt
(9)
8/19/2021
7.00% (L+6.00%, Floor
1.00%)
10/23/2026
25,546
25,546
25,546
99
Table of Contents
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2021
(dollars in thousands)
Portfolio Company (1) (20)
Business Description
Type of Investment
(2) (3) (15)
Investment
Date (24)
Shares/Units
IG Parent Corporation
(11)
Software Engineering
Implus Footcare, LLC
Independent Pet Partners Intermediate
Holdings, LLC
(10)
(10)
Provider of Footwear
and Related Accessories
Omnichannel Retailer
of Specialty Pet
Products
Industrial Services Acquisition, LLC
(10)
Industrial Cleaning
Services
Infolinks Media Buyco, LLC
(10)
Exclusive Placement
Provider to the
Advertising Ecosystem
Interface Security Systems, L.L.C
(10)
Commercial Security &
Alarm Services
Intermedia Holdings, Inc.
(11)
Unified
Communications as a
Service
Invincible Boat Company, LLC.
(10)
Manufacturer of Sport
Fishing Boats
INW Manufacturing, LLC
(11)
Isagenix International, LLC
(11)
Manufacturer of
Nutrition and Wellness
Products
Direct Marketer of
Health & Wellness
Products
Jackmont Hospitality, Inc.
(10)
Franchisee of Casual
Dining Restaurants
Secured Debt
(9)
6/30/2021
Secured Debt
(9)
7/30/2021
Rate
9.25% (L+8.25%, Floor
1.00%)
6.75% (L+5.75%, Floor
1.00%)
Maturity
Date
Principal (4)
Cost (4)
Fair Value (18)
6/30/2026
7,088
6,957
7,028
7/30/2026
9,591
9,419
9,419
Secured Debt
(9)
6/1/2017
8.75% (L+7.75%, Floor
1.00%)
4/30/2024
18,702
18,471
17,743
(36)
(19)
(19)
Secured Debt
Secured Debt
Preferred Stock
(non-voting)
Preferred Stock
(non-voting)
Member Units
8/20/2020
12/10/2020
12/10/2020
12/10/2020
11/20/2018
1,558,333
7.20%
6.00% PIK
6.00% PIK
12/22/2022
11/20/2023
6,563
17,891
6,563
16,861
3,235
-
1,558
28,217
6,563
16,861
4,329
-
-
27,753
Secured Debt
Preferred Member
Units
Preferred Member
Units
Member Units
(9)
8/13/2021
(8) (19) (30)
1/31/2018
(8) (19) (30)
(30)
5/17/2019
6/17/2016
7.75% (L+6.75%, Floor
1.00%)
8/13/2026
19,897
19,490
19,490
144
80
900
10.00% PIK
20.00% PIK
120
81
900
20,591
164
99
730
20,483
Secured Debt
(9)
11/1/2021
7.00% (L+6.00%, Floor
1.00%)
11/1/2026
8,680
8,487
8,487
Secured Debt
(9)
12/9/2021
Secured Debt
(9) (14) (19)
8/7/2019
11.75% (L+10.00%, Floor
1.75%)
9.75% (8.75% Cash,
1.00% PIK) (1.00% PIK +
L+7.00%, Floor 1.75%)
8/7/2023
525
525
525
8/7/2023
7,313
7,237
7,762
5,233
5,758
Secured Debt
(9)
8/3/2018
7.00% (L+6.00%, Floor
1.00%)
7/19/2025
20,627
20,559
20,527
Secured Debt
(9)
8/28/2019
8.00% (L+6.50%, Floor
1.50%)
8/28/2025
17,510
17,354
17,510
Secured Debt
(9)
5/19/2021
6.50% (L+5.75%, Floor
0.75%)
3/25/2027
7,406
7,205
7,258
Secured Debt
(9)
6/21/2018
6.75% (L+5.75%, Floor
1.00%)
6/14/2025
5,158
5,135
3,865
100
Table of Contents
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2021
(dollars in thousands)
Portfolio Company (1) (20)
Business Description
Type of Investment
(2) (3) (15)
Investment
Date (24)
Shares/Units
Secured Debt
Preferred Equity
(9)
5/26/2015
11/8/2021
2,826,667
Rate
8.00% (L+7.00%, Floor
1.00%)
Joerns Healthcare, LLC
(11)
JTI Electrical & Mechanical, LLC
(10)
Klein Hersh, LLC
(10)
Manufacturer and
Distributor of Health
Care Equipment &
Supplies
Electrical, Mechanical
and Automation
Services
Executive and C-Suite
Placement for the Life
Sciences and
Healthcare Industries
KMS, LLC
(10)
Wholesaler of Closeout
and Value-priced
Products
Kore Wireless Group Inc.
(11) (13) Mission Critical
Software Platform
Laredo Energy, LLC
(10)
Oil & Gas Exploration
& Production
LaserAway Intermediate Holdings II, LLC
(11)
Aesthetic Dermatology
Service Provider
Lightbox Holdings, L.P.
(11)
Provider of
Commercial Real
Estate Software
LKCM Headwater Investments I, L.P.
(12) (13)
Investment Partnership
LL Management, Inc.
LLFlex, LLC
(10)
(10)
Logix Acquisition Company, LLC
(10)
Medical Transportation
Service Provider
Provider of Metal-
Based Laminates
Competitive Local
Exchange Carrier
Looking Glass Investments, LLC
(12) (13)
Specialty Consumer
Finance
Secured Debt
Secured Debt
Common Stock
(9)
(19)
8/21/2019
11/15/2021
8/21/2019
472,579
7.00% (L+6.00%, Floor
1.00%)
15.00% PIK
8/21/2024
11/8/2022
4,034
1,000
Secured Debt
Common Equity
(9)
12/22/2021
12/22/2021
1,684,211
7.00% (L+6.00%, Floor
1.00%)
12/22/2026
37,895
Maturity
Date
Principal (4)
Cost (4)
Fair Value (18)
11/4/2024
2,100
2,100
314
2,414
3,989
1,004
4,429
9,422
2,100
314
2,414
3,658
1,004
-
4,662
36,972
1,684
38,656
36,972
1,684
38,656
Secured Debt
(9)
11/13/2020
7.75% (L+7.00%, Floor
0.75%)
11/13/2025
43,321
42,342
43,278
Secured Debt
(9)
10/4/2021
8.25% (L+7.25%, Floor
1.00%)
10/4/2026
7,581
7,415
7,415
Secured Debt
12/31/2018
5.72% (L+5.50%)
12/20/2024
11,415
11,345
11,400
Member Units
5/4/2020
1,155,952
11,560
9,659
Secured Debt
(9)
10/18/2021
6.50% (L+5.75%, Floor
0.75%)
10/14/2027
4,130
4,050
4,115
Secured Debt
5/23/2019
5.22% (L+5.00%)
5/9/2026
14,625
14,460
14,442
LP Interests
(8) (31)
1/25/2013
2.3%
1,746
2,541
Secured Debt
(9)
5/2/2019
8.25% (L+7.25%, Floor
1.00%)
9/25/2023
17,438
17,309
17,438
Secured Debt
(9)
8/16/2021
10.00% (L+9.00%, Floor
1.00%)
8/16/2026
4,478
4,382
4,382
Secured Debt
(9)
1/8/2018
6.75% (L+5.75%, Floor
1.00%)
12/22/2024
25,850
24,605
24,428
101
Table of Contents
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2021
(dollars in thousands)
Portfolio Company (1) (20)
Business Description
Type of Investment
(2) (3) (15)
Member Units
Investment
Date (24)
7/1/2015
Shares/Units
3
Rate
Maturity
Date
Principal (4)
Cost (4)
125
Fair Value (18)
25
Mac Lean-Fogg Company
(10)
Manufacturer and
Supplier for Auto and
Power Markets
Mako Steel, LP
(10)
Self-Storage Design &
Construction
MB2 Dental Solutions, LLC
(11)
Dental Partnership
Organization
Mills Fleet Farm Group, LLC
(10)
NBG Acquisition Inc
NinjaTrader, LLC
NNE Partners, LLC
(11)
(10)
(10)
Omnichannel Retailer
of Work, Farm and
Lifestyle Merchandise
Wholesaler of Home
Décor Products
Operator of Futures
Trading Platform
Oil & Gas Exploration
& Production
Northstar Group Services, Inc
(11)
Commercial &
Industrial Services
NTM Acquisition Corp.
(11)
Provider of B2B Travel
Information Content
NWN Corporation
(10)
Ospemifene Royalty Sub LLC
(10)
OVG Business Services, LLC
(10)
Value Added Reseller
and Provider of
Managed Services to a
Diverse Set of
Industries
Estrogen-Deficiency
Drug Manufacturer and
Distributor
Venue Management
Services
Secured Debt
(9)
4/22/2019
Preferred Stock
(19)
10/1/2019
5.88% (L+5.25%, Floor
0.625%)
13.75% (4.50% Cash,
9.25% PIK)
12/22/2025
17,080
16,995
1,920
18,915
17,080
1,920
19,000
Secured Debt
(9)
3/15/2021
8.00% (L+7.25%, Floor
0.75%)
3/13/2026
17,589
17,267
17,589
Secured Debt
(9)
1/28/2021
7.00% (L+6.00%, Floor
1.00%)
1/29/2027
11,682
11,531
11,682
Secured Debt
(9)
10/24/2018
7.25% (L+6.25%, Floor
1.00%)
10/24/2024
17,781
17,563
17,781
Secured Debt
(9)
4/28/2017
6.50% (L+5.50%, Floor
1.00%)
4/26/2024
3,987
3,961
2,758
Secured Debt
(9)
12/18/2019
7.25% (L+6.25%, Floor
1.00%)
12/18/2024
31,425
30,837
31,368
Secured Debt
(19)
3/2/2017
9.37% (4.87% Cash,
4.50% PIK) (4.50% PIK +
L+4.75%)
12/31/2023
24,781
24,709
23,154
Secured Debt
(9)
11/1/2021
6.50% (L+5.50%, Floor
1.00%)
11/12/2026
10,000
9,952
10,034
Secured Debt
(9) (19)
7/12/2016
8.25% (7.25% Cash,
1.00% PIK) (1.00%PIK +
L+6.25%, Floor 1.00%)
6/7/2024
4,598
4,598
4,552
Secured Debt
(9)
5/7/2021
7.50% (L+6.50%, Floor
1.00%)
5/7/2026
42,972
42,108
42,323
Secured Debt
(14)
7/8/2013
11.50%
11/15/2026
4,562
4,562
112
Secured Debt
(9)
11/29/2021
7.25% (L+6.25%, Floor
1.00%)
11/19/2028
14,000
13,861
13,861
102
Table of Contents
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2021
(dollars in thousands)
Portfolio Company (1) (20)
Project Eagle Holdings, LLC
PT Network, LLC
RA Outdoors LLC
Research Now Group, Inc. and Survey
Sampling International, LLC
RM Bidder, LLC
(10)
(10)
(10)
(11)
(10)
Business Description
Provider of Secure
Business Collaboration
Software
Provider of Outpatient
Physical Therapy and
Sports Medicine
Services
Software Solutions
Provider for Outdoor
Activity Management
Provider of Outsourced
Online Surveying
Scripted and Unscripted
TV and Digital
Programming Provider
Roof Opco, LLC
(10)
Residential Re-
Roofing/Repair
RTIC Subsidiary Holdings, LLC
(10)
Rug Doctor, LLC.
(10)
Direct-To-Consumer
eCommerce Provider of
Outdoor Products
Carpet Cleaning
Products and
Machinery
Salient Partners L.P.
(11)
Provider of Asset
Management Services
Savers, Inc.
SIB Holdings, LLC
(11)
(10)
For-Profit Thrift
Retailer
Provider of Cost
Reduction Services
South Coast Terminals Holdings, LLC
(10)
Specialty Toll Chemical
Manufacturer
Type of Investment
(2) (3) (15)
Investment
Date (24)
Shares/Units
Rate
Maturity
Date
Principal (4)
Cost (4)
Fair Value (18)
Secured Debt
(9)
7/6/2020
7.75% (L+6.75%, Floor
1.00%)
7/6/2026
29,738
29,151
29,714
Secured Debt
Common Stock
(9) (19)
10/12/2017
1/1/2020
2
8.50% (6.50% Cash,
2.00% PIK) (2.00% PIK +
L+5.50%, Floor 1.00%)
11/30/2023
8,889
8,889
-
8,889
8,889
80
8,969
Secured Debt
(9)
4/8/2021
7.75% (L+6.75%, Floor
1.00%)
4/8/2026
19,374
19,193
18,352
Secured Debt
(9)
12/29/2017
6.50% (L+5.50%, Floor
1.00%)
12/20/2024
20,124
19,789
19,899
Member Units
Warrants
(26)
11/12/2015
11/12/2015
2,779
187,161
10/20/2025
46
425
471
26
-
26
Secured Debt
(9)
8/27/2021
7.00% (L+6.00%, Floor
1.00%)
8/27/2026
2,800
2,704
2,704
Secured Debt
(9)
9/1/2020
9.00% (L+7.75%, Floor
1.25%)
9/1/2025
18,191
17,997
18,191
Secured Debt
(9)
7/16/2021
7.25% (L+6.25%, Floor
1.00%)
11/16/2024
11,145
10,902
10,902
Secured Debt
Secured Debt
(9)
(9)
8/31/2018
9/30/2021
7.00% (L+6.00%, Floor
1.00%)
6.00% (L+5.00%, Floor
1.00%)
10/30/2022
6,251
6,247
10/30/2022
1,250
1,250
7,497
4,063
2,435
6,498
Secured Debt
(9)
5/14/2021
6.25% (L+5.50%, Floor
0.75%)
4/26/2028
11,400
11,295
11,386
Secured Debt
Common Equity
(9)
10/29/2021
10/29/2021
95,238
7.00% (L+6.00%, Floor
1.00%)
10/29/2026
6,282
6,134
200
6,334
6,145
200
6,345
103
Table of Contents
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2021
(dollars in thousands)
Portfolio Company (1) (20)
Business Description
Staples Canada ULC
(10) (13)
(21)
Office Supplies Retailer
Stellant Systems, Inc.
(11)
Manufacturer of
Traveling Wave Tubes
and Vacuum Electronic
Devices
Student Resource Center, LLC
(10)
Higher Education
Services
Tacala Investment Corp.
(34)
Quick Service
Restaurant Group
Team Public Choices, LLC
(11)
Tectonic Financial, LLC
Tex Tech Tennis, LLC
U.S. TelePacific Corp.
USA DeBusk LLC
Veregy Consolidated, Inc.
Vida Capital, Inc
Vistar Media, Inc.
(10)
(11)
(10)
(11)
(11)
(10)
VORTEQ Coil Finishers, LLC
(10)
Home-Based Care
Employment Service
Provider
Financial Services
Organization
Sporting Goods &
Textiles
Provider of
Communications and
Managed Services
Provider of Industrial
Cleaning Services
Energy Service
Company
Alternative Asset
Manager
Operator of Digital Out-
of-Home Advertising
Platform
Specialty Coating of
Aluminum and Light-
Gauge Steel
Type of Investment
(2) (3) (15)
Secured Debt
Common Equity
(9)
Investment
Date (24)
12/10/2021
12/10/2021
Shares/Units
863,636
Rate
7.25% (L+6.25%, Floor
1.00%)
Maturity
Date
Principal (4)
Cost (4)
Fair Value (18)
12/13/2026
50,704
49,589
864
50,453
49,589
864
50,453
Secured Debt
(9) (22)
9/14/2017
8.00% (L+7.00%, Floor
1.00%)
9/12/2024
16,116
16,039
15,620
Secured Debt
(9)
1/0/1900
6.25% (L+5.50%, Floor
0.75%)
10/1/2028
7,700
7,625
7,700
Secured Debt
(9)
6/25/2021
9.00% (L+8.00%, Floor
1.00%)
6/25/2026
10,969
10,753
10,826
Secured Debt
(9)
3/19/2021
4.25% (L+3.50%, Floor
0.75%)
2/5/2027
1,995
1,995
1,994
Secured Debt
(9)
12/22/2020
6.00% (L+5.00%, Floor
1.00%)
12/18/2027
15,109
14,778
15,071
Common Stock
(8)
5/15/2017
200,000
2,000
4,650
Common Stock
(30)
7/7/2021
1,000,000
1,000
1,000
Secured Debt
(9)
5/17/2017
7.00% (L+6.00%, Floor
1.00%)
5/2/2023
17,088
16,985
12,917
Secured Debt
(9)
10/22/2019
6.75% (L+5.75%, Floor
1.00%)
9/8/2026
37,281
36,510
37,281
Secured Debt
Secured Debt
(9)
(9)
11/9/2020
11/9/2020
6.25% (L+5.25, Floor
1.00%)
7.00% (L+6.00%, Floor
1.00%)
11/3/2025
5,875
5,111
11/3/2027
14,888
14,524
19,635
5,111
14,925
20,036
Secured Debt
10/10/2019
6.10% (L+6.00%)
10/1/2026
17,089
16,905
15,850
Preferred Stock
4/3/2019
70,207
767
1,726
Secured Debt
Common Equity
(9)
11/30/2021
11/30/2021
1,038,462
8.50% (L+7.50%, Floor
1.00%)
11/30/2026
25,962
25,450
1,038
26,488
25,450
1,038
26,488
104
Table of Contents
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2021
(dollars in thousands)
Portfolio Company (1) (20)
Wahoo Fitness Acquisition L.L.C.
Wall Street Prep, Inc.
Watterson Brands, LLC
Winter Services LLC
Xenon Arc, Inc.
(11)
(10)
(10)
(10)
(10)
Business Description
Fitness Training
Equipment Provider
Financial Training
Services
Facility Management
Services
Provider of Snow
Removal and Ice
Management Services
Tech-enabled
Distribution Services to
Chemicals and Food
Ingredients Primary
Producers
YS Garments, LLC
(11)
Designer and Provider
of Branded Activewear
Subtotal Non-Control/Non-Affiliate
Investments (85.2% of net assets at fair value)
Total Portfolio Investments,December 31,
2021 (199.2% of net assets at fair value)
Type of Investment
(2) (3) (15)
Investment
Date (24)
Shares/Units
Rate
Maturity
Date
Principal (4)
Cost (4)
Fair Value (18)
Secured Debt
(9)
8/17/2021
6.75% (L+5.75%, Floor
1.00%)
8/12/2028
15,000
14,569
14,916
Secured Debt
Common Stock
(9)
7/19/2021
7/19/2021
400,000
8.00% (L+7.00%, Floor
1.00%)
7/19/2026
4,373
4,288
400
4,688
4,285
400
4,685
Secured Debt
(9)
12/17/2021
7.25% (L+6.25%, Floor
1.00%)
12/17/2026
25,876
25,267
25,267
Secured Debt
(9)
11/19/2021
8.00% (L+7.00%, Floor
1.00%)
11/19/2026
10,278
10,018
10,061
Secured Debt
(9)
12/17/2021
6.75% (L+6.00%, Floor
0.75%)
12/17/2026
38,600
37,423
37,423
Secured Debt
(9)
8/22/2018
6.50% (L+5.50%, Floor
1.00%)
8/9/2024
13,034
12,967
12,578
$ 1,573,110
$ 3,259,246
$
$
1,523,360
3,561,831
105
Table of Contents
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2021
(dollars in thousands)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(16)
(17)
(18)
(19)
(20)
(21)
(22)
(23)
All investments are Lower Middle Market portfolio investments, unless otherwise noted. See Note C for a description of Lower
Middle Market portfolio investments. All of the Company’s investments, unless otherwise noted, are encumbered either as
security for the Company’s Credit Facility or in support of the SBA-guaranteed debentures issued by the Funds.
Debt investments are income producing, unless otherwise noted. Equity and warrants are non-income producing, unless
otherwise noted.
See Note C and Schedule 12-14 for a summary of geographic location of portfolio companies.
Principal is net of repayments. Cost is net of repayments and accumulated unearned income.
Control investments are defined by the 1940 Act, as investments in which more than 25% of the voting securities are owned or
where the ability to nominate greater than 50% of the board representation is maintained.
Affiliate investments are defined by the 1940 Act as investments in which between 5% and 25% (inclusive) of the voting
securities are owned and the investments are not classified as Control investments.
Non-Control/Non-Affiliate investments are defined by the 1940 Act as investments that are neither Control investments nor
Affiliate investments.
Income producing through dividends or distributions.
Index based floating interest rate is subject to contractual minimum interest rate. A majority of the variable rate loans in the
Company’s investment portfolio bear interest at a rate that may be determined by reference to either LIBOR or an alternate Base
Rate (commonly based on the Federal Funds Rate or the Prime Rate), which typically resets semi-annually, quarterly, or monthly
at the borrower’s option. The borrower may also elect to have multiple interest reset periods for each loan. For each such loan,
the Company has provided the weighted average annual stated interest rate in effect at December 31, 2021. As noted in this
schedule, 67% of the loans (based on the par amount) contain LIBOR floors which range between 0.50% and 2.00%, with a
weighted-average LIBOR floor of approximately 1.06%.
Private Loan portfolio investment. See Note C for a description of Private Loan portfolio investments.
Middle Market portfolio investment. See Note C for a description of Middle Market portfolio investments.
Other Portfolio investment. See Note C for a description of Other Portfolio investments.
Investment is not a qualifying asset as defined under Section 55(a) of the 1940 Act. Qualifying assets must represent at least 70%
of total assets at the time of acquisition of any additional non-qualifying assets.
Non-accrual and non-income producing investment.
All of the Company’s portfolio investments are generally subject to restrictions on resale as “restricted securities.”
External Investment Manager. Investment is not encumbered as security for the Company's Credit Facility or in support of the
SBA-guaranteed debentures issued by the Funds.
Maturity date is under on-going negotiations with the portfolio company and other lenders, if applicable.
Investment fair value was determined using significant unobservable inputs, unless otherwise noted. See Note C for further
discussion.
PIK interest income and cumulative dividend income represent income not paid currently in cash.
All portfolio company headquarters are based in the United States, unless otherwise noted.
Portfolio company headquarters are located outside of the United States.
In connection with the Company's debt investment in Staples Canada ULC and in an attempt to mitigate any potential adverse
change in foreign exchange rates during the term of the Company's investment, the Company maintains a forward foreign
currency contract with Cadence Bank to lend $21.4 million Canadian Dollars and receive $16.9 million U.S. Dollars with a
settlement date of September 14, 2022. The unrealized depreciation on the forward foreign currency contract was not significant
as of December 31, 2021.
The Company has entered into an intercreditor agreement that entitles the Company to the "last out" tranche of the first lien
secured loans, whereby the "first out" tranche will receive priority as to the "last out" tranche with
106
Table of Contents
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2021
(dollars in thousands)
(24)
(25)
(26)
(27)
(28)
(29)
(30)
(31)
(32)
(33)
(34)
(35)
(36)
respect to payments of principal, interest, and any other amounts due thereunder. Therefore, the Company receives a higher
interest rate than the contractual stated interest rate of LIBOR plus 7.25% (Floor 1.25%) per the credit agreement and the
Consolidated Schedule of Investments above reflects such higher rate.
Investment date represents the date of initial investment in the security position.
Warrants are presented in equivalent shares with a strike price of $10.92 per share.
Warrants are presented in equivalent units with a strike price of $14.28 per unit.
Warrants are presented in equivalent shares/units with a strike price of $0.01 per share/unit.
Warrants are presented in equivalent shares with a strike price of $0.001 per share.
Warrants are presented in equivalent units with a strike price of $1.50 per unit.
Shares/Units represent ownership in an underlying Real Estate or HoldCo entity.
Investment is not unitized. Presentation is made in percent of fully diluted ownership unless otherwise indicated.
Portfolio company is in a bankruptcy process and, as such, the maturity date of our debt investment in this portfolio company will
not be finally determined until such process is complete. As noted in footnote (14), our debt investment in this portfolio
company is on non-accrual status.
The Company has entered into an intercreditor agreement that entitles the Company to the "last out" tranche of the first lien
secured loans, whereby the "first out" tranche will receive priority as to the "last out" tranche with respect to payments of
principal, interest, and any other amounts due thereunder. Therefore, the Company receives a higher interest rate than the
contractual stated interest rate of LIBOR plus 7.96% (Floor 1.00%) per the credit agreement and the Consolidated Schedule of
Investments above reflects such higher rate.
Short-term portfolio investments. See Note C for a description of short-term portfolio investments.
The security has an effective contractual interest rate of 2.00% PIK + L+6.50%, Floor 1.00%, but the issuer may, in its
discretion, elect to pay the PIK interest in cash. The rate presented represents the effective current yield based on actual payments
received during the period.
Delayed draw term loan facility permits the borrower to make an interest rate election on each new tranche of borrowings under
the facility. The rate presented represents a weighted-average rate for borrowings under the facility. As of December 31, 2021,
borrowings under the loan facility bear interest at L+6.00% or Prime+5.00%.
107
Table of Contents
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments
December 31, 2020
(dollars in thousands)
Portfolio Company (1) (20)
Business Description
Type of
Investment
(2) (3) (15)
Control Investments (5)
ASC Interests, LLC
Recreational and
Educational Shooting
Facility
Investment Date (24) Shares/Units
Rate
Maturity Date
Principal (4) Cost (4) Fair Value (18)
Secured Debt
Member Units
8/1/2013
8/1/2013
1,500
13.00%
7/31/2022
$
1,750 $
$
1,715
1,500
3,215
1,715
1,120
2,835
Analytical Systems Keco, LLC
Manufacturer of Liquid
and Gas Analyzers
ATS Workholding, LLC
(10)
Manufacturer of
Machine Cutting Tools
and Accessories
Project BarFly, LLC
(10)
Casual Restaurant
Group
Bolder Panther Group, LLC
Consumer Goods and
Fuel Retailer
Bond-Coat, Inc.
Brewer Crane Holdings, LLC
Casing and Tubing
Coating Services
Provider of Crane
Rental and Operating
Services
Bridge Capital Solutions Corporation
Financial Services and
Cash Flow Solutions
Provider
Secured Debt
Preferred Member
Units
Warrants
(9)
(27)
8/16/2019
8/16/2019
8/16/2019
12.00% (L+10.00%,
Floor 2.00%)
8/16/2024
5,155
4,874
3,200
420
8/16/2029
3,200
316
8,390
Secured Debt
Preferred Member
Units
(14)
11/16/2017
11/16/2017
3,725,862
5.00%
11/16/2021
4,982
4,824
Secured Debt
Member Units
10/15/2020
10/26/2020
37
7.00%
10/31/2024
343
4,874
3,200
10
8,084
3,347
-
3,347
343
1,584
1,927
3,726
8,550
343
1,584
1,927
Secured Debt
Class A Preferred
Member Units
Class B Preferred
Member Units
(9)
(30)
(30)
12/31/2020
12/31/2020
12/31/2020
10.50% (L+9.00%,
Floor 1.50%)
14.00%
140,000
8.00%
12/31/2025
27,500
27,225
27,225
10,194
10,194
14,000
51,419
14,000
51,419
Common Stock
12/28/2012
57,508
6,350
2,040
Secured Debt
Preferred Member
Units
(9)
(8)
Secured Debt
Warrants
Secured Debt
Preferred Member
Units
(27)
(30)
(8) (30)
1/9/2018
1/9/2018
7/25/2016
7/25/2016
7/25/2016
7/25/2016
2,950
82
17,742
11.00% (L+10.00%,
Floor 1.00%)
1/9/2023
8,556
8,513
8,513
13.00%
13.00%
12/11/2024
7/25/2026
12/11/2024
8,813
1,000
4,280
12,793
5,850
14,363
8,403
2,132
998
1,000
12,533
8,403
3,220
998
1,000
13,621
Café Brazil, LLC
Casual Restaurant
Group
Member Units
(8)
6/9/2006
1,233
1,742
2,030
108
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2020
(dollars in thousands)
Portfolio Company (1) (20)
California Splendor Holdings LLC
Business Description
Processor of Frozen
Fruits
CBT Nuggets, LLC
Centre Technologies Holdings, LLC
Produces and Sells IT
Training Certification
Videos
Provider of IT
Hardware Services and
Software Solutions
Chamberlin Holding LLC
Roofing and
Waterproofing
Specialty Contractor
Charps, LLC
Pipeline Maintenance
and Construction
Clad-Rex Steel, LLC
Specialty Manufacturer
of Vinyl-Clad Metal
CMS Minerals Investments
Cody Pools, Inc.
Oil & Gas Exploration
& Production
Designer of Residential
and Commercial Pools
CompareNetworks Topco, LLC
Internet Publishing and
Web Search Portals
Type of
Investment
(2) (3) (15)
Secured Debt
Secured Debt
Preferred Member
Units
Preferred Member
Units
(9)
(9)
(8)
(8)
Investment Date (24) Shares/Units
Rate
Maturity Date
Principal (4) Cost (4)
Fair Value (18)
3/30/2018
3/30/2018
7/31/2019
3/30/2018
6,725
6,157
9.00% (L+8.00%,
Floor 1.00%)
11.00% (L+10.00%,
Floor 1.00%)
3/30/2023
8,100
8,014
8,043
3/30/2023
28,000
27,854
27,789
8,255
10,775
54,898
8,255
6,241
50,328
Member Units
(8)
6/1/2006
416
1,300
46,080
Secured Debt
Preferred Member
Units
(9)
Secured Debt
Member Units
Member Units
(9)
(8)
(8) (30)
Unsecured Debt
Secured Debt
Preferred Member
Units
(19)
(8)
Secured Debt
Member Units
Secured Debt
Member Units
(9)
(8)
(30)
(30)
1/4/2019
1/4/2019
2/26/2018
2/26/2018
11/2/2018
8/26/2020
6/5/2019
2/3/2017
12/20/2016
12/20/2016
12/20/2016
12/20/2016
12,696
4,347
1,047,146
1,600
717
800
12.00% (L+10.00%,
Floor 2.00%)
1/4/2024
11,628
11,549
9.00% (L+8.00%,
Floor 1.00%)
2/26/2023
15,212
10.00% (8.67% Cash,
1.33% PIK)
15.00%
1/31/2024
6/5/2022
9,388
669
5,840
17,389
15,136
11,440
1,322
27,898
7,641
669
400
8,710
10.50% (L+9.50%,
Floor 1.00%)
12/20/2021
10.00%
12/20/2036
10,880
1,111
10,853
7,280
1,100
210
19,443
11,549
6,160
17,709
15,212
28,070
1,270
44,552
8,475
669
10,520
19,664
10,853
8,610
1,100
530
21,093
Member Units
(30)
4/1/2016
100
2,179
1,624
Secured Debt
Preferred Member
Units
(9)
Secured Debt
(9)
3/6/2020
3/6/2020
1/29/2019
109
12.25% (L+10.50%,
Floor 1.75%)
3/6/2025
14,216
14,092
587
8,317
22,409
14,216
14,940
29,156
12.00% (L+11.00%,
Floor 1.00%)
1/29/2024
7,954
7,910
7,953
Portfolio Company (1) (20)
Business Description
Type of
Investment
(2) (3) (15)
Preferred Member
Units
(8)
Copper Trail Fund Investments
(12) (13) Investment Partnership
LP Interests
(CTMH, LP)
(31)
7/17/2017
Datacom, LLC
Technology and
Telecommunications
Provider
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2020
(dollars in thousands)
Investment Date (24) Shares/Units
Rate
Maturity Date
Principal (4) Cost (4)
Fair Value (18)
1/29/2019
1,975
38.8%
-
6,453
3,857
1,975
9,885
6,780
14,733
747
747
8.00%
10.50% PIK
5/31/2021
5/31/2021
1,800
12,507
1,800
12,475
1,294
6,030
21,599
11.00% (L+10.00%,
Floor 1.00%)
4/1/2023
18,173
18,077
9,501
27,578
1,615
10,531
-
-
12,146
18,077
9,835
27,912
(14)
(14) (19)
Secured Debt
Secured Debt
Class A Preferred
Member Units
Class B Preferred
Member Units
Secured Debt
Preferred Member
Units
(9)
(8)
5/30/2014
5/30/2014
5/30/2014
5/30/2014
4/1/2018
4/1/2018
Secured Debt
Preferred Stock
(9)
2/13/2018
2/13/2018
8,400
12.00% (L+11.00%,
Floor 1.00%)
2/13/2023
15,090
Secured Debt
Member Units
(9)
(8)
6/24/2016
6/24/2016
8,619
9.00% (L+7.00%,
Floor 2.00%)
6/24/2021
19,838
7/15/2013
Secured Debt
Member Units
(9)
7/15/2013
1,200
9.00% (L+8.00%,
Floor 1.00%, Ceiling
1.50%)
1/31/2021
4,519
Secured Debt
Member Units
(8)
12/19/2014
12/19/2014
5,879
7.15% (L+7.00%)
12/31/2023
16,775
15,007
8,400
23,407
15,007
19,380
34,387
19,807
14,844
34,651
19,838
52,490
72,328
4,519
1,200
5,719
16,775
13,065
29,840
4,519
1,410
5,929
16,775
44,900
61,675
Member Units
(8)
8/31/2007
438
2,980
4,510
Secured Debt
(9) (17) (19)
9/29/2017
110
10.50% (5.25% Cash,
5.25% PIK)
9/30/2020
250
250
250
Digital Products Holdings LLC
Designer and
Distributor of
Consumer Electronics
Direct Marketing Solutions, Inc.
Provider of Omni-
Channel Direct
Marketing Services
Gamber-Johnson Holdings, LLC
("GJH")
Manufacturer of
Ruggedized Computer
Mounting Systems
Garreco, LLC
GRT Rubber Technologies LLC ("GRT")
Gulf Manufacturing, LLC
Gulf Publishing Holdings, LLC
Manufacturer and
Supplier of Dental
Products
Manufacturer of
Engineered Rubber
Products
Manufacturer of
Specialty Fabricated
Industrial Piping
Products
Energy Industry
Focused Media and
Publishing
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2020
(dollars in thousands)
Portfolio Company (1) (20)
Business Description
Type of
Investment
(2) (3) (15)
Investment Date (24) Shares/Units
Harris Preston Fund Investments
(12) (13) Investment Partnership
Harrison Hydra-Gen, Ltd.
Manufacturer of
Hydraulic Generators
Jensen Jewelers of Idaho, LLC
Retail Jewelry Store
J&J Services, Inc.
KBK Industries, LLC
Provider of Dumpster
and Portable Toilet
Rental Services
Manufacturer of
Specialty Oilfield and
Industrial Products
Kickhaefer Manufacturing Company,
LLC
Precision Metal Parts
Manufacturing
Market Force Information, LLC
Provider of Customer
Experience
Management Services
MH Corbin Holding LLC
Manufacturer and
Distributor of Traffic
Safety Products
MSC Adviser I, LLC
(16)
Third Party Investment
Advisory Services
Mystic Logistics Holdings, LLC
Logistics and
Distribution Services
Secured Debt
Member Units
(19)
4/29/2016
4/29/2016
3,681
LP Interests (2717
MH, L.P.)
LP Interests (2717
HPP-MS, L.P.)
(31)
(31)
10/1/2017
12/28/2020
49.3%
49.3%
Rate
(L+9.50%, Floor
1.00%)
12.50% (6.25% Cash,
6.25% PIK)
Maturity Date
Principal (4) Cost (4)
Fair Value (18)
4/29/2021
13,147
13,135
3,681
17,066
2,599
250
2,849
12,044
-
12,294
2,702
250
2,952
Common Stock
(8)
6/4/2010
107,456
718
5,450
11/14/2006
Secured Debt
Member Units
(9)
(8)
11/14/2006
627
10.00%
(Prime+6.75%, Floor
2.00%)
11/14/2023
3,400
Secured Debt
Preferred Stock
10/31/2019
10/31/2019
2,814
11.50%
10/31/2024
12,800
3,374
811
4,185
12,697
7,085
19,782
3,400
7,620
11,020
12,800
12,680
25,480
Member Units
(8)
1/23/2006
325
783
13,200
Secured Debt
Member Units
Secured Debt
Member Units
(8) (30)
10/31/2018
10/31/2018
10/31/2018
10/31/2018
581
800
11.50%
9.00%
10/31/2023
10/31/2048
22,415
3,948
22,269
12,240
3,909
992
39,410
Secured Debt
Secured Debt
Member Units
(9)
(14) (19)
(19)
Secured Debt
Preferred Member
Units
Preferred Member
Units
7/28/2017
7/28/2017
7/28/2017
8/31/2015
3/15/2019
9/1/2015
743,921
66,000
4,000
12.00% (L+11.00%,
Floor 1.00%)
12.00% PIK
7/28/2023
7/28/2023
1,600
26,079
1,600
25,952
16,642
44,194
13.00% (10.00%
Cash, 3.00% PIK)
3/31/2022
8,570
8,527
4,400
6,000
18,927
22,269
12,240
3,909
1,160
39,578
1,600
13,562
-
15,162
8,280
2,370
-
10,650
Member Units
(8) (31)
11/22/2013
29,500
116,760
111
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2020
(dollars in thousands)
Portfolio Company (1) (20)
Type of
Investment
(2) (3) (15)
Business Description
Provider for Large
Volume Mailers
Investment Date (24) Shares/Units
Rate
Maturity Date
Principal (4) Cost (4)
Fair Value (18)
Secured Debt
Common Stock
(8)
8/18/2014
8/18/2014
5,873
12.00%
1/17/2022
6,733
6,723
2,720
9,443
6,723
8,990
15,713
Member Units
(8)
1/31/2008
2,955
2,975
16,100
Secured Debt
Preferred Member
Units
12/31/2020
12/31/2020
6,500
12.00%
12/31/2025
10,500
10,395
6,500
16,895
Secured Debt
Preferred Member
Units
(8)
2/28/2018
2/28/2018
86,400,000
11.00%
2/28/2023
17,097
17,016
Secured Debt
Warrants
Member Units
(27)
(8)
9/8/2011
9/8/2011
9/8/2011
251,723
1,454,167
9.00%
6/8/2022
6/8/2027
5,620
NRP Jones, LLC
Manufacturer of Hoses,
Fittings and Assemblies
Secured Debt
Member Units
(8)
12/21/2017
12/22/2011
65,962
12.00%
3/20/2023
2,080
6,880
23,896
5,572
252
765
6,589
2,080
3,717
5,797
10,395
6,500
16,895
16,726
1,470
18,196
5,620
1,490
5,600
12,710
2,080
2,821
4,901
17,193
10,780
27,973
NAPCO Precast, LLC
Nebraska Vet AcquireCo, LLC (NVS)
NexRev LLC
Precast Concrete
Manufacturing
Mixed-Animal
Veterinary and Animal
Health Product Provider
Provider of Energy
Efficiency Products &
Services
NRI Clinical Research, LLC
Clinical Research
Service Provider
NuStep, LLC
OMi Holdings, Inc.
Pearl Meyer Topco LLC
Televerde, LLC (Pegasus Research
Group, LLC)
PPL RVs, Inc.
