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Debt
 3 Months Ended
Mar. 31, 2023
Debt Disclosure [Abstract]  
Debt

Note 6. Debt

Revolving Credit Facility: On June 16, 2014, FIC entered into a senior secured revolving credit agreement (the "Credit Agreement" and the senior secured revolving credit facility, the “Credit Facility”) with ING Capital LLC (“ING”), as the administrative agent, collateral agent, and lender. The Credit Facility is secured by certain portfolio investments held by the Company, but portfolio investments held by the Funds are not collateral for the Credit Facility. On April 24, 2019, the Company entered into an Amended & Restated Senior Secured Revolving Credit Agreement (the “Amended Credit Agreement”) among the Company, as borrower, the lenders party thereto, and ING, as administrative agent. On June 26, 2020, the Company entered into an amendment to the Amended Credit Agreement that, among other changes, modified certain financial covenants. On August 17, 2022, the Company entered into a second amendment to the Amended Credit Agreement ("Second Amendment"). The Second Amendment, among other things: (i) changed the underlying benchmark used to compute interest under the Amended Credit Agreement to SOFR from LIBOR; (ii) reduced the applicable margin from 3.00% to 2.675% on SOFR loans prior to satisfying certain step-down conditions, and from 2.675% to 2.50% after satisfying certain step-down conditions, with commensurate reductions in the applicable margins for base rate loans; (iii) provided for a loan commitment availability period ending on August 17, 2026; (iv) extended the maturity date to August 17, 2027 from April 24, 2023; and (v) amended certain financial covenants, including (a) amending the asset coverage ratio to no less than 1.50 to 1.00 from no less than 2.00 to 1.00 (on a regulatory basis); and (b) requiring the Company to maintain a senior asset coverage ratio of no less than 2.00 to 1.00.

The Company pays a commitment fee that varies depending on the size of the unused portion of the Credit Facility: 2.500% to 2.675% per annum on the unused portion of the Credit Facility at or below 35% of the commitments and 0.50% per annum on any remaining unused portion of the Credit Facility between the total commitments and the 35% minimum utilization. The Credit Facility is secured by a first priority security interest in all of our assets, excluding the assets of our SBIC subsidiaries.

Amounts available to borrow under the Credit Facility are subject to a minimum borrowing/collateral base that applies an advance rate to certain investments held by the Company, excluding investments held by the Funds. The Company is subject to limitations with respect to the investments securing the Credit Facility, including, but not limited to, restrictions on sector concentrations, loan size, payment frequency and status and collateral interests, as well as restrictions on portfolio company leverage, which may also affect the borrowing base and therefore amounts available to borrow.

The Company has made customary representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar credit facilities. These covenants are subject to important limitations and exceptions that are described in the documents governing the Credit Facility. As of March 31, 2023 and December 31, 2022, the Company was in compliance in all material respects with the terms of the Credit Agreement.

SBA debentures: The Company uses debenture leverage provided through the SBA to fund a portion of its investment purchases.

Under the SBA debenture program, the SBA commits to purchase debentures issued by SBICs; such debentures have 10-year terms with the entire principal balance due at maturity and are guaranteed by the SBA. Interest on SBA debentures is payable semi-annually on March 1 and September 1. As of March 31, 2023 and December 31, 2022, approved and unused SBA debenture commitments were $25,000 and $37,000, respectively. The SBA may limit the amount that may be drawn each year under these commitments, and each issuance of leverage is conditioned on the Company’s full compliance, as determined by the SBA, with the terms and conditions under SBA regulations.

As of March 31, 2023 and December 31, 2022, the Company’s issued and outstanding SBA debentures mature as follows:

 

Pooling

 

Maturity

 

Fixed

 

 

March 31,

 

 

December 31,

 

Date (1)

 

Date

 

Interest Rate

 

 

2023

 

 

2022

 

3/25/2015

 

3/1/2025

 

 

3.277

 

 %

$

1,500

 

 

$

1,500

 

3/23/2016

 

3/1/2026

 

 

3.267

 

 

 

1,500

 

 

 

1,500

 

3/23/2016

 

3/1/2026

 

 

3.249

 

 

 

2,500

 

 

 

2,500

 

9/21/2016

 

9/1/2026

 

 

2.793

 

 

 

500

 

 

 

500

 

9/20/2017

 

