Annual report pursuant to Section 13 and 15(d)

DEBT

v3.22.4
DEBT
 12 Months Ended
Dec. 31, 2022
Debt Disclosure [Abstract]  
DEBT DEBT
Summary of debt as of December 31, 2022 is as follows:
Outstanding
Balance
Unamortized Debt
Issuance
(Costs)/Premiums (1)
Recorded Value
Estimated Fair
Value (2)
(dollars in thousands)
SBIC Debentures $ 350,000  $ (6,086) $ 343,914  $ 290,204 
Corporate Facility 407,000  —  407,000  407,000 
SPV Facility 200,000  —  200,000  200,000 
May 2024 Notes
 450,000  727  450,727  444,749 
July 2026 Notes
 500,000  (1,864) 498,136  434,250 
December 2025 Notes
 100,000  (675) 99,325  106,607 
Total Debt $ 2,007,000  $ (7,898) $ 1,999,102  $ 1,882,810 
___________________________
(1)The unamortized debt issuance costs for the Credit Facilities are reflected as Deferred financing costs on the Consolidated Balance Sheets, while the deferred debt issuance costs related to the July 2026 Notes, May 2024 Notes, December 2025 Notes and SBIC Debentures are reflected as contra-liabilities on the Consolidated Balance Sheets.
(2)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. — Summary of Significant Accounting Policies — Fair Value of Financial Instruments.
Summary of debt as of December 31, 2021 is as follows:
Outstanding
Balance
Unamortized Debt
Issuance
(Costs)/Premiums (1)
Recorded Value
Estimated Fair
Value (2)
(dollars in thousands)
SBIC Debentures $ 350,000  $ (7,269) $ 342,731  $ 328,206 
Corporate Facility 320,000  —  320,000  320,000 
December 2022 Notes
 185,000  (556) 184,444  190,043 
May 2024 Notes
 450,000  1,272  451,272  480,767 
July 2026 Notes
 500,000  (2,391) 497,609  502,285 
Total Debt $ 1,805,000  $ (8,944) $ 1,796,056  $ 1,821,301 
___________________________
(1)The unamortized debt issuance costs for the Corporate Facility are reflected as Deferred financing costs on the Consolidated Balance Sheets, while the deferred debt issuance costs related to the July 2026 Notes, May 2024 Notes, December 2022 Notes and SBIC Debentures are reflected as contra-liabilities on the Consolidated Balance Sheets.
(2)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. — Summary of Significant Accounting Policies — Fair Value of Financial Instruments.
Summarized interest expense for the years ended December 31, 2022, 2021 and 2020 is as follows:
Year Ended December 31,
2022 2021 2020
(dollars in thousands)
SBIC Debentures $ 11,337  $ 10,857  $ 11,867 
Corporate Facility 18,820  5,204  9,232 
SPV Facility 1,375  —  — 
May 2024 Notes
 22,855  22,855  19,556 
July 2026 Notes
 15,526  10,988  — 
December 2022 Notes
 8,188  8,932  8,932 
December 2025 Notes
 174  —  — 
Total Interest Expense $ 78,276  $ 58,836  $ 49,587 
SBIC Debentures
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 at both December 31, 2022 and 2021. SBIC debentures provide for interest to be paid semiannually, with principal due at the applicable 10-year maturity date of each debenture. 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% as of both years ended December 31, 2022 and 2021. The first principal maturity due under the existing SBIC debentures is in March 2023, and the weighted-average remaining duration as of December 31, 2022 was 5.1 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, 2022, the SBIC debentures consisted of (i) $175.0 million par value of SBIC debentures outstanding issued by MSMF, with a recorded value of $172.0 million that was net of unamortized debt issuance costs of $3.0 million and (ii) $175.0 million par value of SBIC debentures issued by MSC III with a recorded value of $171.9 million that was net of unamortized debt issuance costs of $3.1 million.