Designer, Manufacturer
and Distributor of
Fitness Equipment
Manufacturer of
Overhead Cranes
Provider of Executive
Compensation
Consulting Services
Provider of
Telemarketing and Data
Services
Recreational Vehicle
Dealer
Secured Debt
Preferred Member
Units
1/31/2017
1/31/2017
406
12.00%
1/31/2022
17,240
17,193
10,200
27,393
Common Stock
(8)
4/1/2008
1,500
1,080
20,380
Secured Debt
Member Units
(8)
4/27/2020
4/27/2020
13,800
12.00%
4/27/2025
37,513
37,202
13,000
50,202
37,202
15,940
53,142
Member Units
(8)
1/6/2011
460
1,290
8,830
Secured Debt
Common Stock
(9)
(8)
11/15/2016
6/10/2010
2,000
7.50% (L+7.00%,
Floor 0.50%)
11/15/2022
11,855
11,781
2,150
13,931
11,806
11,500
23,306
112
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2020
(dollars in thousands)
Portfolio Company (1) (20)
Principle Environmental, LLC (d/b/a
TruHorizon Environmental Solutions)
Business Description
Noise Abatement
Service Provider
Type of
Investment
(2) (3) (15)
Investment Date (24) Shares/Units
Rate
Maturity Date
Principal (4) Cost (4) Fair Value (18)
Secured Debt
Preferred Member
Units
Warrants
(8)
(27)
2/1/2011
2/1/2011
2/1/2011
19,631
1,018
13.00%
4/30/2023
6,397
6,335
1/31/2021
4,600
1,200
12,135
6,397
10,500
870
17,767
Quality Lease Service, LLC
River Aggregates, LLC
Tedder Industries, LLC
Provider of Rigsite
Accommodation Unit
Rentals and Related
Services
Processor of
Construction
Aggregates
Manufacturer of
Firearm Holsters and
Accessories
Trantech Radiator Topco, LLC
Transformer Cooling
Products and Services
UnionRock Energy Fund II, LP
(12) (13) Oil & Gas Exploration
& Production
Vision Interests, Inc.
Manufacturer / Installer
of Commercial Signage
Ziegler's NYPD, LLC
Casual Restaurant
Group
Member Units
6/8/2015
1,000
11,063
4,460
Member Units
(30)
3/30/2011
1,500
369
3,240
Secured Debt
Preferred Member
Units
8/31/2018
8/31/2018
Secured Debt
Common Stock
(8)
5/31/2019
5/31/2019
479
615
12.00%
8/31/2023
16,400
16,301
12.00%
5/31/2024
8,720
8,136
24,437
8,644
4,655
13,299
16,301
8,136
24,437
8,644
6,030
14,674
LP Interests
(31)
6/15/2020
49.6%
2,894
2,894
Secured Debt
Series A Preferred
Stock
(17)
6/5/2007
12/23/2011
3,000,000
13.00%
9/30/2019
2,028
2,028
Secured Debt
Secured Debt
Secured Debt
Preferred Member
Units
Warrants
(27)
6/1/2015
10/1/2008
10/1/2008
7/1/2015
6/30/2015
10,072
587
12.00%
6.50%
14.00%
10/1/2022
10/1/2022
10/1/2022
10/1/2025
625
1,000
2,750
2,028
3,160
5,188
625
979
2,750
1,780
-
6,134
3,000
5,028
625
1,000
2,750
2,834
600
7,809
Subtotal Control Investments (73.5% of
net assets at fair value)
$ 831,490
$
1,113,725
113
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2020
(dollars in thousands)
Portfolio Company (1) (20)
Business Description
Type of Investment
(2) (3) (15)
Investment Date (24) Shares/Units
Rate
Maturity Date Principal (4)
Cost (4)
Fair Value (18)
Affiliate Investments (6)
AAC Holdings, Inc.
(11)
AFG Capital Group, LLC
American Trailer Rental Group LLC
BBB Tank Services, LLC
Boccella Precast Products LLC
Buca C, LLC
CAI Software LLC
Substance Abuse
Treatment Service
Provider
Provider of Rent-to-
Own Financing
Solutions and Services
Provider of Short-term
Trailer and Container
Rental
Maintenance, Repair
and Construction
Services to the Above-
Ground Storage Tank
Market
Manufacturer of Precast
Hollow Core Concrete
Casual Restaurant
Group
Provider of Specialized
Enterprise Resource
Planning Software
Secured Debt
Common Stock
Warrants
(19)
(27)
12/11/2020
12/11/2020
12/11/2020
593,928
554,353
18.00% (10.00%
Cash, 8.00% PIK)
6/25/2025
9,406
12/11/2025
9,187
3,148
-
12,335
Secured Debt
Preferred Member
Units
4/25/2019
11/7/2014
186
10.00%
5/25/2022
491
491
1,200
1,691
9,187
3,148
2,938
15,273
491
5,810
6,301
Member Units
(30)
6/7/2017
73,493
8,596
16,010
Unsecured Debt
Preferred Stock
(non-voting)
Member Units
(9)
(8) (19)
4/8/2016
12/17/2018
4/8/2016
800,000
12.00% (L+11.00%,
Floor 1.00%)
15.00% PIK
4/8/2021
4,800
4,773
151
800
5,724
4,722
151
280
5,153
Member Units
(8)
6/30/2017
2,160,000
2,256
6,040
Secured Debt
Preferred Member
Units
(9) (17)
(8) (19)
6/30/2015
6/30/2015
6
6.00% PIK
10.25% (L+9.25%,
Floor 1.00%)
6/30/2020
19,004
19,004
4,770
23,774
47,133
2,095
49,228
14,256
-
14,256
47,474
7,190
54,664
Secured Debt
Member Units
(8)
10/10/2014
10/10/2014
77,960
12.50%
12/7/2023
47,474
Chandler Signs Holdings, LLC
(10)
Sign Manufacturer
Charlotte Russe, Inc
(11)
Fast-Fashion Retailer to
Young Women
Classic H&G Holdings, LLC
Provider of Engineered
Packaging Solutions
Class A Units
1/4/2016
1,500,000
1,500
1,460
Common Stock
2/2/2018
19,041
3,141
-
Secured Debt
Preferred Member
Units
(8)
3/12/2020
3/12/2020
154
12.00%
3/12/2025
24,800
24,583
5,760
30,343
24,800
9,510
34,310
114
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2020
(dollars in thousands)
Portfolio Company (1) (20)
Congruent Credit Opportunities Funds
(12) (13)
Business Description
Investment Partnership
Copper Trail Fund Investments
(12) (13)
Investment Partnership
Dos Rios Partners
(12) (13)
Investment Partnership
East Teak Fine Hardwoods, Inc.
Distributor of
Hardwood Products
EIG Fund Investments
(12) (13)
Investment Partnership
Freeport Financial Funds
(12) (13)
Investment Partnership
Harris Preston Fund Investments
(12) (13)
Investment Partnership
Hawk Ridge Systems, LLC
(13)
Value-Added Reseller
of Engineering Design
and Manufacturing
Solutions
Type of Investment
(2) (3) (15)
LP Interests
(Congruent Credit
Opportunities Fund
II, LP)
LP Interests
(Congruent Credit
Opportunities Fund
III, LP)
(31)
(8) (31)
LP Interests (Copper
Trail Energy Fund I,
LP)
(8) (31)
LP Interests (Dos
Rios Partners, LP)
LP Interests (Dos
Rios Partners - A,
LP)
(31)
(31)
Investment Date (24) Shares/Units
Rate
Maturity Date Principal (4)
Cost (4)
Fair Value (18)
1/24/2012
2/4/2015
7/17/2017
4/25/2013
4/25/2013
19.8%
17.4%
12.4%
20.2%
6.4%
4,449
94
11,741
16,190
11,540
11,634
2,161
1,782
6,605
5,417
2,097
8,702
1,720
7,137
Common Stock
4/13/2006
6,250
480
300
LP Interests (EIG
Global Private Debt
Fund-A, L.P.)
(8) (31)
LP Interests
(Freeport Financial
SBIC Fund LP)
LP Interests
(Freeport First Lien
Loan Fund III LP)
(31)
(8) (31)
11/6/2015
3/23/2015
7/31/2015
LP Interests (HPEP
3, L.P.)
(31)
8/9/2017
Secured Debt
Preferred Member
Units
Preferred Member
Units
(8)
(30)
12/2/2016
12/2/2016
12/2/2016
5/1/2017
11.1%
9.3%
6.0%
8.2%
226
226
739
526
5,974
5,264
10,785
16,759
10,321
15,585
3,071
3,258
11.00%
12/2/2023
18,400
18,366
18,400
2,850
150
21,366
8,030
420
26,850
Houston Plating and Coatings, LLC
Provider of Plating and
Industrial Coating
Services
Unsecured
Convertible Debt
Member Units
(8)
1/8/2003
322,297
8.00%
5/1/2022
3,000
3,000
2,352
2,900
5,080
115
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2020
(dollars in thousands)
Portfolio Company (1) (20)
Business Description
Type of Investment
(2) (3) (15)
I-45 SLF LLC
(12) (13)
Investment Partnership
Investment Date (24) Shares/Units
Rate
Maturity Date Principal (4)
Cost (4)
5,352
Fair Value (18)
7,980
L.F. Manufacturing Holdings, LLC
(10)
Manufacturer of
Fiberglass Products
OnAsset Intelligence, Inc.
Provider of
Transportation
Monitoring / Tracking
Products and Services
PCI Holding Company, Inc.
Rocaceia, LLC (Quality Lease and Rental
Holdings, LLC)
Salado Stone Holdings, LLC
(10)
Slick Innovations, LLC
SI East, LLC
Manufacturer of
Industrial Gas
Generating Systems
Provider of Rigsite
Accommodation Unit
Rentals and Related
Services
Limestone and
Sandstone Dimension
Cut Stone Mining
Quarries
Text Message
Marketing Platform
Rigid Industrial
Packaging
Manufacturing
Superior Rigging & Erecting Co.
Provider of Steel
Erection, Crane Rental
& Rigging Services
Member Units (Fully
diluted 20.0%;
24.40% profits
interest) (8)
(8) (31)
10/20/2015
20.00% Fully
Diluted,
24.40% Profits
Interest
Preferred Member
Units (non-voting)
Member Units
(8) (19)
1/1/2019
12/23/2013
2,179,001
14.00% PIK
Secured Debt
Secured Debt
Secured Debt
Secured Debt
Preferred Stock
Warrants
Unsecured Debt
(19)
(19)
(19)
(19)
(27)
(19)
5/20/2014
3/21/2014
5/10/2013
4/18/2011
4/18/2011
4/18/2011
6/5/2017
12.00% PIK
12.00% PIK
12.00% PIK
12.00% PIK
10.00% PIK
6/30/2021
6/30/2021
6/30/2021
6/30/2021
4/18/2021
6/30/2021
830
846
1,823
3,802
64
912
5,333
20,200
15,789
93
2,019
2,112
830
846
1,823
3,802
1,981
1,919
64
11,265
93
2,050
2,143
830
846
1,823
3,802
-
-
64
7,365
Preferred Stock
4/25/2017
1,500,000
3,927
4,130
Secured Debt
Preferred Member
Units
(14) (32)
6/30/2015
1/8/2013
250
12.00%
1/8/2018
30,369
29,865
2,500
32,365
-
-
-
Class A Preferred
Units
(30)
Secured Debt
Common Stock
Warrants
(27)
6/27/2016
9/13/2018
Secured Debt
Preferred Member
Units
(8)
9/13/2018
9/13/2018
Secured Debt
Preferred Member
Units
8/31/2020
8/31/2020
116
2,000,000
70,000
18,084
157
1,473
2,000
1,250
13.00%
9/13/2023
5,720
9/13/2028
5,605
700
181
6,486
9.50%
8/31/2023
32,963
32,760
6,000
38,760
12.00%
8/31/2025
21,500
21,298
4,500
25,798
5,719
1,330
360
7,409
32,962
9,780
42,742
21,298
4,500
25,798
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2020
(dollars in thousands)
Portfolio Company (1) (20)
Business Description
Type of Investment
(2) (3) (15)
Investment Date (24) Shares/Units
Rate
Maturity Date Principal (4)
Cost (4)
Fair Value (18)
UniTek Global Services, Inc.
(11)
Provider of Outsourced
Infrastructure Services
Secured Debt
(9)
Secured Debt
Preferred Stock
Preferred Stock
Preferred Stock
Preferred Stock
Common Stock
(9)
(8) (19)
(8) (19)
(19)
(19)
10/15/2018
8/27/2018
8/29/2019
8/21/2018
1/15/2015
6/30/2017
4/1/2020
7.50% (L+6.50%
Floor 1.00%)
7.50% (L+6.50%
Floor 1.00%)
20.00% PIK
20.00% PIK
19.00% PIK
13.50% PIK
1,133,102
1,521,122
2,281,682
4,336,866
945,507
8/20/2024
452
450
8/20/2024
2,256
2,237
1,441
2,188
3,667
7,924
-
17,907
404
2,022
2,832
375
-
-
-
5,633
Preferred Member
Units
Member Units
(19) (30)
(30)
12/7/2016
12/7/2016
716,949
4,000,000
14.00% PIK
1,032
4,000
5,032
-
-
-
Universal Wellhead Services Holdings, LLC
(10)
Volusion, LLC
Provider of Wellhead
Equipment, Designs,
and Personnel to the Oil
& Gas Industry
Provider of Online
Software-as-a-Service
eCommerce Solutions
Secured Debt
Unsecured
Convertible Debt
Preferred Member
Units
Warrants
(17)
1/26/2015
5/16/2018
1/26/2015
(27)
1/26/2015
4,876,670
1,831,355
1/26/2025
14,000
2,576
37,219
11.50%
1/26/2020
20,234
20,234
19,242
8.00%
11/16/2023
409
409
291
5,990
-
25,523
Subtotal Affiliate Investments (24.2% of net
assets at fair value)
$
416,479
$
366,301
117
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2020
(dollars in thousands)
Portfolio Company (1) (20)
Business Description
Non-Control/Non-Affiliate Investments (7)
Acousti Engineering Company of Florida,
Inc.
(10)
Interior Subcontractor
Providing Acoustical
Walls and Ceilings
Adams Publishing Group, LLC
(10)
Local Newspaper
Operator
ADS Tactical, Inc.
(10)
Value-Added Logistics
and Supply Chain
Provider to the Defense
Industry
Aethon United BR LP
(10)
Oil & Gas Exploration
& Production
Affordable Care Holding Corp.
(10)
Dental Support
Organization
ALKU, LLC.
American Nuts, LLC
(11)
(10)
Specialty National
Staffing Operator
Roaster, Mixer and
Packager of Bulk Nuts
and Seeds
American Teleconferencing Services, Ltd.
(11)
Provider of Audio
Conferencing and
Video Collaboration
Solutions
APTIM Corp.
Arcus Hunting LLC
(11)
(10)
Engineering,
Construction &
Procurement
Manufacturer of
Bowhunting and
Archery Products and
Accessories
Arrow International, Inc
(10)
Manufacturer and
Distributor of
Charitable Gaming
Supplies
Type of
Investment
(2) (3) (15)
Investment Date (24) Shares/Units
Rate
Maturity
Date
Principal (4)
Cost (4)
Fair Value (18)
Secured Debt
(9)
11/2/2020
10.00% (L+8.50%, Floor
1.50%)
10/31/2025
13,000
12,858
12,858
Secured Debt
Secured Debt
(9)
(9)
11/19/2015
11/19/2015
8.75% (L+7.00%, Floor
1.75%)
8.75% (L+7.00%, Floor
1.75%)
7/3/2023
5,863
5,745
5,813
7/3/2023
5,745
5,813
Secured Debt
(9)
3/7/2017
7.00% (L+6.25%, Floor
0.75%)
7/26/2023
19,633
19,529
19,633
Secured Debt
(9)
9/8/2017
7.75% (L+6.75%, Floor
1.00%)
9/8/2023
9,750
9,659
9,544
Secured Debt
(9)
5/9/2019
5.75% (L+4.75%, Floor
1.00%)
10/22/2022
14,246
14,066
14,044
Secured Debt
10/18/2019
5.75% (L+5.50%)
7/29/2026
9,466
9,385
9,478
Secured Debt
Secured Debt
(9)
(9)
12/21/2018
4/10/2018
9.00% (L+8.00%, Floor
1.00%)
9.00% (L+8.00%, Floor
1.00%)
4/10/2023
1,161
1,155
4/10/2023
10,969
10,799
11,954
1,157
10,954
12,111
Secured Debt
(9)
5/19/2016
7.50% (L+6.50%, Floor
1.00%)
6/8/2023
17,358
16,634
8,071
Secured Debt
8/17/2018
7.75%
6/15/2025
12,452
11,063
9,734
Secured Debt
(9)
1/6/2015
11.00% (L+10.00%,
Floor 1.00%)
3/31/2021
11,009
11,009
11,009
Secured Debt
(9) (23)
12/21/2020
9.23% (L+7.98%, Floor
1.25%)
12/21/2025
10,000
9,901
9,901
118
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2020
(dollars in thousands)
Portfolio Company (1) (20)
Business Description
ASC Ortho Management Company, LLC
(10)
Provider of Orthopedic
Services
Type of
Investment
(2) (3) (15)
Investment Date (24) Shares/Units
Rate
Maturity
Date
Principal (4)
Cost (4)
Fair Value (18)
Secured Debt
(9)
Secured Debt
(19)
8/31/2018
8/31/2018
8.50% (L+7.50%, Floor
1.00%)
13.25% PIK
8/31/2023
5,206
5,148
12/1/2023
2,116
2,091
7,239
5,149
2,116
7,265
ATX Networks Corp.
(11) (13)
(21)
Provider of Radio
Frequency Management
Equipment
Secured Debt
(9) (19)
6/30/2015
Berry Aviation, Inc.
(10)
Charter Airline Services
Secured Debt
(19)
7/6/2018
Preferred Member
Units
Preferred Member
Units
(8) (19) (30)
7/6/2018
122,416
(19) (30)
7/6/2018
1,548,387
8.00% PIK
8.75% (7.25% Cash,
1.50% PIK) (1.50% PIK
+ L+6.25%, Floor
1.00%)
12.00% (10.50% Cash,
1.5% PIK)
16.00% PIK
12/31/2023
13,402
13,342
12,263
1/6/2024
4,624
4,595
4,624
145
1,671
6,411
145
904
5,673
BigName Commerce, LLC
(10)
Binswanger Enterprises, LLC
(10)
Provider of Envelopes
and Complimentary
Stationery Products
Glass Repair and
Installation Service
Provider
BLST Operating Company, LLC.
(11)
Multi-Channel Retailer
of General Merchandise
Brainworks Software, LLC
(10)
Advertising Sales and
Newspaper Circulation
Software
Brightwood Capital Fund Investments
(12) (13) Investment Partnership
Cadence Aerospace LLC
(10)
Aerostructure
Manufacturing
Secured Debt
(9)
5/11/2017
8.25% (L+7.25%, Floor
1.00%)
5/11/2022
2,044
2,037
2,011
Secured Debt
(9)
3/10/2017
9.50% (L+8.50%, Floor
1.00%)
3/9/2022
12,958
12,798
Member Units
3/10/2017
1,050,000
1,050
13,848
Secured Debt
(9)
Common Stock
Warrants
(27)
8/28/2020
10/1/2020
10/1/2020
653
70
10.00% (L+8.50%, Floor
1.50%)
8/28/2025
5,879
5,879
8/28/2030
-
-
5,879
12,958
670
13,628
5,879
-
-
5,879
Secured Debt
(9) (14) (17)
8/12/2014
12.50% (Prime+9.25%,
Floor 3.25%)
7/22/2019
7,817
7,817
5,332
(8) (31)
7/21/2014
1.6%
10,800
8,459
(8) (31)
10/26/2016
0.6%
5,000
4,745
LP Interests
(Brightwood
Capital Fund III,
LP)
LP Interests
(Brightwood
Capital Fund IV,
LP)
15,800
13,204
Secured Debt
(9) (19)
11/14/2017
9.50% (4.25% Cash,
5.25% PIK) (5.25%
11/14/2023
27,703
27,484
26,359
119
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2020
(dollars in thousands)
Portfolio Company (1) (20)
Business Description
Type of
Investment
(2) (3) (15)
Investment Date (24) Shares/Units
California Pizza Kitchen, Inc.
(11)
Casual Restaurant
Group
Secured Debt
(9)
11/23/2020
Secured Debt
(9) (19)
11/23/2020
Secured Debt
(9) (19)
11/23/2020
Maturity
Date
Principal (4)
Cost (4)
Fair Value (18)
11/23/2024
7,700
7,288
11/23/2024
2,657
2,590
7,315
2,524
5/23/2025
2,291
2,291
1,833
Rate
PIK + L+3.25%, Floor
1.00%)
11.50% (L+10.00%,
Floor 1.50%)
13.50% (1.00% Cash,
12.50% PIK) (1.00%
Cash, L+11.00% PIK,
Floor 1.50%)
15.00% (1.00% Cash,
14.00% PIK) (1.00%
Cash, L+12.50% PIK,
Floor 1.50%)
Central Security Group, Inc.
(11)
Cenveo Corporation
(11)
Security Alarm
Monitoring Service
Provider
Provider of Digital
Marketing Agency
Services
Chisholm Energy Holdings, LLC
(10)
Oil & Gas Exploration
& Production
Clarius BIGS, LLC
Clickbooth.com, LLC
(10)
(10)
Prints & Advertising
Film Financing
Provider of Digital
Advertising
Performance Marketing
Solutions
Construction Supply Investments, LLC
(10)
Distribution Platform of
Specialty Construction
Materials to
Professional Concrete
and Masonry
Contractors
Copper Trail Fund Investments
(12) (13) Investment Partnership
Corel Corporation
(11) (13)
(21)
Publisher of Desktop
and Cloud-based
Software
Darr Equipment LP
(10)
Heavy Equipment
Dealer
Common Stock
11/23/2020
169,088
949
13,118
1,860
13,532
Secured Debt
(9)
10/16/2020
7.00% (L+6.00%, Floor
1.00%)
10/16/2025
6,891
6,891
Common Stock
10/16/2020
329,084
1,481
8,372
Secured Debt
(9)
9/7/2018
10.50% (L+9.50%, Floor
1.00%)
6/7/2023
5,250
5,129
Common Stock
9/7/2018
177,130
5,309
10,438
5,823
1,645
7,468
4,909
2,613
7,522
Secured Debt
(9)
5/15/2019
7.75% (L+6.25%, Floor
1.50%)
5/15/2026
3,571
3,498
3,274
Secured Debt
(14) (17) (19)
9/23/2014
15.00% PIK
1/5/2015
2,832
2,832
31
Secured Debt
(9)
12/5/2017
9.50% (L+8.50%, Floor
1.00%)
1/31/2025
7,850
7,750
7,850
Member Units
12/29/2016
5,637
8,617
LP Interests (CTEF
I, LP)
11/3/2020
375
-
67
Secured Debt
7/24/2019
5.23% (L+5.00%)
7/2/2026
19,403
18,580
19,124
Secured Debt
(19)
12/26/2017
12.50% (11.50% Cash,
1.00% PIK)
6/22/2023
5,959
5,959
5,959
Warrants
(29)
4/15/2014
915,734
12/23/2023
474
-
120
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2020
(dollars in thousands)
Portfolio Company (1) (20)
Business Description
Type of
Investment
(2) (3) (15)
Investment Date (24) Shares/Units
Rate
Maturity
Date
Principal (4)
Cost (4)
6,433
Fair Value (18)
5,959
Digital River, Inc.
(11)
Provider of Outsourced
e-Commerce Solutions
and Services
DTE Enterprises, LLC
(10)
Industrial Powertrain
Repair and Services
Dynamic Communities, LLC
(10)
Eastern Wholesale Fence LLC
(10)
Echo US Holdings, LLC.
(10)
Electronic Transaction Consultants, LLC
(10)
Developer of Business
Events and Online
Community Groups
Manufacturer and
Distributor of
Residential and
Commercial Fencing
Solutions
Developer and
Manufacturer of PVC
and Polypropylene
Materials
Technology Service
Provider for Toll Road
and Infrastructure
Operators
EnCap Energy Fund Investments
(12) (13) Investment Partnership
Secured Debt
(9)
2/24/2015
8.00% (L+7.00%, Floor
1.00%)
2/12/2023
13,628
13,422
13,560
Secured Debt
(9)
4/13/2018
Class AA Preferred
Member Units
(non-voting)
Class A Preferred
Member Units
(8) (19)
4/13/2018
4/13/2018
776,316
10.00% (L+8.50%, Floor
1.50%)
10.00% PIK
4/13/2023
9,324
9,213
951
776
9,004
951
880
10,940
10,835
Secured Debt
(9) (19)
7/17/2018
12.50% (6.25% Cash,
6.25% PIK) (L+11.50%,
Floor 1.00%)
7/17/2023
5,320
5,256
4,921
Secured Debt
(9)
11/19/2020
7.50%, (L+6.50%, Floor
1.00%)
10/30/2025
11,857
11,523
11,523
Secured Debt
(9)
11/12/2019
7.88% (L+6.25%, Floor
1.63%)
10/25/2024
22,190
22,090
22,190
Secured Debt
(9)
7/24/2020
8.50% (L+7.50%, Floor
1.00%)
7/24/2025
10,000
9,829
9,829
(31)
1/22/2015
0.1%
3,813
959
(31)
1/21/2015
0.4%
2,097
465
(8) (31)
1/22/2015
0.1%
4,366
1,291
(8) (31)
3/25/2015
0.1%
8,720
6,426
(8) (31)
3/30/2015
0.8%
6,706
2,546
LP Interests
(EnCap Energy
Capital Fund VIII,
L.P.)
LP Interests
(EnCap Energy
Capital Fund VIII
Co-
Investors, L.P.)
LP Interests
(EnCap Energy
Capital Fund IX,
L.P.)
LP Interests
(EnCap Energy
Capital Fund X,
L.P.)
LP Interests
(EnCap Flatrock
Midstream Fund II,
L.P.)
121
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2020
(dollars in thousands)
Portfolio Company (1) (20)
Business Description
Type of
Investment
(2) (3) (15)
LP Interests
(EnCap Flatrock
Midstream Fund
III, L.P.)
Investment Date (24) Shares/Units
Rate
(8) (31)
3/27/2015
0.2%
Maturity
Date
Principal (4)
Cost (4)
6,982
Fair Value (18)
5,793
32,684
17,480
Encino Acquisition Partners Holdings, Inc.
(11)
Oil & Gas Exploration
& Production
EPIC Y-Grade Services, LP
(11)
NGL Transportation &
Storage
Fortna, Inc.
(10)
Process, Physical
Distribution and
Logistics Consulting
Services
Fuse, LLC
(11)
Cable Networks
Operator
GeoStabilization International (GSI)
(11)
Geohazard Engineering
Services & Maintenance
GoWireless Holdings, Inc.
(11)
Provider of Wireless
Telecommunications
Carrier Services
Grupo Hima San Pablo, Inc.
(11)
Tertiary Care Hospitals
GS HVAM Intermediate, LLC
(10)
Specialized Food
Distributor
GS Operating, LLC (Gexpro Services)
(10)
Distributor of Industrial
and Specialty Parts
HDC/HW Intermediate Holdings
(10)
Managed Services and
Hosting Provider
Heartland Dental, LLC
(10)
Dental Support
Organization
Hunter Defense Technologies, Inc.
(10)
Provider of Military
and Commercial
Shelters and Systems
Secured Debt
(9)
11/16/2018
7.75% (L+6.75%, Floor
1.00%)
10/29/2025
9,000
8,932
8,297
Secured Debt
(9)
6/22/2018
7.00% (L+6.00%, Floor
1.00%)
6/30/2027
6,944
6,854
5,799
Secured Debt
7/23/2019
5.15% (L+5.00%)
4/8/2025
7,673
7,553
7,486
Secured Debt
Common Stock
6/30/2019
6/30/2019
10,429
12.00%
6/28/2024
1,810
1,810
256
2,066
1,472
-
1,472
Secured Debt
1/2/2019
5.40% (L+5.25%)
12/19/2025
11,224
11,137
11,196
Secured Debt
(9)
1/10/2018
7.50% (L+6.50%, Floor
1.00%)
12/22/2024
17,113
16,988
16,976
Secured Debt
(9) (17)
Secured Debt
(17)
3/7/2013
3/7/2013
9.25% (L+7.00%, Floor
1.50%)
13.75%
4/30/2019
4,504
4,504
10/15/2018
2,055
2,040
6,544
3,375
49
3,424
Secured Debt
(9)
10/18/2019
6.75% (L+5.75%, Floor
1.00%)
10/2/2024
11,053
10,952
11,007
Secured Debt
(9)
2/24/2020
8.00% (L+6.50%, Floor
1.50%)
2/24/2025
29,180
28,692
28,953
Secured Debt
(9)
12/21/2018
8.50% (L+7.50%, Floor
1.00%)
12/21/2023
3,474
3,429
3,351
Secured Debt
(9)
9/9/2020
7.50% (L+6.50%, Floor
1.00%)
4/30/2025
14,925
14,501
14,501
Secured Debt
(9)
3/29/2018
8.00% (L+7.00%, Floor
1.00%)
3/29/2023
35,246
34,820
35,246
122
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2020
(dollars in thousands)
Portfolio Company (1) (20)
HW Temps LLC
Type of
Investment
(2) (3) (15)
Business Description
Temporary Staffing
Solutions
Investment Date (24) Shares/Units
Rate
Maturity
Date
Principal (4)
Cost (4)
Fair Value (18)
Secured Debt
3/29/2019
12.00%
3/29/2023
9,801
9,698
8,994
Hyperion Materials & Technologies, Inc.
(11) (13) Manufacturer of Cutting
Ian, Evan & Alexander Corporation
(EverWatch)
(10)
and Machine Tools &
Specialty Polishing
Compounds
Cybersecurity, Software
and Data Analytics
provider to the
Intelligence Community
Implus Footcare, LLC
(10)
Provider of Footwear
and Related Accessories
Independent Pet Partners Intermediate
Holdings, LLC
(10)
Omnichannel Retailer
of Specialty Pet
Products
Industrial Services Acquisition, LLC
(10)
Industrial Cleaning
Services
Inn of the Mountain Gods Resort and
Casino
(11)
Hotel & Casino Owner
& Operator
Interface Security Systems, L.L.C
(10)
Commercial Security &
Alarm Services
Intermedia Holdings, Inc.
(11)
Unified
Communications as a
Service
Invincible Boat Company, LLC.
(10)
Manufacturer of Sport
Fishing Boats
Isagenix International, LLC
(11)
Direct Marketer of
Health & Wellness
Products
Secured Debt
(9)
9/12/2019
6.50% (L+5.50%, Floor
1.00%)
8/28/2026
22,275
21,894
20,813
Secured Debt
(9)
7/31/2020
9.50% (L+8.50%, Floor
1.00%)
7/31/2025
16,529
16,158
16,158
Secured Debt
(9)
6/1/2017
8.75% (L+7.75%, Floor
1.00%)
4/30/2024
18,890
18,566
17,172
Secured Debt
(19)
(19)
Secured Debt
Preferred Stock
(non-voting)
Preferred Stock
(non-voting)
Member Units
8/20/2020
12/10/2020
12/10/2020
12/10/2020
11/20/2018
1,558,333
6.31% PIK (L+6.00%
PIK)
6.00% PIK
12/22/2022
6,111
6,111
11/20/2023
16,670
15,086
3,235
-
1,558
25,990
6,111
15,086
3,235
-
-
24,432
Unsecured Debt
(19)
6/17/2016
Preferred Member
Units
Preferred Member
Units
Member Units
(8) (19) (30)
1/31/2018
(8) (19) (30)
5/17/2019
(30)
6/17/2016
144
80
900
13.00% (6.00% Cash,
7.00% PIK)
10.00% PIK
20.00% PIK
12/17/2022
5,624
5,579
5,624
112
71
900
6,662
112
71
530
6,337
Secured Debt
7/18/2018
9.25%
11/30/2023
6,677
6,677
6,677
Secured Debt
(9) (19)
8/7/2019
8/7/2023
7,245
7,145
7,245
11.75% (8.75% Cash,
3.00% PIK) (3.00% PIK
+ L+7.00%, Floor
1.75%)
Secured Debt
(9)
8/3/2018
7.00% (L+6.00%, Floor
1.00%)
7/19/2025
20,839
20,755
20,823
Secured Debt
(9)
8/28/2019
8.00% (L+6.50%, Floor
1.50%)
8/28/2025
8,876
8,793
8,876
Secured Debt
(9)
6/21/2018
6.75% (L+5.75%, Floor
1.00%)
6/14/2025
5,572
5,541
3,130
123
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2020
(dollars in thousands)
Portfolio Company (1) (20)
Business Description
Jackmont Hospitality, Inc.
(10)
Franchisee of Casual
Dining Restaurants
Joerns Healthcare, LLC
(11)
Manufacturer and
Distributor of Health
Care Equipment &
Supplies
Kemp Technologies Inc.
(10)
Provider of Application
Delivery Controllers
Klein Hersh, LLC
(10)
Kore Wireless Group Inc.
Larchmont Resources, LLC
Laredo Energy, LLC
Lightbox Holdings, L.P.
(11)
(11)
(10)
(11)
Executive and C-Suite
Placement for the Life
Sciences and
Healthcare Industries
Mission Critical
Software Platform
Oil & Gas Exploration
& Production
Oil & Gas Exploration
& Production
Provider of
Commercial Real
Estate Software
LKCM Headwater Investments I, L.P.
(12) (13) Investment Partnership
LL Management, Inc.
(10)
Medical Transportation
Service Provider
Logix Acquisition Company, LLC
(10)
Competitive Local
Exchange Carrier
Looking Glass Investments, LLC
(12) (13) Specialty Consumer
Finance
LSF9 Atlantis Holdings, LLC
(11)
Provider of Wireless
Telecommunications
Carrier Services
Type of
Investment
(2) (3) (15)
Investment Date (24) Shares/Units
Rate
Maturity
Date
Principal (4)
Cost (4)
Fair Value (18)
Secured Debt
(9)
5/26/2015
7.75% (L+6.75%, Floor
1.00%)
5/26/2021
3,954
3,953
3,157
Secured Debt
(9)
8/21/2019
7.00% (L+6.00%, Floor
1.00%)
8/21/2024
4,016
3,955
Common Stock
8/21/2019
472,579
4,429
8,384
Secured Debt
(9)
6/27/2019
7.50% (L+6.50%, Floor
1.00%)
3/29/2024
17,387
17,088
Common Stock
1,000,000
1,550
18,638
4,016
2,795
6,811
17,387
1,550
18,937
Secured Debt
(9)
11/13/2020
8.75% (L+8.00%, Floor
0.75%)
11/13/2025
35,000
34,098
34,098
Secured Debt
12/31/2018
5.75% (L+5.50%)
12/20/2024
19,090
19,003
18,828
Secured Debt
(9) (19)
12/8/2016
11.00% PIK (L+10.00%
PIK, Floor 1.00%)
8/9/2021
2,185
2,185
Member Units
(30)
4/1/2018
2,828
353
2,538
983
113
1,096
Member Units
5/4/2020
1,155,952
11,560
10,238
Secured Debt
5/23/2019
5.15% (L+5.00%)
5/9/2026
14,813
14,623
14,368
LP Interests
(31)
1/25/2013
2.3%
1,746
3,524
Secured Debt
(9)
5/2/2019
8.25% (L+7.25%, Floor
1.00%)
9/25/2023
16,504
16,337
16,504
Secured Debt
(9)
1/8/2018
6.75% (L+5.75%, Floor
1.00%)
12/22/2024
26,131
24,550
24,171
Member Units
7/1/2015
3
125
25
124
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2020
(dollars in thousands)
Portfolio Company (1) (20)
Business Description
Type of
Investment
(2) (3) (15)
Investment Date (24) Shares/Units
Secured Debt
(9)
5/17/2017
Rate
7.00% (L+6.00%, Floor
1.00%)
Maturity
Date
5/1/2023
Principal (4)
9,206
Cost (4)
9,206
Fair Value (18)
9,177
Lulu's Fashion Lounge, LLC
(10)
Fast Fashion E-
Commerce Retailer
Secured Debt
(9) (19)
8/31/2017
8/28/2022
11,152
10,983
9,535
10.50% (8.00% Cash,
2.50% PIK) (2.50% PIK
+ L+7.00%, Floor
1.00%)
Lynx FBO Operating LLC
(10)
Fixed Based Operator in
the General Aviation
Industry
Mac Lean-Fogg Company
(10)
Manufacturer and
Supplier for Auto and
Power Markets
MHVC Acquisition Corp.
(11)
Mills Fleet Farm Group, LLC
(10)
Provider of
Differentiated
Information Solutions,
Systems Engineering,
and Analytics
Omnichannel Retailer
of Work, Farm and
Lifestyle Merchandise
NBG Acquisition Inc
(11)
Wholesaler of Home
Décor Products
NinjaTrader, LLC
(10)
Operator of Futures
Trading Platform
NNE Partners, LLC
(10)
Oil & Gas Exploration
& Production
Project Eagle Holdings, LLC
(10)
Novetta Solutions, LLC
(11)
Provider of Secure
Business Collaboration
Software
Provider of Advanced
Analytics Solutions for
Defense Agencies
NTM Acquisition Corp.
(11)
Provider of B2B Travel
Information Content
Secured Debt
(9)
9/30/2019
7.25% (L+5.75%, Floor
1.50%)
9/30/2024
13,613
13,369
Member Units
9/30/2019
4,872
687
14,056
13,521
780
14,301
Secured Debt
(9)
4/22/2019
Preferred Stock
(8) (19)
10/1/2019
5.63% (L+5.00%, Floor
0.625%)
13.75% (4.50% Cash,
9.25% PIK)
12/22/2025
17,251
17,149
17,251
1,870
1,870
1,841
19,019
19,092
Secured Debt
(9)
5/8/2017
6.25% (L+5.25%, Floor
1.00%)
4/29/2024
19,797
19,716
19,846
Secured Debt
(9)
10/24/2018
7.00% (L+6.00%, Floor
1.00%)
10/24/2024
13,860
13,595
13,609
Secured Debt
(9)
4/28/2017
6.50% (L+5.50%, Floor
1.00%)
4/26/2024
4,070
4,034
3,399
Secured Debt
(9)
12/18/2019
8.25% (L+6.75%, Floor
1.50%)
12/18/2024
16,875
16,543
16,849
Secured Debt
(19)
3/2/2017
9.48% (4.75% Cash,
4.50% PIK) (4.50% PIK
+ L+4.75%)
12/31/2023
23,683
23,572
21,025
Secured Debt
(9)
7/6/2020
9.25% (L+8.25%, Floor
1.00%)
7/6/2026
14,963
14,583
14,583
Secured Debt
(9)
6/21/2017
6.00% (L+5.00%, Floor
1.00%)
10/17/2022
22,912
22,629
22,864
125
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2020
(dollars in thousands)
Portfolio Company (1) (20)
Business Description
Type of
Investment
(2) (3) (15)
Investment Date (24) Shares/Units
Secured Debt
(9) (19)
7/12/2016
Maturity
Date
6/7/2024
Principal (4)
4,694
Cost (4)
4,694
Fair Value (18)
4,224
Rate
8.25% (7.25% Cash,
1.00% PIK) (1.00%PIK
+ L+6.25%, Floor
1.00%)
Ospemifene Royalty Sub LLC (QuatRx)
(10)
PaySimple, Inc.
(10)
PricewaterhouseCoopers Public Sector LLP (11)
PT Network, LLC
(10)
Estrogen-Deficiency
Drug Manufacturer and
Distributor
Leading Technology
Services Commerce
Platform
Provider of Consulting
Services to
Governments
Provider of Outpatient
Physical Therapy and
Sports Medicine
Services
Research Now Group, Inc. and Survey
Sampling International, LLC
(11)
Provider of Outsourced
Online Surveying
RM Bidder, LLC
(10)
RTIC Subsidiary Holdings, LLC
(10)
SAFETY Investment Holdings, LLC
Scripted and Unscripted
TV and Digital
Programming Provider
Direct-To-Consumer
eCommerce Provider of
Outdoor Products
Provider of Intelligent
Driver Record
Monitoring Software
and Services
Salient Partners L.P.
(11)
Provider of Asset
Management Services
Staples Canada ULC
(10) (13)
(21)
Office Supplies Retailer
TEAM Public Choices, LLC
(10)
Tectonic Financial, Inc.
