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Main Street Capital CORP - Quarter Report: 2019 September (Form 10-Q)


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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)    

ý

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

OR

o

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from:            to                              

Commission File Number: 001-33723

Main Street Capital Corporation
(Exact name of registrant as specified in its charter)

Maryland
(State or other jurisdiction of
incorporation or organization)
  41-2230745
(I.R.S. Employer
Identification No.)

1300 Post Oak Boulevard, 8th Floor
Houston, TX
(Address of principal executive offices)

 

77056
(Zip Code)

(713) 350-6000
(Registrant's telephone number including area code)

n/a
(Former name, former address and former fiscal year, if changed since last report)

        Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class   Trading Symbol   Name of Each Exchange on Which
Registered
Common Stock, par value $0.01 per share   MAIN   New York Stock Exchange

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

        Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes o    No o

        Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ý   Accelerated filer o   Non-accelerated filer o   Smaller reporting company o

Emerging growth company o

        If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

        Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No ý

        The number of shares outstanding of the issuer's common stock as of November 7, 2019 was 63,424,793.

   


Table of Contents


TABLE OF CONTENTS

PART I
FINANCIAL INFORMATION

Item 1.

 

Consolidated Financial Statements

 

 

Consolidated Balance Sheets—September 30, 2019 (unaudited) and December 31, 2018

  1

 

Consolidated Statements of Operations (unaudited)—Three and nine months ended September 30, 2019 and 2018

  2

 

Consolidated Statements of Changes in Net Assets (unaudited)—Nine months ended September 30, 2019 and 2018

  3

 

Consolidated Statements of Cash Flows (unaudited)—Nine months ended September 30, 2019 and 2018

  4

 

Consolidated Schedule of Investments (unaudited)—September 30, 2019

  5

 

Consolidated Schedule of Investments—December 31, 2018

  31

 

Notes to Consolidated Financial Statements (unaudited)

  57

 

Consolidated Schedules of Investments in and Advances to Affiliates (unaudited)—Nine months ended September 30, 2019 and 2018

  102

Item 2.

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

  112

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

  136

Item 4.

 

Controls and Procedures

  137


PART II
OTHER INFORMATION

Item 1.

 

Legal Proceedings

  138

Item 1A.

 

Risk Factors

  138

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

  138

Item 6.

 

Exhibits

  138

 

Signatures

  139

Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Balance Sheets

(dollars in thousands, except shares and per share amounts)

 
  September 30,
2019
  December 31,
2018
 
 
  (Unaudited)
   
 

ASSETS

             

  

             

Investments at fair value:

             

Control investments (cost: $762,945 and $750,618 as of September 30, 2019 and December 31, 2018, respectively)

  $ 1,024,566   $ 1,004,993  

Affiliate investments (cost: $358,086 and $381,307 as of September 30, 2019 and December 31, 2018, respectively)

    338,747     359,890  

Non-Control/Non-Affiliate investments (cost: $1,237,769 and $1,137,108 as of September 30, 2019 and December 31, 2018, respectively)

    1,193,883     1,089,026  

Total investments (cost: $2,358,800 and $2,269,033 as of September 30, 2019 and December 31, 2018, respectively)

    2,557,196     2,453,909  

  

             

Cash and cash equivalents

    52,281     54,181  

Interest receivable and other assets

    52,145     39,674  

Receivable for securities sold

        1,201  

Deferred financing costs (net of accumulated amortization of $7,267 and $6,562 as of September 30, 2019 and December 31, 2018, respectively)

    3,756     4,461  

Total assets

  $ 2,665,378   $ 2,553,426  

LIABILITIES

             

Credit facility

 
$

150,000
 
$

301,000
 

SBIC debentures (par: $311,800 ($37,000 due within one year) and $345,800 as of September 30, 2019 and December 31, 2018, respectively)

    305,768     338,186  

5.20% Notes due 2024 (par: $250,000 as of September 30, 2019)

    246,257      

4.50% Notes due 2022 (par: $185,000 as of both September 30, 2019 and December 31, 2018)

    183,078     182,622  

4.50% Notes due 2019 (par: $175,000 as of both September 30, 2019 and December 31, 2018)

    174,880     174,338  

Accounts payable and other liabilities

    23,072     17,962  

Payable for securities purchased

    6,875     28,254  

Interest payable

    12,540     6,041  

Dividend payable

    12,975     11,948  

Deferred tax liability, net

    17,878     17,026  

Total liabilities

    1,133,323     1,077,377  

Commitments and contingencies (Note K)

   
 
   
 
 

NET ASSETS

   
 
   
 
 

Common stock, $0.01 par value per share (150,000,000 shares authorized; 63,309,513 and 61,264,861 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively)

   
633
   
613
 

Additional paid-in capital

    1,481,702     1,409,945  

Total undistributed earnings

    49,720     65,491  

Total net assets

    1,532,055     1,476,049  

Total liabilities and net assets

  $ 2,665,378   $ 2,553,426  

NET ASSET VALUE PER SHARE

  $ 24.20   $ 24.09  

   

The accompanying notes are an integral part of these consolidated financial statements

1


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Statements of Operations

(dollars in thousands, except shares and per share amounts)

(Unaudited)

 
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
 
 
  2019   2018   2019   2018  

INVESTMENT INCOME:

                         

Interest, fee and dividend income:

                         

Control investments

  $ 23,173   $ 18,926   $ 70,480   $ 64,756  

Affiliate investments

    8,009     9,643     25,426     27,230  

Non-Control/Non-Affiliate investments

    28,886     29,694     86,818     82,089  

Total investment income

    60,068     58,263     182,724     174,075  

EXPENSES:

                         

Interest

    (12,893 )   (10,884 )   (37,138 )   (31,982 )

Compensation

    (4,322 )   (5,798 )   (15,907 )   (16,962 )

General and administrative

    (2,920 )   (2,951 )   (9,282 )   (9,023 )

Share-based compensation

    (2,572 )   (2,147 )   (7,279 )   (6,883 )

Expenses allocated to the External Investment Manager

    1,651     1,592     5,001     5,336  

Total expenses

    (21,056 )   (20,188 )   (64,605 )   (59,514 )

NET INVESTMENT INCOME

    39,012     38,075     118,119     114,561  

NET REALIZED GAIN (LOSS):

   
 
   
 
   
 
   
 
 

Control investments

    5,869         4,926     4,681  

Affiliate investments

    1,850     1,898     (602 )   1,898  

Non-Control/Non-Affiliate investments

    (13,595 )   7,340     (18,487 )   (3,825 )

Realized loss on extinguishment of debt

            (5,689 )   (2,896 )

Total net realized gain (loss)                     

    (5,876 )   9,238     (19,852 )   (142 )

NET UNREALIZED APPRECIATION (DEPRECIATION):

                         

Control investments

    (8,797 )   30,285     6,286     33,357  

Affiliate investments

    1,323     3,135     3,131     16,997  

Non-Control/Non-Affiliate investments

    4,547     (8,159 )   3,737     (3,264 )

SBIC debentures

    (319 )   (53 )   4,625     1,296  

Total net unrealized appreciation (depreciation)                                                     

    (3,246 )   25,208     17,779     48,386  

INCOME TAXES:

                         

Federal and state income, excise and other taxes

    (1,079 )   (759 )   (2,745 )   (793 )

Deferred taxes

    5,091     (3,022 )   254     (3,304 )

Income tax benefit (provision)                     

    4,012     (3,781 )   (2,491 )   (4,097 )

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

  $ 33,902   $ 68,740   $ 113,555   $ 158,708  

NET INVESTMENT INCOME PER SHARE—BASIC AND DILUTED

  $ 0.62   $ 0.63   $ 1.88   $ 1.91  

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS PER SHARE—BASIC AND DILUTED

  $ 0.54   $ 1.13   $ 1.81   $ 2.65  

WEIGHTED AVERAGE SHARES OUTSTANDING—BASIC AND DILUTED

    63,297,943     60,807,096     62,686,139     59,836,527  

   

The accompanying notes are an integral part of these consolidated financial statements

2


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MAIN STREET CAPITAL CORPORATION

Consolidated Statements of Changes in Net Assets

(dollars in thousands, except shares)

(Unaudited)

 
  Common Stock    
   
   
 
 
  Number
of Shares
  Par
Value
  Additional
Paid-In
Capital
  Total
Undistributed
Earnings
  Total Net
Asset Value
 

Balances at December 31, 2017

    58,660,680   $ 586   $ 1,310,780   $ 69,002   $ 1,380,368  

Public offering of common stock, net of offering costs

   
309,895
   
4
   
11,332
   
   
11,336
 

Share-based compensation

            2,303         2,303  

Purchase of vested stock for employee payroll tax withholding

    (5,392 )       (212 )       (212 )

Dividend reinvestment

    42,423         1,589         1,589  

Amortization of directors' deferred compensation

            206         206  

Issuance of restricted stock

    124                  

Dividends to stockholders

                (33,507 )   (33,507 )

Net increase resulting from operations

                34,517     34,517  

Balances at March 31, 2018

    59,007,730   $ 590   $ 1,325,998   $ 70,012   $ 1,396,600  

Public offering of common stock, net of offering costs

    1,122,290     10     42,416         42,426  

Share-based compensation

            2,432         2,432  

Purchase of vested stock for employee payroll tax withholding

    (104,301 )   (1 )   (3,864 )       (3,865 )

Dividend reinvestment

    126,003     2     4,790         4,792  

Amortization of directors' deferred compensation

            213         213  

Issuance of restricted stock, net of forfeited shares

    248,850     2     (2 )        

Dividends to stockholders

                (50,696 )   (50,696 )

Net increase resulting from operations

                55,452     55,452  

Balances at June 30, 2018

    60,400,572   $ 603   $ 1,371,983   $ 74,768   $ 1,447,354  

Public offering of common stock, net of offering costs

    475,334     5     18,570         18,575  

Share-based compensation

            2,147         2,147  

Purchase of vested stock for employee payroll tax withholding

                     

Dividend reinvestment

    84,699     1     3,342         3,343  

Amortization of directors' deferred compensation

            215         215  

Issuance of restricted stock, net of forfeited shares

    1,900     1     (1 )        

Dividends to stockholders

                (34,931 )   (34,931 )

Net increase resulting from operations

                68,739     68,739  

Balances at September 30, 2018

    60,962,505   $ 610   $ 1,396,256   $ 108,576   $ 1,505,442  

Balances at December 31, 2018

    61,264,861   $ 613   $ 1,409,945   $ 65,491   $ 1,476,049  

Public offering of common stock, net of offering costs

    960,684     9     35,376         35,385  

Share-based compensation

            2,329         2,329  

Dividend reinvestment

    96,189     1     3,595         3,596  

Amortization of directors' deferred compensation

            216         216  

Issuance of restricted stock

    52,043     1     (1 )        

Dividends to stockholders

            70     (36,549 )   (36,479 )

Net increase resulting from operations

                41,401     41,401  

Balances at March 31, 2019

    62,373,777   $ 624   $ 1,451,530   $ 70,343   $ 1,522,497  

Public offering of common stock, net of offering costs

    245,989     2     9,416         9,418  

Share-based compensation

            2,378         2,378  

Purchase of vested stock for employee payroll tax withholding

    (90,404 )   (1 )   (3,364 )       (3,365 )

Dividend reinvestment

    133,128     1     5,392         5,393  

Amortization of directors' deferred compensation

            216         216  

Issuance of restricted stock, net of forfeited shares

    262,642     3     (3 )        

Dividends to stockholders

            114     (53,823 )   (53,709 )

Net increase resulting from operations

                38,254     38,254  

Balances at June 30, 2019

    62,925,132   $ 629   $ 1,465,679   $ 54,774   $ 1,521,082  

Public offering of common stock, net of offering costs

    225,864     2     9,398         9,400  

Share-based compensation

            2,572         2,572  

Dividend reinvestment

    88,052     1     3,747         3,748  

Amortization of directors' deferred compensation

            217         217  

Issuance of restricted stock, net of forfeited shares

    75,465     1     (1 )        

Dividends to stockholders

            90     (38,956 )   (38,866 )

Net increase resulting from operations

                33,902     33,902  

Balances at September 30, 2019

    63,314,513   $ 633   $ 1,481,702   $ 49,720   $ 1,532,055  

   

The accompanying notes are an integral part of these consolidated financial statements

3


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Statements of Cash Flows

(dollars in thousands)

(Unaudited)

 
  Nine Months Ended September 30,  
 
  2019   2018  

CASH FLOWS FROM OPERATING ACTIVITIES

             

Net increase in net assets resulting from operations

  $ 113,555   $ 158,708  

Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by (used in) operating activities:

             

Investments in portfolio companies

    (477,257 )   (766,483 )

Proceeds from sales and repayments of debt investments in portfolio companies

    331,204     480,738  

Proceeds from sales and return of capital of equity investments in portfolio companies

    32,380     71,010  

Net unrealized appreciation

    (17,779 )   (48,386 )

Net realized loss

    19,852     142  

Accretion of unearned income

    (9,131 )   (11,253 )

Payment-in-kind interest

    (3,482 )   (1,760 )

Cumulative dividends

    (1,975 )   (1,735 )

Share-based compensation expense

    7,279     6,883  

Amortization of deferred financing costs

    2,822     2,482  

Deferred tax (benefit) provision

    (254 )   3,304  

Changes in other assets and liabilities:

             

Interest receivable and other assets

    (9,073 )   (1,170 )

Interest payable

    6,499     1,458  

Accounts payable and other liabilities

    5,759     (282 )

Deferred fees and other

    1,495     2,969  

Net cash provided by (used in) operating activities

    1,894     (103,375 )

CASH FLOWS FROM FINANCING ACTIVITIES

   
 
   
 
 

Proceeds from public offering of common stock, net of offering costs

    54,203     72,337  

Proceeds from public offering of 5.20% Notes due 2024

    250,000      

Dividends paid

    (115,288 )   (108,668 )

Proceeds from issuance of SBIC debentures

        54,000  

Repayments of SBIC debentures

    (34,000 )   (4,000 )

Redemption of 6.125% Notes

        (90,655 )

Proceeds from credit facility

    310,000     516,000  

Repayments on credit facility

    (461,000 )   (330,000 )

Payment of deferred issuance costs and SBIC debenture fees

    (4,344 )   (2,787 )

Purchases of vested stock for employee payroll tax withholding

    (3,365 )   (4,077 )

Net cash provided by (used in) financing activities

    (3,794 )   102,150  

Net decrease in cash and cash equivalents

    (1,900 )   (1,225 )

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

    54,181     51,528  

CASH AND CASH EQUIVALENTS AT END OF PERIOD

  $ 52,281   $ 50,303  

Supplemental cash flow disclosures:

             

Interest paid

  $ 27,725   $ 27,948  

Taxes paid

  $ 2,265   $ 4,725  

Operating non-cash activities:

             

Right-of-use assets obtained in exchange for operating lease liabilities

  $ 5,240   $  

Non-cash financing activities:

             

Shares issued pursuant to the DRIP

  $ 12,737   $ 9,723  

   

The accompanying notes are an integral part of these consolidated financial statements

4


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments

September 30, 2019

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Control Investments(5)

     

 

 

 

                   

                               

Access Media Holdings, LLC(10)

  July 22, 2015  

Private Cable Operator

                       

         

10% PIK Secured Debt (Maturity—July 22, 2020)(14)(19)

  $ 23,828   $ 23,828   $ 7,603  

         

Preferred Member Units (9,481,500 units)(27)

          9,375     (284 )

         

Member Units (45 units)

          1      

                      33,204     7,319  

                               

ASC Interests, LLC

  August 1, 2013  

Recreational and Educational Shooting Facility

                       

         

11% Secured Debt (Maturity—July 31, 2020)

    1,650     1,635     1,635  

         

Member Units (1,500 units)

          1,500     1,290  

                      3,135     2,925  

                               

Analytical Systems Keco, LLC

  August 16, 2019  

Manufacturer of Liquid and Gas Analyzers

                       

         

LIBOR Plus 10.00% (Floor 2.00%), Current Coupon 12.50%, Secured Debt (Maturity—August 16, 2024)(9)

    5,600     5,229     5,229  

         

Preferred Member Units (3,200 units)

          3,200     3,200  

         

Warrants (420 equivalent shares; Expiration—August 16, 2029; Strike price—$0.01 per share)

          316     316  

                      8,745     8,745  

                               

ATS Workholding, LLC(10)

  March 10, 2014  

Manufacturer of Machine
Cutting Tools and
Accessories

                       

         

5% Secured Debt (Maturity—November 16, 2021)

    4,919     4,635     4,491  

         

Preferred Member Units (3,725,862 units)

          3,726     1,835  

                      8,361     6,326  

                               

Bond-Coat, Inc.

  December 28, 2012  

Casing and Tubing Coating Services

                       

         

15% Secured Debt (Maturity—December 28, 2020)

    11,596     11,445     11,445  

         

Common Stock (57,508 shares)

          6,350     8,300  

                      17,795     19,745  

                               

Brewer Crane Holdings, LLC

  January 9, 2018  

Provider of Crane Rental and Operating Services

                       

         

LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 12.10%, Secured Debt (Maturity—January 9, 2023)(9)

    9,176     9,108     9,108  

         

Preferred Member Units (2,950 units)(8)

          4,280     4,280  

                      13,388     13,388  

                               

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MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2019

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Bridge Capital Solutions Corporation

  April 18, 2012  

Financial Services and Cash Flow Solutions Provider

                       

         

13% Secured Debt (Maturity—July 25, 2021)

    7,500     6,524     6,524  

         

Warrants (82 equivalent shares; Expiration—July 25, 2026; Strike price—$0.01 per share)

          2,132     3,550  

         

13% Secured Debt (Mercury Service Group, LLC) (Maturity—July 25, 2021)

    1,000     996     996  

         

Preferred Member Units (Mercury Service Group, LLC) (17,742 units)(8)

          1,000     1,000  

                      10,652     12,070  

                               

Café Brazil, LLC

  April 20, 2004  

Casual Restaurant Group

                       

         

Member Units (1,233 units)(8)

          1,742     3,810  

                               

California Splendor Holdings LLC

  March 30, 2018  

Processor of Frozen Fruits

                       

         

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 10.38%, Secured Debt (Maturity—March 30, 2023)(9)

    14,979     14,844     14,844  

         

LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 12.38%, Secured Debt (Maturity—March 30, 2023)(9)

    28,000     27,789     27,789  

         

Preferred Member Units (7,000 units)(8)

          7,178     7,178  

         

Preferred Member Units (6,157 units)(8)

          10,775     7,382  

                      60,586     57,193  

                               

CBT Nuggets, LLC

  June 1, 2006  

Produces and Sells IT Training Certification Videos

                       

         

Member Units (416 units)(8)

          1,300     57,470  

                               

Centre Technologies Holdings, LLC

  January 4, 2019  

Provider of IT Hardware Services and Software Solutions

                       

         

LIBOR Plus 9.00% (Floor 2.00%), Current Coupon 11.13%, Secured Debt (Maturity—January 4, 2024)(9)

    12,240     12,131     12,131  

         

Preferred Member Units (12,696 units)

          5,840     5,840  

                      17,971     17,971  

                               

Chamberlin Holding LLC

  February 26, 2018  

Roofing and Waterproofing Specialty Contractor

                       

         

LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 12.25%, Secured Debt (Maturity—February 26, 2023)(9)

    18,875     18,736     18,875  

         

Member Units (4,347 units)(8)

          11,440     23,590  

         

Member Units (Chamberlin Langfield Real Estate, LLC) (1,047,146 units)(8)

          1,047     1,047  

                      31,223     43,512  

                               

Charps, LLC

  February 3, 2017  

Pipeline Maintenance and Construction

                       

         

15% Secured Debt (Maturity—June 5, 2022)

    2,000     2,000     2,000  

         

Preferred Member Units (1,600 units)(8)

          400     5,470  

                      2,400     7,470  

                               

6


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2019

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Clad-Rex Steel, LLC

  December 20, 2016  

Specialty Manufacturer of Vinyl-Clad Metal

                       

         

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 11.10%, Secured Debt (Maturity—December 20, 2021)(9)

    11,280     11,222     11,280  

         

Member Units (717 units)(8)

          7,280     10,020  

         

10% Secured Debt (Clad-Rex Steel RE Investor, LLC) (Maturity—December 20, 2036)

    1,143     1,132     1,143  

         

Member Units (Clad-Rex Steel RE Investor, LLC) (800 units)

          210     350  

                      19,844     22,793  

                               

CMS Minerals Investments

  January 30, 2015  

Oil & Gas Exploration & Production

                       

         

Member Units (CMS Minerals II, LLC) (100 units)(8)

          2,432     1,946  

                               

CompareNetworks Topco, LLC

  January 29, 2019  

Internet Publishing and Web Search Portals

                       

         

LIBOR Plus 11.00% (Floor 1.00%), Current Coupon 13.13%, Secured Debt (Maturity—January 29, 2024)(9)

    8,750     8,666     8,666  

         

Preferred Member Units (1,975 units)

          1,975     3,010  

                      10,641     11,676  

                               

Copper Trail Fund Investments(12) (13)

  July 17, 2017  

Investment Partnership

                       

         

LP Interests (CTMH, LP) (Fully diluted 38.8%)

          872     872  

                               

Datacom, LLC

  May 30, 2014  

Technology and Telecommunications Provider

                       

         

8% Secured Debt (Maturity—May 31, 2021)(14)

    1,800     1,800     1,554  

         

10.50% PIK Secured Debt (Maturity—May 31, 2021)(14)(19)

    12,511     12,479     10,064  

         

Class A Preferred Member Units

          1,294      

         

Class B Preferred Member Units (6,453 units)

          6,030      

                      21,603     11,618  

                               

Digital Products Holdings LLC

  April 1, 2018  

Designer and Distributor of Consumer Electronics

                       

         

LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 12.13%, Secured Debt (Maturity—April 1, 2023)(9)

    19,950     19,797     19,364  

         

Preferred Member Units (3,857 shares)(8)

          9,501     7,670  

                      29,298     27,034  

                               

Direct Marketing Solutions, Inc.

  February 13, 2018  

Provider of Omni-Channel Direct Marketing Services

                       

         

LIBOR Plus 11.00% (Floor 1.00%), Current Coupon 13.13%, Secured Debt (Maturity—February 13, 2023)(9)

    16,832     16,696     16,821  

         

Preferred Stock (8,400 shares)

          8,400     17,880  

                      25,096     34,701  

                               

7


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2019

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Gamber-Johnson Holdings, LLC

  June 24, 2016  

Manufacturer of Ruggedized Computer Mounting Systems

                       

         

LIBOR Plus 7.00% (Floor 2.00%), Current Coupon 9.10%, Secured Debt (Maturity—June 24, 2021)(9)

    19,022     18,938     19,022  

         

Member Units (8,619 units)(8)

          14,844     46,510  

                      33,782     65,532  

                               

Garreco, LLC

  July 15, 2013  

Manufacturer and Supplier of Dental Products

                       

         

LIBOR Plus 8.00% (Floor 1.00%, Ceiling 1.50%), Current Coupon 9.50%, Secured Debt (Maturity—March 31, 2020)(9)

    4,519     4,511     4,511  

         

Member Units (1,200 units)(8)

          1,200     2,500  

                      5,711     7,011  

                               

GRT Rubber Technologies LLC

  December 19, 2014  

Manufacturer of Engineered Rubber Products

                       

         

LIBOR Plus 7.00%, Current Coupon 9.10%, Secured Debt (Maturity—December 31, 2023)

    15,016     15,009     15,016  

         

Member Units (5,879 units)(8)

          13,065     45,970  

                      28,074     60,986  

                               

Guerdon Modular Holdings, Inc.

  August 13, 2014  

Multi-Family and Commercial Modular Construction Company

                       

         

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.82%, Secured Debt (Maturity—October 1, 2019)(9)(14)

    464     464     464  

         

16% Secured Debt (Maturity—October 1, 2019)(14)

    12,588     12,588     8,307  

         

Preferred Stock (404,998 shares)

          1,140      

         

Common Stock (212,033 shares)

          2,983      

         

Warrants (6,208,877 equivalent shares; Expiration—April 25, 2028; Strike price—$0.01 per share)

               

                      17,175     8,771  

                               

Gulf Manufacturing, LLC

  August 31, 2007  

Manufacturer of Specialty Fabricated Industrial Piping Products

                       

         

Member Units (438 units)(8)

          2,980     9,750  

                               

Gulf Publishing Holdings, LLC

  April 29, 2016  

Energy Industry Focused Media and Publishing

                       

         

LIBOR Plus 9.50% (Floor 1.00%), Current Coupon 11.60%, Secured Debt (Maturity—September 30, 2020)(9)

    320     320     320  

         

12.5% Secured Debt (Maturity—April 29, 2021)

    12,535     12,485     12,485  

         

Member Units (3,681 units)

          3,681     3,850  

                      16,486     16,655  

                               

Harborside Holdings, LLC

  March 20, 2017  

Real Estate Holding Company

                       

         

Member units (100 units)

          6,506     9,560  

                               

Harris Preston Fund Investments(12)(13)

  October 1, 2017  

Investment Partnership

                       

         

LP Interests (2717 MH, L.P.) (Fully diluted 49.3%)

          1,735     2,019  

                               

8


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2019

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Harrison Hydra-Gen, Ltd.

  June 4, 2010  

Manufacturer of Hydraulic Generators

                       

         

Common Stock (107,456 shares)(8)

          718     8,170  

                               

IDX Broker, LLC

  November 15, 2013  

Provider of Marketing and CRM Tools for the Real Estate Industry

                       

         

11.5% Secured Debt (Maturity—November 15, 2020)

    13,700     13,647     13,700  

         

Preferred Member Units (5,607 units)(8)

          5,952     14,510  

                      19,599     28,210  

                               

Jensen Jewelers of Idaho, LLC

  November 14, 2006  

Retail Jewelry Store

                       

         

Prime Plus 6.75% (Floor 2.00%), Current Coupon 12.00%, Secured Debt (Maturity—November 14, 2019)(9)

    2,905     2,902     2,905  

         

Member Units (627 units)(8)

          811     7,020  

                      3,713     9,925  

                               

KBK Industries, LLC

  January 23, 2006  

Manufacturer of Specialty Oilfield and Industrial Products

                       

         

Member Units (325 units)(8)

          783     13,320  

                               

Kickhaefer Manufacturing Company, LLC

  October 31, 2018  

Precision Metal Parts Manufacturing

                       

         

11.5% Secured Debt (Maturity—October 31, 2023)

    27,200     26,953     26,953  

         

Member Units (581 units)

          12,240     12,240  

         

9.0% Secured Debt (Maturity—October 31, 2048)

    3,985     3,946     3,946  

         

Member Units (KMC RE Investor, LLC) (800 units)(8)

          992     992  

                      44,131     44,131  

                               

Market Force Information, LLC

  July 28, 2017  

Provider of Customer Experience Management Services

                       

         

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 9.13%, Secured Debt (Maturity—July 28, 2022)(9)

    2,765     2,765     2,765  

         

LIBOR Plus 11.00% (Floor 1.00%), Current Coupon 13.13%, Secured Debt (Maturity—July 28, 2022)(9)

    22,800     22,654     22,654  

         

Member Units (657,113 units)

          14,700     7,050  

                      40,119     32,469  

                               

MH Corbin Holding LLC

  August 31, 2015  

Manufacturer and Distributor of Traffic Safety Products

                       

         

5% Current / 5% PIK Secured Debt (Maturity—March 31, 2022)(19)

    8,777     8,695     8,777  

         

Preferred Member Units (66,000 shares)

          4,400     4,770  

         

Preferred Member Units (4,000 shares)

          6,000     20  

                      19,095     13,567  

                               

9


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2019

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Mid-Columbia Lumber Products, LLC

  December 18, 2006  

Manufacturer of Finger-Jointed Lumber Products

                       

         

10% Secured Debt (Maturity—January 15, 2020)

    1,750     1,749     1,749  

         

12% Secured Debt (Maturity—January 15, 2020)

    3,900     3,893     3,893  

         

Member Units (7,874 units)

          3,239     530  

         

9.5% Secured Debt (Mid-Columbia Real Estate, LLC) (Maturity—May 13, 2025)

    712     712     712  

         

Member Units (Mid-Columbia Real Estate, LLC) (500 units)(8)

          790     1,640  

                      10,383     8,524  

                               

MSC Adviser I, LLC(16)

  November 22, 2013  

Third Party Investment Advisory Services

                       

         

Member Units (Fully diluted 100.0%)(8)

              70,328  

                               

Mystic Logistics Holdings, LLC

  August 18, 2014  

Logistics and Distribution Services Provider for Large Volume Mailers

                       

         

12% Secured Debt (Maturity—August 15, 2019)(17)

    6,400     6,400     6,400  

         

Common Stock (5,873 shares)(8)

          2,720     4,810  

                      9,120     11,210  

                               

NAPCO Precast, LLC

  January 31, 2008  

Precast Concrete Manufacturing

                       

         

Member Units (2,955 units)(8)

          2,975     15,580  

                               

NexRev LLC

  February 28, 2018  

Provider of Energy Efficiency Products & Services

                       

         

11% Secured Debt (Maturity—February 28, 2023)

    17,004     16,878     16,878  

         

Preferred Member Units (86,400,000 units)(8)

          6,880     6,880  

                      23,758     23,758  

                               

NRI Clinical Research, LLC

  September 8, 2011  

Clinical Research Service Provider

                       

         

14% Secured Debt (Maturity—June 8, 2022)

    6,510     6,397     6,510  

         

Warrants (251,723 equivalent units; Expiration—June 8, 2027; Strike price—$0.01 per unit)

          252     1,050  

         

Member Units (1,454,167 units)(8)

          765     4,218  

                      7,414     11,778  

                               

NRP Jones, LLC

  December 22, 2011  

Manufacturer of Hoses, Fittings and Assemblies

                       

         

12% Secured Debt (Maturity—March 20, 2023)

    6,376     6,376     6,376  

         

Member Units (65,962 units)(8)

          3,717     5,520  

                      10,093     11,896  

                               

NuStep, LLC

  January 31, 2017  

Designer, Manufacturer and Distributor of Fitness Equipment

                       

         

12% Secured Debt (Maturity—January 31, 2022)

    20,600     20,488     20,488  

         

Preferred Member Units (406 units)

          10,200     10,200  

                      30,688     30,688  

                               

OMi Holdings, Inc.

  April 1, 2008  

Manufacturer of Overhead Cranes

                       

         

Common Stock (1,500 shares)(8)

          1,080     16,950  

                               

10


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2019

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Pegasus Research Group, LLC

  January 6, 2011  

Provider of Telemarketing and Data Services

                       

         

Member Units (460 units)

          1,290     7,190  

                               

PPL RVs, Inc.

  June 10, 2010  

Recreational Vehicle Dealer

                       

         

LIBOR Plus 7.00% (Floor 0.50%), Current Coupon 9.32%, Secured Debt (Maturity—November 15, 2021)(9)

    13,845     13,779     13,779  

         

Common Stock (1,962 shares)

          2,150     8,880  

                      15,929     22,659  

                               

Principle Environmental, LLC (d/b/a TruHorizon Environmental Solutions)

  February 1, 2011  

Noise Abatement Service Provider

                       

         

13% Secured Debt (Maturity—April 30, 2020)

    6,397     6,365     6,396  

         

Preferred Member Units (19,631 units)(8)

          4,600     12,740  

         

Warrants (1,018 equivalent units; Expiration—January 31, 2021; Strike price—$0.01 per unit)

          1,200     1,010  

                      12,165     20,146  

                               

Quality Lease Service, LLC

  June 8, 2015  

Provider of Rigsite Accommodation Unit Rentals and Related Services

                       

         

Member Units (1,000 units)

          10,813     10,580  

                               

River Aggregates, LLC

  March 30, 2011  

Processor of Construction Aggregates

                       

         

Zero Coupon Secured Debt (Maturity—June 30, 2018)(17)

    750     750     721  

         

Member Units (1,150 units)

          1,150     4,610  

         

Member Units (RA Properties, LLC) (1,500 units)

          369     3,040  

                      2,269     8,371  

                               

Tedder Industries, LLC

  August 31, 2018  

Manufacturer of Firearm Holsters and Accessories

                       

         

12% Secured Debt (Maturity—August 31, 2020)

    160     160     160  

         

12% Secured Debt (Maturity—August 31, 2023)

    16,400     16,265     16,265  

         

Preferred Member Units (479 units)

          8,136     8,136  

                      24,561     24,561  

                               

The MPI Group, LLC

  October 2, 2007  

Manufacturer of Custom Hollow Metal Doors, Frames and Accessories

                       

         

9% Secured Debt (Maturity—October 2, 2019)

    2,924     2,924     2,736  

         

Series A Preferred Units (2,500 units)

          2,500     10  

         

Warrants (1,424 equivalent units; Expiration—July 1, 2024; Strike price—$0.01 per unit)

          1,096      

         

Member Units (MPI Real Estate Holdings, LLC) (100 units)(8)

          2,300     2,480  

                      8,820     5,226  

                               

Trantech Radiator Topco, LLC

  May 31, 2019  

Transformer Cooling Products and Services

                       

         

12% Secured Debt (Maturity—May 31, 2024)

    9,600     9,494     9,494  

         

Common Stock (615 shares)(8)

          4,655     4,655  

                      14,149     14,149  

                               

11


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2019

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Vision Interests, Inc.

  June 5, 2007  

Manufacturer / Installer of Commercial Signage

                       

         

13% Secured Debt (Maturity—September 30, 2019)(17)

    2,028     2,028     2,028  

         

Series A Preferred Stock (3,000,000 shares)

          3,000     4,090  

         

Common Stock (1,126,242 shares)

          3,706     409  

                      8,734     6,527  

                               

Ziegler's NYPD, LLC

  October 1, 2008  

Casual Restaurant Group

                       

         

6.5% Secured Debt (Maturity—October 1, 2019)

    1,000     1,000     1,000  

         

12% Secured Debt (Maturity—October 1, 2019)

    625     625     625  

         

14% Secured Debt (Maturity—October 1, 2019)

    2,750     2,750     2,750  

         

Warrants (587 equivalent units; Expiration—October 1, 2019; Strike price—$0.01 per unit)

          600      

         

Preferred Member Units (10,072 units)

          2,834     1,410  

                      7,809     5,785  

Subtotal Control Investments (66.9% of net assets at fair value)

  $ 762,945   $ 1,024,566  

12


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2019

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   
                                 

Affiliate Investments(6)

     

 

 

 

                   

                               

AFG Capital Group, LLC

  November 7, 2014  

Provider of Rent-to-Own Financing Solutions and Services

                       

         

10% Secured Debt (Maturity—May 25, 2022)

  $ 924   $ 924   $ 924  

         

Preferred Member Units (186 units)

          1,200     5,040  

                      2,124     5,964  

                               

American Trailer Rental Group LLC

  June 7, 2017  

Provider of Short-term Trailer and Container Rental

                       

         

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 9.58%, Secured Debt (Maturity—June 7, 2022)(9)

    27,188     26,990     27,188  

         

Member Units (Milton Meisler Holdings LLC) (48,555 units)

          4,855     8,380  

                      31,845     35,568  

                               

BBB Tank Services, LLC

  April 8, 2016  

Maintenance, Repair and Construction Services to the Above-Ground Storage Tank Market

                       

         

LIBOR Plus 11.00% (Floor 1.00%), Current Coupon 13.10%, (Maturity—April 8, 2021)(9)

    4,800     4,681     4,681  

         

Preferred Stock (non-voting)(8)

          127     127  

         

Member Units (800,000 units)

          800     120  

                      5,608     4,928  

                               

Boccella Precast Products LLC

  June 30, 2017  

Manufacturer of Precast Hollow Core Concrete

                       

         

LIBOR Plus 12.00% (Floor 1.00%), Current Coupon 14.32%, Secured Debt (Maturity—June 30, 2022)(9)

    13,244     13,095     13,244  

         

Member Units (2,160,000 units)(8)

          2,256     5,900  

                      15,351     19,144  

                               

Buca C, LLC

  June 30, 2015  

Casual Restaurant Group

                       

         

LIBOR Plus 9.25% (Floor 1.00%), Current Coupon 11.33%, Secured Debt (Maturity—June 30, 2020)(9)

    19,004     18,970     18,783  

         

Preferred Member Units (6 units; 6% cumulative)(8)(19)

          4,631     4,631  

                      23,601     23,414  

                               

CAI Software LLC

  October 10, 2014  

Provider of Specialized Enterprise Resource Planning Software

                       

         

12% Secured Debt (Maturity—December 7, 2023)

    9,160     9,073     9,160  

         

Member Units (66,968 units)(8)

          751     4,940  

                      9,824     14,100  

                               

Chandler Signs Holdings, LLC(10)

  January 4, 2016  

Sign Manufacturer

                       

         

12% Secured Debt (Maturity—July 4, 2021)

    4,569     4,551     4,569  

         

Class A Units (1,500,000 units)(8)

          1,500     2,130  

                      6,051     6,699  

                               

Charlotte Russe, Inc(11)

  May 28, 2013  

Fast-Fashion Retailer to Young Women

                       

         

Common Stock (19,041 shares)

          3,141      

                               

13


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2019

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   
                                 

Congruent Credit Opportunities Funds(12)(13)

  January 24, 2012  

Investment Partnership

                       

         

LP Interests (Congruent Credit Opportunities Fund II, LP) (Fully diluted 19.8%)

          5,210     855  

         

LP Interests (Congruent Credit Opportunities Fund III, LP) (Fully diluted 17.4%)(8)

          16,028     16,618  

                      21,238     17,473  

                               

Copper Trail Fund Investments(12)(13)

  July 17, 2017  

Investment Partnership

                       

         

LP Interests (Copper Trail Energy Fund I, LP) (Fully diluted 12.4%)

          1,584     2,273  

                               

Dos Rios Partners(12)(13)

  April 25, 2013  

Investment Partnership

                       

         

LP Interests (Dos Rios Partners, LP) (Fully diluted 20.2%)

          5,846     6,936  

         

LP Interests (Dos Rios Partners—A, LP) (Fully diluted 6.4%)

          1,856     2,202  

                      7,702     9,138  

                               

East Teak Fine Hardwoods, Inc.

  April 13, 2006  

Distributor of Hardwood Products

                       

         

Common Stock (6,250 shares)(8)

          480     480  

                               

EIG Fund Investments(12)(13)

  November 6, 2015  

Investment Partnership

                       

         

LP Interests (EIG Global Private Debt Fund—A, L.P.) (Fully diluted 11.1%)(8)

          749     701  

                               

Freeport Financial Funds(12)(13)

  June 13, 2013  

Investment Partnership

                       

         

LP Interests (Freeport Financial SBIC Fund LP) (Fully diluted 9.3%)

          5,974     5,905  

         

LP Interests (Freeport First Lien Loan Fund III LP) (Fully diluted 6.0%)(8)

          10,555     10,295  

                      16,529     16,200  

                               

Fuse, LLC(11)

  June 30, 2019  

Cable Networks Operator

                       

         

12% Secured Debt (Maturity—June 28, 2024)

    1,939     1,939     1,939  

         

Common Stock (10,429 shares)

          256     256  

                      2,195     2,195  

                               

Harris Preston Fund Investments(12)(13)

  August 9, 2017  

Investment Partnership

                       

         

LP Interests (HPEP 3, L.P.) (Fully diluted 8.2%)

          2,474     2,474  

                               

Hawk Ridge Systems, LLC(13)

  December 2, 2016  

Value-Added Reseller of Engineering Design and Manufacturing Solutions

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 8.10%, Secured Debt (Maturity—December 2, 2021)(9)

    600     600     600  

         

10.0% Secured Debt (Maturity—December 2, 2021)

    13,400     13,328     13,400  

         

Preferred Member Units (226 units)(8)

          2,850     7,900  

         

Preferred Member Units (HRS Services, ULC) (226 units)

          150     420  

                      16,928     22,320  

                               

14


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2019

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   
                                 

Houston Plating and Coatings, LLC

  January 8, 2003  

Provider of Plating and Industrial Coating Services

                       

         

8% Unsecured Convertible Debt (Maturity—May 1, 2022)

    3,000     3,000     4,260  

         

Member Units (318,462 units)(8)

          2,236     10,340  

                      5,236     14,600  

                               

I-45 SLF LLC(12)(13)

  October 20, 2015  

Investment Partnership

                       

         

Member Units (Fully diluted 20.0%; 24.4% profits interest)(8)

          17,000     15,474  

                               

L.F. Manufacturing Holdings, LLC(10)

  December 23, 2013  

Manufacturer of Fiberglass Products

                       

         

Preferred Member Units (non-voting; 14% cumulative)(8)(19)

          78     78  

         

Member Units (2,179,001 units)

          2,019     2,050  

                      2,097     2,128  

                               

OnAsset Intelligence, Inc.

  April 18, 2011  

Provider of Transportation Monitoring / Tracking Products and Services

                       

         

12% PIK Secured Debt (Maturity—June 30, 2021)(19)

    6,282     6,282     6,282  

         

10% PIK Unsecured Debt (Maturity—June 30, 2021)(19)

    57     57     57  

         

Preferred Stock (912 shares)

          1,981      

         

Warrants (5,333 equivalent shares; Expiration—April 18, 2021; Strike price—$0.01 per share)

          1,919      

                      10,239     6,339  

                               

PCI Holding Company, Inc.

