Quarterly report pursuant to Section 13 or 15(d)

DEBT

v3.24.3
DEBT
 9 Months Ended
Sep. 30, 2024
Debt Disclosure [Abstract]  
DEBT DEBT
Summary of Main Street’s debt as of September 30, 2024 is as follows:
Outstanding
Balance
Unamortized Debt
Issuance
(Costs)/Premiums (1)
 Recorded Value
Estimated Fair
Value (2)
(dollars in thousands)
Corporate Facility $ 300,000  $ —  $ 300,000  $ 300,000 
SPV Facility 160,000  —  160,000  160,000 
July 2026 Notes
 500,000  (943) 499,057  479,325 
June 2027 Notes
 400,000  1,136  401,136  409,260 
March 2029 Notes
 350,000  (3,178) 346,822  365,862 
SBIC Debentures 350,000  (6,878) 343,122  285,982 
December 2025 Notes
 150,000  (647) 149,353  151,104 
Total Debt $ 2,210,000  $ (10,510) $ 2,199,490  $ 2,151,533 
____________________
(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, June 2027 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 is shown as 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 is shown as 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 and nine months ended September 30, 2024 and 2023 is as follows:
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
(dollars in thousands)
Corporate Facility $ 8,551  $ 7,157  $ 20,071  $ 21,666 
SPV Facility 3,941  3,665  8,715  10,605 
July 2026 Notes
 3,882  3,882  11,645  11,645 
June 2027 Notes
 5,316  —  6,790  — 
March 2029 Notes
 6,261  —  18,008  — 
SBIC Debentures 2,492  2,965  7,472  8,435 
December 2025 Notes
 3,031  3,031  9,092  8,673 
May 2024 Notes
 —  5,714  7,618  17,141 
Total Interest Expense $ 33,474  $ 26,414  $ 89,411  $ 78,165 
A summary of Main Street’s average amount of total borrowings outstanding and overall weighted-average effective interest rate including amortization of debt issuance costs, original issuance discounts and premiums and fees on unused lender commitments are as follows:
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
(dollars in millions)
Weighted-average borrowings outstanding $ 2,194.5  $ 1,968.5  $ 2,046.6  $ 1,986.0 
Weighted-average effective interest rate 6.1  % 5.4  % 5.8  % 5.3  %
Corporate Facility
Main Street maintains the Corporate Facility to provide additional liquidity to support its investment and operational activities. In June 2024, Main Street entered into an amendment to the Corporate Facility to, among other things: (i) increase the revolving commitments from $995.0 million to $1.11 billion, (ii) increase the accordion feature providing Main Street with the right to request increases in commitments under the facility from new and existing lenders on the same terms and conditions as the existing commitments from up to a total of $1.4 billion to up to a total of $1.665 billion, and (iii) extend the revolving period and the final maturity date through June 2028 and June 2029, respectively, on $1.035 billion of revolving commitments, and August 2026 and August 2027, respectively, on $0.075 billion of revolving commitments.
As of September 30, 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 September 30, 2024, the interest rate for borrowings on the Corporate Facility was 7.2%. The average interest rate for borrowings under the Corporate Facility was 7.3% and 7.2% for the three months ended September 30, 2024 and 2023, respectively, and 7.3% and 6.9% for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 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. In September 2024, Main Street entered into an amendment to the SPV Facility to, among other things: (i) increase the total commitments from $430.0 million to $600.0 million, (ii) increase the accordion feature providing MSCC Funding with the right to request increases in commitments under the facility, subject to the satisfaction of various conditions, from new and existing lenders on the same terms and conditions as the existing commitments to up to a total of $800.0 million, (iii) extend the revolving period from November 2025 to September 2027, (iv) extend the final maturity date from November 2027 to September 2029 and (v) decrease the interest rate to one-month term SOFR plus an applicable margin of (a) 2.35% during the revolving period (from 2.50% plus a 0.10% credit spread adjustment, or 2.60% in total), (b) 2.475% for the first year following the end of the revolving period (from 2.625%) and (c) 2.60% for the second year following the end of the revolving period (from 2.75%).
As of September 30, 2024, the SPV Facility included total commitments of $600.0 million from a diversified group of six lenders. Advances under the SPV Facility bear interest at a per annum rate equal to the one-month term SOFR in effect, plus an applicable margin of 2.35% during the revolving period and 2.475% and 2.60% 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 September 30, 2024, the interest rate for borrowings on the SPV Facility was 7.6%. The average interest rate for borrowings under the SPV Facility was 7.9% for each of the three months ended September 30, 2024 and 2023, and 7.9% and 7.5% for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, MSCC Funding was in compliance with all financial covenants of the SPV Facility.