9/1/2027

 

 

3.260

 

 

 

1,000

 

 

 

1,000

 

9/20/2017

 

9/1/2027

 

 

3.190

 

 

 

33,000

 

 

 

33,000

 

9/25/2019

 

9/1/2029

 

 

2.377

 

 

 

7,500

 

 

 

7,500

 

3/25/2020

 

3/1/2030

 

 

2.172

 

 

 

6,000

 

 

 

6,000

 

9/22/2021

 

9/1/2031

 

 

1.398

 

 

 

11,500

 

 

 

11,500

 

3/23/2022

 

3/1/2032

 

 

3.209

 

 

 

43,500

 

 

 

43,500

 

9/21/2022

 

9/1/2032

 

 

4.533

 

 

 

17,500

 

 

 

17,500

 

3/22/2023

 

3/1/2033

 

 

5.439

 

 

 

4,000

 

 

 

4,000

 

3/22/2023

 

3/1/2033

 

 

5.341

 

 

 

3,000

 

 

 

3,000

 

3/22/2023

 

3/1/2033

 

 

5.341

 

 

 

3,000

 

 

 

3,000

 

3/22/2023

 

3/1/2033

 

 

5.439

 

 

 

5,000

 

 

 

5,000

 

3/22/2023

 

3/1/2033

 

 

5.439

 

 

 

5,000

 

 

 

5,000

 

3/22/2023

 

3/1/2033

 

 

5.341

 

 

 

7,000

 

 

 

7,000

 

3/22/2023

 

3/1/2033

 

 

5.341

 

 

 

4,000

 

 

 

—

 

(2)

 

(2)

 

(2)

 

 

 

8,000

 

 

 

—

 

Total outstanding SBA debentures

 

 

 

 

 

 

$

165,000

 

 

$

153,000

 

 

(1)

The SBA has two scheduled pooling dates for debentures (in March and in September). Certain debentures funded during the reporting periods may not be pooled until the subsequent pooling date.

(2)

The Company issued $8,000 in SBA debentures which will pool in September 2023. Until the pooling date, the debentures bear interest at a fixed rate interim interest rate of 6.047%. The Company expects the current interim interest rate will reset to a higher long-term fixed rate on the pooling date.

Notes: On December 23, 2020, the Company closed the offering of $125,000 in aggregate principal amount of its 4.75% notes due 2026, or the “January 2026 Notes”. The total net proceeds to the Company from the January 2026 Notes, based on a public offering price of 100.00% of par, after deducting underwriting discounts of $2,500 and estimated offering expenses of approximately $400, were approximately $122,100. The January 2026 Notes will mature on January 31, 2026 and bear interest at a rate of 4.75%. The January 2026 Notes may be redeemed in whole or in part at any time or from time to time at our option subject to a make whole provision if redeemed more than three months prior to maturity and at par thereafter. Interest on the January 2026 Notes is payable on January 31 and July 31 of each year. The Company does not intend to list the January 2026 Notes on any securities exchange or automated dealer quotation system.
 

On October 8, 2021, the Company closed the offering of $125,000 in aggregate principal amount of its 3.50% notes due 2026, or the “November 2026 Notes” (collectively with the January 2026 Notes, the “Notes”). The total net proceeds to the Company from the November 2026 Notes, based on a public offering price of 99.996% of par, after deducting underwriting discounts of $2,500 and estimated offering expenses of approximately $400, were approximately $122,095. The November 2026 Notes will mature on November 15, 2026 and bear interest at a rate of 3.50%. The November 2026 Notes may be redeemed in whole or in part at any time or from time to time at our option subject to a make whole provision if redeemed more than three months prior to maturity and at par thereafter. Interest on the November 2026 Notes is payable on May 15 and November 15 of each year. The Company does not intend to list the November 2026 Notes on any securities exchange or automated dealer quotation system.
 

Each of the Notes are unsecured obligations of the Company and rank pari passu with the Company’s existing and future unsecured indebtedness; effectively subordinated to all of the Company’s existing and future secured indebtedness; and structurally subordinated to all existing and future indebtedness and other obligations of any of its subsidiaries, financing vehicles, or similar facilities the Company may form in the future, with respect to claims on the assets of any such subsidiaries, financing vehicles, or similar facilities, including the Credit Facility.
 

