Investcorp Credit Management BDC Inc

Previous wording

We undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law or Securities and Exchange Commission (“SEC”) rule or regulation. You are advised to consult any additional disclosures that we may make directly to you or through reports that we file from time to time with the SEC, including our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

Current wording

We undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law or U.S. Securities and Exchange Commission (“SEC”) rules or regulations. You are advised to consult any additional disclosures that we may make directly to you or through reports that we file from time to time with the SEC, including our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

Previous wording

Investcorp Credit Management BDC, Inc. (“ICMB,” the “Company”, “us”, “we” or “our”), a Maryland corporation formed in May 2013, is a closed-end, externally managed, non-diversified management investment company that has elected to be regulated as a BDC under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, for U.S. federal income tax purposes, we have elected to be treated and intend to continue to qualify as a RIC under Subchapter M of the Code. On August 30, 2019, we changed our name from CM Finance Inc. to Investcorp Credit Management BDC, Inc.

Current wording

Investcorp Credit Management BDC, Inc. (“ICMB,” the “Company”, “us”, “we” or “our”), a Maryland corporation formed in May 2013, is a closed-end, externally managed, non-diversified management investment company that has elected to be regulated as a BDC under the 1940 Act. In addition, for U.S. federal income tax purposes, we have elected to be treated and intend to continue to qualify as a RIC under Subchapter M of the Code. On August 30, 2019, we changed our name from CM Finance Inc. to Investcorp Credit Management BDC, Inc. On September 18, 2024, the Company changed its fiscal year end from June 30 to December 31.

Previous wording

CM Investment Partners LLC (the “Adviser”) serves as our investment adviser. On August 30, 2019, Investcorp Credit Management US LLC (“Investcorp”) acquired an approximate 76% ownership interest in the Adviser through the acquisition of the interests held by Stifel Venture Corp. (“Stifel”) and certain funds managed by Cyrus Capital and through a direct purchase of equity from the Adviser. Investcorp is a leading global credit investment platform with assets under management of $22.9 billion as of December 31, 2023. Investcorp manages funds which invest primarily in senior secured corporate debt issued by mid and large-cap corporations in Western Europe and the United States. The business has a strong track record of consistent performance and growth, employing approximately 45 investment professionals in London and New York. Investcorp is a subsidiary of Investcorp Holdings B.S.C. (“Investcorp Holdings”). Investcorp Holdings and its consolidated subsidiaries, including Investcorp, are referred to as “Investcorp Group”. Investcorp Group is a global provider and manager of alternative investments, offering such investments to its high-net-worth private and institutional clients on a global basis.

Current wording

The Adviser serves as our investment adviser. On August 30, 2019, Investcorp Credit Management US LLC (“Investcorp”) acquired an approximate 76% ownership interest in the Adviser through the acquisition of the interests held by Stifel and certain funds managed by Cyrus Capital and through a direct purchase of equity from the Adviser. Investcorp is a leading global credit investment platform with assets under management of $21.8 billion as of September 30, 2024. Investcorp manages funds which invest primarily in senior secured corporate debt issued by mid and large-cap corporations in Western Europe and the United States. The business has a strong track record of consistent performance and growth, employing approximately 45 investment professionals in London and New York. Investcorp is a subsidiary of Investcorp Holdings B.S.C. (“Investcorp Holdings”). Investcorp Holdings and its consolidated subsidiaries, including Investcorp, are referred to as “Investcorp Group”. Investcorp Group is a global provider and manager of alternative investments, offering such investments to its high-net-worth private and institutional clients on a global basis.

Previous wording

We have entered into an investment advisory agreement (the “Advisory Agreement”) and an administration agreement (the “Administration Agreement”) with the Adviser, pursuant to which the Adviser provides us with investment advisory and the administrative services necessary for our operations. See “Note 7. Agreements and Related Party Transactions” in the notes to our consolidated financial statements in this Quarterly Report on Form 10-Q for more information regarding the Advisory Agreement and Administration Agreement and the fees and expenses paid or reimbursed by us thereunder.