Home-Based Care
Employment Service
Provider
Financial Services
Organization
Secured Debt
(14)
7/8/2013
11.50%
11/15/2026
4,765
4,765
121
Secured Debt
9/9/2019
5.65% (L+5.50%)
8/23/2025
24,448
24,225
23,959
Secured Debt
5/24/2018
8.15% (L+8.00%)
5/1/2026
9,000
8,969
9,000
Secured Debt
(9) (19)
10/12/2017
11/30/2023
8,601
8,601
8,601
8.73% (6.73% Cash,
2.00% PIK) (2.00% PIK
+ L+5.50%, Floor
1.00%)
Secured Debt
(9)
12/29/2017
6.50% (L+5.50%, Floor
1.00%)
12/20/2024
17,930
17,497
17,715
Warrants
Member Units
(26)
11/12/2015
11/12/2015
187,161
2,779
10/20/2025
425
46
471
-
26
26
Secured Debt
(9)
9/1/2020
9.00% (L+7.75%, Floor
1.25%)
9/1/2025
17,260
17,026
17,026
Member Units
4/29/2016
2,000,000
2,000
2,350
Secured Debt
(9)
8/31/2018
7.00% (L+6.00%, Floor
1.00%)
8/31/2021
6,450
6,443
4,542
Secured Debt
(9) (22)
9/14/2017
8.00% (L+7.00%, Floor
1.00%)
9/12/2024
13,032
12,896
12,382
Secured Debt
(9)
12/22/2020
6.00% (L+5.00%, Floor
1.00%)
12/18/2027
12,500
12,126
12,406
Common Stock
5/15/2017
200,000
2,000
2,800
126
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2020
(dollars in thousands)
Portfolio Company (1) (20)
Business Description
TGP Holdings III LLC
(11)
Outdoor Cooking &
Accessories
The Pasha Group
(11)
Diversified Logistics
and Transportation
Provided
USA DeBusk LLC
(10)
Provider of Industrial
Cleaning Services
U.S. TelePacific Corp.
(11)
Provider of
Communications and
Managed Services
Veregy Consolidated, Inc.
(11)
Energy Service
Company
Vida Capital, Inc
Vistar Media, Inc.
(11)
(10)
Alternative Asset
Manager
Operator of Digital Out-
of-Home Advertising
Platform
YS Garments, LLC
(11)
Designer and Provider
of Branded Activewear
Zilliant Incorporated
Price Optimization and
Margin Management
Solutions
Subtotal Non-Control/Non-Affiliate
Investments (79.5% of net assets at fair
value)
Total Portfolio Investments, December 31,
2020 (177.2% of net assets at fair value)
Type of
Investment
(2) (3) (15)
Investment Date (24) Shares/Units
Rate
Maturity
Date
Principal (4)
Cost (4)
Fair Value (18)
Secured Debt
(9)
9/30/2017
9.50% (L+8.50%, Floor
1.00%)
9/25/2025
5,500
5,448
5,307
Secured Debt
(9)
2/2/2018
9.00% (L+8.00%, Floor
1.00%)
1/26/2023
10,162
9,585
9,323
Secured Debt
(9)
10/22/2019
6.75% (L+5.75%, Floor
1.00%)
10/22/2024
24,948
24,561
24,591
Secured Debt
(9)
5/17/2017
6.50% (L+5.50%, Floor
1.00%)
5/2/2023
17,088
16,913
15,486
Secured Debt
(9)
11/9/2020
7.00% (L+6.00%, Floor
1.00%)
11/3/2027
15,000
14,587
14,888
Secured Debt
10/10/2019
6.15% (L+6.00%)
10/1/2026
17,853
17,626
17,272
Secured Debt
(9) (19)
2/17/2017
Secured Debt
(9) (19)
4/3/2019
4/3/2023
2,490
2,394
2,490
4/3/2023
2,146
2,119
2,146
12.00% (8.50% Cash,
3.50% PIK) (3.50% PIK
+ L+7.50%, Floor
1.00%)
12.00% (8.50% Cash,
3.50% PIK) (3.50% PIK
+ L+7.50%, Floor
1.00%)
Preferred Stock
Warrants
(25)
4/3/2019
4/3/2019
70,207
69,675
4/3/2029
767
-
5,280
910
920
6,466
Secured Debt
(9)
8/22/2018
7.00% (L+6.00%, Floor
1.00%)
8/9/2024
13,997
13,902
12,911
Preferred Stock
Warrants
(28)
12/31/2020
12/31/2020
186,777
952,500
6/15/2022
154
1,071
1,225
260
1,190
1,450
1,268,740
1,204,840
$ 2,516,709
$
2,684,866
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MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2020
(dollars in thousands)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(16)
(17)
(18)
(19)
(20)
(21)
(22)
(23)
All investments are Lower Middle Market portfolio investments, unless otherwise noted. See Note C for a description of Lower
Middle Market portfolio investments. All of the Company’s investments, unless otherwise noted, are encumbered either as
security for the Company’s Credit Facility or in support of the SBA-guaranteed debentures issued by the Funds.
Debt investments are income producing, unless otherwise noted. Equity and warrants are non-income producing, unless
otherwise noted.
See Note C and Schedule 12-14 for a summary of geographic location of portfolio companies.
Principal is net of repayments. Cost is net of repayments and accumulated unearned income.
Control investments are defined by the 1940 Act, as investments in which more than 25% of the voting securities are owned or
where the ability to nominate greater than 50% of the board representation is maintained.
Affiliate investments are defined by the 1940 Act as investments in which between 5% and 25% (inclusive) of the voting
securities are owned and the investments are not classified as Control investments.
Non-Control/Non-Affiliate investments are defined by the 1940 Act as investments that are neither Control investments nor
Affiliate investments.
Income producing through dividends or distributions.
Index based floating interest rate is subject to contractual minimum interest rate. A majority of the variable rate loans in the
Company’s investment portfolio bear interest at a rate that may be determined by reference to either LIBOR or an alternate Base
Rate (commonly based on the Federal Funds Rate or the Prime Rate), which typically resets semi-annually, quarterly, or monthly
at the borrower’s option. The borrower may also elect to have multiple interest reset periods for each loan. For each such loan,
the Company has provided the weighted average annual stated interest rate in effect at December 31, 2020. As noted in this
schedule, 61% of the loans (based on the par amount) contain LIBOR floors which range between 0.50% and 2.00%, with a
weighted-average LIBOR floor of approximately 1.11%.
Private Loan portfolio investment. See Note C for a description of Private Loan portfolio investments.
Middle Market portfolio investment. See Note C for a description of Middle Market portfolio investments.
Other Portfolio investment. See Note C for a description of Other Portfolio investments.
Investment is not a qualifying asset as defined under Section 55(a) of the 1940 Act. Qualifying assets must represent at least 70%
of total assets at the time of acquisition of any additional non-qualifying assets.
Non-accrual and non-income producing investment.
All of the Company’s portfolio investments are generally subject to restrictions on resale as “restricted securities.”
External Investment Manager. Investment is not encumbered as security for the Company's Credit Facility or in support of the
SBA-guaranteed debentures issued by the Funds.
Maturity date is under on-going negotiations with the portfolio company and other lenders, if applicable.
Investment fair value was determined using significant unobservable inputs, unless otherwise noted. See Note C for further
discussion.
PIK interest income and cumulative dividend income represent income not paid currently in cash.
All portfolio company headquarters are based in the United States, unless otherwise noted.
Portfolio company headquarters are located outside of the United States.
In connection with the Company's debt investment in Staples Canada ULC and in an attempt to mitigate any potential adverse
change in foreign exchange rates during the term of the Company's investment, the Company maintains a forward foreign
currency contract with Cadence Bank to lend $15.8 million Canadian Dollars and receive $12.0 million U.S. Dollars with a
settlement date of September 14, 2021. The unrealized appreciation on the forward foreign currency contract is $0.4 million as of
December 31, 2020.
The Company has entered into an intercreditor agreement that entitles the Company to the "last out" tranche of the first lien
secured loans, whereby the "first out" tranche will receive priority as to the "last out" tranche with
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MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments (Continued)
December 31, 2020
(dollars in thousands)
(24)
(25)
(26)
(27)
(28)
(29)
(30)
(31)
(32)
respect to payments of principal, interest, and any other amounts due thereunder. Therefore, the Company receives a higher
interest rate than the contractual stated interest rate of LIBOR plus 7.25% (Floor 1.25%) per the credit agreement and the
Consolidated Schedule of Investments above reflects such higher rate.
Investment date represents the date of initial investment in the security position.
Warrants are presented in equivalent shares with a strike price of $10.92 per share.
Warrants are presented in equivalent units with a strike price of $14.28 per unit.
Warrants are presented in equivalent shares/units with a strike price of $0.01 per share/unit.
Warrants are presented in equivalent shares with a strike price of $0.001 per share.
Warrants are presented in equivalent units with a strike price of $1.50 per unit.
Shares/Units represent ownership in an underlying Real Estate or HoldCo entity.
Investment is not unitized. Presentation is made in percent of fully diluted ownership unless otherwise indicated.
Portfolio company is in a bankruptcy process and, as such, the maturity date of our debt investment in this portfolio company will
not be finally determined until such process is complete. As noted in footnote (14), our debt investment in this portfolio
company is on non-accrual status.
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MAIN STREET CAPITAL CORPORATION
Notes to the Consolidated Financial Statements
NOTE A—ORGANIZATION AND BASIS OF PRESENTATION
1. Organization
Main Street Capital Corporation (“MSCC”) is a principal investment firm primarily focused on providing customized debt and
equity financing to lower middle market (“LMM”) companies and debt capital to middle market (“Middle Market”) companies. The
portfolio investments of MSCC and its consolidated subsidiaries are typically made to support management buyouts, recapitalizations,
growth financings, refinancings and acquisitions of companies that operate in a variety of industry sectors. MSCC seeks to partner with
entrepreneurs, business owners and management teams and generally provides “one stop” financing alternatives within its LMM
investment strategy. MSCC and its consolidated subsidiaries invest primarily in secured debt investments, equity investments, warrants and
other securities of LMM companies based in the United States and in secured debt investments of Middle Market companies generally
headquartered in the United States.
MSCC was formed in March 2007 to operate as an internally managed business development company (“BDC”) under the
Investment Company Act of 1940, as amended (the “1940 Act”). MSCC wholly owns several investment funds, including Main Street
Mezzanine Fund, LP (“MSMF”) and Main Street Capital III, LP (“MSC III” and, together with MSMF, the “Funds”), and each of their
general partners. The Funds are each licensed as a Small Business Investment Company (“SBIC”) by the United States Small Business
Administration (“SBA”). Because MSCC is internally managed, all of the executive officers and other employees are employed by MSCC.
Therefore, MSCC does not pay any external investment advisory fees, but instead directly incurs the operating costs associated with
employing investment and portfolio management professionals.
MSC Adviser I, LLC (the “External Investment Manager”) was formed in November 2013 as a wholly owned subsidiary of MSCC
to provide investment management and other services to parties other than MSCC and its subsidiaries or their portfolio companies
(“External Parties”) and receives fee income for such services. MSCC has been granted no-action relief by the Securities and Exchange
Commission (“SEC”) to allow the External Investment Manager to register as a registered investment adviser under the Investment Advisers
Act of 1940, as amended. Since the External Investment Manager conducts all of its investment management activities for External Parties,
it is accounted for as a portfolio investment of MSCC and is not included as a consolidated subsidiary of MSCC in MSCC’s consolidated
financial statements.
MSCC has elected to be treated for U.S. federal income tax purposes as a regulated investment company (“RIC”) under
Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a result, MSCC generally will not pay corporate-
level U.S. federal income taxes on any net ordinary taxable income or capital gains that it distributes to its stockholders.
MSCC has certain direct and indirect wholly owned subsidiaries that have elected to be taxable entities (the “Taxable
Subsidiaries”). The primary purpose of the Taxable Subsidiaries is to permit MSCC to hold equity investments in portfolio companies
which are “pass-through” entities for tax purposes.
Unless otherwise noted or the context otherwise indicates, the terms “we,” “us,” “our,” the “Company” and “Main Street” refer to
MSCC and its consolidated subsidiaries, which include the Funds and the Taxable Subsidiaries.
2. Basis of Presentation
Main Street’s consolidated financial statements are prepared in accordance with generally accepted accounting principles in the
United States of America (“U.S. GAAP”). The Company is an investment company following accounting and reporting guidance in
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 946, Financial Services—Investment
Companies (“ASC 946”). For each of the periods presented
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herein, Main Street’s consolidated financial statements include the accounts of MSCC and its consolidated subsidiaries. The Investment
Portfolio, as used herein, refers to all of Main Street’s investments in LMM portfolio companies, investments in Private Loan (as defined in
Note C) portfolio companies, investments in Middle Market portfolio companies, Other Portfolio (as defined in Note C) investments and the
investment in the External Investment Manager (see “Note C—Fair Value Hierarchy for Investments and Debentures—Portfolio
Composition—Investment Portfolio Composition” for additional discussion of Main Street’s Investment Portfolio and definitions for the
defined terms Private Loan and Other Portfolio). Main Street’s results of operations and cash flows for the years ended December 31, 2021,
2020 and 2019 and financial position as of December 31, 2021 and 2020, are presented on a consolidated basis. The effects of all
intercompany transactions between Main Street and its consolidated subsidiaries have been eliminated in consolidation.
Principles of Consolidation
Under ASC 946, Main Street is precluded from consolidating other entities in which Main Street has equity investments,
including those in which it has a controlling interest, unless the other entity is another investment company. An exception to this general
principle in ASC 946 occurs if Main Street holds a controlling interest in an operating company that provides all or substantially all of its
services directly to Main Street or to its portfolio companies. Accordingly, as noted above, MSCC’s consolidated financial statements
include the financial position and operating results for the Funds and the Taxable Subsidiaries. Main Street has determined that none of its
portfolio investments qualify for this exception, including the investment in the External Investment Manager. Therefore, Main Street’s
Investment Portfolio is carried on the consolidated balance sheet at fair value, as discussed further in Note B.1., with any adjustments to fair
value recognized as “Net Unrealized Appreciation (Depreciation)” on the consolidated statements of operations until the investment is
realized, usually upon exit, resulting in any gain or loss being recognized as a “Net Realized Gain (Loss).”
Portfolio Investment Classification
Main Street classifies its Investment Portfolio in accordance with the requirements of the 1940 Act. Under the 1940 Act,
(a) “Control Investments” are defined as investments in which Main Street owns more than 25% of the voting securities or has rights to
maintain greater than 50% of the board representation, (b) “Affiliate Investments” are defined as investments in which Main Street owns
between 5% and 25% (inclusive) of the voting securities and does not have rights to maintain greater than 50% of the board representation,
and (c) “Non-Control/Non-Affiliate Investments” are defined as investments that are neither Control Investments nor Affiliate Investments.
For purposes of determining the classification of its Investment Portfolio, Main Street has excluded consideration of any voting securities
or board appointment rights held by third-party investment funds advised by the External Investment Manager.
NOTE B—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Valuation of the Investment Portfolio
Main Street accounts for its Investment Portfolio at fair value. As a result, Main Street follows the provisions of ASC 820, Fair
Value Measurements and Disclosures (“ASC 820”). ASC 820 defines fair value, establishes a framework for measuring fair value,
establishes a fair value hierarchy based on the quality of inputs used to measure fair value and enhances disclosure requirements for fair
value measurements. ASC 820 requires Main Street to assume that the portfolio investment is to be sold in the principal market to
independent market participants, which may be a hypothetical market. Market participants are defined as buyers and sellers in the principal
market that are independent, knowledgeable and willing and able to transact.
Main Street’s portfolio strategy calls for it to invest primarily in illiquid debt and equity securities issued by privately held, LMM
companies and more liquid debt securities issued by Middle Market companies that are generally larger in size than the LMM companies.
Main Street categorizes some of its investments in LMM companies and Middle Market companies as Private Loan portfolio investments,
which are primarily debt securities in privately held companies that have been originated by Main Street or through strategic relationships
with other investment funds on a collaborative basis, and are often referred to in the debt markets as “club deals.” Private Loan investments
are typically
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similar in size, structure, terms and conditions to investments Main Street holds in its LMM portfolio and Middle Market portfolio. Main
Street’s portfolio also includes Other Portfolio investments which primarily consist of investments that are not consistent with the typical
profiles for its LMM portfolio investments, Private Loan portfolio investments or Middle Market portfolio investments, including
investments which may be managed by third parties. Main Street’s portfolio may also include short-term portfolio investments that are
atypical of Main Street’s LMM, Private Loan and Middle Market portfolio investments in that they are intended to be a short-term
deployment of capital and are more liquid than investments within the other portfolios. Main Street’s portfolio investments may be subject
to restrictions on resale.
LMM investments and Other Portfolio investments generally have no established trading market while Middle Market and short-
term portfolio investments generally have established markets that are not active. Private Loan investments may include investments which
have no established trading market or have established markets that are not active. Main Street determines in good faith the fair value of its
Investment Portfolio pursuant to a valuation policy in accordance with ASC 820, with such valuation process approved by its Board of
Directors and in accordance with the 1940 Act. Main Street’s valuation policies and processes are intended to provide a consistent basis for
determining the fair value of Main Street’s Investment Portfolio.
For LMM portfolio investments, Main Street generally reviews external events, including private mergers, sales and acquisitions
involving comparable companies, and includes these events in the valuation process by using an enterprise value waterfall methodology
(“Waterfall”) for its LMM equity investments and an income approach using a yield-to-maturity model (“Yield-to-Maturity”) for its LMM
debt investments. For Middle Market and short-term portfolio investments, Main Street primarily uses quoted prices in the valuation
process. Main Street determines the appropriateness of the use of third-party broker quotes, if any, in determining fair value based on its
understanding of the level of actual transactions used by the broker to develop the quote and whether the quote was an indicative price or
binding offer, the depth and consistency of broker quotes and the correlation of changes in broker quotes with underlying performance of
the portfolio company and other market indices. For Private Loan and Middle Market portfolio investments in debt securities for which it
has determined that third-party quotes or other independent pricing are not available or appropriate, Main Street generally estimates the fair
value based on the assumptions that it believes hypothetical market participants would use to value the investment in a current hypothetical
sale using the Yield-to-Maturity valuation method. For its Other Portfolio equity investments, Main Street generally calculates the fair value
of the investment primarily based on the net asset value (“NAV”) of the fund and adjusts the fair value for other factors deemed relevant
that would affect the fair value of the investment. All of the valuation approaches for Main Street’s portfolio investments estimate the value
of the investment as if Main Street were to sell, or exit, the investment as of the measurement date.
These valuation approaches consider the value associated with Main Street’s ability to control the capital structure of the portfolio
company, as well as the timing of a potential exit. For valuation purposes, “control” portfolio investments are composed of debt and equity
securities in companies for which Main Street has a controlling interest in the equity ownership of the portfolio company or the ability to
nominate a majority of the portfolio company’s board of directors. For valuation purposes, “non-control” portfolio investments are
generally composed of debt and equity securities in companies for which Main Street does not have a controlling interest in the equity
ownership of the portfolio company or the ability to nominate a majority of the portfolio company’s board of directors.
Under the Waterfall valuation method, Main Street estimates the enterprise value of a portfolio company using a combination of
market and income approaches or other appropriate valuation methods, such as considering recent transactions in the equity securities of the
portfolio company or third-party valuations of the portfolio company, and then performs a Waterfall calculation by allocating the enterprise
value over the portfolio company’s securities in order of their preference relative to one another. The enterprise value is the fair value at
which an enterprise could be sold in a transaction between two willing parties, other than through a forced or liquidation sale. Typically,
privately held companies are bought and sold based on multiples of earnings before interest, taxes, depreciation and amortization
(“EBITDA”), cash flows, net income, revenues, or in limited cases, book value. There is no single methodology for estimating enterprise
value. For any one portfolio company, enterprise value is generally described as a range of values from which a single estimate of enterprise
value is derived. In estimating the enterprise value of a portfolio company, Main Street analyzes various factors including the portfolio
company’s historical and projected financial results. Due to
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SEC deadlines for Main Street’s quarterly and annual financial reporting, the operating results of a portfolio company used in the current
period valuation are generally the results from the period ended three months prior to such valuation date and may include unaudited,
projected, budgeted or pro forma financial information and may require adjustments for non-recurring items or to normalize the operating
results that may require significant judgment in determining. In addition, projecting future financial results requires significant judgment
regarding future growth assumptions. In evaluating the operating results, Main Street also analyzes the impact of exposure to litigation, loss
of customers or other contingencies. After determining the appropriate enterprise value, Main Street allocates the enterprise value to
investments in order of the legal priority of the various components of the portfolio company’s capital structure. In applying the Waterfall
valuation method, Main Street assumes the loans are paid off at the principal amount in a change in control transaction and are not assumed
by the buyer, which Main Street believes is consistent with its past transaction history and standard industry practices.
Under the Yield-to-Maturity valuation method, Main Street also uses the income approach to determine the fair value of debt
securities based on projections of the discounted future free cash flows that the debt security will likely generate, including analyzing the
discounted cash flows of interest and principal amounts for the debt security, as set forth in the associated loan agreements, as well as the
financial position and credit risk of the portfolio company. Main Street’s estimate of the expected repayment date of its debt securities is
generally the maturity date of the instrument, as Main Street generally intends to hold its loans and debt securities to maturity. The Yield-to-
Maturity analysis also considers changes in leverage levels, credit quality, portfolio company performance, changes in market-based interest
rates and other factors. Main Street will generally use the value determined by the Yield-to-Maturity analysis as the fair value for that
security; however, because of Main Street’s general intent to hold its loans to maturity, the fair value will not exceed the principal amount of
the debt security valued using the Yield-to-Maturity valuation method. A change in the assumptions that Main Street uses to estimate the
fair value of its debt securities using the Yield-to-Maturity valuation method could have a material impact on the determination of fair
value. If there is deterioration in credit quality or if a debt security is in workout status, Main Street may consider other factors in
determining the fair value of the debt security, including the value attributable to the debt security from the enterprise value of the portfolio
company or the proceeds that would most likely be received in a liquidation analysis.
Under the NAV valuation method, for an investment in an investment fund that does not have a readily determinable fair value,
Main Street measures the fair value of the investment predominately based on the NAV of the investment fund as of the measurement date
and adjusts the investment’s fair value for factors known to Main Street that would affect that fund’s NAV, including, but not limited to,
fair values for individual investments held by the fund if Main Street holds the same investment or for a publicly traded investment. In
addition, in determining the fair value of the investment, Main Street considers whether adjustments to the NAV are necessary in certain
circumstances, based on the analysis of any restrictions on redemption of Main Street’s investment as of the measurement date, recent
actual sales or redemptions of interests in the investment fund, and expected future cash flows available to equity holders, including the rate
of return on those cash flows compared to an implied market return on equity required by market participants, or other uncertainties
surrounding Main Street’s ability to realize the full NAV of its interests in the investment fund.
Pursuant to its internal valuation process and the requirements under the 1940 Act, Main Street performs valuation procedures on
each of its portfolio investments quarterly. In addition to its internal valuation process, in arriving at estimates of fair value for its
investments in its LMM portfolio companies, Main Street, among other things, consults with a nationally recognized independent financial
advisory services firm. The nationally recognized independent financial advisory services firm analyzes and provides observations,
recommendations and an assurance certification regarding the Company’s determinations of the fair value of its LMM portfolio company
investments. The nationally recognized independent financial advisory services firm is generally consulted relative to Main Street’s
investments in each LMM portfolio company at least once every calendar year, and for Main Street’s investments in new LMM portfolio
companies, at least once in the twelve-month period subsequent to the initial investment. In certain instances, Main Street may determine
that it is not cost-effective, and as a result is not in its stockholders’ best interest, to consult with the nationally recognized independent
financial advisory services firm on its investments in one or more LMM portfolio companies. Such instances include, but are not limited to,
situations where the fair value of Main Street’s investment in a LMM portfolio company is determined to be insignificant relative to the
total Investment Portfolio. Main Street consulted with and received an assurance certification from its independent financial advisory
services firm in arriving at Main Street’s determination of fair value on its investments in a total of 54 LMM portfolio companies for the
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year ended December 31, 2021, representing approximately 81% of the total LMM portfolio at fair value as of December 31, 2021, and on a
total of 58 LMM portfolio companies for the year ended December 31, 2020, representing approximately 91% of the total LMM portfolio at
fair value as of December 31, 2020. Excluding its investments in LMM portfolio companies that, as of December 31, 2021 and 2020, as
applicable, had not been in the Investment Portfolio for at least twelve months subsequent to the initial investment or whose primary
purpose is to own real estate for which a third-party appraisal is obtained on at least an annual basis, the percentage of the LMM portfolio
reviewed and certified by Main Street’s independent financial advisory services firm for both of the years ended December 31, 2021 and
2020 was 99% of the total LMM portfolio at fair value.
For valuation purposes, all of Main Street’s Private Loan portfolio investments are non-control investments. For Private Loan
portfolio investments for which it has determined that third-party quotes or other independent pricing are not available or appropriate, Main
Street generally estimates the fair value based on the assumptions that it believes hypothetical market participants would use to value such
Private Loan debt investments in a current hypothetical sale using the Yield-to-Maturity valuation method and such Private Loan equity
investments in a current hypothetical sale using the Waterfall valuation method.
In addition to its internal valuation process, in arriving at estimates of fair value for its investments in its Private Loan portfolio
companies, Main Street, among other things, consults with a nationally recognized independent financial advisory services firm. The
nationally recognized independent financial advisory services firm analyzes and provides observations and recommendations and an
assurance certification regarding the Company’s determinations of the fair value of its Private Loan portfolio company investments. The
nationally recognized independent financial advisory services firm is generally consulted relative to Main Street’s investments in each
Private Loan portfolio company at least once every calendar year, and for Main Street’s investments in new Private Loan portfolio
companies, at least once in the twelve-month period subsequent to the initial investment. In certain instances, Main Street may determine
that it is not cost-effective, and as a result is not in its stockholders’ best interest, to consult with the nationally recognized independent
financial advisory services firm on its investments in one or more Private Loan portfolio companies. Such instances include, but are not
limited to, situations where the fair value of Main Street’s investment in a Private Loan portfolio company is determined to be insignificant
relative to the total Investment Portfolio. Main Street consulted with and received an assurance certification from its independent financial
advisory services firm in arriving at its determination of fair value on its investments in a total of 39 Private Loan portfolio companies for
the year ended December 31, 2021, representing approximately 60% of the total Private Loan portfolio at fair value as of
December 31, 2021, and on a total of 36 Private Loan portfolio companies for the year ended December 31, 2020, representing
approximately 66% of the total Private Loan portfolio at fair value as of December 31, 2020. Excluding its investments in Private Loan
portfolio companies that, as of December 31, 2021 and 2020, as applicable, had not been in the Investment Portfolio for at least
twelve months subsequent to the initial investment and its investments in Private Loan portfolio companies that were not reviewed because
the investment is valued based upon third-party quotes or other independent pricing, the percentage of the Private Loan portfolio reviewed
and certified by Main Street’s independent financial advisory services firm for the years ended December 31, 2021 and 2020 was 93% and
92% of the total Private Loan portfolio at fair value as of December 31, 2021 and 2020, respectively.
For valuation purposes, all of Main Street’s Middle Market portfolio investments are non-control investments. To the extent
sufficient observable inputs are available to determine fair value, Main Street uses observable inputs to determine the fair value of these
investments through obtaining third party quotes or other independent pricing. For Middle Market portfolio investments for which it has
determined that third party quotes or other independent pricing are not available or appropriate, Main Street generally estimates the fair
value based on the assumptions that it believes hypothetical market participants would use to value such Middle Market debt investments in
a current hypothetical sale using the Yield-to-Maturity valuation method and such Middle Market equity investments in a current
hypothetical sale using the Waterfall valuation method. The Company generally consults on a limited basis with a financial advisory
services firm in connection with determining the fair value of its Middle Market portfolio investments due to the nature of these
investments. The vast majority (93% and 90%, as of December 31, 2021 and 2020, respectively) of the Middle Market portfolio
investments are valued using third-party quotes or other independent pricing services, or are new investments that will be consulted on once
they have been in the Investment Portfolio for at least twelve months subsequent to the initial investment.
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For valuation purposes, all of Main Street’s short-term portfolio investments are non-control investments. To the extent sufficient
observable inputs are available to determine fair value, Main Street uses observable inputs to determine the fair value of these investments
through obtaining third-party quotes or other independent pricing. Because all of the short-term portfolio investments are typically valued
using third-party quotes or other independent pricing services, Main Street generally does not consult with any financial advisory services
firms in connection with determining the fair value of its short-term portfolio investments.
For valuation purposes, all of Main Street’s Other Portfolio investments are non-control investments. Main Street’s Other
Portfolio investments comprised 4.7% and 3.6% of Main Street’s Investment Portfolio at fair value as of December 31, 2021 and 2020,
respectively. Similar to the LMM investment portfolio, market quotations for Other Portfolio equity investments are generally not readily
available. For its Other Portfolio equity investments, Main Street generally determines the fair value of these investments using the NAV
valuation method.
For valuation purposes, Main Street’s investment in the External Investment Manager is a control investment. Market quotations
are not readily available for this investment, and as a result, Main Street determines the fair value of the External Investment Manager using
the Waterfall valuation method under the market approach. In estimating the enterprise value, Main Street analyzes various factors,
including the entity’s historical and projected financial results, as well as its size, marketability and performance relative to the population
of market comparables. This valuation approach estimates the value of the investment as if Main Street were to sell, or exit, the investment.
In addition, Main Street considers its ability to control the capital structure of the company, as well as the timing of a potential exit, in
connection with determining the fair value of the External Investment Manager.
Due to the inherent uncertainty in the valuation process, Main Street’s determination of fair value for its Investment Portfolio may
differ materially from the values that would have been determined had a ready market for the securities existed. In addition, changes in the
market environment, portfolio company performance and other events that may occur over the lives of the investments may cause the gains
or losses ultimately realized on these investments to be materially different than the valuations currently assigned. Main Street determines
the fair value of each individual investment and records changes in fair value as unrealized appreciation or depreciation.
Main Street uses an internally developed portfolio investment rating system in connection with its investment oversight, portfolio
management and analysis and investment valuation procedures for its LMM portfolio companies. This system takes into account both
quantitative and qualitative factors of the LMM portfolio company and the investments held therein.
In December 2020, the SEC adopted Rule 2a-5 under the 1940 Act, which permits a BDC’s board of directors to designate its
executive officers or investment adviser as a valuation designee to determine the fair value for its investment portfolio, subject to the active
oversight of the board. Main Street’s Board of Directors has approved policies and procedures pursuant to Rule 2a-5 (the “Valuation
Procedures”) and has designated a group of its executive officers to serve as the Board’s valuation designee. Main Street adopted the
Valuation Procedures effective April 1, 2021. Main Street believes its Investment Portfolio as of December 31, 2021 and 2020
approximates fair value as of those dates based on the markets in which it operates and other conditions in existence on those reporting
dates.
2. Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the period. Actual results may differ from these estimates under
different conditions or assumptions. Additionally, as explained in Note B.1., the consolidated financial statements include investments in
the Investment Portfolio whose values have been estimated by Main Street, pursuant to valuation policies and procedures approved and
overseen by Main Street’s Board of Directors, in the absence of readily ascertainable market values. Because of the inherent uncertainty of
the Investment Portfolio valuations, those estimated values may differ materially from the values that would have been determined had a
ready market for the securities existed.
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The COVID-19 pandemic, and the related effect on the U.S. and global economies, has impacted, and threatens to continue to
impact, the businesses and operating results of certain of Main Street’s portfolio companies, as well as market interest rate spreads. As a
result of these and other current effects of the COVID-19 pandemic, as well as the uncertainty regarding the extent and duration of its
impact, the valuation of Main Street’s Investment Portfolio has experienced increased volatility since the beginning of the COVID-19
pandemic.
3. Cash and Cash Equivalents
Cash and cash equivalents consist of cash and highly liquid investments with an original maturity of three months or less at the
date of purchase. Cash and cash equivalents are carried at cost, which approximates fair value.
At December 31, 2021, cash balances totaling $30.0 million exceeded Federal Deposit Insurance Corporation insurance protection
levels, subjecting the Company to risk related to the uninsured balance. All of the Company’s cash deposits are held at large established
high credit quality financial institutions and management believes that the risk of loss associated with any uninsured balances is remote.
4. Interest, Dividend and Fee Income
Main Street records interest and dividend income on the accrual basis to the extent amounts are expected to be collected. Dividend
income is recorded as dividends are declared by the portfolio company or at the point an obligation exists for the portfolio company to
make a distribution. In accordance with Main Street’s valuation policies, Main Street evaluates accrued interest and dividend income
periodically for collectability. When a loan or debt security becomes 90 days or more past due, and if Main Street otherwise does not expect
the debtor to be able to service all of its debt or other obligations, Main Street will generally place the loan or debt security on non-accrual
status and cease recognizing interest income on that loan or debt security until the borrower has demonstrated the ability and intent to pay
contractual amounts due. If a loan or debt security’s status significantly improves regarding the debtor’s ability to service the debt or other
obligations, or if a loan or debt security is sold or written off, Main Street removes it from non-accrual status.
As of December 31, 2021, Main Street’s total Investment Portfolio had nine investments on non-accrual status, which comprised
approximately 0.7% of its fair value and 3.3% of its cost. As of December 31, 2020, Main Street’s total Investment Portfolio had seven
investments on non-accrual status, which comprised approximately 1.3% of its fair value and 3.6% of its cost.
Main Street holds certain debt and preferred equity instruments in its Investment Portfolio that contain payment-in-kind (“PIK”)
interest and cumulative dividend provisions. The PIK interest, computed at the contractual rate specified in each debt agreement, is
periodically added to the principal balance of the debt and is recorded as interest income. Thus, the actual collection of this interest may be
deferred until the time of debt principal repayment. Cumulative dividends are recorded as dividend income, and any dividends in arrears are
added to the balance of the preferred equity investment. The actual collection of these dividends in arrears may be deferred until such time
as the preferred equity is redeemed or sold. To maintain RIC tax treatment (as discussed in Note B.9. below), these non-cash sources of
income may need to be paid out to stockholders in the form of distributions, even though Main Street may not have collected the PIK
interest and cumulative dividends in cash. For the years ended December 31, 2021, 2020 and 2019 (i) approximately 2.6%, 2.8% and 2.0%,
respectively, of Main Street’s total investment income was attributable to PIK interest income not paid currently in cash and
(ii) approximately 0.6%, 0.8% and 1.0%, respectively, of Main Street’s total investment income was attributable to cumulative dividend
income not paid currently in cash. Main Street stops accruing PIK interest and cumulative dividends and writes off any accrued and
uncollected interest and dividends in arrears when it determines that such PIK interest and dividends in arrears are no longer collectible.
Main Street may periodically provide services, including structuring and advisory services, to its portfolio companies or other
third parties. For services that are separately identifiable and evidence exists to substantiate fair value, fee income is recognized as earned,
which is generally when the investment or other applicable transaction closes. Fees received in connection with debt financing transactions
for services that do not meet these criteria are treated as debt origination fees and are deferred and accreted into income over the life of the
financing.
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A presentation of total investment income Main Street received from its Investment Portfolio in each of the periods presented is as
follows:
Interest, fee and dividend income:
Interest income
Dividend income
Fee income
Total interest, fee and dividend income
5. Deferred Financing Costs
Twelve Months Ended December 31,
2021
2020
(dollars in thousands)
2019
$
$
193,667
81,153
14,227
289,047
$
$
173,676
36,373
12,565
222,614
$
$
187,381
49,782
6,210
243,373
Deferred financing costs include commitment fees and other costs related to Main Street’s multi-year revolving credit facility (the
“Credit Facility”) and its unsecured notes, as well as the commitment fees and leverage fees (approximately 3.4% of the total commitment
and draw amounts, as applicable) on the SBIC debentures. See further discussion of Main Street’s debt in Note E. Deferred financing costs
in connection with the Credit Facility are capitalized as an asset. Deferred financing costs in connection with all other debt arrangements are
a direct deduction from the related debt liability.
6. Equity Offering Costs
The Company’s offering costs are charged against the proceeds from equity offerings when the proceeds are received.
7. Unearned Income—Debt Origination Fees and Original Issue Discount and Discounts / Premiums to Par Value
Main Street capitalizes debt origination fees received in connection with financings and reflects such fees as unearned income
netted against the applicable debt investments. The unearned income from the fees is accreted into income based on the effective interest
method over the life of the financing.
In connection with its portfolio debt investments, Main Street sometimes receives nominal cost warrants or warrants with an
exercise price below the fair value of the underlying equity (together, “nominal cost equity”) that are valued as part of the negotiation
process with the particular portfolio company. When Main Street receives nominal cost equity, Main Street allocates its cost basis in its
investment between its debt security and its nominal cost equity at the time of origination based on amounts negotiated with the particular
portfolio company. The allocated amounts are based upon the fair value of the nominal cost equity, which is then used to determine the
allocation of cost to the debt security. Any discount recorded on a debt investment resulting from this allocation is reflected as unearned
income, which is netted against the applicable debt investment, and accreted into interest income based on the effective interest method
over the life of the debt investment. The actual collection of this interest is deferred until the time of debt principal repayment.
Main Street may also purchase debt securities at a discount or at a premium to the par value of the debt security. In the case of a
purchase at a discount, Main Street records the investment at the par value of the debt security net of the discount, and the discount is
accreted into interest income based on the effective interest method over the life of the debt investment. In the case of a purchase at a
premium, Main Street records the investment at the par value of the debt security plus the premium, and the premium is amortized as a
reduction to interest income based on the effective interest method over the life of the debt investment.
To maintain RIC tax treatment (as discussed in Note B.9. below), these non-cash sources of income may need to be paid out to
stockholders in the form of distributions, even though Main Street may not have collected the interest
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income. For the years ended December 31, 2021, 2020 and 2019, approximately 2.0%, 2.7% and 2.7%, respectively, of Main Street’s total
investment income was attributable to interest income from the accretion of discounts associated with debt investments, net of any premium
reduction.
8. Share-Based Compensation
Main Street accounts for its share-based compensation plans using the fair value method, as prescribed by ASC 718,
Compensation—Stock Compensation. Accordingly, for restricted stock awards, Main Street measures the grant date fair value based upon
the market price of its common stock on the date of the grant and amortizes the fair value of the awards as share-based compensation
expense over the requisite service period, which is generally the vesting term.
Main Street has also adopted Accounting Standards Update (“ASU”) 2016-09, Compensation—Stock Compensation:
Improvements to Employee Share-Based Payment Accounting, which requires that all excess tax benefits and tax deficiencies (including tax
benefits of dividends on share-based payment awards) be recognized as income tax expense or benefit in the income statement and not
delay recognition of a tax benefit until the tax benefit is realized through a reduction to taxes payable. Accordingly, the tax effects of
exercised or vested awards are treated as discrete items in the reporting period in which they occur. Additionally, Main Street has elected to
account for forfeitures as they occur.
9. Income Taxes
MSCC has elected to be treated for U.S. federal income tax purposes as a RIC. MSCC’s taxable income includes the taxable
income generated by MSCC and certain of its subsidiaries, including the Funds, which are treated as disregarded entities for tax purposes.
As a RIC, MSCC generally will not pay corporate-level U.S. federal income taxes on any net ordinary taxable income or capital gains that
MSCC distributes to its stockholders. MSCC must generally distribute at least 90% of its “investment company taxable income” (which is
generally its net ordinary taxable income and realized net short-term capital gains in excess of realized net long-term capital losses) and
90% of its tax-exempt income to maintain its RIC status (pass-through tax treatment for amounts distributed). As part of maintaining RIC
status, undistributed taxable income (subject to a 4% non-deductible U.S. federal excise tax) pertaining to a given fiscal year may be
distributed up to 12 months subsequent to the end of that fiscal year, provided such dividends are declared on or prior to the later of (i) the
filing of the U.S. federal income tax return for the applicable fiscal year or (ii) the fifteenth day of the ninth month following the close of
the year in which such taxable income was generated.