Secured Borrowing

As of March 31, 2023 and December 31, 2022, the carrying value of secured borrowings totaled $16,634 and $16,880, respectively and the fair value of the associated loans included in investments was $16,630 and $16,875, respectively. These secured borrowings were created as a result of our completion of partial loan sales of certain unitranche loan assets that did not meet the definition of a “participating interest.” As a result, sale treatment was not permitted and these partial loan sales were treated as secured borrowings. The weighted average interest rate on our secured borrowings was approximately 8.7% and 7.8% as of March 31, 2023, and December 31, 2022, respectively.

Senior Securities

As of March 31, 2023, and December 31, 2022, the aggregate amount outstanding of the senior securities (including secured borrowings) issued by the Company was $281,634 and $266,880, respectively, for which our asset coverage was 272.1% and 280.0%, respectively. The SBA debentures are not subject to the asset coverage requirements of the 1940 Act as a result of exemptive relief granted to us by the SEC on June 30, 2014. The asset coverage ratio for a class of senior securities representing indebtedness is calculated as our consolidated total assets, less all liabilities and indebtedness not represented by senior securities, divided by total senior securities representing indebtedness.

Interest and Financing Expenses

Interest and fees related to the Company’s debt for the three months ended March 31, 2023 and 2022 which are included in interest and financing expenses on the consolidated statements of operations, were as follows:

 

 

Three Months Ended March 31, 2023

 

 

Three Months Ended March 31, 2022

 

 

 

 

SBA debentures

 

 

Credit Facility

 

 

Secured Borrowings

 

 

Notes

 

 

Total

 

 

SBA debentures

 

 

Credit Facility

 

 

Secured Borrowings

 

 

Notes

 

 

Total

 

 

Stated interest expense

 

$

1,372

 

 

$

330

 

 

$

389

 

 

$

2,578

 

 

$

4,669

 

 

$

739

 

 

$

363

 

 

$

208

 

 

$

2,578

 

 

$

3,888

 

 

Amortization of deferred financing costs

 

 

168

 

 

 

73

 

 

 

-

 

 

 

275

 

 

 

516

 

 

 

138

 

 

 

112

 

 

 

-

 

 

 

274

 

 

 

524

 

 

Total interest and financing expenses

 

$

1,540

 

 

$

403

 

 

$

389

 

 

$

2,853

 

 

$

5,185

 

 

$

877

 

 

$

475

 

 

$

208

 

 

$

2,852

 

 

$

4,412

 

 

Weighted average stated interest rate, period end

 

 

3.268

%

 

 

7.390

%

 

 

8.685

%

 

 

4.125

%

 

 

4.244

%

 

 

2.846

%

 

 

3.125

%

 

 

4.497

%

 

 

4.125

%

 

 

3.726

%

 

Unused commitment fee rate, period end

 

N/A

 

 

 

0.970

%

 

N/A

 

 

N/A

 

 

 

0.970

%

 

N/A

 

 

 

1.375

%

 

N/A

 

 

N/A

 

 

 

1.375

%

 

 

Realized Losses on Extinguishment of Debt

During the three months ended March 31, 2023 and 2022, the Company prepaid $0 and $20,000 of SBA debentures, respectively, which were scheduled to mature on dates ranging from 2025 to 2028. As a result of the prepayments, the Company recognized realized losses on extinguishment of debt of $0 and $198, respectively, equal to the write-off of the related unamortized deferred financing costs, during the three months ended March 31, 2023 and 2022.

Deferred Financing Costs

Deferred financing costs are amortized into interest and financing expenses on the consolidated statements of operations, using the effective interest method, over the term of the respective financing instrument. Deferred financing costs related to the SBA debentures, the Credit Facility, and the Notes as of March 31, 2023 and December 31, 2022 were as follows:

 

 

 

March 31, 2023

 

 

December 31, 2022

 

 

 

SBA

 

 

Credit

 

 

 

 

 

 

 

 

SBA

 

 

Credit

 

 

 

 

 

 

 

 

 

debentures

 

 

Facility

 

 

Notes

 

 

Total

 

 

debentures

 

 

Facility

 

 

Notes

 

 

Total

 

SBA debenture commitment fees

 

$

3,000

 

 

$

—

 

 

$

—

 

 

$

3,000

 

 

$

3,000

 

 

$

—

 

 