Current wording

We have entered into the Advisory Agreement and the Administration Agreement with the Adviser, pursuant to which the Adviser provides us with investment advisory and the administrative services necessary for our operations. See “Note 7. Agreements and Related Party Transactions” in the notes to our consolidated financial statements in this Quarterly Report on Form 10-Q for more information regarding the Advisory Agreement and Administration Agreement and the fees and expenses paid or reimbursed by us thereunder.

Previous wording

From time to time, we may form taxable subsidiaries (the “Taxable Subsidiaries”), which are taxed as corporations for federal income tax purposes, to allow the Company to hold equity securities of portfolio companies organized as pass-through entities while continuing to satisfy the requirements applicable to a RIC under the Code. As of each of March 31, 2024 and June 30, 2023, we had no Taxable Subsidiaries.

Current wording

From time to time, we may form Taxable Subsidiaries to allow the Company to hold equity securities of portfolio companies organized as pass-through entities while continuing to satisfy the requirements applicable to a RIC under the Code. As of each of September 30, 2024 and June 30, 2024, we had no Taxable Subsidiaries.

Previous wording

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Changes in the economic environment, financial markets and any other parameters used in determining such estimates could cause actual results to differ.

Current wording

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Changes in the economic environment, financial markets and any other parameters used in determining such estimates could cause actual results to differ.

Previous wording

Understanding our accounting policies and the extent to which we use management’s judgment and estimates in applying these policies is integral to understanding our financial statements. We describe our most significant accounting policies in “Note 2. Significant Accounting Policies” in our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023 and in this Quarterly Report on Form 10-Q. Critical accounting policies are those that require the application of management’s most difficult, subjective or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that may change in subsequent periods. Management has utilized available information, including our past history, industry standards and the current economic environment, among other factors, in forming the estimates and judgments, giving due consideration to materiality. We have identified the valuation of our portfolio investments, including our investment valuation policy (which has been approved by our board of directors), as our critical accounting policy and estimates. The critical accounting policies should be read in conjunction with our risk factors in our Annual Report on Form10-K for the fiscal year ended June 30, 2023 and our subsequently filed Quarterly Reports on Form 10-Q. In addition to the discussion below, our critical accounting policies are further described in the notes to our consolidated financial statements.

Current wording

Understanding our accounting policies and the extent to which we use management’s judgment and estimates in applying these policies is integral to understanding our financial statements. We describe our most significant accounting policies in “Note 2. Significant Accounting Policies” in our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024 and in this Quarterly Report on Form 10-Q. Critical accounting policies are those that require the application of management’s most difficult, subjective or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that may change in subsequent periods. Management has utilized available information, including our past history, industry standards and the current economic environment, among other factors, in forming the estimates and judgments, giving due consideration to materiality. We have identified the valuation of our portfolio investments, including our investment valuation policy (which has been approved by our board of directors), as our critical accounting policy and estimates. The critical accounting policies should be read in conjunction with our risk factors in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024 and our subsequently filed Quarterly Reports on Form 10-Q. In addition to the discussion below, our critical accounting policies are further described in the notes to our consolidated financial statements.

Previous wording

As of March 31, 2024, our investment portfolio, valued at fair value in accordance with our Board-approved valuation policy, represented 91.5% of our total assets, as compared to 95.0% of our total assets as of June 30, 2023.

Current wording

As of September 30, 2024, our investment portfolio, valued at fair value in accordance with our Board-approved valuation policy, represented 93.7% of our total assets, as compared to 96.0% of our total assets as of June 30, 2024.

Previous wording

On August 23, 2021, we, through Investcorp Credit Management BDC SPV, LLC, our wholly-owned subsidiary, entered into a five-year, $115 million senior secured revolving credit facility (the “Capital One Revolving Financing”) with Capital One, N.A. (“Capital One”), which is secured by collateral consisting primarily of loans in our investment portfolio. On June 14, 2023, we amended the Capital One Revolving Financing to decrease the facility size from $115 million to $100 million. On January 17, 2024, we amended the Capital One Revolving Financing to (i) extend the maturity date to January 17, 2029, (ii) increase of the applicable interest spreads under the Capital One Revolving Financing and (iii) extend the Scheduled Revolving Period End Date (as defined in Capital One Revolving Financing) to January 17, 2027. The Capital One Revolving Financing, which will expire on January 17, 2029 (the “Maturity Date”), features a three-year reinvestment period and a two-year amortization period.

