424B2 1 d169886d424b2.htm 424B2 424B2
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This prospectus supplement relates to an effective registration statement under the Securities Act of 1933, but is not complete and may be changed. This prospectus supplement is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

Filed Pursuant to Rule 424(b)(2)
Registration No. 333-238621

Subject to Completion dated May 18, 2021

Preliminary Prospectus Supplement

(to Prospectus dated December 11, 2020)

$                

First Eagle Alternative Capital BDC, Inc.

    % Notes due 2026

 

 

We are an externally managed, non-diversified closed-end management investment company that has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended. We are managed by our investment adviser, First Eagle Alternative Credit, LLC, (formerly, THL Credit Advisors LLC), or FEAC, which also provides the administrative services necessary for us to operate. Effective January 31, 2020, FEAC is a subsidiary of First Eagle Investment Management, LLC (“First Eagle”). Prior to August 3, 2020, we were named “THL Credit, Inc.”

Our investment objective is to generate both current income and capital appreciation, primarily through investments in privately negotiated debt and equity securities of middle market companies. We are a direct lender to middle market companies and invest primarily in directly originated first lien senior secured loans, including unitranche investments. In certain instances, we also make second lien secured loans and subordinated, or mezzanine, debt investments, which may include an associated equity component such as warrants, preferred stock or similar securities, and direct equity investments. Our first lien senior secured loans may be structured as traditional first lien senior secured loans or as unitranche loans. Unitranche structures may combine characteristics of traditional first lien senior secured as well as second lien and subordinated loans and our unitranche loans will expose us to the risks associated with second lien and/or subordinated loans to the extent we invest in the “last-out” tranche or subordinated tranche (or piece) of the unitranche loan. We also may provide advisory services to managed funds.

Substantially all of the debt securities in which we invest are below investment grade debt securities and are often referred to as “high yield” or “junk” securities. Exposure to below investment grade securities involves certain risk, and those securities are viewed as having predominately speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal. A material amount of our debt investments contain interest reset provisions that may make it more difficult for the borrowers to make debt repayments. Further, our debt investments generally will not pay down principal during their term which could result in a substantial loss to us if the portfolio company is unable to refinance or repay the debt at maturity.

We are offering $             in aggregate principal amount of     % notes due 2026, or the “Notes.” The Notes will mature on                 , 2026. We will pay interest on the Notes on March 30, June 30, September 30 and December 30 of each year, beginning on September 30, 2021. We may redeem the Notes in whole or in part at any time or from time to time on or after            ,            , at the redemption price set forth under “Specific Terms of the Notes and the Offering-Optional redemption” in this prospectus supplement. The Notes will be issued in minimum denominations of $25 and integral multiples of $25 in excess thereof.

The Notes will be our direct unsecured obligations and rank pari passu, or equally in right of payment, with all outstanding and future unsecured unsubordinated indebtedness issued by First Eagle Alternative Capital BDC, Inc.

We intend to list the Notes offered hereby on the New York Stock Exchange (“NYSE”), under the trading symbol “            .” The Notes are expected to trade “flat,” which means that purchasers will not pay, and sellers will not receive, any accrued and unpaid interest on the Notes that is not reflected in the trading price.

This prospectus supplement and the accompanying prospectus contain important information about us that a prospective investor should know before investing in the Notes. Please read this prospectus supplement and the accompanying prospectus, and the documents incorporated by reference herein and therein, before investing and keep it for future reference. We file annual, quarterly and current reports, proxy statements and other information about us with the Securities and Exchange Commission. You may obtain this information free of charge or make stockholder inquiries by contacting us at First Eagle Alternative Capital BDC, Inc., 500 Boylston Street, Suite 1200, Boston, MA 02116, or by calling us at (800) 450-4424 or on our website at www.feacbdc.com. The Securities and Exchange Commission maintains a website at www.sec.gov where such information is available without charge. Information contained on or accessed through our website is not incorporated by reference into this prospectus supplement and the accompanying prospectus, and you should not consider information contained on or accessed through our website to be part of this prospectus supplement and the accompanying prospectus.

 

 

An investment in the Notes involves risks that are described in the “Supplementary Risks” section beginning on page S-20 in this prospectus supplement, the “Risks” section beginning on page 10 of the accompanying prospectus or otherwise included in or incorporated by reference herein or in the accompanying prospectus and in any free writing prospectus.

THE NOTES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement and the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

     Per Note      Total  

Public Offering Price

   $                    $                

Sales Load (Underwriting Discounts and Commissions)

   $        $    

Proceeds to First Eagle Alternative Capital BDC, Inc. (before expenses)(1)

   $        $    

 

(1)

Before deducting expenses payable by us related to this offering, estimated at $             million. See “Underwriting” in the prospectus supplement.

The underwriters have an option to purchase up to an additional $                 aggregate principal amount of Notes from us at the public offering price, less the underwriting discounts and commissions, within 30 days from the date of this prospectus supplement to cover overallotments, if any. If the underwriters exercise this option in full, the total public offering price will be $                , the total underwriting discount and commissions (sales load) paid by us will be $                , and total proceeds, before expenses, will be $                .

Delivery of the Notes in book-entry form only through The Depository Trust Company will be made on or about                 , 2021.

 

 

Book-Running Manager

Keefe, Bruyette & Woods, Inc.

                                                         A Stifel Company

Co-Managers

 

Oppenheimer & Co.   ING

The date of this prospectus supplement is May    , 2021


Table of Contents

PROSPECTUS SUPPLEMENT

TABLE OF CONTENTS

 

     Page  

About This Prospectus Supplement

     S-1  

Specific Terms of the Notes and the Offering

     S-2  

Special Note Regarding Forward-Looking Statements and Projections

     S-8  

Prospectus Supplement Summary

     S-10  

Supplementary Risks

     S-20  

Use of Proceeds

     S-24  

Capitalization

     S-25  

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

     S-26  

Quantitative and Qualitative Disclosures About Market Risk

     S-26  

Senior Securities

     S-26  

Portfolio Companies

     S-27  

The Advisor

     S-35  

Underwriting

     S-38  

Certain United States Federal Income Tax Consequences to Non-U.S. Holders

     S-42  

Certain Considerations Applicable to ERISA, Governmental and Other Plan Investors

     S-45  

Legal Matters

     S-47  

Incorporation of Certain Information by Reference

     S-47  

Experts

     S-47  

Available Information

     S-48  

Management’s Report on Internal Control Over Financial Reporting

     S-48  

PROSPECTUS

TABLE OF CONTENTS

 

Incorporation by Reference

     ii  

Prospectus Summary

     1  

Fees and Expenses

     7  

Risks

     10  

Special Note Regarding Forward-Looking Statements

     11  

Use of Proceeds

     12  

Price Range of Common Stock and Distributions

     13  

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

     16  

Selected Consolidated Financial Data

     17  

Financial Highlights

     21  

Senior Securities

     24  

Portfolio Companies

     26  

The Company

     37  

Management of the Company

     38  

Certain Relationships

     39  

Control Persons and Principal Stockholders

     41  

The Advisor

     43  

Determination of Net Asset Value

     46  

Dividend Reinvestment Plan

     49  

Description of Our Capital Stock

     51  

Description of Our Preferred Stock

     55  

 

S-i


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ABOUT THIS PROSPECTUS SUPPLEMENT

This document is in two parts. The first part is this prospectus supplement, which describes the terms of this offering of the Notes and also adds to and updates information contained in the accompanying prospectus. The second part is the accompanying prospectus, which gives more general information and disclosure. To the extent the information contained in this prospectus supplement differs from the information contained in the accompanying prospectus, the information in this prospectus supplement shall control. You should read this prospectus supplement, the accompanying prospectus, including any documents incorporated by reference therein, and any related free writing prospectus, together with the additional information described under the heading “Available Information” before investing in the Notes.

You should rely only on the information contained in this prospectus supplement, the accompanying prospectus, any related free writing prospectus and the documents incorporated by reference herein or therein. Neither we nor the underwriters have authorized any other person to provide you with different or additional information. If anyone provides you with different, additional or inconsistent information, you should not rely on it. This prospectus supplement, the accompanying prospectus and any related free writing prospectus do not constitute an offer to sell, or a solicitation of an offer to buy, any Notes by any person in any jurisdiction where it is unlawful for that person to make such an offer or solicitation or to any person in any jurisdiction to whom it is unlawful to make such an offer or solicitation. You should assume that the information in this prospectus supplement, the accompanying prospectus and any related free writing prospectus is accurate only as of the date on the front of this prospectus supplement, the accompanying prospectus or any related free writing prospectus, as applicable, and the documents incorporated by reference herein or in the accompanying prospectus is accurate only as of their respective dates, regardless of the time of their delivery or sale of the Notes. This prospectus supplement supersedes the accompanying prospectus to the extent it contains information different from or additional to the information in that prospectus.

It is expected that delivery of the notes will be made against payment therefor on or about May     , 2021, which is the fifth business day following the date hereof (such settlement cycle being referred to as “T+5”). Under Rule 15c6-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), trades in the secondary market generally are required to settle in two business days unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade the notes on any date prior to the second business day before delivery thereof will be required, by virtue of the fact that the notes initially will settle in T+5, to specify an alternative settlement cycle at the time of any such trade to prevent failed settlement. Purchasers of the notes who wish to trade the notes prior to their date of delivery hereunder should consult their own advisors.

 

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SPECIFIC TERMS OF THE NOTES AND THE OFFERING

This prospectus supplement sets forth certain terms of the Notes that we are offering pursuant to this prospectus supplement and supplements the accompanying prospectus. This section outlines the specific legal and financial terms of the Notes. You should read this section together with the more general description of the Notes in the accompanying prospectus under the heading “Description of Our Debt Securities” before investing in the Notes. Capitalized terms used in this prospectus supplement and not otherwise defined shall have the meanings ascribed to them in the accompanying prospectus or in the indenture governing the Notes.

 

Issuer

First Eagle Alternative Capital BDC, Inc.

 

Title of the securities

    % Notes due 2026

 

Initial aggregate principal amount being offered

$                

 

Overallotment option

The underwriters may also purchase from us up to an additional $             aggregate principal amount of Notes to cover overallotments, if any, within 30 days of the date of this prospectus supplement.

 

Initial public offering price

    % of the aggregate principal amount.

 

Principal payable at maturity

    % of the aggregate principal amount; the principal amount of each Note will be payable on its stated maturity date at the office of the Trustee in the City of St. Paul, Minnesota or at such other office designated by the Trustee.

 

Type of Note

Fixed rate note

 

Listing

We intend to list the Notes offered hereby on the NYSE, under the trading symbol “            .”

 

Interest rate

    % per year

 

Day count basis

360-day year of twelve 30-day months

 

Original issue date

            , 2021

 

Stated maturity date

            , 2026

 

Date interest starts accruing

            , 2021

 

Interest payment dates

Each March 30, June 30, September 30 and December 30, commencing September 30, 2021. If an interest payment date falls on a non-business day, the applicable interest payment will be made on the next business day and no additional interest will accrue as a result of such delayed payment.

 

Interest periods

The initial interest period will be the period from and including                , 2021, to, but excluding, the initial interest payment date, and the subsequent interest periods will be the periods from and including an interest payment date to, but excluding, the next interest payment date or the stated maturity date, as the case may be.

 

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Regular record dates for interest

Each March 1, June 1, September and December 1.

 

Specified currency

U.S. Dollars

 

Place of payment

St. Paul, Minnesota

 

Ranking of Notes

The Notes will be our direct unsecured obligations and will rank:

 

   

pari passu with our other outstanding and future unsecured unsubordinated indebtedness, including, but not limited to, our $60 million aggregate principal amount of 6.75% notes due 2022, or the 2022 Notes, and $51.6 million aggregate principal amount of 6.125% notes due 2023, or the 2023 Notes;

 

   

senior to any of our future indebtedness that expressly provides it is subordinated to the Notes;

 

   

effectively subordinated to all our existing and future secured indebtedness (including indebtedness that is initially unsecured to which we subsequently grant security), to the extent of the value of the assets securing such indebtedness, including without limitation, the $66.2 million in borrowings outstanding as of March 31, 2021 under our revolving credit agreement, or Revolving Facility; and

 

   

structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries, of which there is currently none.

 

  As of March 31, 2021, we and our subsidiaries had approximately $177.8 million of senior indebtedness outstanding, $66.2 million of which was secured indebtedness and $111.6 million of which was unsecured indebtedness.