The maturity dates and fixed interest rates for Main Street’s SBIC Debentures as of December 31, 2022 and 2021 are summarized in the following table:
Maturity Date Fixed Interest Rate December 31,
2022		 December 31,
2021
3/1/2023 3.16% $ 16,000,000  $ 16,000,000 
3/1/2024 3.95% 39,000,000  39,000,000 
3/1/2024 3.55% 24,800,000  24,800,000 
3/1/2027 3.52% 40,400,000  40,400,000 
9/1/2027 3.19% 34,600,000  34,600,000 
3/1/2028 3.41% 43,000,000  43,000,000 
9/1/2028 3.55% 32,000,000  32,000,000 
3/1/2030 2.35% 15,000,000  15,000,000 
9/1/2030 1.13% 10,000,000  10,000,000 
9/1/2030 1.31% 10,000,000  10,000,000 
3/1/2031 1.94% 25,200,000  25,200,000 
9/1/2031 1.58% 60,000,000  60,000,000 
Ending Balance $ 350,000,000  $ 350,000,000 
Corporate Facility
Main Street maintains the Corporate Facility to provide additional liquidity to support its investment and operational activities. As of December 31, 2022, the Corporate Facility included total commitments of $920.0 million from a diversified group of 18 lenders and contained an accordion feature with the right to request an increase in commitments under the facility from new and existing lenders on the same terms and conditions as the existing commitments up to a total of $1.4 billion. The revolving period under the Corporate Facility expires in August 2026 and the Corporate Facility is scheduled to mature in August 2027.
As of December 31, 2022, borrowings under the Corporate 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 SOFR rate plus an applicable credit spread adjustment of 0.10% plus (i) 1.875% (or the applicable Prime rate 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 Prime Rate plus 1.0%) otherwise. Main Street pays unused commitment fees of 0.25% per annum on the unused lender commitments under the Corporate Facility. The Corporate 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. In connection with the Corporate Facility, MSCC has made customary representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar credit facilities.
As of December 31, 2022, the interest rate on the Corporate Facility was 6.1%. The average interest rate for borrowings under the Corporate Facility was 3.6% and 2.0% for the years ended December 31, 2022 and 2021, respectively. As of December 31, 2022, Main Street was in compliance with all financial covenants of the Corporate Facility.
SPV Facility
In November 2022 and December 2022, MSCC Funding I, LLC (“MSCC Funding”), a wholly-owned Structured Subsidiary that primarily holds originated loan investments, entered into (i) the SPV Facility with MSCC as collateral manager and (ii) a lender joinder agreement (the “Joinder Agreement”) to the SPV Facility that increased the total number of lenders from three to four lenders and increased the total commitments under the SPV Facility from $240.0 million to $255.0 million. As of December 31, 2022, the SPV Facility included total commitments of $255.0 million and an accordion feature, subject to the satisfaction of various conditions, that could bring total commitments and borrowing availability to up to $450.0 million. The revolving period under the SPV Facility expires in November 2025 and the SPV Facility is scheduled to mature in November 2027. Advances under the SPV Facility bear interest at a per annum rate equal to the one-month SOFR in effect, plus a 0.10% credit spread adjustment plus an applicable margin of 2.50% during the revolving period and 2.625% and 2.75% during the first and second years thereafter, respectively. MSCC Funding pays a commitment fee of 0.50% per annum on the unused lender commitments up to 35% the total lender commitments and 0.75% per annum on the unused lender commitments greater than 35% of the total lender commitments. The SPV Facility is secured by a collateral loan on the assets of MSCC Funding and its subsidiaries. In connection with the SPV Facility, MSCC Funding has made customary representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar credit facilities.
As of December 31, 2022, the interest rate on the SPV Facility was 6.7%. The average interest rate for borrowings under the SPV Facility was 6.7% for the year ended December 31, 2022. As of December 31, 2022, MSCC Funding was in compliance with all financial covenants of the SPV Facility.