The Taxable Subsidiaries primarily hold certain portfolio investments for Main Street. The Taxable Subsidiaries permit Main
Street to hold equity investments in portfolio companies which are “pass-through” entities for tax purposes and to continue to comply with
the “source-of-income” requirements contained in the RIC tax provisions of the Code. The Taxable Subsidiaries are consolidated with Main
Street for U.S. GAAP financial reporting purposes, and the portfolio investments held by the Taxable Subsidiaries are included in Main
Street’s consolidated financial statements as portfolio investments and recorded at fair value. The Taxable Subsidiaries are not consolidated
with MSCC for income tax purposes and may generate income tax expense, or benefit, and tax assets and liabilities, as a result of their
ownership of certain portfolio investments. The taxable income, or loss, of the Taxable Subsidiaries may differ from their book income, or
loss, due to temporary book and tax timing differences and permanent differences. The Taxable Subsidiaries are each taxed at their normal
corporate tax rates based on their taxable income. The income tax expense, or benefit, if any, and the related tax assets and liabilities, of the
Taxable Subsidiaries are reflected in Main Street’s consolidated financial statements.
The External Investment Manager is an indirect wholly owned subsidiary of MSCC owned through a Taxable Subsidiary and is a
disregarded entity for tax purposes. The External Investment Manager has entered into a tax sharing agreement with its Taxable Subsidiary
owner. Since the External Investment Manager is accounted for as a portfolio investment of MSCC and is not included as a consolidated
subsidiary of MSCC in MSCC’s consolidated financial statements, and as a result of the tax sharing agreement with its Taxable Subsidiary
owner, for its stand-alone financial reporting purposes the External Investment Manager is treated as if it is taxed at normal corporate tax
rates based on its taxable income and, as a result of its activities, may generate income tax expense or benefit. The income tax expense, or
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benefit, if any, and the related tax assets and liabilities, of the External Investment Manager are reflected in the External Investment
Manager’s separate financial statements.
The Taxable Subsidiaries and the External Investment Manager use the liability method in accounting for income taxes. Deferred
tax assets and liabilities are recorded for temporary differences between the tax basis of assets and liabilities and their reported amounts in
the consolidated financial statements, using statutory tax rates in effect for the year in which the temporary differences are expected to
reverse. A valuation allowance is provided, if necessary, against deferred tax assets when it is more likely than not that some portion or all
of the deferred tax asset will not be realized. Our stockholder’s equity includes an adjustment to classification as a result of permanent
book-to-tax differences, which include differences in the book and tax treatment of income and expenses.
Taxable income generally differs from net income for financial reporting purposes due to temporary and permanent differences in
the recognition of income and expenses. Taxable income generally excludes net unrealized appreciation or depreciation, as investment
gains or losses are not included in taxable income until they are realized.
10. Net Realized Gains or Losses and Net Unrealized Appreciation or Depreciation
Realized gains or losses are measured by the difference between the net proceeds from the sale or redemption of an investment or a
financial instrument and the cost basis of the investment or financial instrument, without regard to unrealized appreciation or depreciation
previously recognized, and includes investments written-off during the period net of recoveries and realized gains or losses from in-kind
redemptions. Net unrealized appreciation or depreciation reflects the net change in the fair value of the Investment Portfolio and financial
instruments and the reclassification of any prior period unrealized appreciation or depreciation on exited investments and financial
instruments to realized gains or losses.
11. Fair Value of Financial Instruments
Fair value estimates are made at discrete points in time based on relevant information. These estimates may be subjective in nature
and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Main Street believes that
the carrying amounts of its financial instruments, consisting of cash and cash equivalents, receivables, payables and other liabilities
approximate the fair values of such items due to the short-term nature of these instruments.
To estimate the fair value of Main Street’s multiple tranches of unsecured debt instruments as disclosed in Note E – Debt, Main
Street uses quoted market prices. For the estimated fair value of Main Street’s SBIC debentures, Main Street uses the Yield-to-Maturity
valuation method based on projections of the discounted future free cash flows that the debt security will likely generate, including both the
discounted cash flows of the associated interest and principal amounts for the debt security.
12. Earnings per Share
Basic and diluted per share calculations are computed utilizing the weighted-average number of shares of common stock
outstanding for the period. In accordance with ASC 260, Earnings Per Share, the unvested shares of restricted stock awarded pursuant to
Main Street’s equity compensation plans are participating securities and, therefore, are included in the basic earnings per share calculation.
As a result, for all periods presented, there is no difference between diluted earnings per share and basic earnings per share amounts.
13. Recently Issued or Adopted Accounting Standards
In March 2020, the FASB issued ASU 2020-04, “Reference rate reform (Topic 848)—Facilitation of the effects of reference rate
reform on financial reporting.” The amendments in this update provide optional expedients and exceptions for applying U.S. GAAP to
certain contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate
reform and became effective upon issuance for all entities. The Company has agreements that have LIBOR as a reference rate with certain
portfolio companies and also
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with certain lenders. Many of these agreements include language for choosing an alternative successor rate if LIBOR reference is no longer
considered to be appropriate. Contract modifications are required to be evaluated in determining whether the modifications result in the
establishment of new contracts or the continuation of existing contracts. The Company adopted this amendment in March 2020 and plans to
apply the amendments in this update to account for contract modifications due to changes in reference rates when LIBOR reference is no
longer used. The Company did not utilize the optional expedients and exceptions provided by ASU 2020-04 during the year ended
December 31, 2021. The Company continues to evaluate the impact that the amendments in this update will have on its consolidated
financial statements and disclosures when applied.
In May 2020, the SEC published Release No. 33-10786 (the “May 2020 Release”), Amendments to Financial Disclosures about
Acquired and Disposed Businesses, announcing its adoption of rules amending Rule 1-02(w)(2) under Regulation S-X used in the
determination of a significant subsidiary specific to investment companies, including BDCs. In part, the rules adopted pursuant to the May
2020 Release eliminated the use of the asset test, and amended the income and investment tests for determining whether an unconsolidated
subsidiary requires additional disclosure in the footnotes of the financial statements. Main Street adopted the rules pursuant to the May 2020
Release during the quarter ended June 30, 2020. The impact of the adoption of these rules on Main Street’s consolidated financial
statements was not material.
In December 2020, the SEC published Release No. IC-34084 (the “December 2020 Release”) Use of Derivatives by Registered
Investment Companies and Business Development Companies, announcing its adoption of Rule 18f-4 and amendment of Rule 6c-11 under
the 1940 Act to provide an updated, comprehensive approach to the regulation of registered investment companies’, including BDCs’, use
of derivatives and address investor protection concerns. In part, the rules adopted pursuant to the December 2020 Release require that funds
using derivatives generally will have to adopt a derivatives risk management program that a derivatives risk manager administers and that
the fund’s board of directors oversees, and comply with an outer limit on fund leverage. Funds that use derivatives only in a limited manner
will not be subject to these requirements, but they will have to adopt and implement policies and procedures reasonably designed to manage
the fund’s derivatives risks. Funds also will be subject to reporting and recordkeeping requirements regarding their derivatives use. Main
Street adopted the rules pursuant to the December 2020 Release during the quarter ended March 31, 2021. As Main Street is a limited user
of derivatives, the impact of the adoption of these rules on the consolidated financial statements was not material.
In December 2021, the SEC published Staff Accounting Bulletin No. 120 (“SAB 120”) to provide accounting and disclosure
guidance for stock compensation awards made to executives and conforming amendments to the Staff Accounting Bulletin Series to align
with the current authoritative accounting guidance in ASC 718, Compensation – Stock Compensation. In part, SAB 120 requires that an
entity disclose how it determines the current price of underlying shares for grant-date fair value, the policy for when an adjustment to the
share price is required, how it determines the amount of an adjustment to the share price and any significant assumptions used in
determining an adjustment to the share price. SAB 120 is effective for all stock compensation awards issued after December 1, 2021. Main
Street is in the compliance with the guidance pursuant to SAB 120 for any share-based compensation disclosures. See Note J – Share-Based
Compensation for further discussion of Main Street’s policies and procedures regarding share-based compensation. Main Street does not
expect the impact of SAB 120 to be material to the consolidated financial statements and the notes thereto.
From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that are adopted by
Main Street as of the specified effective date. Main Street believes that the impact of recently issued standards and any that are not yet
effective will not have a material impact on its consolidated financial statements upon adoption.
NOTE C—FAIR VALUE HIERARCHY FOR INVESTMENTS AND DEBENTURES—PORTFOLIO COMPOSITION
ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the
quality of inputs used to measure fair value, and enhances disclosure requirements for fair value measurements. Main Street accounts for its
investments at fair value.
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Fair Value Hierarchy
In accordance with ASC 820, Main Street has categorized its investments based on the priority of the inputs to the valuation
technique into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for
identical investments (Level 1) and the lowest priority to unobservable inputs (Level 3).
Investments recorded on Main Street’s balance sheet are categorized based on the inputs to the valuation techniques as follows:
Level 1—Investments whose values are based on unadjusted quoted prices for identical assets in an active market that
Main Street has the ability to access (examples include investments in active exchange-traded equity securities and investments in
most U.S. government and agency securities).
Level 2—Investments whose values are based on quoted prices in markets that are not active or model inputs that are
observable either directly or indirectly for substantially the full term of the investment. Level 2 inputs include the following:
● Quoted prices for similar assets in active markets (for example, investments in restricted stock);
● Quoted prices for identical or similar assets in non-active markets (for example, investments in thinly traded public
companies);
●
●
Pricing models whose inputs are observable for substantially the full term of the investment (for example, market
interest rate indices); and
Pricing models whose inputs are derived principally from, or corroborated by, observable market data through
correlation or other means for substantially the full term of the investment.
Level 3—Investments whose values are based on prices or valuation techniques that require inputs that are both
unobservable and significant to the overall fair value measurement (for example, investments in illiquid securities issued by
privately held companies). These inputs reflect management’s own assumptions about the assumptions a market participant would
use in pricing the investment.
As required by ASC 820, when the inputs used to measure fair value fall within different levels of the hierarchy, the level within
which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its
entirety. For example, a Level 3 fair value measurement may include inputs that are observable (Levels 1 and 2) and unobservable
(Level 3). Therefore, unrealized appreciation and depreciation related to such investments categorized within the Level 3 tables below may
include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3).
As of December 31, 2021 and 2020, all of Main Street’s LMM portfolio investments consisted of illiquid securities issued by
privately held companies and the fair value determination for these investments primarily consisted of unobservable inputs. As a result, all
of Main Street’s LMM portfolio investments were categorized as Level 3 as of December 31, 2021 and 2020.
As of December 31, 2021 and 2020, Main Street’s Private Loan portfolio investments primarily consisted of investments in
interest-bearing secured debt investments. The fair value determination for these investments consisted of a combination of observable
inputs in non-active markets for which sufficient observable inputs were not available to determine the fair value of these investments and
unobservable inputs. As a result, all of Main Street’s Private Loan portfolio investments were categorized as Level 3 as of
December 31, 2021 and 2020.
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As of December 31, 2021 and 2020, Main Street’s Middle Market portfolio investments consisted primarily of investments in
secured and unsecured debt investments and independently rated debt investments. The fair value determination for these investments
consisted of a combination of observable inputs in non-active markets for which sufficient observable inputs were not available to determine
the fair value of these investments and unobservable inputs. As a result, all of Main Street’s Middle Market portfolio investments were
categorized as Level 3 as of December 31, 2021 and 2020.
As of December 31, 2021 and 2020, Main Street’s Other Portfolio investments consisted of illiquid securities issued by privately
held companies and the fair value determination for these investments primarily consisted of unobservable inputs. As a result, all of Main
Street’s Other Portfolio investments were categorized as Level 3 as of December 31, 2021 and 2020.
As of December 31, 2021, Main Street held one short-term portfolio investment, which was a secured debt investment. The fair
value determination for this investment consisted of available observable inputs in non-active markets sufficient to determine the fair value
of the investment. As a result, Main Street’s short-term portfolio investment was categorized as Level 2 as of December 31, 2021. Main
Street did not hold any short-term portfolio investments as of December 31, 2020.
The fair value determination of each portfolio investment categorized as Level 3 required one or more of the following
unobservable inputs:
●
Financial information obtained from each portfolio company, including unaudited statements of operations and balance sheets
for the most recent period available as compared to budgeted numbers;
● Current and projected financial condition of the portfolio company;
● Current and projected ability of the portfolio company to service its debt obligations;
●
Type and amount of collateral, if any, underlying the investment;
● Current financial ratios (e.g., fixed charge coverage ratio, interest coverage ratio and net debt/EBITDA ratio) applicable to the
investment;
● Current liquidity of the investment and related financial ratios (e.g., current ratio and quick ratio);
●
●
Pending debt or capital restructuring of the portfolio company;
Projected operating results of the portfolio company;
● Current information regarding any offers to purchase the investment;
● Current ability of the portfolio company to raise any additional financing as needed;
● Changes in the economic environment which may have a material impact on the operating results of the portfolio company;
●
Internal occurrences that may have an impact (both positive and negative) on the operating performance of the portfolio
company;
● Qualitative assessment of key management;
● Contractual rights, obligations or restrictions associated with the investment; and
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● Other factors deemed relevant.
The use of significant unobservable inputs creates uncertainty in the measurement of fair value as of the reporting date. The
significant unobservable inputs used in the fair value measurement of Main Street’s LMM equity securities, which are generally valued
through an average of the discounted cash flow technique and the market comparable/enterprise value technique (unless one of these
approaches is determined to not be appropriate), are (i) EBITDA multiples and (ii) the weighted-average cost of capital (“WACC”).
Significant increases (decreases) in EBITDA multiple inputs in isolation would result in a significantly higher (lower) fair value
measurement. On the contrary, significant increases (decreases) in WACC inputs in isolation would result in a significantly lower (higher)
fair value measurement. The significant unobservable inputs used in the fair value measurement of Main Street’s LMM, Private Loan and
Middle Market securities are (i) risk adjusted discount rates used in the Yield-to-Maturity valuation technique (see “Note B.1.—Valuation
of the Investment Portfolio”) and (ii) the percentage of expected principal recovery. Significant increases (decreases) in any of these
discount rates in isolation would result in a significantly lower (higher) fair value measurement. Significant increases (decreases) in any of
these expected principal recovery percentages in isolation would result in a significantly higher (lower) fair value measurement. However,
due to the nature of certain investments, fair value measurements may be based on other criteria, such as third-party appraisals of collateral
and fair values as determined by independent third parties, which are not presented in the tables below.
The following tables provide a summary of the significant unobservable inputs used to fair value Main Street’s Level 3 portfolio
investments as of December 31, 2021 and 2020:
Fair Value as of
December 31,
2021
(in thousands)
Valuation Technique
Significant
Unobservable Inputs
1,050,269 Discounted cash flow WACC
Range(3)
Weighted
Average(3) Median(3)
9.1% - 20.6%
13.8 %
14.8 %
Market comparable /
Enterprise Value
EBITDA multiple (1)
4.8x - 7.7x(2)
6.6x
5.9x
2,158,424 Discounted cash flow Risk adjusted discount factor
351,144 Market approach
3,559,837
Expected principal recovery percentage
Third‑party quote
5.6% - 15.7%(2)
0.0% - 100.0%
3.0 - 100.5
9.8 %
99.6 %
94.4
9.3 %
100.0 %
99.0
Type of
Investment
Equity
investments
Debt investments
Debt investments
Total Level 3
investments
$
$
$
$
(1) EBITDA may include proforma adjustments and/or other addbacks based on specific circumstances related to each investment.
(2) Range excludes outliers that are greater than one standard deviation from the mean. Including these outliers, the range for EBITDA
multiple is 2.2x - 11.0x and the range for risk adjusted discount factor is 4.2% - 38.5%.
(3) Does not include investments for which the valuation technique does not include the use of the applicable fair value input.
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Type of
Investment
Equity
investments
Debt investments
Debt investments
Total Level 3
investments
$
$
$
$
Fair Value as of
December 31,
2020
(in thousands)
Valuation Technique
877,732 Discounted cash flow WACC
Significant
Unobservable Inputs
Range(3)
Weighted
Average(3) Median(3)
9.4% - 21.0%
14.3 %
15.0 %
Market comparable /
Enterprise Value
EBITDA multiple (1)
4.5x - 8.5x(2)
7.0x
6.1x
1,339,079 Discounted cash flow Risk adjusted discount factor
468,055 Market approach
2,684,866
Expected principal recovery percentage
Third‑party quote
7.4% - 15.3%(2)
0.0% - 100.0%
45.0 - 100.3
10.6 %
99.4 %
94.7
10.8 %
100.0 %
96.5
(1) EBITDA may include proforma adjustments and/or other addbacks based on specific circumstances related to each investment.
(2) Range excludes outliers that are greater than one standard deviation from the mean. Including these outliers, the range for EBITDA
multiple is 2.2x - 15.0x and the range for risk adjusted discount factor is 5.4% - 29.5%.
(3) Does not include investments for which the valuation technique does not include the use of the applicable fair value input.
The following tables provide a summary of changes in fair value of Main Street’s Level 3 portfolio investments for the years
ended December 31, 2021 and 2020 (amounts in thousands):
Type of
Investment
Debt
Equity
Equity Warrant
Fair Value
as of
December 31,
2020
1,807,134
866,734
10,998
2,684,866
$
$
Transfers
Into
Level 3
Redemptions/
New
Net
Changes
from
Net
Unrealized
Unrealized Appreciation
Fair Value
as of
December 31,
Hierarchy Repayments Investments to Realized (Depreciation) Other(1)
$
$
— $
—
—
— $
(909,464)
(78,824)
(1,071)
(989,359)
$ 1,608,143
106,193
—
$ 1,714,336
$
$
18,397
(27,260)
(2,159)
(11,022)
$
$
(10,844)
170,786
1,074
161,016
$
$
$
(3,798)
6,080
(2,282)
— $
2021
2,509,568
1,043,709
6,560
3,559,837
(1)
Includes the impact of non-cash conversions. These transactions represent non-cash investing activities. See additional cash flow
information at the consolidated statements of cash flows.
Type of
Investment
Debt
Equity
Equity Warrant
Fair Value
as of
December 31,
2019
1,782,575
809,538
10,211
2,602,324
$
$
Transfers
Into
Level 3
Hierarchy
Redemptions/
Repayments
$
$
— $
—
—
— $
(544,545)
(51,251)
(2,245)
(598,041)
New
Investments
560,536
$
114,733
—
675,269
$
Net
Changes
from
Unrealized
to Realized
110,099
$
8,938
2,245
121,282
$
Net
Unrealized
Appreciation
(Depreciation)
(78,866)
$
(38,404)
1,302
(115,968)
$
$
$
Fair Value
as of
December 31,
2020
1,807,134
866,219
11,513
2,684,866
$
Other(1)
(22,665)
22,665
—
— $
(1)
Includes the impact of non-cash conversions. These transactions represent non-cash investing activities. See additional cash flow
information at the consolidated statements of cash flows.
At December 31, 2021 and 2020, Main Street’s investments at fair value were categorized as follows in the fair value hierarchy for
ASC 820 purposes:
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At December 31, 2021
LMM portfolio investments
Private Loan portfolio investments
Middle Market portfolio investments
Other Portfolio investments
External Investment Manager
Short-term portfolio investments
Total investments
At December 31, 2020
LMM portfolio investments
Private Loan portfolio investments
Middle Market portfolio investments
Other Portfolio investments
External Investment Manager
Total investments
Investment Portfolio Composition
Fair Value Measurements
(in thousands)
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other Unobservable
Significant
Observable Inputs
(Level 2)
Inputs
(Level 3)
$
$
— $
—
—
—
—
—
— $
— $ 1,716,415
1,141,772
—
395,167
—
166,083
—
140,400
—
—
$ 3,559,837
1,994
1,994
Fair Value Measurements
(in thousands)
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
— $
—
—
—
—
— $
— $ 1,285,524
740,370
—
445,609
—
96,603
—
—
116,760
— $ 2,684,866
Fair Value
$ 1,716,415
1,141,772
395,167
166,083
140,400
1,994
$ 3,561,831
Fair Value
$ 1,285,524
740,370
445,609
96,603
116,760
$ 2,684,866
$
$
Main Street’s principal investment objective is to maximize its portfolio’s total return by generating current income from its debt
investments and current income and capital appreciation from its equity and equity-related investments, including warrants, convertible
securities and other rights to acquire equity securities in a portfolio company. Main Street seeks to achieve its investment objective through
its LMM, Private Loan, and Middle Market investment strategies.
Main Street’s LMM investment strategy involves investments in secured debt, equity warrants and direct equity investments in
privately held, LMM companies based in the United States. Main Street’s LMM portfolio companies generally have annual revenues
between $10 million and $150 million, and its LMM investments generally range in size from $5 million to $75 million. The LMM debt
investments are typically secured by a first priority lien on the assets of the portfolio company, can include either fixed or floating rate
terms and generally have a term of between five and seven years from the original investment date. In most LMM portfolio investments,
Main Street receives nominally priced equity warrants and/or makes direct equity investments in connection with a debt investment.
Main Street’s private loan (“Private Loan”) investment strategy involves investments in privately held companies that are
generally consistent with the size of its LMM portfolio companies or Middle Market portfolio companies and generally range in size from
$10 million to $75 million. Main Street’s Private Loan investments consist generally of loans that have been originated by Main Street or
through strategic relationships with other investment funds on a collaborative basis, and are often referred to in the debt markets as “club
deals.” Private Loan investments are typically similar in structure, terms and conditions to investments Main Street holds in its LMM
portfolio and Middle Market portfolio. Main Street’s Private Loan portfolio debt investments are generally secured by a first priority lien on
the assets of the portfolio company and typically have a term of between three and seven years from the original investment date. Main
Street may have the option to invest alongside the sponsor in the equity securities of its Private Loan portfolio companies.
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Main Street’s Middle Market investment strategy involves investments in syndicated loans to or debt securities in Middle Market
companies, which Main Street defines as companies with annual revenues between $150 million and $1.5 billion, and generally range in
size from $3 million to $25 million. Main Street’s Middle Market portfolio debt investments are generally secured by a first priority lien on
the assets of the portfolio company and typically have an expected duration of between three and seven years from the original investment
date.
Main Street’s other portfolio (“Other Portfolio”) investments primarily consist of investments that are not consistent with the
typical profiles for its LMM, Private Loan or Middle Market portfolio investments, including investments which may be managed by third
parties. In the Other Portfolio, Main Street may incur indirect fees and expenses in connection with investments managed by third parties,
such as investments in other investment companies or private funds. For Other Portfolio investments, Main Street generally receives
distributions related to the assets held by the portfolio company. Those assets are typically expected to be liquidated over a five to ten-year
period.
Based upon Main Street’s liquidity and capital structure management activities, Main Street’s Investment Portfolio may also
include short-term portfolio investments that are atypical of Main Street’s LMM, Private Loan and Middle Market portfolio investments in
that they are intended to be a short-term deployment of capital. Those assets are typically expected to be liquidated in one year or less.
These short-term investments are not expected to be a significant portion of the overall Investment Portfolio.
Main Street’s external asset management business is conducted through its External Investment Manager. The External Investment
Manager earns management fees based on the assets under management for external parties and may earn incentive fees, or a carried
interest, based on the performance of the assets managed. Main Street entered into an agreement with the External Investment Manager to
share employees in connection with its asset management business generally, and specifically for its relationship with MSC Income Fund,
Inc. (“MSC Income”), formerly known as HMS Income Fund, Inc. Through this agreement, Main Street shares employees with the
External Investment Manager, including their related infrastructure, business relationships, management expertise and capital raising
capabilities. Main Street allocates the related expenses to the External Investment Manager pursuant to the sharing agreement. Main
Street’s total expenses for the years ended December 31, 2021, 2020 and 2019 are net of expenses allocated to the External Investment
Manager of $10.3 million, $7.4 million, and $6.7 million, respectively.
Investment income, consisting of interest, dividends and fees, can fluctuate dramatically due to various factors, including the level
of new investment activity, repayments of debt investments or sales of equity interests. Investment income in any given year could also be
highly concentrated among several portfolio companies. For the years ended December 31, 2021 and 2020, Main Street did not record
investment income from any single portfolio company in excess of 10% of total investment income.
The following tables provide a summary of Main Street’s investments in the LMM, Private Loan and Middle Market portfolios as
of December 31, 2021 and 2020 (this information excludes the Other Portfolio, short-term portfolio investments and the External
Investment Manager, each of which is discussed further below):
Number of portfolio companies
Fair value
Cost
Debt investments as a % of portfolio (at cost)
Equity investments as a % of portfolio (at cost)
% of debt investments at cost secured by first priority lien
Weighted-average annual effective yield (b)
Average EBITDA (c)
LMM (a)
As of December 31, 2021
Private Loan
Middle Market
73
1,716.4
1,455.7
(dollars in millions)
75
1,141.8
1,157.5
$
$
70.9 %
29.1 %
99.0 %
11.2 %
6.2
$
95.7 %
4.3 %
98.7 %
8.2 %
41.3
$
$
$
$
$
$
36
395.2
440.9
93.3 %
6.7 %
98.7 %
7.5 %
76.0
(a) At December 31, 2021, Main Street had equity ownership in all of its LMM portfolio companies, and the average fully diluted equity
ownership in those portfolio companies was approximately 40%.
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(b) The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of
December 31, 2021, including amortization of deferred debt origination fees and accretion of original issue discount but excluding fees
payable upon repayment of the debt instruments and any debt investments on non-accrual status. The weighted-average yield on Main
Street’s debt portfolio as of December 31, 2021 including debt investments on non-accrual status was 10.6% for its LMM portfolio,
8.0% for its Private Loan portfolio and 7.1% for its Middle Market portfolio. The weighted-average annual effective yield is not
reflective of what an investor in shares of Main Street’s common stock will realize on its investment because it does not reflect changes
in the market value of Main Street’s stock, Main Street’s utilization of leverage, or debt capital, in its capital structure, and Main Street’s
expenses or any sales load paid by an investor.
(c) The average EBITDA is calculated using a simple average for the LMM portfolio and a weighted-average for the Private Loan and
Middle Market portfolios. These calculations exclude certain portfolio companies, including three LMM portfolio companies, three
Private Loan portfolio companies and one Middle Market portfolio company, as EBITDA is not a meaningful valuation metric for Main
Street’s investments in these portfolio companies, and those portfolio companies whose primary purpose is to own real estate.
Number of portfolio companies
Fair value
Cost
Debt investments as a % of portfolio (at cost)
Equity investments as a % of portfolio (at cost)
% of debt investments at cost secured by first priority lien
Weighted-average annual effective yield (b)
Average EBITDA (c)
LMM (a)
As of December 31, 2020
Private Loan
Middle Market
70
1,285.5
1,104.6
(dollars in millions)
63
740.4
769.0
$
$
65.8 %
34.2 %
98.1 %
11.6 %
5.3
$
93.8 %
6.2 %
95.4 %
8.7 %
58.1
$
$
$
$
$
$
42
445.6
488.9
93.0 %
7.0 %
92.4 %
7.9 %
76.5
(a) At December 31, 2020, Main Street had equity ownership in approximately 99% of its LMM portfolio companies, and the average fully
diluted equity ownership in those portfolio companies was approximately 38%.
(b) The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of
December 31, 2020, including amortization of deferred debt origination fees and accretion of original issue discount but excluding fees
payable upon repayment of the debt instruments and any debt investments on non-accrual status. The weighted-average yield on Main
Street’s debt portfolio as of December 31, 2020 including debt investments on non-accrual status was 10.4% for its LMM portfolio,
8.4% for its Private Loan portfolio and 7.9% for its Middle Market portfolio. The weighted-average annual effective yield is not
reflective of what an investor in shares of Main Street’s common stock will realize on its investment because it does not reflect changes
in the market value of Main Street’s stock, Main Street’s utilization of leverage, or debt capital, in its capital structure, Main Street’s
expenses or any sales load paid by an investor.
(c) The average EBITDA is calculated using a simple average for the LMM portfolio and a weighted-average for the Private Loan and
Middle Market portfolios. These calculations exclude certain portfolio companies, including three LMM portfolio companies, four
Private Loan portfolio companies and one Middle Market portfolio company, as EBITDA is not a meaningful valuation metric for Main
Street’s investments in these portfolio companies, and those portfolio companies whose primary purpose is to own real estate.
For the years ended December 31, 2021 and 2020, Main Street achieved a total return on investments of 16.6% and 4.1%,
respectively. Total return on investments is calculated using the interest, dividend, and fee income, as well as the realized and unrealized
change in fair value of the Investment Portfolio for the specified period. Main Street’s total return on investments is not reflective of what
an investor in shares of Main Street’s common stock will realize on its investment because it does not reflect changes in the market value of
Main Street’s stock, Main Street’s utilization of leverage, or debt capital, in its capital structure, Main Street’s expenses or any sales load
paid by an investor.
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As of December 31, 2021, Main Street had Other Portfolio investments in thirteen companies, collectively totaling approximately
$166.1 million in fair value and approximately $173.7 million in cost basis and which comprised approximately 4.7% and 5.3% of Main
Street’s Investment Portfolio at fair value and cost, respectively. As of December 31, 2020, Main Street had Other Portfolio investments in
twelve companies, collectively totaling approximately $96.6 million in fair value and approximately $124.7 million in cost basis and which
comprised approximately 3.6% and 5.0% of Main Street’s Investment Portfolio at fair value and cost, respectively.
As of December 31, 2021, Main Street had one short-term portfolio investment, which was a secured debt investment that had
approximately $2.0 million in both fair value and in cost basis and which comprised approximately 0.1% of Main Street’s Investment
Portfolio at both fair value and cost. As of December 31, 2020, Main Street held no short-term portfolio investments.
As discussed further in Note A.1., Main Street holds an investment in the External Investment Manager, a wholly owned
subsidiary that is treated as a portfolio investment. As of December 31, 2021, this investment had a fair value of approximately
$140.4 million and a cost basis of $29.5 million, which comprised approximately 3.9% and 0.9% of Main Street’s Investment Portfolio at
fair value and cost, respectively. As of December 31, 2020, this investment had a fair value of approximately $116.8 million and a cost basis
of $29.5 million, which comprised approximately 4.3% and 1.2% of Main Street’s Investment Portfolio at fair value and cost, respectively.
The following tables summarize the composition of Main Street’s total combined LMM portfolio investments, Private Loan
portfolio investments and Middle Market portfolio investments at cost and fair value by type of investment as a percentage of the total
combined LMM portfolio investments, Private Loan portfolio investments and Middle Market portfolio investments, as of
December 31, 2021 and 2020 (this information excludes the Other Portfolio, short-term portfolio investments and the External Investment
Manager, each of which is discussed above).
Cost:
First lien debt
Equity
Second lien debt
Equity warrants
Other
Fair Value:
First lien debt
Equity
Second lien debt
Equity warrants
Other
December 31, 2021
December 31, 2020
82.5 %
16.2 %
0.6 %
0.3 %
0.4 %
100.0 %
77.0 %
19.0 %
2.7 %
0.5 %
0.8 %
100.0 %
December 31, 2021
December 31, 2020
74.3 %
24.6 %
0.5 %
0.2 %
0.4 %
100.0 %
70.0 %
26.4 %
2.4 %
0.4 %
0.8 %
100.0 %
The following tables summarize the composition of Main Street’s total combined LMM portfolio investments, Private Loan
portfolio investments and Middle Market portfolio investments by geographic region of the United States and other countries at cost and
fair value as a percentage of the total combined LMM portfolio investments, Private Loan portfolio investments and Middle Market
portfolio investments, as of December 31, 2021 and 2020 (this information
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excludes the Other Portfolio, short-term portfolio investments and the External Investment Manager). The geographic composition is
determined by the location of the corporate headquarters of the portfolio company.
Cost:
West
Northeast
Southwest
Midwest
Southeast
Canada
Fair Value:
West
Southwest
Northeast
Midwest
Southeast
Canada
December 31, 2021
December 31, 2020
28.3 %
22.6 %
21.6 %
15.1 %
11.6 %
0.8 %
100.0 %
21.0 %
22.6 %
24.3 %
18.2 %
12.8 %
1.1 %
100.0 %
December 31, 2021
December 31, 2020
28.5 %
23.0 %
21.9 %
15.8 %
10.0 %
0.8 %
100.0 %
21.4 %
24.7 %
21.7 %
19.7 %
11.5 %
1.0 %
100.0 %
Main Street’s LMM portfolio investments, Private Loan portfolio investments and Middle Market portfolio investments are in
companies conducting business in a variety of industries. The following tables summarize the composition of Main Street’s total combined
LMM portfolio investments, Private Loan portfolio investments and
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Middle Market portfolio investments by industry at cost and fair value as of December 31, 2021 and 2020 (this information excludes the
Other Portfolio, short-term portfolio investments and the External Investment Manager).
Cost:
Construction & Engineering
Machinery
Internet Software & Services
Commercial Services & Supplies
Distributors
Professional Services
Leisure Equipment & Products
Energy Equipment & Services
Health Care Providers & Services
Specialty Retail
IT Services
Diversified Consumer Services
Diversified Telecommunication Services
Communications Equipment
Containers & Packaging
Building Products
Textiles, Apparel & Luxury Goods
Tobacco
Diversified Financial Services
Food Products
Aerospace & Defense
Software
Oil, Gas & Consumable Fuels
Media
Chemicals
Internet & Catalog Retail
Hotels, Restaurants & Leisure
Electronic Equipment, Instruments & Components
Life Sciences Tools & Services
Computers & Peripherals
Household Durables
Trading Companies & Distributors
Food & Staples Retailing
Transportation Infrastructure
Other (1)
December 31, 2021
December 31, 2020
7.8 %
7.3 %
7.2 %
5.9 %
4.7 %
4.6 %
4.1 %
4.0 %
3.9 %
3.5 %
3.5 %
3.4 %
2.6 %
2.3 %
2.3 %
2.3 %
2.2 %
2.1 %
2.1 %
2.0 %
1.9 %
1.8 %
1.8 %
1.8 %
1.7 %
1.6 %
1.4 %
1.4 %
1.4 %
1.3 %
1.0 %
0.9 %
0.8 %
— %
3.4 %
100.0 %
6.0 %
6.4 %
5.2 %
4.7 %
2.1 %
5.1 %
4.2 %
4.5 %
5.1 %
3.1 %
4.0 %
1.0 %
2.6 %
3.3 %
1.6 %
1.4 %
0.6 %
2.2 %
2.1 %
2.6 %
5.9 %
4.4 %
3.2 %
2.1 %
0.9 %
0.7 %
2.6 %
1.9 %
1.4 %
1.5 %
1.3 %
1.2 %
1.0 %
1.0 %
3.1 %
100.0 %
(1)
Includes various industries with each industry individually less than 1.0% of the total combined LMM portfolio investments, Private
Loan portfolio investments and Middle Market portfolio investments at each date.
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Fair Value:
Machinery
Construction & Engineering
Internet Software & Services
Diversified Consumer Services
Commercial Services & Supplies
Distributors
Specialty Retail
Leisure Equipment & Products
Professional Services
Health Care Providers & Services
IT Services
Energy Equipment & Services
Diversified Telecommunication Services
Containers & Packaging
Diversified Financial Services
Computers & Peripherals
Tobacco
Building Products
Media
Textiles, Apparel & Luxury Goods
Software
Food Products
Aerospace & Defense
Chemicals
Communications Equipment
Internet & Catalog Retail
Oil, Gas & Consumable Fuels
Life Sciences Tools & Services
Construction Materials
Hotels, Restaurants & Leisure
Household Durables
Trading Companies & Distributors
Electronic Equipment, Instruments & Components
Transportation Infrastructure
Other (1)
December 31, 2021
December 31, 2020
8.5 %
7.7 %
6.4 %
5.9 %
5.5 %
4.7 %
4.1 %
4.0 %
3.9 %
3.6 %
3.3 %
2.8 %
2.5 %
2.5 %
2.3 %
2.2 %
2.2 %
2.2 %
2.2 %
2.1 %
2.0 %
1.9 %
1.7 %
1.6 %
1.5 %
1.5 %
1.4 %
1.3 %
1.1 %
1.0 %
0.9 %
0.9 %
0.7 %
— %
3.9 %
100.0 %
8.1 %
6.1 %
4.5 %
3.0 %
4.5 %
2.1 %
3.4 %
4.0 %
4.0 %
5.2 %
3.8 %
3.0 %
2.0 %
1.7 %
2.3 %
2.9 %
2.1 %
1.4 %
2.5 %
0.5 %
4.6 %
2.2 %
5.7 %
0.9 %
2.7 %
0.6 %
2.7 %
1.4 %
1.4 %
2.0 %
1.3 %
1.2 %
1.3 %
1.0 %
3.9 %
100.0 %
(1)
Includes various industries with each industry individually less than 1.0% of the total combined LMM portfolio investments, Private
Loan portfolio investments and Middle Market portfolio investments at each date.
At December 31, 2021 and 2020, Main Street had no portfolio investment that was greater than 10% of the Investment Portfolio at
fair value.
Unconsolidated Significant Subsidiaries
In accordance with Rules 3-09 and 4-08(g) of Regulation S-X, Main Street must determine which of its unconsolidated controlled
portfolio companies, if any, are considered “significant subsidiaries.” On May 20, 2020, the SEC published in Release No. 33-10786,
Amendments to Financial Disclosures about Acquired and Disposed Businesses, amendments to Rule 1-02(w)(2) of Regulation S-X used in
the determination of a significant subsidiary specific to investment companies, including BDCs. The amendments became effective on
January 1, 2021, but the SEC allowed for early application. Main Street elected to apply these revisions effective June 30, 2020. In
evaluating its unconsolidated controlled portfolio companies in accordance with Regulation S-X, there are two tests that Main Street
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must utilize to determine if any of Main Street’s Control Investments (as defined in Note A, including those unconsolidated portfolio
companies defined as Control Investments in which Main Street does not own greater than 50% of the voting securities or maintain greater
than 50% of the board representation) are considered significant subsidiaries: the investment test and the income test. The investment test is
generally measured by dividing Main Street’s investment in the Control Investment by the value of Main Street’s total investments. The
income test is generally measured by dividing the absolute value of the combined sum of total investment income, net realized gain (loss)
and net unrealized appreciation (depreciation) from the relevant Control Investment for the period being tested by the absolute value of
Main Street’s change in net assets resulting from operations for the same period. Rules 3-09 and 4-08(g) of Regulation S-X require Main
Street to include (1) separate audited financial statements of an unconsolidated majority-owned subsidiary (Control Investments in which
Main Street owns greater than 50% of the voting securities) in an annual report and (2) summarized financial information of a Control
Investment in a quarterly report, respectively, if certain thresholds of the investment or income tests are exceeded and the unconsolidated
portfolio company qualifies as a significant subsidiary.
As of December 31, 2021, 2020 and 2019, Main Street had no single investment that qualified as a significant subsidiary under
either the investment or income tests.
NOTE D—EXTERNAL INVESTMENT MANAGER
As discussed further in Note A.1 and Note C, the External Investment Manager provides investment management and other
services to External Parties. The External Investment Manager is accounted for as a portfolio investment of MSCC since the External
Investment Manager conducts all of its investment management activities for External Parties.
During May 2012, Main Street entered into an investment sub-advisory agreement with HMS Adviser, LP (“HMS Adviser”),
which was the investment adviser to MSC Income at the time, to provide certain investment advisory services to HMS Adviser. In
December 2013, after obtaining required no-action relief from the SEC to allow it to own a registered investment adviser, Main Street
assigned the sub-advisory agreement to the External Investment Manager since the fees received from such arrangement could otherwise
have negative consequences on MSCC’s ability to meet the source-of-income requirement necessary for it to maintain its RIC tax treatment.