 

Denominations

We will issue the Notes in denominations of $25 and integral multiples of $25 in excess thereof.

 

Business day

Each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in New York City or the place of payment are authorized or required by law or executive order to close.

 

Optional redemption

The Notes may be redeemed in whole or in part at any time or from time to time at our option on or after                 ,                , upon not less than 30 days nor more than 60 days written notice by mail prior to the date fixed for redemption thereof, at a redemption price of 100% of the outstanding principal amount thereof plus accrued and unpaid interest payments otherwise payable for the then-current quarterly interest period accrued to but not including the date fixed for redemption.

 

 

You may be prevented from exchanging or transferring the Notes when they are subject to redemption. In case any Notes are to be redeemed in part only, the redemption notice will provide that, upon surrender of such Note, you will receive, without a charge, a new Note or Notes of authorized denominations representing the principal

 

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amount of your remaining unredeemed Notes. Any exercise of our option to redeem the Notes will be done in compliance with the indenture and the Investment Company Act of 1940, as amended, and the rules, regulations and interpretations promulgated thereunder, which we collectively refer to as the 1940 Act, to the extent applicable.

 

  If we redeem only some of the Notes, the Trustee will determine the method for selection of the particular Notes to be redeemed, in accordance with the indenture and the 1940 Act and in accordance with the rules of any national securities exchange or quotation system on which the Notes are listed, in each case, to the extent applicable. Unless we default in payment of the redemption price, on and after the date of redemption, interest will cease to accrue on the Notes called for redemption.

 

Sinking fund

The Notes will not be subject to any sinking fund. A sinking fund is a reserve fund accumulated over a period of time for the retirement of debt.

 

Repayment at option of Holders

Holders will not have the option to have the Notes repaid prior to the stated maturity date.

 

Legal defeasance and covenant defeasance

The Notes are subject to defeasance by us, which means that, subject to the satisfaction of certain conditions, including, (i) depositing in trust for the benefit of the holders of the Notes a combination of money and/or U.S. government or U.S. government agency notes or bonds that will generate enough cash to make interest, principal and any other payments on the Notes on their various due dates and (ii) delivering to the trustee an opinion of counsel as described in the accompanying prospectus under “Description of Debt Securities—Defeasance—Full Defeasance,” we can legally release ourselves from all payment and other obligations on the Notes.

 

  The Notes are subject to covenant defeasance by us, which means that, subject to the satisfaction of certain conditions, including, (i) depositing in trust for the benefit of the holders of the Notes a combination of money and/or U.S. government or U.S. government agency notes or bonds that will generate enough cash to make interest, principal and any other payments on the Notes on their various due dates and (ii) delivering to the trustee an opinion of counsel as described in the accompanying prospectus under “Description of Debt Securities—Defeasance—Covenant Defeasance,” we will be released from some of the restrictive covenants in the indenture.

 

  Under the Revolving Facility, as currently in effect, we would be prohibited from defeasing the Notes or effecting covenant defeasance under the Notes without the consent of the lenders.

 

Form of Notes

The Notes will be represented by global securities that will be deposited and registered in the name of The Depository Trust

 

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Company, or DTC, or its nominee. Except in limited circumstances, you will not receive certificates for the Notes. Beneficial interests in the Notes will be represented through book-entry accounts of financial institutions acting on behalf of beneficial owners as direct and indirect participants in DTC. Investors may elect to hold interests in the Notes through either DTC, if they are a participant, or indirectly through organizations which are participants in DTC.

 

Trustee, Paying Agent and Security Registrar

U.S. Bank National Association is the trustee, security registrar and paying agent. U.S. Bank National Association, in each of its capacities, including without limitation as trustee, security registrar and paying agent, assumes no responsibility for the accuracy or completeness of the information concerning us or our affiliates or any other party contained in this document or the related documents or for any failure by us or any other party to disclose events that may have occurred and may affect the significance or accuracy of such information, or for any information provided to it by us, including settlement amounts and any other information.

 

  We may maintain banking relationships in the ordinary course of business with the trustee and its affiliates.

 

Other covenants

In addition to the covenants described in the prospectus attached to this prospectus supplement, the following covenants shall apply to the Notes:

 

   

We agree that for the period of time during which the Notes are outstanding, we will not violate Section 18(a)(1)(A) as modified by Section 61(a) of the 1940 Act or any successor provisions, whether or not we continue to be subject to such provisions of the 1940 Act, but giving effect, in either case, to any exemptive relief granted to us by the U.S. Securities and Exchange Commission, or the SEC. Currently, these provisions generally prohibit us from making additional borrowings, including through the issuance of additional debt or the sale of additional debt securities, unless our asset coverage, as defined in the 1940 Act, equals at least 150% after such borrowings.

 

   

We agree that, for the period of time during which the Notes are outstanding, we will not declare any dividend (except a dividend payable in our stock), or declare any other distribution (except a distribution payable in our stock), upon any class of our capital stock, or purchase or redeem any of our capital stock, if our asset coverage, as defined in the 1940 Act and after giving effect to any exemptive relief granted to us by the SEC with respect to such asset coverage, is (i) below 150%, at the time of the declaration of such dividend or distribution or purchase or redemption and after deducting the amount of such dividend, distribution, purchase or redemption and (ii) has been below 150% for the six consecutive months immediately preceding such declaration or purchase or redemption, in each case whether or not we continue to be subject to the Asset Coverage

 

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Requirement. Notwithstanding the foregoing restriction, we will be permitted to declare a cash dividend or distribution on our capital stock only up to such amount as is necessary for us to maintain our status as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).

 

Reports by the Company

If, at any time, we are not subject to the reporting requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, to file any periodic reports with the SEC, we agree to furnish to holders of the Notes and the trustee, for the period of time during which the Notes are outstanding, our audited annual consolidated financial statements, within 90 days of our fiscal year end, and unaudited interim consolidated financial statements, within 45 days of our fiscal quarter end (other than our fourth fiscal quarter). All such financial statements will be prepared, in all material respects, in accordance with applicable United States generally accepted accounting principles.

 

Modifications to events of default

The following events of default, as described in the prospectus attached to this prospectus supplement:

 

   

We do not pay the principal of, or any premium on, a debt security of the series on its due date, and do not cure this default within 5 days.

 

   

On the last business day of each of 24 consecutive calendar months, we have an asset coverage of less than 100%.

 

  with respect to the Notes has been revised to read as follows:

 

   

We do not pay the principal of, or any premium on, any Note on its due date.

 

   

On the last business day of each of 24 consecutive calendar months, we have an asset coverage of less than 100%, giving effect to any exemptive relief granted to us by the SEC.

 

Global Clearance and Settlement Procedures

Interests in the Notes will trade in DTC’s Same Day Funds Settlement System, and any permitted secondary market trading activity in such Notes will, therefore, be required by DTC to be settled in immediately available funds. None of the issuer, the Trustee or the paying agent will have any responsibility for the performance by DTC or its participants or indirect participants of their respective obligations under the rules and procedures governing their operations.

 

Use of Proceeds

We estimate that the net proceeds we receive from the sale of the $             million aggregate principal amount of Notes in this offering will be approximately $             million (or approximately $            million if the underwriters fully exercise their overallotment option) after deducting the underwriting discount of approximately $            million (or approximately $            million if the underwriters fully exercise their overallotment option) payable by us and estimated offering expenses of approximately $            million payable by us.

 

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  We intend to use the net proceeds from this offering, together with other available funds, to repay certain of our indebtedness, including the redemption of $60.0 million of our 2022 Notes outstanding, in its entirety, and the repayment of a portion of the $66.2 million of debt outstanding as of March 31, 2021 under our Third Amended and Restated Senior Secured Revolving Credit Agreement, dated as of October 16, 2020, as may be amended from time to time (the “Revolving Facility”). Through reborrowing under our Revolving Facility, we intend to invest in debt and equity securities in accordance with our investment objective and strategies.

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND PROJECTIONS

In addition to factors previously identified elsewhere in this prospectus supplement, the accompanying prospectus and any related free writing prospectus, including the “Supplementary Risks” section in this prospectus supplement, the “Risks” section of the accompanying prospectus and any related free writing prospectus, and factors identified in the “Risk Factors” section of our most recent Annual Report on Form 10-K, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance:

 

   

the introduction, withdrawal, success and timing of business initiatives and strategies;

 

   

changes in political, economic or industry conditions, the interest rate environment or financial and capital markets, which could result in changes in the value of our assets;

 

   

the relative and absolute investment performance and operations of our investment adviser;

 

   

the impact of increased competition;

 

   

the impact of future acquisitions and divestitures;

 

   

the resolution of legal proceedings;

 

   

our business prospects and the prospects of our portfolio companies;

 

   

the impact, extent and timing of technological changes and the adequacy of intellectual property protection;

 

   

the impact of legislative and regulatory actions and reforms and regulatory, supervisory or enforcement actions of government agencies relating to us or the Advisor;

 

   

the ability of the Advisor to identify suitable investments for us and to monitor and administer our investments;

 

   

our contractual arrangements and relationships with third parties;

 

   

any future financings by us;

 

   

the ability of the Advisor to attract and retain highly talented professionals;

 

   

fluctuations in foreign currency exchange rates;

 

   

the impact of changes to tax legislation and, generally, our tax position;

 

   

the impact of pandemics or other serious public health epidemics, such as the current novel coronavirus (“COVID-19”) pandemic on our operations, our portfolio companies’ business, or the global economy;

 

   

the impact of the elimination of the London Interbank Offered Rate (“LIBOR”) on our operating results;

 

   

our ability to exit a control investment in a timely manner; and

 

   

the ability to fund First Eagle Logan JV LLC’s (“Logan JV”) unfunded commitments to the extent approved by each member of the Logan JV investment committee.

This prospectus supplement and the accompanying prospectus, and other statements that we may make, may contain forward-looking statements with respect to future financial or business performance, strategies or expectations, our plans and expectations about future investments, amount and timing of distributions, if any, and the future liquidity of the company. Forward-looking statements are typically identified by words or phrases such as “trend,” “opportunity,” “pipeline,” “believe,” “comfortable,” “expect,” “anticipate,” “current,” “intention,” “estimate,” “position,” “assume,” “potential,” “outlook,” “continue,” “remain,” “maintain,” “sustain,” “seek,” “achieve” and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “may” or similar expressions.

 

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Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made, and we assume no duty to and do not undertake to update forward-looking statements. These forward-looking statements do not meet the safe harbor for forward-looking statements pursuant to Section 27A of the Securities Act of 1933, as amended, or the Securities Act, or Section 21E of the Exchange Act. Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance.

 

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PROSPECTUS SUPPLEMENT SUMMARY

This summary highlights some of the information in this prospectus supplement and the accompanying prospectus. It is not complete and may not contain all of the information that you may want to consider before investing in the Notes. You should read the entire prospectus supplement and the accompanying prospectus carefully, including “Supplementary Risks” and “Risks,” and any information incorporated by reference. Throughout this prospectus supplement and the accompanying prospectus, we refer to First Eagle Alternative Capital BDC, Inc. (formerly, THL Credit, Inc.) and its consolidated subsidiaries as the “Company,” “we,” “us” or “our”; First Eagle Alternative Credit, LLC as “First Eagle Alternative Credit,” “FEAC,” the “Advisor” or the “Administrator”; First Eagle Greenway Fund LLC as “Greenway”; First Eagle Greenway Fund II LLC and related investment vehicle as “Greenway II”; and First Eagle Logan JV LLC (formerly, THL Credit Logan JV LLC) as “Logan JV”.

First Eagle Alternative Capital BDC, Inc.

We are an externally managed, non-diversified closed-end management investment company incorporated in Delaware on May 26, 2009, that has elected to be regulated as a business development company, or BDC, under the Investment Company Act of 1940, as amended, or the 1940 Act. In addition, we have elected to be treated for tax purposes as a regulated investment company, or RIC, under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). Our investment activities are managed by First Eagle Alternative Credit, LLC (formerly, THL Credit Advisors LLC), or FEAC, and supervised by our board of directors, a majority of whom are independent of FEAC and its affiliates. Effective January 31, 2020, FEAC is a subsidiary of First Eagle. Prior to August 3, 2020, we were named “THL Credit, Inc.” In connection with our name change, the shares of our common stock began trading on the NASDAQ under the ticker symbol “FCRD.” As a BDC, we are required to comply with certain regulatory requirements. See “Regulation” in the accompanying prospectus for discussion of BDC regulation and other regulatory considerations. We are also registered as an investment adviser under the Investment Advisers Act of 1940, as amended, or the Advisers Act.