  December 18, 2012  

Manufacturer of Industrial Gas Generating Systems

                       

         

12% Current Secured Debt (Maturity—March 31, 2020)

    11,356     11,356     11,356  

         

Preferred Stock (1,740,000 shares) (non-voting)

          1,740     4,350  

         

Preferred Stock (1,500,000 shares)

          3,927     1,550  

                      17,023     17,256  

                               

Rocaceia, LLC (Quality Lease and Rental Holdings, LLC)

  January 8, 2013  

Provider of Rigsite Accommodation Unit Rentals and Related Services

                       

         

12% Secured Debt (Maturity—January 8, 2018)(14)(15)

    30,785     30,281     250  

         

Preferred Member Units (250 units)

          2,500      

                      32,781     250  

                               

Salado Stone Holdings, LLC(10)

  June 27, 2016  

Limestone and Sandstone Dimension Cut Stone Mining Quarries

                       

         

Class A Preferred Units (Salado Acquisition, LLC) (2,000,000 units)

          2,000     730  

                               

SI East, LLC

  August 31, 2018  

Rigid Industrial Packaging Manufacturing

                       

         

10.25% Current, Secured Debt (Maturity—August 31, 2023)

    32,963     32,670     32,963  

         

Preferred Member Units (157 units)(8)

          6,000     7,340  

                      38,670     40,303  

                               

15


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2019

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   
                                 

Slick Innovations, LLC

  September 13, 2018  

Text Message Marketing Platform

                       

         

14% Current, Secured Debt (Maturity—September 13, 2023)

    5,920     5,745     5,745  

         

Member Units (70,000 units)

          700     1,080  

         

Warrants (18,084 equivalent units; Expiration-September 13, 2028; Strike price—$0.01 per unit)

          181     290  

                      6,626     7,115  

                               

UniTek Global Services, Inc.(11)

  April 15, 2011  

Provider of Outsourced Infrastructure Services

                       

         

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.54%, Secured Debt (Maturity—August 20, 2024)(9)

    2,970     2,947     2,968  

         

Preferred Stock (755,401 shares; 20% cumulative)(8)(19)

          769     1,889  

         

Preferred Stock (1,521,122 shares; 19% cumulative)(8)(19)

          1,884     2,282  

         

Preferred Stock (2,281,682 shares; 19% cumulative)(8)(19)

          3,497     3,497  

         

Preferred Stock (4,336,866 shares; 13.50% cumulative)(8)(19)

          7,924     4,374  

         

Common Stock (945,507 shares)

               

                      17,021     15,010  

                               

Universal Wellhead Services Holdings, LLC(10)

  October 30, 2014  

Provider of Wellhead Equipment, Designs, and Personnel to the Oil & Gas Industry

                       

         

Preferred Member Units (UWS Investments, LLC) (716,949 units; 14% cumulative)(8)(19)

          1,032     1,085  

         

Member Units (UWS Investments, LLC) (4,000,000 units)

          4,000     990  

                      5,032     2,075  

                               

Volusion, LLC

  January 26, 2015  

Provider of Online Software-as-a-Service eCommerce Solutions

                       

         

11.5% Secured Debt (Maturity—January 26, 2020)

    20,234     19,952     19,535  

         

8% Unsecured Convertible Debt (Maturity—November 16, 2023)

    409     409     291  

         

Preferred Member Units (4,876,670 units)

          14,000     14,000  

         

Warrants (1,831,355 equivalent units; Expiration—January 26, 2025; Strike price—$0.01 per unit)

          2,576     570  

                      36,937     34,396  

Subtotal Affiliate Investments (22.1% of net assets at fair value)

  $ 358,086   $ 338,747  

16


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2019

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Non-Control/Non-Affiliate Investments(7)

                   

                               

AAC Holdings, Inc.(11)

  June 30, 2017  

Substance Abuse Treatment Service Provider

                       

         

LIBOR Plus 11.00% (Floor 1.00%), Current Coupon 13.29%, Secured Debt (Maturity—April 15, 2020)(9)

  $ 1,855   $ 1,695   $ 1,855  

         

LIBOR Plus 12.75% (Floor 1.00%), Current Coupon 15.01%, Secured Debt (Maturity—June 30, 2023)(9)(14)

    14,396     14,030     10,714  

                      15,725     12,569  

                               

Adams Publishing Group, LLC(10)

  November 19, 2015  

Local Newspaper Operator

                       

         

Prime Plus 5.00% (Floor 1.50%), Current Coupon 9.00%, Secured Debt (Maturity—July 3, 2023)(9)

    5,000     4,925     5,000  

         

LIBOR Plus 7.50% (Floor 1.50%), Current Coupon 9.78%, Secured Debt (Maturity—July 3, 2023)(9)

    6,638     6,533     6,638  

         

LIBOR Plus 7.50% (Floor 1.50%), Current Coupon 9.61%, Secured Debt (Maturity—July 3, 2023)(9)

    210     210     210  

                      11,668     11,848  

                               

ADS Tactical, Inc.(10)

  March 7, 2017  

Value-Added Logistics and Supply Chain Provider to the Defense Industry

                       

         

LIBOR Plus 6.25% (Floor 0.75%), Current Coupon 8.29%, Secured Debt (Maturity—July 26, 2023)(9)

    19,909     19,762     19,909  

                               

Aethon United BR LP(10)

  September 8, 2017  

Oil & Gas Exploration & Production

                       

         

LIBOR Plus 6.75% (Floor 1.00%), Current Coupon 8.79%, Secured Debt (Maturity—September 8, 2023)(9)

    9,750     9,623     9,750  

                               

Affordable Care Holding Corp.(10)

  May 9, 2019  

Dental Service Organization

                       

         

LIBOR Plus 4.75% (Floor 1.00%), Current Coupon 6.84%, Secured Debt (Maturity—October 22, 2022)(9)

    14,434     14,142     13,964  

                               

Allen Media, LLC.(11)

  September 18, 2018  

Operator of Cable Television Networks

                       

         

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.60%, Secured Debt (Maturity—August 30, 2023)(9)

    16,517     16,117     15,980  

                               

Allen Media Broadcasting LLC(10)

  July 3, 2019  

Operator of Television Broadcasting Networks

                       

         

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 8.35%, Secured Debt (Maturity—July 3, 2024)(9)

    15,000     14,644     14,644  

                               

American Nuts, LLC(10)

  April 10, 2018  

Roaster, Mixer and Packager of Bulk Nuts and Seeds

                       

         

LIBOR Plus 9.50% (Floor 1.00%), Current Coupon 11.82%, Secured Debt (Maturity—April 10, 2023)(9)

    12,271     12,101     12,248  

                               

17


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2019

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

American Teleconferencing Services, Ltd.(11)

  May 19, 2016  

Provider of Audio Conferencing and Video Collaboration Solutions

                       

         

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.71%, Secured Debt (Maturity—December 8, 2021)(9)

    17,405     16,319     10,983  

                               

APTIM Corp.(11)

  August 17, 2018  

Engineering, Construction & Procurement

                       

         

7.75% Secured Debt (Maturity—June 15, 2025)

    12,452     10,783     8,841  

                               

Arcus Hunting LLC(10)

  January 6, 2015  

Manufacturer of Bowhunting and Archery Products and Accessories

                       

         

LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 12.32%, Secured Debt (Maturity—January 13, 2020)(9)

    16,447     16,435     16,446  

                               

Arise Holdings, Inc.(10)

  March 12, 2018  

Tech-Enabled Business Process Outsourcing

                       

         

Preferred Stock (1,000,000 shares)

          1,000     2,498  

                               

ASC Ortho Management Company, LLC(10)

  August 31, 2018  

Provider of Orthopedic Services

                       

         

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 9.82%, Secured Debt (Maturity—August 31, 2023)(9)

    4,572     4,488     4,540  

         

13.25% PIK Secured Debt (Maturity—December 1, 2023)(19)

    1,793     1,758     1,793  

                      6,246     6,333  

                               

ATI Investment Sub, Inc.(11)

  July 11, 2016  

Manufacturer of Solar Tracking Systems

                       

         

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 9.31%, Secured Debt (Maturity—June 22, 2021)(9)

    3,385     3,353     3,239  

                               

ATX Networks Corp.(11)(13)(21)

  June 30, 2015  

Provider of Radio Frequency Management Equipment

                       

         

LIBOR Plus 6.00% (Floor 1.00%) Current Coupon 8.35% / 1.00% PIK, Current Coupon Plus PIK 9.35% Secured Debt (Maturity—June 11, 2021)(9)(19)

    13,688     13,462     12,936  

                               

Barfly Ventures, LLC(10)

  August 31, 2015  

Casual Restaurant Group

                       

         

12% Secured Debt (Maturity—August 31, 2020)

    10,185     10,064     9,385  

         

Options (3 equivalent units)

          607     500  

         

Warrant (2 equivalent unit; Expiration—August 31, 2025; Strike price—$1.00 per unit)

          473     290  

                      11,144     10,175  

                               

Berry Aviation, Inc.(10)

  July 6, 2018  

Charter Airline Services

                       

         

10.50% Current / 1.5% PIK, Secured Debt (Maturity—January 6, 2024)(19)

    4,536     4,499     4,536  

         

Preferred Member Units (Berry Acquisition, LLC) (1,548,387 units; 8% cumulative)(8)(19)

          1,671     1,318  

                      6,170     5,854  

                               

18


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2019

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

BigName Commerce, LLC(10)

  May 11, 2017  

Provider of Envelopes and Complimentary Stationery Products

                       

         

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 9.57%, Secured Debt (Maturity—May 11, 2022)(9)

    2,409     2,392     2,377  

                               

Binswanger Enterprises, LLC(10)

  March 10, 2017  

Glass Repair and Installation Service Provider

                       

         

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.10%, Secured Debt (Maturity—March 9, 2022)(9)

    13,828     13,646     13,828  

         

Member Units (1,050,000 units)

          1,050     950  

                      14,696     14,778  

                               

Bluestem Brands, Inc.(11)

  December 19, 2013  

Multi-Channel Retailer of General Merchandise

                       

         

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 9.65%, Secured Debt (Maturity—November 6, 2020)(9)

    10,810     10,744     8,198  

                               

Bojangles', Inc.(11)

  February 5, 2019  

Quick Service Restaurant Group

                       

         

LIBOR Plus 4.75%, Current Coupon 6.79%, Secured Debt (Maturity—January 28, 2026)

    10,000     9,815     10,037  

         

LIBOR Plus 8.50%, Current Coupon 10.54%, Secured Debt (Maturity—January 28, 2027)

    5,000     4,905     5,006  

                      14,720     15,043  

                               

Brainworks Software, LLC(10)

  August 12, 2014  

Advertising Sales and Newspaper Circulation Software

                       

         

4.00% Secured Debt (Maturity—July 22, 2019)(9)(17)

    6,733     6,733     6,032  

                               

Brightwood Capital Fund Investments(12)(13)

  July 21, 2014  

Investment Partnership

                       

         

LP Interests (Brightwood Capital Fund III, LP) (Fully diluted 1.6%)(8)

          11,160     9,267  

         

LP Interests (Brightwood Capital Fund IV, LP) (Fully diluted 0.6%)(8)

          4,500     4,563  

                      15,660     13,830  

                               

Cadence Aerospace LLC(10)

  November 14, 2017  

Aerostructure Manufacturing

                       

         

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.54%, Secured Debt (Maturity—November 14, 2023)(9)

    19,371     19,225     19,371  

                               

California Pizza Kitchen, Inc.(11)

  August 29, 2016  

Casual Restaurant Group

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 8.53%, Secured Debt (Maturity—August 23, 2022)(9)

    14,637     14,531     13,127  

                               

Central Security Group, Inc.(11)

  December 4, 2017  

Security Alarm Monitoring Service Provider

                       

         

LIBOR Plus 5.63% (Floor 1.00%), Current Coupon 7.67%, Secured Debt (Maturity—October 6, 2021)(9)

    13,776     13,728     13,362  

                               

19


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2019

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Cenveo Corporation(11)

  September 4, 2015  

Provider of Digital Marketing Agency Services

                       

         

Libor Plus 9.50% (Floor 1.00%), Current Coupon 11.56%, Secured Debt (Maturity—June 7, 2023)(9)

    5,674     5,488     5,674  

         

Common Stock (177,130 shares)

          5,309     2,746  

                      10,797     8,420  

                               

Chisholm Energy Holdings, LLC(10)

  May 15, 2019  

Oil & Gas Exploration & Production

                       

         

LIBOR Plus 6.25% (Floor 1.50%), Current Coupon 8.41%, Secured Debt (Maturity—May 15, 2026)(9)

    3,571     3,486     3,486  

                               

Clarius BIGS, LLC(10)

  September 23, 2014  

Prints & Advertising Film Financing

                       

         

15% PIK Secured Debt (Maturity—January 5, 2015)(14)(17)

    2,851     2,851     39  

                               

Clickbooth.com, LLC(10)

  December 5, 2017  

Provider of Digital Advertising Performance Marketing Solutions

                       

         

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.82%, Secured Debt (Maturity—December 5, 2022)(9)

    2,682     2,641     2,682  

                               

Construction Supply Investments, LLC(10)

  December 29, 2016  

Distribution Platform of Specialty Construction Materials to Professional Concrete and Masonry Contractors

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 8.12%, Secured Debt (Maturity—June 30, 2023)(9)

    15,941     15,844     15,941  

         

Member Units (43,463 units)

          4,409     7,210  

                      20,253     23,151  

                               

Corel Corporation(11)(13)(21)

  July 24, 2019  

Publisher of Desktop and Cloud-based Software

                       

         

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 7.09%, Secured Debt (Maturity—July 2, 2026)(9)

    15,000     14,268     14,569  

                               

CTVSH, PLLC(10)

  August 3, 2017  

Emergency Care and Specialty Service Animal Hospital

                       

         

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 10.13%, Secured Debt (Maturity—August 3, 2022)(9)

    10,249     10,183     10,249  

                               

Darr Equipment LP(10)

  April 15, 2014  

Heavy Equipment Dealer

                       

         

11.5% Current / 1% PIK Secured Debt (Maturity-June 22, 2023)(19)

    5,884     5,884     5,884  

         

Warrants (915,734 equivalent units; Expiration—December 23, 2023; Strike price—$1.50 per unit)

          474     300  

                      6,358     6,184  

                               

Digital River, Inc.(11)

  February 24, 2015  

Provider of Outsourced e-Commerce Solutions and Services

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 8.12%, Secured Debt (Maturity—February 12, 2021)(9)

    15,876     15,749     15,837  

                               

20


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2019

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

DTE Enterprises, LLC(10)

  April 13, 2018  

Industrial Powertrain Repair and Services

                       

         

LIBOR Plus 7.50% (Floor 1.50%), Current Coupon 9.69%, Secured Debt (Maturity—April 13, 2023)(9)

    11,492     11,309     11,481  

         

Class AA Preferred Member Units (non-voting; 10% cumulative)(8)(19)

          838     838  

         

Class A Preferred Member Units (776,316 units)

          776     1,490  

                      12,923     13,809  

                               

Dynamic Communities, LLC(10)

  July 17, 2018  

Developer of Business Events and Online Community Groups

                       

         

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 10.10%, Secured Debt (Maturity—July 17, 2023)(9)

    5,495     5,405     5,483  

                               

EnCap Energy Fund Investments(12)(13)

  December 28, 2010  

Investment Partnership

                       

         

LP Interests (EnCap Energy Capital Fund VIII, L.P.) (Fully diluted 0.1%)(8)

          3,617     1,487  

         

LP Interests (EnCap Energy Capital Fund VIII Co-Investors, L.P.) (Fully diluted 0.4%)

          2,097     795  

         

LP Interests (EnCap Energy Capital Fund IX, L.P.) (Fully diluted 0.1%)(8)

          4,343     3,160  

         

LP Interests (EnCap Energy Capital Fund X, L.P.) (Fully diluted 0.1%)(8)

          8,242     8,815  

         

LP Interests (EnCap Flatrock Midstream Fund II, L.P.) (Fully diluted 0.8%)(8)

          7,238     5,967  

         

LP Interests (EnCap Flatrock Midstream Fund III, L.P.) (Fully diluted 0.2%)(8)

          6,367     6,264  

                      31,904     26,488  

                               

Encino Acquisition Partners Holdings, Inc.(11)

  November 16, 2018  

Oil & Gas Exploration & Production

                       

         

LIBOR Plus 6.75% (Floor 1.00%), Current Coupon 8.79%, Secured Debt (Maturity—October 29, 2025)(9)

    9,000     8,918     5,625  

                               

EPIC Y-Grade Services, LP(11)

  June 22, 2018  

NGL Transportation & Storage

                       

         

LIBOR Plus 5.50%, Current Coupon 7.54%, Secured Debt (Maturity—June 13, 2024)

    15,275     15,025     14,836  

                               

Evergreen Skills Lux S.á r.l. (d/b/a Skillsoft)(11)(13)

  May 5, 2014  

Technology-based Performance Support Solutions

                       

         

LIBOR Plus 8.25% (Floor 1.00%), Current Coupon 10.45%, Secured Debt (Maturity—April 28, 2022)(9)

    6,999     6,921     2,139  

                               

Felix Investments Holdings II(10)

  August 9, 2017  

Oil & Gas Exploration & Production

                       

         

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.68%, Secured Debt (Maturity—August 9, 2022)(9)

    5,000     4,940     5,000  

                               

21


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2019

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Flavors Holdings Inc.(11)

  October 15, 2014  

Global Provider of Flavoring and Sweetening Products

                       

         

LIBOR Plus 5.75% (Floor 1.00%), Current Coupon 7.85%, Secured Debt (Maturity—April 3, 2020)(9)

    11,297     11,200     10,534  

                               

Fortna, Inc.(10)

  July 23, 2019  

Process, Physcial Distribution and Logistics Consulting Services

                       

         

LIBOR Plus 5.00%, Current Coupon 7.04%, Secured Debt (Maturity—April 8, 2025)

    7,770     7,583     7,583  

                               

GeoStabilization International (GSI)(11)

  December 31, 2018  

Geohazard Engineering Services & Maintenance

                       

         

LIBOR Plus 5.50%, Current Coupon 7.54%, Secured Debt (Maturity—December 19, 2025)

    16,418     16,267     16,376  

                               

GI KBS Merger Sub LLC(11)

  November 10, 2014  

Outsourced Janitorial Service Provider

                       

         

LIBOR Plus 4.75% (Floor 1.00%), Current Coupon 6.81%, Secured Debt (Maturity—October 29, 2021)(9)

    9,126     9,082     8,989  

         

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.77%, Secured Debt (Maturity—April 29, 2022)(9)

    3,915     3,819     3,807  

                      12,901     12,796  

                               

Good Source Solutions, Inc.(10)

  October 23, 2018  

Specialized Food Distributor

                       

         

LIBOR Plus 8.32% (Floor 1.00%), Current Coupon 10.36%, Secured Debt (Maturity—June 29, 2023)(9)(23)

    5,000     4,959     5,000  

                               

GoWireless Holdings, Inc.(11)

  December 31, 2017  

Provider of Wireless Telecommunications Carrier Services

                       

         

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.54%, Secured Debt (Maturity—December 22, 2024)(9)

    18,372     18,207     17,866  

                               

Grupo Hima San Pablo, Inc.(11)

  March 7, 2013  

Tertiary Care Hospitals

                       

         

LIBOR Plus 9.00% (Floor 1.50%), Current Coupon 11.58%, Secured Debt (Maturity—April 30, 2019)(9)(17)

    4,504     4,504     3,681  

         

13.75% Secured Debt (Maturity—October 15, 2018)(17)

    2,055     2,040     226  

                      6,544     3,907  

                               

HDC/HW Intermediate Holdings(10)

  December 21, 2018  

Managed Services and Hosting Provider

                       

         

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 9.61%, Secured Debt (Maturity—December 21, 2023)(9)

    3,382     3,321     3,376  

                               

Hoover Group, Inc.(10)(13)

  October 21, 2016  

Provider of Storage Tanks and Related Products to the Energy and Petrochemical Markets

                       

         

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 9.38%, Secured Debt (Maturity—January 28, 2021)(9)

    16,822     16,341     15,813  

                               

22


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2019

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Hunter Defense Technologies, Inc.(10)

  March 29, 2018  

Provider of Military and Commercial Shelters and Systems

                       

         

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 9.10%, Secured Debt (Maturity—March 29, 2023)(9)

    29,875     29,392     29,875  

                               

HW Temps LLC

  July 2, 2015  

Temporary Staffing Solutions

                       

         

8.00% Secured Debt (Maturity—March 29, 2023)

    10,598     10,420     9,307  

                               

Hydrofarm Holdings LLC(10)

  May 18, 2017  

Wholesaler of Horticultural Products

                       

         

LIBOR Plus 10.00%, Current Coupon 3.64% / 8.50% PIK, Current Coupon Plus PIK 12.14% Secured Debt (Maturity—May 12, 2022)(19)

    7,481     7,376     6,243  

                               

Hyperion Materials & Technologies, Inc.(11)(13)

  September 12, 2019  

Manufacturer of Cutting and Machine Tools & Speciality Polishing Compounds

                       

         

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 7.54%, Secured Debt (Maturity—August 28, 2026)(9)

    22,500     22,053     22,163  

                               

iEnergizer Limited(10)(13)(21)

  April 17, 2019  

Provider of Business Outsourcing Solutions

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 8.06%, Secured Debt (Maturity—April 17, 2024)(9)

    13,725     13,598     13,598  

                               

Implus Footcare, LLC(10)

  June 1, 2017  

Provider of Footwear and Related Accessories

                       

         

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 8.35%, Secured Debt (Maturity—April 30, 2024)(9)

    18,624     18,205     18,379  

                               

Independent Pet Partners Intermediate Holdings, LLC(10)

  November 20, 2018  

Omnichannel Retailer of Specialty Pet Products

                       

         

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 11.48%, Secured Debt (Maturity—November 19, 2023)(9)

    18,847     18,514     18,847  

         

Member Units (1,558,333 units)

          1,558     1,260  

                      20,072     20,107  

                               

Industrial Services Acquisition, LLC(10)

  June 17, 2016  

Industrial Cleaning Services

                       

         

6% Current / 7% PIK Unsecured Debt (Maturity—December 17, 2022)(19)

    5,149     5,075     5,149  

         

Preferred Member Units (Industrial Services Investments, LLC) (144 units; 10% cumulative)(8)(19)

          101     109  

         

Preferred Member Units (Industrial Services Investments, LLC) (80 units; 20% cumulative)(8)(19)

          57     57  

         

Member Units (Industrial Services Investments, LLC) (900 units)

          900     580  

                      6,133     5,895  

                               

23


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2019

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Inn of the Mountain Gods Resort and Casino(11)

  October 30, 2013  

Hotel & Casino Owner & Operator

                       

         

9.25% Secured Debt (Maturity—November 30, 2020)

    7,762     7,539     7,704  

                               

Interface Security Systems, L.L.C(10)

  August 7, 2019  

Commercial Security & Alarm Services

                       

         

LIBOR Plus 7.00% (Floor 1.75%), Current Coupon 9.04%, Secured Debt (Maturity—August 7, 2023)(9)

    7,500     7,355     7,355  

                               

Intermedia Holdings, Inc.(11)

  August 3, 2018  

Unified Communications as a Service

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 8.04%, Secured Debt (Maturity—July 19, 2025)(9)

    16,472     16,372     16,499  

                               

Invincible Boat Company, LLC.(10)

  August 28, 2019  

Manufacturer of Sport Fishing Boats

                       

         

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.61%, Secured Debt (Maturity—August 28, 2025)(9)

    9,500     9,396     9,396  

                               

Isagenix International, LLC(11)

  June 21, 2018  

Direct Marketer of Health & Wellness Products

                       

         

LIBOR Plus 5.75% (Floor 1.00%), Current Coupon 7.85%, Secured Debt (Maturity—June 14, 2025)(9)

    6,025     5,972     4,654  

                               

JAB Wireless, Inc.(10)

  May 2, 2018  

Fixed Wireless Broadband Provider

                       

         

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 10.03%, Secured Debt (Maturity—May 2, 2023)(9)

    14,775     14,662     14,775  

                               

Jackmont Hospitality, Inc.(10)

  May 26, 2015  

Franchisee of Casual Dining Restaurants

                       

         

LIBOR Plus 6.75% (Floor 1.00%), Current Coupon 8.79%, Secured Debt (Maturity—May 26, 2021)(9)

    4,086     4,080     4,086  

                               

Joerns Healthcare, LLC(11)

  April 3, 2013  

Manufacturer and Distributor of Health Care Equipment & Supplies

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 8.79% Secured Debt (Maturity—August 21, 2024)(9)

    4,016     3,938     3,938  

         

Common Stock (472,579 shares)

          4,429     4,429  

                      8,367     8,367  

                               

Kemp Technologies Inc.(10)

  June 27, 2019  

Provider of Application Delivery Controllers

                       

         

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 8.58%, Secured Debt (Maturity—March 29, 2024)(9)

    7,500     7,357     7,357  

                               

Kore Wireless Group Inc.(11)

  December 31, 2018  

Mission Critical Software Platform

                       

         

LIBOR Plus 5.50%, Current Coupon 7.60%, Secured Debt (Maturity—December 20, 2024)

    19,334     19,234     19,213  

                               

24


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2019

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Larchmont Resources, LLC(11)

  August 13, 2013  

Oil & Gas Exploration & Production

                       

         

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 9.14%, Secured Debt (Maturity—August 7, 2020)(9)

    2,145     2,145     1,995  

         

Member Units (Larchmont Intermediate Holdco, LLC) (2,828 units)

          353     707  

                      2,498     2,702  

                               

Laredo Energy VI, LP(10)

  January 15, 2019  

Oil & Gas Exploration & Production

                       

         

LIBOR Plus 10.50% (Floor 2.00%) PIK, Current Coupon 12.76% PIK, Secured Debt (Maturity—November 19, 2021)(9)(19)

    10,785     10,588     10,785  

                               

Lightbox Holdings, L.P.(11)

  May 23, 2019  

Provider of Commercial Real Estate Software

                       

         

LIBOR Plus 5.00%, Current Coupon 7.05%, Secured Debt (Maturity—May 9, 2026)

    15,000     14,783     14,850  

                               

LKCM Headwater Investments I, L.P.(12)(13)

  January 25, 2013  

Investment Partnership

                       

         

LP Interests (Fully diluted 2.3%)(8)

          1,746     3,622  

                               

LL Management, Inc.(10)

  May 2, 2019  

Medical Transportation Service Provider

                       

         

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.56%, Secured Debt (Maturity—September 25, 2023)(9)

    13,784     13,647     13,647  

                               

Logix Acquisition Company, LLC(10)

  June 24, 2016  

Competitive Local Exchange Carrier

                       

         

LIBOR Plus 5.75% (Floor 1.00%), Current Coupon 7.79%, Secured Debt (Maturity—December 22, 2024)(9)

    18,478     18,289     18,478  

                               

Looking Glass Investments, LLC(12)(13)

  July 1, 2015  

Specialty Consumer Finance

                       

         

Member Units (2.5 units)

          125     45  

         

Member Units (LGI Predictive Analytics LLC) (190,712 units)(8)

          49     21  

                      174     66  

                               

LSF9 Atlantis Holdings, LLC(11)

  May 17, 2017  

Provider of Wireless Telecommunications Carrier Services

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 8.04%, Secured Debt (Maturity—May 1, 2023)(9)

    9,521     9,517     8,892  

                               

Lulu's Fashion Lounge, LLC(10)

  August 31, 2017  

Fast Fashion E-Commerce Retailer

                       

         

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 11.04%, Secured Debt (Maturity—August 28, 2022)(9)

    11,591     11,300     11,359  

                               

25


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2019

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Lynx FBO Operating LLC(10)

  September 30, 2019  

Fixed Based Operator in the General Aviation Industry

                       

         

LIBOR Plus 5.75% (Floor 1.00%), Current Coupon 7.86%, Secured Debt (Maturity—September 30, 2024)(9)

    13,750     13,438     13,438  

         

Member Units (3,704 units)

          500     500  

                      13,938     13,938  

                               

Mac Lean-Fogg Company(10)

  April 22, 2019  

Manufacturer and Supplier for Auto and Power Markets

                       

         

LIBOR Plus 5.00%, Current Coupon 7.04%, Secured Debt (Maturity—December 22, 2025)

    16,732     16,608     16,608  

         

Preferred Stock (1,516 shares; 4.50% Cash/ 9.25% PIK cumulative)(8)(19)

          1,759     1,759  

                      18,367     18,367  

                               

MHVC Acquisition Corp.(11)

  May 8, 2017  

Provider of differentiated information solutions, systems engineering, and analytics

                       

         

LIBOR Plus 5.25% (Floor 1.00%), Current Coupon 7.30%, Secured Debt (Maturity—April 29, 2024)(9)

    20,002     19,901     19,852  

                               

Mills Fleet Farm Group, LLC(10)

  October 24, 2018  

Omnichannel Retailer of Work, Farm and Lifestyle Merchandise

                       

         

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 8.29% /0.75% PIK, Current Coupon Plus PIK 9.04%, Secured Debt (Maturity—October 24, 2024)(9)(19)

    14,925     14,589     14,680  

                               

NBG Acquisition Inc(11)

  April 28, 2017  

Wholesaler of Home Décor Products

                       

         

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 7.60%, Secured Debt (Maturity—April 26, 2024)(9)

    4,236     4,187     3,807  

                               

New Media Holdings II LLC(11)(13)

  June 10, 2014  

Local Newspaper Operator

                       

         

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 8.29%, Secured Debt (Maturity—July 14, 2022)(9)

    17,981     17,767     18,034  

                               

NNE Partners, LLC(10)

  March 2, 2017  

Oil & Gas Exploration & Production

                       

         

LIBOR Plus 8.00%, Current Coupon 10.14%, Secured Debt (Maturity—March 2, 2022)

    20,417     20,288     20,417  

                               

North American Lifting Holdings, Inc.(11)

  February 26, 2015  

Crane Service Provider

                       

         

LIBOR Plus 4.50% (Floor 1.00%), Current Coupon 6.60%, Secured Debt (Maturity—November 27, 2020)(9)

    7,624     7,266     6,989  

                               

Novetta Solutions, LLC(11)

  June 21, 2017  

Provider of Advanced Analytics Solutions for Defense Agencies

                       

         

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 7.05%, Secured Debt (Maturity—October 17, 2022)(9)

    21,115     20,697     20,725  

                               

26


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2019

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

NTM Acquisition Corp.(11)

  July 12, 2016  

Provider of B2B Travel Information Content

                       

         

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 8.29%, Secured Debt (Maturity—June 7, 2022)(9)

    4,236     4,231     4,172  

                               

Ospemifene Royalty Sub LLC (QuatRx)(10)

  July 8, 2013  

Estrogen-Deficiency Drug Manufacturer and Distributor

                       

         

11.5% Secured Debt (Maturity—November 15, 2026)(14)

    4,896     4,896     598  

                               

PaySimple, Inc.(10)

  September 9, 2019  

Leading technology services commerce platform

                       

         

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 7.55%, Secured Debt (Maturity—August 23, 2025)(9)

    12,600     12,351     12,351  

                               

Permian Holdco 2, Inc.(11)

  February 12, 2013  

Storage Tank Manufacturer

                       

         

14% PIK Unsecured Debt (Maturity—October 15, 2021)(19)

    440     440     325  

         

18% PIK Unsecured Debt (Maturity—June 30, 2022)(19)

    305     305     305  

         

Preferred Stock (Permian Holdco 1, Inc.) (154,558 units)

          799     330  

                      1,544     960  

                               

Point.360(10)

  July 8, 2015  

Fully Integrated Provider of Digital Media Services

                       

         

Warrants (65,463 equivalent shares; Expiration—July 7, 2020; Strike price—$0.75 per share)

          69      

         

Common Stock (163,658 shares)

          273      

                      342      

                               

PricewaterhouseCoopers Public Sector LLP(11)

  May 24, 2018  

Provider of Consulting Services to Governments

                       

         

LIBOR Plus 7.50%, Current Coupon 9.54%, Secured Debt (Maturity—May 1, 2026)

    9,000     8,964     8,888  

                               

PT Network, LLC(10)

  November 1, 2013  

Provider of Outpatient Physical Therapy and Sports Medicine Services

                       

         

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 7.80% /2.00% PIK, Current Coupon Plus PIK 9.80%, Secured Debt (Maturity—November 30, 2023)(9)(19)

    8,447     8,447     8,277  

                               

Research Now Group, Inc. and Survey Sampling International, LLC(11)

  December 31, 2017  

Provider of Outsourced Online Surveying

                       

         

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 7.75%, Secured Debt (Maturity—December 20, 2024)(9)

    18,161     17,614     18,249  

                               

27


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2019

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

RM Bidder, LLC(10)

  November 12, 2015  

Scripted and Unscripted TV and Digital Programming Provider

                       

         

Warrants (327,532 equivalent units; Expiration—October 20, 2025; Strike price—$14.28 per unit)

          425      

         

Member Units (2,779 units)

          46     11  

                      471     11  

                               

SAFETY Investment Holdings, LLC

  April 29, 2016  

Provider of Intelligent Driver Record Monitoring Software and Services

                       

         

Member Units (2,000,000 units)

          2,000     2,380  

                               

Salient Partners L.P.(11)

  June 25, 2015  

Provider of Asset Management Services

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 8.04%, Secured Debt (Maturity—June 9, 2021)(9)

    6,675     6,654     6,675  

                               

SMART Modular Technologies, Inc.(10)(13)

  August 18, 2017  

Provider of Specialty Memory Solutions

                       

         

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 8.43%, Secured Debt (Maturity—August 9, 2022)(9)

    19,000     18,833     19,190  

                               

Staples Canada ULC(10)(13)(21)

  September 14, 2017  

Office Supplies Retailer

                       

         

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.97%, Secured Debt (Maturity—September 12, 2023)(9)(22)

    14,843     14,630     13,573  

                               

TE Holdings, LLC(11)

  December 5, 2013  

Oil & Gas Exploration & Production

                       

         

Member Units (97,048 units)

          970      

                               

Tectonic Financial, Inc.

  May 15, 2017  

Financial Services Organization

                       

         

Common Stock (400,000 shares)(8)

          2,000     2,620  

                               

TeleGuam Holdings, LLC(11)

  June 26, 2013  

Cable and Telecom Services Provider

                       

         

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.54%, Secured Debt (Maturity—April 12, 2024)(9)

    7,750     7,634     7,798  

                               

TGP Holdings III LLC(11)

  September 30, 2017  

Outdoor Cooking & Accessories

                       

         

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.54%, Secured Debt (Maturity—September 25, 2025)(9)

    5,500     5,438     5,170  

                               

The Pasha Group(11)

  February 2, 2018  

Diversified Logistics and Transportation Provided

                       

         

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 9.58%, Secured Debt (Maturity—January 26, 2023)(9)

    9,961     9,748     10,036  

                               

TMC Merger Sub Corp.(11)

  December 22, 2016  

Refractory & Maintenance Services Provider

                       

         

LIBOR Plus 6.75% (Floor 1.00%), Current Coupon 8.81%, Secured Debt (Maturity—October 31, 2022)(9)(24)

    15,742     15,595     15,604  

                               

28


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2019

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

TOMS Shoes, LLC(11)

  November 13, 2014  

Global Designer, Distributor, and Retailer of Casual Footwear

                       

         

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 7.76%, Secured Debt (Maturity—October 30, 2020)(9)

    4,775     4,667     3,055  

                               

U.S. TelePacific Corp.(11)

  September 14, 2016  

Provider of Communications and Managed Services

                       

         

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 7.10%, Secured Debt (Maturity—May 2, 2023)(9)

    17,088     16,870     16,670  

                               

VIP Cinema Holdings, Inc.(11)

  March 9, 2017  

Supplier of Luxury Seating to the Cinema Industry

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 8.04%, Secured Debt (Maturity—March 1, 2023)(9)

    10,206     10,172     8,036  

                               

Vistar Media, Inc.(10)

  February 17, 2017  

Operator of Digital Out-of-Home Advertising Platform

                       

         

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 10.09%, Secured Debt (Maturity—April 3, 2023)(9)

    5,764     5,555     5,731  

         

Preferred Stock (70,207 shares)(19)

          767     1,210  

         

Warrants (69,675 equivalent shares; Expiration—April 3, 2029; Strike price—$10.92 per share)

              1,220  

                      6,322     8,161  

                               

Wireless Vision Holdings, LLC(10)

  September 29, 2017  

Provider of Wireless Telecommunications Carrier Services

                       

         

LIBOR Plus 9.91% (Floor 1.00%), Current Coupon 11.69% /1.00% PIK, Current Coupon Plus PIK 12.69%, Secured Debt (Maturity—September 29, 2022)(9)(19)(28)

    7,308     7,183     7,290  

         

LIBOR Plus 8.91% (Floor 1.00%), Current Coupon 10.96% /1.00% PIK, Current Coupon Plus PIK 11.96%, Secured Debt (Maturity—September 29, 2022)(9)(19)(28)

    6,351     6,275     6,351  

                      13,458     13,641  

                               

YS Garments, LLC(11)

  August 22, 2018  

Designer and Provider of Branded Activewear

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.95% Secured Debt (Maturity—August 9, 2024)(9)

    14,625     14,500     14,552  

                               

Zilliant Incorporated

  June 15, 2012  

Price Optimization and Margin Management Solutions

                       

         

Preferred Stock (186,777 shares)

          154     260  

         

Warrants (952,500 equivalent shares; Expiration—June 15, 2022; Strike price—$0.001 per share)

          1,071     1,190  

                      1,225     1,450  

Subtotal Non-Control/Non-Affiliate Investments (77.9% of net assets at fair value)

  $ 1,237,769   $ 1,193,883  

Total Portfolio Investments, September 30, 2019

  $ 2,358,800   $ 2,557,196  

(1)
All investments are Lower Middle Market portfolio investments, unless otherwise noted. See Note B for a description of Lower Middle Market portfolio investments. All of the Company's investments, unless otherwise noted, are encumbered either as security for the Company's Credit Facility or in support of the SBA-guaranteed debentures issued by the Funds.

(2)
Debt investments are income producing, unless otherwise noted. Equity and warrants are non-income producing, unless otherwise noted.

29


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2019

(dollars in thousands)

(unaudited)

(3)
See Note C and Schedule 12-14 for a summary of geographic location of portfolio companies.

(4)
Principal is net of repayments. Cost is net of repayments and accumulated unearned income.

(5)
Control investments are defined by the Investment Company Act of 1940, as amended ("1940 Act"), as investments in which more than 25% of the voting securities are owned or where the ability to nominate greater than 50% of the board representation is maintained.

(6)
Affiliate investments are defined by the 1940 Act as investments in which between 5% and 25% (inclusive) of the voting securities are owned and the investments are not classified as Control investments.

(7)
Non-Control/Non-Affiliate investments are defined by the 1940 Act as investments that are neither Control investments nor Affiliate investments.

(8)
Income producing through dividends or distributions.

(9)
Index based floating interest rate is subject to contractual minimum interest rate. A majority of the variable rate loans in the Company's investment portfolio bear interest at a rate that may be determined by reference to either LIBOR or an alternate Base Rate (commonly based on the Federal Funds Rate or the Prime Rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan. For each such loan, the Company has provided the weighted average annual stated interest rate in effect at September 30, 2019. As noted in this schedule, 66% of the loans (based on the par amount) contain LIBOR floors which range between 0.50% and 2.00%, with a weighted-average LIBOR floor of approximately 1.05%.

(10)
Private Loan portfolio investment. See Note B for a description of Private Loan portfolio investments.

(11)
Middle Market portfolio investment. See Note B for a description of Middle Market portfolio investments.

(12)
Other Portfolio investment. See Note B for a description of Other Portfolio investments.

(13)
Investment is not a qualifying asset as defined under Section 55(a) of the 1940 Act. Qualifying assets must represent at least 70% of total assets at the time of acquisition of any additional non-qualifying assets.

(14)
Non-accrual and non-income producing investment.

(15)
Portfolio company is in a bankruptcy process and, as such, the maturity date of our debt investment in this portfolio company will not be finally determined until such process is complete. As noted in footnote(14), our debt investment in this portfolio company is on non-accrual status.

(16)
External Investment Manager. Investment is not encumbered as security for the Company's Credit Facility or in support of the SBA-guaranteed debentures issued by the Funds.

(17)
Maturity date is under on-going negotiations with the portfolio company and other lenders, if applicable.

(18)
Investment fair value was determined using significant unobservable inputs, unless otherwise noted. See Note C for further discussion.

(19)
PIK interest income and cumulative dividend income represent income not paid currently in cash.

(20)
All portfolio company headquarters are based in the United States, unless otherwise noted.

(21)
Portfolio company headquarters are located outside of the United States.

(22)
In connection with the Company's debt investment in Staples Canada ULC and in an attempt to mitigate any potential adverse change in foreign exchange rates during the term of the Company's investment, the Company maintains a forward foreign currency contract with Cadence Bank to lend $18.0 million Canadian Dollars and receive $13.7 million U.S. Dollars with a settlement date of September 14, 2020. The unrealized appreciation on the forward foreign currency contract is $0.1 million as of September 30, 2019.

(23)
The Company has entered into an intercreditor agreement that entitles the Company to the "last out" tranche of the first lien secured loans, whereby the "first out" tranche will receive priority as to the "last out" tranche with respect to payments of principal, interest, and any other amounts due thereunder. Therefore, the Company receives a higher interest rate than the contractual stated interest rate of LIBOR plus 6.00% (Floor 1.00%) per the Credit Facility and the Consolidated Schedule of Investments above reflects such higher rate.

(24)
The Company has entered into an intercreditor agreement that entitles the Company to the "first out" tranche of the first lien secured loans, whereby the "first out" tranche will receive priority as to the "last out" tranche with respect to payments of principal, interest, and any other amounts due thereunder. Therefore, the Company receives a lower interest rate than the contractual stated interest rate of LIBOR plus 7.14% (Floor 1.00%) per the Credit Facility and the Consolidated Schedule of Investments above reflects such lower rate.

(25)
All of the Company's portfolio investments are generally subject to restrictions on resale as "restricted securities."

(26)
Investment date represents the date of initial investment in the portfolio company.

(27)
Investment has an unfunded commitment as of September 30, 2019 (see Note K). The fair value of the investment includes the impact of the fair value of any unfunded commitments

(28)
The Company has entered into an intercreditor agreement that entitles the Company to the "last out" tranche of the first lien secured loans, whereby the "first out" tranche will receive priority as to the "last out" tranche with respect to payments of principal, interest, and any other amounts due thereunder. Therefore, the Company receives a higher interest rate than the contractual stated interest rate of LIBOR plus 8.50% (Floor 1.00%) per the Credit Facility and the Consolidated Schedule of Investments above reflects such higher rate.

30


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments

December 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Control Investments(5)

     

 

 

 

                   

                               

Access Media Holdings, LLC(10)

  July 22, 2015  

Private Cable Operator

                       

         

10% PIK Secured Debt (Maturity—July 22, 2020)(14)(19)

  $ 23,828   $ 23,828   $ 8,558  

         

Preferred Member Units (9,481,500 units)(27)

          9,375     (284 )

         

Member Units (45 units)

          1      

                      33,204     8,274  

                               

ASC Interests, LLC

  August 1, 2013  

Recreational and Educational Shooting Facility

                       

         

11% Secured Debt (Maturity—July 31, 2020)

    1,650     1,622     1,622  

         

Member Units (1,500 units)

          1,500     1,370  

                      3,122     2,992  

                               

ATS Workholding, LLC(10)

  March 10, 2014  

Manufacturer of Machine Cutting Tools and Accessories

                       

         

5% Secured Debt (Maturity—November 16, 2021)

    4,877     4,507     4,390  

         

Preferred Member Units (3,725,862 units)

          3,726     3,726  

                      8,233     8,116  

                               

Bond-Coat, Inc.

  December 28, 2012  

Casing and Tubing Coating Services

                       

         

12% Secured Debt (Maturity—December 28, 2020)

    11,596     11,367     11,596  

         

Common Stock (57,508 shares)

          6,350     9,370  

                      17,717     20,966  

                               

Brewer Crane Holdings, LLC

  January 9, 2018  

Provider of Crane Rental and Operating Services

                       

         

LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 12.35%, Secured Debt (Maturity—January 9, 2023)(9)

    9,548     9,467     9,467  

         

Preferred Member Units (2,950 units)(8)

          4,280     4,280  

                      13,747     13,747  

                               

Café Brazil, LLC

  April 20, 2004  

Casual Restaurant Group

                       

         

Member Units (1,233 units)(8)

          1,742     4,780  

                               

California Splendor Holdings LLC

  March 30, 2018  

Processor of Frozen Fruits

                       

         

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 10.50%, Secured Debt (Maturity—March 30, 2023)(9)

    11,091     10,928     10,928  

         

LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 12.50%, Secured Debt (Maturity—March 30, 2023)(9)

    28,000     27,755     27,755  

         

Preferred Member Units (6,157 units)(8)

          10,775     9,745  

                      49,458     48,428  

                               

CBT Nuggets, LLC

  June 1, 2006  

Produces and Sells IT Training Certification Videos

                       

         

Member Units (416 units)(8)

          1,300     61,610  

                               

31


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Chamberlin Holding LLC

  February 26, 2018  

Roofing and Waterproofing Specialty Contractor

                       

         

LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 12.75%, Secured Debt (Maturity—February 26, 2023)(9)

    20,203     20,028     20,028  

         

Member Units (4,347 units)(8)

          11,440     18,940  

         

Member Units (Chamberlin Langfield Real Estate, LLC) (732,160 units)

          732     732  

                      32,200     39,700  

                               

Charps, LLC

  February 3, 2017  

Pipeline Maintenance and Construction

                       

         

12% Secured Debt (Maturity—February 3, 2022)

    11,900     11,805     11,888  

         

Preferred Member Units (1,600 units)(8)

          400     2,270  

                      12,205     14,158  

                               

Clad-Rex Steel, LLC

  December 20, 2016  

Specialty Manufacturer of Vinyl-Clad Metal

                       

         

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 11.35%, Secured Debt (Maturity—December 20, 2021)(9)

    12,080     12,001     12,080  

         

Member Units (717 units)(8)

          7,280     10,610  

         

10% Secured Debt (Clad-Rex Steel RE Investor, LLC) (Maturity—December 20, 2036)

    1,161     1,150     1,161  

         

Member Units (Clad-Rex Steel RE Investor, LLC) (800 units)

          210     350  

                      20,641     24,201  

                               

CMS Minerals Investments

  January 30, 2015  

Oil & Gas Exploration & Production

                       

         

Member Units (CMS Minerals II, LLC) (100 units)(8)

          2,707     2,580  

                               

Copper Trail Fund Investments(12)(13)

  July 17, 2017  

Investment Partnership

                       

         

LP Interests (CTMH, LP) (Fully diluted 38.8%)

          872     872  

         

LP Interests (Copper Trail Energy Fund I, LP) (Fully diluted 30.1%)(8)

          3,495     4,170  

                      4,367     5,042  

                               

Datacom, LLC

  May 30, 2014  

Technology and Telecommunications Provider

                       

         

8% Secured Debt (Maturity—May 30, 2019)(14)

    1,800     1,800     1,690  

         

10.50% PIK Secured Debt (Maturity—May 30, 2019)(14)(19)

    12,511     12,479     9,786  

         

Class A Preferred Member Units

          1,294      

         

Class B Preferred Member Units (6,453 units)

          6,030      

                      21,603     11,476  

                               

Digital Products Holdings LLC

  April 1, 2018  

Designer and Distributor of Consumer Electronics

                       

         

LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 12.38%, Secured Debt (Maturity—April 1, 2023)(9)

    25,740     25,511     25,511  

         

Preferred Member Units (3,451 shares)(8)

          8,466     8,466  

                      33,977     33,977  

                               

32


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Direct Marketing Solutions, Inc.

  February 13, 2018  

Provider of Omni-Channel Direct Marketing Services

                       

         

LIBOR Plus 11.00% (Floor 1.00%), Current Coupon 13.38%, Secured Debt (Maturity—February 13, 2023)(9)

    18,017     17,848     17,848  

         

Preferred Stock (8,400 shares)

          8,400     14,900  

                      26,248     32,748  

                               

Gamber-Johnson Holdings, LLC

  June 24, 2016  

Manufacturer of Ruggedized Computer Mounting Systems

                       

         

LIBOR Plus 7.50% (Floor 2.00%), Current Coupon 9.85%, Secured Debt (Maturity—June 24, 2021)(9)

    21,486     21,356     21,486  

         

Member Units (8,619 units)(8)

          14,844     45,460  

                      36,200     66,946  

                               

Garreco, LLC

  July 15, 2013  

Manufacturer and Supplier of Dental Products

                       

         

LIBOR Plus 8.00% (Floor 1.00%, Ceiling 1.50%), Current Coupon 9.50%, Secured Debt (Maturity—March 31, 2020)(9)

    5,121     5,099     5,099  

         

Member Units (1,200 units)

          1,200     2,590  

                      6,299     7,689  

                               

GRT Rubber Technologies LLC

  December 19, 2014  

Manufacturer of Engineered Rubber Products

                       

         

LIBOR Plus 7.00%, Current Coupon 9.35%, Secured Debt (Maturity—December 31, 2023)(9)

    9,740     9,716     9,740  

         

Member Units (5,879 units)(8)

          13,065     39,060  

                      22,781     48,800  

                               

Guerdon Modular Holdings, Inc.

  August 13, 2014  

Multi-Family and Commercial Modular Construction Company

                       

         

13% Secured Debt (Maturity—March 1, 2019)

    12,588     12,572     12,002  

         

Preferred Stock (404,998 shares)

          1,140      

         

Common Stock (212,033 shares)

          2,983      

         

Warrants (6,208,877 equivalent shares; Expiration—April 25, 2028; Strike price—$0.01 per unit)

               

                      16,695     12,002  

                               

Gulf Manufacturing, LLC

  August 31, 2007  

Manufacturer of Specialty Fabricated Industrial Piping Products

                       

         

Member Units (438 units)(8)

          2,980     11,690  

                               

Gulf Publishing Holdings, LLC

  April 29, 2016  

Energy Industry Focused Media and Publishing

                       

         

12.5% Secured Debt (Maturity—April 29, 2021)

    12,666     12,594     12,594  

         

Member Units (3,681 units)

          3,681     4,120  

                      16,275     16,714  

                               

Harborside Holdings, LLC

  March 20, 2017  

Real Estate Holding Company

                       

         

Member units (100 units)

          6,306     9,500  

                               

33


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Harris Preston Fund Investments(12)(13)

  October 1, 2017  

Investment Partnership

                       

         

LP Interests (2717 MH, L.P.) (Fully diluted 49.3%)

          1,040     1,133  

                               

Harrison Hydra-Gen, Ltd.

  June 4, 2010  

Manufacturer of Hydraulic Generators

                       

         

Common Stock (107,456 shares)(8)

          718     8,070  

                               

HW Temps LLC

  July 2, 2015  

Temporary Staffing Solutions

                       

         

LIBOR Plus 13.00% (Floor 1.00%), Current Coupon 15.35%, Secured Debt (Maturity July 2, 2020)(9)

    9,976     9,938     9,938  

         

Preferred Member Units (3,200 units)(8)

          3,942     3,942  

                      13,880     13,880  

                               

IDX Broker, LLC

  November 15, 2013  

Provider of Marketing and CRM Tools for the Real Estate Industry

                       

         

11.5% Secured Debt (Maturity—November 15, 2020)

    14,350     14,262     14,350  

         

Preferred Member Units (5,607 units)(8)

          5,952     13,520  

                      20,214     27,870  

                               

Jensen Jewelers of Idaho, LLC

  November 14, 2006  

Retail Jewelry Store

                       

         

Prime Plus 6.75% (Floor 2.00%), Current Coupon 12.00%, Secured Debt (Maturity—November 14, 2019)(9)

    3,355     3,337     3,355  

         

Member Units (627 units)(8)

          811     5,090  

                      4,148     8,445  

                               

KBK Industries, LLC

  January 23, 2006  

Manufacturer of Specialty Oilfield and Industrial Products

                       

         

Member Units (325 units)(8)

          783     8,610  

                               

Kickhaefer Manufacturing Company, LLC

  October 31, 2018  

Precision Metal Parts Manufacturing

                       

         

11.5% Secured Debt (Maturity—October 31, 2020)

    1,064     1,045     1,045  

         

11.5% Secured Debt (Maturity—October 31, 2023)

    28,000     27,730     27,730  

         

Member Units (581 units)

          12,240     12,240  

         

9.0% Secured Debt (Maturity—October 31, 2048)

    4,006     3,970     3,970  

         

Member Units (KMC RE Investor, LLC) (800 units)

          992     992  

                      45,977     45,977  

                               

Lamb Ventures, LLC

  May 30, 2008  

Aftermarket Automotive Services Chain

                       

         

11% Secured Debt (Maturity—July 1, 2022)

    8,339     8,306     8,339  

         

Preferred Stock (non-voting)

          400     400  

         

Member Units (742 units)

          5,273     7,440  

         

9.5% Secured Debt (Lamb's Real Estate Investment I, LLC) (Maturity—March 31, 2027)

    432     428     432  

         

Member Units (Lamb's Real Estate Investment I, LLC) (1,000 units)(8)

          625     630  

                      15,032     17,241  

                               

34


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Market Force Information, LLC

  July 28, 2017  

Provider of Customer Experience Management Services

                       

         

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 9.74%, Secured Debt (Maturity—July 28, 2022)(9)

    200     200     200  

         

LIBOR Plus 11.00% (Floor 1.00%), Current Coupon 13.74%, Secured Debt (Maturity—July 28, 2022)(9)

    22,800     22,624     22,624  

         

Member Units (657,113 units)

          14,700     13,100  

                      37,524     35,924  

                               

MH Corbin Holding LLC

  August 31, 2015  

Manufacturer and Distributor of Traffic Safety Products

                       

         

10% Current / 3% PIK Secured Debt (Maturity—August 31, 2020)(14)(19)

    12,263     12,121     11,733  

         

Preferred Member Units (4,000 shares)

          6,000     1,000  

                      18,121     12,733  

                               

Mid-Columbia Lumber Products, LLC

  December 18, 2006  

Manufacturer of Finger-Jointed Lumber Products

                       

         

10% Secured Debt (Maturity—January 15, 2020)

    1,750     1,746     1,746  

         

12% Secured Debt (Maturity—January 15, 2020)

    3,900     3,880     3,880  

         

Member Units (7,874 units)

          3,001     3,860  

         

9.5% Secured Debt (Mid-Columbia Real Estate, LLC) (Maturity—May 13, 2025)

    746     746     746  

         

Member Units (Mid-Columbia Real Estate, LLC) (500 units)(8)

          790     1,470  

                      10,163     11,702  

                               

MSC Adviser I, LLC(16)

  November 22, 2013  

Third Party Investment Advisory Services

                       

         

Member Units (Fully diluted 100.0%)(8)

              65,748  

                               

Mystic Logistics Holdings, LLC

  August 18, 2014  

Logistics and Distribution Services Provider for Large Volume Mailers

                       

         

12% Secured Debt (Maturity—August 15, 2019)

    7,536     7,506     7,506  

         

Common Stock (5,873 shares)

          2,720     210  

                      10,226     7,716  

                               

NAPCO Precast, LLC

  January 31, 2008  

Precast Concrete Manufacturing

                       

         

LIBOR Plus 8.50%, Current Coupon 11.24%, Secured Debt (Maturity—May 31, 2019)

    11,475     11,464     11,475  

         

Member Units (2,955 units)(8)

          2,975     13,990  

                      14,439     25,465  

                               

NexRev LLC

  February 28, 2018  

Provider of Energy Efficiency Products & Services

                       

         

11% Secured Debt (Maturity—February 28, 2023)

    17,440     17,288     17,288  

         

Preferred Member Units (86,400,000 units)(8)

          6,880     7,890  

                      24,168     25,178  

                               

35


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

NRI Clinical Research, LLC

  September 8, 2011  

Clinical Research Service Provider

                       

         

14% Secured Debt (Maturity—June 8, 2022)

    6,685     6,545     6,685  

         

Warrants (251,723 equivalent units; Expiration—June 8, 2027; Strike price—$0.01 per unit)

          252     660  

         

Member Units (1,454,167 units)

          765     2,478  

                      7,562     9,823  

                               

NRP Jones, LLC

  December 22, 2011  

Manufacturer of Hoses, Fittings and Assemblies

                       

         

12% Secured Debt (Maturity—March 20, 2023)

    6,376     6,376     6,376  

         

Member Units (65,962 units)

          3,717     5,960  

                      10,093     12,336  

                               

NuStep, LLC

  January 31, 2017  

Designer, Manufacturer and Distributor of Fitness Equipment

                       

         

12% Secured Debt (Maturity—January 31, 2022)

    20,600     20,458     20,458  

         

Preferred Member Units (406 units)

          10,200     10,200  

                      30,658     30,658  

                               

OMi Holdings, Inc.