Current wording

On August 23, 2021, we, through Investcorp Credit Management BDC SPV, LLC, our wholly-owned subsidiary, entered into the Capital One Revolving Financing with Capital One, which is secured by collateral consisting primarily of loans in our investment portfolio. On June 14, 2023, we amended the Capital One Revolving Financing to decrease the facility size from $115 million to $100 million. On January 17, 2024, we amended the Capital One Revolving Financing to (i) extend the maturity date to January 17, 2029, (ii) increase of the applicable interest spreads under the Capital One Revolving Financing and (iii) extend the Scheduled Revolving Period End Date (as defined in Capital One Revolving Financing) to January 17, 2027. The Capital One Revolving Financing, which will expire on January 17, 2029 (the “Maturity Date”), features a three-year reinvestment period and a two-year amortization period.

Previous wording

Effective January 17, 2024, borrowings under the Capital One Revolving Financing generally bear interest at a rate per annum equal to Secured Overnight Financing Rate ("SOFR") plus 3.10%. The default interest rate will be equal to the interest rate then in effect plus 2.00%. The Capital One Revolving Financing required the payment of an upfront fee of 1.125% ($1.3 million) of the available borrowings under the Capital One Revolving Financing at the closing, and requires the payment of an unused fee of (i) 0.75% annually for any undrawn amounts below 50% of the Capital One Revolving Financing, (ii) 0.50% annually for any undrawn amounts between 50% and 75% of the Capital One Revolving Financing, and (iii) 0.25% annually for any undrawn amounts above 75% of the Capital One Revolving Financing. Borrowings under the Capital One Revolving Financing are based on a borrowing base. The Capital One Revolving Financing generally requires payment of interest and fees on a quarterly basis. All outstanding principal is due on the Maturity Date. The Capital One Revolving Financing also requires mandatory prepayment of interest and principal upon certain events.

Current wording

Effective January 17, 2024, borrowings under the Capital One Revolving Financing generally bear interest at a rate per annum equal to SOFR plus 3.10%. The default interest rate will be equal to the interest rate then in effect plus 2.00%. The Capital One Revolving Financing required the payment of an upfront fee of 1.125% ($1.3 million) of the available borrowings under the Capital One Revolving Financing at the closing, and requires the payment of an unused fee of (i) 0.75% annually for any undrawn amounts below 50% of the Capital One Revolving Financing, (ii) 0.50% annually for any undrawn amounts between 50% and 75% of the Capital One Revolving Financing, and (iii) 0.25% annually for any undrawn amounts above 75% of the Capital One Revolving Financing. Borrowings under the Capital One Revolving Financing are based on a borrowing base. The Capital One Revolving Financing generally requires payment of interest and fees on a quarterly basis. All outstanding principal is due on the Maturity Date. The Capital One Revolving Financing also requires mandatory prepayment of interest and principal upon certain events.

Previous wording

As of March 31, 2024 and June 30, 2023, there were $57.5 million and $71.9 million in borrowings outstanding under the Capital One Revolving Financing, respectively.

Current wording

As of September 30, 2024 and June 30, 2024, there were $47.5 million and $43.0 million in borrowings outstanding under the Capital One Revolving Financing, respectively.

Previous wording

As a BDC, we are required to comply with certain regulatory requirements. For instance, as a BDC, we may not acquire any assets other than “qualifying assets” specified in the 1940 Act unless, at the time the acquisition is made, at least 70% of our total assets are qualifying assets (with certain limited exceptions). Qualifying assets include investments in “eligible portfolio companies.” Under the relevant SEC rules, the term “eligible portfolio company” includes all private companies, companies whose securities are not listed on a national securities exchange, and certain public companies that have listed their securities on a national securities exchange and have a market capitalization of less than $250 million. In each case, the company must be organized in the United States. As of March 31, 2024, approximately 2.25% of our total assets were non-qualifying assets.