Our investment objective is to generate both current income and capital appreciation, primarily through investments in privately negotiated debt and equity securities of middle market companies. We are a direct lender to middle market companies and invest primarily in directly originated first lien senior secured loans, including unitranche investments. In certain instances, we also make second lien secured loans and subordinated, or mezzanine, debt investments, which may include an associated equity component such as warrants, preferred stock or similar securities, and direct equity investments. Our first lien senior secured loans may be structured as traditional first lien senior secured loans or as unitranche loans. Unitranche structures may combine characteristics of traditional first lien senior secured as well as second lien and subordinated loans and our unitranche loans will expose us to the risks associated with second lien and/or subordinated loans to the extent we invest in the “last-out” tranche or subordinated tranche (or piece) of the unitranche loan. We also may provide advisory services to managed funds.

We intend to co-invest, subject to the conditions included in the exemptive order we received from the SEC, with certain of our affiliates. See “Certain Relationships” in the accompanying prospectus. We believe that such co-investments may afford us additional investment opportunities and an ability to achieve greater diversification.

We define middle market companies to mean both public and privately-held companies with annual earnings before interest, taxes, depreciation and amortization, or EBITDA, generally between $5 million and $25 million. We expect to generate returns primarily through a combination of contractual interest payments on debt investments, equity appreciation, origination and similar fees. We can offer no assurances that we will achieve our investment objective.



 

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Since April 2010, after we completed our initial public offering and commenced principal operations, through March 31, 2021, we have been responsible for making, on behalf of ourselves, managed funds and separately managed account, over $2.3 billion in aggregate commitments to 149 separate portfolio companies through a combination of both initial and follow-on investments. Since April 2010 through March 31, 2021, we, along with our managed funds and separately managed accounts, have received $1.8 billion of proceeds from the realization of investments. The Company alone has received over $1.6 billion of proceeds from the realization of its investments.

As a BDC, we must not acquire any assets other than “qualifying assets” (i.e., those assets specified in Section 55(a) of the 1940 Act) unless, at the time the acquisition is made, at least 70% of our total assets are qualifying assets (with certain limited exceptions). Qualifying assets include investments in “eligible portfolio companies.” Under the relevant U.S. Securities and Exchange Commission, or SEC, rules the term “eligible portfolio company” includes all private companies, companies whose securities are not listed on a national securities exchange, and certain public companies that have listed their securities on a national securities exchange and have a market capitalization of less than $250 million, in each case organized in the United States and with their principal place of business in the United States. Investment companies and certain pooled investment vehicles excepted from the definition of investment company under the 1940 Act are not eligible portfolio companies.

We are permitted to borrow money from time to time within the levels permitted by the 1940 Act (which generally allows us to incur leverage equal to up to two-thirds of our total assets, or a 150% asset coverage ratio). We have used, and expect to continue to use, our credit facilities and other borrowings, along with proceeds from the rotation of our portfolio and proceeds from public and private offerings of securities to finance our investment objectives. See “Regulation” in the accompanying prospectus for a discussion of BDC regulation and other regulatory considerations. Pursuant to the Revolving Facility, it is an event of default if we have an asset coverage ratio of less than 150%.

We are required to make certain disclosures on our website and in SEC filings regarding, among other things, the receipt of approval to increase our leverage, our leverage capacity and usage, and risks related to leverage. See “Regulation” in the accompanying prospectus for a discussion of BDC regulation and other regulatory considerations.

Organizational Overview

The Company was organized as a Delaware corporation on May 26, 2009 and initially funded on July 23, 2009. We commenced principal operations on April 21, 2010 and on January 31, 2020 our Advisor was acquired by First Eagle. The Company has formed substantially owned subsidiaries which serve as tax blockers that hold equity or equity-like investments in portfolio companies organized as limited liability companies or other forms of pass-through entities. The Company also has formed substantially owned subsidiaries which serve as the



 

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administrative agents on certain investment transactions, including First Eagle Alternative Capital Agent, Inc. (formerly, THL Corporate Finance, Inc.).

 

 

(1)

First Eagle Alternative Credit is owned and controlled by First Eagle Investment Management, LLC.

(2)

Greenway I is an investment fund with $150 million of capital committed by affiliates of a single institutional investor, together with a nominal amount committed by the Company, all of which has been paid in and invested by Greenway I, which is managed by us.

(3)

Greenway II is an investment fund and, together with a related vehicle, has $187 million of capital committed by third party investors, all of which has been paid in and invested by Greenway II, together with a nominal amount committed by the Company, which is managed by us.

(4)

Logan JV is a joint venture entered into between the Company and Perspecta Trident LLC, or Perspecta, an affiliate of Perspecta Trust LLC, which invests primarily in senior secured first lien term loans. Logan JV has $137.5 million of capital commitments, of which the Company committed $110.0 million and Perspecta committed $27.5 million.

(5)

First Eagle Investment Management, LLC is a subsidiary of First Eagle Holdings, Inc. (“FE Holdings”), a holding company incorporated in Delaware. A controlling interest in FE Holdings is owned by BCP CC Holdings L.P., a Delaware limited partnership (BCP CC Holdings”). BCP CC Holdings GP L.L.C., a Delaware limited liability company, is the general partner of BCP CC Holdings and has two managing members, Blackstone Capital Partners VI L.P. (“BCP VI”) and Corsair IV Financial Services Capital Partners L.P. (“Corsair IV”). BCP VI and Corsair IV are indirectly controlled by The Blackstone Group Inc. (“Blackstone”) and Corsair Capital LLC (“Corsair”), respectively. Investment vehicles indirectly controlled by Blackstone and Corsair and certain co-investors own a majority economic interest in FE Holdings and First Eagle through BCP CC Holdings.

First Eagle Alternative Credit, LLC

Our investment activities are managed by our investment adviser, FEAC. FEAC is responsible for sourcing potential investments, conducting research on prospective investments, analyzing investment opportunities, structuring our investments, and monitoring our investments and portfolio companies on an ongoing basis. We pay FEAC a management fee as a percentage of our gross assets and may pay incentive fees as a percentage of our ordinary income and capital gains.



 

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FEAC was formed as a Delaware limited liability company on June 26, 2009 and is registered as an investment adviser under the Advisers Act. FEAC is an alternative credit investment manager for both direct lending and tradable credit investments through public and private vehicles, commingled funds including collateralized loan obligations, and separately managed accounts. FEAC and its credit-focused affiliates managed assets of approximately $20.0 billion as of March 31, 2021 across its two primary investment strategies: Direct Lending and Tradable Credit.

FEAC benefits from a scaled and integrated business that draws on a diverse resource base and the credit and industry expertise of the entire platform. Fundamental credit analysis, rigorous and disciplined underwriting, well-structured investments and ongoing monitoring are the hallmarks of its credit culture.

FEAC’s Direct Lending strategy invests primarily in secured loans consisting of first lien senior secured, including unitranche investments, and, to a lesser extent, second lien facilities. In certain instances, FEAC’s Direct Lending strategy also makes subordinated debt investments and equity investments such as warrants, preferred stock or other similar securities.

FEAC’s Tradable Credit strategy manages investments in secured bank loans, structured credit and high-yield securities through CLOs, separate accounts, sub-advisory and various fund formats, including private funds, certain CLOs and as advisor to First Eagle Senior Loan Fund (NYSE: FSLF) (“FSLF”), a diversified, closed-end management investment company, and First Eagle Credit Opportunities Fund, a non-diversified, closed-end management investment company. The Advisor may serve as investment adviser to additional private funds, registered closed-end funds and CLOs in the future. See “Certain Relationships” in the accompanying prospectus for information regarding the allocation of investment opportunities.

FEAC is headquartered in Boston, with additional origination teams in Chicago, Dallas, Los Angeles and New York, allowing it to be close to its portfolio companies as well as its origination and syndication sources. Over the years, FEAC has developed deep and diverse national relationships that it leverages to maximize investment opportunities across its strategies.

FEAC’s Direct Lending investment committee, which serves as our investment committee, is comprised of three fixed members: Christopher J. Flynn, James R. Fellows and Michelle Handy (the “Primary Investment Committee Members”). In addition to the Primary Investment Committee Members, the investment committee has four rotating industry leads that serve on the investment committee for deals within their designated industry, and one rotating industry lead that serves on the investment committee for deals within other industries.

FEAC has received an exemptive order from the SEC permitting it to negotiate, subject to the conditions of the order, co-investments among us and certain of its other investment advisory clients. See “Business—Material Conflicts of Interests” in Part I, Item 1 of our most recent Annual Report on Form 10-K, which is incorporated by reference into this prospectus supplement.

FEAC also serves as our Administrator and leases office space to us and provides us with equipment and office services. The tasks of the Administrator include overseeing our financial records, preparing reports to our stockholders and reports filed with the SEC and generally monitoring the payment of our expenses and the performance of administrative and professional services rendered to us by others.

Investment Approach

Our investment approach consists of the following four separate and distinct phases: (1) sourcing; (2) selecting; (3) structuring; and (4) supervising investments. Sourcing involves our efforts to generate as vast a



 

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universe of relevant and actionable investment opportunities as possible. Selecting represents our decision-making process regarding which of those investments to pursue. Structuring summarizes our creative approach to deploying capital on a case-by-case basis in a way that maximizes value. Supervising is a reference to our ongoing rigorous credit monitoring.

Sourcing

The elements of our sourcing efforts will include: (i) determining the market in which we intend to participate; (ii) identifying the opportunities within that market; (iii) having a clear strategy; (iv) knowing the competition; and (v) distinguishing our competitive advantages.

Determining the Market

We invest primarily in debt securities of sponsored issuers based in the middle market mainly in the United States. Our debt investments are composed of directly originated first lien senior secured loans, including unitranche investments. In certain instances, we also may make second lien loans and subordinated or mezzanine debt investments, which may include an associated equity component such as warrants, preferred stock and other similar securities, and direct equity co-investments. Our first lien senior secured loans may be structured as traditional first lien senior secured loans or as unitranche loans. Unitranche structures may combine characteristics of traditional first lien senior secured as well as second lien and/or subordinated loans and our unitranche loans will expose us to the risks associated with second lien and subordinated loans to the extent we invest in the “last-out” tranche. We also may provide advisory services to managed funds.

Market opportunity

We believe the environment for investing in middle market companies is attractive for several reasons, including:

Improved company fundamentals creating favorable lending trends. As we see a more stabilized economy and increased confidence resulting from broad distribution of vaccines and the lessening of government restrictions, we believe that middle market companies are experiencing improved fundamentals. Middle market companies have recently displayed improvements in operating performance, resulting in stronger credit quality. Default levels remain relatively low, and volatility in the broader capital markets has eased, resulting in more middle market companies seeking growth capital at attractive lender credit metrics.

Meaningful availability of investable capital at private equity firms. Recent private equity data shows approximately $2.0 trillion of cash reserves that private equity fund managers are actively looking to allocate to transactions involving new or existing portfolio companies.1 Private equity funds will often prefer to support these transactions with debt securities, including first lien and second lien loans from sources such as us.

Consolidation among commercial banks has reduced their focus on middle market business. We believe that many bank lenders have de-emphasized their service and product offerings to middle market companies in favor of lending to large corporate clients, managing capital markets transactions and providing other non-credit services to their customers. Further, many financial institutions and traditional lenders are faced with constrained balance sheets and are requiring existing issuers to reduce leverage. As a result, it allows us a greater opportunity to originate proprietary investment opportunities; a situation that we believe the investment professionals are equipped to capitalize upon as a result of their extensive experience.

 

1 

Source: Q4 2020 Preqin Global Private Equity & Venture Capital Report.



 

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Increased lending regulation has limited the ability of traditional lenders to provide capital to middle market companies. Heightened scrutiny of large bank institutions by regulatory bodies has prompted lending guidelines that have sought to limit leverage, deter banks from lengthening payment timelines and restrict banks from holding certain CLO securities. In response, banks have been participating less in the middle market lending arena, opening up opportunities for alternative lenders such as us. In addition to new lending activity, as companies look to refinance existing loans that do not abide by the current guidelines, the market opportunity should continue to expand.

