Quarterly report pursuant to Section 13 or 15(d)

DEBT

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DEBT
 3 Months Ended
Mar. 31, 2024
Debt Disclosure [Abstract]  
DEBT DEBT
Summary of Main Street’s debt as of March 31, 2024 is as follows:
Outstanding
Balance
Unamortized Debt
Issuance
(Costs)/Premiums (1)
Recorded Value
Estimated Fair
Value (2)
(dollars in thousands)
Corporate Facility $ 313,000  $ —  $ 313,000  $ 313,000 
SPV Facility 10,000  —  10,000  10,000 
July 2026 Notes
 500,000  (1,206) 498,794  466,270 
May 2024 Notes
 450,000  45  450,045  449,933 
March 2029 Notes
 350,000  (3,531) 346,469  356,223 
SBIC Debentures 286,200  (5,187) 281,013  220,824 
December 2025 Notes
 150,000  (906) 149,094  148,998 
Total Debt $ 2,059,200  $ (10,785) $ 2,048,415  $ 1,965,248 
____________________
(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, March 2029 Notes, SBIC Debentures and December 2025 Notes 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.12. — Summary of Significant Accounting Policies — Fair Value of Financial Instruments.
Summary of Main Street’s debt as of December 31, 2023 is as follows:
Outstanding
Balance
Unamortized Debt
Issuance
(Costs)/Premiums (1)
Recorded Value
Estimated Fair
Value (2)
(dollars in thousands)
Corporate Facility $ 200,000  $ —  $ 200,000  $ 200,000 
SPV Facility 160,000  —  160,000  160,000 
July 2026 Notes
 500,000  (1,338) 498,662  458,105 
May 2024 Notes
 450,000  182  450,182  447,246 
SBIC Debentures 350,000  (5,465) 344,535  288,468 
December 2025 Notes
 150,000  (1,035) 148,965  151,155 
Total Debt $ 1,810,000  $ (7,656) $ 1,802,344  $ 1,704,974 
____________________
(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, SBIC Debentures and December 2025 Notes 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.12. — Summary of Significant Accounting Policies — Fair Value of Financial Instruments.
Summarized interest expense for the three months ended March 31, 2024 and 2023 is as follows:
Three Months Ended March 31,
2024
2023
(dollars in thousands)
Corporate Facility $ 4,279  $ 6,610 
SPV Facility 1,678  3,427 
July 2026 Notes
 3,882  3,882 
May 2024 Notes
 5,714  5,714 
March 2029 Notes
 5,486  — 
SBIC Debentures 2,706  2,752 
December 2025 Notes
 3,031  2,612 
Total Interest Expense $ 26,776  $ 24,997 
Corporate Facility
Main Street maintains the Corporate Facility to provide additional liquidity to support its investment and operational activities. As of March 31, 2024, the Corporate Facility included total commitments of $995.0 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 March 31, 2024, 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 March 31, 2024, the interest rate on the Corporate Facility was 7.3%. The average interest rate for borrowings under the Corporate Facility was 7.3% and 6.5% for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, Main Street was in compliance with all financial covenants of the Corporate Facility.
SPV Facility
Main Street, through MSCC Funding I, LLC (“MSCC Funding”), a wholly-owned Structured Subsidiary that primarily holds debt investments, maintains the SPV Facility to finance its investment and operational activities. As of March 31, 2024, the SPV Facility included total commitments of $430.0 million from a diversified group of six lenders and contained 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% of 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 March 31, 2024, the interest rate on the SPV Facility was 7.9%. The average interest rate for borrowings under the SPV Facility was 7.9% and 7.1% for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, MSCC Funding was in compliance with all financial covenants of the SPV Facility.
