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Borrowings
 6 Months Ended
Jun. 30, 2024
Debt Disclosure [Abstract]  
Borrowings Borrowings
In accordance with the 1940 Act, the Company is permitted to borrow amounts such that its asset coverage ratio, as defined in the 1940 Act, is at least 150% after such borrowing. As of June 30, 2024 and December 31, 2023, the Company’s asset coverage ratio based on aggregate borrowings outstanding was 196% and 204%, respectively.
The Company’s outstanding debt as of June 30, 2024 and December 31, 2023 was as follows:
As of June 30, 2024As of December 31, 2023
Total
Aggregate
Principal
Amount
Committed/
Outstanding (1)
Principal
Amount
Outstanding
Carrying Value (2)
Unamortized Debt Issuance Costs
Total
Aggregate
Principal
Amount
Committed/
Outstanding (1)
Principal
Amount
Outstanding
Carrying Value (2)
Unamortized Debt Issuance Costs
SPV Credit Facility$450,000 $443,400 $443,327 $73 $450,000 $179,000 $178,098 $902 
Term Loan241,347241,347239,1912,156120,288120,288119,2401,048
2022 ABS306,000(3)306,000302,7863,214306,000(3)306,000300,8105,190
2023 ABS185,850(4)185,850184,1971,653185,850(4)185,850183,8402,010
Revolving Credit Facility385,000349,800346,3123,488325,000256,808253,5793,229
2028 Notes200,000200,000197,9952,005200,000200,000197,7672,233
SPV III Credit Facility
100,00050,00048,7741,226————
Total$1,868,197 $1,776,397 $1,762,582 $13,815 $1,587,138 $1,247,946 $1,233,334 $14,612 
_________________________________________
(1)Represents the total aggregate amount committed or outstanding, as applicable, under such instrument.
(2)Represents the principal amount outstanding, less unamortized debt issuance costs.
(3)As of both June 30, 2024 and December 31, 2023, the 2022 Class C Notes and 2022 Subordinated Notes (as defined below) totaling $36,125 and $82,875, respectively, are excluded from the total aggregate principal amount committed/outstanding amount as these notes are eliminated in consolidation.
(4)As of both June 30, 2024 and December 31, 2023, the 2023 Subordinated Notes (as defined below) totaling $65,319 are excluded from the total aggregate principal amount committed/outstanding amount as these notes are eliminated in consolidation.
SPV Credit Facility: The Company has a $450,000 SPV Credit Facility with KeyBank National Association, as agent, through the Company’s wholly-owned subsidiary, the SPV. The Company’s ability to borrow under the SPV Credit Facility is subject to certain financial and restrictive covenants as well as availability under the borrowing base, which permits the Company to borrow up to 72% of the principal balance of its portfolio company investments depending on the type of investment, subject to a maximum advance rate on the portfolio of 67%. Under the terms of the SPV Credit Facility, the SPV is permitted to reinvest available cash and make new borrowings under the SPV Credit Facility through July 16, 2024. The maturity date of the SPV Credit Facility is July 16, 2026. Distributions from the SPV to the Company are limited by the terms of the SPV Credit Facility, which generally allows for the distribution of net interest income pursuant to a waterfall quarterly during the reinvestment period. As of June 30, 2024 and December 31, 2023, the fair value of investments of the Company that were held in the SPV as collateral for the SPV Credit Facility was $896,854 and $759,141, respectively, and these investments are identified on the accompanying consolidated schedules of investments.
During the reinvestment period, borrowings under the SPV Credit Facility bear interest at an annual rate of SOFR (one or three month, at the SPV’s option and subject to a SOFR minimum of 0.50%) plus a margin ranging from 2.75% to a maximum of 3.00%, depending on the level of utilization of the facility and the number of obligors of eligible loans pledged as collateral in the SPV. After the reinvestment period, borrowings under the SPV Credit Facility bear interest at an annual rate of SOFR plus 3.25%. In addition to the stated interest rate on borrowings, the SPV is required to pay an unused commitment fee of (i) 0.50% per annum on any unused portion of the SPV Credit Facility when the outstanding borrowings are less than or equal to 60% of the facility amount and (ii) 0.35% per annum on any unused portion of the SPV Credit Facility when the outstanding borrowings are greater than 60% of the facility amount. As of both June 30, 2024 and December 31, 2023, the outstanding borrowings were accruing at a weighted average interest rate of 8.2%. See Note 13 for discussion of a subsequent event related to an amendment to the SPV Credit Facility.