Under the investment sub-advisory agreement, the External Investment Manager was entitled to 50% of the annual base management fee
and the incentive fees earned by HMS Adviser under its advisory agreement with MSC Income. Effective October 30, 2020, the External
Investment Manager and HMS Adviser consummated the transactions contemplated by that certain asset purchase agreement by and among
the External Investment Manager, HMS Adviser and the other parties thereto whereby the External Investment Manager became the sole
investment adviser and administrator to MSC Income pursuant to an Investment Advisory and Administrative Services Agreement entered
into between the External Investment Manager and MSC Income (the “Advisory Agreement”). The Advisory Agreement includes a 1.75%
annual management fee, reduced from 2.00%, and the same incentive fee as under MSC Income’s prior advisory agreement with HMS
Adviser, with the External Investment Manager receiving 100% of such fee income (increased from 50% previously).
As described more fully in Note L – Related Party Transactions, the External Investment Manager launched a new private fund,
MS Private Loan Fund I, LP, a private investment fund with a strategy to co-invest with Main Street in Private Loan portfolio investments
(the “Private Loan Fund”), in December 2020. The External Investment Manager entered into an Investment Management Agreement in
December 2020 with the Private Loan Fund, pursuant to which the External Investment Manager provides investment advisory and
management services to the Private Loan Fund in exchange for an asset-based fee and certain incentive fees. The External Investment
Manager may also advise other clients, including funds and separately managed accounts, pursuant to advisory and services agreements
with such clients in exchange for asset-based and incentive fees.
During the year ended December 31, 2021, the External Investment Manager earned $17.7 million in base management fee
income and $0.6 million in incentive fees compared to $10.7 million of base management fees and no incentive fees in 2020 and
$11.1 million of base management fees and $2.0 million in incentive fees in 2019 for the investment advisory services provided to MSC
Income, other funds and other clients.
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Main Street determines the fair value of the External Investment Manager using the Waterfall valuation method under the market
approach (see further discussion in Note B.1.). Any change in fair value of the investment in the External Investment Manager is recognized
on Main Street’s consolidated statements of operations in “Net Unrealized Appreciation (Depreciation)—Control investments.”
The External Investment Manager is an indirect wholly owned subsidiary of MSCC owned through a Taxable Subsidiary and is a
disregarded entity for tax purposes. The External Investment Manager has entered into a tax sharing agreement with its Taxable Subsidiary
owner. Since the External Investment Manager is accounted for as a portfolio investment of MSCC and is not included as a consolidated
subsidiary of MSCC in MSCC’s consolidated financial statements, and as a result of the tax sharing agreement with its Taxable Subsidiary
owner, for financial reporting purposes the External Investment Manager is treated as if it is taxed at normal corporate tax rates based on its
taxable income and, as a result of its activities, may generate income tax expense or benefit. Main Street owns the External Investment
Manager through the Taxable Subsidiary to allow MSCC to continue to comply with the “source-of-income” requirements contained in the
RIC tax provisions of the Code. The taxable income, or loss, of the External Investment Manager may differ from its book income, or loss,
due to temporary book and tax timing differences and permanent differences. As a result of the above described financial reporting and tax
treatment, the External Investment Manager provides for any income tax expense, or benefit, and any tax assets or liabilities in its separate
financial statements.
Main Street shares employees with the External Investment Manager and allocates costs related to such shared employees to the
External Investment Manager generally based on a combination of the direct time spent, new investment origination activity and assets
under management, depending on the nature of the expense. For the years ended December 31, 2021, 2020 and 2019, Main Street allocated
$10.3 million, $7.4 million and $6.7 million of total expenses, respectively, to the External Investment Manager. The total contribution of
the External Investment Manager to Main Street’s net investment income consists of the combination of the expenses allocated to the
External Investment Manager and the dividend income earned from the External Investment Manager. For the years ended
December 31, 2021, 2020, and 2019 the total contribution to Main Street’s net investment income was $16.5 million, $9.9 million and
$11.7 million, respectively.
Summarized financial information from the separate financial statements of the External Investment Manager as of
December 31, 2021 and 2020 and for the years ended December 31, 2021, 2020 and 2019 is as follows:
As of
December 31,
2021
As of
December 31,
2020
Cash
Accounts receivable—advisory clients
Intangible Asset
Total assets
Accounts payable to MSCC and its subsidiaries
Dividend payable to MSCC and its subsidiaries
Equity
Total liabilities and equity
153
$
$
$
$
(dollars in thousands)
— $
5,595
29,500
35,095
3,288
2,307
29,500
35,095
$
$
$
—
3,520
29,500
33,020
2,423
1,097
29,500
33,020
Table of Contents
2021
Management fee income
Incentive fees
Total revenues
Expenses allocated from MSCC or its subsidiaries:
Salaries, share‑based compensation and other personnel costs
Other G&A expenses
Total allocated expenses
Pre‑tax income
Tax expense
Net income
NOTE E—DEBT
Summary of debt as of December 31, 2021 is as follows:
$
$
Twelve Months Ended
December 31,
2020
(dollars in thousands)
$
—
10,665
$
17,665
622
18,287
(8,417)
(1,860)
(10,277)
8,010
(1,795)
6,215
$
10,665
(4,984)
(2,445)
(7,429)
3,236
(745)
2,491
$
2019
11,116
1,972
13,088
(4,388)
(2,284)
(6,672)
6,416
(1,427)
4,989
SBIC Debentures
Credit Facility
4.50% Notes due 2022
5.20% Notes due 2024
3.00% Notes due 2026
Total Debt
Outstanding
Balance
Unamortized Debt
Issuance
(Costs)/Premiums
Estimated Fair
Recorded Value
Value (1)
(in thousands)
$
350,000
$
(7,269) $
342,731
$
328,206
320,000
185,000
450,000
500,000
—
(556)
1,272
(2,391)
320,000
184,444
451,272
497,609
320,000
190,043
480,767
502,285
$ 1,805,000
$
(8,944) $ 1,796,056
$ 1,821,301
(1) Estimated fair value for outstanding debt if Main Street had adopted the fair value option under ASC 825. See discussion of the methods
used to estimate the fair value of Main Street’s debt in Note B.11. – Fair Value of Financial Instruments.
Summary of debt as of December 31, 2020 is as follows:
SBIC Debentures
Credit Facility
4.50% Notes due 2022
5.20% Notes due 2024
Total Debt
Outstanding
Balance
Unamortized Debt
Issuance
(Costs)/Premiums
Estimated Fair
Recorded Value
Value (1)
(in thousands)
$
309,800
$
(5,828) $
303,972
$
309,907
269,000
185,000
450,000
—
(1,164)
1,817
269,000
183,836
451,817
269,000
194,938
488,102
$ 1,213,800
$
(5,175) $ 1,208,625
$ 1,261,947
(1) Estimated fair value for outstanding debt if Main Street had adopted the fair value option under ASC 825. See discussion of the methods
used to estimate the fair value of Main Street’s debt in Note B.11. – Fair Value of Financial Instruments.
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Summarized interest expense for the years ended December 31, 2021, 2020 and 2019 is as follows (in thousands):
SBIC Debentures
Credit Facility
4.50% Notes due 2019
4.50% Notes due 2022
5.20% Notes due 2024
3.00% Notes due in 2026
Total Interest Expense
SBIC Debentures
Twelve Months Ended December 31,
2021
10,857
5,204
—
8,932
22,855
10,988
58,836
$
$
2020
11,867
9,232
—
8,932
19,556
—
49,587
$
$
2019
12,739
10,974
7,881
8,932
9,732
—
50,258
$
$
Under existing SBIC regulations, SBA-approved SBICs under common control have the ability to issue debentures guaranteed by
the SBA up to a regulatory maximum amount of $350.0 million. Main Street’s SBIC debentures payable, under existing SBA-approved
commitments, were $350.0 million and $309.8 million at December 31, 2021 and 2020, respectively. SBIC debentures provide for interest
to be paid semiannually, with principal due at the applicable 10-year maturity date of each debenture. During the year ended
December 31, 2021, Main Street issued $80.2 million of SBIC debentures and opportunistically prepaid $40.0 million of existing SBIC
debentures that were scheduled to mature over the next year as part of an effort to manage the maturity dates of the oldest SBIC debentures.
Main Street expects to maintain SBIC debentures under the SBIC program in the future, subject to periodic repayments and borrowings, in
an amount up to the regulatory maximum amount for affiliated SBIC funds. The weighted-average annual interest rate on the SBIC
debentures was 2.9% and 3.4% as of December 31, 2021 and 2020, respectively. The first principal maturity due under the existing SBIC
debentures is in 2023, and the weighted-average remaining duration as of December 31, 2021 was approximately 6.1 years. In accordance
with SBIC regulations, the Funds are precluded from incurring additional non-SBIC debt without the prior approval of the SBA.
As of December 31, 2021, the SBIC debentures consisted of (i) $175.0 million par value of SBIC debentures outstanding issued
by MSMF, with a recorded value of $171.4 million that was net of unamortized debt issuance costs of $3.6 million and (ii) $175.0 million
par value of SBIC debentures issued by MSC III with a recorded value of $171.3 million that was net of unamortized debt issuance costs of
$3.7 million.
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The maturity dates and fixed interest rates for Main Street’s SBIC Debentures as of December 31, 2021 and 2020 are summarized
in the following table:
Fixed
Interest
Rate
December 31,
2021
December 31,
2020
$
4.37 %
4.60 %
3.39 %
3.16 %
3.95 %
3.55 %
3.52 %
3.19 %
3.41 %
3.55 %
2.35 %
1.13 %
1.31 %
1.94 %
1.58 %
$
—
—
—
16,000,000
39,000,000
24,800,000
40,400,000
34,600,000
43,000,000
32,000,000
15,000,000
10,000,000
10,000,000
25,200,000
60,000,000
350,000,000
10,000,000
20,000,000
10,000,000
16,000,000
39,000,000
24,800,000
40,400,000
34,600,000
43,000,000
32,000,000
15,000,000
10,000,000
10,000,000
5,000,000
—
309,800,000
Maturity Date
3/1/2021
3/1/2021
9/1/2021
3/1/2023
3/1/2024
3/1/2024
3/1/2027
9/1/2027
3/1/2028
9/1/2028
3/1/2030
9/1/2030
9/1/2030
3/1/2031
9/1/2031
Ending Balance
Credit Facility
Main Street maintains the Credit Facility to provide additional liquidity to support its investment and operational activities. As of
December 31, 2021 the Credit Facility included total commitments of $855.0 million from a diversified group of 18 lenders, held a maturity
date in April 2026 and contained an accordion feature which allowed Main Street to increase the total commitments under the facility to up
to $1,200.0 million from new and existing lenders on the same terms and conditions as the existing commitments.
As of December 31, 2021, borrowings under the Credit Facility bore interest, subject to Main Street’s election and resetting on
a monthly basis on the first of each month, on a per annum basis at a rate equal to the applicable LIBOR rate (0.1% as of the most recent
reset date for the period ended December 31, 2021) plus (i) 1.875% (or the applicable base rate (Prime Rate of 3.25% as of
December 31, 2021) plus 0.875%) as long as Main Street meets certain agreed upon excess collateral and maximum leverage requirements
or (ii) 2.0% (or the applicable base rate plus 1.0%) otherwise. Main Street pays unused commitment fees of 0.25% per annum on the
unused lender commitments under the Credit Facility. The Credit Facility is secured by a first lien on the assets of MSCC and its
subsidiaries, excluding the equity ownership or assets of the Funds and the External Investment Manager. As of December 31, 2021, the
Credit Facility contained certain affirmative and negative covenants, including but not limited to: (i) maintaining minimum liquidity,
(ii) maintaining an interest coverage ratio of at least 2.0 to 1.0, (iii) maintaining a 1940 Act asset coverage ratio of at least 1.5 to 1.0,
(iv) maintaining a minimum tangible net worth and (v) maintaining a minimum asset coverage ratio of 200% with respect to the
consolidated assets (with certain limitations on the contribution of equity in financing subsidiaries as specified therein) of MSCC and the
guarantors under the Credit Facility to the secured debt of MSCC and the guarantors.
As of December 31, 2021, the interest rate on the Credit Facility was 2.0% (based on the LIBOR rate of 0.1% as of the most recent
reset date plus 1.875%). The average interest rate for borrowings under the Credit Facility was 2.0% and 2.5% for the years ended
December 31, 2021 and 2020, respectively. As of December 31, 2021, Main Street was in compliance with all financial covenants of the
Credit Facility.
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4.50% Notes due 2022
In November 2017, Main Street issued $185.0 million in aggregate principal amount of 4.50% unsecured notes due December 1,
2022 (the “4.50% Notes”) at an issue price of 99.16%. The 4.50% Notes are unsecured obligations and rank pari passu with Main Street’s
current and future unsecured indebtedness; senior to any of its future indebtedness that expressly provides it is subordinated to the 4.50%
Notes; effectively subordinated to all of its existing and future secured indebtedness, to the extent of the value of the assets securing such
indebtedness, including borrowings under its Credit Facility; and structurally subordinated to all existing and future indebtedness and other
obligations of any of its subsidiaries, including without limitation, the indebtedness of the Funds. The 4.50% Notes may be redeemed in
whole or in part at any time at Main Street’s option subject to certain make-whole provisions. The 4.50% Notes bear interest at a rate of
4.50% per year payable semiannually on June 1 and December 1 of each year. The total net proceeds from the 4.50% Notes, resulting from
the issue price and after underwriting discounts and estimated offering expenses payable, were approximately $182.2 million. Main Street
may from time to time repurchase the 4.50% Notes in accordance with the 1940 Act and the rules promulgated thereunder.
The indenture governing the 4.50% Notes (the “4.50% Notes Indenture”) contains certain covenants, including covenants
requiring Main Street’s compliance with (regardless of whether Main Street is subject to) the asset coverage requirements set forth in
Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act, as well as covenants requiring Main Street to provide financial
information to the holders of the 4.50% Notes and the trustee if Main Street ceases to be subject to the reporting requirements of the
Exchange Act. These covenants are subject to limitations and exceptions that are described in the 4.50% Notes Indenture. As of
December 31, 2021, Main Street was in compliance with these covenants.
5.20% Notes due 2024
In April 2019, Main Street issued $250.0 million in aggregate principal amount of 5.20% unsecured notes due May 1, 2024 (the
“5.20% Notes”) at an issue price of 99.125%. Subsequently, in December 2019, Main Street issued an additional $75.0 million aggregate
principal amount of the 5.20% Notes at an issue price of 105.0% and, in July 2020, Main Street issued an additional $125.0 million
aggregate principal amount at an issue price of 102.674%. The 5.20% Notes issued in December 2019 and July 2020 have identical terms
as, and are a part of a single series with, the 5.20% Notes issued in April 2019. The 5.20% Notes are unsecured obligations and rank pari
passu with Main Street’s current and future unsecured indebtedness; senior to any of its future indebtedness that expressly provides it is
subordinated to the 5.20% Notes; effectively subordinated to all of its existing and future secured indebtedness, to the extent of the value of
the assets securing such indebtedness, including borrowings under its Credit Facility; and structurally subordinated to all existing and future
indebtedness and other obligations of any of its subsidiaries, including without limitation, the indebtedness of the Funds. The 5.20%
Notes may be redeemed in whole or in part at any time at Main Street’s option subject to certain make-whole provisions. The 5.20%
Notes bear interest at a rate of 5.20% per year payable semiannually on May 1 and November 1 of each year. The total net proceeds from
the 5.20% Notes, resulting from the issue price and after net issue price premiums and estimated offering expenses payable, were
approximately $451.4 million. Main Street may from time to time repurchase the 5.20% Notes in accordance with the 1940 Act and the
rules promulgated thereunder.
The indenture governing the 5.20% Notes (the “5.20% Notes Indenture”) contains certain covenants, including covenants
requiring Main Street’s compliance with (regardless of whether Main Street is subject to) the asset coverage requirements set forth in
Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act, as well as covenants requiring Main Street to provide financial
information to the holders of the 5.20% Notes and the trustee if Main Street ceases to be subject to the reporting requirements of the
Exchange Act. These covenants are subject to limitations and exceptions that are described in the 5.20% Notes Indenture. As of
December 31, 2021, Main Street was in compliance with these covenants.
3.00% Notes due 2026
In January 2021, Main Street issued $300.0 million in aggregate principal amount of 3.00% unsecured notes due July 14, 2026
(the “3.00% Notes”) at an issue price of 99.004%. Subsequently, in October 2021, Main Street issued
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an additional $200.0 million aggregate principal amount of the 3.00% Notes at an issue price of 101.741%. The 3.00% Notes issued in
October 2021 have identical terms as, and are a part of a single series with, the 3.00% Notes issued in January 2021. The 3.00% Notes are
unsecured obligations and rank pari passu with Main Street’s current and future unsecured indebtedness; senior to any of its future
indebtedness that expressly provides it is subordinated to the 3.00% Notes; effectively subordinated to all of its existing and future secured
indebtedness, to the extent of the value of the assets securing such indebtedness, including borrowings under its Credit Facility; and
structurally subordinated to all existing and future indebtedness and other obligations of any of its subsidiaries, including without limitation,
the indebtedness of the Funds. The 3.00% Notes may be redeemed in whole or in part at any time at Main Street’s option subject to certain
make-whole provisions. The 3.00% Notes bear interest at a rate of 3.00% per year payable semiannually on January 14 and July 14 of each
year. The total net proceeds from the 3.00% Notes, resulting from the issue price and after net issue price premiums and estimated offering
expenses payable, were approximately $498.3 million. Main Street may from time to time repurchase the 3.00% Notes in accordance with
the 1940 Act and the rules promulgated thereunder.
The indenture governing the 3.00% Notes (the “3.00% Notes Indenture”) contains certain covenants, including covenants
requiring Main Street’s compliance with (regardless of whether Main Street is subject to) the asset coverage requirements set forth in
Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act, as well as covenants requiring Main Street to provide financial
information to the holders of the 3.00% Notes and the trustee if Main Street ceases to be subject to the reporting requirements of the
Exchange Act. These covenants are subject to limitations and exceptions that are described in the 3.00% Notes Indenture. As of December
31, 2021, Main Street was in compliance with these covenants.
Contractual Payment Obligations
A summary of Main Street’s contractual payment obligations for the repayment of outstanding indebtedness at December 31, 2021
is as follows:
SBIC debentures
4.50% Notes due 2022
5.20% Notes due 2024
3.00% Notes due 2026
Credit Facility
Total
Senior Securities
2022
2023
$
185,000
—
—
—
$ 185,000
— $ 16,000
—
—
—
—
$ 16,000
2026
Thereafter
2024
63,800
$
2025
$ — $
450,000
— —
—
— —
— —
— $ 270,200
—
—
—
—
—
500,000
320,000
—
$ 270,200
$ — $ 820,000
$ 513,800
$
Total
350,000
185,000
450,000
500,000
320,000
$ 1,805,000
Information about Main Street’s senior securities is shown in the following table as of December 31 for the years indicated in the
table, unless otherwise noted.
Class and Year
SBIC Debentures
2012
2013
2014
2015
2016
2017
2018
Total Amount
Outstanding
Exclusive of
Treasury
Securities(1)
(dollars in
thousands)
Asset
Coverage
per Unit(2)
Involuntary
Liquidating
Preference
per Unit(3)
Average
Market Value
per Unit(4)
$
225,000
200,200
225,000
225,000
240,000
295,800
345,800
2,763
2,476
2,323
2,368
2,415
2,687
2,455
—
—
—
—
—
—
—
N/A
N/A
N/A
N/A
N/A
N/A
N/A
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Class and Year
2019
2020
2021
Credit Facility
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
6.125% Notes
2013
2014
2015
2016
2017
4.50% Notes Due 2019
2014
2015
2016
2017
2018
4.50% Notes Due 2022
2017
2018
2019
2020
2021
5.20% Notes Due 2024
2019
2020
2021
3.00% Notes Due 2026
2021
Asset
Coverage
per Unit(2)
Involuntary
Liquidating
Preference
per Unit(3)
Average
Market Value
per Unit(4)
Total Amount
Outstanding
Exclusive of
Treasury
Securities(1)
(dollars in
thousands)
311,800
309,800
350,000
$
$
$
$
$
132,000
237,000
218,000
291,000
343,000
64,000
301,000
300,000
269,000
320,000
90,882
90,823
90,738
90,655
90,655
175,000
175,000
175,000
175,000
175,000
185,000
185,000
185,000
185,000
185,000
325,000
450,000
450,000
2,363
2,244
1,985
2,763
2,476
2,323
2,368
2,415
2,687
2,455
2,363
2,244
1,985
2,476
2,323
2,368
2,415
2,687
2,323
2,368
2,415
2,687
2,455
2,687
2,455
2,363
2,244
1,985
2,363
2,244
1,985
$
500,000
1,985
—
—
—
—
—
—
—
—
—
—
—
—
—
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
— $
—
—
—
—
24.35
24.78
25.40
25.76
25.93
—
—
—
—
—
—
—
—
—
—
—
—
—
—
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
(1) Total amount of each class of senior securities outstanding at the end of the period
presented.
(2) Asset coverage per unit is the ratio of the carrying value of Main Street’s total consolidated assets, less all liabilities and indebtedness
not represented by senior securities, to the aggregate amount of senior securities representing indebtedness. Asset coverage per unit is
expressed in terms of dollar amounts per $1,000 of indebtedness.
(3) The amount to which such class of senior security would be entitled upon the involuntary liquidation of the issuer in preference to any
security junior to it. The “—” indicates information that the SEC expressly does not require to be disclosed for certain types of senior
securities.
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(4) Average market value per unit for the 6.125% Notes represents the average of the daily closing prices as reported on the NYSE during
the period presented. Average market value per unit for the SBIC debentures, Credit Facility, 4.50% Notes, 5.20% Notes and 3.00%
notes are not applicable because these are not registered for public trading.
NOTE F—FINANCIAL HIGHLIGHTS
Per Share Data:
NAV at the beginning of the period
Net investment income(1)
Net realized gain (loss) (1)(2)
Net unrealized appreciation (depreciation)(1)(2)
Income tax benefit (provision)(1)(2)
Net increase (decrease) in net assets resulting
from operations(1)
Dividends paid from net investment income
Distributions from capital gains
Dividends paid
Impact of the net change in monthly dividends
declared prior to the end of the period and paid
in the subsequent period
Accretive effect of stock offerings (issuing
shares above NAV per share)
Accretive effect of DRIP issuance (issuing
shares above NAV per share)
Other(3)
NAV at the end of the period
Market value at the end of the period
Shares outstanding at the end of the period
$
2021
$
22.35
2.65
0.66
1.97
(0.48)
4.80
2.58
—
(2.58)
(0.01)
0.58
Twelve Months Ended December 31,
2019
2020
2018
$
23.91
2.10
(1.77)
(0.09)
0.21
0.45
(2.46)
—
(2.46)
$
24.09
2.50
(0.33)
(0.09)
(0.02)
2.06
(2.91)
—
(2.91)
—
(0.01)
0.41
0.55
$
23.53
2.60
(0.03)
0.32
(0.09)
2.80
(2.69)
(0.16)
(2.85)
(0.01)
0.47
2017
22.10
2.39
0.19
0.86
(0.43)
3.01
(2.47)
(0.32)
(2.79)
(0.01)
1.07
0.09
0.06
25.29
44.86
70,737,021
$
$
0.08
(0.04)
22.35
32.26
67,762,032
$
$
0.12
0.01
23.91
43.11
64,252,937
$
$
0.09
0.06
24.09
33.81
61,264,861
$
$
0.06
0.09
23.53
39.73
58,660,680
$
$
160
Table of Contents
Per Share Data:
NAV at the beginning of the period
Net investment income(1)
Net realized gain (loss) (1)(2)
Net unrealized appreciation (depreciation)(1)(2)
Income tax benefit (provision)(1)(2)
Net increase (decrease) in net assets resulting from
operations(1)
Dividends paid from net investment income
Distributions from capital gains
Dividends paid
Impact of the net change in monthly dividends
declared prior to the end of the period and paid in
the subsequent period
Accretive effect of stock offerings (issuing shares
above NAV per share)
Accretive effect of DRIP issuance (issuing shares
above NAV per share)
Other(3)
NAV at the end of the period
Market value at the end of the period
Shares outstanding at the end of the period
$
$
2016
21.24
2.23
0.56
(0.14)
0.02
2.67
(1.99)
(0.74)
(2.73)
(0.01)
0.76
Twelve Months Ended December 31,
2014
2015
2013
$
20.85
2.18
(0.43)
0.20
0.18
2.13
(2.49)
(0.16)
(2.65)
(0.01)
0.74
19.89
2.20
0.53
(0.27)
(0.15)
2.31
(2.17)
(0.38)
(2.55)
(0.01)
1.07
$
$
18.59
2.06
0.07
0.52
—
2.65
(2.29)
(0.37)
(2.66)
(0.02)
1.13
2012
15.19
2.01
0.55
1.34
(0.37)
3.53
(1.17)
(0.54)
(1.71)
(0.02)
1.33
0.08
0.09
22.10
36.77
54,354,857
$
$
0.12
0.06
21.24
29.08
50,413,744
$
$
0.12
0.02
20.85
29.24
45,079,150
$
$
0.13
0.07
19.89
32.69
39,852,604
$
$
0.07
0.20
18.59
30.51
34,589,484
$
$
(1) Based on weighted-average number of common shares outstanding for the period.
(2) Net realized gains or losses, net unrealized appreciation or depreciation, and income taxes can fluctuate significantly from period to
(3)
period.
Includes the impact of the different share amounts as a result of calculating certain per share data based on the weighted-average basic
shares outstanding during the period and certain per share data based on the shares outstanding as of a period end or transaction date.
NAV at end of period
Average NAV
Average outstanding debt
Ratio of total expenses, including income tax
expense, to average NAV (1)
Ratio of operating expenses to average NAV (2)
Ratio of operating expenses, excluding interest
expense, to average NAV (2)
Ratio of net investment income to average NAV
Portfolio turnover ratio
Total investment return (3)
Total return based on change in NAV (4)
Year Ended December 31,
2021
2020
2019
2018
2017
$ 1,788,846
$ 1,626,585
$ 1,417,831
$ 1,514,767
$ 1,436,291
$ 1,152,108
(dollars in thousands)
$ 1,536,390
$ 1,517,615
$ 1,055,800
$ 1,476,049
$ 1,441,163
947,694
$
$ 1,380,368
$ 1,287,639
843,993
$
8.56 %
6.54 %
2.92 %
11.23 %
29.81 %
48.24 %
21.84 %
4.95 %
5.89 %
2.44 %
9.60 %
18.00 %
(19.11)%
1.91 %
5.75 %
5.67 %
2.36 %
10.37 %
18.86 %
36.86 %
8.78 %
5.75 %
5.32 %
2.30 %
10.87 %
29.13 %
(8.25) %
12.19 %
7.37 %
5.47 %
2.63 %
10.51 %
38.18 %
16.02 %
14.20 %
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Table of Contents
NAV at end of period
Average NAV
Average outstanding debt
Ratio of total expenses, including income tax expense, to
average NAV (1)
Ratio of operating expenses to average NAV (2)
Ratio of operating expenses, excluding interest expense,
to average NAV (2)
Ratio of net investment income to average NAV
Portfolio turnover ratio
Total investment return (3)
Total return based on change in NAV (4)
Year Ended December 31,
2016
2015
2014
2013
2012
(dollars in thousands)
$ 1,201,481
$ 1,118,567
801,048
$
$ 1,070,894
$ 1,053,313
759,396
$
$ 939,982
$ 885,568
$ 575,524
$ 792,533
$ 706,056
$ 444,331
$ 642,976
$ 512,156
$ 322,154
5.48 %
5.59 %
2.58 %
10.35 %
24.63 %
37.36 %
12.97 %
4.63 %
5.45 %
2.41 %
10.15 %
25.37 %
8.49 %
11.11 %
5.82 %
5.11 %
2.44 %
10.79 %
35.71 %
(3.09) %
12.71 %
5.82 %
5.82 %
2.95 %
10.68 %
36.10 %
16.68 %
15.06 %
8.18 %
6.07 %
3.03 %
11.57 %
56.22 %
53.60 %
25.73 %
(1) Total expenses are the sum of operating expenses and net income tax provision/benefit. Net income tax provision/benefit includes the
accrual of net deferred tax provision/benefit relating to the net unrealized appreciation/depreciation on portfolio investments held in
Taxable Subsidiaries and due to the change in the loss carryforwards, which are non-cash in nature and may vary significantly from
period to period. Main Street is required to include net deferred tax provision/benefit in calculating its total expenses even though these
net deferred taxes are not currently payable/receivable.
(2) Unless otherwise noted, operating expenses include interest, compensation, general and administrative and share-based compensation
expenses, net of expenses allocated to the External Investment Manager of $10.3 million, $7.4 million, $6.7 million, $6.8 million, $6.4
million, $5.1 million, $4.3 million and $2.0 million for the years ended December 31, 2021, 2020, 2019, 2018, 2017, 2016, 2015 and
2014. There were no expenses allocated to the External Investment Manager for the year ended December 31, 2013 and 2012.
(3) Total investment return is based on the purchase of stock at the current market price on the first day and a sale at the current market price
on the last day of each period reported on the table and assumes reinvestment of dividends at prices obtained by Main Street’s dividend
reinvestment plan during the period. The return does not reflect any sales load that may be paid by an investor.
(4) Total return is based on change in net asset value was calculated using the sum of ending net asset value plus dividends to stockholders
and other non-operating changes during the period, as divided by the beginning net asset value. Non-operating changes include any items
that affect net asset value other than the net increase in net assets resulting from operations, such as the effects of stock offerings, shares
issued under the DRIP and equity incentive plans and other miscellaneous items.
NOTE G—DIVIDENDS, DISTRIBUTIONS AND TAXABLE INCOME
Main Street currently pays monthly dividends to its stockholders. Future monthly dividends, if any, will be determined by its
Board of Directors on a quarterly basis. During 2021, Main Street paid regular monthly dividends of $0.205 per share for each month of
January through September 2021 and regular monthly dividends of $0.21 per share for each month of October through December 2021.
The 2021 regular monthly dividends, which total $170.2 million, or $2.475 per share, represent a 0.6% increase from the regular monthly
dividends paid totaling $161.1 million, or $2.46 per share, for the year ended 2020. During 2021, Main Street also paid a supplemental
dividend of $0.10 per share in December 2021.
For tax purposes, the 2021 dividends, which included the effects of dividends on an accrual basis, total $2.575 per share and were
comprised of (i) ordinary income totaling approximately $1.891 per share, and (ii) qualified dividend income totaling approximately $0.684
per share. As of December 31, 2021, Main Street estimates that it has generated undistributed taxable income of approximately $66.0
million, or $0.93 per share, that will be carried forward toward distributions to be paid in 2022.
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MSCC has elected to be treated for U.S. federal income tax purposes as a RIC. MSCC’s taxable income includes the taxable
income generated by MSCC and certain of its subsidiaries, including the Funds, which are treated as disregarded entities for tax purposes.
As a RIC, MSCC generally will not pay corporate-level U.S. federal income taxes on any net ordinary taxable income or capital gains that
MSCC distributes to its stockholders. MSCC must generally distribute at least 90% of its “investment company taxable income” (which is
generally its net ordinary taxable income and realized net short-term capital gains in excess of realized net long-term capital losses) and
90% of its tax-exempt income to maintain its RIC status (pass-through tax treatment for amounts distributed). As part of maintaining RIC
status, undistributed taxable income (subject to a 4% non-deductible U.S. federal excise tax) pertaining to a given fiscal year may be
distributed up to 12 months subsequent to the end of that fiscal year, provided such dividends are declared on or prior to the later of (i) filing
of the U.S. federal income tax return for the applicable fiscal year or (ii) the fifteenth day of the ninth month following the close of the year
in which such taxable income was generated.
The determination of the tax attributes for Main Street’s distributions is made annually, based upon its taxable income for the
full year and distributions paid for the full year. Therefore, a determination made on an interim basis may not be representative of the actual
tax attributes of distributions for a full year. Ordinary dividend distributions from a RIC do not qualify for the 20% maximum tax rate (plus
a 3.8% Medicare surtax, if applicable) on dividend income from domestic corporations and qualified foreign corporations, except to the
extent that the RIC received the income in the form of qualifying dividends from domestic corporations and qualified foreign corporations.
The tax attributes for distributions will generally include both ordinary income and qualified dividends, but may also include either one or
both of capital gains and return of capital. The tax character of distributions paid for the years ended December 31, 2021, 2020 and 2019
was as follows:
Ordinary income(1)
Qualified dividends
Distributions of long-term capital gains
Distributions on tax basis
Twelve Months Ended December 31,
2020
2019
2021
(dollars in thousands)
$ 135,128
12,398
—
$ 147,526
$ 166,280
15,451
1,858
$ 183,589
$ 129,625
47,202
—
$ 176,827
(1) The years ended December 31, 2021, 2020 and 2019 include $1.8 million, $1.5 million and $1.6 million, respectively, that was reported
for tax purposes as compensation for services in accordance with Section 83 of the Code.
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Listed below is a reconciliation of “Net increase (decrease) in net assets resulting from operations” to taxable income and to total
distributions declared to common stockholders for the years ended December 31, 2021, 2020 and 2019.
Year Ended December 31,
2021
(estimated, dollars in thousands)
2020
2019
Net increase (decrease) in net assets resulting from operations
Book-tax difference from share-based compensation expense
Net unrealized (appreciation) depreciation
Income tax provision (benefit)
Pre-tax book (income) loss not consolidated for tax purposes
Book income and tax income differences, including debt origination, structuring fees, dividends,
realized gains and changes in estimates
Estimated taxable income (1)
Taxable income earned in prior year and carried forward for distribution in current year
Taxable income earned prior to period end and carried forward for distribution next period
Dividend payable as of period end and paid in the following period
Total distributions accrued or paid to common stockholders
$ 330,762 $
(3,213)
(135,624)
32,863
(59,634)
29,383 $ 129,569
5,139
5,622
(13,541)
37,420
(354)
5,754
1,242
(30,690)
39,819
204,973
24,359
(65,994)
15,159
65,686
171,207
41,489
(42,281)
13,174
$ 178,497 $ 161,796 $ 183,589
93,025
157,048
29,107
(38,248)
13,889
(1) Main Street’s taxable income for each period is an estimate and will not be finally determined until the company files its tax return for
each year. Therefore, the final taxable income, and the taxable income earned in each period and carried forward for distribution in the
following period, may be different than this estimate.
The Taxable Subsidiaries primarily hold certain portfolio investments for Main Street. The Taxable Subsidiaries permit Main
Street to hold equity investments in portfolio companies which are “pass-through” entities for tax purposes and to continue to comply with
the “source-of-income” requirements contained in the RIC tax provisions of the Code. The Taxable Subsidiaries are consolidated with Main
Street for U.S. GAAP financial reporting purposes, and the portfolio investments held by the Taxable Subsidiaries are included in Main
Street’s consolidated financial statements as portfolio investments and recorded at fair value. The Taxable Subsidiaries are not consolidated
with MSCC for income tax purposes and may generate income tax expense, or benefit, and tax assets and liabilities, as a result of their
ownership of certain portfolio investments. The taxable income, or loss, of the Taxable Subsidiaries may differ from their book income, or
loss, due to temporary book and tax timing differences and permanent differences. The Taxable Subsidiaries are each taxed at their normal
corporate tax rates based on their taxable income. The income tax expense, or benefit, if any, and the related tax assets and liabilities, of the
Taxable Subsidiaries are reflected in Main Street’s consolidated financial statements.
The income tax expense (benefit) for Main Street is generally composed of (i) deferred tax expense (benefit), which is primarily
the result of the net activity relating to the portfolio investments held in the Taxable Subsidiaries, including changes in loss carryforwards,
changes in net unrealized appreciation or depreciation and other temporary book tax differences, and (ii) current tax expense, which is
primarily the result of current U.S. federal income and state taxes and excise taxes on Main Street’s estimated undistributed taxable income.
The income tax expense, or benefit, and the related tax assets and liabilities generated by the Taxable Subsidiaries, if any, are reflected in
Main Street’s
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consolidated statement of operations. Main Street’s provision for income taxes was comprised of the following for the years ended
December 31, 2021, 2020 and 2019 (amounts in thousands):
Current tax expense (benefit):
Federal
State
Excise
Total current tax expense (benefit)
Deferred tax expense (benefit):
Federal
State
Total deferred tax expense (benefit)
Total income tax provision (benefit)
Twelve Months Ended
December 31,
2020
2021
2019
$
$
$
(235)
3,377
2,590
5,732
497
(1,554)
1,647
590
23,205
3,926
27,131
(13,082)
(1,049)
(14,131)
1,019
1,408
1,119
3,546
(1,267)
(1,037)
(2,304)
$
32,863
$
(13,541)
$
1,242
MSCC operates in a manner to maintain its RIC status and to eliminate corporate-level U.S. federal income tax (other than the 4%
excise tax) by distributing sufficient investment company taxable income and long-term capital gains. As a result, MSCC will have an
effective tax rate equal to 0% before the excise tax and income taxes incurred by the Taxable Subsidiaries. As such, a reconciliation of the
differences between Main Street’s reported income tax expense and its tax expense at the federal statutory rate of 21% is not meaningful.
As of December 31, 2021, the cost of investments for U.S. federal income tax purposes was $3,256.5 million, with such
investments having a gross unrealized appreciation of $559.9 million and gross unrealized depreciation of $253.6 million.
Management believes that the realization of the deferred tax assets is more likely than not based on expectations as to future
taxable income and scheduled reversals of temporary differences. Accordingly, Main Street did not record a valuation allowance related to
its deferred tax assets at December 31, 2021 and 2020. The following table sets forth the significant components of net deferred tax assets
and liabilities as of December 31, 2021 and 2020 (amounts in thousands):
Deferred tax assets:
Net operating loss carryforwards
Interest expense carryforwards
Capital loss carryforwards
Other
Total deferred tax assets
Deferred tax liabilities:
Net unrealized appreciation of portfolio investments
Net basis differences in portfolio investments
Total deferred tax liabilities
Total deferred tax asset (liabilities), net
Years Ended
December 31,
2021
2020
$
$
34,102
11,283
—
2,809
48,194
(49,658)
(28,259)
(77,917)
(29,723)
$
$
41,691
9,779
929
2,315
54,714
(28,351)
(28,955)
(57,306)
(2,592)
The net deferred tax liability at December 31, 2021 and 2020 was $29.7 million and $2.6 million, respectively, with the change
primarily related to changes in net unrealized appreciation or depreciation, changes in loss carryforwards, and other temporary book-tax
differences relating to portfolio investments held by the Taxable Subsidiaries. At December 31, 2021, for U.S. federal income tax purposes,
the Taxable Subsidiaries had a net operating loss carryforward from prior years which, if unused, will expire in various taxable years from
2034 through 2037. Any
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net operating losses generated in 2018 and future periods are not subject to expiration and will carryforward indefinitely until utilized. The
Taxable Subsidiaries have interest expense limitation carryforwards which have an indefinite carryforward. In addition, as of
December 31, 2021, for U.S. federal income tax purposes at the RIC level, MSCC had net capital loss carryforwards totaling approximately
$67.7 million available to offset future capital gains, to the extent available and permitted by U.S. federal income tax law. However, as long
as MSCC maintains its RIC status, any capital loss carryforwards at the RIC are not subject to a federal income tax-effect and are not
subject to an expiration date.
NOTE H—COMMON STOCK
Main Street maintains a program with certain selling agents through which it can sell shares of its common stock by means of at-
the-market offerings from time to time (the “ATM Program”).
During the year ended December 31, 2021, Main Street sold 2,332,795 shares of its common stock at a weighted-average price of
$42.71 per share and raised $99.6 million of gross proceeds under the ATM Program. Net proceeds were $98.4 million after commissions
to the selling agents on shares sold and offering costs. As of December 31, 2021, sales transactions representing 36,136 shares had not
settled and are not included in shares issued and outstanding on the face of the consolidated balance sheet, but are included in the weighted-
average shares outstanding in the consolidated statement of operations and in the shares used to calculate net asset value per share. As of
December 31, 2021, 3,380,577 shares remained available for sale under the ATM Program.