MSCC Funding’s balance sheets as of September 30, 2024 and December 31, 2023 are as follows:
Balance Sheets
(dollars in thousands)
September 30, 2024 December 31, 2023
(Unaudited)
ASSETS
Investments at fair value:
Non-Control Investments (cost: $330,858 and $315,373 as of September 30, 2024 and December 31, 2023, respectively)
 $ 329,228  $ 317,392 
Cash and cash equivalents 7,618  12,817 
Interest and dividend receivable and other assets 3,514  2,956 
Receivable for securities sold —  — 
Deferred financing costs (net of accumulated amortization of $1,516 and $783 as of September 30, 2024 and December 31, 2023, respectively)
 6,855  3,829 
Total assets 347,215  336,994 
LIABILITIES
SPV Facility $ 160,000  $ 160,000 
Accounts payable and other liabilities to affiliates —  7,170 
Interest payable 1,179  1,135 
Total liabilities 161,179  168,305 
NET ASSETS
Contributed capital 136,744  138,163 
Total undistributed earnings 49,292  30,526 
Total net assets 186,036  168,689 
Total liabilities and net assets $ 347,215  $ 336,994 
MSCC Funding’s statements of operations for the three and nine months ended September 30, 2024 and 2023 are as follows:
Statements of Operations
(dollars in thousands)
(Unaudited)
Three Months Ended September 30, Nine Months Ended
September 30,
2024 2023 2024 2023
INVESTMENT INCOME:
Interest, fee and dividend income:
Non‑Control/Non‑Affiliate investments $ 11,179  $ 10,615  $ 32,365  $ 29,205 
Total investment income 11,179  10,615  32,365  29,205 
EXPENSES:
Interest (3,941) (3,666) (8,715) (10,605)
Management Fee to MSCC (418) (421) (1,218) (1,107)
General and administrative (20) (55) (56) (105)
Total expenses (4,379) (4,142) (9,989) (11,817)
NET INVESTMENT INCOME 6,800  6,473  22,376  17,388 
NET UNREALIZED APPRECIATION (DEPRECIATION):
Non‑Control/Non‑Affiliate investments (2,403) (1) (3,649) 563 
Total net unrealized appreciation (depreciation) (2,403) (1) (3,649) 563 
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 4,397  $ 6,472  $ 18,727  $ 17,951 
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 in 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 September 30, 2024, Main Street was in compliance with all covenants and other requirements of the July 2026 Notes.
June 2027 Notes
In June 2024, Main Street issued $300.0 million in aggregate principal amount of 6.50% unsecured notes due June 4, 2027 (the “June 2027 Notes”) at an issue price of 99.793%. Subsequently, in September 2024, Main Street issued an additional $100.0 million in aggregate principal amount of the June 2027 Notes at a public offering price of 102.134% resulting in a yield-to-maturity of 5.617% on such issuance. The $400.0 million of outstanding June 2027 Notes bear interest at 6.50% per year with a yield-to-maturity of 6.34%. The June 2027 Notes issued in September 2024 have identical terms as, and are a part of a single series with, the June 2027 Notes issued in June 2024. The June 2027 Notes are unsecured obligations and rank pari passu with Main Street’s current and future unsecured indebtedness. The June 2027 Notes may be redeemed in whole or in part at any time at Main Street’s option subject to certain make-whole provisions.
The June 2027 Notes bear interest at a rate of 6.50% per year payable semiannually on June 4 and December 4 of each year.
As of September 30, 2024, Main Street was in compliance with all covenants and other requirements of the June 2027 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 September 30, 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. In March 2024, Main Street repaid $63.8 million of SBIC debentures that had reached maturity, which reduced the total outstanding SBIC debentures to $286.2 million. Subsequently, in September 2024, Main Street borrowed an additional $63.8 million of SBIC debentures, which increased the total outstanding SBIC debentures to $350.0 million. Main Street’s SBIC debentures payable, under existing SBA-approved commitments, were $350.0 million as of both September 30, 2024 and December 31, 2023. 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 3.3% and 3.0% as of September 30, 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 September 30, 2024 was 5.9 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 September 30, 2024, the SBIC debentures consisted of (i) $175.0 million par value of SBIC debentures outstanding issued by MSMF, with a recorded value of $170.2 million that was net of unamortized debt issuance costs of $4.8 million and (ii) $175.0 million par value of SBIC debentures issued by MSC III with a recorded value of $172.9 million that was net of unamortized debt issuance costs of $2.1 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 September 30, 2024, Main Street was in compliance with all covenants and other requirements of the December 2025 Notes.
May 2024 Notes
In May 2024, Main Street repaid the $450.0 million principal amount of the issued and outstanding 5.20% unsecured notes (the “May 2024 Notes”) at maturity at par value plus the accrued and unpaid interest. The outstanding aggregate principal amount of the May 2024 Notes was $450.0 million as of December 31, 2023.