MSCC Funding’s balance sheets as of March 31, 2024 and December 31, 2023 are as follows:
Balance Sheets
(dollars in thousands)
March 31, 2024 December 31, 2023
(Unaudited)
ASSETS
Investments at fair value:
Non-Control Investments (cost: $303,482 and $315,373 as of March 31, 2024 and December 31, 2023, respectively)
 $ 305,025  $ 317,392 
Cash and cash equivalents 36,354  12,817 
Interest and dividend receivable and other assets 2,724  2,956 
Deferred financing costs (net of accumulated amortization of $1,028 and $783 as of March 31, 2024 and December 31, 2023, respectively)
 3,585  3,829 
Total assets 347,688  336,994 
LIABILITIES
SPV Facility $ 10,000  $ 160,000 
Accounts payable and other liabilities to affiliates 160,169  7,170 
Interest payable 302  1,135 
Total liabilities 170,471  168,305 
NET ASSETS
Contributed capital 138,163  138,163 
Total undistributed earnings 39,054  30,526 
Total net assets 177,217  168,689 
Total liabilities and net assets $ 347,688  $ 336,994 
MSCC Funding’s statements of operations for the three months ended March 31, 2024 and 2023 are as follows:
Statements of Operations
(dollars in thousands)
(Unaudited)
Three Months Ended March 31,
2024 2023
INVESTMENT INCOME:
Interest, fee and dividend income:
Non‑Control/Non‑Affiliate investments $ 11,067  $ 8,717 
Total investment income 11,067  8,717 
EXPENSES:
Interest (1,678) (3,428)
Management Fee to MSCC (405) (365)
General and administrative (18) (57)
Total expenses (2,101) (3,850)
NET INVESTMENT INCOME 8,966  4,867 
NET UNREALIZED APPRECIATION (DEPRECIATION):
Non‑Control/Non‑Affiliate investments (477) (1,391)
Total net unrealized depreciation (477) (1,391)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 8,489  $ 3,476 
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 March 31, 2024, Main Street was in compliance with all covenants and other requirements of the July 2026 Notes.
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 March 31, 2024, Main Street was in compliance with all covenants and other requirements of the May 2024 Notes.
March 2029 Notes
In January 2024, Main Street issued $350.0 million in aggregate principal amount of 6.95% unsecured notes due March 1, 2029 (the “March 2029 Notes”) at an issue price of 99.865%. The March 2029 Notes are unsecured obligations and rank pari passu with Main Street’s current and future unsecured indebtedness. The March 2029 Notes may be redeemed in whole or in part at any time at Main Street’s option subject to certain make-whole provisions. The March 2029 Notes bear interest at a rate of 6.95% per year payable semiannually on March 1 and September 1 of each year.
As of March 31, 2024, Main Street was in compliance with all covenants and other requirements of the March 2029 Notes.
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 $286.2 million and $350.0 million as of March 31, 2024 and December 31, 2023, respectively. 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. On March 1, 2024, Main Street repaid $63.8 million of debentures that had reached maturity dates. The weighted-average annual interest rate on the SBIC debentures was 2.8% and 3.0% as of March 31, 2024 and December 31, 2023, respectively. The first principal maturity due under the existing SBIC debentures is in 2027, and the weighted-average remaining duration as of March 31, 2024 was 5.4 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 March 31, 2024, the SBIC debentures consisted of (i) $111.2 million par value of SBIC debentures outstanding issued by MSMF, with a recorded value of $108.4 million that was net of unamortized debt issuance costs of $2.8 million and (ii) $175.0 million par value of SBIC debentures issued by MSC III with a recorded value of $172.6 million that was net of unamortized debt issuance costs of $2.4 million.
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 Series A Notes”) at par. In February 2023, Main Street issued an additional $50.0 million in aggregate principal amount of 7.53% Series B unsecured notes due December 23, 2025 (the “December 2025 Series B Notes” and, together with the December 2025 Series A Notes, 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 Series A Notes and the December 2025 Series B Notes bear interest at a rate of 7.84% and 7.53% per year, respectively, payable semiannually on June 23 and December 23 of each year. In addition, Main Street 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 March 31, 2024, Main Street was in compliance with all covenants and other requirements of the December 2025 Notes.