Current wording

As a BDC, we are required to comply with certain regulatory requirements. For instance, as a BDC, we may not acquire any assets other than “qualifying assets” specified in the 1940 Act unless, at the time the acquisition is made, at least 70% of our total assets are qualifying assets (with certain limited exceptions). Qualifying assets include investments in “eligible portfolio companies.” Under the relevant SEC rules, the term “eligible portfolio company” includes all private companies, companies whose securities are not listed on a national securities exchange, and certain public companies that have listed their securities on a national securities exchange and have a market capitalization of less than $250 million. In each case, the company must be organized in the United States. As of September 30, 2024, approximately 1.54% of our total assets were non-qualifying assets.

Previous wording

Our primary operating expenses include the payment of the base management fee (the “Base Management Fee”) and, depending on our operating results, the incentive fees (the “Incentive Fee”) under the Advisory Agreement, as well as the payment of reimbursable expenses to the Adviser for the costs and expenses incurred by the Adviser in performing its obligations and providing personnel and facilities under the Administration Agreement, such as our allocable portion of overhead expenses, including rent and the allocable portion of the cost of our chief financial officer and chief compliance officer and their respective staffs. The Base Management Fee and Incentive Fee compensation under the Advisory Agreement remunerates the Adviser for work in identifying, evaluating, negotiating, closing and monitoring our investments. We bear all other out-of-pocket costs and expenses of our operations and transactions, including, without limitation, those relating to:

Current wording

Our primary operating expenses include the payment of the Base Management Fee and, depending on our operating results, the Incentive Fee under the Advisory Agreement, as well as the payment of reimbursable expenses to the Adviser for the costs and expenses incurred by the Adviser in performing its obligations and providing personnel and facilities under the Administration Agreement, such as our allocable portion of overhead expenses, including rent and the allocable portion of the cost of our chief financial officer and chief compliance officer and their respective staffs. The Base Management Fee and Incentive Fee compensation under the Advisory Agreement remunerates the Adviser for work in identifying, evaluating, negotiating, closing and monitoring our investments. We bear all other out-of-pocket costs and expenses of our operations and transactions, including, without limitation, those relating to:

Previous wording

As of June 30, 2023, our investment portfolio of $220.1 million (at fair value) consisted of debt and equity investments in 36 portfolio companies, of which 89.21% were first lien investments and 10.79% were in equities, warrants and other positions. At June 30, 2023, our average and largest portfolio company investment at fair value was $6.1 million and $13.0 million, respectively.

Current wording

As of September 30, 2024, our investment portfolio of $190.1 million (at fair value) consisted of debt and equity investments in 45 portfolio companies, of which 82.47% were first lien investments and 17.53% were equities, warrants and other positions. At September 30, 2024, our average and largest portfolio company investment at fair value was $4.2 million and $17.4 million, respectively.

Previous wording

As of March 31, 2024, our investment portfolio of $192.2 million (at fair value) consisted of debt and equity investments in 41 portfolio companies, of which 83.82% were first lien investments and 16.18% were in equities, warrants and other positions. At March 31, 2024, our average and largest portfolio company investment at fair value was $4.7 million and $14.6 million, respectively.

Current wording

As of June 30, 2024, our investment portfolio of $184.6 million (at fair value) consisted of debt and equity investments in 41 portfolio companies, of which 85.02% were first lien investments and 14.98% were in equities, warrants and other positions. At June 30, 2024, our average and largest portfolio company investment at fair value was $4.6 million and $13.5 million, respectively.

Previous wording

As of March 31, 2024 and June 30, 2023, our weighted average total yield of debt and income producing securities at amortized cost (which includes interest income and amortization of fees and discounts) was 12.36% and 12.50% respectively. As of March 31, 2024 and June 30, 2023, our weighted average total yield on investments at amortized cost (which includes interest income and amortization of fees and discounts) was 10.68% and 11.32%, respectively. The weighted average total yield was computed using an internal rate of return calculation of our debt investments based on contractual cash flows, including interest and amortization payments, and, for floating rate investments, the spot SOFR, as applicable, as of March 31, 2024 of all of our debt investments. The weighted average total yield of our debt investments is not the same as a return on investment for our stockholders but, rather, relates to a portion of our investment portfolio and is calculated before payment of all of our fees and expenses, including any sales load paid in connection with an offering of our securities. There can be no assurance that the weighted average total yield will remain at its current level.