During the year ended December 31, 2020, Main Street sold 2,645,778 shares of its common stock at a weighted-average price of
$32.10 per share and raised $84.9 million of gross proceeds under the ATM Program. Net proceeds were $83.8 million after commissions
to the selling agents on shares sold and offering costs.
During the year ended December 31, 2019, Main Street sold 2,247,187 shares of its common stock at a weighted-average price of
$40.05 per share and raised $90.0 million of gross proceeds under the ATM Program. Net proceeds were $88.8 million after commissions
to the selling agents on shares sold and offering costs.
NOTE I—DIVIDEND REINVESTMENT PLAN
The dividend reinvestment feature of Main Street’s dividend reinvestment and direct stock purchase plan (the “DRIP”) provides
for the reinvestment of dividends on behalf of its stockholders, unless a stockholder has elected to receive dividends in cash. As a result, if
Main Street declares a cash dividend, its stockholders who have not “opted out” of the DRIP by the dividend record date will have their
cash dividend automatically reinvested into additional shares of MSCC common stock. The share requirements of the DRIP may be
satisfied through the issuance of shares of common stock or through open market purchases of common stock by the DRIP plan
administrator. Newly issued shares will be valued based upon the final closing price of MSCC’s common stock on the valuation date
determined for each dividend by Main Street’s Board of Directors. Shares purchased in the open market to satisfy the DRIP requirements
will be valued based upon the average price of the applicable shares purchased, before any associated brokerage or other costs. Main
Street’s DRIP is administered by its transfer agent on behalf of Main Street’s record holders and participating brokerage firms. Brokerage
firms and other financial intermediaries may decide not to participate in Main Street’s DRIP but may provide a similar dividend
reinvestment plan for their clients.
Summarized DRIP information for the years ended December 31, 2021, 2020 and 2019 is as follows:
DRIP participation
Shares issued for DRIP
166
2021
December 31,
2020
($ in millions)
2019
$
16.3 $
16.2 $
404,384
517,796
18.1
441,927
Table of Contents
NOTE J—SHARE-BASED COMPENSATION
Main Street accounts for its share-based compensation plans using the fair value method, as prescribed by ASC 718,
Compensation—Stock Compensation. Accordingly, for restricted stock awards, Main Street measured the grant date fair value based upon
the market price of its common stock on the date of the grant and amortizes the fair value of the awards as share-based compensation
expense over the requisite service period, which is generally the vesting term.
Main Street’s Board of Directors approves the issuance of shares of restricted stock to Main Street employees pursuant to the
Main Street Capital Corporation 2015 Equity and Incentive Plan (the “Equity and Incentive Plan”). These shares generally vest over a
three-year period from the grant date. The fair value is expensed over the service period, starting on the grant date. The following table
summarizes the restricted stock issuances approved by Main Street’s Board of Directors under the Equity and Incentive Plan, net of shares
forfeited, if any, and the remaining shares of restricted stock available for issuance as of December 31, 2021.
Restricted stock authorized under the plan
Less net restricted stock granted during:
Year ended December 31, 2015
Year ended December 31, 2016
Year ended December 31, 2017
Year ended December 31, 2018
Year ended December 31, 2019
Year ended December 31, 2020
Year ended December 31, 2021
Restricted stock available for issuance as of December 31, 2021
3,000,000
(900)
(260,514)
(223,812)
(243,779)
(384,049)
(370,272)
(332,143)
1,184,531
As of December 31, 2021, the following table summarizes the restricted stock issued to Main Street’s non-employee directors and
the remaining shares of restricted stock available for issuance pursuant to the Main Street Capital Corporation 2015 Non-Employee
Director Restricted Stock Plan. These shares are granted upon appointment or election to the board and vest on the day immediately
preceding the annual meeting of stockholders following the respective grant date and are expensed over such service period.
Restricted stock authorized under the plan
Less net restricted stock granted during:
Year ended December 31, 2015
Year ended December 31, 2016
Year ended December 31, 2017
Year ended December 31, 2018
Year ended December 31, 2019
Year ended December 31, 2020
Year ended December 31, 2021
Restricted stock available for issuance as of December 31, 2021
300,000
(6,806)
(6,748)
(5,948)
(6,376)
(6,008)
(11,463)
(4,949)
251,702
For the years ended December 31, 2021, 2020 and 2019, Main Street recognized total share-based compensation expense of
$10.9 million, $10.8 million and $10.1 million, respectively, related to the restricted stock issued to Main Street employees and non-
employee directors.
As of December 31, 2021, there was $14.3 million of total unrecognized compensation expense related to Main Street’s non-
vested restricted shares. This compensation expense is expected to be recognized over a remaining weighted-average period of
approximately 1.8 years as of December 31, 2021.
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NOTE K—COMMITMENTS AND CONTINGENCIES
At December 31, 2021, Main Street had the following outstanding commitments (in thousands):
Investments with equity capital commitments that have not yet funded:
Amount
Congruent Credit Opportunities Fund III, LP
Encap Energy Fund Investments
EnCap Energy Capital Fund IX, L.P.
EnCap Energy Capital Fund X, L.P.
EnCap Flatrock Midstream Fund II, L.P.
EnCap Flatrock Midstream Fund III, L.P.
MS Private Loan Fund I, LP
EIG Fund Investments
Brightwood Capital Fund Investments
Brightwood Capital Fund III, LP
Brightwood Capital Fund V, LP
Freeport Fund Investments
Freeport Financial SBIC Fund LP
Freeport First Lien Loan Fund III LP
LKCM Headwater Investments I, L.P.
UnionRock Energy Fund II, LP
HPEP 3, L.P.
Dos Rios Partners
Dos Rios Partners, LP
Dos Rios Partners - A, LP
Total Equity Commitments
168
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
8,117
216
748
4,586
365
5,915
7,500
3,701
3,000
4,000
7,000
1,375
4,871
6,246
2,500
1,039
1,555
835
265
1,100
44,673
Table of Contents
Investments with commitments to fund revolving loans that have not been fully drawn or term loans with additional commitments not yet
funded:
Amount
Xenon Arc, Inc.
JTI Electrical & Mechanical, LLC
NinjaTrader, LLC
Watterson Brands, LLC
NWN Corporation
South Coast Terminals Holdings, LLC
SI East, LLC
Bolder Panther Group, LLC
Pearl Meyer Topco LLC
ArborWorks, LLC
Robbins Bros. Jewelry, Inc.
Event Holdco, LLC
Winter Services LLC
Classic H&G Holdco, LLC
Roof Opco, LLC
Direct Marketing Solutions, Inc.
Rug Doctor, LLC
MB2 Dental Solutions, LLC
Cody Pools, Inc.
Infolinks Media Buyco, LLC
AVEX Aviation Holdings, LLC
Nebraska Vet AcquireCo, LLC
Superior Rigging & Erecting Co.
Klein Hersh, LLC
IG Parent Corporation
Computer Data Source, LLC
KMS, LLC
SIB Holdings, LLC
RTIC Subsidiary Holdings, LLC
Mako Steel, LP
Fortna, Inc.
VVS Holdco, LLC
Burning Glass Intermediate Holding Company, Inc.
Evergreen North America Acquisitions, LLC
MS Private Loan Fund I, LP
Career Team Acquireco LLC
Johnson Downie Opco, LLC
Eastern Wholesale Fence LLC
The Affiliati Network, LLC
Colonial Electric Company LLC
Market Force Information, LLC
Chamberlin Holding LLC
Flame King Holdings, LLC
Trantech Radiator Topco, LLC
GS HVAM Intermediate, LLC
Hawk Ridge Systems, LLC
GRT Rubber Technologies LLC
Interface Security Systems, L.L.C
RA Outdoors LLC
PPL RVs, Inc.
Project Eagle Holdings, LLC
Gamber-Johnson Holdings, LLC
Invincible Boat Company, LLC.
CompareNetworks Topco, LLC
American Health Staffing Group, Inc.
Mystic Logistics Holdings, LLC
Project BarFly, LLC
DTE Enterprises, LLC
Student Resource Center, LLC
Orttech Holdings, LLC
ASC Interests, LLC
Jensen Jewelers of Idaho, LLC
PT Network, LLC
169
$
32,400
8,421
7,472
7,374
6,716
5,433
5,250
5,000
5,000
4,818
4,500
4,308
4,167
4,000
3,889
3,400
3,270
3,120
2,950
2,520
2,520
2,500
2,500
2,500
2,500
2,250
2,171
2,124
2,055
2,049
2,027
2,000
1,859
1,854
1,849
1,800
1,800
1,747
1,720
1,600
1,600
1,600
1,600
1,600
1,591
1,415
1,340
1,312
1,278
1,250
1,250
1,200
1,080
1,000
933
800
760
750
750
625
500
500
460
Table of Contents
Investments with commitments to fund revolving loans that have not been fully drawn or term loans with additional commitments not yet
funded:
Wall Street Prep, Inc.
American Nuts, LLC
Dynamic Communities, LLC
Acousti Engineering Company of Florida
Total Loan Commitments
Total Commitments
Amount
400
281
250
53
$
$
191,611
236,284
Main Street will fund its unfunded commitments from the same sources it uses to fund its investment commitments that are funded
at the time they are made (which are typically through existing cash and cash equivalents and borrowings under the Credit Facility). Main
Street follows a process to manage its liquidity and ensure that it has available capital to fund its unfunded commitments as necessary. The
Company had total unrealized depreciation of $0.1 million on the outstanding unfunded commitments as of December 31, 2021.
Effective January 1, 2019, ASC 842 required that a lessee evaluate its leases to determine whether they should be classified as
operating or financing leases. Main Street identified one operating lease for its office space. The lease commenced May 15, 2017 and
expires January 31, 2028. It contains two five-year extension options for a final expiration date of January 31, 2038.
As Main Street classified this lease as an operating lease prior to implementation, ASC 842-10-65-1 indicates that a right-of-use
asset and lease liability should be recorded based on the effective date. Main Street adopted ASC 842 effective January 1, 2019 and
recorded a right-of-use asset and a lease liability as of that date. After this date, Main Street has recorded lease expense on a straight-line
basis, consistent with the accounting treatment for lease expense prior to the adoption of ASC 842.
Total operating lease cost incurred by Main Street for each of the years ended December 31, 2021, 2020 and 2019 was $0.7
million. As of December 31, 2021, the asset related to the operating lease was $3.8 million and is included in the interest receivable and
other assets balance on the consolidated balance sheet. The lease liability was $4.4 million and is included in the accounts payable and other
liabilities balance on the consolidated balance sheet. As of December 31, 2021, the remaining lease term was 6.1 years and the discount rate
was 4.2%.
The following table shows future minimum payments under Main Street’s operating lease as of December 31, 2021 (in
thousands):
For the Years Ended December 31,
2022
2023
2024
2025
2026
Thereafter
Total
$
$
Amount
790
804
818
832
846
933
5,023
Main Street may, from time to time, be involved in litigation arising out of its operations in the normal course of business or
otherwise. Furthermore, third parties may try to impose liability on Main Street in connection with the activities of its portfolio companies.
While the outcome of any current legal proceedings cannot at this time be predicted with certainty, Main Street does not expect any current
matters will materially affect its financial condition or results of operations; however, there can be no assurance whether any pending legal
proceedings will have a material adverse effect on Main Street’s financial condition or results of operations in any future reporting period.
170
Table of Contents
NOTE L – SELECTED QUARTERLY DATA (UNAUDITED)
Total investment income
Net investment income
Net increase in net assets resulting from operations
Net investment income per share — basic and diluted
Net increase in net assets resulting from operations per share — basic and diluted
Total investment income
Net investment income
Net increase in net assets resulting from operations
Net investment income per share — basic and diluted
Net increase in net assets resulting from operations per share — basic and diluted
Total investment income
Net investment income
Net increase in net assets resulting from operations
Net investment income per share — basic and diluted
Net increase in net assets resulting from operations per share — basic and diluted
NOTE M—RELATED PARTY TRANSACTIONS
2021
(dollars in thousands,
except per share amounts)
Qtr. 3
Qtr. 2
67,294
42,395
95,110
0.62
1.39
$
$
$
$
$
76,779
49,304
83,956
0.71
1.22
2020
(dollars in thousands,
except per share amounts)
Qtr. 2
Qtr. 3
52,007
31,294
43,369
0.48
0.66
$
$
$
$
$
51,954
30,462
78,195
0.46
1.18
2019
(dollars in thousands,
except per share amounts)
Qtr. 2
Qtr. 3
61,293
39,617
38,254
0.63
0.61
$
$
$
$
$
60,068
39,012
33,902
0.62
0.54
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
Qtr. 1
62,807
39,757
57,346
0.58
0.84
Qtr. 1
56,150
36,545
(171,438)
0.57
(2.66)
Qtr. 1
61,365
39,491
41,401
0.64
0.67
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
Qtr. 4
82,167
51,209
94,350
0.73
1.34
Qtr. 4
62,503
39,644
79,257
0.59
1.19
Qtr. 4
60,649
39,247
16,014
0.62
0.25
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
As discussed further in Note D, the External Investment Manager is treated as a wholly owned portfolio company of MSCC and is
included as part of Main Street’s Investment Portfolio. At December 31, 2021, Main Street had a receivable of approximately $5.6 million
due from the External Investment Manager, which included (i) approximately $3.3 million related primarily to operating expenses incurred
by MSCC or its subsidiaries as required to support the External Investment Manager’s business and amounts due from the External
Investment Manager to Main Street under a tax sharing agreement (see further discussion in Note D) and (ii) approximately $2.3 million of
dividends declared but not paid by the External Investment Manager. MSCC has entered into an agreement with the External Investment
Manager to share employees in connection with its asset management business generally, and specifically for the External Investment
Manager’s relationship with MSC Income and its other clients (see further discussion in Note A.1 and Note D).
From time to time, Main Street may make investments in clients of the External Investment Manager in the form of debt or equity
capital on terms approved by Main Street’s Board of Directors. In January 2021, Main Street entered into a Term Loan Agreement with
MSC Income (the “Term Loan Agreement”). The Term Loan Agreement was unanimously approved by Main Street’s Board, including
each director who is not an “interested person,” as such term is defined in Section 2(a)(19) of the 1940 Act, and the board of directors of
MSC Income, including each director who is not an “interested person” of MSC Income or the External Investment Manager. The Term
Loan Agreement initially provided for a term loan of $40.0 million to MSC Income, bearing interest at a fixed rate of 5.00% per annum,
and maturing in January 2026. The Term Loan Agreement was amended in July 2021 to provide for borrowings up to an additional $35.0
million, $20.0 million of which was funded upon signing of the amendment and $15.0 million available in two additional advances during
the six months following the amendment date. Borrowings under the Term Loan Agreement are expressly subordinated and junior in right
of payment to all secured indebtedness of MSC Income. In
171
Table of Contents
October 2021, MSC Income fully repaid all borrowings outstanding under the Term Loan Agreement and the Term Loan Agreement was
terminated.
In December 2020, the External Investment Manager entered into an Investment Management Agreement with the Private Loan
Fund to provide investment advisory and management services in exchange for an asset-based fee and certain incentive fees. The Private
Loan Fund is a private investment fund exempt from registration under the 1940 Act that co-invests with Main Street in Main Street’s
Private Loan investment strategy. In connection with the Private Loan Fund’s initial closing in December 2020, Main Street committed to
contribute up to $10.0 million as a limited partner and will be entitled to distributions on such interest. In addition, certain of Main Street’s
officers and employees (and certain of their immediate family members) have made capital commitments to the Private Loan Fund as
limited partners and therefore have direct pecuniary interests in the Private Loan Fund. As of December 31, 2021, Main Street has funded
approximately $2.5 million of its limited partner commitment and Main Street’s unfunded commitment was approximately $7.5 million. In
February 2022, Main Street increased its commitment to the Private Loan Fund from $10.0 million to $15.0 million. Main Street’s limited
partner commitment to the Private Loan Fund was unanimously approved by the Board, including each director who is not an “interested
person,” as such term is defined in Section 2(a)(19) of the 1940 Act.
Additionally, Main Street provided the Private Loan Fund with a revolving line of credit pursuant to an Unsecured Revolving
Promissory Note, dated February 5, 2021 and as amended November 30, 2021 and December 29, 2021 (as amended, the “Private Loan
Fund Loan”), in an aggregate amount equal to the amount of limited partner capital commitments to the Private Loan Fund up to $85.0
million. Borrowings under the Private Loan Fund Loan bore interest at a fixed rate of 5.00% per annum and matured on February 28, 2022.
The Private Loan Fund Loan was unanimously approved by Main Street’s Board, including each director who is not an “interested person,”
as such term is defined in Section 2(a)(19) of the 1940 Act. As of December 31, 2021, there were $63.2 million of borrowings outstanding
under the Private Loan Fund Loan. In February 2022, the Private Loan Fund fully repaid all borrowings outstanding under the Private Loan
Fund Loan and the Private Loan Fund Loan was terminated.
In November 2015, Main Street’s Board of Directors approved and adopted the Main Street Capital Corporation Deferred
Compensation Plan (the “2015 Deferred Compensation Plan”). The 2015 Deferred Compensation Plan became effective on January 1, 2016
and replaced the Deferred Compensation Plan for Non-Employee Directors previously adopted by the Board of Directors in June 2013 (the
“2013 Deferred Compensation Plan”). Under the 2015 Deferred Compensation Plan, non-employee directors and certain key employees
may defer receipt of some or all of their cash compensation and directors’ fees, subject to certain limitations. Individuals participating in the
2015 Deferred Compensation Plan receive distributions of their respective balances based on predetermined payout schedules or other
events as defined by the plan and are also able to direct investments made on their behalf among investment alternatives permitted from
time to time under the plan, including phantom Main Street stock units. As of December 31, 2021, $15.8 million of compensation and
dividend reinvestments, plus net unrealized gains and losses and investment income and minus distributions had been deferred under the
2015 Deferred Compensation Plan (including amounts previously deferred under the 2013 Deferred Compensation Plan). Of this amount,
$7.3 million had been deferred into phantom Main Street stock units, representing 162,040 shares of Main Street’s common stock. Any
amounts deferred under the plan represented by phantom Main Street stock units will not be issued or included as outstanding on the
consolidated statements of changes in net assets until such shares are actually distributed to the participant in accordance with the plan, but
the related phantom stock units are included in weighted-average shares outstanding with the related dollar amount of the deferral included
in total expenses in Main Street’s consolidated statements of operations as earned. The dividend amounts related to additional phantom
stock units are included in the statements of changes in net assets as an increase to dividends to stockholders offset by a corresponding
increase to additional paid-in capital.
NOTE N—SUBSEQUENT EVENTS
In February 2022, Main Street declared a supplemental cash dividend of $0.075 per share payable in March 2022. This
supplemental cash dividend is in addition to the previously announced regular monthly cash dividends that Main Street declared for the first
quarter of 2022 of $0.215 per share for each of January, February and March 2022.
172
Table of Contents
During February 2022, Main Street declared regular monthly dividends of $0.215 per share for each month of April, May and
June 2022. These regular monthly dividends equal a total of $0.645 per share for the second quarter of 2022, representing a 4.9% increase
from the regular monthly dividends declared for the second quarter of 2021. Including the supplemental dividends declared for March 2022
and the regular monthly dividends declared for the first quarter and second quarter of 2022, Main Street will have paid $33.540 per share in
cumulative dividends since its October 2007 initial public offering.
On February 23, 2022, Main Street’s Board of Directors unanimously approved the application to the Company of the 150%
minimum asset coverage ratio set forth in Section 61(a)(2) of the 1940 Act. As a result, the minimum asset coverage ratio applicable to the
Company will be reduced from 200% to 150%, effective as of February 23, 2023, unless approved earlier by a vote of Main Street’s
stockholders, in which case the 150% minimum asset coverage ratio will be effective on the day after such approval. The Main Street Board
also authorized the submission of a proposal for stockholders to accelerate the application of the 150% minimum asset coverage ratio to the
Company at Main Street’s 2022 Annual Meeting of Stockholders.
173
Table of Contents
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
Main Street Capital Corporation
Opinion on financial statement schedule
We have audited in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”) the consolidated financial statements of Main Street Capital Corporation and subsidiaries (the “Company”) referred to in our
report dated February 25, 2022, which is included in the annual report on the Form 10-K. Our audits of the consolidated financial
statements also included the audit of the consolidated financial statement schedule for the years ended December 31, 2021 and 2020, listed
in the index appearing under Item 15(2). In our opinion, this consolidated financial statement schedule, when considered in relation to the
consolidated financial statements as a whole, present fairly, in all material respects, the information set forth therein.
Basis for opinion
This consolidated financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express
an opinion on the Company’s consolidated financial statement schedule based on our audits. We are a public accounting firm registered
with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
/s/ GRANT THORNTON LLP
Houston, Texas
February 25, 2022
174
Table of Contents
Company
Majority‑owned investments
ASK (Analytical Systems Keco Holdings, LLC)
Brewer Crane Holdings, LLC
Café Brazil, LLC
California Splendor Holdings LLC
Clad-Rex Steel, LLC
CMS Minerals Investments
Cody Pools, Inc.
CompareNetworks Topco, LLC
Datacom, LLC
Direct Marketing Solutions, Inc.
Gamber-Johnson Holdings, LLC
GRT Rubber Technologies LLC
Jensen Jewelers of Idaho, LLC
Kickhaefer Manufacturing Company, LLC
Market Force Information, LLC
MH Corbin Holding LLC
MSC Adviser I, LLC
Mystic Logistics Holdings, LLC
OMi Holdings, Inc.
PPL RVs, Inc.
Principle Environmental, LLC
Quality Lease Service, LLC
Robbins Bros. Jewelry, Inc.
Trantech Radiator Topco, LLC
Ziegler’s NYPD, LLC
Other controlled investments
2717 MH, L.P.
Schedule 12-14
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments In and Advances to Affiliates
December 31, 2021
(dollars in thousands)
Investment(1)(10)(11)
Geography Gain/(Loss)
Amount of
Realized
Amount of
Interest,
Fees or
Dividends
Credited to
Income(2)
Amount of
Unrealized
Gain/(Loss)
December 31,
2020
Fair Value
Gross
Gross
December 31,
2021
Additions(3) Reductions(4) Fair Value
12.00% (L+10.00%, Floor
2.00%) Secured Debt
Preferred Member Units
Warrants
11.00% (L+10.00%, Floor
1.00%) Secured Debt
Preferred Member Units
Member Units
11.00% (L+10.00%, Floor
1.00%) Secured Debt
Preferred Member Units
10.00% Secured Debt
10.50% (L+9.50%, Floor 1.00%)
Secured Debt
Member Units
Member Units
12.25% (L+10.50%, Floor
1.75%) Secured Debt
Preferred Member Units
10.00% (L+9.00%, Floor 1.00%)
Secured Debt
Preferred Member Units
5.00% Secured Debt
8.00% Secured Debt
Preferred Member Units
12.00% (L+11.00%, Floor
1.00%) Secured Debt
Preferred Stock
9.50% (L+7.50%, Floor 2.00%)
Secured Debt
Member Units
8.10% (L+8.00%) Secured Debt
Member Units
10.00% (Prime+6.75%, Floor
2.00%) Secured Debt
10.00% (Prime+6.75%, Floor
2.00%) Secured Debt
Member Units
11.50% Secured Debt
9.00% Secured Debt
Member Units
12.00% (L+11.00%, Floor
1.00%) Secured Debt
12.00% PIK Secured Debt
13.00% Secured Debt
Preferred Member Units
Member Units
12.00% Secured Debt
Common Stock
12.00% Secured Debt
Preferred Member Units
7.50% (L+7.00%, Floor 0.50%)
Secured Debt
Common Stock
13.00% Secured Debt
Common Stock
Preferred Member Units
Warrants
Member Units
12.00% (L+11.00%, Floor
1.00%) Secured Debt
Preferred Equity
12.00% Secured Debt
Common Stock
12.00% Secured Debt
14.00% Secured Debt
6.50% Secured Debt
Preferred Member Units
LP Interests (2717 HPP-MS,
L.P.)
(8)
(8)
(8)
(9)
(9)
(8)
(9)
(9)
(5)
(5)
(5)
(9)
(8)
(8)
(9)
(9)
(8)
(8)
(8)
(9)
(9)
(5)
(5)
(8)
(8)
(9)
(9)
(9)
(5)
(5)
(5)
(9)
(9)
(5)
(5)
(8)
(6)
(6)
(8)
(8)
(8)
(8)
(8)
(8)
(8)
(8)
(7)
(9)
(9)
(7)
(7)
(8)
(8)
(8)
(8)
(8)
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(3,601)
(7,324)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
175
$
$
-
(733)
(10)
-
1,860
540
36
7,034
-
-
1,640
691
242
32,700
(18)
5,220
(628)
2,130
7,324
137
(1,030)
32
(5,638)
213
1,290
(13)
-
4,800
-
-
1,370
-
(4,626)
(2,059)
(2,370)
23,638
1
(150)
169
(170)
(25)
2,860
(62)
(490)
(449)
330
(461)
-
-
49
2,630
-
-
21
350
$
691
-
-
940
927
1,012
3,381
1,505
110
1,167
2,391
50
2,357
3,100
777
474
793
1
-
2,034
672
2,019
3,921
1,786
4,264
313
3
1,937
2,526
354
92
387
-
1,137
-
6,216
820
1,271
1,109
1,578
957
555
929
-
-
-
-
621
-
1,084
116
76
390
66
-
$
4,873
3,200
10
8,513
5,850
2,030
35,833
14,496
1,100
10,853
9,140
1,624
14,216
14,940
7,954
6,780
-
12,146
-
15,006
19,380
19,838
52,490
16,775
44,900
3,400
-
7,620
22,269
3,909
13,400
1,600
13,562
8,280
2,370
116,760
6,723
8,990
-
20,380
11,806
11,500
6,397
-
10,500
870
4,460
-
-
8,644
6,030
625
2,750
979
1,780
153
4,894
-
20
1,860
540
211
8,289
-
(52)
1,640
691
32,737
32,700
18
5,220
8,404
2,130
9,934
9,512
-
1,761
2,848
22,110
1,290
13
-
4,800
55
-
1,370
1,800
-
34
-
23,640
10
-
18,000
-
801
2,860
2,938
1,200
1,109
330
-
35,956
11,070
68
2,630
-
-
21
350
$
$
290
3,200
10
496
-
-
8,129
-
29
400
-
341
4,469
-
1,495
-
736
14,276
7,324
470
1,030
1
5,638
-
-
863
-
-
2,000
33
-
-
4,626
2,380
2,370
-
355
150
-
170
225
-
2,062
490
449
1,200
2,312
-
-
-
-
-
-
-
-
4,736
4,894
-
8,037
7,710
2,570
27,915
22,785
1,071
10,401
10,780
1,974
42,484
47,640
6,477
12,000
7,668
-
2,610
24,048
18,350
21,598
49,700
38,885
46,190
2,550
-
12,420
20,324
3,876
14,770
3,400
8,936
5,934
-
140,400
6,378
8,840
18,000
20,210
12,382
14,360
7,273
710
11,160
-
2,148
35,956
11,070
8,712
8,660
625
2,750
1,000
2,130
-
-
250
-
250
-
Table of Contents
ASC Interests, LLC
ATS Workholding, LLC
Barfly Ventures, LLC
Bolder Panther Group, LLC
Bond-Coat, Inc.
Bridge Capital Solutions Corporation
CBT Nuggets, LLC
Centre Technologies Holdings, LLC
Chamberlin Holding LLC
Charps, LLC
Colonial Electric Company LLC
Copper Trail Energy Fund I, LP - CTMH
Digital Products Holdings LLC
Garreco, LLC
Gulf Manufacturing, LLC
Gulf Publishing Holdings, LLC
Harrison Hydra-Gen, Ltd.
J&J Services, Inc.
Johnson Downie Opco, LLC
KBK Industries, LLC
MS Private Loan Fund
MSC Income Fund Inc.
NAPCO Precast, LLC
Nebraska Vet AcquireCo, LLC (NVS)
NexRev LLC
NRI Clinical Research, LLC
NRP Jones, LLC
NuStep, LLC
Orttech Holdings, LLC
Pearl Meyer Topco LLC
Pegasus Research Group, LLC
River Aggregates, LLC
Tedder Industries, LLC
UnionRock Energy Fund II, LP
Vision Interests, Inc.
VVS Holdco LLC
Other
Amounts related to investments transferred to or
from other 1940 Act classification during the
period
Total Control investments
Affiliate Investments
AAC Holdings, Inc.
LP Interests (2717 MH, L.P.)
13.00% Secured Debt
Member Units
5.00% Secured Debt
7.00% Secured Debt
Member Units
10.50% (L+9.00%, Floor 1.50%)
Secured Debt
Class A Preferred Member Units
Class B Preferred Member Units
Common Stock
13.00% Secured Debt
Preferred Member Units
Warrants
Member Units
12.00% (L+10.00%, Floor
2.00%) Secured Debt
Preferred Member Units
9.00% (L+8.00%, Floor 1.00%)
Secured Debt
Member Units
10.00% Unsecured Debt
15.00%
Preferred Member Units
12.00% Secured Debt
Preferred Member Units
LP Interests (CTMH, LP)
11.00% (L+10.00%, Floor
1.00%) Secured Debt
Preferred Member Units
9.00% (L+8.00%, Floor 1.00%,
Ceiling 1.50%) Secured Debt
Member Units
Member Units
10.50% (5.25% Cash, 5.25%
PIK) (L+9.50%, Floor 1.00%)
Secured Debt
12.50% (6.25% Cash, 6.25%
PIK) Secured Debt
Common Stock
11.50% Secured Debt
Preferred Stock
13.00% (L+11.50%, Floor
1.50%) Secured Debt
Preferred Equity
Member Units
5.00% Unsecured Debt
LP Interests
5.00% Unsecured Debt
Member Units
12.00% Secured Debt
Preferred Member Units
11.00% Secured Debt
Preferred Member Units
9.00% Secured Debt
Member Units
Warrants
12.00% Secured Debt
Member Units
11.00% Secured Debt
7.50% (L+6.50%, Floor 1.00%)
Secured Debt
Preferred Member Units
12.00% (L+11.00%, Floor
1.00%) Secured Debt
Preferred Stock
12.00% Secured Debt
Member Units
Member Units
Member Units
12.00% Secured Debt
Preferred Member Units
LP Interests
13.00% Secured Debt
Series A Preferred Stock
11.50% Secured Debt
7.00% (L+6.00%, Floor 1.00%)
Secured Debt
Preferred Equity
18.00% (10.00% Cash, 8.00%
PIK) Secured Debt
(8)
(8)
(8)
(9)
(5)
(5)
(9)
(9)
(9)
(8)
(6)
(6)
(6)
(9)
(8)
(8)
(8)
(8)
(5)
(5)
(5)
(6)
(6)
(9)
(5)
(5)
(8)
(8)
(8)
(8)
(8)
(8)
(7)
(7)
(8)
(8)
(5)
(8)
(8)
(8)
(8)
(5)
(5)
(8)
(8)
(9)
(9)
(9)
(5)
(5)
(5)
(5)
(5)
(5)
(5)
(6)
(6)
(8)
(8)
(9)
(9)
(9)
(9)
(9)
(5)
(5)
(5)
(7)
-
-
-
-
-
-
-
-
-
(2,320)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10,952
-
-
-
-
-
-
-
-
-
-
-
-
8,787
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,165
-
(400)
(154)
-
346
313
-
9,170
4,310
-
-
840
4,540
(507)
(320)
2
(3,660)
260
-
1,907
-
1,450
-
-
-
-
860
1,130
-
(2,757)
(1,920)
(103)
(5,595)
-
-
420
-
81
-
(2,540)
-
713
(1,839)
1,220
(48)
(4,835)
(1,238)
-
3,619
4
-
2,720
-
-
236
11,030
(1,550)
40
-
-
2,295
-
(160)
-
-
-
-
261
-
-
49
-
3,686
1,427
3,100
-
1,705
100
-
2,308
1,266
120
1,544
3,922
1,007
4
4,839
2,705
1,480
-
1,978
200
405
300
2,109
21
1,282
-
1,264
-
208
-
992
1,402
-
2,179
1,553
1,466
-
1,883
80
380
2,805
-
253
(45)
1,991
58
-
1,522
130
4,259
3,599
-
125
2,009
-
273
244
-
913
7
-
2,702
1,715
1,120
3,347
343
1,584
27,225
10,194
14,000
2,040
9,401
1,000
3,220
46,080
11,549
6,160
15,212
29,340
8,475
669
10,520
-
-
747
18,077
9,835
4,519
1,410
4,510
250
12,044
5,450
12,800
12,680
-
-
13,200
-
-
-
16,100
10,395
6,500
16,727
1,470
5,620
5,600
1,490
2,080
2,821
17,193
-
10,780
-
-
37,201
15,940
8,830
3,240
16,301
8,136
2,894
2,028
3,160
-
-
-
1,269
121
-
-
367
346
12,275
-
9,170
4,310
412
-
840
4,540
33
-
4,001
270
559
-
3,470
24,981
9,130
-
44
-
-
860
1,130
14
849
-
103
-
11,344
3,150
420
66,726
2,581
60,000
-
4,846
1,200
38
1,220
48
(749)
-
-
3,619
47
2,120
2,720
24,151
12,600
311
11,030
-
40
2,280
443
3,669
-
-
30,100
1,169
11,840
-
-
400
342
-
-
500
-
-
6,350
-
-
-
-
2,718
320
1,396
3,930
3,340
669
-
630
-
37
1,320
-
323
-
-
7
3,176
1,920
12,903
12,680
-
-
-
3,575
-
60,000
2,540
-
-
2,720
-
5,668
4,851
1,490
-
-
-
400
-
-
2,600
4,838
-
1,550
-
2,400
-
440
2,028
160
-
-
-
3,971
1,836
720
3,005
710
1,930
39,000
10,194
23,170
-
9,813
1,000
4,060
50,620
8,864
5,840
17,817
25,680
5,694
-
13,990
24,351
9,130
710
16,801
9,835
4,196
2,270
5,640
257
9,717
3,530
-
-
11,344
3,150
13,620
63,151
2,581
-
13,560
15,241
7,700
14,045
2,690
-
-
-
2,080
6,440
17,240
1,720
13,500
24,151
10,000
32,674
26,970
7,280
3,280
16,181
8,579
6,123
-
3,000
30,100
1,169
11,840
$
$
-
6,494
-
$
$
-
99,420
-
122,277
$
(217)
$
1,817
$
$
-
1,113,725
$
-
592,022
$
-
216,490
$
-
1,489,257
9,187
$
1,095
$
488
$
9,794
176
Table of Contents
AFG Capital Group, LLC
ATX Networks Corp.
BBB Tank Services, LLC
Boccella Precast Products LLC
Brightwood Capital Fund Investments - Fund V
Buca C, LLC
CAI Software LLC
Career Team Holdings, LLC
Chandler Signs Holdings, LLC
Charlotte Russe, Inc
Classic H&G Holdings, LLC
Congruent Credit Opportunities Funds
Copper Trail Energy Fund I, LP
DMA Industries, LLC
Dos Rios Partners
Dos Rios Stone Products LLC
East Teak Fine Hardwoods, Inc.
EIG Fund Investments
Flame King Holdings, LLC
Freeport Financial SBIC Fund LP
GFG Group, LLC.
Hawk Ridge Systems, LLC
Houston Plating and Coatings, LLC
HPEP 3, L.P.
I-45 SLF LLC
Iron-Main Investments, LLC
L.F. Manufacturing Holdings, LLC
Meisler Operating LLC
OnAsset Intelligence, Inc.
Oneliance, LLC
PCI Holding Company, Inc.
SI East, LLC (Stavig)
Common Stock
Warrants
10.00% Secured Debt
Preferred Member Units
10.00% PIK Unsecured Debt
8.50% (L+7.50%, Floor 1.00%)
Secured Debt
8.75% (7.25% Cash, 1.50% PIK)
(1.50% PIK + L+6.25%, Floor
1.00%) Secured Debt
12.00% (L+11.00%, Floor
1.00%) Unsecured Debt
Member Units
Preferred Stock (non-voting)
10.00% Secured Debt
Member Units
LP Interests (Brightwood Capital
Fund V, LP)
10.25% (L+9.25%, Floor 1.00%)
Secured Debt
12.50% Secured Debt
Member Units
12.50% Secured Debt
Class A Common Units
Class A Units
Common Stock
7.00% (L+6.00%, Floor 1.00%)
Secured Debt
8.00% Secured Debt
Preferred Member Units
LP Interests (Congruent Credit
Opportunities Fund
III, LP)
LP Interests (Congruent Credit
Opportunities Fund
II, LP)
LP Interests (Copper Trail
Energy Fund I, LP)
12.00% Secured Debt
Preferred Equity
LP Interests (Dos Rios Partners -
A, LP)
LP Interests (Dos Rios Partners,
LP)
Class A Preferred Units
Common Stock
LP Interests (EIG Global Private
Debt Fund-A, L.P.)
12.00% (L+11.00%, Floor
1.00%) Secured Debt
7.50% (L+6.50%, Floor 1.00%)
Secured Debt
Preferred Equity
LP Interests (Freeport Financial
SBIC Fund LP)
LP Interests (Freeport First Lien
Loan Fund III LP)
12.00% Secured Debt
Preferred Member Units
7.00% (L+6.00%, Floor 1.00%)
Secured Debt
8.00% Secured Debt
Preferred Member Units
8.00% Unsecured Convertible
Debt
Member Units
LP Interests (HPEP 3, L.P.)
Member Units (Fully diluted
20.0%; 24.40% profits
interest)
12.50% Secured Debt
12.50% PIK Secured Debt
12.50% Secured Debt
13.00% Secured Debt
Common Stock
Member Units
Preferred Member Units (non-
voting)
Common Stock
10.00% PIK Unsecured Debt
12.00% PIK Secured Debt
Common Stock
Warrants
12.00% (L+11.00%, Floor
1.00%) Secured Debt
Preferred Stock
Preferred Stock
10.25% Secured Debt
Preferred Member Units
(7)
(7)
(8)
(8)
(6)
(6)
(6)
(8)
(8)
(8)
(6)
(6)
(6)
(7)
(6)
(6)
(6)
(6)
(8)
(9)
(6)
(6)
(6)
(8)
(8)
(9)
(7)
(7)
(8)
(8)
(8)
(7)
(8)
(9)
(9)
(9)
(5)
(5)
(5)
(5)
(9)
(9)
(9)
(8)
(8)
(8)
(8)
(5)
(5)
(5)
(5)
(5)
(8)
(8)
(5)
(8)
(8)
(8)
(8)
(7)
(7)
(9)
(7)
(7)
-
-
-
-
-
-
(4,528)
-
-
-
-
-
-
-
-
10,252
-
-
-
(3,141)
-
-
-
-
(1,069)
(998)
-
1,930
-
-
1,133
(2,242)
(280)
(162)
-
(1,210)
-
(373)
(340)
(5,095)
-
-
(1,000)
3,141
-
(82)
5,750
-
-
31
200
-
168
-
612
-
11
9
398
-
1,782
7,570
2,380
513
-
-
-
83
2,210
1,070
3,148
2,938
491
5,810
-
-
-
-
-
1,930
1,963
7,092
1,069
998
347
-
-
-
12,263
1,521
13,784
4,722
280
151
-
6,040
27
-
11
320
-
-
1,000
14,256
47,474
7,190
-
-
1,460
-
-
24,800
9,510
487
23,940
-
20,050
4,500
-
3,141
4,000
82
5,750
2,242
280
162
-
1,210
-
373
71,414
7,190
-
-
1,000
3,141
-
5,608
-
2,079
1,940
144
7,740
1,963
7,092
-
2,507
-
-
320
4,830
1,000
14,370
-
-
20,050
4,500
460
-
4,000
19,274
15,260
(96)
776
11,540
-
1,581
9,959
(4,449)
4,355
379
-
-
1,560
4,912
(610)
180
166
-
-
-
814
66
110
2,090
-
94
7,000
60
(1,870)
1,332
(202)
-
-
-
-
-
510
-
(7,413)
-
-
(830)
830
-
-
(203)
(90)
6,572
(203)
-
-
715
2,252
-
(80)
9
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
17,048
-
-
-
-
-
-
-
-
-
177
-
378
521
-
-
-
-
100
53
884
77
-
-
751
1,601
629
70
2,023
1,914
243
261
177
1,861
201
408
731
346
-
-
14
-
11
930
-
-
335
-
2,852
4,032
2,340
94
4,355
1,782
-
-
1,720
5,417
1,250
300
526
-
-
-
5,264
10,321
-
-
-
18,400
8,450
2,900
5,080
3,258
15,789
-
-
-
-
-
2,050
93
16,010
64
7,299
-
-
-
-
4,130
32,962
9,780
379
20,993
5,944
1,560
4,912
-
180
200
20,996
6,324
10,400
814
66
15,745
6,990
2,585
16,400
7,000
60
-
1,706
800
3,170
9,088
19,805
4,557
1,798
510
14
(550)
139
930
830
830
5,547
1,056
-
36,765
6,572
4,449
2,161
-
-
-
-
610
480
179
-
-
-
-
3,156
3,200
-
-
-
-
-
1,870
252
2,202
-
144
-
-
-
-
-
15,460
11
-
830
830
-
-
4,130
3,877
4,782
-
-
20,993
5,944
3,280
10,329
640
-
547
20,996
6,324
10,400
6,078
7,231
12,545
6,990
2,585
34,800
15,450
2,960
3,210
4,712
14,387
3,170
8,944
19,805
4,557
1,798
2,560
107
-
192
8,229
-
-
5,547
1,056
-
65,850
11,570
Table of Contents
Slick Innovations, LLC
Sonic Systems International, LLC
Superior Rigging & Erecting Co.