A balance sheet and statement of operations of MSCC Funding as of December 31, 2022 and for the period from November 22, 2022 (date of inception of MSCC Funding and the SPV Facility) through December 31, 2022 are as follows:
Balance Sheet
(dollars in thousands)

December 31, 2022
ASSETS
Investments at fair value:
Non-Control Investments (cost: $314,752 as of December 31, 2022)
 $ 316,507 
Cash and cash equivalents 10,838 
Interest and dividend receivable and other assets 2,828 
Accounts receivable from MSCC and its subsidiaries 556 
Receivable for securities sold 369 
Deferred financing costs (net of accumulated amortization of $141 as of December 31, 2022)
 2,630 
Total assets $ 333,728 
LIABILITIES
SPV Facility $ 200,000 
Accounts payable and other liabilities 112 
Interest payable 1,272 
Total liabilities 201,384 
Commitments and contingencies (Note K)
NET ASSETS
Contributed capital 126,010 
Total undistributed earnings 6,334 
Total net assets 132,344 
Total liabilities and net assets $ 333,728 

Statement of Operations
(dollars in thousands)

Period from November 22, 2022 to December 31, 2022
INVESTMENT INCOME:
Interest, fee and dividend income:
Non‑Control/Non‑Affiliate investments $ 3,454 
EXPENSES:
Interest (1,414)
Management fee (89)
General and administrative (25)
Total expenses (1,528)
NET INVESTMENT INCOME (LOSS) 1,926 
NET UNREALIZED APPRECIATION (DEPRECIATION):
Non‑Control/Non‑Affiliate investments 4,408 
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 6,334 
December 2022 Notes
In November 2017, Main Street issued $185.0 million in aggregate principal amount of 4.50% unsecured notes due December 1, 2022 (the “December 2022 Notes”) at an issue price of 99.16%. The December 2022 Notes bore interest at a rate of 4.50% per year payable semiannually on June 1 and December 1 of each year. In December 2022, Main Street repaid the entire principal amount of the issued and outstanding December 2022 Notes at par value plus the accrued and unpaid interest.
May 2024 Notes
In April 2019, Main Street issued $250.0 million in aggregate principal amount of 5.20% unsecured notes due May 1, 2024 (the “May 2024 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 May 2024 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 102.7%. The May 2024 Notes issued in December 2019 and July 2020 have identical terms as, and are a part of a single series with, the May 2024 Notes issued in April 2019. The May 2024 Notes are unsecured obligations and rank pari passu with Main Street’s current and future unsecured indebtedness. The May 2024 Notes may be redeemed in whole or in part at any time at Main Street’s option subject to certain make-whole provisions. The May 2024 Notes bear interest at a rate of 5.20% per year payable semiannually on May 1 and November 1 of each year.
As of December 31, 2022, Main Street was in compliance with all covenants and other requirements of the May 2024 Notes.
July 2026 Notes
In January 2021, Main Street issued $300.0 million in aggregate principal amount of 3.00% unsecured notes due July 14, 2026 (the “July 2026 Notes”) at an issue price of 99.004%. Subsequently, in October 2021, Main Street issued an additional $200.0 million aggregate principal amount of the July 2026 Notes at an issue price of 101.741%. The July 2026 Notes issued in October 2021 have identical terms as, and are a part of a single series with, the July 2026 Notes issued in January 2021. The July 2026 Notes are unsecured obligations and rank pari passu with Main Street’s current and future unsecured indebtedness. The July 2026 Notes may be redeemed in whole or in part at any time at Main Street’s option subject to certain make-whole provisions. The July 2026 Notes bear interest at a rate of 3.00% per year payable semiannually on January 14 and July 14 of each year.
As of December 31, 2022, Main Street was in compliance with all covenants and other requirements of the July 2026 Notes.
December 2025 Notes
In December 2022, Main Street issued $100.0 million in aggregate principal amount of 7.84% Series A unsecured notes due December 23, 2025 (the “December 2025 Notes”) at par. The December 2025 Notes are unsecured obligations and rank pari passu with Main Street’s current and future unsecured indebtedness. The December 2025 Notes may be redeemed in whole or in part at any time at Main Street’s option at par plus accrued interest to the prepayment date, subject to certain make-whole provisions. The December 2025 Notes bear interest at a rate of 7.84% per year payable semiannually on June 23 and December 23 of each year. In addition, the Company is obligated to offer to repay the December 2025 Notes at par plus accrued and unpaid interest if certain change in control events occur. The December 2025 Notes will bear interest at an increased rate from the date that (i) the December 2025 Notes receive a below investment grade rating by a rating agency if there is one or two rating agencies providing ratings of the December 2025 Notes, or two-thirds of the rating agencies if there are three rating agencies who are rating the notes (a “Below Investment Grade Event”), or (ii) the ratio of the Company’s consolidated secured indebtedness (other than indebtedness of the Funds or any Structured Subsidiaries) to the value of its consolidated total assets is greater than 0.35 to 1.00 (a “Secured Debt Ratio Event”), to and until the date on which the Below Investment Grade Event and the Secured Debt Ratio Event are no longer continuing. The governing agreement for the December 2025 Notes contains customary terms and conditions for senior unsecured notes issued in a private placement, as well as customary events of default with customary cure and notice periods.