Current wording

As of September 30, 2024 and June 30, 2024, our weighted average total yield of debt and income producing securities at amortized cost (which includes interest income and amortization of fees and discounts) was 10.70% and 12.47% respectively. As of September 30, 2024 and June 30, 2024, our weighted average total yield on investments at amortized cost (which includes interest income and amortization of fees and discounts) was 9.08% and 10.60%, respectively. The weighted average total yield was computed using an internal rate of return calculation of our debt investments based on contractual cash flows, including interest and amortization payments, and, for floating rate investments, the spot SOFR, as applicable, as of September 30, 2024 of all of our debt investments. The weighted average total yield of our debt investments is not the same as a return on investment for our stockholders but, rather, relates to a portion of our investment portfolio and is calculated before payment of all of our fees and expenses, including any sales load paid in connection with an offering of our securities. There can be no assurance that the weighted average total yield will remain at its current level.

Previous wording

We use Global Industry Classification Standard (“GICS”) codes to identify the industry groupings of our portfolio companies. At March 31, 2024 and June 30, 2023, respectively, the industry composition of our portfolio in accordance with the GICS codes at fair value, as a percentage of our total portfolio, was as follows:

Current wording

We use GICS codes to identify the industry groupings of our portfolio companies. At September 30, 2024 and June 30, 2024, respectively, the industry composition of our portfolio in accordance with the GICS codes at fair value, as a percentage of our total portfolio, was as follows:

Previous wording

During the nine months ended March 31, 2024, we made investments in nine new portfolio companies and three existing portfolio companies totaling approximately $42.5 million, at cost. Of the new investments, 90.52% consisted of first lien investments and 9.48% consisted of equity investments.

Current wording

During the three months ended September 30, 2024, we made investments in three new portfolio companies and three existing portfolio companies totaling approximately $13.1 million, at cost, of which $0.5 million represented the reinstatement of previously recorded paydowns for interest received from Klein Hersh, LLC while it was on non-accrual status. Of the new investments, 100.0% consisted of first lien investments and 0.0% consisted of equity investments.

Previous wording

At March 31, 2024, 99.6% of our debt investments bore interest based on floating rates based on indices such as SOFR, the Euro Interbank Offered Rate, the Federal Funds Rate of the Prime Rate (in certain cases, subject to interest rate floors), and 0.4% bore interest at fixed rates. At June 30, 2023, 99.6% of our debt investments bore interest based on floating rates based on indices such as LIBOR, SOFR, the Euro Interbank Offered Rate, the Federal Funds Rate or the Prime Rate (in certain cases, subject to interest rate floors), and 0.4% bore interest at fixed rates.

Current wording

At September 30, 2024, 96.9% of our debt investments bore interest based on floating rates based on indices such as SOFR, the Euro Interbank Offered Rate, the Federal Funds Rate of the Prime Rate (in certain cases, subject to interest rate floors), and 3.1% bore interest at fixed rates. At June 30, 2024, 97.0% of our debt investments bore interest based on floating rates based on indices such as LIBOR, SOFR, the Euro Interbank Offered Rate, the Federal Funds Rate or the Prime Rate (in certain cases, subject to interest rate floors), and 3.0% bore interest at fixed rates.

Previous wording

Our investment portfolio may contain loans that are in the form of lines of credit or revolving credit facilities, which require us to provide funding when requested by portfolio companies in accordance with the terms of the underlying loan agreements. As of March 31, 2024, we had three investments with aggregate unfunded commitments of $1.8 million, and as of June 30, 2023, we had nine investments with aggregate unfunded commitments of $5.7 million. As of March 31, 2024, we had sufficient liquidity (through cash on hand and available borrowings under our Capital One Revolving Financing) to fund such unfunded loan commitments should the need arise.

Current wording

Our investment portfolio may contain loans that are in the form of lines of credit or revolving credit facilities, which require us to provide funding when requested by portfolio companies in accordance with the terms of the underlying loan agreements. As of September 30, 2024, we had six investments with aggregate unfunded commitments of $2.7 million, and as of June 30, 2024, we had three investments with aggregate unfunded commitments of $1.8 million. As of September 30, 2024, we had sufficient liquidity (through cash on hand and available borrowings under our Capital One Revolving Financing) to fund such unfunded loan commitments should the need arise.