  April 1, 2008  

Manufacturer of Overhead Cranes

                       

         

Common Stock (1,500 shares)(8)

          1,080     16,020  

                               

Pegasus Research Group, LLC

  January 6, 2011  

Provider of Telemarketing and Data Services

                       

         

Member Units (460 units)

          1,290     7,680  

                               

PPL RVs, Inc.

  June 10, 2010  

Recreational Vehicle Dealer

                       

         

LIBOR Plus 7.00% (Floor 0.50%), Current Coupon 9.40%, Secured Debt (Maturity—November 15, 2021)(9)

    15,100     15,006     15,100  

         

Common Stock (1,962 shares)(8)

          2,150     10,380  

                      17,156     25,480  

                               

Principle Environmental, LLC (d/b/a TruHorizon Environmental Solutions)

  February 1, 2011  

Noise Abatement Service Provider

                       

         

13% Secured Debt (Maturity—April 30, 2020)

    7,477     7,398     7,477  

         

Preferred Member Units (19,631 units)(8)

          4,600     13,090  

         

Warrants (1,018 equivalent units; Expiration—January 31, 2021; Strike price—$0.01 per unit)

          1,200     780  

                      13,198     21,347  

                               

Quality Lease Service, LLC

  June 8, 2015  

Provider of Rigsite Accommodation Unit Rentals and Related Services

                       

         

Zero Coupon Secured Debt (Maturity—June 8, 2021)

    7,341     7,341     6,450  

         

Member Units (1,000 units)

          4,043     3,809  

                      11,384     10,259  

                               

36


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

River Aggregates, LLC

  March 30, 2011  

Processor of Construction Aggregates

                       

         

Zero Coupon Secured Debt (Maturity—June 30, 2018)(17)

    750     750     722  

         

Member Units (1,150 units)

          1,150     4,610  

         

Member Units (RA Properties, LLC) (1,500 units)

          369     2,930  

                      2,269     8,262  

                               

Tedder Industries, LLC

  August 31, 2018  

Manufacturer of Firearm Holsters and Accessories

                       

         

12% Secured Debt (Maturity—August 31, 2020)

    480     480     480  

         

12% Secured Debt (Maturity—August 31, 2023)

    16,400     16,246     16,246  

         

Preferred Member Units (440 units)

          7,476     7,476  

                      24,202     24,202  

                               

The MPI Group, LLC

  October 2, 2007  

Manufacturer of Custom Hollow Metal Doors, Frames and Accessories

                       

         

9% Secured Debt (Maturity—October 2, 2019)

    2,924     2,924     2,582  

         

Series A Preferred Units (2,500 units)

          2,500     440  

         

Warrants (1,424 equivalent units; Expiration—July 1, 2024; Strike price—$0.01 per unit)

          1,096      

         

Member Units (MPI Real Estate Holdings, LLC) (100 units)(8)

          2,300     2,479  

                      8,820     5,501  

                               

Vision Interests, Inc.

  June 5, 2007  

Manufacturer / Installer of Commercial Signage

                       

         

13% Secured Debt (Maturity—December 23, 2018)(17)

    2,153     2,153     2,153  

         

Series A Preferred Stock (3,000,000 shares)

          3,000     3,740  

         

Common Stock (1,126,242 shares)

          3,706     280  

                      8,859     6,173  

                               

Ziegler's NYPD, LLC

  October 1, 2008  

Casual Restaurant Group

                       

         

6.5% Secured Debt (Maturity—October 1, 2019)

    1,000     998     1,000  

         

12% Secured Debt (Maturity—October 1, 2019)

    425     425     425  

         

14% Secured Debt (Maturity—October 1, 2019)

    2,750     2,750     2,750  

         

Warrants (587 equivalent units; Expiration—October 1, 2019; Strike price—$0.01 per unit)

          600      

         

Preferred Member Units (10,072 units)

          2,834     1,249  

                      7,607     5,424  

Subtotal Control Investments (68.1% of net assets at fair value)

  $ 750,618   $ 1,004,993  

37


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Affiliate Investments(6)

     

 

 

 

                   

                               

AFG Capital Group, LLC

  November 7, 2014  

Provider of Rent-to-Own Financing Solutions and Services

                       

         

Warrants (42 equivalent units; Expiration—November 7, 2024; Strike price—$0.01 per unit)

        $ 259   $ 950  

         

Preferred Member Units (186 units)(8)

          1,200     3,980  

                      1,459     4,930  

                               

Barfly Ventures, LLC(10)

  August 31, 2015  

Casual Restaurant Group

                       

         

12% Secured Debt (Maturity—August 31, 2020)

    10,185     10,039     10,018  

         

Options (3 equivalent units)

          607     940  

         

Warrant (1 equivalent unit; Expiration—August 31, 2025; Strike price—$1.00 per unit)

          473     410  

                      11,119     11,368  

                               

BBB Tank Services, LLC

  April 8, 2016  

Maintenance, Repair and Construction Services to the Above-Ground Storage Tank Market

                       

         

LIBOR Plus 11.00% (Floor 1.00%), Current Coupon 13.35%, (Maturity—April 8, 2021)(9)

    4,000     3,833     3,833  

         

Preferred Stock (non-voting)

          113     113  

         

Member Units (800,000 units)

          800     230  

                      4,746     4,176  

                               

Boccella Precast Products LLC

  June 30, 2017  

Manufacturer of Precast Hollow Core Concrete

                       

         

LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 12.40%, Secured Debt (Maturity—June 30, 2022)(9)

    15,724     15,512     15,724  

         

Member Units (2,160,000 units)(8)

          2,160     5,080  

                      17,672     20,804  

                               

Boss Industries, LLC

  July 1, 2014  

Manufacturer and Distributor of Air, Power and Other Industrial Equipment

                       

         

Preferred Member Units (2,242 units)(8)

          2,246     6,176  

                               

Bridge Capital Solutions Corporation

  April 18, 2012  

Financial Services and Cash Flow Solutions Provider

                       

         

13% Secured Debt (Maturity—July 25, 2021)

    7,500     6,221     6,221  

         

Warrants (82 equivalent shares; Expiration—July 25, 2026; Strike price—$0.01 per share)

          2,132     4,020  

         

13% Secured Debt (Mercury Service Group, LLC) (Maturity—July 25, 2021)

    1,000     994     1,000  

         

Preferred Member Units (Mercury Service Group, LLC) (17,742 units)(8)

          1,000     1,000  

                      10,347     12,241  

                               

38


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Buca C, LLC

  June 30, 2015  

Casual Restaurant Group

                       

         

LIBOR Plus 9.25% (Floor 1.00%), Current Coupon 11.63%, Secured Debt (Maturity—June 30, 2020)(9)

    19,104     19,038     19,038  

         

Preferred Member Units (6 units; 6% cumulative)(8)(19)

          4,431     4,431  

                      23,469     23,469  

                               

CAI Software LLC

  October 10, 2014  

Provider of Specialized Enterprise Resource Planning Software

                       

         

12% Secured Debt (Maturity—December 7, 2023)

    10,880     10,763     10,880  

         

Member Units (66,968 units)(8)

          751     2,717  

                      11,514     13,597  

                               

Chandler Signs Holdings, LLC(10)

  January 4, 2016  

Sign Manufacturer

                       

         

12% Current / 1% PIK Secured Deb (Maturity—July 4, 2021)(19)

    4,546     4,522     4,546  

         

Class A Units (1,500,000 units)(8)

          1,500     2,120  

                      6,022     6,666  

                               

Charlotte Russe, Inc(11)

  May 28, 2013  

Fast-Fashion Retailer to Young Women

                       

         

8.50% Secured Debt (Maturity—February 2, 2023)

    7,932     7,932     3,930  

         

Common Stock (19,041 shares)

          3,141      

                      11,073     3,930  

                               

Condit Exhibits, LLC

  July 1, 2008  

Tradeshow Exhibits / Custom Displays Provider

                       

         

Member Units (3,936 units)(8)

          100     1,950  

                               

Congruent Credit Opportunities Funds(12)(13)

  January 24, 2012  

Investment Partnership

                       

         

LP Interests (Congruent Credit Opportunities Fund II, LP) (Fully diluted 19.8%)

          5,210     855  

         

LP Interests (Congruent Credit Opportunities Fund III, LP) (Fully diluted 17.4%)(8)

          16,959     17,468  

                      22,169     18,323  

                               

Dos Rios Partners(12)(13)

  April 25, 2013  

Investment Partnership

                       

         

LP Interests (Dos Rios Partners, LP) (Fully diluted 20.2%)

          5,846     7,153  

         

LP Interests (Dos Rios Partners—A, LP) (Fully diluted 6.4%)

          1,856     2,271  

                      7,702     9,424  

                               

East Teak Fine Hardwoods, Inc.

  April 13, 2006  

Distributor of Hardwood Products

                       

         

Common Stock (6,250 shares)(8)

          480     560  

                               

EIG Fund Investments(12)(13)

  November 6, 2015  

Investment Partnership

                       

         

LP Interests (EIG Global Private Debt Fund—A, L.P.) (Fully diluted 11.1%)(8)

          553     505  

                               

Freeport Financial Funds(12)(13)

  June 13, 2013  

Investment Partnership

                       

         

LP Interests (Freeport Financial SBIC Fund LP) (Fully diluted 9.3%)(8)

          5,974     5,399  

         

LP Interests (Freeport First Lien Loan Fund III LP) (Fully diluted 6.0%)(8)

          11,155     10,980  

                      17,129     16,379  

                               

39


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Harris Preston Fund Investments(12)(13)

  August 9, 2017  

Investment Partnership

                       

         

LP Interests (HPEP 3, L.P.) (Fully diluted 8.2%)

          1,733     1,733  

                               

Hawk Ridge Systems, LLC(13)

  December 2, 2016  

Value-Added Reseller of Engineering Design and Manufacturing Solutions

                       

         

10.5% Secured Debt (Maturity—December 2, 2021)

    14,300     14,201     14,300  

         

Preferred Member Units (226 units)(8)

          2,850     7,260  

         

Preferred Member Units (HRS Services, ULC) (226 units)

          150     380  

                      17,201     21,940  

                               

Houston Plating and Coatings, LLC

  January 8, 2003  

Provider of Plating and Industrial Coating Services

                       

         

8% Unsecured Convertible Debt (Maturity—May 1, 2022)

    3,000     3,000     3,720  

         

Member Units (318,462 units)(8)

          2,236     8,330  

                      5,236     12,050  

                               

I-45 SLF LLC(12)(13)

  October 20, 2015  

Investment Partnership

                       

         

Member Units (Fully diluted 20.0%; 24.4% profits interest)(8)

          16,200     15,627  

                               

L.F. Manufacturing Holdings, LLC(10)

  December 23, 2013  

Manufacturer of Fiberglass Products

                       

         

Member Units (2,179,001 units)

          2,019     2,060  

                               

Meisler Operating LLC

  June 7, 2017  

Provider of Short-term Trailer and Container Rental

                       

         

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.90%, Secured Debt (Maturity—June 7, 2022)(9)

    20,480     20,312     20,312  

         

Member Units (Milton Meisler Holdings LLC) (48,555 units)

          4,855     5,780  

                      25,167     26,092  

                               

OnAsset Intelligence, Inc.

  April 18, 2011  

Provider of Transportation Monitoring / Tracking Products and Services

                       

         

12% PIK Secured Debt (Maturity—June 30, 2021)(19)

    5,743     5,743     5,743  

         

10% PIK Unsecured Debt (Maturity—June 30, 2021)(19)

    53     53     53  

         

Preferred Stock (912 shares)

          1,981      

         

Warrants (5,333 equivalent shares; Expiration—April 18, 2021; Strike price—$0.01 per share)

          1,919      

                      9,696     5,796  

                               

PCI Holding Company, Inc.

  December 18, 2012  

Manufacturer of Industrial Gas Generating Systems

                       

         

12% Current / 3% PIK Secured Debt (Maturity—March 31, 2019)(19)

    11,919     11,908     11,908  

         

Preferred Stock (1,740,000 shares) (non-voting)

          1,740     3,480  

         

Preferred Stock (1,500,000 shares)

          3,927     340  

                      17,575     15,728  

                               

40


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Rocaceia, LLC (Quality Lease and Rental Holdings, LLC)

  January 8, 2013  

Provider of Rigsite Accommodation Unit Rentals and Related Services

                       

         

12% Secured Debt (Maturity—January 8, 2018)(14)(15)

    30,785     30,281     250  

         

Preferred Member Units (250 units)

          2,500      

                      32,781     250  

                               

Salado Stone Holdings, LLC(10)

  June 27, 2016  

Limestone and Sandstone Dimension Cut Stone Mining Quarries

                       

         

Class A Preferred Units (Salado Acquisition, LLC) (2,000,000 units)(8)

          2,000     1,040  

                               

SI East, LLC

  August 31, 2018  

Rigid Industrial Packaging Manufacturing

                       

         

10.25% Current, Secured Debt (Maturity—August 31, 2023)

    35,250     34,885     34,885  

         

Preferred Member Units (157 units)

          6,000     6,000  

                      40,885     40,885  

                               

Slick Innovations, LLC

  September 13, 2018  

Text Message Marketing Platform

                       

         

14% Current, Secured Debt (Maturity—September 13, 2023)

    7,200     6,959     6,959  

         

Member Units (70,000 units)

          700     700  

         

Warrants (18,084 equivalent units; Expiration—September 13, 2028; Strike price—$0.01 per unit)

          181     181  

                      7,840     7,840  

                               

UniTek Global Services, Inc.(11)

  April 15, 2011  

Provider of Outsourced Infrastructure Services

                       

         

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 8.01%, Secured Debt (Maturity—August 20, 2024)(9)

    2,993     2,969     2,969  

         

Preferred Stock (1,521,122 shares; 19% cumulative)(8)(19)

          1,637     1,637  

         

Preferred Stock (2,281,682 shares; 19% cumulative)(8)(19)

          3,038     3,038  

         

Preferred Stock (4,336,866 shares; 13.5% cumulative)(8)(19)

          7,413     7,413  

         

Common Stock (945,507 shares)

              1,420  

                      15,057     16,477  

                               

Universal Wellhead Services Holdings, LLC(10)

  October 30, 2014  

Provider of Wellhead Equipment, Designs, and Personnel to the Oil & Gas Industry

                       

         

Preferred Member Units (UWS Investments, LLC) (716,949 units; 14% cumulative)(8)(19)

          837     950  

         

Member Units (UWS Investments, LLC) (4,000,000 units)

          4,000     2,330  

                      4,837     3,280  

                               

41


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Volusion, LLC

  January 26, 2015  

Provider of Online Software-as-a-Service eCommerce Solutions

                       

         

11.5% Secured Debt (Maturity—January 26, 2020)

    19,272     18,407     18,407  

         

8% Unsecured Convertible Debt (Maturity—November 16, 2023)

    297     297     297  

         

Preferred Member Units (4,876,670 units)

          14,000     14,000  

         

Warrants (1,831,355 equivalent units; Expiration—January 26, 2025; Strike price—$0.01 per unit)

          2,576     1,890  

                      35,280     34,594  

Subtotal Affiliate Investments (24.4% of net assets at fair value)

  $ 381,307   $ 359,890  

42


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Non-Control/Non-Affiliate Investments(7)

 

 

                   

                               

AAC Holdings, Inc.(11)

  June 30, 2017  

Substance Abuse Treatment Service Provider

                       

         

LIBOR Plus 6.75% (Floor 1.00%), Current Coupon 9.28%, Secured Debt (Maturity—June 30, 2023)(9)

  $ 14,500   $ 14,245   $ 14,246  

                               

Adams Publishing Group, LLC(10)

  November 19, 2015  

Local Newspaper Operator

                       

         

Prime Plus 4.00% (Floor 1.00%), Current Coupon 9.50%, Secured Debt (Maturity—July 3, 2023)(9)

    4,250     4,160     4,160  

         

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 9.93%, Secured Debt (Maturity—July 3, 2023)(9)

    8,108     7,956     7,956  

                      12,116     12,116  

                               

ADS Tactical, Inc.(10)

  March 7, 2017  

Value-Added Logistics and Supply Chain Provider to the Defense Industry

                       

         

LIBOR Plus 6.25% (Floor 0.75%), Current Coupon 8.77%, Secured Debt (Maturity—July 26, 2023)(9)

    16,416     16,263     15,306  

                               

Aethon United BR LP(10)

  September 8, 2017  

Oil & Gas Exploration & Production

                       

         

LIBOR Plus 6.75% (Floor 1.00%), Current Coupon 9.14%, Secured Debt (Maturity—September 8, 2023)(9)

    4,063     4,011     3,817  

                               

Allen Media, LLC.(11)

  September 18, 2018  

Operator of Cable Television Networks

                       

         

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 9.21%, Secured Debt (Maturity—August 30, 2023)(9)

    17,143     16,670     16,800  

                               

Allflex Holdings III Inc.(11)

  July 18, 2013  

Manufacturer of Livestock Identification Products

                       

         

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 9.48%, Secured Debt (Maturity—July 19, 2021)(9)

    13,120     13,077     13,013  

                               

American Nuts, LLC(10)

  April 10, 2018  

Roaster, Mixer and Packager of Bulk Nuts and Seeds

                       

         

LIBOR Plus 8.50% (Floor 1.00%) PIK, 9.50% PIK Secured Debt, (Maturity—April 10, 2023)(9)(19)

    1,127     1,115     1,115  

         

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.90%, Secured Debt (Maturity—April 10, 2023)(9)

    11,194     11,000     10,475  

                      12,115     11,590  

                               

American Scaffold Holdings, Inc.(10)

  June 14, 2016  

Marine Scaffolding Service Provider

                       

         

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 9.30%, Secured Debt (Maturity—March 31, 2022)(9)

    6,656     6,592     6,623  

                               

43


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

American Teleconferencing Services, Ltd.(11)

  May 19, 2016  

Provider of Audio Conferencing and Video Collaboration Solutions

                       

         

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 9.09%, Secured Debt (Maturity—December 8, 2021)(9)

    15,940     15,186     13,310  

                               

Apex Linen Service, Inc.

  October 30, 2015  

Industrial Launderers

                       

         

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 11.35%, Secured Debt (Maturity—October 30, 2022)(9)

    2,400     2,400     2,400  

         

16% Secured Debt (Maturity—October 30, 2022)

    14,416     14,357     14,357  

                      16,757     16,757  

                               

APTIM Corp.(11)

  August 17, 2018  

Engineering, Construction & Procurement

                       

         

7.75% Secured Debt (Maturity—June 15, 2025)

    12,452     10,633     9,464  

                               

Arcus Hunting LLC(10)

  January 6, 2015  

Manufacturer of Bowhunting and Archery Products and Accessories

                       

         

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 9.40%, Secured Debt (Maturity—November 13, 2019)(9)

    15,394     15,351     15,394  

                               

Arise Holdings, Inc.(10)

  March 12, 2018  

Tech-Enabled Business Process Outsourcing

                       

         

Preferred Stock (1,000,000 shares)

          1,000     1,704  

                               

ASC Ortho Management Company, LLC(10)

  August 31, 2018  

Provider of Orthopedic Services

                       

         

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 9.90%, Secured Debt (Maturity—August 31, 2023)(9)

    4,660     4,559     4,559  

         

13.25% PIK Secured Debt (Maturity—December 1, 2023)(19)

    1,624     1,587     1,587  

                      6,146     6,146  

                               

ATI Investment Sub, Inc.(11)

  July 11, 2016  

Manufacturer of Solar Tracking Systems

                       

         

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 9.76%, Secured Debt (Maturity—June 22, 2021)(9)

    4,385     4,346     3,943  

                               

ATX Networks Corp.(11)(13)(21)

  June 30, 2015  

Provider of Radio Frequency Management Equipment

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 8.39% / 1.00% PIK, Current Coupon Plus PIK 9.39%, Secured Debt (Maturity—June 11, 2021)(9)(19)

    14,121     13,844     13,415  

                               

Berry Aviation, Inc.(10)

  July 6, 2018  

Charter Airline Services

                       

         

10.50% Current / 1.5% PIK, Secured Debt (Maturity—January 6, 2024)(19)

    4,485     4,443     4,443  

         

Preferred Member Units (Berry Acquisition, LLC) (1,548,387 units; 8% cumulative)(8)(19)

          1,609     1,609  

                      6,052     6,052  

                               

44


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

BigName Commerce, LLC(10)

  May 11, 2017  

Provider of Envelopes and Complimentary Stationery Products

                       

         

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 9.65%, Secured Debt (Maturity—May 11, 2022)(9)

    2,462     2,440     2,369  

                               

Binswanger Enterprises, LLC(10)

  March 10, 2017  

Glass Repair and Installation Service Provider

                       

         

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 10.74%, Secured Debt (Maturity—March 9, 2022)(9)

    14,368     14,169     13,743  

         

Member Units (1,050,000 units)

          1,050     1,330  

                      15,219     15,073  

                               

Bluestem Brands, Inc.(11)

  December 19, 2013  

Multi-Channel Retailer of General Merchandise

                       

         

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 10.02%, Secured Debt (Maturity—November 6, 2020)(9)

    11,375     11,262     7,356  

                               

Brainworks Software, LLC(10)

  August 12, 2014  

Advertising Sales and Newspaper Circulation Software

                       

         

Prime Plus 9.25% (Floor 3.25%), Current Coupon 14.70%, Secured Debt (Maturity—July 22, 2019)(9)

    6,733     6,723     6,590  

                               

Brightwood Capital Fund Investments(12)(13)

  July 21, 2014  

Investment Partnership

                       

         

LP Interests (Brightwood Capital Fund III, LP) (Fully diluted 1.6%)(8)

          12,000     10,264  

         

LP Interests (Brightwood Capital Fund IV, LP) (Fully diluted 0.6%)(8)

          2,000     2,063  

                      14,000     12,327  

                               

Cadence Aerospace LLC(10)

  November 14, 2017  

Aerostructure Manufacturing

                       

         

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 9.06%, Secured Debt (Maturity—November 14, 2023)(9)

    19,470     19,301     18,244  

                               

California Pizza Kitchen, Inc.(11)

  August 29, 2016  

Casual Restaurant Group

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 8.53%, Secured Debt (Maturity—August 23, 2022)(9)

    12,739     12,707     12,389  

                               

Central Security Group, Inc.(11)

  December 4, 2017  

Security Alarm Monitoring Service Provider

                       

         

LIBOR Plus 5.63% (Floor 1.00%), Current Coupon 8.15%, Secured Debt (Maturity—October 6, 2021)(9)

    13,884     13,821     13,867  

                               

Cenveo Corporation(11)

  September 4, 2015  

Provider of Digital Marketing Agency Services

                       

         

Libor Plus 9.00% (Floor 1.00%), Current Coupon 11.54%, Secured Debt (Maturity—June 7, 2023)(9)

    6,370     6,128     6,048  

         

Common Stock (177,130 shares)

          5,309     2,746  

                      11,437     8,794  

                               

45


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Clarius BIGS, LLC(10)

  September 23, 2014  

Prints & Advertising Film Financing

                       

         

15% PIK Secured Debt (Maturity—January 5, 2015)(14)(17)

    2,908     2,908     44  

                               

Clickbooth.com, LLC(10)

  December 5, 2017  

Provider of Digital Advertising Performance Marketing Solutions

                       

         

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.90%, Secured Debt (Maturity—December 5, 2022)(9)

    2,925     2,876     2,750  

                               

Construction Supply Investments, LLC(10)

  December 29, 2016  

Distribution Platform of Specialty Construction Materials to Professional Concrete and Masonry Contractors

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 8.62%, Secured Debt (Maturity—June 30, 2023)(9)

    15,423     15,355     15,384  

         

Member Units (42,207 units)

          4,221     4,290  

                      19,576     19,674  

                               

CTVSH, PLLC(10)

  August 3, 2017  

Emergency Care and Specialty Service Animal Hospital

                       

         

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 10.74%, Secured Debt (Maturity—August 3, 2022)(9)

    11,250     11,163     10,939  

                               

Darr Equipment LP(10)

  April 15, 2014  

Heavy Equipment Dealer

                       

         

11.5% Current / 1% PIK Secured Debt (Maturity—June 22, 2023)(19)

    5,839     5,839     5,723  

         

Warrants (915,734 equivalent units; Expiration—December 23, 2023; Strike price—$1.50 per unit)

          474     60  

                      6,313     5,783  

                               

Digital River, Inc.(11)

  February 24, 2015  

Provider of Outsourced e-Commerce Solutions and Services

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 8.78%, Secured Debt (Maturity—February 12, 2021)(9)

    10,146     10,074     10,044  

                               

DTE Enterprises, LLC(10)

  April 13, 2018  

Industrial Powertrain Repair and Services

                       

         

LIBOR Plus 7.50% (Floor 1.50%), Current Coupon 10.12%, Secured Debt (Maturity—April 13, 2023)(9)

    12,492     12,260     11,580  

         

Class AA Preferred Member Units (non-voting; 10% cumulative)(8)(19)

          778     778  

         

Class A Preferred Member Units (776,316 units)(8)

          776     1,300  

                      13,814     13,658  

                               

Dynamic Communities, LLC(10)

  July 17, 2018  

Developer of Business Events and Online Community Groups

                       

         

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 10.80%, Secured Debt (Maturity—July 17, 2023)(9)

    5,600     5,495     5,495  

                               

46


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Elite SEM INC.(10)

  August 31, 2018  

Provider of Digital Marketing Agency Services

                       

         

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 11.27%, Secured Debt (Maturity—February 1, 2022)(9)(23)

    6,875     6,750     6,750  

                               

EnCap Energy Fund Investments(12)(13)

  December 28, 2010  

Investment Partnership

                       

         

LP Interests (EnCap Energy Capital Fund VIII, L.P.) (Fully diluted 0.1%)(8)

          3,661     2,003  

         

LP Interests (EnCap Energy Capital Fund VIII Co-Investors, L.P.) (Fully diluted 0.4%)(8)

          2,103     1,153  

         

LP Interests (EnCap Energy Capital Fund IX, L.P.) (Fully diluted 0.1%)(8)

          4,430     3,784  

         

LP Interests (EnCap Energy Capital Fund X, L.P.) (Fully diluted 0.1%)(8)

          7,629     7,692  

         

LP Interests (EnCap Flatrock Midstream Fund II, L.P.) (Fully diluted 0.8%)(8)

          5,881     4,538  

         

LP Interests (EnCap Flatrock Midstream Fund III, L.P.) (Fully diluted 0.2%)(8)

          5,423     5,051  

                      29,127     24,221  

                               

Encino Acquisition Partners Holdings, Inc.(11)

  November 16, 2018  

Oil & Gas Exploration & Production

                       

         

LIBOR Plus 6.75% (Floor 1.00%), Current Coupon 9.27%, Secured Debt (Maturity—October 29, 2025)(9)

    9,000     8,911     8,595  

                               

EPIC Y-Grade Services, LP(11)

  June 22, 2018  

NGL Transportation & Storage

                       

         

LIBOR Plus 5.50%, Current Coupon 8.02%, Secured Debt (Maturity—June 13, 2024)

    17,500     17,175     16,625  

                               

Evergreen Skills Lux S.á r.l. (d/b/a Skillsoft)(11)(13)

  May 5, 2014  

Technology-based Performance Support Solutions

                       

         

LIBOR Plus 8.25% (Floor 1.00%), Current Coupon 10.77%, Secured Debt (Maturity—April 28, 2022)(9)

    6,999     6,901     3,931  

                               

Extreme Reach, Inc.(11)

  March 31, 2015  

Integrated TV and Video Advertising Platform

                       

         

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 8.78%, Secured Debt (Maturity—February 7, 2020)(9)

    16,460     16,451     16,371  

                               

Felix Investments Holdings II(10)

  August 9, 2017  

Oil & Gas Exploration & Production

                       

         

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 9.10%, Secured Debt (Maturity—August 9, 2022)(9)

    3,333     3,279     3,141  

                               

Flavors Holdings Inc.(11)

  October 15, 2014  

Global Provider of Flavoring and Sweetening Products

                       

         

LIBOR Plus 5.75% (Floor 1.00%), Current Coupon 8.55%, Secured Debt (Maturity—April 3, 2020)(9)

    12,295     12,044     11,434  

                               

47


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

GeoStabilization International (GSI)(11)

  December 31, 2018  

Geohazard Engineering Services & Maintenance

                       

         

LIBOR Plus 5.50%, Current Coupon 8.09%, Secured Debt (Maturity—December 19, 2025)

    16,500     16,335     16,418  

                               

GI KBS Merger Sub LLC(11)

  November 10, 2014  

Outsourced Janitorial Service Provider

                       

         

LIBOR Plus 4.75% (Floor 1.00%), Current Coupon 7.43%, Secured Debt (Maturity—October 29, 2021)(9)

    9,195     9,139     9,207  

         

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 11.02%, Secured Debt (Maturity—April 29, 2022)(9)

    3,915     3,797     3,949  

                      12,936     13,156  

                               

Good Source Solutions, Inc.(10)

  October 23, 2018  

Specialized Food Distributor

                       

         

LIBOR Plus 8.34% (Floor 1.00%), Current Coupon 11.14%, Secured Debt (Maturity—June 29, 2023)(9)(23)

    5,000     4,952     4,952  

                               

GoWireless Holdings, Inc.(11)

  December 31, 2017  

Provider of Wireless Telecommunications Carrier Services

                       

         

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 9.02%, Secured Debt (Maturity—December 22, 2024)(9)

    17,325     17,170     16,856  

                               

Grupo Hima San Pablo, Inc.(11)

  March 7, 2013  

Tertiary Care Hospitals

                       

         

LIBOR Plus 7.00% (Floor 1.50%), Current Coupon 9.52%, Secured Debt (Maturity—January 31, 2019)(9)

    4,688     4,688     3,629  

         

13.75% Secured Debt (Maturity—October 15, 2018)(17)

    2,055     2,040     226  

                      6,728     3,855  

                               

HDC/HW Intermediate Holdings(10)

  December 21, 2018  

Managed Services and Hosting Provider

                       

         

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 10.29%, Secured Debt (Maturity—December 21, 2023)(9)

    3,201     3,132     3,132  

                               

Hoover Group, Inc.(10)(13)

  October 21, 2016  

Provider of Storage Tanks and Related Products to the Energy and Petrochemical Markets

                       

         

LIBOR Plus 6.00%, Current Coupon 8.71%, Secured Debt (Maturity—January 28, 2020)

    5,250     4,803     4,771  

         

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 9.90%, Secured Debt (Maturity—January 28, 2021)(9)

    9,395     9,053     8,831  

                      13,856     13,602  

                               

Hunter Defense Technologies, Inc.(10)

  March 29, 2018  

Provider of Military and Commercial Shelters and Systems

                       

         

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 9.80%, Secured Debt (Maturity—March 29, 2023)(9)

    16,080     15,757     15,077  

                               

48


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Hydrofarm Holdings LLC(10)

  May 18, 2017  

Wholesaler of Horticultural Products

                       

         

LIBOR Plus 10.00%, Current Coupon 3.69% / 8.61% PIK, Current Coupon Plus PIK 12.30% Secured Debt (Maturity—May 12, 2022)(19)

    7,235     7,139     5,660  

                               

iEnergizer Limited(11)(13)(21)

  May 8, 2013  

Provider of Business Outsourcing Solutions

                       

         

LIBOR Plus 6.00% (Floor 1.25%), Current Coupon 8.53%, Secured Debt (Maturity—May 1, 2019)(9)

    14,100     14,052     14,117  

                               

Implus Footcare, LLC(10)

  June 1, 2017  

Provider of Footwear and Related Accessories

                       

         

LIBOR Plus 6.75% (Floor 1.00%), Current Coupon 9.55%, Secured Debt (Maturity—April 30, 2021)(9)

    18,819     18,629     18,390  

                               

Independent Pet Partners Intermediate Holdings, LLC(10)

  November 20, 2018  

Omnichannel Retailer of Specialty Pet Products

                       

         

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 11.90%, Secured Debt (Maturity—November 19, 2023)(9)

    2,078     2,037     2,037  

         

Member Units (1,558,333 units)

          1,558     1,558  

                      3,595     3,595  

                               

Industrial Services Acquisition, LLC(10)

  June 17, 2016  

Industrial Cleaning Services

                       

         

6% Current / 7% PIK Unsecured Debt (Maturity—December 17, 2022)(19)

    4,885     4,822     4,470  

         

Preferred Member Units (Industrial Services Investments, LLC) (144 units; 10% cumulative)(8)(19)

          94     94  

         

Member Units (Industrial Services Investments, LLC) (900 units)

          900     210  

                      5,816     4,774  

                               

Inn of the Mountain Gods Resort and Casino(11)

  October 30, 2013  

Hotel & Casino Owner & Operator

                       

         

9.25% Secured Debt (Maturity—November 30, 2020)

    7,832     7,479     7,480  

                               

Intermedia Holdings, Inc.(11)

  August 3, 2018  

Unified Communications as a Service

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 8.52%, Secured Debt (Maturity—July 19, 2025)(9)

    11,571     11,461     11,557  

                               

irth Solutions, LLC

  December 29, 2010  

Provider of Damage Prevention Information Technology Services

                       

         

Member Units (27,893 units)

          1,441     2,830  

                               

Isagenix International, LLC(11)

  June 21, 2018  

Direct Marketer of Health & Wellness Products

                       

         

LIBOR Plus 5.75% (Floor 1.00%), Current Coupon 8.55%, Secured Debt (Maturity—June 14, 2025)(9)

    6,268     6,208     6,095  

                               

JAB Wireless, Inc.(10)

  May 2, 2018  

Fixed Wireless Broadband Provider

                       

         

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 10.39%, Secured Debt (Maturity—May 2, 2023)(9)

    14,888     14,754     13,987  

                               

49


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Jacent Strategic Merchandising, LLC(10)

  September 16, 2015  

General Merchandise Distribution

                       

         

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 10.27%, Secured Debt (Maturity—September 16, 2020)(9)

    10,740     10,705     10,740  

                               

Jackmont Hospitality, Inc.(10)

  May 26, 2015  

Franchisee of Casual Dining Restaurants

                       

         

LIBOR Plus 6.75% (Floor 1.00%), Current Coupon 9.26%, Secured Debt (Maturity—May 26, 2021)(9)

    4,165     4,157     4,165  

                               

Jacuzzi Brands LLC(11)

  June 30, 2017  

Manufacturer of Bath and Spa Products

                       

         

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 9.52%, Secured Debt (Maturity—June 28, 2023)(9)

    3,850     3,788     3,831  

                               

Joerns Healthcare, LLC(11)

  April 3, 2013  

Manufacturer and Distributor of Health Care Equipment & Supplies

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 8.71% Secured Debt (Maturity—May 9, 2020)(9)

    13,387     13,335     11,998  

                               

Kore Wireless Group Inc.(11)

  December 31, 2018  

Mission Critical Software Platform

                       

         

LIBOR Plus 5.50%, Current Coupon 8.29%, Secured Debt (Maturity—December 20, 2024)

    6,667     6,600     6,631  

                               

Larchmont Resources, LLC(11)

  August 13, 2013  

Oil & Gas Exploration & Production

                       

         

LIBOR Plus 9.00% (Floor 1.00%) PIK, 11.77% PIK Secured Debt, (Maturity—August 7, 2020)(9)(19)

    2,312     2,312     2,266  

         

Member Units (Larchmont Intermediate Holdco, LLC) (2,828 units)

          353     707  

                      2,665     2,973  

                               

LKCM Headwater Investments I, L.P.(12)(13)

  January 25, 2013  

Investment Partnership

                       

         

LP Interests (Fully diluted 2.3%)(8)

          1,780     3,501  

                               

Logix Acquisition Company, LLC(10)

  June 24, 2016  

Competitive Local Exchange Carrier

                       

         

LIBOR Plus 5.75% (Floor 1.00%), Current Coupon 8.27%, Secured Debt (Maturity—December 22, 2024)(9)

    12,927     12,725     12,797  

                               

Looking Glass Investments, LLC(12)(13)

  July 1, 2015  

Specialty Consumer Finance

                       

         

Member Units (2.5 units)

          125     57  

         

Member Units (LGI Predictive Analytics LLC) (190,712 units)(8)

          49     33  

                      174     90  

                               

LSF9 Atlantis Holdings, LLC(11)

  May 17, 2017  

Provider of Wireless Telecommunications Carrier Services

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 8.38%, Secured Debt (Maturity—May 1, 2023)(9)

    9,710     9,694     9,269  

                               

50


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Lulu's Fashion Lounge, LLC(10)

  August 31, 2017  

Fast Fashion E-Commerce Retailer

                       

         

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 9.52%, Secured Debt (Maturity—August 28, 2022)(9)

    12,358     12,060     11,987  

                               

MHVC Acquisition Corp.(11)

  May 8, 2017  

Provider of differentiated information solutions, systems engineering, and analytics

                       

         

LIBOR Plus 5.25% (Floor 1.00%), Current Coupon 8.06%, Secured Debt (Maturity—April 29, 2024)(9)

    15,475     15,442     15,088  

                               

Mills Fleet Farm Group, LLC(10)

  October 24, 2018  

Omnichannel Retailer of Work, Farm and Lifestyle Merchandise

                       

         

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 8.77%, Secured Debt (Maturity—October 24, 2024)(9)

    15,000     14,707     15,000  

                               

Mobileum(10)

  October 23, 2018  

Provider of big data analytics to telecom service providers

                       

         

LIBOR Plus 10.25% (Floor 0.75%), Current Coupon 13.06%, Secured Debt (Maturity—May 1, 2022)(9)

    7,500     7,429     7,429  

                               

NBG Acquisition Inc(11)

  April 28, 2017  

Wholesaler of Home Décor Products

                       

         

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 8.09%, Secured Debt (Maturity—April 26, 2024)(9)

    4,292     4,235     4,184  

                               

New Era Technology, Inc.(10)

  June 30, 2018  

Managed Services and Hosting Provider

                       

         

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.99%, Secured Debt (Maturity—June 22, 2023)(9)

    7,654     7,526     7,616  

                               

New Media Holdings II LLC(11)(13)

  June 10, 2014  

Local Newspaper Operator

                       

         

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 8.77%, Secured Debt (Maturity—July 14, 2022)(9)

    21,125     20,797     20,967  

                               

NNE Partners, LLC(10)

  March 2, 2017  

Oil & Gas Exploration & Production

                       

         

LIBOR Plus 8.00%, Current Coupon 10.74%, Secured Debt (Maturity—March 2, 2022)

    20,417     20,260     19,572  

                               

North American Lifting Holdings, Inc.(11)

  February 26, 2015  

Crane Service Provider

                       

         

LIBOR Plus 4.50% (Floor 1.00%), Current Coupon 7.30%, Secured Debt (Maturity—November 27, 2020)(9)

    7,664     7,093     6,997  

                               

Novetta Solutions, LLC(11)

  June 21, 2017  

Provider of Advanced Analytics Solutions for Defense Agencies

                       

         

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 7.53%, Secured Debt (Maturity—October 17, 2022)(9)

    15,478     15,091     15,091  

                               

51


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

NTM Acquisition Corp.(11)

  July 12, 2016  

Provider of B2B Travel Information Content

                       

         

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 8.96%, Secured Debt (Maturity—June 7, 2022)(9)

    4,419     4,396     4,375  

                               

Ospemifene Royalty Sub LLC (QuatRx)(10)

  July 8, 2013  

Estrogen-Deficiency Drug Manufacturer and Distributor

                       

         

11.5% Secured Debt (Maturity—November 15, 2026)(14)

    4,975     4,975     937  

                               

Permian Holdco 2, Inc.(11)

  February 12, 2013  

Storage Tank Manufacturer

                       

         

14% PIK Unsecured Debt (Maturity—October 15, 2021)(19)

    396     396     396  

         

Preferred Stock (Permian Holdco 1, Inc.) (154,558 units)

          799     920  

                      1,195     1,316  

                               

Pernix Therapeutics Holdings, Inc.(10)

  August 18, 2014  

Pharmaceutical Royalty

                       

         

12% Secured Debt (Maturity—August 1, 2020)

    3,031     3,031     2,037  

                               

Pier 1 Imports, Inc.(11)

  February 20, 2018  

Decorative Home Furnishings Retailer

                       

         

LIBOR Plus 3.50% (Floor 1.00%), Current Coupon 6.38%, Secured Debt (Maturity—April 30, 2021)(9)

    9,736     9,152     6,998  

                               

Point.360(10)

  July 8, 2015  

Fully Integrated Provider of Digital Media Services

                       

         

Warrants (65,463 equivalent shares; Expiration—July 7, 2020; Strike price—$0.75 per share)

          69      

         

Common Stock (163,658 shares)

          273     5  

                      342     5  

                               

PricewaterhouseCoopers Public Sector LLP(11)

  May 24, 2018  

Provider of Consulting Services to Governments

                       

         

LIBOR Plus 7.50%, Current Coupon 9.74%, Secured Debt (Maturity—May 1, 2026)

    8,000     7,962     8,040  

                               

Prowler Acquisition Corp.(11)

  February 11, 2014  

Specialty Distributor to the Energy Sector

                       

         

LIBOR Plus 4.50% (Floor 1.00%), Current Coupon 7.30%, Secured Debt (Maturity—January 28, 2020)(9)

    20,028     19,122     19,727  

                               

PT Network, LLC(10)

  November 1, 2013  

Provider of Outpatient Physical Therapy and Sports Medicine Services

                       

         

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 7.99%, Secured Debt (Maturity—November 30, 2021)(9)

    8,732     8,732     8,619  

                               

52


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Research Now Group, Inc. and Survey Sampling International, LLC(11)

  December 31, 2017  

Provider of Outsourced Online Surveying

                       

         

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 8.02%, Secured Debt (Maturity—December 20, 2024)(9)

    15,360     14,757     15,110  

                               

Resolute Industrial, LLC(10)

  July 26, 2017  

HVAC Equipment Rental and Remanufacturing

                       

         

Member Units (601 units)

          750     920  

                               

RM Bidder, LLC(10)

  November 12, 2015  

Scripted and Unscripted TV and Digital Programming Provider

                       

         

Warrants (327,532 equivalent units; Expiration—October 20, 2025; Strike price—$14.28 per unit)

          425      

         

Member Units (2,779 units)

          46     11  

                      471     11  

                               

SAFETY Investment Holdings, LLC

  April 29, 2016  

Provider of Intelligent Driver Record Monitoring Software and Services

                       

         

Member Units (2,000,000 units)

          2,000     1,820  

                               

Salient Partners L.P.(11)

  June 25, 2015  

Provider of Asset Management Services

                       

         

LIBOR Plus 5.75% (Floor 1.00%), Current Coupon 8.27%, Secured Debt (Maturity—June 9, 2021)(9)

    7,313     7,280     7,280  

                               

SiTV, LLC(11)

  September 26, 2017  

Cable Networks Operator

                       

         

10.375% Secured Debt (Maturity—July 1, 2019)

    10,429     7,196     3,911  

                               

SMART Modular Technologies, Inc.(10)(13)

  August 18, 2017  

Provider of Specialty Memory Solutions

                       

         

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 8.86%, Secured Debt (Maturity—August 9, 2022)(9)

    19,000     18,793     19,095  

                               

Sorenson Communications, Inc.(11)

  June 7, 2016  

Manufacturer of Communication Products for Hearing Impaired

                       

         

LIBOR Plus 5.75% (Floor 2.25%), Current Coupon 8.56%, Secured Debt (Maturity—April 30, 2020)(9)

    13,097     13,059     13,048  

                               

Staples Canada ULC(10)(13)(21)

  September 14, 2017  

Office Supplies Retailer

                       

         

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 9.26%, Secured Debt (Maturity—September 12, 2023)(9)(22)

    16,867     16,589     14,026  

                               

STL Parent Corp.(10)

  December 14, 2018  

Manufacturer and Servicer of Tank and Hopper Railcars

                       

         

LIBOR Plus 7.00%, Current Coupon 9.52%, Secured Debt (Maturity—December 5, 2022)

    15,000     14,475     14,475  

                               

Strike, LLC(11)

  December 12, 2016  

Pipeline Construction and Maintenance Services

                       

         

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 10.59%, Secured Debt (Maturity—November 30, 2022)(9)

    9,000     8,797     9,011  

                               

53


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

TE Holdings, LLC(11)

  December 5, 2013  

Oil & Gas Exploration & Production

                       

         

Member Units (97,048 units)

          970     66  

                               

Tectonic Holdings, LLC

  May 15, 2017  

Financial Services Organization

                       

         

Member Units (200,000 units)(8)

          2,000     2,420  

                               

TeleGuam Holdings, LLC(11)

  June 26, 2013  

Cable and Telecom Services Provider

                       

         

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 11.02%, Secured Debt (Maturity—April 12, 2024)(9)

    7,750     7,620     7,798  

                               

TGP Holdings III LLC(11)

  September 30, 2017  

Outdoor Cooking & Accessories

                       

         

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 11.30%, Secured Debt (Maturity—September 25, 2025)(9)

    5,500     5,433     5,335  

                               

The Pasha Group(11)

  February 2, 2018  

Diversified Logistics and Transportation Provided

                       

         

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 10.06%, Secured Debt (Maturity—January 26, 2023)(9)

    10,938     10,655     11,006  

                               

TMC Merger Sub Corp.(11)

  December 22, 2016  

Refractory & Maintenance Services Provider

                       

         

LIBOR Plus 6.75% (Floor 1.00%), Current Coupon 9.31%, Secured Debt (Maturity—October 31, 2022)(9)(24)

    17,207     17,014     17,121  

                               

TOMS Shoes, LLC(11)

  November 13, 2014  

Global Designer, Distributor, and Retailer of Casual Footwear

                       

         

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 8.30%, Secured Debt (Maturity—October 30, 2020)(9)

    4,813     4,635     3,798  

                               

Turning Point Brands, Inc.(10)(13)

  February 17, 2017  

Marketer/Distributor of Tobacco Products

                       

         

LIBOR Plus 7.00%, Current Coupon 9.46%, Secured Debt (Maturity—March 7, 2024)

    8,500     8,424     8,585  

                               

TVG-I-E CMN ACQUISITION, LLC(10)

  November 3, 2016  

Organic Lead Generation for Online Postsecondary Schools

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 8.52%, Secured Debt (Maturity—November 3, 2021)(9)

    19,503     19,191     19,454  

                               

U.S. TelePacific Corp.(11)

  September 14, 2016  

Provider of Communications and Managed Services

                       

         

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 7.80%, Secured Debt (Maturity—May 2, 2023)(9)

    18,491     18,344     17,363  

                               

VIP Cinema Holdings, Inc.(11)

  March 9, 2017  

Supplier of Luxury Seating to the Cinema Industry

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 8.53%, Secured Debt (Maturity—March 1, 2023)(9)

    10,494     10,451     10,304  

                               

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MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Vistar Media, Inc.(10)

  February 17, 2017  

Operator of Digital Out-of-Home Advertising Platform

                       

         

LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 12.74%, Secured Debt (Maturity—February 16, 2022)(9)

    3,263     3,048     2,987  

         

Warrants (70,207 equivalent shares; Expiration—February 17, 2027; Strike price—$0.01 per share)

          331     790  

                      3,379     3,777  

                               

Wireless Vision Holdings, LLC(10)

  September 29, 2017  

Provider of Wireless Telecommunications Carrier Services

                       

         

LIBOR Plus 8.91% (Floor 1.00%), Current Coupon 11.41%, Secured Debt (Maturity—September 29, 2022)(9)(28)

    14,279     14,055     13,414  

                               

YS Garments, LLC(11)

  August 22, 2018  

Designer and Provider of Branded Activewear

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 8.42% Secured Debt (Maturity—August 9, 2024)(9)

    14,906     14,764     14,756  

                               

Zilliant Incorporated

  June 15, 2012  

Price Optimization and Margin Management Solutions

                       

         

Preferred Stock (186,777 shares)

          154     260  

         

Warrants (952,500 equivalent shares; Expiration—June 15, 2022; Strike price—$0.001 per share)

          1,071     1,189  

                      1,225     1,449  

Subtotal Non-Control/Non-Affiliate Investments (73.8% of net assets at fair value)

  $ 1,137,108   $ 1,089,026  

Total Portfolio Investments, December 31, 2018

  $ 2,269,033   $ 2,453,909  

(1)
All investments are Lower Middle Market portfolio investments, unless otherwise noted. See Note B for a description of Lower Middle Market portfolio investments. All of the Company's investments, unless otherwise noted, are encumbered either as security for the Company's Credit Agreement or in support of the SBA-guaranteed debentures issued by the Funds.