The Affiliati Network, LLC
UniTek Global Services, Inc.
Volusion, LLC
Other
Amounts related to investments transferred to or
from other 1940 Act classification during the
period
Total Affiliate investments
13.00% Secured Debt
Common Stock
Warrants
8.50% (L+7.50%, Floor 1.00%)
Secured Debt
Common Stock
12.00% Secured Debt
Preferred Member Units
11.83% Secured Debt
7.00% Secured Debt
Preferred Stock
15.00% PIK Secured Convertible
Debt
8.50% (6.50% cash, 2.00% PIK)
(2.00% PIK, L+5.50% Floor
1.00%) Secured Debt
Preferred Stock
11.50% Secured Debt
8.00% Unsecured Convertible
Debt
Preferred Member Units
(6)
(6)
(6)
(8)
(8)
(7)
(7)
(9)
(9)
(9)
(6)
(6)
(6)
(8)
(8)
(8)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(42)
180
40
-
-
-
-
-
-
-
1,178
115
807
991
118
-
731
-
-
394
37
2,650
-
842
9
270
151
236
315
2,248
33
-
5,720
1,330
360
-
-
21,298
4,500
-
-
-
42
180
40
11,757
1,070
34
-
13,873
1,462
6,400
-
2,461
2,425
3,208
19,243
291
5,990
259
1,439
991
118
-
442
-
-
-
-
-
-
1,039
1,200
-
86
462
316
2,800
-
-
5,320
1,510
400
11,757
1,070
21,332
4,500
12,834
262
6,400
2,375
2,222
4,331
17,434
409
5,990
$
(694)
17,181
$
-
21,989
(11)
51,278
$
$
(12,263)
366,301
$
-
336,505
$
-
165,855
$
-
549,214
(1) The principal amount, the ownership detail for equity investments and if the investment is income producing is included in the consolidated schedule
of investments.
(2) Represents the total amount of interest, fees and dividends credited to income for the portion of the period for which an investment was included in
Control or Affiliate categories, respectively. For investments transferred between Control and Affiliate categories during the period, any income or
investment balances related to the time period it was in the category other than the one shown at period end is included in “Amounts from
investments transferred from other 1940 Act classifications during the period.”
(3) Gross additions include increases in the cost basis of investments resulting from new portfolio investments, follow-on investments and accrued PIK
interest, and the exchange of one or more existing securities for one or more new securities. Gross additions also include net increases in unrealized
appreciation or net decreases in net unrealized depreciation as well as the movement of an existing portfolio company into this category and out of a
different category.
(4) Gross reductions include decreases in the cost basis of investments resulting from principal repayments or sales and the exchange of one or more
existing securities for one or more new securities. Gross reductions also include net increases in net unrealized depreciation or net decreases in
unrealized appreciation as well as the movement of an existing portfolio company out of this category and into a different category.
(5) Portfolio company located in the Midwest region as determined by location of the corporate headquarters. The fair value as of December 31, 2021 for
control investments located in this region was $342,215. This represented 23.0% of net assets as of December 31, 2021. The fair value as of
December 31, 2021 for affiliate investments located in this region was $71,118. This represented 12.9% of net assets as of December 31, 2021.
(6) Portfolio company located in the Northeast region as determined by location of the corporate headquarters. The fair value as of December 31, 2021
for control investments located in this region was $123,216. This represented 8.3% of net assets as of December 31, 2021. The fair value as of
December 31, 2021 for affiliate investments located in this region was $94,447. This represented 17.2% of net assets as of December 31, 2021.
(7) Portfolio company located in the Southeast region as determined by location of the corporate headquarters. The fair value as of December 31, 2021
for control investments located in this region was $19,520. This represented 1.3% of net assets as of December 31, 2021. The fair value as of
December 31, 2021 for affiliate investments located in this region was $164,975. This represented 30.0% of net assets as of December 31, 2021.
(8) Portfolio company located in the Southwest region as determined by location of the corporate headquarters. The fair value as of December 31, 2021
for control investments located in this region was $640,096. This represented 43.0% of net assets as of
178
Table of Contents
December 31, 2021. The fair value as of December 31, 2021 for affiliate investments located in this region was $108,623. This represented 19.8% of
net assets as of December 31, 2021.
(9) Portfolio company located in the West region as determined by location of the corporate headquarters. The fair value as of December 31, 2021 for
control investments located in this region was $364,210. This represented 24.5% of net assets as of December 31, 2021. The fair value as of
December 31, 2021 for affiliate investments located in this region was $110,051. This represented 20.0% of net assets as of December 31, 2021.
(10) All of the Company’s portfolio investments are generally subject to restrictions on resale as “restricted securities,” unless otherwise noted.
(11) This schedule should be read in conjunction with the consolidated schedule of investments and notes to the consolidated financial statements.
Supplemental information can be located within the schedule of investments including end of period interest rate, preferred dividend rate, maturity
date, investments not paid currently in cash and investments whose value was determined using significant unobservable inputs.
179
Table of Contents
MAIN STREET CAPITAL CORPORATION
Consolidated Schedule of Investments In and Advances to Affiliates
December 31, 2020
(dollars in thousands)
Schedule 12-14
Company
Majority‑owned investments
Café Brazil, LLC
California Splendor Holdings
LLC
Investment(1)(10)(11)
Member Units
LIBOR Plus 8.00% (Floor 1.00%)
Clad-Rex Steel, LLC
CMS Minerals Investments
Cody Pools, Inc.
CompareNetworks Topco, LLC
Direct Marketing Solutions, Inc.
Gamber-Johnson Holdings, LLC
LIBOR Plus 10.00% (Floor 1.00%)
Preferred Member Units
Preferred Member Units
LIBOR Plus 9.50% (Floor 1.00%)
Member Units
10% Secured Debt
Member Units
Member Units
LIBOR Plus 10.50% (Floor 1.75%)
Preferred Member Units
LIBOR Plus 11.00% (Floor 1.00%)
Preferred Member Units
LIBOR Plus 11.00% (Floor 1.00%)
Preferred Stock
LIBOR Plus 7.00% (Floor 2.00%)
GRT Rubber Technologies LLC
LIBOR Plus 7.00%
Member Units
Guerdon Modular Holdings, Inc.
Harborside Holdings, LLC
IDX Broker, LLC
Jensen Jewelers of Idaho, LLC
Kickhaefer Manufacturing
Company, LLC
Member Units
16.00% Secured Debt
LIBOR Plus 8.50% (Floor 1.00%)
Preferred Stock
Common Stock
Warrants
Member Units
11.00% Secured Debt
Preferred Member Units
Prime Plus 6.75% (Floor 2.00%)
Member Units
11.50% Secured Debt
Member Units
9.00% Secured Debt
Member Units
Market Force Information, LLC
12.00% PIK Secured Debt
LIBOR Plus 11.00% (Floor 1.00%)
MH Corbin Holding LLC
Mid-Columbia Lumber Products,
LLC
Member Units
13.00% Secured Debt
Preferred Member Units
Preferred Member Units
10.00% Secured Debt
12.00% Secured Debt
Member Units
9.50% Secured Debt
MSC Adviser I, LLC
Mystic Logistics Holdings, LLC
OMi Holdings, Inc.
Pearl Meyer Topco LLC
PPL RVs, Inc.
Principle Environmental, LLC
Member Units
Member Units
12.00% Secured Debt
Common Stock
Common Stock
12.00% Secured Debt
Member Units
LIBOR Plus 7.00% (Floor 0.50%)
Common Stock
13.00% Secured Debt
Amount of
Realized
Geography Gain/(Loss) Gain/(Loss)
Amount of
Unrealized
Amount of
Interest,
Fees or
Dividends
Credited to
Income(2)
December 31,
2019
Gross
Fair Value Additions(3)
Gross
Reductions(4)
December 31,
2020
Fair Value
(8)
(9)
(9)
(9)
(9)
(5)
(5)
(5)
(5)
(9)
(8)
(8)
(9)
(9)
(9)
(9)
(5)
(5)
(8)
(8)
(9)
(9)
(9)
(9)
(9)
(8)
(9)
(9)
(9)
(9)
(5)
(5)
(5)
(5)
(9)
(9)
(9)
(5)
(5)
(5)
(9)
(9)
(9)
(9)
(9)
(8)
(6)
(6)
(8)
(6)
(6)
(8)
(8)
(8)
$
—
$
(410)
$
38
$
2,440
$
—
$
410
$
2,030
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(12,776)
(993)
(1,140)
(2,849)
—
(2,406)
—
9,337
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(4,240)
—
—
—
—
—
—
—
—
—
—
—
29
(65)
—
(1,141)
49
(1,020)
(11)
70
(69)
125
6,623
43
3,770
(110)
(820)
(41)
(920)
—
(2,550)
12,588
1,010
1,140
2,983
—
(3,054)
(42)
(9,088)
(14)
(650)
—
—
—
—
(11,762)
—
(5,280)
(322)
(20)
(2,400)
148
256
3,239
—
(850)
12,740
—
580
3,430
—
2,940
25
1,570
44
180
1,154
3,291
1,092
250
1,195
587
113
—
—
1,798
87
1,123
632
1,934
—
1,776
3,537
1,294
3,542
—
—
—
—
—
—
711
1,193
423
683
2,947
—
357
84
242
116
—
1,181
—
—
44
119
1
30
20
2,491
814
203
2,343
3,356
538
1,204
690
877
7,104
27,801
7,163
7,382
10,781
9,630
1,137
460
1,900
—
—
8,288
3,010
15,707
20,200
19,022
53,410
15,016
47,450
—
—
—
—
—
9,560
13,400
15,040
4,000
8,270
24,982
12,240
3,939
1,160
22,621
2,695
5,280
8,890
20
4,770
1,602
3,644
—
701
1,640
74,520
6,253
8,410
16,950
—
—
12,118
9,930
6,397
18,239
53
1,092
—
72
—
—
70
—
16,000
14,940
2,075
3,770
37
—
1,640
—
1,759
—
12,776
993
1,140
2,849
—
100
42
—
14
—
1,433
—
—
—
2,794
1,791
—
32
—
—
148
256
101
19
709
42,240
990
580
3,430
37,202
16,740
188
1,570
—
17,300
65
—
1,141
—
1,020
37
—
276
1,784
—
2,410
—
737
820
824
920
—
2,550
12,776
993
1,140
2,849
—
9,660
13,442
15,040
614
650
4,146
—
30
—
11,853
2,886
5,280
642
20
2,400
1,750
3,900
101
720
2,349
—
520
—
—
—
800
500
—
—
8,043
27,789
8,255
6,241
10,853
8,610
1,100
530
1,624
14,216
14,940
7,953
6,780
15,007
19,380
19,838
52,490
16,775
44,900
—
—
—
—
—
—
—
—
3,400
7,620
22,269
12,240
3,909
1,160
13,562
1,600
—
8,280
—
2,370
—
—
—
—
—
116,760
6,723
8,990
20,380
37,202
15,940
11,806
11,500
6,397
Table of Contents
(d/b/a TruHorizon
Environmental Solutions)
Preferred Member Units
Quality Lease Service, LLC
Trantech Radiator Topco, LLC
Warrants
Member Units
Vision Interests, Inc.
Ziegler’s NYPD, LLC
12.00% Secured Debt
Common Stock
13.00% Secured Debt
Series A Preferred Stock
Common Stock
6.50% Secured Debt
12.00% Secured Debt
14.00% Secured Debt
Other controlled investments
Access Media Holdings, LLC
Analytical Systems Keco, LLC
Warrants
Preferred Member Units
10.00% PIK Secured Debt
Preferred Member Units
Member Units
LIBOR Plus 10.00% (Floor 2.00%)
Preferred Member Units
Warrants
ASC Interests, LLC
13.00% Secured Debt
Member Units
ATS Workholding, LLC
Bolder Panther Group, LLC
Bond-Coat, Inc.
Brewer Crane Holdings, LLC
Bridge Capital Solutions
Corporation
CBT Nuggets, LLC
Centre Technologies Holdings,
LLC
Chamberlin Holding LLC
Charps, LLC
Copper Trail Fund Investments
Datacom, LLC
Digital Products Holdings LLC
Garreco, LLC
Gulf Manufacturing, LLC
Gulf Publishing Holdings, LLC
Harris Preston Fund Investments
Harrison Hydra-Gen, Ltd.
J&J Services, Inc.
KBK Industries, LLC
NAPCO Precast, LLC
Nebraska Vet AcquireCo, LLC
(NVS)
NexRev LLC
NRI Clinical Research, LLC
5.00% Secured Debt
Preferred Member Units
LIBOR Plus 9.00% (Floor 1.50%)
Preferred Member Units
Preferred Member Units
15.00% Secured Debt
Common Stock
LIBOR Plus 10.00% (Floor 1.00%)
Preferred Member Units
13.00% Secured Debt
Warrants
13.00% Secured Debt
Preferred Member Units
Member Units
LIBOR Plus 10.00% (Floor 2.00%)
Preferred Member Units
LIBOR Plus 8.00% (Floor 1.00%)
Member Units
Member Units
15.00% Secured Debt
8.67% Current / 1.33% PIK
Preferred Member Units
LP Interests (CTMH, LP)
8.00% Secured Debt
10.50% PIK Secured Debt
Class A Preferred Member Units
Class B Preferred Member Units
LIBOR Plus 10.00% (Floor 1.00%)
Preferred Member Units
LIBOR Plus 8.00% (Floor 1.00%,
Ceiling 1.50%)
Member Units
Member Units
LIBOR Plus 9.50% (Floor 1.00%),
Current Coupon 5.25% / 5.25% PIK
6.25% Current / 6.25% PIK
Member Units
LP Interests (2717 MH, L.P.)
LP Interests (2717 HPP-MH, L.P.)
Common Stock
11.50% Secured Debt
Preferred Stock
Member Units
Member Units
12.00% Secured Debt
Preferred Member Units
11.00% PIK Secured Debt
Preferred Member Units
9.00% Secured Debt
Warrants
Member Units
(8)
(8)
(7)
(7)
(7)
(9)
(9)
(9)
(8)
(8)
(8)
(8)
(8)
(5)
(5)
(5)
(8)
(8)
(8)
(8)
(8)
(9)
(9)
(9)
(9)
(9)
(8)
(8)
(9)
(9)
(6)
(6)
(6)
(6)
(9)
(8)
(8)
(8)
(8)
(8)
(5)
(5)
(5)
(9)
(8)
(8)
(8)
(8)
(5)
(5)
(8)
(8)
(8)
(8)
(8)
(8)
(8)
(8)
(8)
(7)
(7)
(5)
(8)
(5)
(5)
(8)
(8)
(9)
(9)
(9)
(2,890)
(220)
(4,880)
—
1,375
—
(929)
3,296
(21)
—
—
—
511
17,442
9,660
—
—
—
(306)
—
(170)
(1,332)
(939)
—
—
—
—
(6,260)
—
1,570
—
(280)
—
—
(4,770)
—
320
(47)
4,030
(455)
—
1,716
2,718
—
—
389
—
—
1,026
4,661
—
(1,150)
(2,920)
—
(1,091)
(2,420)
(319)
—
(2,520)
103
5,595
(2,270)
1,340
—
—
(289)
(4,840)
(47)
260
612
—
—
—
—
—
—
—
(3,586)
—
—
—
—
—
(19,698)
(9,376)
(1)
—
—
—
—
—
—
—
—
—
—
(3)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
693
—
—
—
—
—
—
—
—
—
—
—
—
—
181
—
—
—
1,105
116
268
—
—
66
76
391
—
—
50
—
—
724
—
—
237
—
282
—
579
—
—
1,399
—
1,012
120
1,771
—
135
100
954
1,480
120
1,942
4,134
68
258
1,499
559
—
—
—
—
—
2,177
200
428
—
135
27
1,650
—
—
—
104
1,943
—
454
642
223
—
1,973
(35)
752
—
548
13,390
1,090
9,289
9,102
4,655
2,028
4,089
409
1,000
625
2,750
—
1,269
6,387
(284)
—
5,210
3,200
316
1,639
1,290
4,521
939
—
—
—
11,473
8,300
8,989
4,280
7,797
3,500
996
1,000
50,850
12,136
5,840
17,773
24,040
1,450
2,000
—
6,920
872
1,615
10,142
—
—
18,452
5,174
4,515
2,560
7,430
280
12,493
2,420
3,157
—
7,970
17,430
7,160
15,470
14,760
—
—
17,469
6,310
5,981
1,230
4,988
—
—
301
22
1,375
—
—
3,296
—
—
—
—
511
17,442
9,660
1
74
—
—
100
—
179
—
27,225
10,194
14,000
123
—
20
1,570
606
—
2
—
—
25
320
47
4,030
275
—
8,903
3,600
—
—
389
—
—
1,072
4,661
4
—
—
17
1,055
—
52
250
—
170
5,595
—
1,340
10,395
6,500
201
—
1,566
260
1,160
2,890
220
5,130
480
—
—
929
3,705
21
—
—
—
—
23,829
9,376
1
410
—
306
24
170
1,353
939
—
—
—
11,596
6,260
496
—
—
280
—
—
4,770
612
—
2,608
—
455
1,331
428
—
125
—
—
—
—
1,447
—
—
1,150
2,920
47
1,504
2,420
507
—
2,520
4,800
75
2,270
—
—
—
944
4,840
1,927
—
548
10,500
870
4,460
8,644
6,030
2,028
3,160
—
979
625
2,750
—
1,780
—
—
—
4,874
3,200
10
1,715
1,120
3,347
—
27,225
10,194
14,000
—
2,040
8,513
5,850
8,403
3,220
998
1,000
46,080
11,549
6,160
15,212
28,070
1,270
669
8,475
10,520
747
1,615
10,531
—
—
18,077
9,835
4,519
1,410
4,510
250
12,044
—
2,702
250
5,450
12,800
12,680
13,200
16,100
10,395
6,500
16,726
1,470
5,620
1,490
5,600
Table of Contents
NRP Jones, LLC
NuStep, LLC
12.00% Secured Debt
Member Units
12.00% Secured Debt
Preferred Member Units
Pegasus Research Group, LLC
Project BarFly, LLC
Member Units
Member Units
7.00% Secured Debt
7.00% Secured Debt
Warrants
7.00% Secured Debt
Warrants
River Aggregates, LLC
Zero Coupon Secured Debt
Tedder Industries, LLC
UnionRock Energy Fund II, LP
Other
Amounts related to investments
transferred to or from other
1940 Act classification during the
period
Total Control investments
Affiliate Investments
AAC Holdings, Inc.
AFG Capital Group, LLC
American Trailer Rental Group
LLC
BBB Tank Services, LLC
Member Units
Member Units
12.00% Secured Debt
Preferred Member Units
LP Interests
18.00% (10.00% Cash, 8.00% PIK)
Secured Debt
Common Stock
Warrants
10.00% Secured Debt
Preferred Member Units
LIBOR Plus 7.25% (Floor 1.00%)
Member Units
LIBOR Plus 11.00% (Floor 1.00%)
Preferred Member Units
Member Units
Boccella Precast Products LLC
LIBOR Plus 10.00% (Floor 1.00%)
Buca C, LLC
CAI Software LLC
Chandler Signs Holdings, LLC
Charlotte Russe, Inc
Classic H&G Holdings, LLC
Member Units
LIBOR Plus 9.25% (Floor 1.00%)
Preferred Member Units
12.50% Secured Debt
Member Units
Class A Units
Common Stock
12.00% Secured Debt
Preferred Member Units
Congruent Credit Opportunities
Funds
LP Interests (Fund II)
Copper Trail Fund Investments
Dos Rios Partners
East Teak Fine Hardwoods, Inc.
EIG Fund Investments
Freeport Financial Funds
Harris Preston Fund Investments
Hawk Ridge Systems, LLC
LP Interests (Fund III)
LP Interests (Copper Trail Energy
Fund I, LP)
LP Interests (Dos Rios Partners,
LP)
LP Interests (Dos Rios Partners - A,
LP)
Common Stock
LP Interests (EIG Global Private
Debt fund-A, L.P.)
LP Interests (Freeport Financial
SBIC Fund LP)
LP Interests (Freeport First Lien
Loan Fund III LP)
LP Interests (HPEP 3, L.P.)
LIBOR Plus 6.00% (Floor 1.00%)
11.00% Secured Debt
Preferred Member Units
Preferred Member Units
8.00% Unsecured Convertible Debt
Houston Plating and Coatings,
LLC
I-45 SLF LLC
L.F. Manufacturing Holdings,
LLC
OnAsset Intelligence, Inc.
PCI Holding Company, Inc.
Member Units
Member Units
Preferred Member Units
Member Units
12.00% PIK Secured Debt
10.00% PIK Secured Debt
Preferred Stock
Warrants
12.00% Current Secured Debt
Preferred Stock
(5)
(5)
(5)
(5)
(8)
(5)
(5)
(5)
(5)
(5)
(5)
(8)
(8)
(8)
(9)
(9)
(9)
(7)
(7)
(7)
(8)
(8)
(5)
(5)
(8)
(8)
(8)
(6)
(6)
(7)
(7)
(6)
(6)
(8)
(9)
(6)
(6)
(8)
(8)
(9)
(8)
(8)
(7)
(8)
(5)
(5)
(8)
(9)
(9)
(9)
(9)
(8)
(8)
(8)
(8)
(8)
(8)
(8)
(8)
(8)
(9)
(9)
—
1,279
—
—
—
—
(8,591)
(110)
(607)
—
(473)
—
4,015
—
—
—
—
(8,069)
(59,594)
(11,210)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
6
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(1,889)
—
580
660
—
8,961
—
607
—
473
28
(3,840)
71
—
—
—
764
384
2,444
—
491
—
—
—
—
3
—
—
187
—
2,097
—
—
6,376
4,710
19,703
10,200
8,170
—
7,736
—
—
—
—
722
4,990
3,169
16,912
8,136
—
—
—
196
580
660
1,584
2,438
110
607
343
473
28
—
71
29
—
2,894
4,296
1,889
2,706
—
—
—
10,174
110
607
—
473
750
4,990
—
640
—
—
2,080
2,821
17,193
10,780
8,830
1,584
—
—
—
343
—
—
—
3,240
16,301
8,136
2,894
4,251
37,924
9
81,155
(3,172)
1,032,721
—
336,485
—
258,653
—
1,113,725
4,568
—
2,938
—
630
(182)
3,729
(51)
—
(10)
(138)
(230)
(4,562)
(4,770)
257
636
(1,280)
—
217
3,750
—
(515)
(744)
(2,375)
(754)
(100)
(165)
(514)
(204)
187
—
(31)
130
—
(1,360)
(5,250)
(1,818)
—
—
—
—
—
—
—
1,450
182
119
—
—
66
—
1,119
—
668
20
—
982
619
2,032
69
3,001
10
(91)
—
3,112
469
—
823
698
—
—
—
141
—
930
—
70
1,758
378
—
244
261
2,346
12
—
827
6
—
—
1,851
—
11,530
—
—
838
5,180
27,087
8,540
4,698
131
290
13,244
6,270
18,794
4,701
9,160
5,210
2,740
—
—
—
855
13,915
2,362
7,033
2,233
400
720
5,778
9,696
2,474
600
13,400
7,900
420
4,260
10,330
14,407
81
2,050
6,474
58
—
—
11,356
2,680
21,359
3,148
2,938
—
630
182
7,470
75
20
—
138
—
24
69
40,830
1,980
—
—
26,000
9,510
—
—
—
759
241
—
110
—
989
784
1,384
5,031
130
—
—
—
3,200
12
—
827
9
—
—
—
1,450
23,702
—
—
347
—
27,269
—
51
—
10
13,382
230
4,562
4,770
2,516
—
1,280
—
1,200
—
761
2,375
580
2,375
754
100
304
514
364
—
1,984
31
—
—
1,360
5,250
1,818
—
—
—
3
—
—
11,356
—
9,187
3,148
2,938
491
5,810
—
16,010
4,722
151
280
—
6,040
14,256
—
47,474
7,190
1,460
—
24,800
9,510
94
11,540
1,782
5,417
1,720
300
526
5,264
10,321
3,258
—
18,400
8,030
420
2,900
5,080
15,789
93
2,050
7,301
64
—
—
—
4,130
Table of Contents
Rocaceia, LLC (Quality Lease
and Rental Holdings, LLC)
Salado Stone Holdings, LLC
SI East, LLC
Slick Innovations, LLC
Superior Rigging & Erecting Co.
UniTek Global Services, Inc.
Universal Wellhead Services
Holdings, LLC
Volusion, LLC
Other
Amounts related to investments
transferred to or from other
1940 Act classification during the
period
Total Affiliate investments
Preferred Stock
12.00% Secured Debt
Preferred Member Units
Class A Preferred Units
9.50% Current, Secured Debt
Preferred Member Units
13.00% Current, Secured Debt
Warrants
Common Stock
12.00% Current, Secured Debt
Preferred Member Units
LIBOR Plus 6.50% (Floor 1.00%)
Preferred Stock
Preferred Stock
Preferred Stock
Preferred Stock
Common Stock
Preferred Member Units
Member Units
11.50% Secured Debt
8.00% Unsecured Convertible Debt
Preferred Member Units
Warrants
(9)
(8)
(8)
(8)
(7)
(7)
(6)
(6)
(6)
(7)
(7)
(6)
(6)
(6)
(6)
(6)
(6)
(8)
(8)
(8)
(8)
(8)
(8)
2,610
(413)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(2,610)
—
—
680
(74)
1,580
115
70
250
—
—
(283)
(2,684)
(2,119)
312
(3,667)
—
(800)
—
(181)
—
(8,010)
(150)
—
—
—
—
3,285
1,292
919
—
—
1,110
—
233
—
212
255
—
—
—
—
2,438
33
—
—
4,350
—
—
570
32,963
8,200
6,197
290
1,080
—
—
2,962
2,684
2,282
1,889
3,667
—
800
—
19,352
291
14,000
150
—
413
—
680
73
1,580
163
70
250
21,298
4,500
17
—
212
945
—
—
—
—
71
—
—
—
4,350
413
—
—
74
—
641
—
—
—
—
553
2,684
2,119
2
3,667
—
800
—
181
—
8,010
150
—
—
—
1,250
32,962
9,780
5,719
360
1,330
21,298
4,500
2,426
—
375
2,832
—
—
—
—
19,242
291
5,990
—
11,210
2,203
(4,906)
(29,038)
118
32,435
(9,335)
330,287
—
159,571
—
132,892
—
366,301
(1) The principal amount, the ownership detail for equity investments and if the investment is income producing is included in the consolidated schedule
of investments.
(2) Represents the total amount of interest, fees and dividends credited to income for the portion of the period for which an investment was included in
Control or Affiliate categories, respectively. For investments transferred between Control and Affiliate categories during the period, any income or
investment balances related to the time period it was in the category other than the one shown at period end is included in “Amounts from
investments transferred from other 1940 Act classifications during the period.”
(3) Gross additions include increases in the cost basis of investments resulting from new portfolio investments, follow-on investments and accrued PIK
interest, and the exchange of one or more existing securities for one or more new securities. Gross additions also include net increases in unrealized
appreciation or net decreases in net unrealized depreciation as well as the movement of an existing portfolio company into this category and out of a
different category.
(4) Gross reductions include decreases in the cost basis of investments resulting from principal repayments or sales and the exchange of one or more
existing securities for one or more new securities. Gross reductions also include net increases in net unrealized depreciation or net decreases in
unrealized appreciation as well as the movement of an existing portfolio company out of this category and into a different category.
(5) Portfolio company located in the Midwest region as determined by location of the corporate headquarters. The fair value as of December 31, 2020 for
control investments located in this region was $256,121. This represented 16.9% of net assets as of December 31, 2020. The fair value as of
December 31, 2020 for affiliate investments located in this region was $31,595. This represented 2.1% of net assets as of December 31, 2020.
(6) Portfolio company located in the Northeast region as determined by location of the corporate headquarters. The fair value as of December 31, 2020
for control investments located in this region was $82,476. This represented 5.4% of net assets as of December 31, 2020. The fair value as of
December 31, 2020 for affiliate investments located in this region was $108,056. This represented 7.1% of net assets as of December 31, 2020.
(7) Portfolio company located in the Southeast region as determined by location of the corporate headquarters. The fair value as of December 31, 2020
for control investments located in this region was $44,614. This represented 2.9% of net assets as of
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December 31, 2020. The fair value as of December 31, 2020 for affiliate investments located in this region was $98,369. This represented 6.5% of net
assets as of December 31, 2020.
(8) Portfolio company located in the Southwest region as determined by location of the corporate headquarters. The fair value as of December 31, 2020
for control investments located in this region was $442,075. This represented 29.2% of net assets as of December 31, 2020. The fair value as of
December 31, 2020 for affiliate investments located in this region was $95,519. This represented 6.3% of net assets as of December 31, 2020.
(9) Portfolio company located in the West region as determined by location of the corporate headquarters. The fair value as of December 31, 2020 for
control investments located in this region was $288,439. This represented 19.0% of net assets as of December 31, 2020. The fair value as of
December 31, 2020 for affiliate investments located in this region was $32,762. This represented 2.2% of net assets as of December 31, 2020.
(10) All of the Company’s portfolio investments are generally subject to restrictions on resale as “restricted securities,” unless otherwise noted.
(11) This schedule should be read in conjunction with the consolidated schedule of investments and notes to the consolidated financial statements.
Supplemental information can be located within the schedule of investments including end of period interest rate, preferred dividend rate, maturity
date, investments not paid currently in cash and investments whose value was determined using significant unobservable inputs.
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures. As of the end of the period covered by this annual report on Form 10-K,
we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer,
President, Chief Financial Officer, Chief Compliance Officer and Chief Accounting Officer, of our disclosure controls and procedures (as
defined in Rule 13a-15 of the Exchange Act). Based on that evaluation, our Chief Executive Officer, President, Chief Financial Officer,
Chief Compliance Officer and Chief Accounting Officer have concluded that our current disclosure controls and procedures are effective in
timely alerting them of material information relating to us that is required to be disclosed in the reports we file or submit under the
Exchange Act.
(b) Management’s Report on Internal Control Over Financial Reporting. The management of Main Street Capital Corporation
and its subsidiaries (the Company) is responsible for establishing and maintaining adequate internal control over financial reporting, as such
term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of management, including the Chief
Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of the Company’s internal control
over financial reporting based on the criteria established in Internal Control — Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). Based on the Company’s evaluation under the framework in Internal
Control — Integrated Framework, management concluded that the Company’s internal control over financial reporting was effective as of
December 31, 2021. Grant Thornton LLP, the Company’s independent registered public accounting firm, has issued an attestation report on
the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021, as stated in its report which is
included herein.
(c) Attestation Report of the Registered Public Accounting Firm. Our independent registered public accounting firm, Grant
Thornton LLP, has issued an attestation report on the effectiveness of our internal control over financial reporting, which is set forth above
under the heading “Reports of Independent Registered Public Accounting Firm” in Item 8. “Consolidated Financial Statements and
Supplementary Data” of this Annual Report on Form 10-K.
(d) Changes in Internal Control over Financial Reporting. There have been no changes in our internal control over financial
reporting that occurred during the fiscal quarter ended December 31, 2021 that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
Item 9B. Other Information
Director Departure and Reduction in Size of Board
On February 22, 2022, Mr. Arthur French informed our Board of Directors that after over fourteen years of excellent service to
our Board since our initial public offering in 2007, he has decided not to stand for re-election to the Board of Directors at the end of his
current term on the date of our 2022 Annual Meeting of Stockholders. Mr. French’s decision not to stand for re-election was not the result
of any disagreement with management or the Board of Directors. In connection with Mr. French’s departure, the Board of Directors passed
a resolution reducing the number of directors that constitutes the full Board of Directors from nine to eight directors, effective as of the date
of our 2022 Annual Meeting of Stockholders.
Fees and Expenses
The following table is being provided to update, as of December 31, 2021, certain information in the Company’s effective shelf
registration statement on Form N-2 (File No. 333-231146) filed with the SEC on April 30, 2019 as supplemented by the prospectus
supplements relating to our ATM Program and to the direct stock purchase feature of the Plan. The information is intended to assist you in
understanding the costs and expenses that an investor in
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the Company will bear directly or indirectly. We caution you that some of the percentages indicated in the table below are estimates and
may vary. Except where the context suggests otherwise, whenever this Annual Report on Form 10-K contains a reference to fees or
expenses paid by “you,” “us” or “Main Street,” or that “we” will pay fees or expenses, stockholders will indirectly bear such fees or
expenses as investors in us.
Stockholder Transaction Expenses:
Sales load (as a percentage of offering price)
Offering expenses (as a percentage of offering price)
Dividend reinvestment and direct stock purchase plan expenses
Total stockholder transaction expenses (as a percentage of offering price)
Annual Expenses of the Company (as a percentage of net assets attributable to common stock):
Operating expenses
Interest payments on borrowed funds
Income tax expense
Acquired fund fees and expenses
Total annual expenses
— %(1)
— %(2)
— %(3)
— %(4)
3.23 %(5)
3.57 %(6)
1.84 %(7)
0.30 %(8)
8.94 %
(1) The maximum agent commission with respect to the shares of our common stock sold by us in the ATM Program is 1.00%. Purchasers
of shares of common stock through the direct stock purchase feature of the Plan will not pay any sales load. In the event that our
securities are sold to or through underwriters, a corresponding prospectus or prospectus supplement will disclose the applicable sales
load.
(2) Estimated offering expenses payable by us for the estimated duration of the ATM Program are approximately $0.6 million. In the event
that we conduct an offering of our securities, a corresponding prospectus or prospectus supplement will disclose the estimated offering
expenses.
(3) The expenses of administering the Plan are included in operating expenses. Additional costs may be charged to participants in the direct
stock purchase feature of the plan for certain types of transactions.
(4) Total stockholder transaction expenses may include sales load and will be disclosed in a future prospectus or prospectus supplement, if
any.
(5) Operating expenses in this table represent our estimated
expenses.
(6)
Interest payments on borrowed funds represent our estimated annual interest payments on borrowed funds based on current debt levels
as adjusted for projected increases (but not decreases) in debt levels over the next twelve months.
(7)
Income tax expense relates to the accrual of (a) deferred tax provision (benefit) primarily related to loss carryforwards, timing
differences in net unrealized appreciation or depreciation and other temporary book-tax differences from our portfolio investments held
in Taxable Subsidiaries and (b) excise, state and other taxes. Deferred taxes are non-cash in nature and may vary significantly from
period to period. We are required to include deferred taxes in calculating our annual expenses even though deferred taxes are not
currently payable or receivable. Due to the variable nature of deferred tax expense, which can be a large portion of the income tax
expense, and the difficulty in providing an estimate for future periods, this income tax expense estimate is based upon the actual
amount of income tax expense for the year ended December 31, 2021.
(8) Acquired fund fees and expenses represent the estimated indirect expense incurred due to investments in other investment companies
and private funds.
Example
The following example demonstrates the projected dollar amount of total cumulative expenses that would be incurred over various
periods with respect to a hypothetical investment in our common stock. In calculating the following expense amounts, we have assumed we
would have no additional leverage and that our annual operating
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expenses would remain at the levels set forth in the table above and that you would pay either no sales load or a sales load of up to 1.00%
(the commission to be paid by us with respect to common stock sold by us in the ATM Program).
You would pay the following expenses on a $1,000 investment, assuming a 5.0% annual
return and no sales load
You would pay the following expenses on a $1,000 investment, assuming a 5.0% annual
return and a 1.00% sales load
1 Year
3 Years 5 Years 10 Years
$
$
88
98
$
$
253
263
$
$
405
415
$
$
736
746
The example and the expenses in the table above should not be considered a representation of our future expenses, and
actual expenses may be greater or less than those shown. While the example assumes, as required by the SEC, a 5.0% annual return, our
performance will vary and may result in a return greater or less than 5.0%. In addition, while the example assumes reinvestment of all
dividends at net asset value, participants in our dividend reinvestment plan will receive a number of shares of our common stock,
determined by dividing the total dollar amount of the dividend payable to a participant by (i) the market price per share of our common
stock at the close of trading on a valuation date determined by our Board of Directors for each dividend in the event that we use newly
issued shares to satisfy the share requirements of the dividend reinvestment plan or (ii) the average purchase price of all shares of common
stock purchased by the plan administrator in the event that shares are purchased in the open market to satisfy the share requirements of the
dividend reinvestment plan, which may be at, above or below net asset value. See the description in “Item 5. Market for Registrant’s
Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities — Common Stock and Holders” for additional
information regarding our dividend reinvestment plan.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
Item 10. Directors, Executive Officers and Corporate Governance
PART III
The information required by this Item will be contained in the definitive proxy statement relating to our 2022 Annual Meeting of
Stockholders (the “Proxy Statement”) under the headings “Election of Directors,” “Corporate Governance” and “Executive Officers” to be
filed with the Securities and Exchange Commission on or prior to April 30, 2022, and is incorporated herein by reference.
We have adopted a code of business conduct and ethics that applies to directors, officers and employees of Main Street. This code
of ethics is published on our website at www.mainstcapital.com. We intend to disclose any substantive amendments to, or waivers from,
this code of conduct within four business days of the waiver or amendment through a website posting.
Item 11. Executive Compensation
The information required by this Item will be contained in the Proxy Statement under the headings “Compensation of Executive
Officers,” “Compensation of Directors,” “Compensation Discussion and Analysis,” “Compensation Committee Interlocks and Insider
Participation” and “Compensation Committee Report,” to be filed with the Securities and Exchange Commission on or prior to April 30,
2022, and is incorporated herein by reference.