Term Loan: On December 20, 2022, the Company entered into the Term Loan with KeyBank National Association, as lead arranger and administrative agent, through a special purpose wholly-owned subsidiary, SPV II as borrower. The Term Loan initially allowed SPV II to borrow an aggregate principal amount of $100,000, and includes an accordion feature which allows the Company, under certain circumstances, to increase the total size of the facility upon request to the administrative agent and with the consent of one or more increasing or additional lenders. Through a series of amendments, most recently on June 18, 2024, the Company increased the facility amount pursuant to the accordion feature of the Term Loan to $245,447. As of June 30, 2024, the aggregate commitments and principal amount outstanding under the Term Loan were $241,347. As of June 30, 2024 and December 31, 2023 the fair value of the Company’s investments held in SPV II as collateral for the Term Loan was $340,690 and $216,104, respectively, and these investments are identified on the accompanying consolidated schedules of investments.
Borrowings under the Term Loan bear interest at Adjusted Term SOFR (subject to a SOFR minimum of 0.50%) plus an applicable margin rate of 2.40% per annum during the initial period, December 20, 2022 through December 20, 2025, and 3.40% per annum during the amortization period, December 21, 2025 through December 20, 2026. The Term Loan matures on December 20, 2026, unless sooner terminated in accordance with its terms. As of both June 30, 2024 and December 31, 2023, the outstanding borrowings were accruing at a weighted average interest rate of 7.7%.
Under the terms of the Term Loan, pursuant to a monthly waterfall and subject to the satisfaction of certain coverage tests and portfolio quality tests, SPV II is permitted to reinvest 25% of principal proceeds during the initial period, with the remaining 75% applied to prepay the Term Loan. During the amortization period, pursuant to a monthly waterfall, 100% of principal proceeds must be applied to prepay the Term Loan. The Term Loan contains representations and warranties and affirmative and negative covenants customary for secured financings of this type. The Term Loan also contains customary events of default (subject to certain grace periods, as applicable), including but not limited to the nonpayment of principal, interest or fees, breach of covenants, voluntary or involuntary bankruptcy proceedings and change of control of the borrower.
2022 Asset-Backed Securitization: On April 7, 2022, the Company completed a $425,000 asset-backed securitization (the “2022 ABS”). The notes offered in the 2022 ABS were issued by the 2022 Issuer, a wholly-owned subsidiary of the Company, and are secured by a diversified portfolio of senior secured loans. The transaction was executed through a private placement of $261,375 of Class A Senior Secured Notes, which bear interest at 4.05% (the “2022 Class A Notes”), $44,625 of Class B Senior Secured Notes, which bear interest at 5.15% (the “2022 Class B Notes”) and $36,125 of Class C Senior Secured Notes, which bear interest at 7.75% (the “2022 Class C Notes” and collectively with the 2022 Class A Notes and the 2022 Class B Notes, the “2022 Secured Notes”), and $82,875 of Subordinated Notes, which do not bear interest (the “2022 Subordinated Notes” and, together with the 2022 Secured Notes, the “2022 Notes”). The Company retained all of the 2022 Class C Notes and the 2022 Subordinated Notes. The 2022 Class A Notes and the 2022 Class B Notes are included as debt on the Company’s consolidated statements of assets and liabilities. As of both June 30, 2024 and December 31, 2023, the 2022 Class C Notes and the 2022 Subordinated Notes were eliminated in consolidation.
Through April 22, 2024, the 2022 Issuer is permitted to use all principal collections received on the underlying collateral to purchase new collateral under the direction of MC Advisors, in its capacity as collateral manager of the 2022 Issuer, in accordance with the Company’s investment strategy and subject to customary conditions set forth in the documents governing the 2022 ABS, allowing the Company to maintain the initial leverage in the 2022 ABS. The 2022 Notes are due on April 30, 2032.