Middle market companies are increasingly seeking lenders with long-term capital to provide flexible solutions for their debt and equity financing needs. Middle market companies continue to seek lenders with long-term capital to provide flexible solutions for their debt and equity financing needs. We believe that many middle market companies prefer to execute transactions with private capital providers such as us, rather than execute high-yield bond or equity transactions in the public markets, which may necessitate increased financial and regulatory compliance and reporting obligations. Further, we believe many middle market companies are inclined to seek capital from a small number of skilled, reliable and predictable providers with access to permanent capital that can satisfy their specific needs and serve as value-added financial partners with an understanding of, and longer-term view oriented towards the growth of their businesses. We aim to develop a constructive partnership with its portfolio companies to help them navigate economic cycles and operational issues which will arise.

The large yet fragmented middle market may offer lenders more attractive economic terms compared to the more efficient, syndicated markets. Investing in debt securities in the middle market may offer more favorable returns relative to their investment risk, when compared to investments in public high yield or syndicated bank loan securities. Furthermore, private equity sponsors focused on the middle market seek lenders with domain expertise and certainty of closing rather than running a fully efficient arranger process. Directly originated investments in the middle market may, in our experience, permit higher yields on investments and may also benefit from other more favorable terms relative to the broadly syndicated market, including lower leverage, tighter covenant packages, stronger call protection, and greater control of a work-out process in the case of a default.

Investment strategy

We believe a strategy focused primarily on debt securities in middle market companies has a number of compelling attributes. First, the market for these instruments is relatively inefficient, allowing an experienced investor an opportunity to produce high risk-adjusted returns. Second, downside risk can be managed through an extensive credit-oriented underwriting process, creative structuring techniques and intensive portfolio monitoring. We believe private debt investments generally require the highest level of credit and legal due diligence among debt or credit asset classes. Lastly, compared with equity investments, returns on debt investments tend to be less volatile given the substantial current return component and seniority in the capital structure relative to equity. Though it is not part of our investment strategy, we currently have, and may acquire in the future, control investments in portfolio companies. See “Risk Factors—Risks Related To Our Investments—Our equity ownership in a portfolio company may represent a control investment. Our ability to exit a control investment may be limited,” in Part I, Item 1A of our most recent Annual Report, which is incorporated by reference into this prospectus supplement.

We will consider opportunities within all industries and do not have fixed guidelines for industry concentration. As of March 31, 2021, our portfolio investments spanned several industries and the largest industries represented and the percentage of our investment portfolio at fair value were as follows: (i) Investment Funds and Vehicles at 20.48%; (ii) Healthcare & Pharmaceuticals at 14.88%; (iii) Consumer Goods: Non-Durable at 12.98%; (iv) High Tech Industries at 7.32%; and (v) Finance at 7.03%.



 

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Competition

Our primary competitors to providing financing to middle market companies include other BDCs, public and private funds, commercial and investment banks, CLO funds, commercial finance companies and, to the extent they provide an alternative form of financing, private equity and hedge funds. Some of our competitors are substantially larger and have considerably greater financial and marketing resources than we do. For example, some competitors may have access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than us. Furthermore, many of our competitors are not subject to the regulatory restrictions in Investment Company Act imposes on us as a BDC.

Competitive advantages

We believe that we possess the following competitive advantages over many other capital providers to middle market companies:

Experienced management team. As stated above, the Investment Committee Members are experienced and many have worked together extensively and together with their past investment experiences have invested through multiple business and credit cycles in a variety of credit products with the objective of generating attractive, long-term, risk-adjusted returns. Each of the Investment Committee Members brings a unique investment perspective and skill-set by virtue of their complementary collective experiences as both debt and equity investors.

Proactive sourcing platform with a regional focus set up in industry verticals. We take a proactive, hands-on, and creative approach to investment sourcing. Our disciplined origination process includes proprietary tools and resources and employs a national platform with a regional focus. With offices in Boston, Chicago, Dallas, Los Angeles and New York, we have a deep and diverse relationship network in the debt capital and private equity markets. These activities and relationships provide an important channel through which the Company generates investment opportunities consistent with its investment strategy. We have activities and relationships with private equity sponsors, investment bankers, middle market senior lenders, commercial bankers (national, regional and local), lawyers, accountants and business brokers. We actively utilize these activities, relationships and networks to source and execute attractive investments, and maintain a database and set of reports where the details of all potential investment opportunities are tracked. Further, the Company believes the investment history and long-standing reputation of the Investment Committee Members provides the Company an early look at new investment opportunities.

Given our five-office footprint, we are closer to smaller, regional sponsors and have cultivated deep relationships with these private equity firms. In many cases, regional sponsors prefer to partner with local lenders. Once an investment opportunity is sourced by one of our fives offices, the opportunity is transitioned to a lead underwriter while the individual who originated the opportunity remains closely involved in a relationship management capacity. We cover four primary industry verticals: Business & Financial Services, Consumer, Healthcare and Information Services & Media. Given our emphasis on four primary industry verticals, we have a strong preference for industry or sector-focused funds and/or sponsors who specialize in only several sectors as opposed to generalist private equity firms. Many middle market sponsors do not staff an internal capital markets resource (i.e., one who maintains a database and network of debt financing partners/arrangers); as such, a sponsor’s deal team leader without this resource is directly responsible for arranging debt financing as part of his/her deal process on a case-by-case basis. Middle market sponsors with this profile appreciate the value proposition of partnering with a trusted, local relationship and respected lender with deep domain expertise.

Significant institutional expertise and brand recognition gained from investing approximately $4.5 billion in over 180 companies between June 2009 and December 31, 2020, across our direct lending credit strategy. We



 

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have developed the institutional knowledge and operational infrastructure required to successfully achieve our investment objectives. We benefit from proprietary deal flow from strong relationships with sponsors cultivated over ten years of doing business in the middle market. Our comprehensive underwriting methodology and monitoring processes have been implemented across all five regional offices. Additionally, the Investment Committee Members are supported by an experienced operational and administrative team.

Relationship with tradable credit strategy of FEAC. Our underwriting team is centrally located in Chicago alongside the investment professionals of our tradable credit strategy creating an open, collaborative and centralized credit culture. We regularly collaborate with the tradable credit industry experts which has created significant synergies and idea generation.

Selecting

Selecting investments to pursue requires us to have an employable investment philosophy, know our key metrics, have a process to consistently measure those metrics, and implement a repeatable underwriting process that enables our investment committee to make well-reasoned decisions.

Investment Philosophy

Our investment philosophy focuses on capital preservation, relative value, and establishing close relationships with portfolio companies. It is our expectation that this multifaceted focus should generate consistent, attractive, risk-adjusted returns coupled with low volatility.

Key Investment Metrics

Our value-oriented investment philosophy is primarily focused on maximizing yield relative to risk. Upon identifying a potential opportunity, we perform an initial screen to determine whether pursuing intensive due diligence is merited. As part of this process, we have identified several criteria we believe are important in evaluating and investing in prospective portfolio companies, which include (i) value orientation/positive cash flow; (ii) seasoned management with significant equity ownership; (iii) strong competitive position; and (iv) exit strategy.

Due Diligence and Investment Process

We employ a rigorous and disciplined underwriting and due diligence process. Our process includes a comprehensive understanding of a portfolio company’s industry, market, operational, financial, organizational and legal position and prospects.

Underwriting Process

We employ an extensive due diligence approach tailored to each particular investment opportunity. To begin, we review the information memorandum that the company presenting the investment opportunity or its intermediary has prepared, and discuss the opportunity at a high level with the company’s management team, the sponsor or the intermediary, as applicable.

Investment Committee

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members to the analysis and consideration of every investment. The committee also serves to provide investment consistency and adherence to FEAC’s investment philosophies and policies. The investment committee also determines appropriate investment sizing and suggests ongoing monitoring requirements.

Structuring

Our approach to structuring involves us choosing the most appropriate variety of securities for each particular investment; and negotiating the best and most favorable terms.

Investment Structure

In order to achieve our investment objective, we invest primarily in directly originated first lien senior secured loans, including unitranche investments. In certain instances, we also make second lien loans and subordinated, or mezzanine, debt investments, which may include an associated equity component such as warrants, preferred stock or similar securities, and direct equity investments. Typically, our investments will be approximately $5 million to $25 million of capital per transaction and have maturities of five to seven years. In determining whether a prospective investment satisfies our investment criteria, we generally seek a high total return potential on a risk-adjusted basis, although there can be no assurance we will find investments satisfying that criterion or that any such investments will perform in accordance with expectations.

Investment Terms

We tailor the terms of each investment to the facts and circumstances of the transaction and the prospective portfolio company, negotiating a structure that protects our rights and manages our risk while creating incentives for the company to achieve its business plan and improve its profitability.

Supervising

Supervision of our investments involves employing active monitoring methods and developing strong underlying management teams at each portfolio company.

Monitoring

We employ the use of board observation and/or information rights, regular dialogue with company management and sponsors, and detailed internally generated monitoring reports to actively monitor performance. Additionally, we have developed a monitoring template that promotes compliance with these standards and that is used as a tool to assess investment performance relative to plan.

Leverage

We borrow funds to make additional investments, and we have granted, and may in the future grant, a security interest in our assets to lenders in connection with any such borrowings, including any borrowings by any of our subsidiaries. We use this practice, which is known as “leverage,” to attempt to increase returns to our common stockholders. However, leverage involves significant risks. See “Risks” in the accompanying prospectus. With certain limited exceptions, we are currently only allowed to borrow amounts such that our asset coverage, as defined in the 1940 Act, equals at least 150% after such borrowing. As of March 31, 2021, we had $177.8 million of borrowings outstanding. The amount of leverage that we employ will depend on our assessment of market and other factors at the time of any proposed borrowing.



 

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Risks

Investing in the Notes offered hereby involves certain risks. You should consider the information under “Supplementary Risks” beginning on page S-20 of this prospectus supplement and “Risks” beginning on page 10 of the accompanying prospectus and the information incorporated by reference therein, and the other information included in this prospectus supplement and the accompanying prospectus before deciding to invest in the Notes.

General Information

Our principal executive offices are located at 500 Boylston Street, Suite 1200, Boston, MA 02116, and we can be reached by telephone at (800) 450-4424. We maintain a website on the Internet at www.feacbdc.com. Information contained on or accessed through our website is not incorporated by reference into this prospectus supplement or the accompanying prospectus, and you should not consider that information to be part of this prospectus supplement or the accompanying prospectus.

We file annual, quarterly and current periodic reports, proxy statements and other information with the SEC under the Exchange Act. This information is available at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information about the operation of the SEC’s public reference room by calling the SEC at 202-551-8090. In addition, the SEC maintains an Internet website, at www.sec.gov, that contains reports, proxy and information statements, and other information regarding issuers, including us, who file documents electronically with the SEC.



 

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Supplementary Risks

Investing in the Notes involves a high degree of risk. Before deciding whether to invest in the Notes, you should carefully consider the following supplementary risk factors together with the risk factors set forth in the accompanying prospectus and as described in the section titled “Risk Factors” in our most recent Annual Report on Form 10-K, as well as in subsequent filings with the SEC, which are incorporated by reference into this prospectus supplement and the accompanying prospectus in their entirety, together with other information in this prospectus supplement, the accompanying prospectus, the documents incorporated by reference herein and therein, and any free writing prospectus that we may authorize for use in connection with this offering. The risks described below and in these documents are not the only risks we face. Additional risks and uncertainties not presently known to us might also impair our operations and performance. If any of the events described herein or in such documents occur, our business, financial condition and results of operations could be materially and adversely affected. Past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods. If any of these risks actually occurs, our business, reputation, financial condition, results of operations, revenue, and future prospects could be seriously harmed. Please also read carefully the section titled “Special Note Regarding Forward-Looking Statements” in this prospectus supplement and the accompanying prospectus.

The Notes will be unsecured and therefore will be effectively subordinated to any secured indebtedness we have currently incurred or may incur in the future.