(2)
Debt investments are income producing, unless otherwise noted. Equity and warrants are non-income producing, unless otherwise noted.

(3)
See Note C and Schedule 12-14 for a summary of geographic location of portfolio companies.

(4)
Principal is net of repayments. Cost is net of repayments and accumulated unearned income.

(5)
Control investments are defined by the Investment Company Act of 1940, as amended ("1940 Act"), as investments in which more than 25% of the voting securities are owned or where the ability to nominate greater than 50% of the board representation is maintained.

(6)
Affiliate investments are defined by the 1940 Act as investments in which between 5% and 25% (inclusive) of the voting securities are owned and the investments are not classified as Control investments.

(7)
Non-Control/Non-Affiliate investments are defined by the 1940 Act as investments that are neither Control investments nor Affiliate investments.

(8)
Income producing through dividends or distributions.

(9)
Index based floating interest rate is subject to contractual minimum interest rate. A majority of the variable rate loans in the Company's investment portfolio bear interest at a rate that may be determined by reference to either LIBOR or an alternate Base Rate (commonly based on the Federal Funds Rate or the Prime Rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan. For each such loan, the Company has provided the weighted average annual stated interest rate in effect at December 31, 2018. As noted in this schedule, 64% of the loans (based on the par amount) contain LIBOR floors which range between 0.50% and 2.00%, with a weighted-average LIBOR floor of approximately 1.03%.

(10)
Private Loan portfolio investment. See Note B for a description of Private Loan portfolio investments.

(11)
Middle Market portfolio investment. See Note B for a description of Middle Market portfolio investments.

(12)
Other Portfolio investment. See Note B for a description of Other Portfolio investments.

(13)
Investment is not a qualifying asset as defined under Section 55(a) of the 1940 Act. Qualifying assets must represent at least 70% of total assets at the time of acquisition of any additional non-qualifying assets.

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MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2018

(dollars in thousands)

(unaudited)

(14)
Non-accrual and non-income producing investment.

(15)
Portfolio company is in a bankruptcy process and, as such, the maturity date of our debt investment in this portfolio company will not be finally determined until such process is complete. As noted in footnote (14), our debt investment in this portfolio company is on non-accrual status.

(16)
External Investment Manager. Investment is not encumbered as security for the Company's Credit Agreement or in support of the SBA-guaranteed debentures issued by the Funds.

(17)
Maturity date is under on-going negotiations with the portfolio company and other lenders, if applicable.

(18)
Investment fair value was determined using significant unobservable inputs, unless otherwise noted. See Note C for further discussion.

(19)
PIK interest income and cumulative dividend income represent income not paid currently in cash.

(20)
All portfolio company headquarters are based in the United States, unless otherwise noted.

(21)
Portfolio company headquarters are located outside of the United States.

(22)
In connection with the Company's debt investment in Staples Canada ULC in an attempt to mitigate any potential adverse change in foreign exchange rates during the term of the Company's investment, the Company maintains a forward foreign currency contract with Cadence Bank to lend $20.4 million Canadian Dollars and receive $15.7 million U.S. Dollars with a settlement date of September 12, 2019. The unrealized appreciation on the forward foreign currency contract is $0.6 million as of December 31, 2018.

(23)
The Company has entered into an intercreditor agreement that entitles the Company to the "last out" tranche of the first lien secured loans, whereby the "first out" tranche will receive priority as to the "last out" tranche with respect to payments of principal, interest, and any other amounts due thereunder. Therefore, the Company receives a higher interest rate than the contractual stated interest rate of LIBOR plus 6.00% (Floor 1.00%) per the Credit Agreement and the Consolidated Schedule of Investments above reflects such higher rate.

(24)
The Company has entered into an intercreditor agreement that entitles the Company to the "first out" tranche of the first lien secured loans, whereby the "first out" tranche will receive priority as to the "last out" tranche with respect to payments of principal, interest, and any other amounts due thereunder. Therefore, the Company receives a lower interest rate than the contractual stated interest rate of LIBOR plus 6.64% (Floor 1.00%) per the Credit Agreement and the Consolidated Schedule of Investments above reflects such lower rate.

(25)
All of the Company's portfolio investments are generally subject to restrictions on resale as "restricted securities."

(26)
Investment date represents the date of initial investment in the portfolio company.

(27)
Investment has an unfunded commitment as of December 31, 2018 (see Note K). The fair value of the investment includes the impact of the fair value of any unfunded commitments

(28)
The Company has entered into an intercreditor agreement that entitles the Company to the "last out" tranche of the first lien secured loans, whereby the "first out" tranche will receive priority as to the "last out" tranche with respect to payments of principal, interest, and any other amounts due thereunder. Therefore, the Company receives a higher interest rate than the contractual stated interest rate of LIBOR plus 8.50% (Floor 1.00%) per the Credit Agreement and the Consolidated Schedule of Investments above reflects such higher rate.

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements

(Unaudited)

NOTE A—ORGANIZATION AND BASIS OF PRESENTATION

1.     Organization

        Main Street Capital Corporation ("MSCC") is a principal investment firm primarily focused on providing customized debt and equity financing to lower middle market ("LMM") companies and debt capital to middle market ("Middle Market") companies. The portfolio investments of MSCC and its consolidated subsidiaries are typically made to support management buyouts, recapitalizations, growth financings, refinancings and acquisitions of companies that operate in a variety of industry sectors. MSCC seeks to partner with entrepreneurs, business owners and management teams and generally provides "one stop" financing alternatives within its LMM portfolio. MSCC and its consolidated subsidiaries invest primarily in secured debt investments, equity investments, warrants and other securities of LMM companies based in the United States and in secured debt investments of Middle Market companies generally headquartered in the United States.

        MSCC was formed in March 2007 to operate as an internally managed business development company ("BDC") under the Investment Company Act of 1940, as amended (the "1940 Act"). MSCC wholly owns several investment funds, including Main Street Mezzanine Fund, LP ("MSMF"), Main Street Capital II, LP ("MSC II") and Main Street Capital III, LP ("MSC III" and, collectively with MSMF and MSC II, the "Funds"), and each of their general partners. The Funds are each licensed as a Small Business Investment Company ("SBIC") by the United States Small Business Administration ("SBA"). Because MSCC is internally managed, all of the executive officers and other employees are employed by MSCC. Therefore, MSCC does not pay any external investment advisory fees, but instead directly incurs the operating costs associated with employing investment and portfolio management professionals.

        MSC Adviser I, LLC (the "External Investment Manager") was formed in November 2013 as a wholly owned subsidiary of MSCC to provide investment management and other services to parties other than MSCC and its subsidiaries or their portfolio companies ("External Parties") and receives fee income for such services. MSCC has been granted no-action relief by the Securities and Exchange Commission ("SEC") to allow the External Investment Manager to register as a registered investment adviser under the Investment Advisers Act of 1940, as amended. Since the External Investment Manager conducts all of its investment management activities for External Parties, it is accounted for as a portfolio investment of MSCC and is not included as a consolidated subsidiary of MSCC in MSCC's consolidated financial statements.

        MSCC has elected to be treated for U.S. federal income tax purposes as a regulated investment company ("RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). As a result, MSCC generally will not pay corporate-level U.S. federal income taxes on any net ordinary taxable income or capital gains that it distributes to its stockholders.

        MSCC has certain direct and indirect wholly owned subsidiaries that have elected to be taxable entities (the "Taxable Subsidiaries"). The primary purpose of the Taxable Subsidiaries is to permit MSCC to hold equity investments in portfolio companies which are "pass-through" entities for tax purposes.

        Unless otherwise noted or the context otherwise indicates, the terms "we," "us," "our," the "Company" and "Main Street" refer to MSCC and its consolidated subsidiaries, which include the Funds and the Taxable Subsidiaries.

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

2.     Basis of Presentation

        Main Street's consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP"). The Company is an investment company following accounting and reporting guidance in Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 946, Financial Services—Investment Companies ("ASC 946"). For each of the periods presented herein, Main Street's consolidated financial statements include the accounts of MSCC and its consolidated subsidiaries. The Investment Portfolio, as used herein, refers to all of Main Street's investments in LMM portfolio companies, investments in Middle Market portfolio companies, Private Loan portfolio investments, Other Portfolio investments and the investment in the External Investment Manager (see Note C—Fair Value Hierarchy for Investments and Debentures—Portfolio Composition—Investment Portfolio Composition for additional discussion of Main Street's Investment Portfolio and definitions for the terms Private Loan and Other Portfolio). Main Street's results of operations for the three and nine months ended September 30, 2019 and 2018, cash flows for the nine months ended September 30, 2019 and 2018, and financial position as of September 30, 2019 and December 31, 2018, are presented on a consolidated basis. The effects of all intercompany transactions between Main Street and its consolidated subsidiaries have been eliminated in consolidation.

        The accompanying unaudited consolidated financial statements of Main Street are presented in conformity with U.S. GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Articles 6, 10 and 12 of Regulation S-X. Accordingly, certain disclosures accompanying annual financial statements prepared in accordance with U.S. GAAP are omitted. In the opinion of management, the unaudited consolidated financial results included herein contain all adjustments, consisting solely of normal recurring accruals, considered necessary for the fair presentation of financial statements for the interim periods included herein. The results of operations for the three and nine months ended September 30, 2019 and 2018 are not necessarily indicative of the operating results to be expected for the full year. Also, the unaudited financial statements and notes should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2018. Financial statements prepared on a U.S. GAAP basis require management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein.

        Under ASC 946, Main Street is precluded from consolidating other entities in which Main Street has equity investments, including those in which it has a controlling interest, unless the other entity is another investment company. An exception to this general principle in ASC 946 occurs if Main Street holds a controlling interest in an operating company that provides all or substantially all of its services directly to Main Street or to its portfolio companies. Accordingly, as noted above, MSCC's consolidated financial statements include the financial position and operating results for the Funds and the Taxable Subsidiaries. Main Street has determined that all of its portfolio investments do not qualify for this exception, including the investment in the External Investment Manager. Therefore, Main Street's Investment Portfolio is carried on the consolidated balance sheet at fair value, as discussed further in Note B.1., with any adjustments to fair value recognized as "Net Unrealized Appreciation (Depreciation)" on the consolidated statements of operations until the investment is realized, usually upon exit, resulting in any gain or loss being recognized as a "Net Realized Gain (Loss)."

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

    Portfolio Investment Classification

        Main Street classifies its Investment Portfolio in accordance with the requirements of the 1940 Act. Under the 1940 Act, (a) "Control Investments" are defined as investments in which Main Street owns more than 25% of the voting securities or has rights to maintain greater than 50% of the board representation, (b) "Affiliate Investments" are defined as investments in which Main Street owns between 5% and 25% (inclusive) of the voting securities and does not have rights to maintain greater than 50% of the board representation, and (c) "Non-Control/Non-Affiliate Investments" are defined as investments that are neither Control Investments nor Affiliate Investments.

NOTE B—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1.     Valuation of the Investment Portfolio

        Main Street accounts for its Investment Portfolio at fair value. As a result, Main Street follows the provisions of ASC 820, Fair Value Measurements and Disclosures ("ASC 820"). ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value and enhances disclosure requirements for fair value measurements. ASC 820 requires Main Street to assume that the portfolio investment is to be sold in the principal market to independent market participants, which may be a hypothetical market. Market participants are defined as buyers and sellers in the principal market that are independent, knowledgeable and willing and able to transact.

        Main Street's portfolio strategy calls for it to invest primarily in illiquid debt and equity securities issued by privately held, LMM companies and more liquid debt securities issued by Middle Market companies that are generally larger in size than the LMM companies. Main Street categorizes some of its investments in LMM companies and Middle Market companies as Private Loan portfolio investments, which are primarily debt securities in privately held companies that have been originated through strategic relationships with other investment funds on a collaborative basis, and are often referred to in the debt markets as "club deals." Private Loan investments are typically similar in size, structure, terms and conditions to investments Main Street holds in its LMM portfolio and Middle Market portfolio. Main Street's portfolio also includes Other Portfolio investments, which primarily consist of investments that are not consistent with the typical profiles for its LMM portfolio investments, Middle Market portfolio investments or Private Loan portfolio investments, including investments which may be managed by third parties. Main Street's portfolio investments may be subject to restrictions on resale.

        LMM investments and Other Portfolio investments generally have no established trading market while Middle Market securities generally have established markets that are not active. Private Loan investments may include investments which have no established trading market or have established markets that are not active. Main Street determines in good faith the fair value of its Investment Portfolio pursuant to a valuation policy in accordance with ASC 820 and a valuation process approved by its Board of Directors and in accordance with the 1940 Act. Main Street's valuation policies and processes are intended to provide a consistent basis for determining the fair value of Main Street's Investment Portfolio.

        For LMM portfolio investments, Main Street generally reviews external events, including private mergers, sales and acquisitions involving comparable companies, and includes these events in the valuation process by using an enterprise value waterfall methodology ("Waterfall") for its LMM equity

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

investments and an income approach using a yield-to-maturity model ("Yield-to-Maturity") for its LMM debt investments. For Middle Market portfolio investments, Main Street primarily uses quoted prices in the valuation process. Main Street determines the appropriateness of the use of third-party broker quotes, if any, in determining fair value based on its understanding of the level of actual transactions used by the broker to develop the quote and whether the quote was an indicative price or binding offer, the depth and consistency of broker quotes and the correlation of changes in broker quotes with underlying performance of the portfolio company and other market indices. For Middle Market and Private Loan portfolio investments in debt securities for which it has determined that third-party quotes or other independent pricing are not available or appropriate, Main Street generally estimates the fair value based on the assumptions that it believes hypothetical market participants would use to value the investment in a current hypothetical sale using the Yield-to-Maturity valuation method. For its Other Portfolio equity investments, Main Street generally calculates the fair value of the investment primarily based on the net asset value ("NAV") of the fund and adjusts the fair value for other factors deemed relevant that would affect the fair value of the investment. All of the valuation approaches for Main Street's portfolio investments estimate the value of the investment as if Main Street were to sell, or exit, the investment as of the measurement date.

        These valuation approaches consider the value associated with Main Street's ability to control the capital structure of the portfolio company, as well as the timing of a potential exit. For valuation purposes, "control" portfolio investments are composed of debt and equity securities in companies for which Main Street has a controlling interest in the equity ownership of the portfolio company or the ability to nominate a majority of the portfolio company's board of directors. For valuation purposes, "non-control" portfolio investments are generally composed of debt and equity securities in companies for which Main Street does not have a controlling interest in the equity ownership of the portfolio company or the ability to nominate a majority of the portfolio company's board of directors.

        Under the Waterfall valuation method, Main Street estimates the enterprise value of a portfolio company using a combination of market and income approaches or other appropriate valuation methods, such as considering recent transactions in the equity securities of the portfolio company or third-party valuations of the portfolio company, and then performs a waterfall calculation by allocating the enterprise value over the portfolio company's securities in order of their preference relative to one another. The enterprise value is the fair value at which an enterprise could be sold in a transaction between two willing parties, other than through a forced or liquidation sale. Typically, privately held companies are bought and sold based on multiples of earnings before interest, taxes, depreciation and amortization ("EBITDA"), cash flows, net income, revenues, or in limited cases, book value. There is no single methodology for estimating enterprise value. For any one portfolio company, enterprise value is generally described as a range of values from which a single estimate of enterprise value is derived. In estimating the enterprise value of a portfolio company, Main Street analyzes various factors including the portfolio company's historical and projected financial results. Due to SEC deadlines for Main Street's quarterly and annual financial reporting, the operating results of a portfolio company used in the current period valuation are generally the results from the period ended three months prior to such valuation date and may include unaudited, projected, budgeted or pro forma financial information and may require adjustments for non-recurring items or to normalize the operating results that may require significant judgment in determining. In addition, projecting future financial results requires significant judgment regarding future growth assumptions. In evaluating the operating results, Main Street also analyzes the impact of exposure to litigation, loss of customers or other contingencies. After determining the appropriate enterprise value, Main Street allocates the enterprise value to

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

investments in order of the legal priority of the various components of the portfolio company's capital structure. In applying the Waterfall valuation method, Main Street assumes the loans are paid off at the principal amount in a change in control transaction and are not assumed by the buyer, which Main Street believes is consistent with its past transaction history and standard industry practices.

        Under the Yield-to-Maturity valuation method, Main Street also uses the income approach to determine the fair value of debt securities based on projections of the discounted future free cash flows that the debt security will likely generate, including analyzing the discounted cash flows of interest and principal amounts for the debt security, as set forth in the associated loan agreements, as well as the financial position and credit risk of the portfolio company. Main Street's estimate of the expected repayment date of its debt securities is generally the maturity date of the instrument, as Main Street generally intends to hold its loans and debt securities to maturity. The Yield-to-Maturity analysis also considers changes in leverage levels, credit quality, portfolio company performance and other factors. Main Street will generally use the value determined by the Yield-to-Maturity analysis as the fair value for that security; however, because of Main Street's general intent to hold its loans to maturity, the fair value will not exceed the principal amount of the debt security valued using the Yield-to-Maturity valuation method. A change in the assumptions that Main Street uses to estimate the fair value of its debt securities using the Yield-to-Maturity valuation method could have a material impact on the determination of fair value. If there is deterioration in credit quality or if a debt security is in workout status, Main Street may consider other factors in determining the fair value of the debt security, including the value attributable to the debt security from the enterprise value of the portfolio company or the proceeds that would most likely be received in a liquidation analysis.

        Under the NAV valuation method, for an investment in an investment fund that does not have a readily determinable fair value, Main Street measures the fair value of the investment predominately based on the NAV of the investment fund as of the measurement date and adjusts the investment's fair value for factors known to Main Street that would affect that fund's NAV, including, but not limited to, fair values for individual investments held by the fund if Main Street holds the same investment or for a publicly traded investment. In addition, in determining the fair value of the investment, Main Street considers whether adjustments to the NAV are necessary in certain circumstances, based on the analysis of any restrictions on redemption of Main Street's investment as of the measurement date, recent actual sales or redemptions of interests in the investment fund, and expected future cash flows available to equity holders, including the rate of return on those cash flows compared to an implied market return on equity required by market participants, or other uncertainties surrounding Main Street's ability to realize the full NAV of its interests in the investment fund.

        Pursuant to its internal valuation process and the requirements under the 1940 Act, Main Street performs valuation procedures on each of its portfolio investments quarterly. In addition to its internal valuation process, in arriving at estimates of fair value for its investments in its LMM portfolio companies, Main Street, among other things, consults with a nationally recognized independent financial advisory services firm. The nationally recognized independent financial advisory services firm analyzes and provides observations, recommendations and an assurance certification regarding the Company's determinations of the fair value of its LMM portfolio company investments. The nationally recognized independent financial advisory services firm is generally consulted relative to Main Street's investments in each LMM portfolio company at least once every calendar year, and for Main Street's investments in new LMM portfolio companies, at least once in the twelve-month period subsequent to the initial investment. In certain instances, Main Street may determine that it is not cost-effective, and as a result is not in its stockholders' best interest, to consult with the nationally recognized independent

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

financial advisory services firm on its investments in one or more LMM portfolio companies. Such instances include, but are not limited to, situations where the fair value of Main Street's investment in a LMM portfolio company is determined to be insignificant relative to the total Investment Portfolio. Main Street consulted with and received an assurance certification from its independent financial advisory services firm in arriving at Main Street's determination of fair value on its investments in a total of 40 LMM portfolio companies for the nine months ended September 30, 2019, representing approximately 66% of the total LMM portfolio at fair value as of September 30, 2019, and on a total of 40 LMM portfolio companies for the nine months ended September 30, 2018, representing approximately 62% of the total LMM portfolio at fair value as of September 30, 2018. Excluding its investments in LMM portfolio companies that, as of September 30, 2019 and 2018, as applicable, had not been in the Investment Portfolio for at least twelve months subsequent to the initial investment or whose primary purpose is to own real estate for which a third-party appraisal is obtained on at least an annual basis, the percentage of the LMM portfolio reviewed and certified by its independent financial advisory services firm for the nine months ended September 30, 2019 and 2018 was 69% and 73% of the total LMM portfolio at fair value as of September 30, 2019 and 2018, respectively.

        For valuation purposes, all of Main Street's Middle Market portfolio investments are non-control investments. To the extent sufficient observable inputs are available to determine fair value, Main Street uses observable inputs to determine the fair value of these investments through obtaining third-party quotes or other independent pricing. For Middle Market portfolio investments for which it has determined that third-party quotes or other independent pricing are not available or appropriate, Main Street generally estimates the fair value based on the assumptions that it believes hypothetical market participants would use to value such Middle Market debt investments in a current hypothetical sale using the Yield-to-Maturity valuation method and such Middle Market equity investments in a current hypothetical sale using the Waterfall valuation method. Because the vast majority of the Middle Market portfolio investments are typically valued using third-party quotes or other independent pricing services (including 90% and 94% of the Middle Market portfolio investments as of September 30, 2019 and December 31, 2018, respectively), Main Street generally does not consult with any financial advisory services firms in connection with determining the fair value of its Middle Market investments.

        For valuation purposes, all of Main Street's Private Loan portfolio investments are non-control investments. For Private Loan portfolio investments for which it has determined that third-party quotes or other independent pricing are not available or appropriate, Main Street generally estimates the fair value based on the assumptions that it believes hypothetical market participants would use to value such Private Loan debt investments in a current hypothetical sale using the Yield-to-Maturity valuation method and such Private Loan equity investments in a current hypothetical sale using the Waterfall valuation method.

        In addition to its internal valuation process, in arriving at estimates of fair value for its investments in its Private Loan portfolio companies, Main Street, among other things, consults with a nationally recognized independent financial advisory services firm. The nationally recognized independent financial advisory services firm analyzes and provides observations and recommendations and an assurance certification regarding the Company's determinations of the fair value of its Private Loan portfolio company investments. The nationally recognized independent financial advisory services firm is generally consulted relative to Main Street's investments in each Private Loan portfolio company at least once every calendar year, and for Main Street's investments in new Private Loan portfolio companies, at least once in the twelve-month period subsequent to the initial investment. In certain instances, Main Street may determine that it is not cost-effective, and as a result is not in its

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(Unaudited)

stockholders' best interest, to consult with the nationally recognized independent financial advisory services firm on its investments in one or more Private Loan portfolio companies. Such instances include, but are not limited to, situations where the fair value of Main Street's investment in a Private Loan portfolio company is determined to be insignificant relative to the total Investment Portfolio. Main Street consulted with and received an assurance certification from its independent financial advisory services firm in arriving at its determination of fair value on its investments in a total of 27 Private Loan portfolio companies for the nine months ended September 30, 2019, representing approximately 51% of the total Private Loan portfolio at fair value as of September 30, 2019, and on a total of 17 Private Loan portfolio companies for the nine months ended September 30, 2018, representing approximately 43% of the total Private Loan portfolio at fair value as of September 30, 2018. Excluding its investments in Private Loan portfolio companies that, as of September 30, 2019 and 2018, as applicable, had not been in the Investment Portfolio for at least twelve months subsequent to the initial investment and its investments in Private Loan portfolio companies that were not reviewed because the investment is valued based upon third-party quotes or other independent pricing, the percentage of the Private Loan portfolio reviewed and certified by its independent financial advisory services firm for the nine months ended September 30, 2019 and 2018 was 78% and 67% of the total Private Loan portfolio at fair value as of September 30, 2019 and 2018, respectively.

        For valuation purposes, all of Main Street's Other Portfolio investments are non-control investments. Main Street's Other Portfolio investments comprised 4.3% and 4.4% of Main Street's Investment Portfolio at fair value as of September 30, 2019 and December 31, 2018, respectively. Similar to the LMM investment portfolio, market quotations for Other Portfolio equity investments are generally not readily available. For its Other Portfolio equity investments, Main Street generally determines the fair value of these investments using the NAV valuation method.

        For valuation purposes, Main Street's investment in the External Investment Manager is a control investment. Market quotations are not readily available for this investment, and as a result, Main Street determines the fair value of the External Investment Manager using the Waterfall valuation method under the market approach. In estimating the enterprise value, Main Street analyzes various factors, including the entity's historical and projected financial results, as well as its size, marketability and performance relative to the population of market comparables. This valuation approach estimates the value of the investment as if Main Street were to sell, or exit, the investment. In addition, Main Street considers its ability to control the capital structure of the company, as well as the timing of a potential exit, in connection with determining the fair value of the External Investment Manager.

        Due to the inherent uncertainty in the valuation process, Main Street's determination of fair value for its Investment Portfolio may differ materially from the values that would have been determined had a ready market for the securities existed. In addition, changes in the market environment, portfolio company performance and other events that may occur over the lives of the investments may cause the gains or losses ultimately realized on these investments to be materially different than the valuations currently assigned. Main Street determines the fair value of each individual investment and records changes in fair value as unrealized appreciation or depreciation.

        Main Street uses an internally developed portfolio investment rating system in connection with its investment oversight, portfolio management and analysis and investment valuation procedures for its LMM portfolio companies. This system takes into account both quantitative and qualitative factors of the LMM portfolio company and the investments held therein.

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        The Board of Directors of Main Street has the final responsibility for overseeing, reviewing and approving, in good faith, Main Street's determination of the fair value for its Investment Portfolio, as well as its valuation procedures, consistent with 1940 Act requirements. Main Street believes its Investment Portfolio as of September 30, 2019 and December 31, 2018 approximates fair value as of those dates based on the markets in which Main Street operates and other conditions in existence on those reporting dates.

2.     Use of Estimates

        The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results may differ from these estimates under different conditions or assumptions. Additionally, as explained in Note B.1., the consolidated financial statements include investments in the Investment Portfolio whose values have been estimated by Main Street with the oversight, review and approval by Main Street's Board of Directors in the absence of readily ascertainable market values. Because of the inherent uncertainty of the Investment Portfolio valuations, those estimated values may differ materially from the values that would have been determined had a ready market for the securities existed.

3.     Cash and Cash Equivalents

        Cash and cash equivalents consist of cash and highly liquid investments with an original maturity of three months or less at the date of purchase. Cash and cash equivalents are carried at cost, which approximates fair value.

        At September 30, 2019, cash balances totaling $48.0 million exceeded Federal Deposit Insurance Corporation insurance protection levels, subjecting the Company to risk related to the uninsured balance. All of the Company's cash deposits are held at large established high credit quality financial institutions and management believes that the risk of loss associated with any uninsured balances is remote.

4.     Interest, Dividend and Fee Income

        Main Street records interest and dividend income on the accrual basis to the extent amounts are expected to be collected. Dividend income is recorded as dividends are declared by the portfolio company or at the point an obligation exists for the portfolio company to make a distribution. In accordance with Main Street's valuation policies, Main Street evaluates accrued interest and dividend income periodically for collectability. When a loan or debt security becomes 90 days or more past due, and if Main Street otherwise does not expect the debtor to be able to service all of its debt or other obligations, Main Street will generally place the loan or debt security on non-accrual status and cease recognizing interest income on that loan or debt security until the borrower has demonstrated the ability and intent to pay contractual amounts due. If a loan or debt security's status significantly improves regarding the debtor's ability to service the debt or other obligations, or if a loan or debt security is sold or written off, Main Street removes it from non-accrual status.

        As of September 30, 2019, Main Street's total Investment Portfolio had seven investments on non-accrual status, which comprised approximately 1.6% of its fair value and 4.4% of its cost. As of

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(Unaudited)

December 31, 2018, Main Street's total Investment Portfolio had six investments on non-accrual status, which comprised approximately 1.3% of its fair value and 3.9% of its cost.

        Main Street holds certain debt and preferred equity instruments in its Investment Portfolio that contain payment-in-kind ("PIK") interest and cumulative dividend provisions. The PIK interest, computed at the contractual rate specified in each debt agreement, is periodically added to the principal balance of the debt and is recorded as interest income. Thus, the actual collection of this interest may be deferred until the time of debt principal repayment. Cumulative dividends are recorded as dividend income, and any dividends in arrears are added to the balance of the preferred equity investment. The actual collection of these dividends in arrears may be deferred until such time as the preferred equity is redeemed or sold. To maintain RIC tax treatment (as discussed in Note B.9. below), these non-cash sources of income may need to be paid out to stockholders in the form of distributions, even though Main Street may not have collected the PIK interest and cumulative dividends in cash. Main Street stops accruing PIK interest and cumulative dividends and writes off any accrued and uncollected interest and dividends in arrears when it determines that such PIK interest and dividends in arrears are no longer collectible. For the three months ended September 30, 2019 and 2018, (i) approximately 1.6% and 1.4%, respectively, of Main Street's total investment income was attributable to PIK interest income not paid currently in cash and (ii) approximately 1.0% and 1.1%, respectively, of Main Street's total investment income was attributable to cumulative dividend income not paid currently in cash. For the nine months ended September 30, 2019 and 2018, (i) approximately 1.9% and 1.0%, respectively, of Main Street's total investment income was attributable to PIK interest income not paid currently in cash and (ii) approximately 1.1% and 1.0%, respectively, of Main Street's total investment income was attributable to cumulative dividend income not paid currently in cash.

        Main Street may periodically provide services, including structuring and advisory services, to its portfolio companies or other third parties. For services that are separately identifiable and evidence exists to substantiate fair value, fee income is recognized as earned, which is generally when the investment or other applicable transaction closes. Fees received in connection with debt financing transactions for services that do not meet these criteria are treated as debt origination fees and are deferred and accreted into income over the life of the financing.

        A presentation of total investment income Main Street received from its Investment Portfolio in each of the periods presented is as follows:

 
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
 
 
  2019   2018   2019   2018  
 
  (dollars in thousands)
 

Interest, fee and dividend income:

                         

Interest income

  $ 46,192   $ 46,351   $ 140,732   $ 130,229  

Dividend income

    12,492     8,510     37,751     36,021  

Fee income

    1,384     3,402     4,241     7,825  

Total interest, fee and dividend income

  $ 60,068   $ 58,263   $ 182,724   $ 174,075  

5.     Deferred Financing Costs

        Deferred financing costs include commitment fees and other costs related to Main Street's multi-year revolving credit facility (the "Credit Facility") and its unsecured notes, as well as the

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(Unaudited)

commitment fees and leverage fees (approximately 3.4% of the total commitment and draw amounts, as applicable) on the SBIC debentures which are not accounted for under the fair value option under ASC 825 (as discussed further in Note B.11.). See further discussion of Main Street's debt in Note E. Deferred financing costs in connection with the Credit Facility are capitalized as an asset. Deferred financing costs in connection with all other debt arrangements not using the fair value option are a direct deduction from the related debt liability.

6.     Equity Offering Costs

        The Company's offering costs are charged against the proceeds from equity offerings when the proceeds are received.

7.     Unearned Income—Debt Origination Fees and Original Issue Discount and Discounts / Premiums to Par Value

        Main Street capitalizes debt origination fees received in connection with financings and reflects such fees as unearned income netted against the applicable debt investments. The unearned income from the fees is accreted into income based on the effective interest method over the life of the financing.

        In connection with its portfolio debt investments, Main Street sometimes receives nominal cost warrants or warrants with an exercise price below the fair value of the underlying equity (together, "nominal cost equity") that are valued as part of the negotiation process with the particular portfolio company. When Main Street receives nominal cost equity, Main Street allocates its cost basis in its investment between its debt security and its nominal cost equity at the time of origination based on amounts negotiated with the particular portfolio company. The allocated amounts are based upon the fair value of the nominal cost equity, which is then used to determine the allocation of cost to the debt security. Any discount recorded on a debt investment resulting from this allocation is reflected as unearned income, which is netted against the applicable debt investment, and accreted into interest income based on the effective interest method over the life of the debt investment. The actual collection of this interest is deferred until the time of debt principal repayment.

        Main Street may also purchase debt securities at a discount or at a premium to the par value of the debt security. In the case of a purchase at a discount, Main Street records the investment at the par value of the debt security net of the discount, and the discount is accreted into interest income based on the effective interest method over the life of the debt investment. In the case of a purchase at a premium, Main Street records the investment at the par value of the debt security plus the premium, and the premium is amortized as a reduction to interest income based on the effective interest method over the life of the debt investment.

        To maintain RIC tax treatment (as discussed in Note B.9. below), these non-cash sources of income may need to be paid out to stockholders in the form of distributions, even though Main Street may not have collected the interest income. For the three months ended September 30, 2019 and 2018, approximately 2.6% and 3.1%, respectively, of Main Street's total investment income was attributable to interest income from the accretion of discounts associated with debt investments, net of any premium reduction. For the nine months ended September 30, 2019 and 2018, approximately 2.6% and 3.0%, respectively, of Main Street's total investment income was attributable to interest income from the accretion of discounts associated with debt investments, net of any premium reduction.

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(Unaudited)

8.     Share-Based Compensation

        Main Street accounts for its share-based compensation plans using the fair value method, as prescribed by ASC 718, Compensation—Stock Compensation. Accordingly, for restricted stock awards, Main Street measures the grant date fair value based upon the market price of its common stock on the date of the grant and amortizes the fair value of the awards as share-based compensation expense over the requisite service period, which is generally the vesting term.

        Main Street has also adopted Accounting Standards Update ("ASU") 2016-09, Compensation—Stock Compensation: Improvements to Employee Share-Based Payment Accounting, which requires that all excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) be recognized as income tax expense or benefit in the income statement and not delay recognition of a tax benefit until the tax benefit is realized through a reduction to taxes payable. Accordingly, the tax effects of exercised or vested awards are treated as discrete items in the reporting period in which they occur. Additionally, Main Street has elected to account for forfeitures as they occur.

9.     Income Taxes

        MSCC has elected to be treated for U.S. federal income tax purposes as a RIC. MSCC's taxable income includes the taxable income generated by MSCC and certain of its subsidiaries, including the Funds, which are treated as disregarded entities for tax purposes. As a RIC, MSCC generally will not pay corporate-level U.S. federal income taxes on any net ordinary taxable income or capital gains that MSCC distributes to its stockholders. MSCC must generally distribute at least 90% of its "investment company taxable income" (which is generally its net ordinary taxable income and realized net short-term capital gains in excess of realized net long-term capital losses) and 90% of its tax-exempt income to maintain its RIC status (pass-through tax treatment for amounts distributed). As part of maintaining RIC status, undistributed taxable income (subject to a 4% non-deductible U.S. federal excise tax) pertaining to a given fiscal year may be distributed up to 12 months subsequent to the end of that fiscal year, provided such dividends are declared on or prior to the later of (i) the filing of the U.S. federal income tax return for the applicable fiscal year or (ii) the fifteenth day of the ninth month following the close of the year in which such taxable income was generated.

        The Taxable Subsidiaries primarily hold certain portfolio investments for Main Street. The Taxable Subsidiaries permit Main Street to hold equity investments in portfolio companies which are "pass-through" entities for tax purposes and to continue to comply with the "source-of-income" requirements contained in the RIC tax provisions of the Code. The Taxable Subsidiaries are consolidated with Main Street for U.S. GAAP financial reporting purposes, and the portfolio investments held by the Taxable Subsidiaries are included in Main Street's consolidated financial statements as portfolio investments and recorded at fair value. The Taxable Subsidiaries are not consolidated with MSCC for income tax purposes and may generate income tax expense, or benefit, and tax assets and liabilities, as a result of their ownership of certain portfolio investments. The taxable income, or loss, of the Taxable Subsidiaries may differ from their book income, or loss, due to temporary book and tax timing differences and permanent differences. The Taxable Subsidiaries are each taxed at their normal corporate tax rates based on their taxable income. The income tax expense, or benefit, if any, and the related tax assets and liabilities, of the Taxable Subsidiaries are reflected in Main Street's consolidated financial statements.

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(Unaudited)

        The External Investment Manager is an indirect wholly owned subsidiary of MSCC owned through a Taxable Subsidiary and is a disregarded entity for tax purposes. The External Investment Manager has entered into a tax sharing agreement with its Taxable Subsidiary owner. Since the External Investment Manager is accounted for as a portfolio investment of MSCC and is not included as a consolidated subsidiary of MSCC in MSCC's consolidated financial statements, and as a result of the tax sharing agreement with its Taxable Subsidiary owner, for its stand-alone financial reporting purposes the External Investment Manager is treated as if it is taxed at normal corporate tax rates based on its taxable income and, as a result of its activities, may generate income tax expense or benefit. The income tax expense, or benefit, if any, and the related tax assets and liabilities, of the External Investment Manager are reflected in the External Investment Manager's separate financial statements.

        In December 2017, the "Tax Cuts and Jobs Act" legislation was enacted. The Tax Cuts and Jobs Act includes significant changes to the U.S. corporate tax system, including a U.S. federal corporate income tax rate reduction from 35% to 21% and other changes. ASC 740, Income Taxes, requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation was enacted. As such, Main Street has accounted for the tax effects as a result of the enactment of the Tax Cuts and Jobs Act beginning with the period ended December 31, 2017.

        The Taxable Subsidiaries and the External Investment Manager use the liability method in accounting for income taxes. Deferred tax assets and liabilities are recorded for temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements, using statutory tax rates in effect for the year in which the temporary differences are expected to reverse. A valuation allowance is provided, if necessary, against deferred tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized.

        Taxable income generally differs from net income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses. Taxable income generally excludes net unrealized appreciation or depreciation, as investment gains or losses are not included in taxable income until they are realized.

10.   Net Realized Gains or Losses and Net Unrealized Appreciation or Depreciation

        Realized gains or losses are measured by the difference between the net proceeds from the sale or redemption of an investment or a financial instrument and the cost basis of the investment or financial instrument, without regard to unrealized appreciation or depreciation previously recognized, and includes investments written-off during the period net of recoveries and realized gains or losses from in-kind redemptions. Net unrealized appreciation or depreciation reflects the net change in the fair value of the Investment Portfolio and financial instruments and the reclassification of any prior period unrealized appreciation or depreciation on exited investments and financial instruments to realized gains or losses.

11.   Fair Value of Financial Instruments

        Fair value estimates are made at discrete points in time based on relevant information. These estimates may be subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Main Street believes that the carrying amounts of its financial instruments, consisting of cash and cash equivalents, receivables, payables and other liabilities approximate the fair values of such items due to the short-term nature of these instruments.

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(Unaudited)

        As part of Main Street's acquisition of the majority of the equity interests of MSC II in January 2010 (the "MSC II Acquisition"), Main Street elected the fair value option under ASC 825, Financial Instruments ("ASC 825"), relating to accounting for debt obligations at their fair value, for the MSC II SBIC debentures acquired as part of the acquisition accounting related to the MSC II Acquisition and values those obligations as discussed further in Note C. In order to provide for a more consistent basis of presentation, Main Street has continued to elect the fair value option for SBIC debentures issued by MSC II subsequent to the MSC II Acquisition. When the fair value option is elected for a given SBIC debenture, the deferred loan costs associated with the debenture are fully expensed in the current period to "Net Unrealized Appreciation (Depreciation)—SBIC debentures" as part of the fair value adjustment. Interest incurred in connection with SBIC debentures which are valued at fair value is included in interest expense.

12.   Earnings per Share

        Basic and diluted per share calculations are computed utilizing the weighted-average number of shares of common stock outstanding for the period. In accordance with ASC 260, Earnings Per Share, the unvested shares of restricted stock awarded pursuant to Main Street's equity compensation plans are participating securities and, therefore, are included in the basic earnings per share calculation. As a result, for all periods presented, there is no difference between diluted earnings per share and basic earnings per share amounts.

13.   Recently Issued or Adopted Accounting Standards

        In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 supersedes the revenue recognition requirements under ASC 605, Revenue Recognition, and most industry-specific guidance throughout the Industry Topics of the ASC. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. Under the guidance, an entity is required to perform the following five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The guidance significantly enhances comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets. Additionally, the guidance requires improved disclosures as to the nature, amount, timing and uncertainty of revenue that is recognized. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which clarified the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which clarified the implementation guidance regarding performance obligations and licensing arrangements. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606)—Narrow-Scope Improvements and Practical Expedients, which clarified guidance on assessing collectability, presenting sales tax, measuring noncash consideration, and certain transition matters. In December 2016, the FASB issued ASU No. 2016-20, Revenue from Contracts with Customers (Topic 606)—Technical Corrections and Improvements, which provided disclosure relief, and clarified the scope and application of the new revenue standard and related cost guidance. The guidance was effective for the annual reporting period beginning after December 15, 2017, including interim periods

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(Unaudited)

within that reporting period. Substantially all of Main Street's income is outside the scope of ASU 2014-09. For those income items that are within the scope (primarily fee income), Main Street has similar performance obligations as compared with deliverables and separate units of account previously identified. As a result, Main Street's timing of its income recognition remains the same and the adoption of the standard was not material.

        In February 2016, the FASB issued ASU 2016-02, Leases, which amended the FASB Accounting Standards Codification and created ASC 842, Leases ("ASC 842"), to require lessees to recognize on the balance sheet a right-of-use asset, representing its right to use the underlying asset for the lease term, and a lease liability for all leases with terms greater than 12 months, utilizing a modified retrospective transition approach, which includes a number of optional practical expedients that entities may elect to apply. The guidance in ASC 842 also requires qualitative and quantitative disclosures designed to assess the amount, timing and uncertainty of cash flows arising from leases. Main Street adopted ASC 842 effective January 1, 2019. Under ASC 842, Main Street evaluates leases to determine if the leases are considered financing or operating leases. Main Street currently has one operating lease for office space for which it has recorded a right-of-use asset and lease liability for the operating lease obligation. Non-lease components (maintenance, property tax, insurance and parking) are not included in the lease cost. The lease expense is presented as a single lease cost that is amortized on a straight-line basis over the life of the lease.

        In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), which is intended to reduce the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The guidance was effective for annual periods beginning after December 15, 2017, and interim periods therein. Main Street adopted ASU 2016-15 effective January 1, 2018. The impact of the adoption of this accounting standard on Main Street's consolidated financial statements was not material.

        In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), which is intended to improve fair value and defined benefit disclosure requirements by removing disclosures that are not cost-beneficial, clarifying disclosures' specific requirements, and adding relevant disclosure requirements. The amendments take effect for all organizations for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. Main Street elected to early adopt ASU 2018-13 during the year ended December 31, 2018. No significant changes to the fair value disclosures were necessary in the notes to the consolidated financial statements in order to comply with ASU 2018-13.

        In August 2018, the SEC adopted rules (the "SEC Release") amending certain disclosure requirements intended to eliminate redundant, duplicative, overlapping, outdated or superseded, in light of other SEC disclosure requirements, U.S. GAAP requirements or changes in the information environment. In part, the SEC Release requires an investment company to present distributable earnings in total on the consolidated balance sheet and consolidated statement of changes in net assets, rather than showing the three components of distributable earnings as previously shown. Main Street adopted this part of the SEC Release during the year ended December 31, 2018. The impact of the adoption of these rules on Main Street's consolidated financial statements was not material. Additionally, the SEC Release requires disclosure of changes in net assets within a registrant's Form 10-Q filing on a quarter-to-date and year-to-date basis for both the current year and prior year comparative periods. Main Street adopted the new requirement to present changes in net assets in

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(Unaudited)

interim financial statements within Form 10-Q filings effective January 1, 2019. The adoption of these rules did not have a material impact on the consolidated financial statements.

        From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that are adopted by Main Street as of the specified effective date. Main Street believes that the impact of recently issued standards and any that are not yet effective will not have a material impact on its consolidated financial statements upon adoption.

NOTE C—FAIR VALUE HIERARCHY FOR INVESTMENTS AND DEBENTURES—PORTFOLIO COMPOSITION

        ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value, and enhances disclosure requirements for fair value measurements. Main Street accounts for its investments at fair value.

    Fair Value Hierarchy

        In accordance with ASC 820, Main Street has categorized its investments based on the priority of the inputs to the valuation technique into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical investments (Level 1) and the lowest priority to unobservable inputs (Level 3).

        Investments recorded on Main Street's balance sheet are categorized based on the inputs to the valuation techniques as follows:

            Level 1—Investments whose values are based on unadjusted quoted prices for identical assets in an active market that Main Street has the ability to access (examples include investments in active exchange-traded equity securities and investments in most U.S. government and agency securities).

            Level 2—Investments whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the investment. Level 2 inputs include the following:

      Quoted prices for similar assets in active markets (for example, investments in restricted stock);

      Quoted prices for identical or similar assets in non-active markets (for example, investments in thinly traded public companies);

      Pricing models whose inputs are observable for substantially the full term of the investment (for example, market interest rate indices); and

      Pricing models whose inputs are derived principally from, or corroborated by, observable market data through correlation or other means for substantially the full term of the investment.

            Level 3—Investments whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement (for example, investments in illiquid securities issued by privately held companies). These inputs reflect management's own assumptions about the assumptions a market participant would use in pricing the investment.

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(Unaudited)

        As required by ASC 820, when the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. For example, a Level 3 fair value measurement may include inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Therefore, unrealized appreciation and depreciation related to such investments categorized within the Level 3 tables below may include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3).

        As of September 30, 2019 and December 31, 2018, all of Main Street's LMM portfolio investments consisted of illiquid securities issued by privately held companies. As a result, the fair value determination for all of Main Street's LMM portfolio investments primarily consisted of unobservable inputs. As a result, all of Main Street's LMM portfolio investments were categorized as Level 3 as of September 30, 2019 and December 31, 2018.

        As of September 30, 2019 and December 31, 2018, Main Street's Middle Market portfolio investments consisted primarily of investments in secured and unsecured debt investments and independently rated debt investments. The fair value determination for these investments consisted of a combination of observable inputs in non-active markets for which sufficient observable inputs were not available to determine the fair value of these investments and unobservable inputs. As a result, all of Main Street's Middle Market portfolio investments were categorized as Level 3 as of September 30, 2019 and December 31, 2018.

        As of September 30, 2019 and December 31, 2018, Main Street's Private Loan portfolio investments primarily consisted of investments in interest-bearing secured debt investments. The fair value determination for these investments consisted of a combination of observable inputs in non-active markets for which sufficient observable inputs were not available to determine the fair value of these investments and unobservable inputs. As a result, all of Main Street's Private Loan portfolio investments were categorized as Level 3 as of September 30, 2019 and December 31, 2018.

        As of September 30, 2019 and December 31, 2018, Main Street's Other Portfolio investments consisted of illiquid securities issued by privately held companies. The fair value determination for these investments primarily consisted of unobservable inputs. As a result, all of Main Street's Other Portfolio investments were categorized as Level 3 as of September 30, 2019 and December 31, 2018.