As of June 30, 2024 and December 31, 2023, the fair value of investments of the Company that were held in the 2022 Issuer as collateral was $429,803 and $425,146, respectively, and these investments are identified on the consolidated schedule of investments. As of both June 30, 2024 and December 31, 2023, the 2022 Class A Notes were accruing at a weighted average interest rate of 4.05%. As of both June 30, 2024 and December 31, 2023, the 2022 Class B Notes were accruing at a weighted average interest rate of 5.15%.
Distributions from the 2022 Issuer to the Company are limited by the terms of the indenture governing the 2022 ABS, which generally allows for the payment of interest on the 2022 Secured Notes and the distribution of remaining net interest income to the holders of the 2022 Subordinated Notes pursuant to a waterfall quarterly during the reinvestment period.
2023 Asset-Backed Securitization: On September 15, 2023, the Company completed a $251,169 asset-backed securitization (the “2023 ABS”). The notes offered in the 2023 ABS were issued by the 2023 Issuer, a wholly-owned subsidiary of the Company, and are secured by a diversified portfolio of middle market loans and recurring revenue loans. The transaction was executed through a private placement of $160,750 of Class A Senior Secured Notes, which bear interest at Term SOFR plus 3.50% (the “2023 Class A Notes”), $25,100 of Class B Senior Secured Notes, which bear interest at 11.16% (the “2023 Class B Notes” and collectively with the 2023 Class A Notes, the “2023 Secured Notes”), and $65,319 of Subordinated Notes, which do not bear interest (the “2023 Subordinated Notes” and, together with the 2023 Secured Notes, the “2023 Notes”). The Company retained all of the 2023 Subordinated Notes. The 2023 Class A Notes and the 2023 Class B Notes are included as debt on the consolidated statements of assets and liabilities. As of both June 30, 2024 and December 31, 2023, the 2023 Subordinated Notes were eliminated in consolidation. As of June 30, 2024 and December 31, 2023, the 2023 Class A Notes were accruing at a weighted average interest rate of 8.8% and 8.9%, respectively. As of both June 30, 2024 and December 31, 2023, the 2023 Class B Notes were accruing at a weighted average interest rate of 11.2%.
Through October 22, 2025, the 2023 Issuer is permitted to use all principal collections received on the underlying collateral to purchase new collateral under the direction of MC Advisors, in its capacity as collateral manager of the 2023 Issuer, in accordance with the Company’s investment strategy and subject to customary conditions set forth in the documents governing the 2023 ABS, allowing the Company to maintain the initial leverage in the 2023 ABS. The 2023 Notes are due on September 22, 2033.
As of June 30, 2024 and December 31, 2023, the fair value of investments of the Company that were held in the 2023 Issuer as collateral was $243,480 and $248,175, respectively, and these investments are identified on the consolidated schedule of investments.
Distributions from the 2023 Issuer to the Company are limited by the terms of the indenture governing the 2023 ABS, which generally allows for the payment of interest on the 2023 Secured Notes and the distribution of remaining net interest income to the holders of the 2023 Subordinated Notes pursuant to a waterfall quarterly during the reinvestment period.
Revolving Credit Facility: On October 20, 2023, the Company entered into a senior secured revolving credit facility (the “Revolving Credit Facility”) pursuant to a Senior Secured Revolving Credit Agreement (the “Revolving Credit Agreement”), with ING Capital, LLC, as Administrative Agent and Joint Lead Arranger.