The Notes will not be secured by any of our assets or any of the assets of our subsidiaries. As a result, the Notes are effectively subordinated to any secured indebtedness we or our subsidiaries have currently incurred and may incur in the future (or any indebtedness that is initially unsecured to which we subsequently grant security) to the extent of the value of the assets securing such indebtedness. In any liquidation, dissolution, bankruptcy or other similar proceeding, the holders of any of our existing or future secured indebtedness and the secured indebtedness of our subsidiaries may assert rights against the assets pledged to secure that indebtedness in order to receive full payment of their indebtedness before the assets may be used to pay other creditors, including the holders of the Notes. As of March 31, 2021, we had $66.2 million outstanding under the Revolving Facility. The indebtedness under the Revolving Facility is effectively senior to the Notes to the extent of the value of the assets securing such indebtedness.

The Notes will be structurally subordinated to the indebtedness and other liabilities of our subsidiaries.

The Notes are obligations exclusively of First Eagle Alternative Capital BDC, Inc. and not of any of our subsidiaries. None of our subsidiaries will be a guarantor of the Notes and the Notes are not required to be guaranteed by any subsidiaries we may acquire or create in the future. Except to the extent we are a creditor with recognized claims against our subsidiaries, all claims of creditors of our subsidiaries will have priority over our equity interests in such subsidiaries (and therefore the claims of our creditors, including holders of the Notes) with respect to the assets of such subsidiaries. Even if we are recognized as a creditor of one or more of our subsidiaries, our claims would still be effectively subordinated to any security interests in the assets of any such subsidiary and to any indebtedness or other liabilities of any such subsidiary senior to our claims. Consequently, the Notes will be structurally subordinated to all indebtedness and other liabilities of any of our subsidiaries and any subsidiaries that we may in the future acquire or establish. In addition, our subsidiaries may incur substantial additional indebtedness in the future, all of which would be structurally senior to the Notes.

The indenture under which the Notes will be issued will contain limited protection for holders of the Notes.

The indenture under which the Notes will be issued offers limited protection to holders of the Notes. The terms of the indenture and the Notes do not restrict our or any of our subsidiaries’ ability to engage in, or otherwise be a party to, a variety of corporate transactions, circumstances or events that could have an adverse

 

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impact on your investment in the Notes. In particular, the terms of the indenture and the Notes will not place any restrictions on our or our subsidiaries’ ability to:

 

   

issue securities or otherwise incur additional indebtedness or other obligations, including (1) any indebtedness or other obligations that would be equal in right of payment to the Notes, (2) any indebtedness or other obligations that would be secured and therefore rank effectively senior in right of payment to the Notes to the extent of the values of the assets securing such debt, (3) indebtedness of ours that is guaranteed by one or more of our subsidiaries and which therefore is structurally senior to the Notes and (4) securities, indebtedness or obligations issued or incurred by our subsidiaries that would be senior to our equity interests in our subsidiaries and therefore rank structurally senior to the Notes with respect to the assets of our subsidiaries, in each case other than an incurrence of indebtedness or other obligation that would cause a violation of Section 18(a)(1)(A) as modified by Section 61(a) of the 1940 Act or any successor provisions, whether or not we continue to be subject to such provisions of the 1940 Act, but giving effect, in either case, to any exemptive relief granted to us by the SEC (these provisions generally prohibit us from making additional borrowings, including through the issuance of additional debt or the sale of additional debt securities, unless our asset coverage, as defined in the 1940 Act, equals at least 150% after such borrowings);

 

   

pay dividends on, or purchase or redeem or make any payments in respect of, capital stock or other securities ranking junior in right of payment to the Notes, except that we have agreed that, for the period of time during which the Notes are outstanding, we will not declare any dividend (except a dividend payable in our stock), or declare any other distribution (except a distribution payable in our stock), upon any class of our capital stock, or purchase or redeem any of our capital stock, if our asset coverage, as defined in the 1940 Act and after giving effect to any exemptive relief granted to us by the SEC with respect to such asset coverage, is (i) below 150% at the time of the declaration of such dividend or distribution or purchase or redemption and after deducting the amount of such dividend, distribution, purchase or redemption and (ii) has been below 150% for the six consecutive months immediately preceding such declaration or purchase or redemption in each case, whether or not we continue to be subject to the 1940 Act asset coverage requirements. Notwithstanding the foregoing restriction, we will be permitted to declare a cash dividend or distribution on our capital stock only up to such amount as is necessary for us to maintain our status as a RIC under Subchapter M of the Code;

 

   

sell assets (other than certain limited restrictions on our ability to consolidate, merge or sell all or substantially all of our assets);

 

   

enter into transactions with affiliates;

 

   

create liens (including liens on the shares of our subsidiaries) or enter into sale and leaseback transactions;

 

   

make investments; or

 

   

create restrictions on the payment of dividends or other amounts to us from our subsidiaries.

In addition, the indenture will not require us to offer to purchase the Notes in connection with a change of control or any other event.

Furthermore, the terms of the indenture and the Notes do not protect holders of the Notes in the event that we experience changes (including significant adverse changes) in our financial condition, results of operations or credit ratings, as they do not require that we or our subsidiaries adhere to any financial tests or ratios or specified levels of net worth, revenues, income, cash flow, or liquidity.

Our ability to recapitalize, incur additional debt and take a number of other actions that are not limited by the terms of the Notes may have important consequences for you as a holder of the Notes, including making it more difficult for us to satisfy our obligations with respect to the Notes or negatively affecting the trading value of the Notes.

 

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Certain of our current debt instruments include more protections for their holders than the indenture and the Notes. In addition, other debt we issue or incur in the future could contain more protections for its holders than the indenture and the Notes, including additional covenants and events of default. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Financial Condition, Liquidity and Capital Resources—Credit Facility,” in our most recent Quarterly Report which is incorporated by reference herein. The issuance or incurrence of any such debt with incremental protections could affect the market for and trading levels and prices of the Notes.

An active trading market for the Notes may not develop or be maintained, which could limit the market price of the Notes or your ability to sell them.

The Notes are a new issue of debt securities for which there is no trading market. We intend to list the Notes on the NYSE within 30 days of the original issue date. Although we expect the Notes to be listed on the NYSE, we cannot provide any assurances that an active trading market will develop or be maintained for the Notes or that you will be able to sell your Notes. If the Notes are traded after their initial issuance, they may trade at a discount from their initial offering price depending on prevailing interest rates, the market for similar securities, our credit ratings, general economic conditions, our financial condition, performance and prospects and other factors. If a rating agency assigns the Notes a non-investment grade rating, the Notes may be subject to greater price volatility than securities of similar maturity without such a non-investment grade rating. Below investment grade securities, which are often referred to as “junk” bonds, are viewed as speculative investments because of concerns with respect to the issuer’s capacity to pay interest and repay principal. Certain of the underwriters have advised us that they intend to make a market in the Notes, but they are not obligated to do so. The underwriters may discontinue any market-making in the Notes at any time at their sole discretion. Accordingly, we cannot assure you that a liquid trading market will develop or be maintained for the Notes, that you will be able to sell your Notes at a particular time or that the price you receive when you sell will be favorable. To the extent an active trading market does not develop or is not maintained, the liquidity and trading price for the Notes may be harmed. Accordingly, you may be required to bear the financial risk of an investment in the Notes for an indefinite period of time.

If we default on our obligations to pay our other indebtedness, we may not be able to make payments on the Notes.

Any default under the agreements governing our indebtedness, including a default under the Revolving Facility or other indebtedness to which we may be a party that is not waived by the required lenders or holders, and the remedies sought by the holders of such indebtedness could make us unable to pay principal, premium, if any, and interest on the Notes and substantially decrease the market value of the Notes. If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on our indebtedness, or if we otherwise fail to comply with the various covenants, including financial and operating covenants, in the instruments governing our indebtedness, we could be in default under the terms of the agreements governing such indebtedness. In the event of such default, the holders of such indebtedness could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest, the lenders under the Revolving Facility or other debt we may incur in the future could elect to terminate their commitments, cease making further loans and institute foreclosure proceedings against our assets, and we could be forced into bankruptcy or liquidation. If our operating performance declines, we may in the future need to seek to obtain waivers from the required lenders under the Revolving Facility or other debt that we may incur in the future to avoid being in default. If we breach our covenants under the Revolving Facility or other debt and seek a waiver, we may not be able to obtain a waiver from the required lenders or holders. If this occurs, we would be in default under the Revolving Facility or other debt, the lenders or holders could exercise their rights as described above, and we could be forced into bankruptcy or liquidation. If we are unable to repay debt, lenders having secured obligations, including the lenders under the Revolving Facility, could proceed against the collateral securing the debt. Because the Revolving Facility has, and any future credit facilities will likely have, customary cross-default provisions, if the

 

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indebtedness under the Notes or the Revolving Facility or under any future credit facility is accelerated, we may be unable to repay or finance the amounts due.

A downgrade, suspension or withdrawal of the rating assigned by a rating agency to us or the Notes, if any, could cause the liquidity or market value of the Notes to decline significantly.

Our credit ratings are an assessment by rating agencies of our ability to pay our debts when due. Consequently, real or anticipated changes in our credit ratings will generally affect the market value of the Notes. These credit ratings may not reflect the potential impact of risks relating to the structure or marketing of the Notes. Credit ratings are not a recommendation to buy, sell or hold any security, and may be revised or withdrawn at any time by the issuing organization in its sole discretion. We do not undertake any obligation to maintain our rating, if any, or to advise holders of Notes of any changes in ratings.

The Notes are rated by Egan Jones Ratings Co. or “Egan Jones.” There can be no assurance that its rating will remain for any given period of time or that such rating will not be lowered or withdrawn entirely by Egan Jones if in its judgment future circumstances relating to the basis of the rating, such as adverse changes in us, so warrant.

 

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USE OF PROCEEDS

The net proceeds from the sale of $                 aggregate principal amount of the Notes in this offering are approximately $                 (or approximately $                 if the underwriters fully exercise their overallotment option) after deducting the underwriting discounts and commissions of $                 (or $                 if the underwriters fully exercise their overallotment option) payable by us and estimated offering expenses of approximately $                 payable by us.

We intend to use the net proceeds from this offering, together with other available funds, to repay certain of our indebtedness, including the redemption of $60.0 million of the 2022 Notes outstanding, in its entirety, which bear interest at 6.75% per annum and mature on December 30, 2022, and the repayment of a portion of the $66.2 million of debt outstanding under our Revolving Facility, as of March 31, 2021, which debt currently bears interest at a rate of 3.50% and matures in December 2022. Through reborrowing under our Revolving Facility, we intend to invest in debt and equity securities of middle market companies in accordance with our investment objective and strategies described in this prospectus supplement and the accompanying prospectus.

 

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CAPITALIZATION

The following table sets forth our capitalization at March 31, 2021:

 

   

on an actual basis; and

 

   

on an as adjusted basis to give effect to the sale of $                 of Notes in this offering (assuming the full exercise of the underwriters’ overallotment option) in each case assuming a public offering price of 100% of par, and after deducting the estimated underwriting discounts and commissions of approximately $                 and estimated offering expenses of $                 payable by us.

You should read this table together with “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our most recent balance sheet incorporated by reference in this prospectus supplement.

 

     As of March 31, 2021  
     Actual
(unaudited)
     As
Adjusted
(unaudited)
 
     (amounts in thousands)  

Assets:

     

Cash

   $ 13,197      $    

Investments at fair value

   $ 362,964      $    

Other assets

   $ 10,109      $    
  

 

 

    

 

 

 

Total assets

   $ 386,270      $    

Liabilities:

     

Revolving facility(1)

   $ 66,161      $    

Existing Notes(2)

   $ 109,870      $    

Notes offered hereby

   $ —          —    

Other liabilities

   $ 18,566     
  

 

 

    

 

 

 

Total liabilities

   $ 194,597      $    

Net assets:

     

Common stock, par value $0.001 per share; 100,000 shares authorized, 30,109 shares issued and outstanding

   $ 30      $    

Capital in excess of par value

   $ 418,379      $    

Undistributed income and net losses

   $ (226,736    $ (    
  

 

 

    

 

 

 

Total net assets

   $ 191,673      $    

 

(1)

The above table reflects the carrying value of indebtedness outstanding under the Revolving Facility of $66.2 million. The net proceeds from the sale of the Notes in this offering may be used to pay down a portion of the outstanding indebtedness under the Revolving Facility. See “Use of Proceeds” in this prospectus supplement for additional information.