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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table provides information regarding our equity compensation plans as of December 31, 2021:
Plan Category
Equity compensation plans approved by
security holders(1)
Equity compensation plans not approved by
security holders(2)
Total
Number of Securities to be
Issued Upon Exercise of
Outstanding Options,
Warrants and Rights
Weighted‑Average Exercise
Price of Outstanding
Options, Warrants and
Rights
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation Plans
(Excluding Securities
Reflected in Column)
$
$
— $
162,040
162,040
$
— $
—
— $
1,436,233
—
1,436,233
(1) Consists of our Main Street Capital Corporation 2015 Equity and Incentive Plan and our Main Street Capital Corporation 2015 Non-
Employee Director Restricted Stock Plan. As of December 31, 2021, we had issued 1,921,088 shares of restricted stock pursuant to
these plans, of which 855,028 had vested and 57,015 shares were forfeited. Pursuant to each of these plans, if any award issued
thereunder shall for any reason expire or otherwise terminate or be forfeited, in whole or in part, the shares of stock not acquired under
such award shall revert to and again become available for issuance under such plan. For more information regarding these plans, see
“Note J — Share-Based Compensation” in the notes to the consolidated financial statements.
(2) Consists of our 2015 Deferred Compensation Plan. For more information regarding this plan, see “Note M — Related Party
Transactions” in the notes to the consolidated financial statements.
The other information required by this Item will be contained in the Proxy Statement under the heading “Security Ownership of
Certain Beneficial Owners and Management,” to be filed with the Securities and Exchange Commission on or prior to April 30, 2022, and
is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item will be contained in the Proxy Statement under the headings “Certain Relationships and
Related Party Transactions” and “Corporate Governance,” to be filed with the Securities and Exchange Commission on or prior to April 30,
2022, and is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
The information required by this Item will be contained in the Proxy Statement under the heading “Ratification of Appointment of
Independent Registered Public Accounting Firm for Year Ending December 31, 2022,” to be filed with the Securities and Exchange
Commission on or prior to April 30, 2022, and is incorporated herein by reference.
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Item 15. Exhibits and Consolidated Financial Statement Schedules
PART IV
The following documents are filed or incorporated by reference as part of this Annual Report:
1.
Consolidated Financial
Statements
Reports of Independent Registered Public Accounting Firm (PCAOB ID Number 248)
Consolidated Balance Sheets—As of December 31, 2021 and December 31, 2020
Consolidated Statements of Operations—For the years ended December 31, 2021, 2020 and 2019
Consolidated Statements of Changes in Net Assets—For the years ended December 31, 2021, 2020 and 2019
Consolidated Statements of Cash Flows—For the years ended December 31, 2021, 2020 and 2019
Consolidated Schedule of Investments—December 31, 2021
Consolidated Schedule of Investments—December 31, 2020
Notes to Consolidated Financial Statements
2.
Consolidated Financial Statement
Schedule
Report of Independent Registered Public Accounting Firm
Schedule of Investments in and Advances to Affiliates for the Years Ended December 31, 2021 and 2020
3.
Exhibits
76
81
82
83
84
86
108
130
174
175
Listed below are the exhibits which are filed as part of this report (according to the number assigned to them in Item 601 of
Regulation S-K):
Exhibit
Number
3.1*
3.2*
4.1*
4.2*
4.3*
4.4*
4.5*
Description
Articles of Amendment and Restatement of Main Street Capital Corporation (previously filed as Exhibit (a) to Main Street
Capital Corporation’s Pre-Effective Amendment No. 2 to the Registration Statement on Form N-2 filed on August 15, 2007
(Reg. No. 333-142879))
Amended and Restated Bylaws of Main Street Capital Corporation (previously filed as Exhibit 3.1 to Main Street Capital
Corporation’s Current Report on Form 8-K filed on March 6, 2013 (File No. 1-33723))
Form of Common Stock Certificate (previously filed as Exhibit (d) to Main Street Capital Corporation’s Pre-Effective
Amendment No. 2 to the Registration Statement on Form N-2 filed on August 15, 2007 (Reg. No. 333-142879))
Dividend Reinvestment and Direct Stock Purchase Plan, effective May 10, 2019 (previously filed as Exhibit 99.1 to Main
Street Capital Corporation’s Current Report on Form 8-K filed on May 10, 2019 (File No. 1-33723))
Main Street Mezzanine Fund, LP SBIC debentures guaranteed by the SBA (previously filed as Exhibit (f)(1) to Main Street
Capital Corporation’s Pre-Effective Amendment No. 1 to the Registration Statement on Form N-2 filed on June 22, 2007
(Reg. No. 333-142879))
Main Street Capital III, LP SBIC debentures guaranteed by the SBA (see Exhibit (f)(1) to Main Street Capital Corporation’s
Pre-Effective Amendment No. 1 to the Registration Statement on Form N-2 filed on June 22, 2007 for a substantially
identical copy of the form of debentures)
Form of Indenture between Main Street Capital Corporation and The Bank of New York Mellon Trust Company, N.A.
(previously filed as Exhibit (d)(6) to Main Street Capital Corporation’s Post-Effective Amendment No. 2 to the Registration
Statement on Form N-2 filed on March 28, 2013 (Reg. No. 333-183555))
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Exhibit
Number
4.6*
4.7*
4.8*
4.9*
4.10*
4.11*
4.12*
10.1*
10.2*
10.3*
10.4*
10.5*
10.6*†
10.7*†
10.8*†
10.9*†
Description
Form of Third Supplemental Indenture relating to the 4.50% Notes due 2022, between Main Street Capital Corporation and
The Bank of New York Mellon Trust Company, N.A. (previously filed as Exhibit (d)(12) to Main Street Capital
Corporation’s Post-Effective Amendment No. 14 to the Registration Statement on Form N-2 filed on November 17, 2017
(Reg. No. 333-203147))
Form of 4.50% Notes due 2022 (incorporated by reference to Exhibit 4.6)
Form of Fourth Supplemental Indenture relating to the 5.20% Notes due 2024, between Main Street Capital Corporation and
The Bank of New York Mellon Trust Company, N.A. (previously filed as Exhibit (d)(11) to Main Street Capital
Corporation’s Post-Effective Amendment No. 7 to the Registration Statement on Form N-2 filed on April 18, 2019 (Reg.
No. 333-223483))
Form of 5.20% Notes due 2024 (incorporated by reference to Exhibit 4.8)
Fifth Supplemental Indenture relating to the 3.00% Notes due 2026, between Main Street Capital Corporation and The Bank
of New York Mellon Trust Company, N.A., as trustee (previously filed as Exhibit 4.1 to Main Street Capital Corporation’s
Current Report on Form 8-K filed on January 14, 2021 (File No. 1-33723))
Form of 3.00% Notes due 2026 (incorporated by reference to Exhibit 4.10)
Description of Main Street Capital Corporation’s securities registered pursuant to Section 12 of the Securities Exchange Act
of 1934 (previously filed as Exhibit 4.11 to Main Street Capital Corporation’s Annual Report on Form 10-K filed on
February 28, 2020 (File No. 1-33723))
Omnibus Amendment No. 1, dated as of April 7, 2021, by and among Main Street, the guarantors party thereto, Truist Bank,
as administrative agent, solely with respect to Section 2 thereof, the withdrawing lender, and the lenders party thereto
(previously filed as Exhibit 10.1 to Main Street Capital Corporation’s Current Report on Form 8-K filed on April 8, 2021
(File No. 1-33723))
Third Amended and Restated General Security Agreement dated June 5, 2018 (previously filed as Exhibit 10.2 to Main
Street Capital Corporation’s Current Report on Form 8-K filed on June 6, 2018 (File No. 1-33723))
Third Amended and Restated Equity Pledge Agreement dated June 5, 2018 (previously filed as Exhibit 10.3 to Main Street
Capital Corporation’s Current Report on Form 8-K filed on June 6, 2018 (File No. 1-33723))
Amended and Restated Custodial Agreement dated September 20, 2010 (previously filed as Exhibit 10.3 to Main Street
Capital Corporation’s Current Report on Form 8-K filed September 21, 2010 (File No. 1-33723))
Third Amendment to Amended and Restated Credit Agreement and First Amendment to Amended and Restated Custodial
Agreement dated November 21, 2011 (previously filed as Exhibit 10.1 to Main Street Capital Corporation’s Current Report
on Form 8-K filed November 22, 2011 (File No. 1-33723))
Main Street Capital Corporation 2015 Equity and Incentive Plan (previously filed as Exhibit 4.4 to Main Street Capital
Corporation’s Registration Statement on Form S-8 filed on May 5, 2015 (Reg. No. 333-203893))
Main Street Capital Corporation 2015 Non-Employee Director Restricted Stock Plan (previously filed as Exhibit 4.5 to Main
Street Capital Corporation’s Registration Statement on Form S-8 filed on May 5, 2015 (Reg. No. 333-203893))
Form of Restricted Stock Agreement for Executive Officers — Main Street Capital Corporation 2015 Equity and Incentive
Plan (previously filed as Exhibit 4.6 to Main Street Capital Corporation’s Registration Statement on Form S-8 filed on
May 5, 2015 (Reg. No. 333-203893))
Form of Restricted Stock Agreement for Non-Employee Directors — Main Street Capital Corporation 2015 Non-Employee
Director Restricted Stock Plan (previously filed as Exhibit 4.7 to Main Street Capital Corporation’s Registration Statement
on Form S-8 filed on May 5, 2015 (Reg. No. 333-203893))
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Table of Contents
Exhibit
Number
10.10*
10.11*†
10.12*†
10.13*
10.14*†
10.15*
14.1**
21.1**
23.1**
31.1**
31.2**
32.1**
32.2**
Description
Custodian Agreement (previously filed as Exhibit (j) to Main Street Capital Corporation’s Pre-Effective Amendment No. 3
to the Registration Statement on Form N-2 filed on September 21, 2007 (Reg. No. 333-142879))
Form of Confidentiality and Non-Compete Agreement by and between Main Street Capital Corporation and Vincent D.
Foster (previously filed as Exhibit (k)(12) to Main Street Capital Corporation’s Pre-Effective Amendment No. 3 to the
Registration Statement on Form N-2 filed on September 21, 2007 (Reg. No. 333-142879))
Form of Indemnification Agreement by and between Main Street Capital Corporation and each executive officer and
director (previously filed as Exhibit (k)(13) to Main Street Capital Corporation’s Pre-Effective Amendment No. 3 to the
Registration Statement on Form N-2 filed on September 21, 2007 (Reg. No. 333-142879))
Investment Advisory and Administrative Services Agreement dated October 30, 2020 by and among MSC Adviser I, LLC
and MSC Income Fund, Inc. (previously filed as Exhibit 10.1 to Main Street Capital Corporation’s Current Report on Form
8-K filed on November 3, 2020 (File No. 1-33723))
Main Street Capital Corporation Deferred Compensation Plan Adoption Agreement and Plan Document (previously filed as
Exhibit 4.1 to Main Street Capital Corporation’s Registration Statement on Form S-8 filed on December 18, 2015 (File
No. 333-208643))
Form of Equity Distribution Agreement dated May 16, 2019 (previously filed as Exhibit 1.1 to Main Street Capital
Corporation’s Current Report on Form 8-K filed on May 16, 2019 (File No. 1-33723))
Business Conduct and Ethics
List of Subsidiaries
Consent of Grant Thornton LLP, independent registered public accounting firm
Rule 13a-14(a)/15d-14(a) certification of Chief Executive Officer
Rule 13a-14(a)/15d-14(a) certification of Chief Financial Officer
Section 1350 certification of Chief Executive Officer
Section 1350 certification of Chief Financial Officer
*
Exhibit previously filed with the Securities and Exchange Commission, as indicated, and incorporated herein by
reference.
** Furnished
herewith.
† Management contract or compensatory plan or
arrangement.
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Table of Contents
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
MAIN STREET CAPITAL CORPORATION
By:
/s/ DWAYNE L. HYZAK
Dwayne L. Hyzak
Chief Executive Officer and Director
Date: February 25, 2022
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ DWAYNE L. HYZAK
Dwayne L. Hyzak
/s/ JESSE E. MORRIS
Jesse E. Morris
/s/ LANCE A. PARKER
Lance A. Parker
/s/ VINCENT D. FOSTER
Vincent D. Foster
/s/ ARTHUR L. FRENCH
Arthur L. French
/s/ J. KEVIN GRIFFIN
J. Kevin Griffin
/s/ JOHN E. JACKSON
John E. Jackson
/s/ BRIAN E. LANE
Brian E. Lane
/s/ KAY MATTHEWS
Kay Matthews
/s/ DUNIA A. SHIVE
Dunia A. Shive
/s/ STEPHEN B. SOLCHER
Stephen B. Solcher
Chief Executive Officer and Director
(principal executive officer)
Chief Financial Officer, Chief Operating Officer
(principal financial officer)
Vice President, Chief Accounting Officer
(principal accounting officer)
February 25, 2022
February 25, 2022
February 25, 2022
Chairman of the Board
February 25, 2022
Director
Director
Director
Director
Director
Director
Director
192
February 25, 2022
February 25, 2022
February 25, 2022
February 25, 2022
February 25, 2022
February 25, 2022
February 25, 2022
Exhibit 14.1
MAIN STREET CAPITAL
CORPORATION
MSC INCOME FUND, INC.
MSC ADVISER I, LLC
JOINT CODE OF ETHICS
This Code of Ethics (the “Code”) has been adopted by the Board of Directors of each of Main Street Capital Corporation (“Main
Street”) and MSC Income Fund, Inc. (“MSIF” and, together with Main Street, the “BDCs”) in accordance with Rule 17j-l(c) under the
Investment Company Act of 1940, as amended (the “1940 Act”), and the May 9, 1994 Report of the Advisory Group on Personal Investing
by the Investment Company Institute (the “Report”). Rule 17j-1 generally describes fraudulent or manipulative practices with respect to
purchases or sales of securities held or to be acquired by business development companies if effected by access persons of such companies.
In addition, this Code Ethics shall serve as the code of ethics required to be adopted by Rule 204A-1 under the Investment
Advisers Act of 1940 (the “Advisers Act”) and, to the extent applicable, by Rule 17j-1 under the 1940 Act in connection with the provision
of investment advisory services by Main Street and its wholly owned subsidiary MSC Advisor I, LLC (“MSCA” and, together with the
BDCs, the “Company”) to third parties (“Clients”). Rule 204A-1 requires every registered investment adviser to establish, maintain, and
enforce a written investment adviser code of ethics that is applicable to its “supervised persons.” Section 202(a)(25) of the Advisers Act
defines the term “supervised persons” to include all of the officers, directors, and employees of the investment adviser, or other person who
provides investment advice on behalf of the investment adviser and is subject to the supervision and control of the investment adviser. As
used herein, the term “employees” consists of all employees of Main Street and MSCA who, in the course of their business, act as an
investment adviser as defined under the Advisers Act in providing investment advice to Clients and those employees that make, participate
in or obtain non-public information regarding the portfolio management decisions relating to the investment advisory services.
The purpose of this Code of Ethics is to reflect the following: (1) the duty at all times to place the interests of shareholders
and Clients, as appropriate, of the Company first; (2) the requirement that all personal securities transactions be conducted
consistent with the Code of Ethics and in such a manner as to avoid any actual or potential conflict of interest or any abuse of an
individual’s position of trust and responsibility; and (3) the fundamental standard that business development company and
investment advisory personnel, as appropriate, should not take inappropriate advantage of their positions.
PART A. RULE 17j-1 OF THE 1940 ACT
SECTION I:
STATEMENT OF PURPOSE AND APPLICABILITY
(A)
Statement of Purpose
It shall be a violation of the policy of the Company for any affiliated person of the Company, in connection with the
purchase or sale, directly or indirectly, by such person of any security held or to be acquired by the Company, to:
(1)
(2)
(3)
(4)
employ any device, scheme or artifice to defraud the Company;
make to the Company any untrue statement of a material fact or omit to state to the Company a material fact
necessary in order to make the statement made, in light of the circumstances under which it is made, not
misleading;
engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon the
Company; or
engage in any manipulative practice with respect to the
Company.
1
(B)
Scope of the Code
In order to prevent the Access Persons, as defined in Section II, paragraph (A) below, of the Company from engaging in
any of these prohibited acts, practices or courses of business, the Board of Directors of the Company has adopted this
Code.
SECTION II: DEFINITIONS
(A)
(B)
(C)
(D)
(E)
(F)
(G)
(H)
(I)
Access Person. “Access Person” means any director, officer, or Advisory Person of the Company.
Advisory Person. “Advisory Person” of the Company means: (i) any employee of the Company or of any company in a
control relationship to the Company, who, in connection with his or her regular functions or duties, makes, participates in,
or obtains information regarding the purchase or sale of a Covered Security by the Company, or whose functions relate to
the making of any recommendations with respect to such purchases or sales; and (ii) any natural person in a control
relationship to the Company who obtains information concerning recommendations made to the Company with regard to
the purchase or sale of Covered Security.
Beneficial Interest. “Beneficial Interest” includes any entity, person, trust, or account with respect to which an Access
Person exercises investment discretion or provides investment advice. A beneficial interest shall be presumed to include
all accounts in the name of or for the benefit of the Access Person, his or her spouse, dependent children, or any person
living with him or her or to whom he or she contributes economic support.
Beneficial Ownership. “Beneficial Ownership” shall be determined in accordance with Rule 16a-1(a)(2) under the
Securities Exchange Act of 1934, except that the determination of direct or indirect Beneficial Ownership shall apply to all
securities, and not just equity securities, that an Access Person has or acquires. Rule 16a-1(a)(2) provides that the term
“beneficial owner” means any person who, directly or indirectly, through any contract, arrangement, understanding,
relationship, or otherwise, has or shares a direct or indirect pecuniary interest in any equity security. Therefore, an Access
Person may be deemed to have Beneficial Ownership of securities held by members of his or her immediate family sharing
the same household, or by certain partnerships, trusts, corporations, or other arrangements.
Control. “Control” shall have the same meaning as that set forth in Section 2(a)(9) of the 1940 Act.
Covered Security. “Covered Security” means a security as defined in Section 2(a)(36) of the 1940 Act, except that it does
not include (i) direct obligations of the Government of the United States; (ii) banker’s acceptances, bank certificates of
deposit, commercial paper and high quality short-term debt instruments including repurchase agreements; and (iii) shares
issued by registered open-end investment companies (i.e., mutual funds); however, exchange traded funds structured as
unit investment trusts or open-end funds are considered “Covered Securities”.
Designated Officer. “Designated Officer” shall mean the officer of the Company designated by the Board of Directors
from time to time to be responsible for management of compliance with this Code, who shall initially be the Chief
Compliance Officer of the Company until such time as the Board of Directors shall appoint a successor. The Designated
Officer may appoint a designee to carry out certain of his or her functions pursuant to this Code.
Disinterested Director. “Disinterested Director” means a director of the Company who is not an “interested person” of
the Company within the meaning of Section 2(a)(19) of the 1940 Act.
Initial Public Offering. “Initial Public Offering” means an offering of securities registered under the Securities Act of
1933, as amended (the “Securities Act”), the issuer of which, immediately before the
2
registration, was not subject to the reporting requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934.
(J)
(K)
(L)
Investment Personnel. “Investment Personnel” means: (i) any employee of the Company (or of any company in a control
relationship to the Company) who, in connection with his or her regular functions or duties, makes or participates in
making recommendations regarding the purchase or sale of securities by the Company; and (ii) any natural person who
controls the Company and who obtains information concerning recommendations regarding the purchase or sale of
securities by the Company.
Limited Offering. “Limited Offering” means an offering that is exempt from registration under the Securities Act pursuant
to Section 4(2) or Section 4(6) or pursuant to Rule 504, Rule 505 or Rule 506 under the Securities Act.
Purchase or Sale of a Covered Security. “Purchase or Sale of a Covered Security” is broad and includes, among other
things, the writing of an option to purchase or sell a covered security, or the use of a derivative product to take a position in
a Covered Security.
SECTION III: STANDARDS OF CONDUCT
(A)
General Standards
(1)
(2)
(3)
No Access Person shall engage, directly or indirectly, in any business transaction or arrangement for personal
profit that is inconsistent with the best interests of the Company or its shareholders; nor shall he or she make use
of any confidential information gained by reason of his or her employment by or affiliation with the Company or
affiliates thereof in order to derive a personal profit for himself or herself or for any Beneficial Interest, in
violation of the fiduciary duty owed to the Company or its shareholders.
Any Access Person recommending or authorizing the purchase or sale of a Covered Security by the Company
shall, at the time of such recommendation or authorization, disclose any Beneficial Interest in, or Beneficial
Ownership of, such Covered Security or the issuer thereof.
No Access Person shall dispense any information concerning securities holdings or securities transactions of the
Company to anyone outside the Company, without obtaining prior written approval from the Designated
Officer, or such person or persons as these individuals may designate to act on their behalf. Notwithstanding the
preceding sentence, such Access Person may dispense such information without obtaining prior written
approval:
(a)
(b)
(c)
(d)
when
there
information;
is a public report containing
the same
when such information is dispensed in accordance with compliance procedures established to prevent
conflicts of interest between the Company and its affiliates;
when such information is reported to directors of the Company; or
in the ordinary course of his or her duties on behalf of the
Company.
(4)
All personal securities transactions should be conducted consistent with this Code and in such a manner as to
avoid actual or potential conflicts of interest, the appearance of a conflict of interest, or any abuse of an
individual’s position of trust and responsibility within the Company.
3
(B)
Prohibited Transactions
(1)
General Prohibition. No Access Person shall purchase or sell, directly or indirectly, any Covered Security in
which he or she has, or by reason of such transaction acquires, any direct or indirect Beneficial Ownership and
which such Access Person knows or should have known at the time of such purchase or sale is being considered
for purchase or sale by the Company, or is held in the portfolio of the Company unless such Access Person shall
have obtained prior written approval for such purpose from the Designated Officer.
(a)
(b)
(c)
(d)
An Access Person who becomes aware that the Company is considering the purchase or sale of any
Covered Security by any person (an issuer) must immediately notify the Designated Officer of any
interest that such Access Person may have in any outstanding Covered Securities of that issuer.
An Access Person shall similarly notify the Designated Officer of any other interest or connection that
such Access Person might have in or with such issuer.
Once an Access Person becomes aware that the Company is considering the purchase or sale of a
Covered Security or that the Company holds a Covered Security in its portfolio, such Access Person
may not engage, without prior approval of the Designated Officer, in any transaction in any Covered
Securities of that issuer.
The foregoing notifications or permission may be provided verbally, but should be confirmed in writing
as soon and with as much detail as possible.
Initial Public Offerings and Limited Offerings. Investment Personnel of the Company must obtain approval
from the Company before directly or indirectly acquiring beneficial ownership in any securities in an Initial
Public Offering or in a Limited Offering. For purposes of the pre-clearance requirements, transactions in digital
assets and cryptocurrencies, such as Bitcoin and Ethereum, as well as other tokens or similar assets shall be
treated as transactions in securities, thus requiring pre-clearance where such assets are acquired through a private
placement or initial public offering regardless of whether such assets are deemed to be “securities” for purposes
of the federal securities laws.
Blackout Periods. No Investment Personnel shall execute a securities transaction in any security that the
Company owns or is considering for purchase or sale.
Company Acquisition of Shares in Companies that Investment Personnel Hold Through Limited Offerings.
Investment Personnel who have been authorized to acquire securities in a Limited Offering must disclose that
investment to the Designated Officer when they are involved in the Company’s subsequent consideration of an
investment in the issuer, and the Company’s decision to purchase such securities must be independently
reviewed by Investment Personnel with no personal interest in that issuer.
Gifts and Entertainment. No Access Person may accept, directly or indirectly, any gift, favor, or service of more
than a de minimis value from any person with whom he or she transacts business on behalf of the Company
under circumstances when to do so would conflict with the Company’s best interests or would impair the ability
of such person to be completely disinterested when required, in the course of business, to make judgments and/or
recommendations on behalf of the Company. The foregoing restrictions do not apply to ordinary and usual
business entertainment. For an item to be considered “business entertainment,” a representative of the
vendor/host must be present at the event/meal and there must be an opportunity to discuss matters related to the
Company or Client business. Questions regarding these restrictions should be directed to the Designated
Officer.
(2)
(3)
(4)
(5)
4
(6)
Service as Director. No Access Person shall serve on the board of directors of a portfolio company of the
Company without prior written authorization of the Designated Officer based upon a determination that the
board service would be consistent with the interests of the Company and its shareholders.
SECTION IV: PROCEDURES TO IMPLEMENT CODE OF ETHICS
The following reporting procedures have been established to assist Access Persons in avoiding a violation of this Code, and to
assist the Company in preventing, detecting, and imposing sanctions for violations of this Code. Every Access Person must follow these
procedures. Questions regarding these procedures should be directed to the Designated Officer.
(A)
Applicability
All Access Persons are subject to the reporting requirements set forth in Section IV(B) except:
(1)
(2)
(3)
with respect to transactions effected for, and Covered Securities held in, any account over which the Access
Person has no direct or indirect influence or control;
a Disinterested Director, who would be required to make a report solely by reason of being a Director, need not
make: (1) an initial holdings or an annual holdings report; and (2) a quarterly transaction report, unless the
Disinterested Director knew or, in the ordinary course of fulfilling his or her official duties as a Director, should
have known that during the 15-day period immediately before or after such Disinterested Director’s transaction
in a Covered Security, the Company purchased or sold the Covered Security, or the Company considered
purchasing or selling the Covered Security; and
an Access Person need not make a quarterly transaction report if the report would duplicate information
contained in broker trade confirmations or account statements received by the Company with respect to the
Access Person in the time required by subsection (B)(2) of this Section IV, if all of the information required by
subsection (B)(2) of this Section IV is contained in the broker trade confirmations or account statements, or in
the records of the Company, as specified in subsection (B)(4) of this Section IV.
(B)
Report Types
(1)
Initial Holdings Report. An Access Person must file an initial report not later than 10 days after that person
became an Access Person. The initial report must: (a) contain the title, number of shares and principal amount
of each Covered Security in which the Access Person had any direct or indirect beneficial ownership when the
person became an Access Person; (b) identify any broker, dealer or bank with whom the Access Person
maintained an account in which any Covered Securities were held for the direct or indirect benefit of the Access
Person as of the date the person became an Access Person; and (c) indicate the date that the report is filed with
the Designated Person. A copy of a form of such report is attached hereto as Exhibit B.
(2)
Quarterly Transaction Report. An Access Person must file a quarterly transaction report not later than 30 days
after the end of a calendar quarter.
(a)
With respect to any transaction made during the reporting quarter in a Covered Security in which such
Access Person had any direct or indirect beneficial ownership, the quarterly transaction report must
contain: (i) the transaction date, title, interest date and maturity date (if applicable), the number of
shares and the principal amount of each Covered Security; (ii) the nature of the transaction (i.e.,
purchase, sale or any other type of acquisition or disposition); (iii) the price of the Covered Security at
which
5
the transaction was effected; (iv) the name of the broker, dealer or bank through which the transaction
was effected; and (v) the date that the report is submitted by the Access Person. A copy of a form of
such report is attached hereto as Exhibit C.
(b)
With respect to any account established by the Access Person in which any securities were held during
the quarter for the direct or indirect benefit of the Access Person, the quarterly transaction report must
contain: (i) the name of the broker, dealer or bank with whom the Access Person established the
account; (ii) the date the account was established; and (iii) the date that the report is submitted by the
Access Person. A copy of a form of such report is attached hereto as Exhibit E unless provided under
C.
Annual Holdings Report. An Access Person must file an annual holdings report not later than 30 days after the
end of a fiscal year. The annual report must contain the following information (which information must be
current as of a date no more than 30 days before the report is submitted): (a) the title, number of shares, and
principal amount of each Covered Security in which the Access Person had any direct or indirect beneficial
ownership; (b) the name of any broker, dealer or bank in which any Covered Securities are held for the direct or
indirect benefit of the Access Person; and (c) the date the report is submitted. A copy of a form of such report is
attached hereto as Exhibit D.
Account Statements. In lieu of providing a quarterly transaction report, an Access Person may direct his or her
broker to provide to the Designated Officer copies of periodic statements for all investment accounts in which
they have Beneficial Ownership that provide the information required in quarterly transaction reports, as set
forth above.
Company Reports. No less frequently than annually, the Company must furnish to the Board, and the Board
must consider, a written report that:
(a)
(b)
describes any issues arising under the Code or procedures since the last report to the Board, including
but not limited to, information about material violations of the code or procedures and sanctions
imposed in response to the material violations; and
certifies that the Company has adopted procedures reasonably necessary to prevent Access Persons
from violating the Code.
(3)
(4)
(5)
(C)
(D)
(E)
Disclaimer of Beneficial Ownership. Any report required under this Section IV may contain a statement that the report
shall not be construed as an admission by the person submitting such duplicate confirmation or account statement or
making such report that he or she has any direct or indirect beneficial ownership in the Covered Security to which the
report relates.
Review of Reports. The reports required to be submitted under this Section IV shall be delivered to the Designated
Officer. The Designated Officer shall review such reports to determine whether any transactions recorded therein
constitute a violation of the Code. Before making any determination that a violation has been committed by any Access
Person, such Access Person shall be given an opportunity to supply additional explanatory material. The Designated
Officer shall maintain copies of the reports as required by Rule 17j-1(f).
Acknowledgment and Certification. Upon becoming an Access Person and annually thereafter, all Access Persons shall
sign an acknowledgment and certification of their receipt of and intent to comply with this Code in the form attached
hereto as Exhibit A and return it to the Designated Officer. Each Access Person must also certify annually that he or she
has read and understands the Code and recognizes that he or she is subject to the Code. In addition, each access person
must certify annually that he or she has complied with the requirements of the Code and that he or she has disclosed or
reported all personal securities transactions required to be disclosed or reported pursuant to the requirements of the Code.
6
(F)
Records. The Company shall maintain records with respect to this Code in the manner and to the extent set forth below,
which records may be maintained on microfilm or electronic storage media under the conditions described in Rule 31a-2(f)
under the 1940 Act and shall be available for examination by representatives of the Securities and Exchange Commission
(the “SEC”):
(1)
(2)
(3)
(4)
(5)
(6)
A copy of this Code and any other code of ethics of the Company that is, or at any time within the past five
years has been, in effect shall be maintained in an easily accessible place;
A record of any violation of this Code and of any action taken as a result of such violation shall be maintained in
an easily accessible place for a period of not less than five years following the end of the fiscal year in which the
violation occurs;
A copy of each report made by an Access Person or duplicate account statement received pursuant to this Code,
including any information provided in lieu of the reports under subsection (A)(3) of this Section IV shall be
maintained for a period of not less than five years from the end of the fiscal year in which it is made or the
information is provided, the first two years in an easily accessible place;
A record of all persons who are, or within the past five years have been, required to make reports pursuant to this
Code, or who are or were responsible for reviewing these reports, shall be maintained in an easily accessible
place;
A copy of each report required under subsection (B)(5) of this Section IV shall be maintained for at least five
years after the end of the fiscal year in which it is made, the first two years in an easily accessible place; and
A record of any decision, and the reasons supporting the decision, to approve the direct or indirect acquisition by
an Access Person of beneficial ownership in any securities in an Initial Public Offering or Limited Offering shall
be maintained for at least five years after the end of the fiscal year in which the approval is granted.
(G)
(H)
Obligation to Report a Violation. Every Access Person who becomes aware of a violation of this Code by any person
must report it to the Designated Officer, who shall report it to appropriate management personnel. The management
personnel will take such disciplinary action that they consider appropriate under the circumstances. In the case of officers
or other employees of the Company, such action may include removal from office. If the management personnel consider
disciplinary action against any person, they will cause notice thereof to be given to that person and provide to that person
the opportunity to be heard. The Board will be notified, in a timely manner, of remedial action taken with respect to
violations of the Code.
Confidentiality. All reports of Covered Securities transactions, duplicate confirmations, account statements and other
information filed with the Company or furnished to any person pursuant to this Code shall be treated as confidential, but
are subject to review as provided herein and by representatives of the SEC or otherwise to comply with applicable law or
the order of a court of competent jurisdiction.
7
SECTION V: SANCTIONS
Upon determination that a violation of this Code has occurred, appropriate management personnel of the Company may impose
such sanctions as they deem appropriate, including, among other things, disgorgement of profits, a letter of censure or suspension or
termination of the employment of the violator. All violations of this Code and any sanctions imposed with respect thereto shall be reported
in a timely manner to the Board of Directors of the Company.
PART B. RULE 204A-1 OF THE ADVISERS ACT/RULE 17j-1 OF THE 1940 ACT
For purposes of Rule 204A-1 of the Advisers Act and, to the extent applicable, Rule 17j-1 of the 1940 Act, the provisions set forth
in Part A to this Code of Ethics shall apply in connection with the Company’s provision of investment advisory services to Clients except
that it shall be interpreted in a manner to protect the interests of Clients, including prohibiting supervised persons of the Company from: (i)
employing any device, scheme or artifice to defraud the Client; (ii) making any untrue statement of a material fact to the Client or omitting
to state a material fact necessary in order to make the statements made to the Client, in light of the circumstances under which they are
made, not misleading; (iii) engaging in any act, practice or course of business conduct that operates or would operate as a fraud or deceit on
the Client; and (iv) engaging in any manipulative practice with respect to the Client.
Notwithstanding the foregoing, the administrative provisions, enforcement provisions, approval (including pre-approval)
provisions and recordkeeping provisions (which shall be read to refer to Rule 204-2 under the Advisers Act for purposes of this Part B) set
forth in Part A of this Code of Ethics shall continue to be the exclusive/sole province of the Company for purposes of Part B of this Code of
Ethics. For example, the initial, annual and quarterly holding report obligations set forth in Part A of this Code of Ethics shall be furnished
by supervised persons of the Company to the Company (and not to the Client) for purposes of Part B to this Code of Ethics.
v.11.2020
8
EXHIBIT A
ACKNOWLEDGMENT AND CERTIFICATION
I acknowledge receipt of the Code of Ethics of Main Street Capital Corporation, MSC Adviser I, LLC and MSC Income Fund, Inc.. I have
read and understand such Code of Ethics and agree to be governed by it at all times. Further, if I have been subject to the Code of Ethics
during the preceding year, I certify that I have complied with the requirements of the Code of Ethics and have disclosed or reported all
personal securities transactions required to be disclosed or reported pursuant to the requirements of the Code of Ethics.
(Signature)
(Please print name)
Date:
Date
Date Received:
Reviewed By:
Note – the form shown above is for illustrative purposes and is representative of the certification provided by employees of the
Company using the Company’s compliance portal, MyComplianceOffice, accessible to employees of the Company. The form itself is
not typically used in practice, but it would be an acceptable, temporary alternative if the compliance portal was not accessible.
9
Name
Date
EXHIBIT B
INITIAL HOLDINGS REPORT
NAME OF ISSUER
NUMBER OF SHARES
PRINCIPAL AMOUNT
I certify that the foregoing is a complete and accurate list of all securities in which I have any Beneficial Ownership.
Date Received:
Reviewed By:
(Signature)
Date
Note – the form shown above is for illustrative purposes and is representative of the report provided by employees of the Company
using the Company’s compliance portal, MyComplianceOffice, accessible to employees of the Company. The form itself is not
typically used in practice, but it would be an acceptable, temporary alternative if the compliance portal was not accessible.
10
Name
Date
EXHIBIT C
QUARTERLY TRANSACTION REPORT
DATE
NAME OF
ISSUER
NUMBER
OF
SHARES
INTEREST
DATE
MATURITY
DATE
PRINCIPAL
AMOUNT
TYPE OF
TRANSACTION
NAME OF
BROKER/
DEALER/
BANK
I certify that the foregoing is a complete and accurate list of all transactions for the covered period in securities in which I have any
Beneficial Ownership.
Date Received:
Reviewed By:
(Signature)
Date
Note – the form shown above is for illustrative purposes and is representative of the report provided by employees of the Company
using the Company’s compliance portal, MyComplianceOffice, accessible to employees of the Company. The form itself is not
typically used in practice, but it would be an acceptable, temporary alternative if the compliance portal was not accessible.
11
Name
Date
EXHIBIT D
ANNUAL HOLDINGS REPORT
NAME OF ISSUER
NUMBER OF SHARES
PRINCIPAL AMOUNT
NAME OF
BROKER/DEALER/ BANK
I certify that the foregoing is a complete and accurate list of all securities in which I have any Beneficial Ownership.
Date Received:
Reviewed By:
(Signature)
Date
Note – the form shown above is for illustrative purposes and is representative of the report provided by employees of the Company
using the Company’s compliance portal, MyComplianceOffice, accessible to employees of the Company. The form itself is not
typically used in practice, but it would be an acceptable, temporary alternative if the compliance portal was not accessible.
12
EXHIBIT E
PERSONAL SECURITIES ACCOUNT INFORMATION
Name
Date
SECURITIES
FIRM NAME AND ADDRESS
ACCOUNT NUMBER
ACCOUNT NAME(S)
I certify that the foregoing is a complete and accurate list of all securities accounts in which I have any Beneficial Ownership.
Date Received:
Reviewed By:
(Signature)
Date
Note – the form shown above is for illustrative purposes and is representative of the report provided by employees of the Company
using the Company’s compliance portal, MyComplianceOffice, accessible to employees of the Company. The form itself is not
typically used in practice, but it would be an acceptable, temporary alternative if the compliance portal was not accessible.
13
Exhibit 21.1
LIST OF SUBSIDIARIES
Main Street Capital Partners, LLC, a Delaware limited liability company
Main Street Mezzanine Management, LLC, a Delaware limited liability company
Main Street Equity Interests, Inc., a Delaware corporation
Main Street Mezzanine Fund, LP, a Delaware limited partnership
Main Street Capital II GP, LLC, a Delaware limited liability company
Main Street Capital II, LP, a Delaware limited partnership
Main Street Capital III GP, LLC, a Delaware limited liability company
Main Street Capital III, LP, a Delaware limited partnership
Main Street CA Lending, LLC, a Delaware limited liability company
MS Equity Holdings, Inc., a Delaware corporation
MS International Holdings, Inc., a Delaware corporation
1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have issued our reports dated February 25, 2022, with respect to the consolidated financial statements, financial highlights,
financial statement schedule and internal control over financial reporting included in the Annual Report of Main Street Capital Corporation
on Form 10-K for the year ended December 31, 2021. We consent to the incorporation by reference of said reports in the Registration
Statements of Main Street Capital Corporation on Form N-2 (File No. 333-231146) and Form S-8 (File Nos. 333-203893 and 333-208643).
Exhibit 23.1
/s/ GRANT THORNTON LLP
Houston, Texas
February 25, 2022
1
Exhibit 31.1
CERTIFICATION PURSUANT TO
RULE 13a-14(a) and 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED
I, Dwayne L. Hyzak, certify that:
1.
I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2021 of Main Street Capital
Corporation (the “registrant”);
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this
report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; and
d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s Board of Directors (or persons performing
the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting.
Date: February 25, 2022
By:
/s/ Dwayne L. Hyzak
Dwayne L. Hyzak
Chief Executive Officer
1
Exhibit 31.2
CERTIFICATION PURSUANT TO
RULE 13a-14(a) and 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED
I, Jesse E. Morris, certify that:
1.
I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2021 of Main Street Capital
Corporation (the “registrant”);
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this
report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; and
d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s Board of Directors (or persons performing
the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting.
Date: February 25, 2022
By:
/s/ Jesse E. Morris
Brent D. Smith
Chief Financial Officer
1
CERTIFICATION PURSUANT TO
SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the accompanying Annual Report of Main Street Capital Corporation (the “Company”) on Form 10-K for the
year ended December 31, 2021 (the “Report”), I, Dwayne L. Hyzak, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C.
§1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
(1)
1934, as amended; and
The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date: February 25, 2022
By:
/s/ Dwayne L. Hyzak
Dwayne L. Hyzak
Chief Executive Officer
1
CERTIFICATION PURSUANT TO
SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
In connection with the accompanying Annual Report of Main Street Capital Corporation (the “Company”) on Form 10-K for the
year ended December 31, 2021 (the “Report”), I, Brent D. Smith, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C.
§1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
(1)
1934, as amended; and
The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date: February 25, 2022
By:
/s/ Jesse E. Morris
Brent D. Smith
Chief Financial Officer
1