As of December 31, 2022, the Company was in compliance with all covenants and other requirements of the December 2025 Notes.
Contractual Payment Obligations
A summary of Main Street’s contractual payment obligations for the repayment of outstanding indebtedness at December 31, 2022 is as follows:
2023 2024 2025 2026 2027 Thereafter Total
(dollars in thousands)
SBIC debentures $ 16,000  $ 63,800  $ —  $ —  $ 75,000  $ 195,200  $ 350,000 
Corporate Facility —  —  —  —  407,000  —  407,000 
SPV Facility —  —  —  —  200,000  —  200,000 
May 2024 Notes
 —  450,000  —  —  —  —  450,000 
July 2026 Notes
 —  —  —  500,000  —  —  500,000 
December 2025 Notes
 —  —  100,000  —  —  —  100,000 
Total $ 16,000  $ 513,800  $ 100,000  $ 500,000  $ 682,000  $ 195,200  $ 2,007,000 
Senior Securities
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.
Total Amount Outstanding Exclusive of Treasury Securities(1) Asset Coverage per Unit(2) Involuntary Liquidating Preference per Unit(3) Average Market Value per Unit(4)
(dollars in thousands)
SBIC Debentures
2013 $ 200,200  2,476  —  N/A
2014 225,000  2,323  —  N/A
2015 225,000  2,368  —  N/A
2016 240,000  2,415  —  N/A
2017 295,800  2,687  —  N/A
2018 345,800  2,455  —  N/A
2019 311,800  2,363  —  N/A
2020 309,800  2,244  —  N/A
2021 350,000  1,985  —  N/A
2022 350,000  2,044  —  N/A
Corporate Facility
2013 $ 237,000  2,476  —  N/A
2014 218,000  2,323  —  N/A
2015 291,000  2,368  —  N/A
2016 343,000  2,415  —  N/A
2017 64,000  2,687  —  N/A
Total Amount Outstanding Exclusive of Treasury Securities(1) Asset Coverage per Unit(2) Involuntary Liquidating Preference per Unit(3) Average Market Value per Unit(4)
(dollars in thousands)
2018 301,000  2,455  —  N/A
2019 300,000  2,363  —  N/A
2020 269,000  2,244  —  N/A
2021 320,000  1,985  —  N/A
2022 407,000  2,044  —  N/A
SPV Facility
2022 $ 200,000  2,044  —  N/A
April 2023 Notes
2013 $ 90,882  2,476  —  $ 24.35 
2014 90,823  2,323  —  24.78 
2015 90,738  2,368  —  25.40 
2016 90,655  2,415  —  25.76 
2017 90,655  2,687  —  25.93 
December 2019 Notes
2014 $ 175,000  2,323  —  N/A
2015 175,000  2,368  —  N/A
2016 175,000  2,415  —  N/A
2017 175,000  2,687  —  N/A
2018 175,000  2,455  —  N/A
December 2022 Notes
2017 $ 185,000  2,687  —  N/A
2018 185,000  2,455  —  N/A
2019 185,000  2,363  —  N/A
2020 185,000  2,244  —  N/A
2021 185,000  1,985  —  N/A
May 2024 Notes
2019 $ 325,000  2,363  —  N/A
2020 450,000  2,244  —  N/A
2021 450,000  1,985  —  N/A
2022 450,000  2,044  —  N/A
July 2026 Notes
2021 $ 500,000  1,985  —  N/A
2022 500,000  2,044  —  N/A
December 2025 Notes
2022 $ 100,000  2,044  —  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.
(4)Average market value per unit for the April 2023 Notes represents the average of the daily closing prices as reported on the NYSE during the period presented. Average market value per unit for all other senior securities included in the table is not applicable because these are not registered for public trading.