(2)

The above table reflects the carrying value of the indebtedness under the 2022 Notes and 2023 Notes of $60.0 million and $51.6 million, respectively, less unamortized debt issuance costs of $1.1 million and $0.6 million, respectively. The net proceeds from the sale of the Notes in this offering are expected to be used to redeem the 2022 Notes. See “Use of Proceeds” in this prospectus supplement for additional information.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The information in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I, Item 2 of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, filed with the SEC on May 6, 2021, and in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 5, 2021, is incorporated herein by reference.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information in “Quantitative and Qualitative Disclosures About Market Risk” in Part I, Item 3 of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, filed with the SEC on May 6, 2021, is incorporated herein by reference.

SENIOR SECURITIES

The information in “Senior Securities” in Part II, Item 5 of our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 5, 2021, is incorporated herein by reference.

 

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PORTFOLIO COMPANIES

The following tables set forth certain information as of March 31, 2021 regarding each portfolio company in which we had a debt or equity investment. The general terms of our loans and other investments are described in “The Company.” We offer to make available significant managerial assistance to our portfolio companies. In addition, we may receive rights to participate in or observe the board of directors’ meetings of our portfolio companies. Amounts are presented in thousands.

 

Portfolio company(1)(2)(3)

  Industry     Type of
Investment
    Interest
Rate(4)
    Initial
Acquisition
Date
    Maturity/
Dissolution
Date
    Percentage
of
Class Held
on a Fully
Diluted

Basis
    Principal(5)
No. of Shares /
No. of Units
    Amortized
Cost
    Fair
Value(6)
 

Non-controlled/non-affiliated investments —138.03% of net asset value

 

               

1-800 Hansons, LLC

                 

977 E 14 Mile Rd
Troy, MI 48083

   
High Tech
Industries
 
 
   
First lien senior
secured debt
 
 
   

10.5% (LIBOR
+ 8.5%) (8.5%
Cash + 1.0% PIK)
 
 
 
    10/19/2017       10/19/2022       $        3,315     $       3,296     $       3,083  
     
First lien senior
secured debt(8)
 
 
   
9.5% (LIBOR +
8.5%)
 
 
    10/19/2017       10/19/2022         210       208       195  
               

 

 

   

 

 

 
                $ 3,504     $ 3,278  

3SI Security Systems

 

             

101 Lindenwood Dr, Suite

200 Malvern, PA 19355

   
Services:
Consumer
 
 
   
First lien senior
secured debt
 
 
   
6.8% (LIBOR +
5.8%)
 
 
    12/17/2019       6/16/2023       $ 4,065     $ 4,039     $ 4,004  
               

 

 

   

 

 

 
                $ 4,039     $ 4,004  

ABC Legal Services, LLC

 

             

633 Yesler Way
Seattle, WA 98104

    Finance      
First lien senior
secured debt
 
 
   
7.0% (LIBOR +
5.5%)
 
 
    6/21/2019       6/21/2024       $ 6,861     $ 6,782     $ 6,689  
     
First lien senior
secured debt(8)(9)
 
 
   
7.0% (LIBOR +
5.5%)
 
 
    6/21/2019       6/21/2024         —         (8     —    
               

 

 

   

 

 

 
                $ 6,774     $ 6,689  

Action Point, Inc (Pacific Group)

 

             

19310 San Jose Ave
City of Industry,
CA 91748

   

Chemicals,
Plastics, &
Rubber
 
 
 
   
First lien senior
secured debt
 
 
   
7.5% (LIBOR +
6.5%)
 
 
    12/17/2020       6/17/2026       $ 3,325     $ 3,261     $ 3,259  
     

First lien senior
secured
debt(9)(23)
 
 
 
   
7.5% (LIBOR +
6.5%)
 
 
    12/17/2020       6/17/2026         —         (13     —    
               

 

 

   

 

 

 
                $ 3,248     $ 3,259  

Advanced Web Technologies

 

             

600 Hoover St Northeast
Suite 500 Minneapolis,
MN 55413

   

Containers,
Packaging, &
Glass
 
 
 
   
First lien senior
secured debt
 
 
   
7.0% (LIBOR +
6.0%)
 
 
    12/17/2020       12/17/2026       $ 2,048     $ 2,009     $ 2,007  
     
First lien senior
secured debt(8)
 
 
   
7.0% (LIBOR +
6.0%)
 
 
    12/17/2020       12/17/2026         80       74       78  
     

First lien senior
secured
debt(9)(23)
 
 
 
   
7.0% (LIBOR +
6.0%)
 
 
    12/17/2020       12/17/2026         —         (15     —    
               

 

 

   

 

 

 
                $ 2,068     $ 2,085  

Allied Wireline Services, LLC

 

             

3200 Wilcrest Dr, Suite 170,
Houston, TX 77042

   
Energy: Oil &
Gas
 
 
   

First lien senior
secured
debt(11)(25)
 
 
 
    10.0% PIK       6/15/2020       6/15/2025       $ 4,951     $ 4,971     $ 3,961  
     

Equity
investments
(10)(13)(18)
 

 
      6/15/2020         4.54     4,538       144       —    
     

Equity
investments
(10)(13)(18)
 

 
      6/15/2020         2.06     2,063       —         —    
               

 

 

   

 

 

 
                $ 5,115     $ 3,961  

 

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Portfolio company(1)(2)(3)

  Industry     Type of
Investment
  Interest
Rate(4)
    Initial
Acquisition
Date
    Maturity/
Dissolution
Date
    Percentage
of
Class Held
on a Fully
Diluted

Basis
    Principal(5)
No. of Shares /
No. of Units
    Amortized
Cost
    Fair
Value(6)
 

Alpine SG, LLC

             

1333 N California Blvd, Suite
448, Walnut Creek,
CA 94596

   
High Tech
Industries
 
 
  First lien senior
secured debt
   
6.8% (LIBOR
+ 5.8%)
 
 
    4/9/2019       11/16/2022       $        1,316     $       1,310     $       1,316  
    First lien senior
secured debt
   
6.8% (LIBOR
+ 5.8%)
 
 
    4/9/2019       11/16/2022         659       656       659  
    First lien senior
secured debt
   
7.5% (LIBOR
+ 6.5%)
 
 
    11/2/2020       11/16/2022         1,500       1,464       1,500  
    First lien senior
secured debt
   
6.8% (LIBOR
+ 5.8%)
 
 
    2/10/2021       11/16/2022         1,500       1,458       1,500  
               

 

 

   

 

 

 
                $ 4,888     $ 4,975  

Apex Services Partners, LLC

             

401 East Jackson St, Suite
3300 Tampa, FL 33602

   
Capital
Equipment
 
 
  First lien senior
secured debt
   
6.3% (LIBOR
+ 5.3%)
 
 
    2/11/2020       7/31/2025       $ 5,327     $ 5,285     $ 5,274  
    First lien senior
secured debt(23)
   
6.3% (LIBOR
+ 5.3%)
 
 
    2/11/2020       7/31/2025         —         —         —    
               

 

 

   

 

 

 
                $ 5,285     $ 5,274  

Aurotech, LLC

             

8701 Georgia Ave., Suite 801
Silver Spring, MD 20910

   
High Tech
Industries
 
 
  First lien senior
secured debt
   
8.0% (LIBOR
+ 7.0%)
 
 
    10/30/2020       10/30/2025       $ 3,065     $ 3,008     $ 3,004  
    First lien senior
secured
debt(8)(9)
   
8.0% (LIBOR
+ 7.0%)
 
 
    10/30/2020       10/30/2025         —         (8     —    
               

 

 

   

 

 

 
                $ 3,000     $ 3,004  

BCDI Rodeo Dental Buyer, LLC

             

1141 US-77 BUS #G
San Benito, TX 78586

   
Healthcare &
Pharmaceuticals
 
 
  First lien senior
secured debt
   
6.0% (LIBOR
+ 5.0%)
 
 
    5/14/2019       5/14/2025       $ 5,715     $ 5,675     $ 5,686  
    First lien senior
secured debt(8)
   
6.0% (LIBOR
+ 5.0%)
 
 
    5/14/2019       5/14/2025         1,615       1,604       1,607  
    First lien senior
secured debt(8)
   
6.0% (LIBOR
+ 5.0%)
 
 
    5/14/2019       5/14/2025         1,304       1,293       1,297  
               

 

 

   

 

 

 
                $ 8,572     $ 8,590  

C&K Market, Inc.

             

615 5th St.,
Brookings, OR 97415

    Retail     Subordinated
debt
   

11.0% (8.0%
Cash + 3.0%
PIK)
 
 
 
    12/29/2020       12/29/2025       $ 5,885     $ 5,885     $ 5,885  
    Warrants       12/29/2020         11.75     1,063,221       —         500  
               

 

 

   

 

 

 
                $ 5,885     $ 6,385  

Certify, Inc.

             

20 York St., Suite 201
Portland, ME 04101

   
Services:
Business
 
 
  First lien senior
secured debt
   
6.8% (LIBOR +
5.8%)
 
 
    2/28/2019       2/28/2024       $ 1,544     $ 1,531     $ 1,544  
    First lien senior
secured debt(24)
   
6.8% (LIBOR +
5.8%)
 
 
    2/28/2019       2/28/2024         211       208       211  
    First lien senior
secured debt(8)
   
6.8% (LIBOR +
5.8%)
 
 
    2/28/2019       2/28/2024         18       17       18  
    Equity
investments(18)
      2/28/2019         0.02     841       175       212  
               

 

 

   

 

 

 
                $ 1,931     $ 1,985  

Communication Technology Intermediate

 

               

211 Congress St. 6th
Floor Boston, MA
02110

    Telecommunications     First lien senior
secured debt(7)
   
8.5% (LIBOR +
7.5%)
 
 
    10/13/2020       10/13/2025       $        8,452     $       8,282     $       8,451  
    First lien senior
secured
debt(7)(8)(9)
   
8.5% (LIBOR +
7.5%)
 
 
    10/13/2020       10/13/2025         —         (12     —    
               

 

 

   

 

 

 
                $ 8,270     $ 8,451  

 

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Portfolio company(1)(2)(3)

  Industry     Type of
Investment
  Interest
Rate(4)
    Initial
Acquisition
Date
    Maturity/
Dissolution
Date
    Percentage
of
Class Held
on a Fully
Diluted

Basis
    Principal(5)
No. of Shares /
No. of Units
    Amortized
Cost
    Fair
Value(6)
 

Doxa Insurance Holdings, LLC

 

               

1502 Magnavox Way,
Suite 250 Fort
Wayne, IN 46804

    Insurance     First lien senior
secured debt
   
7.3% (LIBOR +
6.3%)
 
 
    12/4/2020       12/4/2026       $ 1,596     $ 1,558     $ 1,556  
    First lien senior
secured
debt(8)(9)
   
7.3% (LIBOR +
6.3%)
 
 
    12/4/2020       12/4/2026         —         (8     —    
    First lien senior
secured debt
   
7.3% (LIBOR +
6.3%)
 
 
    12/4/2020       12/4/2026         865       819       843  
    Equity
investments(18)
      12/4/2020         0.19     129,187       129       129  
               

 

 

   

 

 

 
                $ 2,498     $ 2,528  

DTI Holdco, Inc. (Epiq Systems, Inc)

 

               

213 Technology Dr
Suite 100 Irvine, CA
92618

   
Services:
Business
 
 
  First lien senior
secured debt
   
5.8% (LIBOR +
4.8%)
 
 
    3/31/2021       9/29/2023       $ 3,949     $ 3,840     $ 3,821  
               

 

 

   

 

 

 
                $ 3,840     $ 3,821  

EBS Intermediate LLC

                 

436 North Bedford
Drive, Suite 304
Beverly Hills, CA
90210

    Services: Consumer     First lien senior
secured debt
   
6.0% (LIBOR +
5.0%)
 
 
    10/2/2018       10/2/2023       $ 7,765     $ 7,696     $ 7,765  
    First lien senior
secured
debt(8)(9)
   
6.0% (LIBOR +
5.0%)
 
 
    10/2/2018       10/2/2023         —         (15     —    
               

 

 

   

 

 

 
                $ 7,681     $ 7,765  

ECL Entertainment

                 

5629 Nashville Road
Franklin, KY 42134

   
Hotel, Gaming,
& Leisure
 
 
  First lien senior
secured debt
   
8.3% (LIBOR +
7.5%)
 
 
    3/31/2021       3/31/2028       $ 3,000     $ 2,971     $ 2,998  
               

 

 

   

 

 

 
                $ 2,971     $ 2,998  

Evergreen Services Group, LLC

 

               

1 California St., Suite
2900 San Francisco,
CA 94111

   
High Tech
Industries
 
 
  First lien senior
secured debt
   
7.0% (LIBOR +
6.0%)
 
 
    11/13/2018       6/6/2023       $ 9,315     $ 9,270     $ 9,315  
               

 

 

   

 

 

 
                $ 9,270     $ 9,315  

Finxera Intermediate, LLC

                 

55 S Market St #1220,
San Jose, CA 95113

    Finance     First lien senior
secured debt
   
6.8% (LIBOR +
5.8%)
 
 
    3/3/2020       8/27/2024       $ 6,852     $ 6,800     $ 6,852  
               

 

 

   

 

 

 
                $ 6,800     $ 6,852  

Freeport Financial SBIC Fund LP

 

               

300 North LaSalle, Suite
5300 Chicago, IL
60654

   

Investment
Funds And
Vehicles
 
 
 
  Investments in
funds(14)(21)
      6/14/2013           $ 2,957     $ 2,634  
               

 

 

   

 

 

 
                $ 2,957     $ 2,634  

GC EOS Buyer, Inc.