        The fair value determination of each portfolio investment categorized as Level 3 required one or more of the following unobservable inputs:

    Financial information obtained from each portfolio company, including unaudited statements of operations and balance sheets for the most recent period available as compared to budgeted numbers;

    Current and projected financial condition of the portfolio company;

    Current and projected ability of the portfolio company to service its debt obligations;

    Type and amount of collateral, if any, underlying the investment;

    Current financial ratios (e.g., fixed charge coverage ratio, interest coverage ratio and net debt/EBITDA ratio) applicable to the investment;

    Current liquidity of the investment and related financial ratios (e.g., current ratio and quick ratio);

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(Unaudited)

    Pending debt or capital restructuring of the portfolio company;

    Projected operating results of the portfolio company;

    Current information regarding any offers to purchase the investment;

    Current ability of the portfolio company to raise any additional financing as needed;

    Changes in the economic environment which may have a material impact on the operating results of the portfolio company;

    Internal occurrences that may have an impact (both positive and negative) on the operating performance of the portfolio company;

    Qualitative assessment of key management;

    Contractual rights, obligations or restrictions associated with the investment; and

    Other factors deemed relevant.

        The use of significant unobservable inputs creates uncertainty in the measurement of fair value as of the reporting date. The significant unobservable inputs used in the fair value measurement of Main Street's LMM equity securities, which are generally valued through an average of the discounted cash flow technique and the market comparable/enterprise value technique (unless one of these approaches is determined to not be appropriate), are (i) EBITDA multiples and (ii) the weighted-average cost of capital ("WACC"). Significant increases (decreases) in EBITDA multiple inputs in isolation would result in a significantly higher (lower) fair value measurement. On the contrary, significant increases (decreases) in WACC inputs in isolation would result in a significantly lower (higher) fair value measurement. The significant unobservable inputs used in the fair value measurement of Main Street's LMM, Middle Market and Private Loan securities are (i) risk adjusted discount rates used in the Yield-to-Maturity valuation technique (see "Note B.1.—Valuation of the Investment Portfolio") and (ii) the percentage of expected principal recovery. Significant increases (decreases) in any of these discount rates in isolation would result in a significantly lower (higher) fair value measurement. Significant increases (decreases) in any of these expected principal recovery percentages in isolation would result in a significantly higher (lower) fair value measurement. However, due to the nature of certain investments, fair value measurements may be based on other criteria, such as third-party appraisals of collateral and fair values as determined by independent third parties, which are not presented in the tables below.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

        The following tables provide a summary of the significant unobservable inputs used to fair value Main Street's Level 3 portfolio investments as of September 30, 2019 and December 31, 2018:

Type of Investment
  Fair Value
as of
September 30, 2019
(in thousands)
  Valuation Technique   Significant Unobservable Inputs   Range(3)   Weighted
Average(3)
  Median(3)  

Equity investments

  $ 813,539   Discounted cash flow   WACC   9.4% - 20.0%     13.7%     14.3%  

        Market comparable /   EBITDA multiple(1)   4.7x - 8.3x(2)     7.2x     6.3x  

        Enterprise Value                      

Debt investments

  $ 1,156,579   Discounted cash flow   Risk adjusted discount factor   5.8% - 17.5%(2)     10.9%     10.7%  

            Expected principal recovery   1.4% - 100.0%     99.2%     100.0%  

            percentage                  

Debt investments

  $ 587,078   Market approach   Third-party quote   30.6 - 101.0     95.5     97.8  

Total Level 3 investments

  $ 2,557,196                          

(1)
EBITDA may include proforma adjustments and/or other addbacks based on specific circumstances related to each investment.

(2)
Range excludes outliers that are greater than one standard deviation from the mean. Including these outliers, the range for EBITDA multiple is 3.5x - 15.0x and the range for risk adjusted discount factor is 4.5% - 43.0%.

(3)
Does not include investments for which the valuation technique does not include the use of the applicable fair value input.


Type of Investment
  Fair Value
as of
December 31, 2018
(in thousands)
  Valuation Technique   Significant Unobservable Inputs   Range(3)   Weighted
Average(3)
  Median(3)  

Equity investments

  $ 767,156   Discounted cash flow   WACC   9.9% - 20.7%     13.7%     14.3%  

        Market comparable /   EBITDA multiple(1)   4.7x - 8.0x(2)     7.0x     6.0x  

        Enterprise Value                      

Debt investments

  $ 1,039,453   Discounted cash flow   Risk adjusted discount factor   8.5% - 17.0%(2)     12.2%     12.0%  

            Expected principal recovery   1.5% - 100.0%     99.3%     100.0%  

            percentage                  

Debt investments

  $ 647,300   Market approach   Third-party quote   37.5 - 101.0     96.0     98.3  

Total Level 3 investments

  $ 2,453,909                          

(1)
EBITDA may include proforma adjustments and/or other addbacks based on specific circumstances related to each investment.

(2)
Range excludes outliers that are greater than one standard deviation from the mean. Including these outliers, the range for EBITDA multiple is 3.9x - 15.0x and the range for risk adjusted discount factor is 5.3% - 30.3%.

(3)
Does not include investments for which the valuation technique does not include the use of the applicable fair value input.

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(Unaudited)

        The following tables provide a summary of changes in fair value of Main Street's Level 3 portfolio investments for the nine month periods ended September 30, 2019 and 2018 (amounts in thousands):

Type of Investment
  Fair Value
as of
December 31,
2018
  Transfers
Into Level 3
Hierarchy
  Redemptions/
Repayments
  New
Investments
  Net Changes
from
Unrealized
to Realized
  Net
Unrealized
Appreciation
(Depreciation)
  Other(1)   Fair Value
as of
September 30,
2019
 

Debt

  $ 1,686,753   $   $ (360,335 ) $ 426,068   $ 31,019   $ (19,559 ) $ (20,289 ) $ 1,743,657  

Equity

  $ 755,710   $   $ (20,338 ) $ 33,705   $ (13,834 ) $ 25,899   $ 22,096   $ 803,238  

Equity Warrant

  $ 11,446   $   $ 1,217   $ 316   $ (1,090 ) $ 219   $ (1,807 ) $ 10,301  

  $ 2,453,909   $   $ (379,456 ) $ 460,089   $ 16,095   $ 6,559   $   $ 2,557,196  

(1)
Includes the impact of non-cash conversions. These transactions represent non-cash investing activities. See additional cash flow information at the consolidated statements of cash flows.


Type of Investment
  Fair Value
as of
December 31,
2017
  Transfers
Into Level 3
Hierarchy
  Redemptions/
Repayments
  New
Investments
  Net Changes
from
Unrealized
to Realized
  Net
Unrealized
Appreciation
(Depreciation)
  Other(1)   Fair Value
as of
September 30,
2018
 

Debt

  $ 1,518,297   $   $ (512,532 ) $ 656,376   $ 33,724   $ (7,737 ) $ (8,450 ) $ 1,679,678  

Equity

    641,493         (40,920 )   92,855     (34,943 )   69,034     8,450     735,969  

Equity Warrant

    11,515         (280 )   181     (1,120 )   930         11,226  

  $ 2,171,305   $   $ (553,732 ) $ 749,412   $ (2,339 ) $ 62,227   $   $ 2,426,873  

(1)
Includes the impact of non-cash conversions. These transactions represent non-cash investing activities. See additional cash flow information at the consolidated statements of cash flows.

        As of September 30, 2019 and December 31, 2018, the fair value determination for the SBIC debentures recorded at fair value primarily consisted of unobservable inputs. As a result, the SBIC debentures which are recorded at fair value were categorized as Level 3. Main Street determines the fair value of these instruments primarily using a Yield-to-Maturity approach that analyzes the discounted cash flows of interest and principal for each SBIC debenture recorded at fair value based on estimated market interest rates for debt instruments of similar structure, terms and maturity. Main Street's estimate of the expected repayment date of principal for each SBIC debenture recorded at fair value is the legal maturity date of the instrument. The significant unobservable inputs used in the fair value measurement of Main Street's SBIC debentures recorded at fair value are the estimated market interest rates used to fair value each debenture using the yield valuation technique described above. Significant increases (decreases) in the estimated market interest rates in isolation would result in a significantly lower (higher) fair value measurement.

        The following tables provide a summary of the significant unobservable inputs used to fair value Main Street's Level 3 SBIC debentures as of September 30, 2019 and December 31, 2018 (amounts in thousands):

Type of Instrument
  Fair Value as of
September 30, 2019
  Valuation Technique   Significant Unobservable Inputs   Range   Weighted
Average
 

SBIC debentures

  $ 21,752   Discounted cash flow   Estimated market interest rates   4.0% - 4.0%     4.0%  

 

Type of Instrument
  Fair Value as of
December 31, 2018
  Valuation Technique   Significant Unobservable Inputs   Range   Weighted
Average
 

SBIC debentures

  $ 44,688   Discounted cash flow   Estimated market interest rates   5.5% - 5.8%     5.6%  

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

        The following tables provide a summary of changes for the Level 3 SBIC debentures recorded at fair value for the nine month periods ended September 30, 2019 and 2018 (amounts in thousands):

Type of Instrument
  Fair Value as of
December 31, 2018
  Repayments   Net
Realized
Loss
  New SBIC
Debentures
  Net
Unrealized
(Appreciation)
Depreciation
  Fair Value as of
September 30, 2019
 

SBIC debentures at fair value

  $ 44,688   $ (24,000 ) $ 5,689   $   $ (4,625 ) $ 21,752  

 

Type of Instrument
  Fair Value as of December 31, 2017   Repayments   Net
Realized
Loss
  New SBIC
Debentures
  Net
Unrealized
(Appreciation)
Depreciation
  Fair Value as of
September 30, 2018
 

SBIC debentures at fair value

  $ 48,608   $ (4,000 ) $ 1,374   $   $ (1,296 ) $ 44,686  

        At September 30, 2019 and December 31, 2018, Main Street's investments and SBIC debentures at fair value were categorized as follows in the fair value hierarchy for ASC 820 purposes:

 
   
  Fair Value Measurements  
 
   
  (in thousands)
 
At September 30, 2019
  Fair Value   Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
  Significant Other
Observable Inputs
(Level 2)
  Significant
Unobservable Inputs
(Level 3)
 

LMM portfolio investments

  $ 1,199,634   $   $   $ 1,199,634  

Middle Market portfolio investments

    548,710             548,710  

Private Loan portfolio investments

    627,892             627,892  

Other Portfolio investments

    110,632             110,632  

External Investment Manager

    70,328             70,328  

Total investments

  $ 2,557,196   $   $   $ 2,557,196  

SBIC debentures at fair value

  $ 21,752   $   $   $ 21,752  

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

 
   
  Fair Value Measurements  
 
   
  (in thousands)
 
At December 31, 2018
  Fair Value   Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
  Significant Other
Observable Inputs
(Level 2)
  Significant
Unobservable Inputs
(Level 3)
 

LMM portfolio investments

  $ 1,195,035   $   $   $ 1,195,035  

Middle Market portfolio investments

    576,929             576,929  

Private Loan portfolio investments

    507,892             507,892  

Other Portfolio investments

    108,305             108,305  

External Investment Manager

    65,748             65,748  

Total investments

  $ 2,453,909   $   $   $ 2,453,909  

SBIC debentures at fair value

  $ 44,688   $   $   $ 44,688  

Investment Portfolio Composition

        Main Street's LMM portfolio investments primarily consist of secured debt, equity warrants and direct equity investments in privately held, LMM companies based in the United States. Main Street's LMM portfolio companies generally have annual revenues between $10 million and $150 million, and its LMM investments generally range in size from $5 million to $50 million. The LMM debt investments are typically secured by either a first or second priority lien on the assets of the portfolio company, can include either fixed or floating rate terms and generally have a term of between five and seven years from the original investment date. In most LMM portfolio investments, Main Street receives nominally priced equity warrants and/or makes direct equity investments in connection with a debt investment.

        Main Street's Middle Market portfolio investments primarily consist of direct investments in or secondary purchases of interest-bearing debt securities in privately held companies based in the United States that are generally larger in size than the companies included in Main Street's LMM portfolio. Main Street's Middle Market portfolio companies generally have annual revenues between $150 million and $1.5 billion, and its Middle Market investments generally range in size from $3 million to $20 million. Main Street's Middle Market portfolio debt investments are generally secured by either a first or second priority lien on the assets of the portfolio company and typically have a term of between three and seven years from the original investment date.

        Main Street's private loan ("Private Loan") portfolio investments are primarily debt securities in privately held companies which have been originated through strategic relationships with other investment funds on a collaborative basis, and are often referred to in the debt markets as "club deals." Private Loan investments are typically similar in size, structure, terms and conditions to investments Main Street holds in its LMM portfolio and Middle Market portfolio. Main Street's Private Loan portfolio debt investments are generally secured by either a first or second priority lien on the assets of the portfolio company and typically have a term of between three and seven years from the original investment date.

        Main Street's other portfolio ("Other Portfolio") investments primarily consist of investments which are not consistent with the typical profiles for LMM, Middle Market and Private Loan portfolio investments, including investments which may be managed by third parties. In the Other Portfolio,

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Main Street may incur indirect fees and expenses in connection with investments managed by third parties, such as investments in other investment companies or private funds. For Other Portfolio investments, Main Street generally receives distributions related to the assets held by the portfolio company. Those assets are typically expected to be liquidated over a five to ten year period.

        Main Street's external asset management business is conducted through its External Investment Manager. The External Investment Manager earns management fees based on the assets of the funds under management and may earn incentive fees, or a carried interest, based on the performance of the funds managed. Main Street entered into an agreement with the External Investment Manager to share employees in connection with its asset management business generally, and specifically for its relationship with HMS Income Fund, Inc. ("HMS Income"). Through this agreement, Main Street shares employees with the External Investment Manager, including their related infrastructure, business relationships, management expertise and capital raising capabilities. Main Street allocates the related expenses to the External Investment Manager pursuant to the sharing agreement. Main Street's total expenses for the three months ended September 30, 2019 and 2018 are net of expenses allocated to the External Investment Manager of $1.7 million and $1.6 million, respectively. Main Street's total expenses for the nine months ended September 30, 2019 and 2018 are net of expenses allocated to the External Investment Manager of $5.0 million and $5.3 million, respectively.

        Investment income, consisting of interest, dividends and fees, can fluctuate dramatically due to various factors, including the level of new investment activity, repayments of debt investments or sales of equity interests. Investment income in any given year could also be highly concentrated among several portfolio companies. For the three and nine months ended September 30, 2019 and 2018, Main Street did not record investment income from any single portfolio company in excess of 10% of total investment income.

        The following tables provide a summary of Main Street's investments in the LMM, Middle Market and Private Loan portfolios as of September 30, 2019 and December 31, 2018 (this information excludes the Other Portfolio investments and the External Investment Manager which are discussed further below):

 
  As of September 30, 2019  
 
  LMM(a)   Middle Market   Private Loan  
 
  (dollars in millions)
 

Number of portfolio companies

    68     52     62  

Fair value

  $ 1,199.6   $ 548.7   $ 627.9  

Cost

  $ 987.7   $ 589.4   $ 662.3  

% of portfolio at cost—debt

    66.3%     95.0%     93.7%  

% of portfolio at cost—equity

    33.7%     5.0%     6.3%  

% of debt investments at cost secured by first priority lien

    98.1%     89.8%     94.4%  

Weighted-average annual effective yield(b)

    12.0%     8.9%     9.8%  

Average EBITDA(c)

  $ 4.9   $ 93.5   $ 56.3  

(a)
At September 30, 2019, Main Street had equity ownership in approximately 99% of its LMM portfolio companies, and the average fully diluted equity ownership in those portfolio companies was approximately 41%.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

(b)
The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of September 30, 2019, including amortization of deferred debt origination fees and accretion of original issue discount but excluding fees payable upon repayment of the debt instruments and any debt investments on non-accrual status. The weighted-average annual effective yield is higher than what an investor in shares of Main Street's common stock will realize on its investment because it does not reflect Main Street's expenses or any sales load paid by an investor.

(c)
The average EBITDA is calculated using a simple average for the LMM portfolio and a weighted-average for the Middle Market and Private Loan portfolios. These calculations exclude certain portfolio companies, including two LMM portfolio companies, two Middle Market portfolio companies and three Private Loan portfolio companies, as EBITDA is not a meaningful valuation metric for Main Street's investments in these portfolio companies, and those portfolio companies whose primary purpose is to own real estate.
 
  As of December 31, 2018  
 
  LMM(a)   Middle Market   Private Loan  
 
  (dollars in millions)
 

Number of portfolio companies

    69     56     59  

Fair value

  $ 1,195.0   $ 576.9   $ 507.9  

Cost

  $ 990.9   $ 608.8   $ 553.3  

% of portfolio at cost—debt

    68.7%     96.3%     93.0%  

% of portfolio at cost—equity

    31.3%     3.7%     7.0%  

% of debt investments at cost secured by first priority lien

    98.5%     87.9%     92.0%  

Weighted-average annual effective yield(b)

    12.3%     9.6%     10.4%  

Average EBITDA(c)

  $ 4.7   $ 99.1   $ 46.1  

(a)
At December 31, 2018, Main Street had equity ownership in approximately 99% of its LMM portfolio companies, and the average fully diluted equity ownership in those portfolio companies was approximately 40%.

(b)
The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of December 31, 2018, including amortization of deferred debt origination fees and accretion of original issue discount but excluding fees payable upon repayment of the debt instruments and any debt investments on non-accrual status. The weighted-average annual effective yield is higher than what an investor in shares of Main Street's common stock will realize on its investment because it does not reflect Main Street's expenses or any sales load paid by an investor.

(c)
The average EBITDA is calculated using a simple average for the LMM portfolio and a weighted-average for the Middle Market and Private Loan portfolios. These calculations exclude certain portfolio companies, including two LMM portfolio companies, one Middle Market portfolio company and four Private Loan portfolio companies, as EBITDA is not a meaningful valuation metric for Main Street's investments in these portfolio companies, and those portfolio companies whose primary purpose is to own real estate.

        As of September 30, 2019, Main Street had Other Portfolio investments in eleven companies, collectively totaling approximately $110.6 million in fair value and approximately $119.4 million in cost

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

basis and which comprised approximately 4.3% of Main Street's Investment Portfolio at fair value. As of December 31, 2018, Main Street had Other Portfolio investments in eleven companies, collectively totaling approximately $108.3 million in fair value and approximately $116.0 million in cost basis and which comprised approximately 4.4% of Main Street's Investment Portfolio at fair value.

        As discussed further in Note A.1., Main Street holds an investment in the External Investment Manager, a wholly owned subsidiary that is treated as a portfolio investment. As of September 30, 2019, there was no cost basis in this investment and the investment had a fair value of approximately $70.3 million, which comprised approximately 2.8% of Main Street's Investment Portfolio at fair value. As of December 31, 2018, there was no cost basis in this investment and the investment had a fair value of approximately $65.7 million, which comprised approximately 2.7% of Main Street's Investment Portfolio at fair value.

        The following tables summarize the composition of Main Street's total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments at cost and fair value by type of investment as a percentage of the total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments, as of September 30, 2019 and December 31, 2018 (this information excludes the Other Portfolio investments and the External Investment Manager).

Cost:
  September 30, 2019   December 31, 2018  

First lien debt

    77.3%     77.1%  

Equity

    17.4%     16.6%  

Second lien debt

    4.3%     5.3%  

Equity warrants

    0.6%     0.6%  

Other

    0.4%     0.4%  

    100.0%     100.0%  

 

Fair Value:
  September 30, 2019   December 31, 2018  

First lien debt

    69.4%     69.0%  

Equity

    26.2%     25.5%  

Second lien debt

    3.6%     4.6%  

Equity warrants

    0.4%     0.5%  

Other

    0.4%     0.4%  

    100.0%     100.0%  

        The following tables summarize the composition of Main Street's total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments by geographic region of the United States and other countries at cost and fair value as a percentage of the total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments, as of September 30, 2019 and December 31, 2018 (this information excludes the Other

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Portfolio investments and the External Investment Manager). The geographic composition is determined by the location of the corporate headquarters of the portfolio company.

Cost:
  September 30, 2019   December 31, 2018  

Southwest

    24.8%     26.7%  

West

    24.5%     27.2%  

Midwest

    20.4%     19.4%  

Northeast

    15.4%     14.3%  

Southeast

    12.7%     10.0%  

Canada

    1.3%     1.4%  

Other Non-United States

    0.9%     1.0%  

    100.0%     100.0%  

 

Fair Value:
  September 30, 2019   December 31, 2018  

Southwest

    26.5%     28.4%  

West

    25.4%     28.2%  

Midwest

    20.0%     18.9%  

Northeast

    14.7%     13.4%  

Southeast

    11.4%     8.9%  

Canada

    1.1%     1.2%  

Other Non-United States

    0.9%     1.0%  

    100.0%     100.0%  

        Main Street's LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments are in companies conducting business in a variety of industries. The following tables summarize the composition of Main Street's total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments by industry at cost and fair value

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

as of September 30, 2019 and December 31, 2018 (this information excludes the Other Portfolio investments and the External Investment Manager).

Cost:
  September 30, 2019   December 31, 2018  

Machinery

    8.0%     6.5%  

Media

    6.7%     6.5%  

Construction & Engineering

    5.6%     7.5%  

Energy Equipment & Services

    5.4%     6.4%  

Aerospace & Defense

    4.9%     3.8%  

Commercial Services & Supplies

    4.5%     4.9%  

IT Services

    4.4%     3.8%  

Internet Software & Services

    4.2%     4.1%  

Diversified Telecommunication Services

    4.1%     4.8%  

Leisure Equipment & Products

    4.1%     3.9%  

Health Care Providers & Services

    3.9%     2.8%  

Hotels, Restaurants & Leisure

    3.9%     3.3%  

Oil, Gas & Consumable Fuels

    3.8%     3.0%  

Electronic Equipment, Instruments & Components

    3.6%     3.5%  

Food Products

    3.5%     3.8%  

Specialty Retail

    3.2%     4.2%  

Communications Equipment

    3.2%     2.5%  

Software

    2.5%     2.6%  

Professional Services

    2.4%     2.6%  

Computers & Peripherals

    2.3%     2.6%  

Containers & Packaging

    1.7%     1.9%  

Construction Materials

    1.7%     1.8%  

Building Products

    1.6%     1.6%  

Road & Rail

    1.4%     1.8%  

Distributors

    1.1%     1.7%  

Transportation Infrastructure

    1.1%     0.5%  

Internet & Catalog Retail

    1.0%     1.1%  

Other(1)

    6.2%     6.5%  

    100.0%     100.0%  

(1)
Includes various industries with each industry individually less than 1.0% of the total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments at each date.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Fair Value:
  September 30, 2019   December 31, 2018  

Machinery

    10.2%     8.8%  

Construction & Engineering

    6.1%     7.9%  

Media

    5.9%     5.4%  

Energy Equipment & Services

    4.9%     5.7%  

IT Services

    4.6%     3.9%  

Aerospace & Defense

    4.6%     3.5%  

Internet Software & Services

    4.0%     3.8%  

Commercial Services & Supplies

    4.0%     4.4%  

Leisure Equipment & Products

    3.8%     3.7%  

Health Care Providers & Services

    3.7%     2.7%  

Hotels, Restaurants & Leisure

    3.6%     3.2%  

Computers & Peripherals

    3.6%     3.8%  

Specialty Retail

    3.4%     4.2%  

Diversified Telecommunication Services

    3.4%     4.0%  

Oil, Gas & Consumable Fuels

    3.3%     2.7%  

Food Products

    3.0%     3.5%  

Software

    2.9%     2.9%  

Electronic Equipment, Instruments & Components

    2.8%     2.8%  

Communications Equipment

    2.7%     2.2%  

Diversified Consumer Services

    2.5%     2.9%  

Construction Materials

    2.1%     2.1%  

Professional Services

    1.9%     2.4%  

Containers & Packaging

    1.7%     1.8%  

Road & Rail

    1.5%     1.8%  

Building Products

    1.5%     1.6%  

Distributors

    1.0%     1.5%  

Transportation Infrastructure

    1.0%     0.5%  

Other(1)

    6.3%     6.3%  

    100.0%     100.0%  

(1)
Includes various industries with each industry individually less than 1.0% of the total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments at each date.

        At September 30, 2019 and December 31, 2018, Main Street had no portfolio investment that was greater than 10% of the Investment Portfolio at fair value.

Unconsolidated Significant Subsidiaries

        In accordance with Rules 3-09 and 4-08(g) of Regulation S-X, Main Street must determine which of its unconsolidated controlled portfolio companies, if any, are considered "significant subsidiaries." In evaluating these unconsolidated controlled portfolio companies, there are three tests utilized to determine if any of Main Street's Control Investments (as defined in Note A, including those unconsolidated portfolio companies defined as Control Investments in which Main Street does not own greater than 50% of the voting securities) are considered significant subsidiaries: the investment test,

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

the asset test and the income test. The income test is measured by dividing the absolute value of the combined total of total investment income, net realized gain (loss) and net unrealized appreciation (depreciation) from each Control Investment for the period being tested by the absolute value of Main Street's pre-tax income for the same period. Rule 3-09 of Regulation S-X, as interpreted by the SEC, requires Main Street to include separate audited financial statements of an unconsolidated majority-owned subsidiary (Control Investments in which Main Street owns greater than 50% of the voting securities) in an annual report if any of the three tests exceed 20% of Main Street's total investments at fair value, total assets or total income, respectively. Rule 4-08(g) of Regulation S-X requires summarized financial information of a Control Investment in an annual report if any of the three tests exceeds 10% of Main Street's annual total amounts and Rule 10-01(b)(1) of Regulation S-X requires summarized financial information in a quarterly report if any of the three tests exceeds 20% of Main Street's year-to-date total amounts.

        As of September 30, 2019 and December 31, 2018, Main Street had no single investment that represented greater than 20% of its total Investment Portfolio at fair value and no single investment whose total assets represented greater than 20% of its total assets. After performing the income test for the nine months ended September 30, 2019 and 2018, Main Street determined that no single Control Investment had income that represented greater than 20% of Main Street's total income, except for the External Investment Manager. As such, the External Investment Manager was considered a significant subsidiary. The summarized financial information for the External Investment Manager is included in Note D.

NOTE D—EXTERNAL INVESTMENT MANAGER

        As discussed further in Note A.1., the External Investment Manager provides investment management and other services to External Parties. The External Investment Manager is accounted for as a portfolio investment of MSCC since the External Investment Manager conducts all of its investment management activities for External Parties.

        During May 2012, Main Street entered into an investment sub-advisory agreement with HMS Adviser, LP ("HMS Adviser"), which is the investment advisor to HMS Income, a non-listed BDC, to provide certain investment advisory services to HMS Adviser. In December 2013, after obtaining required no-action relief from the SEC to allow it to own a registered investment adviser, Main Street assigned the sub-advisory agreement to the External Investment Manager since the fees received from such arrangement could otherwise have negative consequences on MSCC's ability to meet the source-of-income requirement necessary for it to maintain its RIC tax treatment. Under the investment sub-advisory agreement, the External Investment Manager is entitled to 50% of the base management fee and the incentive fees earned by HMS Adviser under its advisory agreement with HMS Income. The External Investment Manager agreed to waive the historical incentive fees otherwise earned through December 31, 2018. During the three months ended September 30, 2019, the External Investment Manager earned $2.9 million in fee income, which consisted of $2.7 million of base management fees and $0.2 million in incentive fees, compared to $3.0 million in base management fees for the comparable period in 2018 under the sub-advisory agreement with HMS Adviser. During the nine months ended September 30, 2019, the External Investment Manager earned $10.0 million in fee income, which consisted of $8.4 million of base management fees and $1.6 million in incentive fees compared to $8.7 million of base management fees for the comparable period in 2018 under the sub-advisory agreement with HMS Adviser.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

        The investment in the External Investment Manager is accounted for using fair value accounting, with the fair value determined by Main Street and approved, in good faith, by Main Street's Board of Directors. Main Street determines the fair value of the External Investment Manager using the Waterfall valuation method under the market approach (see further discussion in Note B.1.). Any change in fair value of the investment in the External Investment Manager is recognized on Main Street's consolidated statements of operations in "Net Unrealized Appreciation (Depreciation)—Control investments."

        The External Investment Manager is an indirect wholly owned subsidiary of MSCC owned through a Taxable Subsidiary and is a disregarded entity for tax purposes. The External Investment Manager has entered into a tax sharing agreement with its Taxable Subsidiary owner. Since the External Investment Manager is accounted for as a portfolio investment of MSCC and is not included as a consolidated subsidiary of MSCC in MSCC's consolidated financial statements, and as a result of the tax sharing agreement with its Taxable Subsidiary owner, for financial reporting purposes the External Investment Manager is treated as if it is taxed at normal corporate tax rates based on its taxable income and, as a result of its activities, may generate income tax expense or benefit. Main Street owns the External Investment Manager through the Taxable Subsidiary to allow MSCC to continue to comply with the "source-of-income" requirements contained in the RIC tax provisions of the Code. The taxable income, or loss, of the External Investment Manager may differ from its book income, or loss, due to temporary book and tax timing differences and permanent differences. As a result of the above described financial reporting and tax treatment, the External Investment Manager provides for any income tax expense, or benefit, and any tax assets or liabilities in its separate financial statements.

        Main Street shares employees with the External Investment Manager and allocates costs related to such shared employees to the External Investment Manager generally based on a combination of the direct time spent, new investment origination activity and assets under management, depending on the nature of the expense. For the three months ended September 30, 2019 and 2018, Main Street allocated $1.7 million and $1.6 million of total expenses, respectively, to the External Investment Manager. For the nine months ended September 30, 2019 and 2018, Main Street allocated $5.0 million and $5.3 million of total expenses, respectively, to the External Investment Manager. The total contribution of the External Investment Manager to Main Street's net investment income consists of the combination of the expenses allocated to the External Investment Manager and the dividend income received from the External Investment Manager. For the three months ended September 30, 2019 and 2018, the total contribution to Main Street's net investment income was $2.6 million and $2.7 million, respectively. For the nine months ended September 30, 2019 and 2018, the total contribution to Main Street's net investment income was $8.9 million and $8.0 million, respectively.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

        Summarized financial information from the separate financial statements of the External Investment Manager as of September 30, 2019 and December 31, 2018 and for the three and nine months ended September 30, 2019 and 2018 is as follows:

 
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
 
 
  2019   2018   2019   2018  
 
  (dollars in thousands)
 

Management fee income

  $ 2,750   $ 2,972   $ 8,427   $ 8,667  

Incentive fees

    178         1,552      

Total revenues

    2,928     2,972     9,979     8,667  

Expenses allocated from MSCC or its subsidiaries:

   
 
   
 
   
 
   
 
 

Salaries, share-based compensation and other personnel costs

    (1,118 )   (974 )   (3,294 )   (3,386 )

Other G&A expenses

    (533 )   (618 )   (1,707 )   (1,950 )

Total allocated expenses

    (1,651 )   (1,592 )   (5,001 )   (5,336 )

Pre-tax income

    1,277     1,380     4,978     3,331  

Tax expense

   
(286

)
 
(308

)
 
(1,106

)
 
(670

)

Net income

  $ 991   $ 1,072   $ 3,872   $ 2,661  

 

 
  As of
September 30,
  As of
December 31,
 
 
  2019   2018  
 
  (dollars in thousands)
 

Cash

  $   $  

Accounts receivable—HMS Income

    2,955     2,947  

Total assets

  $ 2,955   $ 2,947  

Accounts payable to MSCC and its subsidiaries

  $ 1,964   $ 1,786  

Dividend payable to MSCC and its subsidiaries

    991     1,161  

Equity

         

Total liabilities and equity

  $ 2,955   $ 2,947  

NOTE E—DEBT

SBIC Debentures

        Under existing SBA 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, through the funds, has an effective maximum amount of $347.0 million as a result of certain voluntary prepayments of SBIC debentures under historical commitments from the SBA. SBIC debentures payable were $311.8 million and $345.8 million at September 30, 2019 and December 31, 2018, respectively. SBIC debentures provide for interest to be paid semiannually, with principal due at the applicable 10-year maturity date of each debenture. During the nine months ended September 30,

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(Unaudited)

2019, Main Street received a $25.0 million commitment from the SBA in order to issue new SBIC debentures in the future and opportunistically prepaid $34.0 million of existing SBIC debentures that were scheduled to mature over the next year as part of an effort to manage the maturity dates of the oldest SBIC debentures. As a result of this prepayment, Main Street recognized a realized loss of $5.7 million due primarily to the previously recognized gain recorded as a result of recording the MSC II debentures at fair value on the date of the acquisition of the majority interests of MSC II. The effect of the realized loss is substantially offset by the reversal of all previously recognized unrealized depreciation due to fair value adjustments since the date of the acquisition. Main Street expects to issue new SBIC debentures under the SBIC program in the future in an amount up to the regulatory maximum amount for affiliated SBIC funds. The weighted-average annual interest rate on the SBIC debentures was 3.6% and 3.7% as of September 30, 2019 and December 31, 2018, respectively. The first principal maturity due under the existing SBIC debentures is in 2020, and the weighted-average remaining duration as of September 30, 2019 was approximately 5.4 years. For each of the three months ended September 30, 2019 and 2018, Main Street recognized interest expense, including the amortization of upfront leverage and other miscellaneous fees, attributable to the SBIC debentures of $3.2 million. For the nine months ended September 30, 2019 and 2018, Main Street recognized interest expense, including the amortization of upfront leverage and other miscellaneous fees, attributable to the SBIC debentures of $9.7 million and $9.3 million, respectively. In accordance with SBA regulations, the Funds are precluded from incurring additional non-SBIC debt without the prior approval of the SBA.

        As of September 30, 2019, the recorded value of the SBIC debentures was $305.8 million, which consisted of (i) $21.8 million recorded at fair value, or $0.2 million less than the $22.0 million par value of the SBIC debentures issued by MSC II, (ii) $139.8 million par value of SBIC debentures outstanding issued by MSMF, with a recorded value of $138.4 million that was net of unamortized debt issuance costs of $1.4 million and (iii) $150.0 million par value of SBIC debentures issued by MSC III with a recorded value of $145.6 million that was net of unamortized debt issuance costs of $4.4 million. As of September 30, 2019, if Main Street had adopted the fair value option under ASC 825 for all of its SBIC debentures, Main Street estimates the fair value of its SBIC debentures would be approximately $302.0 million, or $9.8 million less than the $311.8 million face value of the SBIC debentures.

Credit Facility

        Main Street maintains the Credit Facility to provide additional liquidity to support its investment and operational activities. The Credit Facility includes total commitments of $705.0 million from a diversified group of 17 lenders. The Credit Facility matures in September 2023 and contains an accordion feature which allows Main Street to increase the total commitments under the facility to up to $800.0 million from new and existing lenders on the same terms and conditions as the existing commitments.

        Borrowings under the Credit Facility bear 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 LIBOR rate (2.0% as of September 30, 2019) plus (i) 1.875% (or the applicable base rate (Prime Rate of 5.0% as of September 30, 2019) 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 base rate plus 1.0%) otherwise. Main Street pays unused commitment fees of 0.25% per annum on the unused lender commitments under the Credit Facility. The Credit 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

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Investment Manager. The Credit Facility contains certain affirmative and negative covenants, including but not limited to: (i) maintaining a minimum availability of at least 10% of the borrowing base, (ii) maintaining an interest coverage ratio of at least 2.0 to 1.0, (iii) maintaining an asset coverage ratio (tangible net worth to Credit Facility borrowings) of at least 1.5 to 1.0 and (iv) maintaining a minimum tangible net worth. The Credit Facility is provided on a revolving basis through its final maturity date in September 2023, and contains two, one-year extension options which could extend the final maturity by up to two years, subject to certain conditions, including lender approval.

        At September 30, 2019, Main Street had $150.0 million in borrowings outstanding under the Credit Facility. As of September 30, 2019, if Main Street had adopted the fair value option under ASC 825 for its Credit Facility, Main Street estimates its fair value would approximate its recorded value. Main Street recognized interest expense related to the Credit Facility, including unused commitment fees and amortization of deferred issuance costs, of $1.9 million and $3.3 million for the three months ended September 30, 2019 and 2018, respectively, and $8.3 million and $8.1 million for the nine months ended September 30, 2019 and 2018, respectively. As of September 30, 2019, the interest rate on the Credit Facility was 4.0% (based on the LIBOR rate of 2.1% as of the most recent reset date of September 1, 2019 plus 1.875%). The average interest rate was 4.1% and 4.3% for the three and nine months ended September 30, 2019, respectively. As of September 30, 2019, Main Street was in compliance with all financial covenants of the Credit Facility.

6.125% Notes

        In April 2013, Main Street issued $92.0 million, including the underwriters full exercise of their option to purchase additional principal amounts to cover over-allotments, in aggregate principal amount of 6.125% Notes due 2023 (the "6.125% Notes"). The 6.125% Notes bore interest at a rate of 6.125% per year payable quarterly on January 1, April 1, July 1 and October 1 of each year. The total net proceeds to Main Street from the 6.125% Notes, after underwriting discounts and estimated offering expenses payable, were approximately $89.0 million. On April 2, 2018, Main Street redeemed the entire principal amount of the issued and outstanding 6.125% Notes effective April 1, 2018 (the "Redemption Date"). The 6.125% Notes were redeemed at par value, plus the accrued and unpaid interest thereon from January 1, 2018, through, but excluding, the Redemption Date. As part of the redemption, Main Street recognized a realized loss on extinguishment of debt of $1.5 million in the second quarter of 2018 related to the write-off of the related unamortized deferred financing costs. Main Street recognized interest expense related to the 6.125% Notes, including amortization of unamortized deferred issuance costs, of $1.5 million for the nine months ended September 30, 2018.

4.50% Notes due 2019

        In November 2014, Main Street issued $175.0 million in aggregate principal amount of 4.50% unsecured notes due 2019 (the "4.50% Notes due 2019") at an issue price of 99.53%. The 4.50% Notes due 2019 are unsecured obligations and rank pari passu with Main Street's current and future unsecured indebtedness; senior to any of its future indebtedness that expressly provides it is subordinated to the 4.50% Notes due 2019; effectively subordinated to all of its existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness, including borrowings under its Credit Facility; and structurally subordinated to all existing and future indebtedness and other obligations of any of its subsidiaries, including without limitation, the indebtedness of the Funds. The 4.50% Notes due 2019 mature on December 1, 2019, and may be redeemed in whole or in part at any time at Main Street's option subject to certain make-whole

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

provisions. The 4.50% Notes due 2019 bear interest at a rate of 4.50% per year payable semiannually on June 1 and December 1 of each year. The total net proceeds from the 4.50% Notes due 2019, resulting from the issue price and after underwriting discounts and estimated offering expenses payable, were approximately $171.2 million. Main Street may from time to time repurchase the 4.50% Notes due 2019 in accordance with the 1940 Act and the rules promulgated thereunder. As of September 30, 2019, the outstanding balance of the 4.50% Notes due 2019 was $175.0 million and the recorded value of $174.9 million was net of unamortized debt issuance costs of $0.1 million. As of September 30, 2019, if Main Street had adopted the fair value option under ASC 825 for the 4.50% Notes due 2019, Main Street estimates its fair value would be approximately $175.5 million. Main Street recognized interest expense related to the 4.50% Notes due 2019, including amortization of unamortized deferred issuance costs, of $2.1 million for each of the three months ended September 30, 2019 and 2018, and $6.4 million for each of the nine months ended September 30, 2019 and 2018.

        The indenture governing the 4.50% Notes due 2019 (the "4.50% Notes due 2019 Indenture") contains certain covenants, including covenants requiring Main Street's compliance with (regardless of whether Main Street is subject to) the asset coverage requirements set forth in Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act, as well as covenants requiring Main Street to provide financial information to the holders of the 4.50% Notes due 2019 and the Trustee if Main Street ceases to be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These covenants are subject to limitations and exceptions that are described in the 4.50% Notes due 2019 Indenture. As of September 30, 2019, Main Street was in compliance with these covenants.

4.50% Notes due 2022

        In November 2017, Main Street issued $185.0 million in aggregate principal amount of 4.50% unsecured notes due 2022 (the "4.50% Notes due 2022") at an issue price of 99.16%. The 4.50% Notes due 2022 are unsecured obligations and rank pari passu with Main Street's current and future unsecured indebtedness; senior to any of its future indebtedness that expressly provides it is subordinated to the 4.50% Notes due 2022; effectively subordinated to all of its existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness, including borrowings under its Credit Facility; and structurally subordinated to all existing and future indebtedness and other obligations of any of its subsidiaries, including without limitation, the indebtedness of the Funds. The 4.50% Notes due 2022 mature on December 1, 2022, and may be redeemed in whole or in part at any time at Main Street's option subject to certain make-whole provisions. The 4.50% Notes due 2022 bear interest at a rate of 4.50% per year payable semiannually on June 1 and December 1 of each year. The total net proceeds from the 4.50% Notes due 2022, resulting from the issue price and after underwriting discounts and estimated offering expenses payable, were approximately $182.2 million. Main Street may from time to time repurchase the 4.50% Notes due 2022 in accordance with the 1940 Act and the rules promulgated thereunder. As of September 30, 2019, the outstanding balance of the 4.50% Notes due 2022 was $185.0 million and the recorded value of $183.1 million was net of unamortized debt issuance costs of $1.9 million. As of September 30, 2019, if Main Street had adopted the fair value option under ASC 825 for the 4.50% Notes due 2022, Main Street estimates its fair value would be approximately $191.6 million. Main Street recognized interest expense related to the 4.50% Notes due 2022, including amortization of unamortized deferred issuance costs, of $2.2 million and $6.7 million for the three and nine months ended September 30, 2019 and 2018, respectively.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

        The indenture governing the 4.50% Notes due 2022 (the "4.50% Notes due 2022 Indenture") contains certain covenants, including covenants requiring Main Street's compliance with (regardless of whether Main Street is subject to) the asset coverage requirements set forth in Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act, as well as covenants requiring Main Street to provide financial information to the holders of the 4.50% Notes due 2022 and the Trustee if Main Street ceases to be subject to the reporting requirements of the Exchange Act. These covenants are subject to limitations and exceptions that are described in the 4.50% Notes due 2022 Indenture. As of September 30, 2019, Main Street was in compliance with these covenants.

5.20% Notes

        In April 2019, Main Street issued $250.0 million in aggregate principal amount of 5.20% unsecured notes due 2024 (the "5.20% Notes") at an issue price of 99.125%. The 5.20% Notes are unsecured obligations and rank pari passu with Main Street's current and future unsecured indebtedness; senior to any of its future indebtedness that expressly provides it is subordinated to the 5.20% Notes; effectively subordinated to all of its existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness, including borrowings under its Credit Facility; and structurally subordinated to all existing and future indebtedness and other obligations of any of its subsidiaries, including without limitation, the indebtedness of the Funds. The 5.20% Notes mature on May 1, 2024, and may be redeemed in whole or in part at any time at Main Street's option subject to certain make-whole provisions. The 5.20% Notes bear interest at a rate of 5.20% per year payable semiannually on May 1 and November 1 of each year. The total net proceeds from the 5.20% Notes, resulting from the issue price and after underwriting discounts and estimated offering expenses payable, were approximately $245.8 million. Main Street may from time to time repurchase the 5.20% Notes in accordance with the 1940 Act and the rules promulgated thereunder. As of September 30, 2019, the outstanding balance of the 5.20% Notes was $250.0 million and the recorded value of $246.3 million was net of unamortized debt issuance costs of $3.7 million. As of September 30, 2019, if Main Street had adopted the fair value option under ASC 825 for the 5.20% Notes, Main Street estimates its fair value would be approximately $268.1 million. Main Street recognized interest expense related to the 5.20% Notes, including amortization of unamortized deferred issuance costs, of $3.5 million for the three months ended September 30, 2019 and $6.1 million for the nine months ended September 30, 2019.

        The indenture governing the 5.20% Notes (the "5.20% Notes Indenture") contains certain covenants, including covenants requiring Main Street's compliance with (regardless of whether Main Street is subject to) the asset coverage requirements set forth in Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act, as well as covenants requiring Main Street to provide financial information to the holders of the 5.20% Notes and the Trustee if Main Street ceases to be subject to the reporting requirements of the Exchange Act. These covenants are subject to limitations and exceptions that are described in the 5.20% Notes Indenture. As of September 30, 2019, Main Street was in compliance with these covenants.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

NOTE F—FINANCIAL HIGHLIGHTS

 
  Nine Months Ended September 30,  
 
  2019   2018  

Per Share Data:

             

NAV at the beginning of the period

  $ 24.09   $ 23.53  

Net investment income(1)

    1.88     1.91  

Net realized loss(1)(2)

    (0.32 )    

Net unrealized appreciation(1)(2)

    0.28     0.81  

Income tax provision(1)(2)

    (0.03 )   (0.07 )

Net increase in net assets resulting from operations(1)

    1.81     2.65  

Dividends paid from net investment income

    (2.05 )   (1.80 )

Distributions from capital gains

        (0.19 )

Total dividends paid

    (2.05 )   (1.99 )

Impact of the net change in monthly dividends declared prior to the end of the period and paid in the subsequent period

    (0.01 )   (0.01 )

Accretive effect of stock offerings (issuing shares above NAV per share)

    0.31     0.44  

Accretive effect of DRIP issuance (issuing shares above NAV per share)

    0.08     0.06  

Other(3)

    (0.03 )   0.01  

NAV at the end of the period

  $ 24.20   $ 24.69  

Market value at the end of the period

  $ 43.21   $ 38.50  

Shares outstanding at the end of the period

    63,314,513     60,962,505  

(1)
Based on weighted-average number of common shares outstanding for the period.

(2)
Net realized gains or losses, net unrealized appreciation or depreciation, and income taxes can fluctuate significantly from period to period.

(3)
Includes the impact of the different share amounts as a result of calculating certain per share data based on the weighted-average basic shares outstanding during the period and

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

    certain per share data based on the shares outstanding as of a period end or transaction date.

 
  Nine Months Ended
September 30,
 
 
  2019   2018  
 
  (dollars in thousands)
 

NAV at end of period

  $ 1,532,055   $ 1,505,442  

Average NAV

  $ 1,512,921   $ 1,432,441  

Average outstanding debt

  $ 1,033,400   $ 927,962  

Ratio of total expenses, including income tax expense, to average NAV(1)(2)

    4.43%     4.44%  

Ratio of operating expenses to average NAV(2)(3)

    4.27%     4.15%  

Ratio of operating expenses, excluding interest expense, to average NAV(2)(3)

    1.82%     1.92%  

Ratio of net investment income to average NAV(2)

    7.81%     8.00%  

Portfolio turnover ratio(2)

    14.44%     23.12%  

Total investment return(2)(4)

    34.48%     2.05%  

Total return based on change in NAV(2)(5)

    7.69%     11.50%  

(1)
Total expenses are the sum of operating expenses and net income tax provision/benefit. Net income tax provision/benefit includes the accrual of net deferred tax provision/benefit relating to the net unrealized appreciation/depreciation on portfolio investments held in Taxable Subsidiaries and due to the change in the loss carryforwards, which are non-cash in nature and may vary significantly from period to period. Main Street is required to include net deferred tax provision/benefit in calculating its total expenses even though these net deferred taxes are not currently payable/receivable.

(2)
Not annualized.

(3)
Unless otherwise noted, operating expenses include interest, compensation, general and administrative and share-based compensation expenses, net of expenses allocated to the External Investment Manager.

(4)
Total investment return is based on the purchase of stock at the current market price on the first day and a sale at the current market price on the last day of each period reported on the table and assumes reinvestment of dividends at prices obtained by Main Street's dividend reinvestment plan during the period. The return does not reflect any sales load that may be paid by an investor.

(5)
Total return is based on change in net asset value was calculated using the sum of ending net asset value plus dividends to stockholders and other non-operating changes during the period, as divided by the beginning net asset value. Non-operating changes include any items that affect net asset value other than the net increase in net assets resulting from operations, such as the effects of stock offerings, shares issued under the DRIP and equity incentive plans and other miscellaneous items.