The initial principal amount of the Revolving Credit Facility was $295,000, subject to availability under the borrowing base, which is based on the Company’s portfolio investments and other outstanding indebtedness, with an accordion provision to permit increases to the total facility amount up to $450,000, subject to the satisfaction of certain conditions. On December 22, 2023, March 18, 2024 and June 27, 2024, the Company increased the facility amount pursuant to the accordion feature of the Revolving Credit Facility from $295,000 of aggregate commitments to $325,000, $350,000 and $385,000, respectively, of aggregate commitments. As of June 30, 2024 and December 31, 2023, the Company had outstanding U.S. dollar borrowings under the Revolving Credit Facility of $301,000 and $240,800, respectively, and non-U.S. dollar borrowings denominated in Australian dollars of AUD 21,978 ($14,659 in U.S. dollars) and AUD 23,500 ($16,008 in U.S. dollars), respectively, and Great Britain pounds of £27,000 ($34,141 in U.S. dollars) and zero, respectively. The borrowings denominated in a foreign currency may be positively or negatively affected by movements in the rate of exchange between the U.S. dollar and the respective foreign currency. These movements are beyond the control of the Company and cannot be predicted. The borrowings denominated in foreign currency are translated into U.S. dollars based on the spot rate at each balance sheet date. The impact resulting from changes in foreign currency borrowings is included in net change in unrealized gain (loss) on foreign currency and other transactions on the Company’s consolidated statements of operations and totaled ($346) and $295 for the three and six months ended June 30, 2024, respectively, and zero for both the three and six months ended June 30, 2023, respectively.
Advances under the Revolving Credit Facility initially bear interest at a per annum rate equal to, (a) in the case of any U.S. dollar advances, (i) 1.50% per annum (or, at any time the Rating Condition is satisfied, 1.35% per annum) plus an “alternate base rate” (as described in the Revolving Credit Agreement) or (ii) 2.50% per annum (or, at any time the Rating Condition is satisfied, 2.35% per annum) plus Term SOFR, (b) in the case of any foreign currency advances (other than Pounds Sterling), 2.50% per annum (or, at any time the Rating Condition is satisfied, 2.35% per annum) plus the applicable benchmark rate and (c) in the case of any Pounds Sterling advances, 2.50% per annum (or, at any time the Rating Condition is satisfied, 2.35% per annum) plus the Daily Simple Risk Free Rate, in each case, depending on the nature of the advances being requested under the Revolving Credit Facility. The “Rating Condition” shall be satisfied at any time the Company maintains a public credit rating of at least BBB- from S&P Global Ratings (or equivalent rating from Moody’s Investors Service, Inc. or Fitch, Inc.). As of both June 30, 2024 and December 31, 2023, the outstanding borrowings were accruing at a weighted average interest rate of 7.9%.
Advances under the Revolving Credit Facility are subject to compliance with borrowing base requirements, pursuant to which the amount of funds advanced varies depending upon the types of assets in the Company’s portfolio. Assets must meet certain criteria in order to be included in the borrowing base, and the borrowing base is subject to certain portfolio restrictions including investment size, sector concentrations and investment type.
The Company’s ability to borrow under the Revolving Credit Facility is subject to availability under the borrowing base, which permits the Company to borrow up to 72.5% of the fair market value of its portfolio company investments depending on the type of investment the Company holds and whether the investment is quoted. The Company’s ability to borrow is also subject to certain concentration limits, and continued compliance with the representations, warranties and covenants given by the Company under the Revolving Credit Facility. The Revolving Credit Facility contains certain financial covenants, including, but not limited to, the Company’s maintenance of: (1) minimum consolidated total net assets of the greater of (a) $500,000 and (b) an amount equal to the sum of (i) $660,865 plus (ii) an amount equal to 65% of the difference of (x) the net proceeds to the Company from sales of its equity securities during each quarter following October 20, 2023 and (y) the amount paid or distributed to purchase or redeem its common stock in connection with a tender offer during such quarter; (2) a ratio of total assets (less total liabilities other than indebtedness) to total indebtedness of not less than 1.5 to 1; (3) a senior debt coverage ratio of at least 2 to 1; and (4) minimum net worth equal to or greater than $215,000. The Revolving Credit Facility also requires the Company to undertake customary indemnification obligations with respect to ING Capital LLC and other members of the lending group and to reimburse the lenders for expenses associated with entering into the Revolving Credit Facility. The Revolving Credit Facility also has customary provisions regarding events of default, including events of default for nonpayment, change in control transactions at both the Company and MC Advisors, failure to comply with financial and negative covenants, and failure to maintain the Company’s relationship with MC Advisors. If the Company incurs an event of default under the Revolving Credit Facility and fails to remedy such default under any applicable grace period, if any, then the entire Revolving Credit Facility could become immediately due and payable, which would materially and adversely affect the Company’s liquidity, financial condition, results of operations and cash flows.