                 

29627 Renaissance Blvd.
Daphne, AL 36526

    Automotive     First lien senior
secured debt
   
6.8% (LIBOR +
5.8%)
 
 
    3/31/2021       8/1/2025       $        4,000     $ 3,971     $ 3,978  
               

 

 

   

 

 

 
                $ 3,971     $ 3,978  

Gener8, LLC

                 

500 Mercury Drive
Sunnyvale, CA 94085

   
Services:
Business
 
 
  First lien senior
secured debt
   
6.5% (LIBOR +
5.5%)
 
 
    8/14/2018       8/14/2023       $ 5,842     $ 5,799     $ 5,842  
    First lien senior
secured
debt(8)(9)
   
6.5% (LIBOR +
5.5%)
 
 
    8/14/2018       8/14/2023         —         (11     —    
               

 

 

   

 

 

 
                $ 5,788     $ 5,842  

 

S-29


Table of Contents

Portfolio company(1)(2)(3)

  Industry     Type of
Investment
  Interest
Rate(4)
    Initial
Acquisition
Date
    Maturity/
Dissolution
Date
    Percentage
of
Class Held
on a Fully
Diluted

Basis
    Principal(5)
No. of Shares /
No. of Units
    Amortized
Cost
    Fair
Value(6)
 

Groundworks Operations, LLC

 

               

1741 Corporate Landing
Pkwy Virginia Beach,
VA 23454

   
Construction &
Building
 
 
  First lien senior
secured debt
   
6.0% (LIBOR +
5.0%)
 
 
    7/9/2020       1/17/2026       $ 1,942     $ 1,908     $ 1,943  
    First lien senior
secured
debt(8)(9)
   
6.0% (LIBOR +
5.0%)
 
 
    7/9/2020       1/17/2026         —         (2     —    
    First lien senior
secured debt(23)
   
6.0% (LIBOR +
5.0%)
 
 
    7/9/2020       1/17/2026         855       842       855  
    First lien senior
secured debt(23)
   
6.0% (LIBOR +
5.0%)
 
 
    7/9/2020       1/17/2026         397       378       397  
    First lien senior
secured debt(9)
   
6.0% (LIBOR +
5.0%)
 
 
    3/18/2021       1/17/2026         —         (37     —    
               

 

 

   

 

 

 
                $ 3,089     $ 3,195  

Gryphon Partners 3.5, L.P.

                 

One Market Plaza, Steuart
Tower, 24th Fl, San
Francisco, CA, 94105

   

Investment
Funds And
Vehicles
 
 
 
  Investments in
funds(14)(21)
      11/20/2012           $ 399     $ 238  
               

 

 

   

 

 

 
                $ 399     $ 238  

HealthDrive Corporation

                 

888 Worcester Street
Wellesley, MA 02482

   
Healthcare &
Pharmaceuticals
 
 
  First lien senior
secured debt
   
6.8% (LIBOR +
5.8%)
 
 
    12/21/2018       12/21/2023       $ 9,775     $ 9,721     $ 9,433  
    First lien senior
secured debt(8)
   
6.8% (LIBOR +
5.8%)
 
 
    12/21/2018       12/21/2023         1,761       1,751       1,699  
               

 

 

   

 

 

 
                $ 11,472     $ 11,132  

Igloo Products Corp.

                 

777 Igloo Road
Katy, TX 77494

   

Consumer
Goods: Non-
Durable
 

 
  First lien senior
secured debt
   
11.5% (LIBOR
+ 10.0%)
 
 
    3/28/2014       3/28/2023       $ 21,567     $     21,554     $     21,567  
    Equity
investments(18)
      4/30/2014         0.66     1,902       1,716       171  
               

 

 

   

 

 

 
                $ 23,270     $ 21,738  

IRC Opco LLC

                 

401 N. Michigan Avenue,
Suite 1200, Chicago,
IL 60611

   
Healthcare &
Pharmaceuticals
 
 
  First lien senior
secured debt
   
6.5% (LIBOR +
5.5%)
 
 
    1/4/2019       1/4/2024       $ 5,332     $ 5,308     $ 5,065  
    First lien senior
secured debt(8)
   
6.5% (LIBOR +
5.5%)
 
 
    1/4/2019       1/4/2024         818       815       777  
               

 

 

   

 

 

 
                $ 6,123     $ 5,842  

Lash Opco LLC

                 

1256 Main Street Suite 256

Southlake, TX 76092

   

Consumer
Goods:
Non-Durable
 
 
 
  First lien senior
secured debt
   
9.3% (LIBOR +
6.0%)
 
 
    9/18/2020       3/18/2026       $ 3,015     $     2,946     $     2,985  
    First lien senior
secured
debt(8)(9)
   
9.3% (LIBOR +
6.0%)
 
 
    9/18/2020       9/18/2025         —         (8     —    
    First lien senior
secured debt
   
9.3% (LIBOR +
6.0%)
 
 
    12/31/2020       3/18/2026         998       973       988  
               

 

 

   

 

 

 
                $ 3,911     $ 3,973  

Marlin DTC-LS Midco 2, LLC

 

               

500 Enterprise Drive 2nd
Floor Rocky Hill,
CT 06067

   
Services:
Consumer
 
 
  First lien senior
secured
debt(8)(9)
   
7.5% (LIBOR +
6.5%)
 
 
    3/5/2021       7/1/2025       $ —       $ (3   $ —    
    First lien senior
secured debt
   
7.5% (LIBOR +
6.5%)
 
 
    3/5/2021       7/1/2025         3,154       3,092       3,154  
               

 

 

   

 

 

 
                $ 3,089     $ 3,154  

 

S-30


Table of Contents

Portfolio company(1)(2)(3)

  Industry     Type of
Investment
  Interest
Rate(4)
    Initial
Acquisition
Date
    Maturity/
Dissolution
Date
    Percentage
of
Class Held
on a Fully
Diluted

Basis
    Principal(5)
No. of Shares /
No. of Units
    Amortized
Cost
    Fair
Value(6)
 

MarkLogic Corporation

                 

999 Skyway Road, Suite
200 San Carlos, CA
94070

   
High Tech
Industries
 
 
  First lien senior
secured debt
   
9.0% (LIBOR +
8.0%)
 
 
    10/20/2020       10/20/2025       $ 3,142     $ 3,083     $ 3,087  
    First lien senior
secured
debt(9)(23)
   
9.0% (LIBOR +
8.0%)
 
 
    10/20/2020       10/20/2025         —         (5     —    
               

 

 

   

 

 

 
                $ 3,078     $ 3,087  

Matilda Jane Holdings, Inc.

                 

4031 Merchant Road Fort
Wayne, IN 46818

   

Consumer
Goods:
Non-Durable
 
 
 
  First lien senior
secured debt
   
9.5% (LIBOR +
8.5%)
 
 
    4/28/2017       5/1/2022       $ 12,103     $ 12,033     $ 10,409  
    Equity
investments
(12)(17)
      4/28/2017         4.02     2,587,855       489       —    
    First lien senior
secured debt(8)
   
9.5% (LIBOR +
8.5%)
 
 
    10/30/2020       5/1/2022         —         —         —    
               

 

 

   

 

 

 
                $ 12,522     $ 10,409  

Merchants Capital Access, LLC

 

               

525 Broadhollow Rd #200,
Melville, NY 11747

    Banking     Second lien
debt(14)
   
11.5% (LIBOR
+ 10.5%)
 
 
    4/20/2015       6/4/2021       $ 12,000     $ 11,998     $ 11,880  
               

 

 

   

 

 

 
                $ 11,998     $ 11,880  

MeriCal, LLC

                 

2995 East Miraloma
Avenue, Anaheim,
CA 92806

   

Consumer
Goods:
Non-Durable
 
 
 
  First lien senior
secured debt
   
6.5% (LIBOR +
5.5%)
 
 
    11/16/2018       11/16/2021       $ 7,396     $ 7,396     $ 7,396  
    Equity
investments
(10)(12)(17)
      9/30/2016         0.75     521       505       718  
    Equity
investments
(10)(12)(18)
      9/30/2016         0.66     5,334       10       394  
               

 

 

   

 

 

 
                $ 7,911     $ 8,508  

Multi Specialty Healthcare (AMM LLC)

 

               

9601 Pulaski Park Dr,
Suite 416 Baltimore,
MD 21220

   
Healthcare &
Pharmaceuticals
 
 
  First lien senior
secured debt
   
7.5% (LIBOR +
6.5%)
 
 
    12/18/2020       12/18/2026       $        3,780     $     3,707     $     3,704  
    First lien senior
secured
debt(8)(9)
   
7.5% (LIBOR +
6.5%)
 
 
    12/18/2020       12/18/2026         —         (14     —    
               

 

 

   

 

 

 
                $ 3,693     $ 3,704  

PDFTron Systems Inc.

 

               

500-838 West Hastings
Street, Vancouver,
BC, V6C 0A6 Canada

   
Services:
Business
 
 
  First lien senior
secured debt(7)
   
7.3% (LIBOR +
6.0%)
 
 
    5/15/2019       5/15/2024       $ 4,925     $ 4,895     $ 4,925  
    First lien senior
secured
debt(7)(23)
   
7.3% (LIBOR +
6.0%)
 
 
    5/15/2019       5/15/2024         1,083       1,077       1,083  
    First lien senior
secured
debt(7)(23)
   
7.3% (LIBOR +
6.0%)
 
 
    5/15/2019       5/15/2024         320       317       320  
    First lien senior
secured debt(7)
   
8.8% (LIBOR +
7.5%)
 
 
    6/19/2020       5/15/2024         397       388       397  
    First lien senior
secured
debt(7)(9)(22)
   
8.8% (LIBOR +
7.5%)
 
 
    6/19/2020       5/15/2024         —         (10     —    
    First lien senior
secured debt(7)
   
8.8% (LIBOR +
7.5%)
 
 
    3/31/2021       5/15/2024         136       134       134  
    First lien senior
secured
debt(7)(9)(23)
   
8.8% (LIBOR +
7.5%)
 
 
    3/31/2021       5/15/2024         —         (1     —    
               

 

 

   

 

 

 
                $ 6,800     $ 6,859  

 

S-31


Table of Contents

Portfolio company(1)(2)(3)

  Industry     Type of
Investment
    Interest
Rate(4)
    Initial
Acquisition
Date
    Maturity/
Dissolution
Date
    Percentage
of
Class Held
on a Fully
Diluted

Basis
    Principal(5)
No. of Shares /
No. of Units
    Amortized
Cost
    Fair
Value(6)
 

Quartermaster Newco, LLC

 

               

428 Greenwich Street
New York, NY 10013

   
Healthcare &
Pharmaceuticals
 
 
   
First lien senior
secured debt
 
 
   
7.8% (LIBOR +
6.5%)
 
 
    7/31/2020       7/31/2025       $ 3,120     $ 3,093     $ 3,120  
     

First lien senior
secured
debt(8)(9)
 
 
 
   
7.8% (LIBOR +
6.5%)
 
 
    7/31/2020       7/31/2025         —         (3     —    
               

 

 

   

 

 

 
                $ 3,090     $ 3,120  

Revlon Consumer Products Corporation

 

               

1 New York Plaza
New York, NY 10004

   

Consumer
Goods:
Non-Durable
 
 
 
   
First lien senior
secured debt
 
 
   
7.5% (LIBOR +
5.8%)
 
 
    3/8/2021       6/8/2023       $ 2,500     $ 2,476     $ 2,475  
               

 

 

   

 

 

 
                $ 2,476     $ 2,475  

Riveron Acquisition Holdings, Inc.