Previous wording

Investment income, attributable primarily to interest and fees on our debt investments, for the three months ended March 31, 2024 decreased to $6.6 million from $7.0 million for the three months ended March 31, 2023 primarily related to a decrease in interest income related to the sale of two portfolio companies and the repayment of four portfolio companies and a decrease in interest income related to the portfolio companies on non-accrual status, offset by increases in PIK income, dividend income, and other fee income.

Current wording

Investment income, attributable primarily to interest and fees on our debt investments, for the three months ended September 30, 2024 increased to $6.8 million from $5.9 million for the three months ended September 30, 2023 primarily related to an increase in PIK interest income related to the removal of the Klein Hersh, LLC Term Loan from non-accrual status, partially offset by a decrease in interest income due to lower index and interest rates and the repayment of two portfolio companies.

Previous wording

Total expenses for the three months ended March 31, 2024 increased to $4.6 million, compared to $4.5 million for the three months ended March 31, 2023, primarily due to an increase in the provision for tax expense, an increase in professional fees, and an increase in other expenses associated with the sale and write off of our investments in 1888 Industrial Services, LLC, partially offset by a decrease in base management fees and a decrease in the allocation of administrative costs from the Adviser.

Current wording

Net expenses for the three months ended September 30, 2024 increased to $4.5 million compared to $4.3 million for the three months ended September 30, 2023, primarily due to an increase in the provision for tax expense, an increase in income-based incentive fees, and an increase in professional fees primarily due to increases in audit and legal expenses partially offset by a decrease in interest expense due to lower index rates in 2024 compared to 2023, a decrease in base management fees, and a decrease in the allocation of administrative costs from the Adviser.

Previous wording

Net investment income decreased to $2.1 million for the three months ended March 31, 2024 from $2.5 million for the three months ended March 31, 2023 primarily due to a decrease in total investment income primarily related to the sale of two portfolio companies and the repayment of four portfolio companies, a decrease in interest income related to the portfolio companies on non-accrual status, an increase in the provision for tax expense, an increase in professional fees, and an increase in other expenses associated with the sale and write off of our investments in 1888 Industrial Services, LLC, partially offset by increases in PIK income, dividend income, and other fee income and decreases in base management fees and the allocation of administrative costs from the Adviser.

Current wording

Net investment income increased to $2.3 million for the three months ended September 30, 2024 from $1.6 million for the three months ended September 30, 2023 primarily due to an increase in PIK interest income related to the removal of the Klein Hersh, LLC Term Loan from non-accrual status, a decrease in interest expense due to lower index rates in 2024 compared to 2023, a decrease in base management fees, and a decrease in the allocation of administrative costs from the Adviser, partially offset by a decrease in interest income due to lower index and interest rates and the repayment of two portfolio companies, an increase in the provision for tax expense, an increase in income-based incentive fees, and an increase in professional fees primarily due to increases in audit and legal expenses.

Previous wording

There was a net realized loss from investments of $6.3 million for the three months ended March 31, 2024 primarily due to the realization of losses associated with the sale and write off of our investments in 1888 Industrial Services, LLC. Net realized loss on investments totaled $26.9 million for the three months ended March 31, 2023, primarily due to the write off of our investments in the American Teleconferencing Services, Ltd. (d/b/a Premiere Global Services, Inc.) 1st and 2nd lien term loans.

Current wording

There was a net realized loss from investments of $4.1 million for the three months ended September 30, 2024 primarily due to the realization of losses associated with the restructuring of our investment in Klein Hersh, LLC. There was no net realized gain or loss on investments for the three months ended September 30, 2023.

Previous wording

For the nine months ended March 31, 2024, our total cash balance increased by $3.7 million. During that period, cash increased by $26.0 million from operating activities, primarily due to proceeds from sales and repayments of portfolio companies of $68.8 million and payables for investments purchased of $1.7 million, partially offset by a decrease in net assets resulting from operations of $2.1 million and payments for the purchase of investments in portfolio companies of $44.6 million. During the same period, net cash used in financing activities totaled $22.3 million, consisting primarily of $6.9 million of distributions paid to our stockholders and repayments of $46.5 million to paydown the Capital One Revolving Facility, offset by proceeds of $32.1 million from borrowing under the Capital One Revolving Facility.