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

NOTE G—DIVIDENDS, DISTRIBUTIONS AND TAXABLE INCOME

        Main Street paid regular monthly dividends of $0.205 per share for each month of July through September 2019, totaling $38.9 million, or $0.615 per share, for the three months ended September 30, 2019, and $112.5 million, or $1.80 per share, for the nine months ended September 30, 2019 compared to regular monthly dividends of approximately $34.5 million, or $0.57 per share, for the three months ended September 30, 2018, and $101.8 million, or $1.71 per share, for the nine months ended September 30, 2018. The third quarter 2019 regular monthly dividends represent a 7.9% increase from the regular monthly dividends paid for the third quarter of 2018. Additionally, Main Street paid a $0.25 per share semi-annual supplemental dividend, totaling $15.8 million, in June 2019 compared to $16.6 million, or $0.275 per share, paid in June 2018 resulting in total dividends paid of $2.05 and $1.985 per share for the nine months ended September 30, 2019 and September 30, 2018, respectively.

        MSCC has elected to be treated for U.S. federal income tax purposes as a RIC. MSCC's taxable income includes the taxable income generated by MSCC and certain of its subsidiaries, including the Funds, which are treated as disregarded entities for tax purposes. As a RIC, MSCC generally will not pay corporate-level U.S. federal income taxes on any net ordinary taxable income or capital gains that MSCC distributes to its stockholders. MSCC must generally distribute at least 90% of its "investment company taxable income" (which is generally its net ordinary taxable income and realized net short-term capital gains in excess of realized net long-term capital losses) and 90% of its tax-exempt income to maintain its RIC status (pass-through tax treatment for amounts distributed). As part of maintaining RIC status, undistributed taxable income (subject to a 4% non-deductible U.S. federal excise tax) pertaining to a given fiscal year may be distributed up to 12 months subsequent to the end of that fiscal year, provided such dividends are declared on or prior to the later of (i) filing of the U.S. federal income tax return for the applicable fiscal year or (ii) the fifteenth day of the ninth month following the close of the year in which such taxable income was generated.

        The determination of the tax attributes for Main Street's distributions is made annually, based upon its taxable income for the full year and distributions paid for the full year. Therefore, a determination made on an interim basis may not be representative of the actual tax attributes of distributions for a full year. Ordinary dividend distributions from a RIC do not qualify for the 20% maximum tax rate (plus a 3.8% Medicare surtax, if applicable) on dividend income from domestic corporations and qualified foreign corporations, except to the extent that the RIC received the income in the form of qualifying dividends from domestic corporations and qualified foreign corporations. The tax attributes for distributions will generally include both ordinary income and qualified dividends, but may also include either one or both of capital gains and return of capital.

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

        Listed below is a reconciliation of "Net increase in net assets resulting from operations" to taxable income and to total distributions declared to common stockholders for the nine months ended September 30, 2019 and 2018.

 
  Nine months ended
September 30,
 
 
  2019   2018  
 
  (estimated, dollars
in thousands)

 

Net increase in net assets resulting from operations

  $ 113,555   $ 158,708  

Book-tax difference from share-based compensation expense

    (1,690 )   (3,686 )

Net unrealized appreciation

    (17,779 )   (48,386 )

Income tax provision

    2,491     4,097  

Pre-tax book (income) loss not consolidated for tax purposes

    (21,117 )   1,049  

Book income and tax income differences, including debt origination, structuring fees, dividends, realized gains and changes in estimates

    47,866     21,493  

Estimated taxable income(1)

    123,326     133,275  

Taxable income earned in prior year and carried forward for distribution in current year

    41,489     42,357  

Taxable income earned prior to period end and carried forward for distribution next period

    (48,462 )   (68,387 )

Dividend payable as of period end and paid in the following period

    12,975     11,889  

Total distributions accrued or paid to common stockholders

  $ 129,328   $ 119,134  

(1)
Main Street's taxable income for each period is an estimate and will not be finally determined until the company files its tax return for each year. Therefore, the final taxable income, and the taxable income earned in each period and carried forward for distribution in the following period, may be different than this estimate.

        The Taxable Subsidiaries primarily hold certain portfolio investments for Main Street. The Taxable Subsidiaries permit Main Street to hold equity investments in portfolio companies which are "pass-through" entities for tax purposes and to continue to comply with the "source-of-income" requirements contained in the RIC tax provisions of the Code. The Taxable Subsidiaries are consolidated with Main Street for U.S. GAAP financial reporting purposes, and the portfolio investments held by the Taxable Subsidiaries are included in Main Street's consolidated financial statements as portfolio investments and recorded at fair value. The Taxable Subsidiaries are not consolidated with MSCC for income tax purposes and may generate income tax expense, or benefit, and tax assets and liabilities, as a result of their ownership of certain portfolio investments. The taxable income, or loss, of the Taxable Subsidiaries may differ from their book income, or loss, due to temporary book and tax timing differences and permanent differences. The Taxable Subsidiaries are each taxed at their normal corporate tax rates based on their taxable income. The income tax expense, or benefit, if any, and the related tax assets and liabilities, of the Taxable Subsidiaries are reflected in Main Street's consolidated financial statements.

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

        The income tax provision (benefit) for Main Street is generally composed of (i) deferred tax expense (benefit), which is primarily the result of the net activity relating to the portfolio investments held in the Taxable Subsidiaries, including changes in loss carryforwards, changes in net unrealized appreciation or depreciation and other temporary book tax differences, and (ii) current tax expense, which is primarily the result of current U.S. federal income and state taxes and excise taxes on Main Street's estimated undistributed taxable income. For the three months ended September 30, 2019, Main Street recognized a net income tax benefit of $4.0 million, principally consisting of a deferred tax benefit of $5.1 million partially offset by a $1.1 million current tax expense, which is primarily related to a $0.7 million provision for current U.S. federal income and state taxes and a $0.4 million accrual for excise taxes. For the nine months ended September 30, 2019, Main Street recognized a net income tax provision of $2.5 million, principally consisting of a $2.7 million current tax expense primarily related to a $2.0 million provision for current U.S. federal income and state taxes and a $0.7 million accrual for excise taxes, partially offset by a deferred tax benefit of $0.3 million. For the three months ended September 30, 2018, Main Street recognized a net income tax provision of $3.8 million, principally consisting of a deferred tax provision of $3.0 million and a $0.8 million current tax expense, which is primarily related to a $0.5 million accrual for excise taxes and $0.3 million provision for current U.S. federal income and state taxes. For the nine months ended September 30, 2018, Main Street recognized a net income tax provision of $4.1 million, principally consisting of a deferred tax provision of $3.3 million and a $0.8 million current tax expense, which is primarily related to a $1.0 million accrual for excise taxes, partially offset by a $0.2 million benefit for current U.S. federal income and state taxes.

        The net deferred tax liability at September 30, 2019 was $17.9 million compared to $17.0 million at December 31, 2018, primarily related to changes in net unrealized appreciation or depreciation, changes in loss carryforwards, and other temporary book-tax differences relating to portfolio investments held by the Taxable Subsidiaries. At September 30, 2019, for U.S. federal income tax purposes, the Taxable Subsidiaries had a net operating loss carryforward from prior years which, if unused, will expire in various taxable years from 2028 through 2037. Under the Tax Cuts and Jobs Act, any net operating losses generated in 2018 and future periods will have an indefinite carryforward. The timing and manner in which Main Street will utilize any loss carryforwards generated before December 31, 2018 may be limited in the future under the provisions of the Code. Additionally, as a result of the Tax Cuts and Jobs Act, our Taxable Subsidiaries have interest expense limitation carryforwards which have an indefinite carryforward.

NOTE H—COMMON STOCK

        Main Street maintains a program with certain selling agents through which it can sell shares of its common stock by means of at-the-market offerings from time to time (the "ATM Program"). During the nine months ended September 30, 2019, Main Street sold 1,423,042 shares of its common stock at a weighted-average price of $38.41 per share and raised $54.7 million of gross proceeds under the ATM Program. Net proceeds were $53.8 million after commissions to the selling agents on shares sold and offering costs. As of September 30, 2019, sales transactions representing 5,000 shares had not settled and are not included in shares issued and outstanding on the face of the consolidated balance sheet but are included in the weighted-average shares outstanding in the consolidated statement of operations and in the shares used to calculate net asset value per share. As of September 30, 2019, 9,183,295 shares remained available for sale under the ATM Program.

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

        During the year ended December 31, 2018, Main Street sold 2,060,019 shares of its common stock at a weighted-average price of $38.48 per share and raised $79.3 million of gross proceeds under the ATM Program. Net proceeds were $78.0 million after commissions to the selling agents on shares sold and offering costs.

NOTE I—DIVIDEND REINVESTMENT PLAN ("DRIP")

        Main Street's DRIP provides for the reinvestment of dividends on behalf of its stockholders, unless a stockholder has elected to receive dividends in cash. As a result, if Main Street declares a cash dividend, its stockholders who have not "opted out" of the DRIP by the dividend record date will have their cash dividend automatically reinvested into additional shares of MSCC common stock. The share requirements of the DRIP may be satisfied through the issuance of shares of common stock or through open market purchases of common stock by the DRIP plan administrator. Newly issued shares will be valued based upon the final closing price of MSCC's common stock on the valuation date determined for each dividend by Main Street's Board of Directors. Shares purchased in the open market to satisfy the DRIP requirements will be valued based upon the average price of the applicable shares purchased, before any associated brokerage or other costs. Main Street's DRIP is administered by its transfer agent on behalf of Main Street's record holders and participating brokerage firms. Brokerage firms and other financial intermediaries may decide not to participate in Main Street's DRIP but may provide a similar dividend reinvestment plan for their clients.

        For the nine months ended September 30, 2019, $12.7 million of the total $128.3 million in dividends paid to stockholders represented DRIP participation. During this period, the DRIP participation requirements were satisfied with the issuance of 317,369 newly issued shares. For the nine months ended September 30, 2018, $9.7 million of the total $118.4 million in dividends paid to stockholders represented DRIP participation. During this period, the DRIP participation requirements were satisfied with the issuance of 253,125 newly issued shares. The shares disclosed above relate only to Main Street's DRIP and exclude any activity related to broker-managed dividend reinvestment plans.

NOTE J—SHARE-BASED COMPENSATION

        Main Street accounts for its share-based compensation plans using the fair value method, as prescribed by ASC 718, Compensation—Stock Compensation. Accordingly, for restricted stock awards, Main Street measured the grant date fair value based upon the market price of its common stock on the date of the grant and amortizes the fair value of the awards as share-based compensation expense over the requisite service period, which is generally the vesting term.

        Main Street's Board of Directors approves the issuance of shares of restricted stock to Main Street employees pursuant to the Main Street Capital Corporation 2015 Equity and Incentive Plan (the "Equity and Incentive Plan"). These shares generally vest over a three-year period from the grant date. The fair value is expensed over the service period, starting on the grant date. The following table summarizes the restricted stock issuances approved by Main Street's Board of Directors under the

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Equity and Incentive Plan, net of shares forfeited, if any, and the remaining shares of restricted stock available for issuance as of September 30, 2019.

Restricted stock authorized under the plan

    3,000,000  

Less net restricted stock granted during:

       

Year ended December 31, 2015

    (900 )

Year ended December 31, 2016

    (260,514 )

Year ended December 31, 2017

    (223,812 )

Year ended December 31, 2018

    (243,779 )

Nine months ended September 30, 2019

    (384,049 )

Restricted stock available for issuance as of September 30, 2019

    1,886,946  

        As of September 30, 2019, the following table summarizes the restricted stock issued to Main Street's non-employee directors and the remaining shares of restricted stock available for issuance pursuant to the Main Street Capital Corporation 2015 Non-Employee Director Restricted Stock Plan. These shares are granted upon appointment or election to the board and vest on the day immediately preceding the annual meeting of stockholders following the respective grant date and are expensed over such service period.

Restricted stock authorized under the plan

    300,000  

Less net restricted stock granted during:

       

Year ended December 31, 2015

    (6,806 )

Year ended December 31, 2016

    (6,748 )

Year ended December 31, 2017

    (5,948 )

Year ended December 31, 2018

    (6,376 )

Nine months ended September 30, 2019

    (6,008 )

Restricted stock available for issuance as of September 30, 2019

    268,114  

        For the three months ended September 30, 2019 and 2018, Main Street recognized total share-based compensation expense of $2.6 million and $2.1 million, respectively, related to the restricted stock issued to Main Street employees and non-employee directors. For the nine months ended September 30, 2019 and 2018, Main Street recognized total share-based compensation expense of $7.3 million and $6.9 million, respectively, related to the restricted stock issued to Main Street employees and non-employee directors.

        As of September 30, 2019, there was $18.6 million of total unrecognized compensation expense related to Main Street's non-vested restricted shares. This compensation expense is expected to be recognized over a remaining weighted-average period of approximately 2.3 years as of September 30, 2019.

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

NOTE K—COMMITMENTS AND CONTINGENCIES

        At September 30, 2019, Main Street had the following outstanding commitments (in thousands):

 
  Amount  

Investments with equity capital commitments that have not yet funded:

       

Congruent Credit Opportunities Funds

   
 
 

Congruent Credit Opportunities Fund II, LP

  $ 8,488  

Congruent Credit Opportunities Fund III, LP

    8,117  

  $ 16,605  

Encap Energy Fund Investments

   
 
 

EnCap Energy Capital Fund VIII, L.P. 

  $ 220  

EnCap Energy Capital Fund IX, L.P. 

    339  

EnCap Energy Capital Fund X, L.P. 

    1,846  

EnCap Flatrock Midstream Fund II, L.P. 

    4,827  

EnCap Flatrock Midstream Fund III, L.P. 

    1,110  

  $ 8,342  

EIG Fund Investments

 
$

4,619
 

Brightwood Capital Fund Investments

   
 
 

Brightwood Capital Fund III, LP

  $ 3,000  

Brightwood Capital Fund IV, LP

    500  

  $ 3,500  

Freeport Fund Investments

   
 
 

Freeport Financial SBIC Fund LP

  $ 1,375  

Freeport First Lien Loan Fund III LP

    1,945  

  $ 3,320  

Harris Preston Fund Investments

   
 
 

HPEP 3, L.P. 

  $ 2,526  

LKCM Headwater Investments I, L.P. 

 
$

2,500
 

Dos Rios Partners

   
 
 

Dos Rios Partners, LP

  $ 1,594  

Dos Rios Partners—A, LP

    506  

  $ 2,100  

Construction Supply Investments, LLC

 
$

952
 

Access Media Holdings, LLC

 
$

284
 

Total equity commitments

  $ 44,748  

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

 
  Amount  

Investments with commitments to fund revolving loans that have not been fully drawn or term loans with additional commitments not yet funded:

       

Independent Pet Partners Intermediate Holdings, LLC

 
$

12,236
 

SI East, LLC

    7,500  

Hunter Defense Technologies, Inc. 

    6,460  

Fortna, Inc. 

    4,392  

PaySimple, Inc. 

    4,067  

GRT Rubber Technologies LLC

    3,099  

NNE Partners, LLC

    3,000  

Centre Technologies Holdings, LLC

    2,400  

Boccella Precast Products LLC

    2,000  

Lynx FBO Operating LLC

    1,875  

Chamberlin Holding LLC

    1,600  

Direct Marketing Solutions, Inc. 

    1,600  

Trantech Radiator Topco, LLC

    1,600  

Meisler Operating LLC

    1,600  

Chisholm Energy Holdings, LLC

    1,429  

Hawk Ridge Systems, LLC

    1,400  

Gamber-Johnson Holdings, LLC

    1,200  

LL Management, Inc.(Lab Logistics)

    1,182  

Invincible Boat Company, LLC. 

    1,080  

Tedder Industries, LLC

    1,040  

NRI Clinical Research, LLC

    1,000  

CompareNetworks Topco, LLC

    1,000  

Analytical Systems Keco, LLC

    800  

CTVSH, PLLC

    800  

HW Temps LLC

    800  

Adams Publishing Group, LLC

    775  

ASC Ortho Management Company, LLC

    750  

DTE Enterprises RLOC

    750  

Mac Lean-Fogg Company

    729  

PT Network, LLC

    658  

Wireless Vision Holdings, LLC

    592  

Jensen Jewelers of Idaho, LLC

    500  

HDC/HW Intermediate Holdings

    444  

Barfly Ventures, LLC

    368  

American Nuts, LLC

    281  

Laredo Energy VI, LP

    250  

Dynamic Communities, LLC

    250  

Arcus Hunting LLC

    240  

Total loan commitments

  $ 71,747  

Total commitments

  $ 116,495  

        Main Street will fund its unfunded commitments from the same sources it uses to fund its investment commitments that are funded at the time they are made (which are typically through existing cash and cash equivalents and borrowings under the Credit Facility). Main Street follows a

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

process to manage its liquidity and ensure that it has available capital to fund its unfunded commitments as necessary. The Company had total unrealized depreciation of $0.3 million on the outstanding unfunded commitments as of September 30, 2019.

        Effective January 1, 2019, ASC 842 required that a lessee evaluate its leases to determine whether they should be classified as operating or financing leases. Main Street identified one operating lease for its office space. The lease commenced May 15, 2017 and expires January 31, 2028. It contains two five-year extension options for a final expiration date of January 31, 2038.

        As Main Street classified this lease as an operating lease prior to implementation, ASC 842-10-65-1 indicates that a right-of-use asset and lease liability should be recorded based on the effective date. Main Street adopted ASC 842 effective January 1, 2019 and recorded a right-of-use asset and a lease liability as of that date. After this date, Main Street has recorded lease expense on a straight-line basis, consistent with the accounting treatment for lease expense prior to the adoption of ASC 842.

        Total lease expense incurred by Main Street for each of the three months ended September 30, 2019 and 2018 was $0.2 million. Total lease expense incurred by Main Street for each of the nine months ended September 30, 2019 and 2018 was $0.5 million. As of September 30, 2019, the asset related to the operating lease was $4.9 million and the lease liability was $5.7 million. As of September 30, 2019, the remaining lease term was 8.3 years and the discount rate was 4.2%.

        The following table shows future minimum payments under Main Street's operating lease as of September 30, 2019 (in thousands):

For the Years Ended December 31,
  Amount  

2019

  $ 188  

2020

    762  

2021

    776  

2022

    790  

2023

    804  

Thereafter

    3,428  

Total

  $ 6,748  

        Main Street may, from time to time, be involved in litigation arising out of its operations in the normal course of business or otherwise. Furthermore, third parties may try to impose liability on Main Street in connection with the activities of its portfolio companies. While the outcome of any current legal proceedings cannot at this time be predicted with certainty, Main Street does not expect any current matters will materially affect its financial condition or results of operations; however, there can be no assurance whether any pending legal proceedings will have a material adverse effect on Main Street's financial condition or results of operations in any future reporting period.

NOTE L—RELATED PARTY TRANSACTIONS

        As discussed further in Note D, the External Investment Manager is treated as a wholly owned portfolio company of MSCC and is included as part of Main Street's Investment Portfolio. At September 30, 2019, Main Street had a receivable of approximately $3.0 million due from the External Investment Manager which included (i) approximately $2.0 million related primarily to operating expenses incurred by MSCC or its subsidiaries as required to support the External Investment Manager's business and amounts due from the External Investment Manager to Main Street under a tax sharing agreement (see further discussion in Note D) and (ii) approximately $1.0 million of dividends declared but not paid by the External Investment Manager.

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

        In November 2015, Main Street's Board of Directors approved and adopted the Main Street Capital Corporation Deferred Compensation Plan (the "2015 Deferred Compensation Plan"). The 2015 Deferred Compensation Plan became effective on January 1, 2016 and replaced the Deferred Compensation Plan for Non-Employee Directors previously adopted by the Board of Directors in June 2013 (the "2013 Deferred Compensation Plan"). Under the 2015 Deferred Compensation Plan, non-employee directors and certain key employees may defer receipt of some or all of their cash compensation and directors' fees, subject to certain limitations. Individuals participating in the 2015 Deferred Compensation Plan receive distributions of their respective balances based on predetermined payout schedules or other events as defined by the plan and are also able to direct investments made on their behalf among investment alternatives permitted from time to time under the plan, including phantom Main Street stock units. As of September 30, 2019, $7.8 million of compensation and directors' fees had been deferred under the 2015 Deferred Compensation Plan (including amounts previously deferred under the 2013 Deferred Compensation Plan). Of this amount, $4.2 million was deferred into phantom Main Street stock units, representing 119,064 shares of Main Street's common stock. Including phantom stock units issued through dividend reinvestment and net of any shares distributed, the phantom stock units outstanding as of September 30, 2019 represented 147,994 shares of Main Street's common stock. Any amounts deferred under the plan represented by phantom Main Street stock units will not be issued or included as outstanding on the consolidated statements of changes in net assets until such shares are actually distributed to the participant in accordance with the plan, but the related phantom stock units are included in weighted-average shares outstanding with the related dollar amount of the deferral included in total expenses in Main Street's consolidated statements of operations as earned. The amounts related to additional phantom stock units are included in the statement of changes in net assets as an increase to dividends to stockholders offset by a corresponding increase to additional paid-in capital.

NOTE M—SUBSEQUENT EVENTS

        In October 2019, Main Street declared a semi-annual supplemental cash dividend of $0.24 per share payable in December 2019. This supplemental cash dividend is in addition to the previously announced regular monthly cash dividends that Main Street declared for the fourth quarter of 2019 of $0.205 per share for each of October, November and December 2019.

        During November 2019, Main Street declared regular monthly dividends of $0.205 per share for each month of January, February and March of 2020. These regular monthly dividends equal a total of $0.615 per share for the first quarter of 2020 and represent a 5.1% increase from the regular monthly dividends declared for the first quarter of 2019. Including the semi-annual supplemental dividend declared payable for December 2019 and the regular monthly dividends declared for the fourth quarter of 2019 and first quarter of 2020, Main Street will have paid $27.755 per share in cumulative dividends since its October 2007 initial public offering.

        In November 2019, Main Street led a new portfolio investment to facilitate the recapitalization of J&J Services, Inc. ("J&J"), a leading provider of roll-off dumpster and portable toilet rental services. Main Street, along with its co-investors, partnered with the J&J's founders and senior management team to facilitate the recapitalization and provide growth capital, with Main Street funding $24.8 million in a combination of first-lien, senior secured term debt and a direct equity investment. Founded in 2000, and headquartered in Nashville, Tennessee, J&J is a second-generation family-owned business providing roll-off dumpster and portable toilet rental services to an expansive base of residential, commercial, and demolition customers.

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Schedule 12-14

MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments In and Advances to Affiliates
September 30, 2019
(dollars in thousands)
(unaudited)

Company
  Investment(1)(10)(11)   Geography   Amount
of
Realized
Gain/
(Loss)
  Amount
of
Unrealized
Gain/
(Loss)
  Amount
of
Interest,
Fees or
Dividends
Credited
to
Income(2)
  December 31,
2018
Fair Value
  Gross
Additions(3)
  Gross
Reductions(4)
  September 30,
2019
Fair
Value
 

Majority-owned investments

                                                   

Analytical Systems Keco, LLC

 

LIBOR Plus 10.00% (Floor 2.00%)

 

(8)

 
$

 
$

 
$

259
 
$

 
$

5,229
 
$

 
$

5,229
 

  Preferred Member Units   (8)                     3,200         3,200  

  Warrants   (8)                     316         316  

Café Brazil, LLC

  Member Units   (8)         (970 )   193     4,780         970     3,810  

California Splendor Holdings LLC

  LIBOR Plus 8.00% (Floor 1.00%)   (9)             922     10,928     15,667     11,751     14,844  

  LIBOR Plus 10.00% (Floor 1.00%)   (9)             2,715     27,755     34         27,789  

  Preferred Member Units   (9)             178         7,178         7,178  

  Preferred Member Units   (9)         (2,363 )   188     9,745         2,363     7,382  

Clad-Rex Steel, LLC

  LIBOR Plus 9.00% (Floor 1.00%)   (5)         (21 )   1,049     12,080     21     821     11,280  

  Member Units   (5)         (590 )   217     10,610         590     10,020  

  10% Secured Debt   (5)             87     1,161         18     1,143  

  Member Units   (5)                 350             350  

CMS Minerals Investments

  Member Units   (9)         (359 )   41     2,580         634     1,946  

CompareNetworks Topco, LLC

  LIBOR Plus 11.00% (Floor 1.00%)   (9)             982         8,916     250     8,666  

  Preferred Member Units   (9)         1,035     2         3,010         3,010  

Direct Marketing Solutions, Inc.

  LIBOR Plus 11.00% (Floor 1.00%)   (9)         125     1,834     17,848     158     1,185     16,821  

  Preferred Stock   (9)         2,980         14,900     2,980         17,880  

Gamber-Johnson Holdings, LLC

  LIBOR Plus 7.00% (Floor 2.00%)   (5)         (46 )   1,553     21,486     46     2,510     19,022  

  Member Units   (5)         1,050     2,666     45,460     1,050         46,510  

GRT Rubber Technologies LLC

  LIBOR Plus 7.00%   (8)         (17 )   881     9,740     5,293     17     15,016  

  Member Units   (8)         6,910     8,728     39,060     6,910         45,970  

Guerdon Modular Holdings, Inc.

  16% Secured Debt   (9)         (3,711 )   424     12,002     16     3,711     8,307  

  LIBOR Plus 8.50% (Floor 1.00%)   (9)             9         464         464  

  Preferred Stock   (9)                              

  Common Stock   (9)     (6 )               6     6      

  Warrants   (9)                              

Harborside Holdings, LLC

  Member Units   (8)         (140 )       9,500     200     140     9,560  

IDX Broker, LLC

  11.5% Secured Debt   (9)         (35 )   1,259     14,350     35     685     13,700  

  Preferred Member Units   (9)         990     276     13,520     990         14,510  

Jensen Jewelers of Idaho, LLC

  Prime Plus 6.75% (Floor 2.00%)   (9)         (15 )   302     3,355     15     465     2,905  

  Member Units   (9)         1,930     245     5,090     1,930         7,020  

Kickhaefer Manufacturing Company, LLC

  11.5% Secured Debt   (5)             2,460     28,775     42     1,864     26,953  

  Member Units   (5)                 12,240             12,240  

  9.0% Secured Debt   (5)             267     3,970         24     3,946  

  Member Units   (5)             94     992             992  

Lamb Ventures, LLC

  LIBOR Plus 5.75%   (8)         (2 )   10         402     402      

  11% Secured Debt   (8)         (32 )   608     8,339     3,532     11,871      

  Preferred Equity   (8)                 400         400      

  Member Units   (8)     6,007     (2,167 )   394     7,440         7,440      

  9.5% Secured Debt   (8)         (4 )   24     432     4     436      

  Member Units   (8)     (139 )   (5 )   74     630         630      

Market Force Information, LLC

  LIBOR Plus 7.00% (Floor 1.00%)   (9)             72     200     2,765     200     2,765  

  LIBOR Plus 11.00% (Floor 1.00%)   (9)             2,365     22,624     30         22,654  

  Member Units   (9)         (6,050 )       13,100         6,050     7,050  

MH Corbin Holding LLC

  5% Current / 5% PIK Secured Debt   (5)         470     1,213     11,733     1,444     4,400     8,777  

  Preferred Member Units   (5)         (980 )       1,000         980     20  

  Preferred Member Units   (5)         370             4,770         4,770  

Mid-Columbia Lumber Products, LLC

  10% Secured Debt   (9)             135     1,746     3         1,749  

  12% Secured Debt   (9)             369     3,880     13         3,893  

  Member Units   (9)         (3,568 )   5     3,860     238     3,568     530  

  9.5% Secured Debt   (9)             52     746         34     712  

  Member Units   (9)         170     53     1,470     170         1,640  

MSC Adviser I, LLC

  Member Units   (8)         4,580     3,872     65,748     4,580         70,328  

Mystic Logistics Holdings, LLC

  12% Secured Debt   (6)             681     7,506     30     1,136     6,400  

  Common Stock   (6)         4,600     124     210     4,600         4,810  

PPL RVs, Inc.

  LIBOR Plus 7.00% (Floor 0.50%)   (8)         (94 )   1,094     15,100     28     1,349     13,779  

  Common Stock   (8)         (1,500 )       10,380         1,500     8,880  

102


Table of Contents

Company
  Investment(1)(10)(11)   Geography   Amount
of
Realized
Gain/
(Loss)
  Amount
of
Unrealized
Gain/
(Loss)
  Amount
of
Interest,
Fees or
Dividends
Credited
to
Income(2)
  December 31,
2018
Fair Value
  Gross
Additions(3)
  Gross
Reductions(4)
  September 30,
2019
Fair
Value
 

Principle Environmental, LLC

  13% Secured Debt   (8)         (48 )   709     7,477     48     1,129     6,396  

(d/b.a TruHorizon Environmental Solutions)

  Preferred Member Units   (8)         (350 )   1,878     13,090         350     12,740  

  Warrants   (8)         230         780     230         1,010  

Quality Lease Service, LLC

  Zero Coupon Secured Debt   (7)     (741 )   891         6,450     891     7,341      

  Member Units   (7)                 3,809     6,771         10,580  

The MPI Group, LLC

  9% Secured Debt   (7)         154     200     2,582     154         2,736  

  Series A Preferred Units   (7)     (8 )   (430 )       440     8     438     10  

  Warrants   (7)                              

  Member Units   (7)             98     2,479     1         2,480  

Trantech Radiator Topco, LLC

  12% Secured Debt   (7)             680         10,294     800     9,494  

  Common Stock   (7)             39         4,655         4,655  

Vision Interests, Inc.

  13% Secured Debt   (9)             204     2,153         125     2,028  

  Series A Preferred Stock   (9)         350         3,740     350         4,090  

  Common Stock   (9)         129         280     129         409  

Ziegler's NYPD, LLC

  6.5% Secured Debt   (8)         (2 )   51     1,000     2     2     1,000  

  12% Secured Debt   (8)             46     425     200         625  

  14% Secured Debt   (8)             292     2,750             2,750  

  Warrants   (8)                              

  Preferred Member Units   (8)         161         1,249     161         1,410  

Other controlled investments

                                                   

Access Media Holdings, LLC

 

10% PIK Secured Debt

 

(5)

   
   
(955

)
 
38
   
8,558
   
   
955
   
7,603
 

  Preferred Member Units   (5)                 (284 )           (284 )

  Member Units   (5)                              

ASC Interests, LLC

  11% Secured Debt   (8)             150     1,622     13         1,635  

  Member Units   (8)         (80 )       1,370         80     1,290  

ATS Workholding, LLC

  5% Secured Debt   (9)         (26 )   270     4,390     194     93     4,491  

  Preferred Member Units   (9)         (1,891 )       3,726         1,891     1,835  

Bond-Coat, Inc.

  15% Secured Debt   (8)         (229 )   1,343     11,596     78     229     11,445  

  Common Stock   (8)         (1,070 )       9,370         1,070     8,300  

Brewer Crane Holdings, LLC

  LIBOR Plus 10.00% (Floor 1.00%)   (9)             889     9,467     13     372     9,108  

  Preferred Member Units   (9)             90     4,280             4,280  

Bridge Capital Solutions Corporation

  13% Secured Debt   (6)             1,043     6,221     303         6,524  

  Warrants   (6)         (470 )       4,020         470     3,550  

  13% Secured Debt   (6)         (6 )   100     1,000     2     6     996  

  Preferred Member Units   (6)             75     1,000             1,000  

CBT Nuggets, LLC

  Member Units   (9)         (4,140 )   300     61,610         4,140     57,470  

Centre Technologies Holdings, LLC

  LIBOR Plus 9.00% (Floor 2.00%)   (8)             1,222         12,131         12,131  

  Preferred Member Units   (8)             90         5,840         5,840  

Chamberlin Holding LLC

  LIBOR Plus 10.00% (Floor 1.00%)   (8)         140     1,898     20,028     174     1,327     18,875  

  Member Units   (8)         4,650     1,449     18,940     4,650         23,590  

  Member Units   (8)             28     732     315         1,047  

Charps, LLC

  11.50% Secured Debt   (5)         (83 )   675     11,888     1,695     13,583      

  15% Secured Debt   (5)             98         2,000         2,000  

  Preferred Member Units   (5)         3,200     461     2,270     3,200         5,470  

Copper Trail Fund Investments

  LP Interests (CTMH, LP)   (9)             5     872             872  

Datacom, LLC

  8% Secured Debt   (8)         (137 )       1,690         136     1,554  

  10.50% PIK Secured Debt   (8)         278         9,786     278         10,064  

  Class A Preferred Member Units   (8)                              

  Class B Preferred Member Units   (8)                              

Digital Products Holdings LLC

  LIBOR Plus 10.00% (Floor 1.00%)   (5)         (433 )   2,335     25,511     76     6,223     19,364  

  Preferred Member Units   (5)         (1,831 )   150     8,466     1,035     1,831     7,670  

Garreco, LLC

  LIBOR Plus 8.00% (Floor 1.00%, Ceiling 1.50%)   (8)             358     5,099     15     603     4,511  

  Member Units   (8)         (90 )   28     2,590         90     2,500  

Gulf Manufacturing, LLC

  Member Units   (8)         (1,940 )   671     11,690         1,940     9,750  

Gulf Publishing Holdings, LLC

  LIBOR Plus 9.50% (Floor 1.00%)   (8)             16         320         320  

  12.5% Secured Debt   (8)             1,212     12,594     21     130     12,485  

  Member Units   (8)         (270 )       4,120         270     3,850  

Harris Preston Fund Investments

  LP Interests (2717 MH, L.P.)   (8)         191         1,133     1,386     500     2,019  

Harrison Hydra-Gen, Ltd.

  Common Stock   (8)         100     247     8,070     100         8,170  

KBK Industries, LLC

  Member Units   (5)         4,710     1,344     8,610     4,710         13,320  

NAPCO Precast, LLC

  LIBOR Plus 8.50%   (8)         (11 )   123     11,475     11     11,486      

  Member Units   (8)         1,590     2,657     13,990     1,590         15,580  

NexRev LLC

  11% Secured Debt   (8)             1,462     17,288     26     436     16,878  

  Preferred Member Units   (8)         (1,010 )   175     7,890         1,010     6,880  

103


Table of Contents

Company
  Investment(1)(10)(11)   Geography   Amount
of
Realized
Gain/
(Loss)
  Amount
of
Unrealized
Gain/
(Loss)
  Amount
of
Interest,
Fees or
Dividends
Credited
to
Income(2)
  December 31,
2018
Fair Value
  Gross
Additions(3)
  Gross
Reductions(4)
  September 30,
2019
Fair
Value
 

NRI Clinical Research, LLC

  LIBOR Plus 6.50% (Floor 1.50%)   (9)             10         200     200      

  14% Secured Debt   (9)         (27 )   733     6,685     27     202     6,510  

  Warrants   (9)         390         660     390         1,050  

  Member Units   (9)         1,740     32     2,478     1,740         4,218  

NRP Jones, LLC

  12% Secured Debt   (5)             580     6,376             6,376  

  Member Units   (5)         (440 )   173     5,960         440     5,520  

NuStep, LLC

  12% Secured Debt   (5)             1,908     20,458     30         20,488  

  Preferred Member Units   (5)                 10,200             10,200  

OMi Holdings, Inc.

  Common Stock   (8)         930     1,440     16,020     930         16,950  

Pegasus Research Group, LLC

  Member Units   (8)         (490 )       7,680         490     7,190  

River Aggregates, LLC

  Zero Coupon Secured Debt   (8)                 722         1     721  

  Member Units   (8)                 4,610             4,610  

  Member Units   (8)         110         2,930     110         3,040  

Tedder Industries, LLC

  12%, Secured Debt   (9)             51     480     720     1,040     160  

  12%, Secured Debt   (9)             1,511     16,246     19         16,265  

  Preferred Member Units   (9)                 7,476     660         8,136  

Other

                                                   

Amounts related to investments transferred to or from other 1940 Act classification during the period

            (187 )   260     (133 )   5,809              

Total Control investments

          $ 4,926   $ 6,286   $ 70,480   $ 1,004,993   $ 155,211   $ 129,829   $ 1,024,566  

Affiliate Investments

                                                   

                                                   

AFG Capital Group, LLC

 

Warrants

 

(8)

 
$

781
 
$

(691

)

$

 
$

950
 
$

 
$

950
 
$

 

  10% Secured Debt   (8)             43         1,040     116     924  

  Preferred Member Units   (8)         1,060     (40 )   3,980     1,060         5,040  

American Trailer Rental Group LLC

  LIBOR Plus 7.25% (Floor 1.00%)   (5)         199     1,990     20,312     8,728     1,852     27,188  

  Member Units   (5)         2,600         5,780     2,600         8,380  

BBB Tank Services, LLC

  LIBOR Plus 11% (Floor 1.00%)   (8)             507     3,833     848         4,681  

  Preferred Member Units   (8)             14     113     14         127  

  Member Units   (8)         (110 )       230         110     120  

Boccella Precast Products LLC

  LIBOR Plus 12% (Floor 1.00%)   (6)         (63 )   1,696     15,724     463     2,943     13,244  

  Member Units   (6)         724     215     5,080     820         5,900  

Boss Industries, LLC

  Preferred Member Units   (5)     3,771     (3,930 )   611     6,176         6,176      

Buca C, LLC

  LIBOR Plus 9.25% (Floor 1.00%)   (7)         (187 )   1,711     19,038     32     287     18,783  

  Preferred Member Units   (7)             200     4,431     200         4,631  

CAI Software LLC

  12% Secured Debt   (6)         (30 )   969     10,880     30     1,750     9,160  

  Member Units   (6)         2,223     20     2,717     2,223         4,940  

Chandler Signs Holdings, LLC

  12% Secured Debt   (8)         (6 )   444     4,546     29     6     4,569  

  Class A Units   (8)         10     16     2,120     10         2,130  

Charlotte Russe, Inc

  8.50% Secured Debt   (9)     (7,012 )   4,003         3,930     4,003     7,933      

  Common Stock   (9)                              

Condit Exhibits, LLC

  Member Units   (9)     1,850     (1,850 )   132     1,950         1,950      

Congruent Credit Opportunities Funds

  LP Interests (Fund II)   (8)                 855             855  

  LP Interests (Fund III)   (8)         81     949     17,468     81     931     16,618  

Copper Trail Fund Investments

  LP Interests (Copper Trail Energy Fund I, LP)   (9)         14     11     4,170     14     1,911     2,273  

Dos Rios Partners

  LP Interests (Dos Rios Partners, LP)   (8)         (217 )       7,153         217     6,936  

  LP Interests (Dos Rios Partners—A, LP)   (8)         (69 )       2,271         69     2,202  

East Teak Fine Hardwoods, Inc.

  Common Stock   (7)         (80 )   12     560         80     480  

EIG Fund Investments

  LP Interests (EIG Global Private Debt fund—A, L.P.)   (8)     8         84     505     253     57     701  

Freeport Financial Funds

  LP Interests (Freeport Financial SBIC Fund LP)   (5)         506         5,399     506         5,905  

  LP Interests (Freeport First Lien Loan Fund III LP)   (5)         (85 )   809     10,980     799     1,484     10,295  

Fuse, LLC

  12% Secured Debt   (9)             59         1,939         1,939  

  Common Stock   (9)                     256         256  

Harris Preston Fund Investments

  LP Interests (HPEP 3, L.P.)   (8)                 1,733     741         2,474  

Hawk Ridge Systems, LLC

  LIBOR Plus 6.00% (Floor 1.00%)   (9)             13         600         600  

  10.0% Secured Debt   (9)         (27 )   1,076     14,300     27     927     13,400  

  Preferred Member Units   (9)         640     262     7,260     640         7,900  

  Preferred Member Units   (9)         40         380     40         420  

Houston Plating and Coatings, LLC

  8% Unsecured Convertible Debt   (8)         540     182     3,720     540         4,260  

  Member Units   (8)         2,010     400     8,330     2,010         10,340  

I-45 SLF LLC

  Member Units   (8)         (953 )   2,515     15,627     800     953     15,474  

104


Table of Contents

Company
  Investment(1)(10)(11)   Geography   Amount
of
Realized
Gain/
(Loss)
  Amount
of
Unrealized
Gain/
(Loss)
  Amount
of
Interest,
Fees or
Dividends
Credited
to
Income(2)
  December 31,
2018
Fair Value
  Gross
Additions(3)
  Gross
Reductions(4)
  September 30,
2019
Fair
Value
 

L.F. Manufacturing Holdings, LLC

  Preferred Member Units   (8)             8         78         78  

  Member Units   (8)         (10 )       2,060         10     2,050  

OnAsset Intelligence, Inc.

  12% PIK Secured Debt   (8)             537     5,743     539         6,282  

  10% PIK Secured Debt   (8)             4     53     4         57  

  Preferred Stock   (8)                              

  Warrants   (8)                              

PCI Holding Company, Inc.

  12% Current Secured Debt   (9)             1,140     11,908     98     650     11,356  

  Preferred Stock   (9)         1,210         340     1,210         1,550  

  Preferred Stock   (9)         870         3,480     870         4,350  

Rocaceia, LLC (Quality Lease and Rental

  12% Secured Debt   (8)                 250             250  

Holdings, LLC)

  Preferred Member Units   (8)                              

Salado Stone Holdings, LLC

  Class A Preferred Units   (8)         (310 )       1,040         310     730  

SI East, LLC

  10.25% Current, Secured Debt   (7)         293     2,800     34,885     365     2,287     32,963  

  Preferred Member Units   (7)         1,340     273     6,000     1,340         7,340  

Slick Innovations, LLC

  14% Current, Secured Debt   (6)             760     6,959     66     1,280     5,745  

  Warrants   (6)         109         181     109         290  

  Member Units   (6)         380         700     380         1,080  

UniTek Global Services, Inc.

  LIBOR Plus 6.50% (Floor 1.00%)   (6)         22     194     2,969     22     23     2,968  

  Preferred Stock   (6)         (3,550 )   512     7,413     511     3,550     4,374  

  Preferred Stock   (6)         398     247     1,637     645         2,282  

  Preferred Stock   (6)         1,118     14         1,889         1,889  

  Preferred Stock   (6)             459     3,038     459         3,497  

  Common Stock   (6)         (1,420 )       1,420         1,420      

Universal Wellhead Services Holdings, LLC

  Preferred Member Units   (8)         (60 )   195     950     195     60     1,085  

  Member Units   (8)         (1,340 )       2,330         1,340     990  

Volusion, LLC

  11.5% Secured Debt   (8)         (418 )   2,330     18,407     1,546     418     19,535  

  8% Unsecured Convertible Debt   (8)         (118 )   23     297     112     118     291  

  Preferred Member Units   (8)                 14,000             14,000  

  Warrants   (8)         (1,320 )       1,890         1,320     570  

Other

                                                   

Amounts related to investments transferred to or from other 1940 Act classification during the period

                (415 )   1,030     19,439              

Total Affiliate investments

          $ (602 ) $ 3,131   $ 25,426   $ 359,890   $ 41,784   $ 43,488   $ 338,747  

(1)
The principal amount, the ownership detail for equity investments and if the investment is income producing is included in the consolidated schedule of investments.

(2)
Represents the total amount of interest, fees and dividends credited to income for the portion of the period for which an investment was included in Control or Affiliate categories, respectively. For investments transferred between Control and Affiliate categories during the period, any income or investment balances related to the time period it was in the category other than the one shown at period end is included in "Amounts from investments transferred from other 1940 Act classifications during the period."

(3)
Gross additions include increases in the cost basis of investments resulting from new portfolio investments, follow-on investments and accrued PIK interest, and the exchange of one or more existing securities for one or more new securities. Gross additions also include net increases in unrealized appreciation or net decreases in net unrealized depreciation as well as the movement of an existing portfolio company into this category and out of a different category.

(4)
Gross reductions include decreases in the cost basis of investments resulting from principal repayments or sales and the exchange of one or more existing securities for one or more new securities. Gross reductions also include net increases in net unrealized depreciation or net decreases in unrealized appreciation as well as the movement of an existing portfolio company out of this category and into a different category.

(5)
Portfolio company located in the Midwest region as determined by location of the corporate headquarters. The fair value as of September 30, 2019 for control investments located in this region was $243,750. This represented 15.9% of net assets as of September 30, 2019. The fair value as of September 30, 2019 for affiliate investments located in this region was $51,768. This represented 3.4% of net assets as of September 30, 2019.

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Table of Contents

(6)
Portfolio company located in the Northeast region as determined by location of the corporate headquarters. The fair value as of September 30, 2019 for control investments located in this region was $23,280. This represented 1.5% of net assets as of September 30, 2019. The fair value as of September 30, 2019 for affiliate investments located in this region was $55,369. This represented 3.6% of net assets as of September 30, 2019.

(7)
Portfolio company located in the Southeast region as determined by location of the corporate headquarters. The fair value as of September 30, 2019 for control investments located in this region was $29,955. This represented 2.0% of net assets as of September 30, 2019. The fair value as of September 30, 2019 for affiliate investments located in this region was $64,197. This represented 4.2% of net assets as of September 30, 2019.

(8)
Portfolio company located in the Southwest region as determined by location of the corporate headquarters. The fair value as of September 30, 2019 for control investments located in this region was $413,244. This represented 27.0% of net assets as of September 30, 2019. The fair value as of September 30, 2019 for affiliate investments located in this region was $123,369. This represented 8.1% of net assets as of September 30, 2019.

(9)
Portfolio company located in the West region as determined by location of the corporate headquarters. The fair value as of September 30, 2019 for control investments located in this region was $314,337. This represented 20.5% of net assets as of September 30, 2019. The fair value as of September 30, 2019 for affiliate investments located in this region was $44,044. This represented 2.9% of net assets as of September 30, 2019.

(10)
All of the Company's portfolio investments are generally subject to restrictions on resale as "restricted securities," unless otherwise noted.

(11)
This schedule should be read in conjunction with the consolidated schedule of investments and notes to the consolidated financial statements. Supplemental information can be located within the schedule of investments including end of period interest rate, preferred dividend rate, maturity date, investments not paid currently in cash and investments whose value was determined using significant unobservable inputs.

(12)
Investment has an unfunded commitment as of September 30, 2019 (see Note K). The fair value of the investment includes the impact of the fair value of any unfunded commitments.

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Schedule 12-14

MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments In and Advances to Affiliates
September 30, 2018
(dollars in thousands)
(unaudited)

Company
  Investment(1)(10)(11)   Geography   Amount
of
Realized
Gain/
(Loss)
  Amount
of
Unrealized
Gain/
(Loss)
  Amount
of
Interest,
Fees or
Dividends
Credited
to
Income(2)
  December 31,
2017
Fair Value
  Gross
Additions(3)
  Gross
Reductions(4)
  September 30,
2018
Fair
Value
 

Majority-owned investments

                                                   

Café Brazil, LLC

 

Member Units

 

(8)

 
$

 
$

(120

)

$

222
 
$

4,900
 
$

 
$

120
 
$

4,780
 

California Splendor Holdings LLC

  LIBOR Plus 8.00% (Floor 1.00%)   (9)             702         18,318     3,500     14,818  

  LIBOR Plus 10.00% (Floor 1.00%)   (9)             2,084         27,744         27,744  

  Preferred Member Units   (9)             115         12,500     1,725     10,775  

Clad-Rex Steel, LLC

  LIBOR Plus 9.50% (Floor 1.00%)   (5)         (24 )   1,148     13,280     24     824     12,480  

  Member Units   (5)         880     400     9,500     880         10,380  

  10% Secured Debt   (5)             88     1,183         16     1,167  

  Member Units   (5)                 280             280  

CMS Minerals Investments

  Member Units   (9)         748     83     2,392     748     549     2,591  

Direct Marketing Solutions, Inc.

  LIBOR Plus 11.00% (Floor 1.00%)   (9)             1,872         18,621     548     18,073  

  Preferred Stock   (9)         3,380             11,780         11,780  

Gamber-Johnson Holdings, LLC

  LIBOR Plus 9.00% (Floor 2.00%)   (5)         (40 )   1,997     23,400     40     914     22,526  

  Member Units   (5)         16,750     1,436     23,370     16,750         40,120  

GRT Rubber Technologies LLC

  LIBOR Plus 9.00% (Floor 1.00%)   (8)         (23 )   916     11,603     23     1,525     10,101  

  Member Units   (8)         10,070     979     21,970     10,070         32,040  

Harborside Holdings, LLC

  Member Units   (8)                 9,400     100         9,500  

Harris Preston Fund Investments

  LP Interests (2717 MH, L.P.)   (8)         93         536     597         1,133  

Hydratec, Inc.