$

—

 

 

$

3,000

 

SBA debenture leverage fees

 

 

6,681

 

 

 

—

 

 

 

—

 

 

 

6,681

 

 

 

6,389

 

 

 

—

 

 

 

—

 

 

 

6,389

 

Credit Facility upfront fees

 

 

—

 

 

 

4,417

 

 

 

—

 

 

 

4,417

 

 

 

—

 

 

 

4,417

 

 

 

—

 

 

 

4,417

 

Notes underwriting discounts

 

 

—

 

 

 

—

 

 

 

5,005

 

 

 

5,005

 

 

 

—

 

 

 

—

 

 

 

5,005

 

 

 

5,005

 

Notes debt issue costs

 

 

—

 

 

 

—

 

 

 

685

 

 

 

685

 

 

 

—

 

 

 

—

 

 

 

685

 

 

 

685

 

Total deferred financing costs

 

 

9,681

 

 

 

4,417

 

 

 

5,690

 

 

 

19,788

 

 

 

9,389

 

 

 

4,417

 

 

 

5,690

 

 

 

19,496

 

Less: accumulated amortization

 

 

(5,033

)

 

 

(3,111

)

 

 

(2,092

)

 

 

(10,236

)

 

 

(4,865

)

 

 

(3,037

)

 

 

(1,818

)

 

 

(9,720

)

Unamortized deferred financing costs

 

$

4,648

 

 

$

1,306

 

 

$

3,598

 

 

$

9,552

 

 

$

4,524

 

 

$

1,380

 

 

$

3,872

 

 

$

9,776

 

 

Unamortized deferred financing costs are presented as a direct offset to the SBA debentures, the Credit Facility and the Notes liabilities on the consolidated statements of assets and liabilities. The following table summarizes the outstanding debt net of unamortized deferred financing costs as of March 31, 2023 and December 31, 2022:

 

 

 

March 31, 2023(1)

 

 

December 31, 2022(1)

 

 

 

SBA

 

 

Credit

 

 

 

 

 

 

 

 

SBA

 

 

Credit

 

 

 

 

 

 

 

 

 

debentures

 

 

Facility

 

 

Notes

 

 

Total

 

 

debentures

 

 

Facility

 

 

Notes

 

 

Total

 

Outstanding debt

 

$

165,000

 

 

$

15,000

 

 

$

250,000

 

 

$

430,000

 

 

$

153,000

 

 

$

—

 

 

$

250,000

 

 

$

403,000

 

Less: unamortized deferred financing costs

 

 

(4,648

)

 

 

(1,306

)

 

 

(3,598

)

 

 

(9,552

)

 

 

(4,524

)

 

 

(1,380

)

 

 

(3,872

)

 

 

(9,776

)

Debt, net of deferred financing costs

 

$

160,352

 

 

$

13,694

 

 

$

246,402

 

 

$

420,448

 

 

$

148,476

 

 

$

(1,380

)

 

$

246,128

 

 

$

393,224

 

 

(1)
Total excludes $16,634 and $16,880 of Secured Borrowings as of March 31, 2023 and December 31, 2022, respectively.

 

As of March 31, 2023, the Company’s debt liabilities are scheduled to mature as follows (1):

 

 

 

SBA

 

 

Credit

 

 

Secured

 

 

 

 

 

 

 

Year

 

debentures

 

 

Facility (2)

 

 

Borrowings

 

 

Notes

 

 

Total

 

2024

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

2025

 

 

1,500

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,500

 

2026

 

 

4,500

 

 

 

—

 

 

 

16,634

 

 

 

250,000

 

 

 

271,134

 

2027

 

 

34,000

 

 

 

15,000

 

 

 

—

 

 

 

—

 

 

 

49,000

 

2028

 

 

-

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

-

 

Thereafter

 

 

125,000

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

125,000

 

Total

 

$

165,000

 

 

$

15,000

 

 

$

16,634

 

 

$

250,000

 

 

$

446,634

 

 

(1)

The table above presents scheduled maturities of the Company’s outstanding debt liabilities as of a point in time pursuant to the terms of those instruments. The timing of actual repayments of outstanding debt liabilities may not ultimately correspond with the scheduled maturity dates depending on the terms of the underlying instruments and the potential for earlier prepayments.

(2)

The Credit Facility matures on August 17, 2027.