Current wording

For the three months ended September 30, 2024, our total cash balance increased by $5.0 million. During that period, cash increased by $0.5 million from operating activities, primarily due to proceeds from sales and repayments of portfolio companies of $14.3 million, an increase in net assets resulting from operations of $6.6 million, a realized loss on investments of $4.1 million, and an increase in interest payable of $0.7 million, partially offset by payments for the purchase of investments in portfolio companies of $13.1 million, a net change in unrealized depreciation on investments of $8.3 million, a decrease in payable for investments purchased of $2.2 million, and a decrease in PIK interest and dividends of $2.1 million. During the same period, net cash provided by financing activities totaled $4.5 million consisting of proceeds of $4.5 million from borrowing under the Capital One Revolving Facility.

Previous wording

As of March 31, 2024, we had $2.7 million of cash as well as $10.2 million in restricted cash and $42.5 million of capacity under the Capital One Revolving Financing. We intend to generate additional cash primarily from future offerings of equity and/or debt securities, future borrowings or debt issuances, as well as cash flows from operations, including income earned from investments in our portfolio companies and, to a lesser extent, from the temporary investment of cash in U.S. government securities and other high-quality debt investments that mature in one year or less.

Current wording

As of September 30, 2024, we had $1.7 million of cash as well as $8.3 million in restricted cash and $52.5 million of capacity under the Capital One Revolving Financing. We intend to generate additional cash primarily from future offerings of equity and/or debt securities, future borrowings or debt issuances, as well as cash flows from operations, including income earned from investments in our portfolio companies and, to a lesser extent, from the temporary investment of cash in U.S. government securities and other high-quality debt investments that mature in one year or less.

Previous wording

On May 2, 2018, our board of directors, including a “required majority” (as such term is defined in Section 57(o) of the 1940 Act) of the board of directors, approved the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act. As a result, effective May 2, 2019, our applicable minimum asset coverage ratio under the 1940 Act was decreased to 150% from 200%. Thus, we are permitted under the 1940 Act, under specified conditions, to issue multiple classes of debt and one class of stock senior to our common stock if our asset coverage, as defined in the 1940 Act, is at least equal to 150% immediately after each such issuance. As of March 31, 2024, our asset coverage for borrowed amounts was 164.6%.

Current wording

On May 2, 2018, our board of directors, including a “required majority” (as such term is defined in Section 57(o) of the 1940 Act) of the board of directors, approved the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act. As a result, effective May 2, 2019, our applicable minimum asset coverage ratio under the 1940 Act was decreased to 150% from 200%. Thus, we are permitted under the 1940 Act, under specified conditions, to issue multiple classes of debt and one class of stock senior to our common stock if our asset coverage, as defined in the 1940 Act, is at least equal to 150% immediately after each such issuance. As of September 30, 2024, our asset coverage for borrowed amounts was 172.0%.

Previous wording

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. As of March 31, 2024, our off-balance sheet arrangements consisted of $1.8 million in unfunded commitments to three of our portfolio companies. As of March 31, 2024, we had sufficient liquidity (through cash on hand and available borrowings under our Capital One Revolving Financing) to fund such unfunded loan commitments should the need arise. As of June 30, 2023, our off-balance arrangements consisted of $5.7 million in unfunded commitments to nine of our portfolio companies.

Current wording

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. As of September 30, 2024, our off-balance sheet arrangements consisted of $2.7 million in unfunded commitments to five of our portfolio companies. As of September 30, 2024, we had sufficient liquidity (through cash on hand and available borrowings under our Capital One Revolving Financing) to fund such unfunded loan commitments should the need arise. As of June 30, 2024, our off-balance arrangements consisted of $1.8 million in unfunded commitments to three of our portfolio companies.

Previous wording

On April 12, 2024, our board of directors declared a distribution for the quarter ended June 30, 2024 of $0.12 per share payable on June 14, 2024 to stockholders of record as of May 26, 2024 and a supplemental distribution of $0.03 per share, payable on June 14, 2024 to stockholders of record as of May 26, 2024.

Current wording

On November 6, 2024, our board of directors declared a distribution for the quarter ended December 31, 2024 of $0.12 per share payable on January 8, 2025 to stockholders of record as of December 20, 2024.