  Common Stock   (9)     7,922     (7,905 )   332     15,000         15,000      

IDX Broker, LLC

  11.5% Secured Debt   (9)         (35 )   1,330     15,250     35     785     14,500  

  Preferred Member Units   (9)         810     206     11,660     810         12,470  

Jensen Jewelers of Idaho, LLC

  Prime Plus 6.75% (Floor 2.00%)   (9)         (15 )   338     3,955     15     465     3,505  

  Member Units   (9)         (10 )   190     5,100         10     5,090  

Lamb Ventures, LLC

  11% Secured Debt   (8)         (16 )   739     9,942     215     1,818     8,339  

  Preferred Equity   (8)                 400             400  

  Member Units   (8)         (60 )       6,790         60     6,730  

  9.5% Secured Debt   (8)             31     432             432  

  Member Units   (8)         110     20     520     110         630  

Mid-Columbia Lumber Products, LLC

  10% Secured Debt   (9)             136     1,390     355         1,745  

  12% Secured Debt   (9)             367     3,863     12         3,875  

  Member Units   (9)         1,689     5     1,575     2,285         3,860  

  9.5% Secured Debt   (9)             56     791         34     757  

  Member Units   (9)         180     39     1,290     180         1,470  

MSC Adviser I, LLC

  Member Units   (8)         28,380     2,661     41,768     28,380         70,148  

Mystic Logistics Holdings, LLC

  12% Secured Debt   (6)             726     7,696     32     232     7,496  

  Common Stock   (6)         (6,110 )       6,820         6,110     710  

NexRev LLC

  11% Secured Debt   (8)             1,346         17,281         17,281  

  Preferred Member Units   (8)         1,010     40         7,890         7,890  

NRP Jones, LLC

  12% Secured Debt   (5)             580     6,376             6,376  

  Member Units   (5)         2,120         3,250     2,120         5,370  

PPL RVs, Inc.

  LIBOR Plus 7.00% (Floor 0.50%)   (8)         (28 )   1,118     16,100     28     1,028     15,100  

  Common Stock   (8)         (660 )   53     12,440         660     11,780  

Principle Environmental, LLC

  13% Secured Debt   (8)         (37 )   775     7,477     37     37     7,477  

(d/b.a TruHorizon Environmental Solutions)

  Preferred Member Units   (8)         1,600     1,282     11,490     1,600         13,090  

  Warrants   (8)         130         650     130         780  

Quality Lease Service, LLC

  Zero Coupon Secured Debt   (7)         (500 )       6,950         500     6,450  

  Member Units   (7)         (1,668 )       4,938     1,100     1,668     4,370  

Tedder Industries, LLC

  12%, Secured Debt   (9)             501         16,240         16,240  

  Member Units   (9)                     7,476         7,476  

The MPI Group, LLC

  9% Secured Debt   (7)         (1,301 )   201     2,410     1     1,301     1,110  

  Series A Preferred Units   (7)                              

  Warrants   (7)                              

  Member Units   (7)         90     92     2,389     91         2,480  

Uvalco Supply, LLC

  9% Secured Debt   (8)             7     348         348      

  Member Units   (8)     301     (301 )   898     3,880         3,880      

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Table of Contents

Company
  Investment(1)(10)(11)   Geography   Amount
of
Realized
Gain/
(Loss)
  Amount
of
Unrealized
Gain/
(Loss)
  Amount
of
Interest,
Fees or
Dividends
Credited
to
Income(2)
  December 31,
2017
Fair Value
  Gross
Additions(3)
  Gross
Reductions(4)
  September 30,
2018
Fair
Value
 

Vision Interests, Inc.

  13% Secured Debt   (9)             284     2,797     13     499     2,311  

  Series A Preferred Stock   (9)         280         3,000     740         3,740  

  Common Stock   (9)         740             280         280  

Ziegler's NYPD, LLC

  6.5% Secured Debt   (8)         2     51     996     4         1,000  

  12% Secured Debt   (8)             34     300     125         425  

  14% Secured Debt   (8)             292     2,750             2,750  

  Warrants   (8)                              

  Preferred Member Units   (8)         (1,150 )       3,220         1,149     2,071  

Other controlled investments

                                                   

Access Media Holdings, LLC

 

10% PIK Secured Debt

 

(5)

   
   
(2,030

)
 
13
   
17,150
   
   
2,030
   
15,120
 

  Preferred Member Units(12)   (5)         (1,517 )           1,030     1,517     (487 )

  Member Units   (5)                              

ASC Interests, LLC

  11% Secured Debt   (8)             148     1,795         178     1,617  

  Member Units   (8)         (160 )       1,530         160     1,370  

ATS Workholding, LLC

  5% Secured Debt   (9)             245     3,249     1,125         4,374  

  Preferred Member Units   (9)                 3,726             3,726  

Bond-Coat, Inc.

  12% Secured Debt   (8)         253     1,102     11,596             11,596  

  Common Stock   (8)                 9,370             9,370  

Brewer Crane Holdings, LLC

  LIBOR Plus 10.00% (Floor 1.00%)   (9)             969         9,834     248     9,586  

  Preferred Member Units   (9)             87         4,280         4,280  

CBT Nuggets, LLC

  Member Units   (9)         (27,470 )   11,395     89,560         27,470     62,090  

Chamberlin Holding LLC

  LIBOR Plus 10.00% (Floor 1.00%)   (8)             1,956         21,405         21,405  

  Member Units   (8)         6,350     1,367         17,790         17,790  

Charps, LLC

  LIBOR Plus 7.00% (Floor 1.00%)   (5)                     1,587         1,587  

  12% Secured Debt   (5)             1,587     18,225     58     2,500     15,783  

  Preferred Member Units   (5)         400         650     400         1,050  

Copper Trail Fund Investments

  LP Interests (CTMH, LP)   (9)             10         872         872  

  LP Interests (Copper Trail Energy Fund I, LP)   (9)         229     57     2,500     999         3,499  

Datacom, LLC

  8% Secured Debt   (8)         (110 )   33     1,575     225     110     1,690  

  10.50% PIK Secured Debt   (8)         (718 )   330     11,110     168     718     10,560  

  Class A Preferred Member Units   (8)         (843 )       730     113     843      

  Class B Preferred Member Units   (8)                              

Digital Products Holdings LLC

  LIBOR Plus 10.00% (Floor 1.00%)   (5)             1,886         26,158     330     25,828  

  Preferred Member Units   (5)             100         8,800     334     8,466  

Garreco, LLC

  LIBOR Plus 10.00% (Floor 1.00%)   (8)             497     5,443     13     121     5,335  

  Member Units   (8)                 1,940             1,940  

Guerdon Modular Holdings, Inc.

  13% Secured Debt   (9)         (570 )   871     10,632     2,316     970     11,978  

  Preferred Stock   (9)                              

  Common Stock   (9)                              

  Warrants   (9)                              

Gulf Manufacturing, LLC

  Member Units   (8)         1,630     1,227     10,060     1,630         11,690  

Gulf Publishing Holdings, LLC

  LIBOR Plus 9.50% (Floor 1.00%)   (8)             9     80     160     80     160  

  12.5% Secured Debt   (8)             1,223     12,703     19     134     12,588  

  Member Units   (8)         (270 )       4,840         270     4,570  

Harrison Hydra-Gen, Ltd.

  Common Stock   (8)         3,990     120     3,580     3,990         7,570  

HW Temps LLC

  LIBOR Plus 11.00% (Floor 1.00%)   (6)             1,035     9,918     14         9,932  

  Preferred Member Units   (6)         2     135     3,940     2         3,942  

KBK Industries, LLC

  10% Secured Debt   (5)         (3 )   9     375     3     378      

  12.5% Secured Debt   (5)         (33 )   546     5,900     33     5,933      

  Member Units   (5)         2,680     756     4,420     2,680         7,100  

Marine Shelters Holdings, LLC

  12% PIK Secured Debt   (8)     (3,361 )   3,078             3,361     3,361      

  Preferred Member Units   (8)     (5,352 )   5,352             5,352     5,352      

Market Force Information, LLC

  LIBOR Plus 11.00% (Floor 1.00%)   (9)             16         680     280     400  

  LIBOR Plus 11.00% (Floor 1.00%)   (9)             2,322     23,143     32     560     22,615  

  Member Units   (9)         (450 )       14,700         450     14,250  

MH Corbin Holding LLC

  10% Secured Debt   (5)             1,044     12,526         527     11,999  

  Preferred Member Units   (5)         (1,500 )   105     6,000         1,500     4,500  

NAPCO Precast, LLC

  LIBOR Plus 8.50%   (8)         (18 )   946     11,475     18     18     11,475  

  Member Units   (8)         1,610     1,024     11,670     1,610         13,280  

NRI Clinical Research, LLC

  14% Secured Debt   (9)         152     726     4,265     3,035     400     6,900  

  Warrants   (9)                 500             500  

  Member Units   (9)                 2,500             2,500  

NuStep, LLC

  12% Secured Debt   (5)             1,907     20,420     28         20,448  

  Preferred Member Units   (5)                 10,200             10,200  

OMi Holdings, Inc.

  Common Stock   (8)         1,370     1,128     14,110     1,370         15,480  

Pegasus Research Group, LLC

  Member Units   (8)         (2,060 )       10,310         2,060     8,250  

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Table of Contents

Company
  Investment(1)(10)(11)   Geography   Amount
of
Realized
Gain/
(Loss)
  Amount
of
Unrealized
Gain/
(Loss)
  Amount
of
Interest,
Fees or
Dividends
Credited
to
Income(2)
  December 31,
2017
Fair Value
  Gross
Additions(3)
  Gross
Reductions(4)
  September 30,
2018
Fair
Value
 

River Aggregates, LLC

  Zero Coupon Secured Debt   (8)         (28 )   43     707     43     28     722  

  Member Units   (8)                 4,610             4,610  

  Member Units   (8)         171         2,559     171         2,730  

SoftTouch Medical Holdings LLC

  LIBOR Plus 9.00% (Floor 1.00%)   (7)         (30 )   120     7,140     30     7,170      

  Member Units   (7)     5,171     (5,159 )   865     10,089         10,089      

Other

                                                   

Amounts related to investments transferred to or from other 1940 Act classification during the period

                    25     (10,632 )            

Total Control investments

          $ 4,681   $ 33,357   $ 64,756   $ 750,706   $ 327,214   $ 121,424   $ 967,128  

Affiliate Investments

                                                   

                                                   

AFG Capital Group, LLC

 

Warrants

 

(8)

 
$

 
$

80
 
$

 
$

860
 
$

80
 
$

 
$

940
 

  Preferred Member Units   (8)         350     30     3,590     350         3,940  

Barfly Ventures, LLC

  12% Secured Debt   (5)         (4 )   859     8,715     1,097     4     9,808  

  Options   (5)         (190 )       920         190     730  

  Warrants   (5)         (110 )       520         110     410  

BBB Tank Services, LLC

  LIBOR Plus 10% (Floor 1.00%)   (8)             63     778     417     562     633  

  17% Secured Debt   (8)             511     3,876     22         3,898  

  Member Units   (8)         (30 )       500         30     470  

Boccella Precast Products LLC

  LIBOR Plus 8% (Floor 1.00%)   (6)         (29 )   1,442     16,400     2,188     2,304     16,284  

  Member Units   (6)         1,520     510     3,440     1,520         4,960  

Boss Industries, LLC

  Preferred Member Units   (5)         1,777     495     3,930     1,900         5,830  

Bridge Capital Solutions Corporation

  13% Secured Debt   (6)             1,011     5,884     246         6,130  

  Warrants   (6)         500         3,520     500         4,020  

  13% Secured Debt   (6)         (1 )   100     1,000     1     1     1,000  

  Preferred Member Units   (6)             83     1,000             1,000  

Buca C, LLC

  LIBOR Plus 9.25% (Floor 1.00%)   (7)             1,708     20,193     34     900     19,327  

  Preferred Member Units   (7)         5     188     4,172     193         4,365  

CAI Software LLC

  12% Secured Debt   (6)         (11 )   367     4,083     11     811     3,283  

  Member Units   (6)         (610 )   20     3,230         610     2,620  

Chandler Signs Holdings, LLC

  12% Secured Debt/1.00% PIK   (8)         (6 )   451     4,500     40     6     4,534  

  Class A Units   (8)         (390 )   45     2,650         390     2,260  

Charlotte Russe, Inc

  8.50% Secured Debt   (9)         7,779     458     7,807     16,658     17,400     7,065  

  Common Stock   (9)                     3,141         3,141  

Condit Exhibits, LLC

  Member Units   (9)             104     1,950             1,950  

Congruent Credit Opportunities Funds

  LP Interests (Fund II)   (8)         (140 )       1,515         660     855  

  LP Interests (Fund III)   (8)         (10 )   1,486     18,632     4,014     1,465     21,181  

Dos Rios Partners

  LP Interests (Dos Rios Partners, LP)   (8)         241         7,165     241     150     7,256  

  LP Interests (Dos Rios Partners—A, LP)   (8)         462         1,889     462     47     2,304  

East Teak Fine Hardwoods, Inc.

  Common Stock   (7)         (70 )   30     630         70     560  

EIG Fund Investments

  LP Interests (EIG Global Private Debt fund—A, L.P.)   (8)             37     1,055     416     1,030     441  

Freeport Financial Funds

  LP Interests (Freeport Financial SBIC Fund LP)   (5)         247     102     5,614     247         5,861  

  LP Interests (Freeport First Lien Loan Fund III LP)   (5)         (123 )   660     8,506         123     8,383  

Gault Financial, LLC (RMB Capital, LLC)

  8% Secured Debt   (7)         228     734     11,532     228     450     11,310  

  Warrants   (7)                              

Harris Preston Fund Investments

  LP Interests (HPEP 3, L.P.)   (8)                 943     790         1,733  

Hawk Ridge Systems, LLC

  10.5% Secured Debt   (9)         (20 )   1,168     14,300     20     20     14,300  

  Preferred Member Units   (9)         3,210     352     3,800     3,210         7,010  

  Preferred Member Units   (9)         170         200     170         370  

Houston Plating and Coatings, LLC

  8% Unsecured Convertible Debt   (8)         280     182     3,200     280         3,480  

  Member Units   (8)         1,293     177     6,140     1,350         7,490  

I-45 SLF LLC

  Member Units   (8)         (219 )   2,154     16,841         219     16,622  

L.F. Manufacturing Holdings, LLC

  Member Units   (8)         60         2,000     60         2,060  

Meisler Operating LLC

  LIBOR Plus 8.50% (Floor 1.00%)   (5)             1,646     16,633     3,989     320     20,302  

  Member Units   (5)         525         3,390     2,181         5,571  

OnAsset Intelligence, Inc.

  12% PIK Secured Debt   (8)             477     5,094     478         5,572  

  10% PIK Secured Debt   (8)             4     48     3         51  

  Preferred Stock   (8)                              

  Warrants   (8)                              

OPI International Ltd.

  Common Stock   (8)                              

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Company
  Investment(1)(10)(11)   Geography   Amount
of
Realized
Gain/
(Loss)
  Amount
of
Unrealized
Gain/
(Loss)
  Amount
of
Interest,
Fees or
Dividends
Credited
to
Income(2)
  December 31,
2017
Fair Value
  Gross
Additions(3)
  Gross
Reductions(4)
  September 30,
2018
Fair
Value
 

PCI Holding Company, Inc.

  12% Current/3% PIK Secured Debt   (9)             1,639     12,593     513     976     12,130  

  Preferred Stock   (9)         (890 )       890         890      

  Preferred Stock   (9)         570         2,610     570         3,180  

Rocaceia, LLC (Quality Lease and Rental

  12% Secured Debt   (8)                 250             250  

Holdings, LLC)

  Preferred Member Units   (8)                              

Salado Acquisition, LLC

  Class A Preferred Units   (8)         (430 )   23     1,790         430     1,360  

SI East, LLC

  10.25% Current, Secured Debt   (7)             499         34,869         34,869  

  Preferred Member Units   (7)                     6,000         6,000  

Slick Innovations, LLC

  14.00% Current, Secured Debt   (6)             197         6,950         6,950  

  Warrants   (6)                     181         181  

  Preferred Member Units   (6)                     700         700  

Tin Roof Acquisition Company

  12% Secured Debt   (7)             841     12,722     561     13,283      

  Class C Preferred Stock   (7)             152     3,027     152     3,179      

UniTek Global Services, Inc.

  LIBOR Plus 5.50% (Floor 1.00%)   (6)             57         2,476         2,476  

  LIBOR Plus 8.50% (Floor 1.00%)   (6)         (6 )   819     8,535     6     8,541      

  LIBOR Plus 7.50% (Floor 1.00%)/1.00% PIK   (6)             7     137         137      

  15% PIK Unsecured Debt   (6)             122     865     87     952      

  Preferred Stock   (6)         41     780     7,320     820         8,140  

  Preferred Stock   (6)                     1,772         1,772  

  Preferred Stock   (6)         8     432     2,850     440         3,290  

  Common Stock   (6)         800     41     2,490     800         3,290  

Universal Wellhead Services Holdings, LLC

  Preferred Member Units   (8)         30     60     830     90         920  

  Member Units   (8)         300         1,910     301         2,211  

Valley Healthcare Group, LLC

  LIBOR Plus 10.50% (Floor 0.50%)   (8)             1,400     11,685     81     11,766      

  Preferred Member Units   (8)     1,898         58     1,600         1,600      

Volusion, LLC

  11.5% Secured Debt   (8)             2,074     15,200     3,027         18,227  

  8% Unsecured Convertible Debt   (8)             9         297         297  

  Preferred Member Units   (8)             1     14,000             14,000  

  Warrants   (8)         (190 )       2,080         189     1,891  

Other

                                                   

Amounts related to investments transferred to or from other 1940 Act classification during the period

                    365     2,825              

Total Affiliate investments

          $ 1,898   $ 16,997   $ 27,230   $ 338,854   $ 107,230   $ 69,815   $ 373,444  

(1)
The principal amount, the ownership detail for equity investments and if the investment is income producing is included in the consolidated schedule of investments.

(2)
Represents the total amount of interest, fees and dividends credited to income for the portion of the period for which an investment was included in Control or Affiliate categories, respectively. For investments transferred between Control and Affiliate categories during the period, any income or investment balances related to the time period it was in the category other than the one shown at period end is included in "Amounts from investments transferred from other 1940 Act classifications during the period."

(3)
Gross additions include increases in the cost basis of investments resulting from new portfolio investments, follow-on investments and accrued PIK interest, and the exchange of one or more existing securities for one or more new securities. Gross additions also include net increases in unrealized appreciation or net decreases in net unrealized depreciation as well as the movement of an existing portfolio company into this category and out of a different category.

(4)
Gross reductions include decreases in the cost basis of investments resulting from principal repayments or sales and the exchange of one or more existing securities for one or more new securities. Gross reductions also include net increases in net unrealized depreciation or net decreases in unrealized appreciation as well as the movement of an existing portfolio company out of this category and into a different category.

(5)
Portfolio company located in the Midwest region as determined by location of the corporate headquarters. The fair value as of September 30, 2018 for control investments located in this region was $220,293. This represented 14.6% of net assets as of September 30, 2018. The fair value as of September 30, 2018 for affiliate investments located in this region was $56,895. This represented 3.8% of net assets as of September 30, 2018.

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(6)
Portfolio company located in the Northeast region as determined by location of the corporate headquarters. The fair value as of September 30, 2018 for control investments located in this region was $22,080. This represented 1.5% of net assets as of September 30, 2018. The fair value as of September 30, 2018 for affiliate investments located in this region was $66,096. This represented 4.4% of net assets as of September 30, 2018.

(7)
Portfolio company located in the Southeast region as determined by location of the corporate headquarters. The fair value as of September 30, 2018 for control investments located in this region was $14,410. This represented 1.0% of net assets as of September 30, 2018. The fair value as of September 30, 2018 for affiliate investments located in this region was $76,431. This represented 5.1% of net assets as of September 30, 2018.

(8)
Portfolio company located in the Southwest region as determined by location of the corporate headquarters. The fair value as of September 30, 2018 for control investments located in this region was $399,675. This represented 26.5% of net assets as of September 30, 2018. The fair value as of September 30, 2018 for affiliate investments located in this region was $124,876. This represented 8.3% of net assets as of September 30, 2018.

(9)
Portfolio company located in the West region as determined by location of the corporate headquarters. The fair value as of September 30, 2018 for control investments located in this region was $310,670. This represented 20.6% of net assets as of September 30, 2018. The fair value as of September 30, 2018 for affiliate investments located in this region was $49,146. This represented 3.3% of net assets as of September 30, 2018.

(10)
All of the Company's portfolio investments are generally subject to restrictions on resale as "restricted securities," unless otherwise noted.

(11)
This schedule should be read in conjunction with the consolidated schedule of investments and notes to the consolidated financial statements. Supplemental information can be located within the schedule of investments including end of period interest rate, preferred dividend rate, maturity date, investments not paid currently in cash and investments whose value was determined using significant unobservable inputs.

(12)
Investment has an unfunded commitment as of September 30, 2018 (see Note M). The fair value of the investment includes the impact of the fair value of any unfunded commitments.

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Item 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        The information in this section contains forward-looking statements that involve risks and uncertainties. Please see "Risk Factors" and "Cautionary Statement Concerning Forward-Looking Statements" in our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the Securities and Exchange Commission (the "SEC") on March 1, 2019, for a discussion of the uncertainties, risks and assumptions associated with these statements. You should read the following discussion in conjunction with the consolidated financial statements and related notes and other financial information included elsewhere in this Quarterly Report and in the Annual Report on Form 10-K for the year ended December 31, 2018.

ORGANIZATION

        Main Street Capital Corporation ("MSCC") is a principal investment firm primarily focused on providing customized debt and equity financing to lower middle market ("LMM") companies and debt capital to middle market ("Middle Market") companies. The portfolio investments of MSCC and its consolidated subsidiaries are typically made to support management buyouts, recapitalizations, growth financings, refinancings and acquisitions of companies that operate in a variety of industry sectors. MSCC seeks to partner with entrepreneurs, business owners and management teams and generally provides "one stop" financing alternatives within its LMM portfolio. MSCC and its consolidated subsidiaries invest primarily in secured debt investments, equity investments, warrants and other securities of LMM companies based in the United States and in secured debt investments of Middle Market companies generally headquartered in the United States.

        MSCC was formed in March 2007 to operate as an internally managed business development company ("BDC") under the Investment Company Act of 1940, as amended (the "1940 Act"). MSCC wholly owns several investment funds, including Main Street Mezzanine Fund, LP ("MSMF"), Main Street Capital II, LP ("MSC II") and Main Street Capital III, LP ("MSC III" and, collectively with MSMF and MSC II, the "Funds"), and each of their general partners. The Funds are each licensed as a Small Business Investment Company ("SBIC") by the United States Small Business Administration ("SBA"). Because MSCC is internally managed, all of the executive officers and other employees are employed by MSCC. Therefore, MSCC does not pay any external investment advisory fees, but instead directly incurs the operating costs associated with employing investment and portfolio management professionals.

        MSC Adviser I, LLC (the "External Investment Manager") was formed in November 2013 as a wholly owned subsidiary of MSCC to provide investment management and other services to parties other than MSCC and its subsidiaries or their portfolio companies ("External Parties") and receives fee income for such services. MSCC has been granted no-action relief by the Securities and Exchange Commission ("SEC") to allow the External Investment Manager to register as a registered investment adviser under the Investment Advisers Act of 1940, as amended. Since the External Investment Manager conducts all of its investment management activities for External Parties, it is accounted for as a portfolio investment of MSCC and is not included as a consolidated subsidiary of MSCC in MSCC's consolidated financial statements.

        MSCC has elected to be treated for U.S. federal income tax purposes as a regulated investment company ("RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). As a result, MSCC generally will not pay corporate-level U.S. federal income taxes on any net ordinary taxable income or capital gains that it distributes to its stockholders.

        MSCC has certain direct and indirect wholly owned subsidiaries that have elected to be taxable entities (the "Taxable Subsidiaries"). The primary purpose of the Taxable Subsidiaries is to permit MSCC to hold equity investments in portfolio companies which are "pass-through" entities for tax purposes.

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        Unless otherwise noted or the context otherwise indicates, the terms "we," "us," "our," the "Company" and "Main Street" refer to MSCC and its consolidated subsidiaries, which include the Funds and the Taxable Subsidiaries.

OVERVIEW

        Our principal investment objective is to maximize our portfolio's total return by generating current income from our debt investments and capital appreciation from our equity and equity-related investments, including warrants, convertible securities and other rights to acquire equity securities in a portfolio company. Our LMM companies generally have annual revenues between $10 million and $150 million, and our LMM portfolio investments generally range in size from $5 million to $50 million. Our Middle Market investments are made in businesses that are generally larger in size than our LMM portfolio companies, with annual revenues typically between $150 million and $1.5 billion, and our Middle Market investments generally range in size from $3 million to $20 million. Our private loan ("Private Loan") portfolio investments are primarily debt securities in privately held companies which have been originated through strategic relationships with other investment funds on a collaborative basis. Private Loan investments are typically similar in size, structure, terms and conditions to investments we hold in our LMM portfolio and Middle Market portfolio.

        We seek to fill the financing gap for LMM businesses, which, historically, have had limited access to financing from commercial banks and other traditional sources. The underserved nature of the LMM creates the opportunity for us to meet the financing needs of LMM companies while also negotiating favorable transaction terms and equity participations. Our ability to invest across a company's capital structure, from secured loans to equity securities, allows us to offer portfolio companies a comprehensive suite of financing options, or a "one stop" financing solution. Providing customized, "one stop" financing solutions is important to LMM portfolio companies. We generally seek to partner directly with entrepreneurs, management teams and business owners in making our investments. Our LMM portfolio debt investments are generally secured by a first lien on the assets of the portfolio company and typically have a term of between five and seven years from the original investment date.

        Our Middle Market portfolio investments primarily consist of direct investments in or secondary purchases of interest-bearing debt securities in privately held companies that are generally larger in size than the companies included in our LMM portfolio. Our Middle Market portfolio debt investments are generally secured by either a first or second priority lien on the assets of the portfolio company and typically have an expected duration of between three and seven years from the original investment date.

        Our Private Loan portfolio investments are primarily debt securities in privately held companies which have been originated through strategic relationships with other investment funds on a collaborative basis, and are often referred to in the debt markets as "club deals." Private Loan investments are typically similar in size, structure, terms and conditions to investments we hold in our LMM portfolio and Middle Market portfolio. Our Private Loan portfolio debt investments are generally secured by either a first or second priority lien on the assets of the portfolio company and typically have a term of between three and seven years from the original investment date.

        Our other portfolio ("Other Portfolio") investments primarily consist of investments which are not consistent with the typical profiles for our LMM, Middle Market or Private Loan portfolio investments, including investments which may be managed by third parties. In our Other Portfolio, we may incur indirect fees and expenses in connection with investments managed by third parties, such as investments in other investment companies or private funds.

        Our external asset management business is conducted through the External Investment Manager. The External Investment Manager earns management fees based on the assets of the funds under management and may earn incentive fees, or a carried interest, based on the performance of the funds managed. We have entered into an agreement with the External Investment Manager to share

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employees in connection with its asset management business generally, and specifically for its relationship with HMS Income Fund, Inc. ("HMS Income"). Through this agreement, we share employees with the External Investment Manager, including their related infrastructure, business relationships, management expertise and capital raising capabilities.

        The following tables provide a summary of our investments in the LMM, Middle Market and Private Loan portfolios as of September 30, 2019 and December 31, 2018 (this information excludes the Other Portfolio investments and the External Investment Manager which are discussed further below):

 
  As of September 30, 2019  
 
  LMM(a)   Middle
Market
  Private Loan  
 
  (dollars in millions)
 

Number of portfolio companies

    68     52     62  

Fair value

  $ 1,199.6   $ 548.7   $ 627.9  

Cost

  $ 987.7   $ 589.4   $ 662.3  

% of portfolio at cost—debt

    66.3%     95.0%     93.7%  

% of portfolio at cost—equity

    33.7%     5.0%     6.3%  

% of debt investments at cost secured by first priority lien

    98.1%     89.8%     94.4%  

Weighted-average annual effective yield(b)

    12.0%     8.9%     9.8%  

Average EBITDA(c)

  $ 4.9   $ 93.5   $ 56.3  

(a)
At September 30, 2019, we had equity ownership in approximately 99% of our LMM portfolio companies, and the average fully diluted equity ownership in those portfolio companies was approximately 41%.

(b)
The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of September 30, 2019, including amortization of deferred debt origination fees and accretion of original issue discount but excluding fees payable upon repayment of the debt instruments and any debt investments on non-accrual status. Weighted-average annual effective yield is higher than what an investor in shares of our common stock will realize on its investment because it does not reflect our expenses or any sales load paid by an investor.

(c)
The average EBITDA is calculated using a simple average for the LMM portfolio and a weighted-average for the Middle Market and Private Loan portfolios. These calculations exclude certain portfolio companies, including two LMM portfolio companies, two Middle Market portfolio companies and three Private Loan portfolio companies, as EBITDA is

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    not a meaningful valuation metric for our investments in these portfolio companies, and those portfolio companies whose primary purpose is to own real estate.

 
  As of December 31, 2018  
 
  LMM(a)   Middle
Market
  Private Loan  
 
  (dollars in millions)
 

Number of portfolio companies

    69     56     59  

Fair value

  $ 1,195.0   $ 576.9   $ 507.9  

Cost

  $ 990.9   $ 608.8   $ 553.3  

% of portfolio at cost—debt

    68.7%     96.3%     93.0%  

% of portfolio at cost—equity

    31.3%     3.7%     7.0%  

% of debt investments at cost secured by first priority lien

    98.5%     87.9%     92.0%  

Weighted-average annual effective yield(b)

    12.3%     9.6%     10.4%  

Average EBITDA(c)

  $ 4.7   $ 99.1   $ 46.1  

(a)
At December 31, 2018, we had equity ownership in approximately 99% of our LMM portfolio companies, and the average fully diluted equity ownership in those portfolio companies was approximately 40%.

(b)
The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of December 31, 2018, including amortization of deferred debt origination fees and accretion of original issue discount but excluding fees payable upon repayment of the debt instruments and any debt investments on non-accrual status. Weighted-average annual effective yield is higher than what an investor in shares of our common stock will realize on its investment because it does not reflect our expenses or any sales load paid by an investor.

(c)
The average EBITDA is calculated using a simple average for the LMM portfolio and a weighted-average for the Middle Market and Private Loan portfolios. These calculations exclude certain portfolio companies, including two LMM portfolio companies, one Middle Market portfolio company and four Private Loan portfolio companies, as EBITDA is not a meaningful valuation metric for our investments in these portfolio companies, and those portfolio companies whose primary purpose is to own real estate.

        As of September 30, 2019, we had Other Portfolio investments in eleven companies, collectively totaling approximately $110.6 million in fair value and approximately $119.4 million in cost basis and which comprised approximately 4.3% of our Investment Portfolio (as defined in "—Critical Accounting Policies—Basis of Presentation" below) at fair value. As of December 31, 2018, we had Other Portfolio investments in eleven companies, collectively totaling approximately $108.3 million in fair value and approximately $116.0 million in cost basis and which comprised approximately 4.4% of our Investment Portfolio at fair value.

        As previously discussed, the External Investment Manager is a wholly owned subsidiary that is treated as a portfolio investment. As of September 30, 2019, there was no cost basis in this investment and the investment had a fair value of approximately $70.3 million, which comprised approximately 2.8% of our Investment Portfolio at fair value. As of December 31, 2018, there was no cost basis in this investment and the investment had a fair value of approximately $65.7 million, which comprised approximately 2.7% of our Investment Portfolio at fair value.

        Our portfolio investments are generally made through MSCC and the Funds. MSCC and the Funds share the same investment strategies and criteria, although they are subject to different

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regulatory regimes. An investor's return in MSCC will depend, in part, on the Funds' investment returns as they are wholly owned subsidiaries of MSCC.

        The level of new portfolio investment activity will fluctuate from period to period based upon our view of the current economic fundamentals, our ability to identify new investment opportunities that meet our investment criteria, and our ability to consummate the identified opportunities. The level of new investment activity, and associated interest and fee income, will directly impact future investment income. In addition, the level of dividends paid by portfolio companies and the portion of our portfolio debt investments on non-accrual status will directly impact future investment income. While we intend to grow our portfolio and our investment income over the long term, our growth and our operating results may be more limited during depressed economic periods. However, we intend to appropriately manage our cost structure and liquidity position based on applicable economic conditions and our investment outlook. The level of realized gains or losses and unrealized appreciation or depreciation on our investments will also fluctuate depending upon portfolio activity, economic conditions and the performance of our individual portfolio companies. The changes in realized gains and losses and unrealized appreciation or depreciation could have a material impact on our operating results.

        Because we are internally managed, we do not pay any external investment advisory fees, but instead directly incur the operating costs associated with employing investment and portfolio management professionals. We believe that our internally managed structure provides us with a beneficial operating expense structure when compared to other publicly traded and privately held investment firms which are externally managed, and our internally managed structure allows us the opportunity to leverage our non-interest operating expenses as we grow our Investment Portfolio. For the trailing twelve months ended September 30, 2019 and 2018, the ratio of our total operating expenses, excluding interest expense, as a percentage of our quarterly average total assets was 1.3% and 1.5%, respectively, and 1.4% for the year ended December 31, 2018.

        During May 2012, we entered into an investment sub-advisory agreement with HMS Adviser, LP ("HMS Adviser"), which is the investment advisor to HMS Income, a non-listed BDC, to provide certain investment advisory services to HMS Adviser. In December 2013, after obtaining required no-action relief from the SEC to allow us to own a registered investment adviser, we assigned the sub-advisory agreement to the External Investment Manager since the fees received from such arrangement could otherwise have negative consequences on our ability to meet the source-of-income requirement necessary for us to maintain our RIC tax treatment. Under the investment sub-advisory agreement, the External Investment Manager is entitled to 50% of the base management fee and the incentive fees earned by HMS Adviser under its advisory agreement with HMS Income. The External Investment Manager agreed to waive the historical incentive fees otherwise earned through December 31, 2018. During the three months ended September 30, 2019, the External Investment Manager earned $2.9 million in fees, which consisted of $2.7 million of base management fees and $0.2 million in incentive fees, compared to $3.0 million in base management fees for the comparable period in 2018 under the sub-advisory agreement with HMS Adviser. During the nine months ended September 30, 2019, the External Investment Manager earned $10.0 million in fee income, which consisted of $8.4 million of base management fees and $1.6 million in incentive fees compared to $8.7 million of base management fees for the comparable period in 2018 under the sub-advisory agreement with HMS Adviser.

        During April 2014, we received an exemptive order from the SEC permitting co-investments by us and HMS Income in certain negotiated transactions where co-investing would otherwise be prohibited under the 1940 Act. We have made, and in the future intend to continue to make, such co-investments with HMS Income in accordance with the conditions of the order. The order requires, among other things, that we and the External Investment Manager consider whether each such investment opportunity is appropriate for HMS Income and, if it is appropriate, to propose an allocation of the investment opportunity between us and HMS Income. Because the External Investment Manager may receive performance-based fee compensation from HMS Income, this may provide it an incentive to allocate opportunities to HMS Income instead of us. However, both we and the External Investment Manager have policies and procedures in place to manage this conflict.

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CRITICAL ACCOUNTING POLICIES

    Basis of Presentation

        Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP"). For each of the periods presented herein, our consolidated financial statements include the accounts of MSCC and its consolidated subsidiaries. The Investment Portfolio, as used herein, refers to all of our investments in LMM portfolio companies, investments in Middle Market portfolio companies, Private Loan portfolio investments, Other Portfolio investments, and the investment in the External Investment Manager. Our results of operations for the three and nine months ended September 30, 2019 and 2018, cash flows for the nine months ended September 30, 2019 and 2018, and financial position as of September 30, 2019 and December 31, 2018, are presented on a consolidated basis. The effects of all intercompany transactions between us and our consolidated subsidiaries have been eliminated in consolidation.

        Our accompanying unaudited consolidated financial statements are presented in conformity with U.S. GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Articles 6, 10 and 12 of Regulation S-X. Accordingly, certain disclosures accompanying annual financial statements prepared in accordance with U.S. GAAP are omitted. In the opinion of management, the unaudited consolidated financial results included herein contain all adjustments, consisting solely of normal recurring accruals, considered necessary for the fair presentation of financial statements for the interim periods included herein. The results of operations for the three and nine months ended September 30, 2019 and 2018 are not necessarily indicative of the operating results to be expected for the full year. Also, the unaudited financial statements and notes should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2018. Financial statements prepared on a U.S. GAAP basis require management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein.

        We are an investment company following the accounting and reporting guidance in Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 946, Financial Services—Investment Companies ("ASC 946"). Under ASC 946, we are precluded from consolidating other entities in which we have equity investments, including those in which we have a controlling interest, unless the other entity is another investment company. An exception to this general principle in ASC 946 occurs if we hold a controlling interest in an operating company that provides all or substantially all of its services directly to us or to any of our portfolio companies. Accordingly, as noted above, our consolidated financial statements include the financial position and operating results for the Funds and the Taxable Subsidiaries. We have determined that all of our portfolio investments do not qualify for this exception, including the investment in the External Investment Manager. Therefore, our Investment Portfolio is carried on the consolidated balance sheet at fair value with any adjustments to fair value recognized as "Net Unrealized Appreciation (Depreciation)" on the consolidated statements of operations until the investment is realized, usually upon exit, resulting in any gain or loss being recognized as a "Net Realized Gain (Loss)."

    Investment Portfolio Valuation

        The most significant determination inherent in the preparation of our consolidated financial statements is the valuation of our Investment Portfolio and the related amounts of unrealized appreciation and depreciation. As of both September 30, 2019 and December 31, 2018, our Investment Portfolio valued at fair value represented approximately 96% of our total assets. We are required to report our investments at fair value. We follow the provisions of FASB ASC 820, Fair Value Measurements and Disclosures ("ASC 820"). ASC 820 defines fair value, establishes a framework for

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measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value, and enhances disclosure requirements for fair value measurements. ASC 820 requires us to assume that the portfolio investment is to be sold in the principal market to independent market participants, which may be a hypothetical market. Market participants are defined as buyers and sellers in the principal market that are independent, knowledgeable and willing and able to transact. See "Note B.1.—Valuation of the Investment Portfolio" in the notes to consolidated financial statements for a detailed discussion of our investment portfolio valuation process and procedures.

        Due to the inherent uncertainty in the valuation process, our determination of fair value for our Investment Portfolio may differ materially from the values that would have been determined had a ready market for the securities existed. In addition, changes in the market environment, portfolio company performance and other events that may occur over the lives of the investments may cause the gains or losses ultimately realized on these investments to be materially different than the valuations currently assigned. We determine the fair value of each individual investment and record changes in fair value as unrealized appreciation or depreciation.

        Our Board of Directors has the final responsibility for overseeing, reviewing and approving, in good faith, our determination of the fair value for our Investment Portfolio and our valuation procedures, consistent with 1940 Act requirements. We believe our Investment Portfolio as of September 30, 2019 and December 31, 2018 approximates fair value as of those dates based on the markets in which we operate and other conditions in existence on those reporting dates.

    Revenue Recognition

    Interest and Dividend Income

        We record interest and dividend income on the accrual basis to the extent amounts are expected to be collected. Dividend income is recorded as dividends are declared by the portfolio company or at the point an obligation exists for the portfolio company to make a distribution. In accordance with our valuation policies, we evaluate accrued interest and dividend income periodically for collectability. When a loan or debt security becomes 90 days or more past due, and if we otherwise do not expect the debtor to be able to service all of its debt or other obligations, we will generally place the loan or debt security on non-accrual status and cease recognizing interest income on that loan or debt security until the borrower has demonstrated the ability and intent to pay contractual amounts due. If a loan or debt security's status significantly improves regarding the debtor's ability to service the debt or other obligations, or if a loan or debt security is sold or written off, we remove it from non-accrual status.

    Fee Income

        We may periodically provide services, including structuring and advisory services, to our portfolio companies or other third parties. For services that are separately identifiable and evidence exists to substantiate fair value, fee income is recognized as earned, which is generally when the investment or other applicable transaction closes. Fees received in connection with debt financing transactions for services that do not meet these criteria are treated as debt origination fees and are deferred and accreted into income over the life of the financing.

    Payment-in-Kind ("PIK") Interest and Cumulative Dividends

        We hold certain debt and preferred equity instruments in our Investment Portfolio that contain PIK interest and cumulative dividend provisions. The PIK interest, computed at the contractual rate specified in each debt agreement, is periodically added to the principal balance of the debt and is recorded as interest income. Thus, the actual collection of this interest may be deferred until the time of debt principal repayment. Cumulative dividends are recorded as dividend income, and any dividends in arrears are added to the balance of the preferred equity investment. The actual collection of these

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dividends in arrears may be deferred until such time as the preferred equity is redeemed or sold. To maintain RIC tax treatment (as discussed below), these non-cash sources of income may need to be paid out to stockholders in the form of distributions, even though we may not have collected the PIK interest and cumulative dividends in cash. We stop accruing PIK interest and cumulative dividends and write off any accrued and uncollected interest and dividends in arrears when we determine that such PIK interest and dividends in arrears are no longer collectible. For the three months ended September 30, 2019 and 2018, (i) approximately 1.6% and 1.4%, respectively, of our total investment income was attributable to PIK interest income not paid currently in cash and (ii) approximately 1.0% and 1.1%, respectively, of our total investment income was attributable to cumulative dividend income not paid currently in cash. For the nine months ended September 30, 2019 and 2018, (i) approximately 1.9% and 1.0%, respectively, of our total investment income was attributable to PIK interest income not paid currently in cash and (ii) approximately 1.1% and 1.0%, respectively, of our total investment income was attributable to cumulative dividend income not paid currently in cash.

    Share-Based Compensation

        We account for our share-based compensation plans using the fair value method, as prescribed by ASC 718, Compensation—Stock Compensation. Accordingly, for restricted stock awards, we measure the grant date fair value based upon the market price of our common stock on the date of the grant and amortize the fair value of the awards as share-based compensation expense over the requisite service period, which is generally the vesting term.

        We have also adopted Accounting Standards Update ("ASU") 2016-09, Compensation—Stock Compensation: Improvements to Employee Share-Based Payment Accounting, which requires that all excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) be recognized as income tax expense or benefit in the income statement and not delay recognition of a tax benefit until the tax benefit is realized through a reduction to taxes payable. Accordingly, the tax effects of exercised or vested awards are treated as discrete items in the reporting period in which they occur. Additionally, we have elected to account for forfeitures as they occur.

    Income Taxes

        MSCC has elected to be treated for U.S. federal income tax purposes as a RIC. MSCC's taxable income includes the taxable income generated by MSCC and certain of its subsidiaries, including the Funds, which are treated as disregarded entities for tax purposes. As a RIC, MSCC generally will not pay corporate-level U.S. federal income taxes on any net ordinary taxable income or capital gains that MSCC distributes to its stockholders. MSCC must generally distribute at least 90% of its "investment company taxable income" (which is generally its net ordinary taxable income and realized net short-term capital gains in excess of realized net long-term capital losses) and 90% of its tax-exempt income to maintain its RIC status (pass-through tax treatment for amounts distributed). As part of maintaining RIC status, undistributed taxable income (subject to a 4% non-deductible U.S. federal excise tax) pertaining to a given fiscal year may be distributed up to 12 months subsequent to the end of that fiscal year, provided such dividends are declared on or prior to the later of (i) filing of the U.S. federal income tax return for the applicable fiscal year or (ii) the fifteenth day of the ninth month following the close of the year in which such taxable income was generated.

        The Taxable Subsidiaries primarily hold certain portfolio investments for us. The Taxable Subsidiaries permit us to hold equity investments in portfolio companies which are "pass-through" entities for tax purposes and to continue to comply with the "source-of-income" requirements contained in the RIC tax provisions of the Code. The Taxable Subsidiaries are consolidated with us for U.S. GAAP financial reporting purposes, and the portfolio investments held by the Taxable Subsidiaries are included in our consolidated financial statements as portfolio investments and recorded at fair value. The Taxable Subsidiaries are not consolidated with MSCC for income tax purposes and may

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generate income tax expense, or benefit, and tax assets and liabilities, as a result of their ownership of certain portfolio investments. The taxable income, or loss, of the Taxable Subsidiaries may differ from their book income, or loss, due to temporary book and tax timing differences and permanent differences. The Taxable Subsidiaries are each taxed at their normal corporate tax rates based on their taxable income. The income tax expense, or benefit, if any, and the related tax assets and liabilities, of the Taxable Subsidiaries are reflected in our consolidated financial statements.

        The External Investment Manager is an indirect wholly owned subsidiary of MSCC owned through a Taxable Subsidiary and is a disregarded entity for tax purposes. The External Investment Manager has entered into a tax sharing agreement with its Taxable Subsidiary owner. Since the External Investment Manager is accounted for as a portfolio investment of MSCC and is not included as a consolidated subsidiary of MSCC in MSCC's consolidated financial statements, and as a result of the tax sharing agreement with its Taxable Subsidiary owner, for its stand-alone financial reporting purposes the External Investment Manager is treated as if it is taxed at normal corporate tax rates based on its taxable income and, as a result of its activities, may generate income tax expense or benefit. The income tax expense, or benefit, if any, and the related tax assets and liabilities, of the External Investment Manager are reflected in the External Investment Manager's separate financial statements.

        In December 2017, the "Tax Cuts and Jobs Act" legislation was enacted. The Tax Cuts and Jobs Act includes significant changes to the U.S. corporate tax system, including a U.S. federal corporate income tax rate reduction from 35% to 21% and other changes. ASC 740, Income Taxes, requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation was enacted. As such, we have accounted for the tax effects as a result of the enactment of the Tax Cuts and Jobs Act beginning with the period ended December 31, 2017.

        The Taxable Subsidiaries and the External Investment Manager use the liability method in accounting for income taxes. Deferred tax assets and liabilities are recorded for temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements, using statutory tax rates in effect for the year in which the temporary differences are expected to reverse. A valuation allowance is provided, if necessary, against deferred tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized.

        Taxable income generally differs from net income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses. Taxable income generally excludes net unrealized appreciation or depreciation, as investment gains or losses are not included in taxable income until they are realized.

INVESTMENT PORTFOLIO COMPOSITION

        Our LMM portfolio investments primarily consist of secured debt, equity warrants and direct equity investments in privately held, LMM companies based in the United States. Our LMM portfolio companies generally have annual revenues between $10 million and $150 million, and our LMM investments generally range in size from $5 million to $50 million. The LMM debt investments are typically secured by either a first or second priority lien on the assets of the portfolio company, can include either fixed or floating rate terms and generally have a term of between five and seven years from the original investment date. In most LMM portfolio investments, we receive nominally priced equity warrants and/or make direct equity investments in connection with a debt investment.

        Our Middle Market portfolio investments primarily consist of direct investments in or secondary purchases of interest-bearing debt securities in privately held companies based in the United States that are generally larger in size than the companies included in our LMM portfolio. Our Middle Market portfolio companies generally have annual revenues between $150 million and $1.5 billion, and our Middle Market investments generally range in size from $3 million to $20 million. Our Middle Market portfolio debt investments are generally secured by either a first or second priority lien on the assets of

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the portfolio company and typically have a term of between three and seven years from the original investment date.

        Our Private Loan portfolio investments are primarily debt securities in privately held companies which have been originated through strategic relationships with other investment funds on a collaborative basis, and are often referred to in the debt markets as "club deals." Private Loan investments are typically similar in size, structure, terms and conditions to investments we hold in our LMM portfolio and Middle Market portfolio. Our Private Loan portfolio debt investments are generally secured by either a first or second priority lien on the assets of the portfolio company and typically have a term of between three and seven years from the original investment date.

        Our Other Portfolio investments primarily consist of investments which are not consistent with the typical profiles for LMM, Middle Market and Private Loan portfolio investments, including investments which may be managed by third parties. In the Other Portfolio, we may incur indirect fees and expenses in connection with investments managed by third parties, such as investments in other investment companies or private funds.