The Revolving Credit Facility also imposes certain conditions that may limit the amount of the Company’s distributions to stockholders. Distributions payable in the Company’s common stock under the DRIP are not limited by the Revolving Credit Facility. Distributions in cash or property other than common stock are generally limited to 115% of the amount of distributions required to maintain the Company’s status as a RIC.
The Revolving Credit Facility is guaranteed by certain subsidiary guarantors (primarily the Taxable Subsidiaries). Proceeds of the Revolving Credit Facility may be used for general corporate purposes, including, without limitation, making distributions, contributions and investments and such other uses as permitted under the Revolving Credit Agreement.
The period during which the Company may borrow under the Revolving Credit Facility expires on October 20, 2027, and the Revolving Credit Facility will mature and all amounts outstanding thereunder must be repaid by October 20, 2028. The Revolving Credit Facility is secured by a perfected first-priority interest in substantially all of the portfolio investments held by the Company and the subsidiary guarantors, subject to certain exceptions.
2028 Notes: On November 15, 2023, the Company entered into a Note Purchase Agreement (the “Note Purchase Agreement”) governing the issuance of $100,000 in aggregate principal amount of series A unsecured notes (the “Series A Notes”), due November 15, 2028, with a fixed interest rate of 9.42% per year and $100,000 in aggregate principal amount of series B unsecured notes (the “Series B Notes”), due December 13, 2028, with a fixed interest rate of 9.42% per year (collectively, the “2028 Notes”), to institutional accredited investors (as defined in Regulation D under the Securities Act of 1933, as amended (the “Securities Act”) in a private placement. The 2028 Notes are guaranteed by various subsidiaries of the Company. As of both June 30, 2024 and December 31, 2023, the Series A Notes and the Series B Notes were accruing at a weighted average interest rate of 9.42%.
Interest on the 2028 Notes is due semiannually on May 15 and November 15 each year, beginning on May 15, 2024. The 2028 Notes may be redeemed in whole or in part at any time or from time to time at the Company’s option at par plus accrued interest to the prepayment date and, if applicable, a make-whole premium. In addition, the Company is obligated to offer to prepay the 2028 Notes at par plus accrued and unpaid interest up to, but excluding, the date of prepayment, if certain change in control events occur. The 2028 Notes are general unsecured obligations of the Company that rank pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by the Company. As of both June 30, 2024 and December 31, 2023, the Company had $100,000 in aggregate principal amount of Series A Notes outstanding and $100,000 in aggregate principal amount of Series B Notes outstanding.
The Note Purchase Agreement contains customary terms and conditions for senior unsecured notes issued in a private placement, including, without limitation, affirmative and negative covenants such as information reporting, maintenance of the Company’s regulation as a business development company within the meaning of the 1940 Act and as a regulated investment company under the Code, as amended, a minimum net worth of $660,865 and a minimum asset coverage ratio of 1.50 to 1.00.
In addition, in the event that a Below Investment Grade Event (as defined in the Note Purchase Agreement) occurs, the 2028 Notes will bear interest at a fixed rate per annum which is 1.00% above the stated rate of the 2028 Notes from the date of the occurrence of the Below Investment Grade Event to and until the date on which the Below Investment Grade Event is no longer continuing. In the event that a Secured Debt Ratio Event (as defined in the Note Purchase Agreement) occurs, the 2028 Notes will bear interest at a fixed rate per annum which is 1.50% above the stated rate of the 2028 Notes from the date of the occurrence of the Secured Debt Ratio Event to and until the date on which the Below Investment Grade Event is no longer continuing. In the event that both a Below Investment Grade Event and a Secured Debt Ratio Event have occurred and are continuing, the 2028 Notes will bear interest at a fixed rate per annum which is 2.00% above the stated rate of the 2028 Notes from the date of the occurrence of the later to occur of the Below Investment Grade Event and the Secured Debt Ratio Event to and until the date on which one of such events is no longer continuing.
The Note Purchase Agreement also contains customary events of default with customary cure and notice periods, including, without limitation, nonpayment, incorrect representation in any material respect, breach of covenant, certain cross-defaults or cross-acceleration under other indebtedness of the Company, certain judgments and orders and certain events of bankruptcy.
The 2028 Notes were offered in reliance on Section 4(a)(2) of the Securities Act. The 2028 Notes have not and will not be registered under the Securities Act or any state securities laws and, unless so registered, may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, as applicable.
SPV III Credit Facility: On March 28, 2024, the Company entered into the SPV III Credit Facility with Goldman Sachs Bank USA, as administrative agent, through a special purpose wholly-owned subsidiary, SPV III. The SPV III Credit Facility allows SPV III to borrow an aggregate principal amount of $100,000, and includes an accordion feature which allows the Company, under certain circumstances, to increase the total size of the facility to $250,000 upon request to the administrative agent and with consent of the lenders. The Company's ability to borrow under the SPV III Credit Facility is subject to certain financial and restrictive covenants as well as availability under the borrowing base, which permits the Company to borrow up to 70% of the principal balance of its portfolio company investments, depending on the type of investment. Under the terms of the SPV III Credit Facility, the SPV III is permitted to reinvest available cash and make new borrowings under the SPV III Credit Facility through April 5, 2027. The maturity date of the SPV III Credit Facility is April 5, 2029, unless sooner terminated in accordance with its terms. As of June 30, 2024 and December 31, 2023, the fair value of investments of the Company that were held in the SPV III as collateral for the SPV III Credit Facility was $86,587 and zero, respectively, and these investments are identified on the accompanying consolidated schedules of investments.
Borrowings under the SPV III Credit Facility bear interest at Adjusted Term SOFR (subject to a SOFR minimum of 1.00%) plus an applicable margin rate of 2.95% per annum. In addition to the stated interest rate on borrowings, the SPV III is required to pay an unused commitment fee of (i) 0.75% per annum on any unused portion of the SPV III Credit Facility through September 5, 2024 and (ii) 0.50% per annum on any unused portion of the SPV III Credit Facility after September 5, 2024. As of June 30, 2024, the outstanding borrowings were accruing at a weighted average interest rate of 8.3%.
Short-Term Borrowings: To finance the purchase of certain investments, the Company may enter into participation agreements for par/near par trades with a third-party counterparty, whereby the Company simultaneously agrees to sell an investment and re-purchase the same investment back at a premium within a specified period of time, generally not to exceed 60-days from the date it was sold (each such transaction a “Short-Term Borrowing”). The amount, interest rate and terms of these Short-Term Borrowings are negotiated on a transaction-by transaction basis. Each transaction is secured by an interest in an underlying asset which is participated or assigned to the counterparty for the duration of the transaction.
The Company accounts for its Short-Term Borrowings as a type of secured borrowing under ASC Topic 860 – Transfers and Servicing and continues to present the participated investment as an asset and the obligation to repurchase the investment as a liability within debt on the consolidated statements of assets and liabilities. Interest income earned on investments participated under the Short-Term Borrowings and financing charges associated with the Short-Term Borrowings are included within interest income and interest and other debt financing expenses, respectively, on the consolidated statements of operations. Accrued interest receivable on investments and accrued financing charges on the Short-Term Borrowings are included within interest and dividend receivable and interest payable, respectively, on the consolidated statements of assets and liabilities.
As of both of June 30, 2024 and December 31, 2023, the Company had no outstanding Short-Term Borrowings.
Components of Interest Expense: The components of the Company’s interest and other debt financing expenses and average debt outstanding and average stated interest rate (i.e., the rate in effect plus spread) were as follows:
Three months ended June 30,
20242023
Interest expense - SPV Credit Facility$5,603$5,412
Interest expense - Term Loan3,7902,831
Interest expense - 2022 ABS3,2213,221
Interest expense - 2023 ABS4,285—
Interest expense - 2028 Notes4,710—
Interest expense - Revolving Credit Facility5,549—
Interest expense - SPV III Credit Facility988—
Interest expense - Short-Term Borrowings—79
Amortization of debt issuance costs2,2261,523
Total interest and other debt financing expenses$30,372$13,066
Average debt outstanding$1,459,289$724,664
Average stated interest rate7.8 %6.4 %