        Our external asset management business is conducted through the External Investment Manager. The External Investment Manager earns management fees based on the assets of the funds under management and may earn incentive fees, or a carried interest, based on the performance of the funds managed. We have entered into an agreement with the External Investment Manager to share employees in connection with its asset management business generally, and specifically for its relationship with HMS Income. Through this agreement, we share employees with the External Investment Manager, including their related infrastructure, business relationships, management expertise and capital raising capabilities, and we allocate the related expenses to the External Investment Manager pursuant to the sharing agreement. Our total expenses for the three months ended September 30, 2019 and 2018 are net of expenses allocated to the External Investment Manager of $1.7 million and $1.6 million, respectively. Our total expenses for the nine months ended September 30, 2019 and 2018 are net of expenses allocated to the External Investment Manager of $5.0 million and $5.3 million, respectively. The External Investment Manager earns management fees based on the assets of the funds under management and may earn incentive fees, or a carried interest, based on the performance of the funds managed. The total contribution of the External Investment Manager to our net investment income consists of the combination of the expenses allocated to the External Investment Manager and the dividend income received from the External Investment Manager. For the three months ended September 30, 2019 and 2018, the total contribution to our net investment income was $2.6 million and $2.7 million, respectively. For the nine months ended September 30, 2019 and 2018, the total contribution to our net investment income was $8.9 million and $8.0 million, respectively.

        The following tables summarize the composition of our total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments at cost and fair value by type of investment as a percentage of the total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments as of September 30, 2019

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and December 31, 2018 (this information excludes the Other Portfolio investments and the External Investment Manager).

Cost:
  September 30,
2019
  December 31,
2018
 

First lien debt

    77.3%     77.1%  

Equity

    17.4%     16.6%  

Second lien debt

    4.3%     5.3%  

Equity warrants

    0.6%     0.6%  

Other

    0.4%     0.4%  

    100.0%     100.0%  

 

Fair Value:
  September 30,
2019
  December 31,
2018
 

First lien debt

    69.4%     69.0%  

Equity

    26.2%     25.5%  

Second lien debt

    3.6%     4.6%  

Equity warrants

    0.4%     0.5%  

Other

    0.4%     0.4%  

    100.0%     100.0%  

        Our LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments carry a number of risks including: (1) investing in companies which may have limited operating histories and financial resources; (2) holding investments that generally are not publicly traded and which may be subject to legal and other restrictions on resale; and (3) other risks common to investing in below investment grade debt and equity investments in our Investment Portfolio. Please see "Risk Factors—Risks Related to Our Investments" contained in our Form 10-K for the fiscal year ended December 31, 2018 and "Risk Factors" below for a more complete discussion of the risks involved with investing in our Investment Portfolio.

PORTFOLIO ASSET QUALITY

        We utilize an internally developed investment rating system to rate the performance of each LMM portfolio company and to monitor our expected level of returns on each of our LMM investments in relation to our expectations for the portfolio company. The investment rating system takes into consideration various factors, including each investment's expected level of returns, the collectability of our debt investments and the ability to receive a return of the invested capital in our equity investments, comparisons to competitors and other industry participants, the portfolio company's future outlook and other factors that are deemed to be significant to the portfolio company.

        As of September 30, 2019, our total Investment Portfolio had seven investments on non-accrual status, which comprised approximately 1.6% of its fair value and 4.4% of its cost. As of December 31, 2018, our total Investment Portfolio had six investments on non-accrual status, which comprised approximately 1.3% of its fair value and 3.9% of its cost.

        The operating results of our portfolio companies are impacted by changes in the broader fundamentals of the United States economy. In the event that the United States economy contracts, it is likely that the financial results of small to mid-sized companies, like those in which we invest, could experience deterioration or limited growth from current levels, which could ultimately lead to difficulty in meeting their debt service requirements, to an increase in defaults on our debt investments or in realized losses on our investments and to difficulty in maintaining historical dividend payment rates and unrealized appreciation on our equity investments. Consequently, we can provide no assurance that the

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performance of certain portfolio companies will not be negatively impacted by economic cycles or other conditions, which could also have a negative impact on our future results.

DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS

    Comparison of the three months ended September 30, 2019 and September 30, 2018

 
  Three Months Ended
September 30,
  Net Change
 
  2019   2018   Amount   %
 
  (dollars in thousands)

Total investment income

  $ 60,068   $ 58,263   $ 1,805     3%

Total expenses

    (21,056 )   (20,188 )   (868 )   (4)%

Net investment income

    39,012     38,075     937     2%

Net realized gain (loss) from investments

    (5,876 )   9,238     (15,114 )    

Net unrealized appreciation (depreciation) from:

                       

Portfolio investments

    (2,927 )   25,261     (28,188 )    

SBIC debentures

    (319 )   (53 )   (266 )    

Total net unrealized appreciation (depreciation)

    (3,246 )   25,208     (28,454 )    

Income tax benefit (provision)

    4,012     (3,781 )   7,793      

Net increase in net assets resulting from operations

  $ 33,902   $ 68,740   $ (34,838 )   (51)%

 

 
  Three Months Ended
September 30,
  Net Change
 
  2019   2018   Amount   %
 
  (dollars in thousands, except
per share amounts)

Net investment income

  $ 39,012   $ 38,075   $ 937     2%

Share-based compensation expense

    2,572     2,147     425     20%

Distributable net investment income(a)

  $ 41,584   $ 40,222   $ 1,362     3%

Net investment income per share—

                       

Basic and diluted

  $ 0.62   $ 0.63   $ (0.01 )   (2)%

Distributable net investment income per share—

                       

Basic and diluted(a)

  $ 0.66   $ 0.66   $     0%

(a)
Distributable net investment income is net investment income as determined in accordance with U.S. GAAP, excluding the impact of share-based compensation expense which is non-cash in nature. We believe presenting distributable net investment income and related per share amounts is useful and appropriate supplemental disclosure of information for analyzing our financial performance since share-based compensation does not require settlement in cash. However, distributable net investment income is a non-U.S. GAAP measure and should not be considered as a replacement to net investment income and other earnings measures presented in accordance with U.S. GAAP. Instead, distributable net investment income should be reviewed only in connection with such U.S. GAAP measures in analyzing our financial performance. A reconciliation of net investment income in accordance with U.S. GAAP to distributable net investment income is presented in the table above.

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    Investment Income

        Total investment income for the three months ended September 30, 2019 was $60.1 million, a 3% increase over the $58.3 million of total investment income for the corresponding period of 2018. This comparable period increase was principally attributable to a $4.0 million increase in dividend income from Investment Portfolio equity investments, partially offset by (i) a $2.0 million decrease in fee income and (ii) a $0.2 million decrease in interest income. The $1.8 million increase in total investment income in the three months ended September 30, 2019 is net of the negative impact of a decrease of $1.9 million related to lower accelerated prepayment, repricing and other activity for certain Investment Portfolio debt investments.

    Expenses

        Total expenses for the three months ended September 30, 2019 increased to $21.1 million from $20.2 million in the corresponding period of 2018. This increase in operating expenses was principally attributable to (i) a $2.0 million increase in interest expense, primarily due to an increase in interest expense related to our 5.20% Notes (as defined in "—Liquidity and Capital Resources—Capital Resources" below) issued in April 2019, partially offset by decreased interest expense relating to our multi-year revolving credit facility (the "Credit Facility") due to the lower average balance outstanding and (ii) a $0.4 million increase in share-based compensation expense, partially offset by a $1.5 million decrease in compensation expense primarily due to a decrease in incentive compensation accruals.

    Net Investment Income

        Net investment income for the three months ended September 30, 2019 increased 2% to $39.0 million, or $0.62 per share, compared to net investment income of $38.1 million, or $0.63 per share, for the corresponding period of 2018. The increase in net investment income was principally attributable to the increase in total investment income, partially offset by higher operating expenses both as discussed above.

    Distributable Net Investment Income

        Distributable net investment income for the three months ended September 30, 2019 increased 3% to $41.6 million, or $0.66 per share, compared with $40.2 million, or $0.66 per share, in the corresponding period of 2018. The increase in distributable net investment income was primarily due to the higher level of total investment income, partially offset by higher operating expenses both as discussed above. Distributable net investment income on a per share basis for the three months ended September 30, 2019 includes the impacts of (i) a decrease of approximately $0.03 per share from the comparable period in 2018 attributable to the decrease in the comparable levels of accelerated prepayment, repricing and other activity for certain investment portfolio debt investments as discussed above and (ii) a greater number of average shares outstanding compared to the corresponding period in 2018 primarily due to shares issued through the ATM Program (as defined in "—Liquidity and Capital Resources—Capital Resources" below), shares issued pursuant to our equity incentive plans and shares issued pursuant to our dividend reinvestment plan.

    Net Increase in Net Assets Resulting from Operations

        The net increase in net assets resulting from operations for the three months ended September 30, 2019 was $33.9 million, or $0.54 per share, compared with $68.7 million, or $1.13 per share, during the three months ended September 30, 2018. This $34.8 million decrease from the prior year was primarily the result of (i) a $28.5 million decrease in net unrealized appreciation (depreciation) from portfolio investments, including the impact of accounting reversals relating to realized gains/income (losses), and SBIC debentures and (ii) a $15.1 million decrease in the net realized gain (loss) from investments, with

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these decreases partially offset by (i) a $7.8 million benefit from the change in the income tax benefit (provision) and (ii) a $0.9 million increase in net investment income as discussed above. The net realized loss from investments of $5.9 million for the three months ended September 30, 2019 was primarily the result of (i) the realized loss of $7.0 million from the restructure of a Middle Market investment and (ii) the realized loss of $6.9 million resulting from the exit of a Middle Market investment, with these realized losses partially offset by the realized gain of $7.7 million resulting from the exit of two LMM investments.

        The following table provides a summary of the total net unrealized depreciation of $3.2 million for the three months ended September 30, 2019:

 
  Three Months Ended September 30, 2019  
 
  LMM(a)   Middle Market   Private Loan   Other   Total  
 
  (dollars in millions)
 

Accounting reversals of net unrealized (appreciation) depreciation recognized in prior periods due to net realized (gains / income) losses recognized during the current period

  $ (8.2 ) $ 13.9   $ (0.9 ) $   $ 4.8  

Net unrealized appreciation (depreciation) relating to portfolio investments

    2.7     (12.2 )   1.5     0.3 (b)   (7.7 )

Total net unrealized appreciation (depreciation) relating to portfolio investments

  $ (5.5 ) $ 1.7   $ 0.6   $ 0.3   $ (2.9 )

Unrealized depreciation relating to SBIC debentures(c)

                            (0.3 )

Total net unrealized depreciation

                          $ (3.2 )

(a)
LMM includes unrealized appreciation on 27 LMM portfolio investments and unrealized depreciation on 17 LMM portfolio investments.

(b)
Other includes (i) $0.8 million of unrealized appreciation relating to the External Investment Manager, partially offset by $0.5 million of net unrealized depreciation relating to the Other Portfolio.

(c)
Relates to unrealized depreciation on the SBIC debentures previously issued by MSC II which are accounted for on a fair value basis.

        The income tax benefit for the three months ended September 30, 2019 of $4.0 million principally consisted of a deferred tax benefit of $5.1 million, which is primarily the result of the net activity relating to our portfolio investments held in our Taxable Subsidiaries, including changes in loss carryforwards, changes in net unrealized appreciation/depreciation and other temporary book-tax differences, partially offset by current tax expense of $1.1 million related to (i) a $0.7 million provision for current U.S. federal and state income taxes and (ii) a $0.4 million provision for excise tax on our estimated undistributed taxable income.

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    Comparison of the nine months ended September 30, 2019 and September 30, 2018

 
  Nine Months Ended September 30,   Net Change  
 
  2019   2018   Amount   %  
 
  (dollars in thousands)
 

Total investment income

  $ 182,724   $ 174,075   $ 8,649     5%  

Total expenses

    (64,605 )   (59,514 )   (5,091 )   (9)%  

Net investment income

    118,119     114,561     3,558     3%  

Net realized gain (loss) from investments

    (14,163 )   2,754     (16,917 )      

Net realized loss on extinguishment of debt

    (5,689 )   (2,896 )   (2,793 )      

Net unrealized appreciation (depreciation) from:

                         

Portfolio investments

    13,154     47,090     (33,936 )      

SBIC debentures

    4,625     1,296     3,329        

Total net unrealized appreciation

    17,779     48,386     (30,607 )      

Income tax provision

    (2,491 )   (4,097 )   1,606        

Net increase in net assets resulting from operations          

  $ 113,555   $ 158,708   $ (45,153 )   (28)%  

 

 
  Nine Months Ended September 30,   Net Change  
 
  2019   2018   Amount   %  
 
  (dollars in thousands, except per share amounts)
 

Net investment income

  $ 118,119   $ 114,561   $ 3,558     3%  

Share-based compensation expense

    7,279     6,883     396     6%  

Distributable net investment income(a)

  $ 125,398   $ 121,444   $ 3,954     3%  

Net investment income per share—

                         

Basic and diluted

  $ 1.88   $ 1.91   $ (0.03 )   (2)%  

Distributable net investment income per share—

                         

Basic and diluted(a)

  $ 2.00   $ 2.03   $ (0.03 )   (1)%  

(a)
Distributable net investment income is net investment income as determined in accordance with U.S. GAAP, excluding the impact of share-based compensation expense which is non-cash in nature. We believe presenting distributable net investment income and related per share amounts is useful and appropriate supplemental disclosure of information for analyzing our financial performance since share-based compensation does not require settlement in cash. However, distributable net investment income is a non-U.S. GAAP measure and should not be considered as a replacement to net investment income and other earnings measures presented in accordance with U.S. GAAP. Instead, distributable net investment income should be reviewed only in connection with such U.S. GAAP measures in analyzing our financial performance. A reconciliation of net investment income in accordance with U.S. GAAP to distributable net investment income is presented in the table above.

    Investment Income

        Total investment income for the nine months ended September 30, 2019 was $182.7 million, a 5% increase over the $174.1 million of total investment income for the corresponding period of 2018. This comparable period increase was principally attributable to (i) a $10.5 million net increase in interest income primarily related to higher average levels of Investment Portfolio debt investments, partially offset by decreased income from lower accelerated prepayment, repricing and other activities involving

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existing Investment Portfolio debt investments and (ii) a $1.7 million increase in dividend income from Investment Portfolio equity investments, partially offset by a $3.6 million decrease in fee income. The $8.6 million increase in total investment income in the nine months ended September 30, 2019 is net of the negative impacts of (i) a decrease of $8.0 million related to elevated dividend income activity from certain Investment Portfolio equity investments that is considered to be less consistent on a recurring basis or non-recurring and (ii) a decrease of $3.6 million related to lower accelerated prepayment, repricing and other activity from certain Middle Market and Private Loan Investment Portfolio debt investments, both when compared to the same period in 2018.

    Expenses

        Total expenses for the nine months ended September 30, 2019 increased to $64.6 million from $59.5 million for the corresponding period of 2018. This comparable period increase in operating expenses was principally attributable to (i) a $5.2 million increase in interest expense, primarily due to an increase in interest expense related to our 5.20% Notes issued in April 2019, partially offset by a decrease in interest expense resulting from the redemption of the 6.125% Notes (as defined in "—Liquidity and Capital Resources—Capital Resources" below) in April 2018, (ii) a $0.4 million increase in share-based compensation expense, (iii) a $0.3 million increase in general and administrative expenses and (iv) a $0.3 million decrease in the expenses allocated to the External Investment Manager primarily as a result of the non-recurring strategic activities at the External Investment Manager during the nine months ended September 30, 2018 which did not occur during the nine months ended September 30, 2019, with these increases partially offset by a $1.1 million decrease in compensation expense primarily due (i) to a decrease in incentive compensation accruals and (ii) a decrease of $0.4 million in the fair value of our deferred compensation plan assets.

    Net Investment Income

        Net investment income for the nine months ended September 30, 2019 increased 3% to $118.1 million, or $1.88 per share, compared to net investment income of $114.6 million, or $1.91 per share, for the corresponding period of 2018. The increase in net investment income was principally attributable to the increase in total investment income, partially offset by higher operating expenses both as discussed above.

    Distributable Net Investment Income

        Distributable net investment income for the nine months ended September 30, 2019 increased 3% to $125.4 million, or $2.00 per share, compared with $121.4 million, or $2.03 per share, in the corresponding period of 2018. The increase in distributable net investment income was primarily due to the higher level of total investment income, partially offset by higher operating expenses both as discussed above. Distributable net investment income on a per share basis for the nine months ended September 30, 2019 includes the impacts of (i) a decrease of approximately $0.20 per share from the comparable period in 2018 attributable to the net effect of the lower dividend income activity that is considered less recurring or non-recurring and the decrease in the comparable levels of accelerated prepayment, repricing and other activity as discussed above, (ii) a decrease of $0.01 per share due to the increase in the fair value of the deferred compensation plan assets as discussed above and (iii) a greater number of average shares outstanding compared to the corresponding period in 2018 primarily due to shares issued through the ATM Program (as defined in "—Liquidity and Capital Resources—Capital Resources" below), shares issued pursuant to our equity incentive plans and shares issued pursuant to our dividend reinvestment plan.

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    Net Increase in Net Assets Resulting from Operations

        The net increase in net assets resulting from operations for the nine months ended September 30, 2019 was $113.6 million, or $1.81 per share, compared with $158.7 million, or $2.65 per share, during the nine months ended September 30, 2018. This $45.2 million decrease from the prior year was primarily the result of (i) a $30.6 million decrease in net unrealized appreciation (depreciation) from portfolio investments and SBIC debentures, including the impact of accounting reversals relating to realized gains/income (losses), (ii) a $16.9 million decrease in the net realized gain (loss) from investments, (iii) a $2.8 million increase in the net realized loss on extinguishment of debt, with these increases partially offset by (i) a $3.6 million increase in net investment income as discussed above and (ii) a $1.6 million decrease in the income tax provision. The net realized loss from investments of $14.2 million for the nine months ended September 30, 2019 was primarily the result of (i) the realized loss of $12.2 million resulting from the exit of two Middle Market investments, (ii) the realized loss of $7.0 million resulting from the partial exit of a Middle Market investment, (iii) the realized loss of $7.0 million resulting from the restructure of a Middle Market investment and (iv) the net realized loss of $1.8 million resulting from the exit of three Private Loan investments, with these net realized losses partially offset by realized gains of $13.8 million resulting from the exit of four LMM investments.

        The following table provides a summary of the total net unrealized appreciation of $17.8 million for the nine months ended September 30, 2019:

 
  Nine Months Ended September 30, 2019  
 
  LMM(a)   Middle Market   Private Loan   Other   Total  
 
  (dollars in millions)
 

Accounting reversals of net unrealized (appreciation) depreciation recognized in prior periods due to net realized (gains / income) losses recognized during the current period

  $ (14.0 ) $ 22.2   $ (0.7 ) $   $ 7.5  

Net unrealized appreciation (depreciation) relating to portfolio investments

    21.4     (30.9 )   11.1     4.1 (b)   5.7  

Total net unrealized appreciation (depreciation) relating to portfolio investments

  $ 7.4   $ (8.7 ) $ 10.4   $ 4.1   $ 13.2  

Unrealized appreciation relating to SBIC debentures(c)

                            4.6  

Total net unrealized appreciation

                          $ 17.8  

(a)
LMM includes unrealized appreciation on 31 LMM portfolio investments and unrealized depreciation on 28 LMM portfolio investments.

(b)
Other includes (i) $4.6 million of unrealized appreciation relating to the External Investment Manager and (ii) $0.6 million of unrealized appreciation relating to the Main Street Capital Corporation Deferred Compensation Plan (see "Related Party Transactions"), partially offset by $1.1 million of net unrealized depreciation relating to the Other Portfolio.

(c)
Relates to $5.7 million of unrealized appreciation on the SBIC debentures previously issued by MSC II which are accounted for on a fair value basis and is primarily related to accounting reversals of previously recognized unrealized depreciation recorded since the date of the MSC II acquisition on the debentures repaid during the nine months ended September 30, 2019, partially offset by $1.1 million of unrealized depreciation on the SBIC debentures previously issued by MSC II which are accounted for on a fair value basis.

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        The income tax provision for the nine months ended September 30, 2019 of $2.5 million principally consisted of a current tax expense of $2.7 million related to (i) a $2.0 million provision for current U.S. federal and state income taxes and (ii) a $0.7 million provision for excise tax on our estimated undistributed taxable income, partially offset by a deferred tax benefit of $0.3 million, which is primarily the result of the net activity relating to our portfolio investments held in our Taxable Subsidiaries, including changes in loss carryforwards, changes in net unrealized appreciation/depreciation and other temporary book-tax differences.

    Liquidity and Capital Resources

    Cash Flows

        For the nine months ended September 30, 2019, we experienced a net decrease in cash and cash equivalents in the amount of $1.9 million, which is the net result of $1.9 million of cash provided by our operating activities and $3.8 million of cash used in our financing activities.

        The $1.9 million of cash provided by our operating activities resulted primarily from (i) cash flows we generated from the operating profits earned through our operating activities totaling $113.6 million, which is our distributable net investment income, excluding the non-cash effects of the accretion of unearned income, payment-in-kind interest income, cumulative dividends and the amortization expense for deferred financing costs, (ii) cash uses totaling $477.3 million for the funding of new portfolio company investments and settlement of accruals for portfolio investments existing as of December 31, 2018, (iii) cash proceeds totaling $363.6 million from the sales and repayments of debt investments and sales of and return on capital of equity investments and (iv) cash proceeds of $2.0 million related to changes in other assets and liabilities.

        The $3.8 million of cash used in our financing activities principally consisted of (i) $250.0 million in cash proceeds from the issuance of the 5.20% Notes in April 2019 and (ii) $54.2 million in net cash proceeds from the ATM Program (described below), offset by (i) $151.0 million in net repayments on the Credit Facility, (ii) $115.3 million in cash dividends paid to stockholders, (iii) $34.0 million in repayment of SBIC debentures, (iv) $4.3 million for payment of deferred debt issuance costs, SBIC debenture fees and other costs and (v) $3.4 million for purchases of vested restricted stock from employees to satisfy their tax withholding requirements upon the vesting of such restricted stock.

    Capital Resources

        As of September 30, 2019, we had $52.3 million in cash and cash equivalents and $555.0 million of unused capacity under the Credit Facility, which we maintain to support our investment and operating activities. As of September 30, 2019, our net asset value totaled $1,532.1 million, or $24.20 per share.

        The Credit Facility, which provides additional liquidity to support our investment and operational activities, provides for total commitments of $705.0 million from a diversified group of 17 lenders. The Credit Facility matures in September 2023 and contains an accordion feature which allows us to increase the total commitments under the facility to up to $800.0 million from new and existing lenders on the same terms and conditions as the existing commitments.

        Borrowings under the Credit Facility bear interest, subject to our 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 LIBOR rate (2.0% as of September 30, 2019) plus (i) 1.875% (or the applicable base rate (Prime Rate of 5.0% as of September 30, 2019) plus 0.875%) as long as we meet certain agreed upon excess collateral and maximum leverage requirements or (ii) 2.0% (or the applicable base rate plus 1.0%) otherwise. We pay unused commitment fees of 0.25% per annum on the unused lender commitments under the Credit Facility. The Credit 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

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Manager. The Credit Facility contains certain affirmative and negative covenants, including but not limited to: (i) maintaining a minimum availability of at least 10% of the borrowing base, (ii) maintaining an interest coverage ratio of at least 2.0 to 1.0, (iii) maintaining an asset coverage ratio (tangible net worth to Credit Facility borrowings) of at least 1.5 to 1.0 and (iv) maintaining a minimum tangible net worth. The Credit Facility is provided on a revolving basis through its final maturity date in September 2023, and contains two, one-year extension options which could extend the final maturity by up to two years, subject to certain conditions, including lender approval. As of September 30, 2019, we had $150.0 million in borrowings outstanding under the Credit Facility, the interest rate on the Credit Facility was 4.0% (based on the LIBOR rate of 2.1% as of the most recent reset date of September 1, 2019 plus 1.875%) and we were in compliance with all financial covenants of the Credit Facility.

        Through the Funds, we have the ability to issue SBIC debentures guaranteed by the SBA at favorable interest rates and favorable terms and conditions. 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. Through the Funds, we have an effective maximum amount of $347.0 million as a result of certain voluntary prepayments of SBIC debentures under historical commitments from the SBA. During the nine months ended September 30, 2019, Main Street received a $25.0 million commitment from the SBA in order to issue new SBIC debentures in the future and opportunistically prepaid $34.0 million of existing SBIC debentures that were scheduled to mature over the next year as part of an effort to manage the maturity dates of the oldest SBIC debentures. Debentures guaranteed by the SBA have fixed interest rates that equal prevailing 10-year Treasury Note rates plus a market spread and have a maturity of ten years with interest payable semiannually. The principal amount of the debentures is not required to be paid before maturity, but may be pre-paid at any time with no prepayment penalty. We expect to issue new SBIC debentures under the SBIC program in the future in an amount up to the regulatory maximum amount for affiliated SBIC funds. As of September 30, 2019, through our three wholly owned SBICs, we had $311.8 million of outstanding SBIC debentures guaranteed by the SBA, which bear a weighted-average annual fixed interest rate of approximately 3.6%, paid semiannually, and mature ten years from issuance. The first maturity related to our SBIC debentures occurs in 2020, and the weighted-average remaining duration is approximately 5.4 years as of September 30, 2019.

        In April 2013, we issued $92.0 million, including the underwriters' full exercise of their over-allotment option, in aggregate principal amount of the 6.125% Notes (the "6.125% Notes"). The 6.125% Notes bore interest at a rate of 6.125% per year payable quarterly on January 1, April 1, July 1 and October 1 of each year. The total net proceeds to us from the 6.125% Notes, after underwriting discounts and estimated offering expenses payable, were approximately $89.0 million. On April 2, 2018, we redeemed the entire principal amount of the issued and outstanding 6.125% Notes effective April 1, 2018 (the "Redemption Date"). The 6.125% Notes were redeemed at par value, plus the accrued and unpaid interest thereon from January 1, 2018, through, but excluding, the Redemption Date. As part of the redemption, we recognized a realized loss on extinguishment of debt of $1.5 million in the second quarter of 2018 related to the write-off of the related unamortized deferred financing costs.

        In November 2014, we issued $175.0 million in aggregate principal amount of 4.50% unsecured notes due 2019 (the "4.50% Notes due 2019") at an issue price of 99.53%. The 4.50% Notes due 2019 are unsecured obligations and rank pari passu with our current and future unsecured indebtedness; senior to any of our future indebtedness that expressly provides it is subordinated to the 4.50% Notes due 2019; effectively subordinated to all of our existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness, including borrowings under our Credit Facility; and structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries, including without limitation, the indebtedness of the Funds. The 4.50% Notes due 2019 mature on December 1, 2019, and may be redeemed in whole or in part at any time at our option subject to certain make-whole provisions. The 4.50% Notes due 2019 bear interest at a rate of 4.50%

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per year payable semiannually on June 1 and December 1 of each year. We may from time to time repurchase 4.50% Notes due 2019 in accordance with the 1940 Act and the rules promulgated thereunder. As of September 30, 2019, the outstanding balance of the 4.50% Notes due 2019 was $175.0 million.

        The indenture governing the 4.50% Notes due 2019 (the "4.50% Notes due 2019 Indenture") contains certain covenants, including covenants requiring our compliance with (regardless of whether we are subject to) the asset coverage requirements set forth in Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act, as well as covenants requiring us to provide financial information to the holders of the 4.50% Notes due 2019 and the Trustee if we cease to be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These covenants are subject to limitations and exceptions that are described in the 4.50% Notes due 2019 Indenture.

        In November 2017, we issued $185.0 million in aggregate principal amount of 4.50% unsecured notes due 2022 (the "4.50% Notes due 2022") at an issue price of 99.16%. The 4.50% Notes due 2022 are unsecured obligations and rank pari passu with our current and future unsecured indebtedness; senior to any of our future indebtedness that expressly provides it is subordinated to the 4.50% Notes due 2022; effectively subordinated to all of our existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness, including borrowings under our Credit Facility; and structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries, including without limitation, the indebtedness of the Funds. The 4.50% Notes due 2022 mature on December 1, 2022, and may be redeemed in whole or in part at any time at our option subject to certain make-whole provisions. The 4.50% Notes due 2022 bear interest at a rate of 4.50% per year payable semiannually on June 1 and December 1 of each year. We may from time to time repurchase 4.50% Notes due 2022 in accordance with the 1940 Act and the rules promulgated thereunder. As of September 30, 2019, the outstanding balance of the 4.50% Notes due 2022 was $185.0 million.

        The indenture governing the 4.50% Notes due 2022 (the "4.50% Notes due 2022 Indenture") contains certain covenants, including covenants requiring our compliance with (regardless of whether we are subject to) the asset coverage requirements set forth in Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act, as well as covenants requiring us to provide financial information to the holders of the 4.50% Notes due 2022 and the Trustee if we cease to be subject to the reporting requirements of the Exchange Act. These covenants are subject to limitations and exceptions that are described in the 4.50% Notes due 2022 Indenture.

        In April 2019, we issued $250.0 million in aggregate principal amount of 5.20% unsecured Notes due 2024 (the "5.20% Notes") at an issue price of 99.125%. The net proceeds were used to repay a portion of the borrowings outstanding under the Credit Facility and we currently expect that we will re-borrow under the Credit Facility to repay the 4.50% Notes due 2019 upon maturity in December 2019. The 5.20% Notes are unsecured obligations and rank pari passu with our current and future unsecured indebtedness; senior to any of our future indebtedness that expressly provides it is subordinated to the 5.20% Notes; effectively subordinated to all of our existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness, including borrowings under our Credit Facility; and structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries, including without limitation, the indebtedness of the Funds. The 5.20% Notes mature on May 1, 2024, and may be redeemed in whole or in part at any time at our option subject to certain make-whole provisions. The 5.20% Notes bear interest at a rate of 5.20% per year payable semiannually on May 1 and November 1 of each year. We may from time to time repurchase 5.20% Notes in accordance with the 1940 Act and the rules promulgated thereunder. As of September 30, 2019, the outstanding balance of the 5.20% Notes was $250.0 million.

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        The indenture governing the 5.20% Notes (the "5.20% Notes Indenture") contains certain covenants, including covenants requiring our compliance with (regardless of whether we are subject to) the asset coverage requirements set forth in Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act, as well as covenants requiring us to provide financial information to the holders of the 5.20% Notes and the Trustee if we cease to be subject to the reporting requirements of the Exchange Act. These covenants are subject to limitations and exceptions that are described in the 5.20% Notes Indenture.

        We maintain a program with certain selling agents through which we can sell shares of our common stock by means of at-the-market offerings from time to time (the "ATM Program"). During the nine months ended September 30, 2019, we sold 1,423,042 shares of our common stock at a weighted-average price of $38.41 per share and raised $54.7 million of gross proceeds under the ATM Program. Net proceeds were $53.8 million after commissions to the selling agents on shares sold and offering costs. As of September 30, 2019, sales transactions representing 5,000 shares had not settled and are not included in shares issued and outstanding on the face of the consolidated balance sheet but are included in the weighted-average shares outstanding in the consolidated statement of operations and in the shares used to calculate net asset value per share. As of September 30, 2019, 9,183,295 shares remained available for sale under the ATM Program.

        During the year ended December 31, 2018, we sold 2,060,019 shares of our common stock at a weighted-average price of $38.48 per share and raised $79.3 million of gross proceeds under the ATM Program. Net proceeds were $78.0 million after commissions to the selling agents on shares sold and offering costs.

        We anticipate that we will continue to fund our investment activities through existing cash and cash equivalents, cash flows generated through our ongoing operating activities, utilization of available borrowings under our Credit Facility, and a combination of future issuances of debt and equity capital. Our primary uses of funds will be investments in portfolio companies, operating expenses and cash distributions to holders of our common stock.

        We periodically invest excess cash balances into marketable securities and idle funds investments. The primary investment objective of marketable securities and idle funds investments is to generate incremental cash returns on excess cash balances prior to utilizing those funds for investment in our LMM, Middle Market and Private Loan portfolio investments. Marketable securities and idle funds investments generally consist of debt investments, independently rated debt investments, certificates of deposit with financial institutions, diversified bond funds and publicly traded debt and equity investments.

        If our common stock trades below our net asset value per share, we will generally not be able to issue additional common stock at the market price unless our stockholders approve such a sale and our Board of Directors makes certain determinations. We did not seek stockholder authorization to sell shares of our common stock below the then current net asset value per share of our common stock at our 2019 annual meeting of stockholders because our common stock price per share had been trading significantly above the net asset value per share of our common stock since 2011. We would therefore need future approval from our stockholders to issue shares below the then current net asset value per share.

        In order to satisfy the Code requirements applicable to a RIC, we intend to distribute to our stockholders, after consideration and application of our ability under the Code to carry forward certain excess undistributed taxable income from one tax year into the next tax year, substantially all of our taxable income. In addition, as a BDC, we generally are required to meet a coverage ratio of total assets to total senior securities, which include borrowings and any preferred stock we may issue in the future, of at least 200% (or 150% if certain requirements are met). This requirement limits the amount that we may borrow. In January 2008, we received an exemptive order from the SEC to exclude

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SBA-guaranteed debt securities issued by MSMF and any other wholly owned subsidiaries of ours which operate as SBICs from the asset coverage requirements of the 1940 Act as applicable to us, which, in turn, enables us to fund more investments with debt capital.

        Although we have been able to secure access to additional liquidity, including through the Credit Facility, public debt issuances, leverage available through the SBIC program and equity offerings, there is no assurance that debt or equity capital will be available to us in the future on favorable terms, or at all.

    Recently Issued or Adopted Accounting Standards

        In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 supersedes the revenue recognition requirements under ASC 605, Revenue Recognition, and most industry-specific guidance throughout the Industry Topics of the ASC. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. Under the guidance, an entity is required to perform the following five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The guidance significantly enhances comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets. Additionally, the guidance requires improved disclosures as to the nature, amount, timing and uncertainty of revenue that is recognized. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which clarified the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which clarified the implementation guidance regarding performance obligations and licensing arrangements. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606)—Narrow-Scope Improvements and Practical Expedients, which clarified guidance on assessing collectability, presenting sales tax, measuring noncash consideration, and certain transition matters. In December 2016, the FASB issued ASU No. 2016-20, Revenue from Contracts with Customers (Topic 606)—Technical Corrections and Improvements, which provided disclosure relief, and clarified the scope and application of the new revenue standard and related cost guidance. The guidance was effective for the annual reporting period beginning after December 15, 2017, including interim periods within that reporting period. Substantially all of our income is outside the scope of ASU 2014-09. For those income items that are within the scope (primarily fee income), we have similar performance obligations as compared with deliverables and separate units of account previously identified. As a result, our timing of income recognition remains the same and the adoption of the standard was not material.

        In February 2016, the FASB issued ASU 2016 02, Leases, which amended the FASB Accounting Standards Codification and created ASC 842, Leases ("ASC 842"), to require lessees to recognize on the balance sheet a right of use asset, representing its right to use the underlying asset for the lease term, and a lease liability for all leases with terms greater than 12 months, utilizing a modified retrospective transition approach, which includes a number of optional practical expedients that entities may elect to apply. The guidance in ASC 842 also requires qualitative and quantitative disclosures designed to assess the amount, timing and uncertainty of cash flows arising from leases. We adopted ASC 842 effective January 1, 2019. Under ASC 842, we evaluate leases to determine if the leases are considered financing or operating leases. We currently have one operating lease for office space for which we have recorded a right-of-use asset and lease liability for the operating lease obligation. Non-lease components (maintenance, property tax, insurance and parking) are not included in the lease

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cost. The lease expense is presented as a single lease cost that is amortized on a straight-line basis over the life of the lease.

        In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), which is intended to reduce the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The guidance was effective for annual periods beginning after December 15, 2017, and interim periods therein. We adopted ASU 2016-15 effective January 1, 2018. The impact of the adoption of this accounting standard on our consolidated financial statements was not material.

        In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), which is intended to improve fair value and defined benefit disclosure requirements by removing disclosures that are not cost-beneficial, clarifying disclosures' specific requirements, and adding relevant disclosure requirements. The amendments take effect for all organizations for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. We elected to early adopt ASU 2018-13 during the year ended December 31, 2018. No significant changes to our fair value disclosures were necessary in the notes to the consolidated financial statements in order to comply with ASU 2018-13.

        In August 2018, the SEC adopted rules (the "SEC Release") amending certain disclosure requirements intended to eliminate redundant, duplicative, overlapping, outdated or superseded, in light of other SEC disclosure requirements, U.S. GAAP requirements or changes in the information environment. In part, the SEC Release requires an investment company to present distributable earnings in total on the consolidated balance sheet and consolidated statement of changes in net assets, rather than showing the three components of distributable earnings as previously shown. We adopted this part of the SEC Release during the year ended December 31, 2018. The impact of the adoption of these rules on our consolidated financial statements was not material. Additionally, the SEC Release requires disclosure of changes in net assets within a registrant's Form 10-Q filing on a quarter-to-date and year-to-date basis for both the current year and prior year comparative periods. We adopted the new requirement to present changes in net assets in interim financial statements within Form 10-Q filings effective January 1, 2019. The adoption of these rules did not have a material impact on the consolidated financial statements.

        From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that are adopted by us as of the specified effective date. We believe that the impact of recently issued standards and any that are not yet effective will not have a material impact on our consolidated financial statements upon adoption.

    Inflation

        Inflation has not had a significant effect on our results of operations in any of the reporting periods presented herein. However, our portfolio companies have experienced, and may in the future experience, the impacts of inflation on their operating results, including periodic escalations in their costs for labor, raw materials and third-party services and required energy consumption.

    Off-Balance Sheet Arrangements

        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. These instruments include commitments to extend credit and fund equity capital and involve, to varying degrees, elements of liquidity and credit risk in excess of the amount recognized in the balance sheet. At September 30, 2019, we had a total of $116.5 million in outstanding commitments comprised of (i) 38 investments with commitments to fund revolving loans that had not been fully drawn or term loans with additional

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commitments not yet funded and (ii) 10 investments with equity capital commitments that had not been fully called.

    Contractual Obligations

        As of September 30, 2019, the future fixed commitments for cash payments in connection with our SBIC debentures, the 4.50% Notes due 2019, the 4.50% Notes due 2022, the 5.20% Notes and rent obligations under our office lease for each of the next five years and thereafter are as follows:

 
  2019   2020   2021   2022   2023   Thereafter   Total  

SBIC debentures

  $   $ 37,000   $ 40,000   $ 5,000   $ 16,000   $ 213,800   $ 311,800  

Interest due on SBIC debentures

        11,271     9,260     8,248     7,868     23,317     59,964  

4.50% Notes due 2019

    175,000                         175,000  

Interest due on 4.50% Notes due 2019

    3,938                         3,938  

4.50% Notes due 2022

                185,000             185,000  

Interest due on 4.50% Notes due 2022

    4,163     8,325     8,325     8,325             29,138  

5.20% Notes due 2024

                        250,000     250,000  

Interest due on 5.20% Notes

    6,789     13,000     13,000     13,000     13,000     6,500     65,289  

Operating Lease Obligation(1)

    188     762     776     790     804     3,428     6,748  

Total

  $ 190,078   $ 70,358   $ 71,361   $ 220,363   $ 37,672   $ 497,045   $ 1,086,877  

(1)
Operating Lease Obligation means a rent payment obligation under a lease classified as an operating lease and disclosed pursuant to ASC 842, as may be modified or supplemented.

        As of September 30, 2019, we had $150.0 million in borrowings outstanding under our Credit Facility, and the Credit Facility is currently scheduled to mature in September 2023. The Credit Facility contains two, one-year extension options which could extend the maturity to September 2025, subject to lender approval. See further discussion of the Credit Facility terms in "—Liquidity and Capital Resources—Capital Resources."

    Related Party Transactions

        As discussed further above, the External Investment Manager is treated as a wholly owned portfolio company of MSCC and is included as part of our Investment Portfolio. At September 30, 2019, we had a receivable of approximately $3.0 million due from the External Investment Manager which included approximately $2.0 million primarily related to operating expenses incurred by us as required to support the External Investment Manager's business and amounts due from the External Investment Manager to Main Street under a tax sharing agreement (see further discussion above in "—Critical Accounting Policies—Income Taxes") and approximately $1.0 million of dividends declared but not paid by the External Investment Manager.

        In November 2015, our Board of Directors approved and adopted the Main Street Capital Corporation Deferred Compensation Plan (the "2015 Deferred Compensation Plan"). The 2015 Deferred Compensation Plan became effective on January 1, 2016 and replaced the Deferred Compensation Plan for Non-Employee Directors previously adopted by the Board of Directors in June 2013 (the "2013 Deferred Compensation Plan"). Under the 2015 Deferred Compensation Plan, non-employee directors and certain key employees may defer receipt of some or all of their cash compensation and directors' fees, subject to certain limitations. Individuals participating in the 2015 Deferred Compensation Plan receive distributions of their respective balances based on predetermined payout schedules or other events as defined by the plan and are also able to direct investments made

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on their behalf among investment alternatives permitted from time to time under the plan, including phantom Main Street stock units. As of September 30, 2019, $7.8 million of compensation and directors' fees had been deferred under the 2015 Deferred Compensation Plan (including amounts previously deferred under the 2013 Deferred Compensation Plan). Of this amount, $4.2 million was deferred into phantom Main Street stock units, representing 119,064 shares of our common stock. Including phantom stock units issued through dividend reinvestment and net of any shares distributed, the phantom stock units outstanding as of September 30, 2019 represented 147,994 shares of our common stock. Any amounts deferred under the plan represented by phantom Main Street stock units will not be issued or included as outstanding on the consolidated statements of changes in net assets until such shares are actually distributed to the participant in accordance with the plan, but the related phantom stock units are included in weighted average shares outstanding with the related dollar amount of the deferral included in total expenses in Main Street's consolidated statements of operations as earned. The amounts related to additional phantom stock units are included in the statement of changes in net assets as an increase to dividends to stockholders offset by a corresponding increase to additional paid-in capital.

    Recent Developments

        In October 2019, we declared a semi-annual supplemental cash dividend of $0.24 per share payable in December 2019. This supplemental cash dividend is in addition to the previously announced regular monthly cash dividends that we declared for the fourth quarter of 2019 of $0.205 per share for each of October, November and December 2019.

        During November 2019, we declared regular monthly dividends of $0.205 per share for each month of January, February and March of 2020. These regular monthly dividends equal a total of $0.615 per share for the first quarter of 2020 and represent a 5.1% increase from the regular monthly dividends declared for the first quarter of 2019. Including the semi-annual supplemental dividend declared payable for December 2019 and the regular monthly dividends declared for the fourth quarter of 2019 and first quarter of 2020, we will have paid $27.755 per share in cumulative dividends since our October 2007 initial public offering.

        In November 2019, we led a new portfolio investment to facilitate the recapitalization of J&J Services, Inc. ("J&J"), a leading provider of roll-off dumpster and portable toilet rental services. We, along with our co-investors, partnered with the J&J's founders and senior management team to facilitate the recapitalization and provide growth capital, with us funding $24.8 million in a combination of first-lien, senior secured term debt and a direct equity investment. Founded in 2000, and headquartered in Nashville, Tennessee, J&J is a second-generation family-owned business providing roll-off dumpster and portable toilet rental services to an expansive base of residential, commercial, and demolition customers.

Item 3.    Quantitative and Qualitative Disclosures about Market Risk

        We are subject to financial market risks, including changes in interest rates. Changes in interest rates may affect both our interest expense on the debt outstanding under our Credit Facility and our interest income from portfolio investments. Our risk management systems and procedures are designed to identify and analyze our risk, to set appropriate policies and limits and to continually monitor these risks. Our investment income will be affected by changes in various interest rates, including LIBOR and prime rates, to the extent that any debt investments include floating interest rates. The majority of our debt investments are made with either fixed interest rates or floating rates that are subject to contractual minimum interest rates for the term of the investment. As of September 30, 2019, approximately 75% of our debt investment portfolio (at cost) bore interest at floating rates, 89% of which were subject to contractual minimum interest rates. Our interest expense will be affected by changes in the published LIBOR rate in connection with our Credit Facility; however, the interest rates

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on our outstanding SBIC debentures, 4.50% Notes due 2019, 4.50% Notes due 2022 and 5.20% Notes, which comprise the majority of our outstanding debt, are fixed for the life of such debt. As of September 30, 2019, we had not entered into any interest rate hedging arrangements. The following table shows the approximate annualized increase or decrease in the components of net investment income due to hypothetical base rate changes in interest rates, assuming no changes in our investments and borrowings as of September 30, 2019.

Basis Point Change
  Increase
(Decrease)
in Interest
Income
  (Increase)
Decrease
in Interest
Expense
  Increase
(Decrease) in Net
Investment
Income
  Increase
(Decrease) in Net
Investment
Income per
Share
 
 
  (dollars in thousands)
   
 

(200)

  $ (15,849 ) $ 3,000   $ (12,849 ) $ (0.20 )

(175)

    (15,436 )   2,625     (12,811 )   (0.20 )

(150)

    (14,994 )   2,250     (12,744 )   (0.20 )

(125)

    (14,526 )   1,875     (12,651 )   (0.20 )

(100)

    (13,358 )   1,500     (11,858 )   (0.19 )

(75)

    (10,066 )   1,125     (8,941 )   (0.14 )

(50)

    (6,751 )   750     (6,001 )   (0.09 )

(25)

    (3,392 )   375     (3,017 )   (0.05 )

25

    3,496     (375 )   3,121     0.05  

50

    6,992     (750 )   6,242     0.10  

100

    13,984     (1,500 )   12,484     0.20  

200

    27,968     (3,000 )   24,968     0.39  

        The hypothetical results would also be impacted by the changes in the amount of debt outstanding under our Credit Facility (with an increase (decrease) in the debt outstanding under the Credit Facility resulting in an (increase) decrease in the hypothetical interest expense).

Item 4.    Controls and Procedures

        As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer, President, Chief Financial Officer, Chief Compliance Officer and Chief Accounting Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15 of the Exchange Act). Based on that evaluation, our Chief Executive Officer, President, Chief Financial Officer, Chief Compliance Officer and Chief Accounting Officer have concluded that our current disclosure controls and procedures are effective in timely alerting them of material information relating to us that is required to be disclosed in the reports we file or submit under the Exchange Act. There have been no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1.    Legal Proceedings

        We may, from time to time, be involved in litigation arising out of our operations in the normal course of business or otherwise. Furthermore, third parties may seek to impose liability on us in connection with the activities of our portfolio companies. While the outcome of any current legal proceedings cannot at this time be predicted with certainty, we do not expect any current matters will materially affect our financial condition or results of operations; however, there can be no assurance whether any pending legal proceedings will have a material adverse effect on our financial condition or results of operations in any future reporting period.

Item 1A.    Risk Factors

        There have been no material changes to the risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2018 that we filed with the SEC on March 1, 2019.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

        During the three months ended September 30, 2019, we issued 88,052 shares of our common stock under our dividend reinvestment plan. These issuances were not subject to the registration requirements of the Securities Act of 1933, as amended. The aggregate value of the shares of common stock issued during the three months ended September 30, 2019 under the dividend reinvestment plan was approximately $3.7 million.

        Upon vesting of restricted stock awarded pursuant to our employee equity compensation plan, shares may be withheld to meet applicable tax withholding requirements. Any withheld shares are treated as common stock purchases by the Company in our consolidated financial statements as they reduce the number of shares received by employees upon vesting (see "Purchase of vested stock for employee payroll tax withholding" in the consolidated statements of changes in net assets for share amounts withheld).

Item 6.    Exhibits

        Listed below are the exhibits which are filed as part of this report (according to the number assigned to them in Item 601 of Regulation S-K):

Exhibit
Number
  Description of Exhibit
  14.1   Code of Business Conduct and Ethics.

 

31.1

 

Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

 

31.2

 

Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

 

32.1

 

Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

 

32.2

 

Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

 

99.1

 

Code of Ethics.

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SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

    Main Street Capital Corporation

Date: November 8, 2019

 

/s/ DWAYNE L. HYZAK

Dwayne L. Hyzak
Chief Executive Officer
(principal executive officer)

Date: November 8, 2019

 

/s/ BRENT D. SMITH

Brent D. Smith
Chief Financial Officer and Treasurer
(principal financial officer)

Date: November 8, 2019

 

/s/ SHANNON D. MARTIN

Shannon D. Martin
Vice President and Chief Accounting Officer
(principal accounting officer)

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