 

               

2515 MicKinney Avenue,
Suite 1200, Dallas,
TX 75201

    Finance      
First lien senior
secured debt
 
 
   
6.8% (LIBOR +
5.8%)
 
 
    5/22/2019       5/22/2025       $ 8,159     $ 8,047     $ 8,160  
               

 

 

   

 

 

 
                $ 8,047     $ 8,160  

Sciens Building Solutions, LLC

 

               

5925 Stoneridge Dr
Pleasanton, CA 94588

   
Services:
Business
 
 
   

Equity
investments
(10)(17)
 
 
 
      7/12/2017         0.50     194     $ 213     $ 395  
               

 

 

   

 

 

 
                $ 213     $ 395  

smarTours, LLC

                 

545 8th Ave Suite 2250
New York, NY
10018

   
Services:
Consumer
 
 
   
First lien senior
secured debt
 
 
   
7.8% (LIBOR +
6.8%)
 
 
    12/21/2020       12/31/2024       $ 475     $ 475     $ 475  
     
First lien senior
secured debt(8)
 
 
   

8.8% (LIBOR+
7.8%) (1.0% Cash
+ 7.8% PIK)
 
 
 
    12/21/2020       12/31/2024         2,205           2,205           2,205  
     
Second lien
debt
 
 
   
8.8% PIK (LIBOR
+ 7.8%)
 
 
    12/21/2020       12/31/2024         1,327       575       418  
               

 

 

   

 

 

 
                $ 3,255     $ 3,098  

SolutionReach, Inc.

 

               

2600 N. Ashton Blvd.
Lehi, UT 84043

   
Services:
Consumer
 
 
   
First lien senior
secured debt
 
 
   
6.8% (LIBOR +
5.8%)
 
 
    1/17/2019       1/17/2024       $ 6,238     $ 6,168     $ 6,239  
     

First lien senior
secured
debt(8)(9)
 
 
 
   
6.8% (LIBOR +
5.8%)
 
 
    1/17/2019       1/17/2024         —         (11     —    
               

 

 

   

 

 

 
                $ 6,157     $ 6,239  

Specialty Brands Holdings, LLC

 

               

1400 Old Country Rd,
Westbury, NY
11590

   
Services:
Business
 
 
   
Equity
investments(17)
 
 
      6/29/2018         0.50     58     $ —       $ —    
     
Equity
investments(18)
 
 
      6/29/2018         1.00     1,232       —         —    
               

 

 

   

 

 

 
                $ —       $ —    

SPST Holdings

 

               

545 8th Ave Suite 2250
New York, NY
10018

   
Services:
Consumer
 
 
   

Equity
investments
(10)(13)(17)
 

 
      12/21/2020         2.47     3,237     $ —       $ —    
     

Equity
investments
(10)(13)(18)
 

 
      12/21/2020         0.66          820,040       216       —    
               

 

 

   

 

 

 
              $ 216     $ 0  

SPST Investors II, LLC

 

               
     

Equity
investments
(10)(13)(18)(26)
 

 
      12/21/2020         9.51     51,095     $ 51     $ —    
               

 

 

   

 

 

 
                $ 51     $ —    

 

S-32


Table of Contents

Portfolio company(1)(2)(3)

  Industry   Type of
Investment
  Interest
Rate(4)
  Initial
Acquisition
Date
    Maturity/
Dissolution
Date
    Percentage
of
Class Held
on a Fully
Diluted

Basis
    Principal(5)
No. of Shares /
No. of Units
    Amortized
Cost
    Fair
Value(6)
 

SRS Acquiom Holdings LLC

               

950 17th Street Suite
1400 Denver, CO
80202

  Finance   First lien
senior
secured
debt
  7.0% (LIBOR +
6.0%)
    11/8/2018       11/8/2024       $ 4,200     $ 4,174     $ 3,822  
               

 

 

   

 

 

 
                $ 4,174     $ 3,822  

Trace3, LLC

               

7565 Irvine Center
Drive, Suite 200
Irvine, CA 92618

  High Tech
Industries
  First lien
senior
secured
debt
  7.8% (LIBOR +
6.8%)
    11/4/2020       8/3/2024       $ 3,007     $ 2,922     $ 2,917  
               

 

 

   

 

 

 
                $ 2,922     $ 2,917  

TTF Holdings, LLC (Soliant)

               

7 Jon Court
Chatsworth, GA
30705

  Healthcare &
Pharmaceuticals
  First lien
senior
secured
debt
  5.0% (LIBOR +
4.3%)
    3/31/2021       3/25/2028       $ 4,000     $ 3,970     $ 3,979  
               

 

 

   

 

 

 
                $ 3,970     $ 3,979  

Urology Management Associates, LLC

               

1000 Corporate Blvd.
Linthicum, MD
21090

  Healthcare &
Pharmaceuticals
  First lien
senior
secured
debt
  6.0% (LIBOR +
5.0%)
    8/31/2018       8/31/2024       $ 8,328     $ 8,235     $ 8,287  
    Equity
investments(18)
      8/31/2018         0.48     769       769       1,059  
               

 

 

   

 

 

 
                $ 9,004     $ 9,346  

Virtus Aggregator, LLC

               

2649 Causeway Center
Drive Tampa, FL
33619

  Healthcare &
Pharmaceuticals
  Equity
investments
(10)(13)(18)
      5/7/2020         0.51     10     $ 32     $ 32  
               

 

 

   

 

 

 
                $ 32     $ 32  

Wheels Up Partners, LLC

                 

220 West 42nd St., 16th
Floor New York,
NY 10036

  Transportation:
Consumer
  Equity
investments
(10)(13)(18)
      1/31/2014         0.35     1,000,000     $ 1,000     $ 3,780  
               

 

 

   

 

 

 
                $ 1,000     $ 3,780  

Whitney, Bradley & Brown, Inc.

               

11790 Sunrise Valley Dr
#5 Reston, VA 20191

  Services:
Business
  First lien
senior
secured
debt
  8.5% (LIBOR +
7.5%)
    10/18/2017       10/18/2022       $ 7,461     $     7,434     $     7,535  
               

 

 

   

 

 

 
                $ 7,434     $ 7,535  

Women’s Health USA

                 

22 Waterville Road Avon,
CT 06001

  Healthcare &
Pharmaceuticals
  First lien
senior
secured
debt
  8.8% (LIBOR +
7.8%)
    10/9/2018       10/9/2023       $ 7,271     $ 7,256     $ 7,235  
    First lien
senior
secured
debt(8)
  8.8% (LIBOR +
7.8%)
    10/9/2018       10/9/2023         1,050       1,040       1,045  
               

 

 

   

 

 

 
                $ 8,296     $ 8,280  
               

 

 

   

 

 

 

Total non-controlled/non-affiliated investments
—138.03% of net asset value

              $ 266,047     $ 264,570  
               

 

 

   

 

 

 

 

S-33


Table of Contents

Portfolio company(1)(2)(3)

  Industry     Type of
Investment
    Interest
Rate(4)
    Initial
Acquisition
Date
    Maturity/
Dissolution
Date
    Percentage
of
Class Held
on a Fully
Diluted

Basis
    Principal(5)
No. of Shares /
No. of Units
    Amortized
Cost
    Fair
Value(6)
 

Controlled investments
—51.33% of net asset value

 

               

Loadmaster Derrick & Equipment, Inc.

 

               

1084 S Cruse Ave,
Broussard, LA 70518

   
Energy: Oil &
Gas
 
 
   


First lien
senior
secured
debt(15)(19)(27)
 
 
 
 
   
11.3% (LIBOR
+ 10.3% PIK)
 
 
    7/1/2016       12/31/2020       $ 11,897     $ 7,307     $ —    
     


First lien
senior
secured
debt(15)(19)(27)
 
 
 
 
   
13.0% (LIBOR
+ 12.0% PIK)
 
 
    7/1/2016       12/31/2020         2,838       1,053       —    
     


First lien
senior
secured
debt(15)(19)(27)
 
 
 
 
   
11.3% (LIBOR+
10.3% PIK)
 
 
    1/17/2017       12/31/2020         9,758       7,200       7,807  
     

Equity
investments
(15)(17)
 

 
      7/1/2016         81.93     2,956       1,114       —    
     

Equity
investments
(15)(18)
 

 
      12/21/2016         73.83     12,131       —         —    
               

 

 

   

 

 

 
                $ 16,674     $ 7,807  

OEM Group, LLC

                 

2120 W Guadalupe Road,
Gilbert, AZ 85233

   
Capital
Equipment
 
 
   


First lien
senior
secured
debt(15)
 
 
 
 
   
8.5% (LIBOR +
7.5%)
 
 
    9/30/2020       9/30/2025       $ 9,076     $ 9,076     $ 9,076  
     
Second lien
debt(15)(25)
 
 
    10.0% PIK       9/30/2020       9/30/2025         46,323       22,203       10,068  
     

Equity
investments
(10)(12)(15)(20)
 

 
      3/16/2016         93.51     20,000       8,890       —    
               

 

 

   

 

 

 
                $ 40,169     $ 19,144  

First Eagle Logan JV LLC

                 

500 Boylston Street, Suite
1200 Boston, MA
02116

   

Investment
Funds And
Vehicles
 
 
 
   

Investments
in funds
(10)(14)(15)(16)(18)(21)
 

 
      12/3/2014           $ 92,013     $ 71,443  
               

 

 

   

 

 

 
                $ 92,013     $ 71,443  
               

 

 

   

 

 

 

Total controlled investments
—51.33% of net asset value

 

              $ 148,856     $ 98,394  
               

 

 

   

 

 

 

Non-controlled/affiliated investments
—0.00% of net asset value

 

               

First Eagle Greenway Fund II LLC

 

               

500 Boylston Street, Suite
1200 Boston, MA
02116

   

Investment
Funds And
Vehicles
 
 
 
   

Investments
in funds
(10)(14)(18)(21)
 

 
      3/1/2013           $ 1     $ 1  
               

 

 

   

 

 

 
                $ 1     $ 1  
               

 

 

   

 

 

 

Total non-controlled/affiliated investments
—0.00% of net asset value

 

              $ 1     $ 1  
               

 

 

   

 

 

 

Total investments
—189.37% of net asset value

 

              $ 414,904     $ 362,965  
               

 

 

   

 

 

 

 

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THE ADVISOR

First Eagle Alternative Credit (formerly, THL Credit Advisors LLC) serves as our investment adviser. FEAC is registered as an investment adviser under the Advisers Act. Subject to the overall supervision of our board of directors, FEAC manages the day-to-day operations of, and provides investment advisory and management services to First Eagle Alternative Capital BDC, Inc. (formerly, THL Credit, Inc.). The address of FEAC is 500 Boylston Street, Suite 1200, Boston, Massachusetts 02116.

Effective January 31, 2020, FEAC is a subsidiary of First Eagle. Prior to August 3, 2020, we were named “THL Credit, Inc.”

Portfolio managers

The Primary Investment Committee Members of FEAC’s investment committee are our portfolio managers. The Primary Investment Committee Members are: Christopher J. Flynn, James R. Fellows and Michelle Handy. Biographical information with respect to Mr. Flynn is set forth under “Management of the Company—Biographical information,” which is incorporated by reference herein.

None of the members of the investment committee are employed by us or receive any direct compensation from us. These individuals receive compensation from FEAC that includes an annual base salary and an annual discretionary bonus.

Christopher J. Flynn. Please refer to Mr. Flynn’s biography under “Management of the Company—Interested Directors,” which is incorporated by reference herein.

James R. Fellows. Mr. Fellows is the Chief Investment Officer of First Eagle Alternative Credit, LLC and First Eagle Alternative Credit SLS, LLC, Head of the Tradable Credit Platform and is on the investment committee of First Eagle Alternative Capital BDC, Inc. (formerly, THL Credit, Inc.). He has more than twenty-nine years of investment industry experience, principally in the area of leveraged finance. From April 2004 through June 2012, Mr. Fellows was Co-Head, Alternative Credit Strategies Group of McDonnell Investment Management, LLC, where he helped establish and manage three cash flow CLOs, a leveraged loan opportunity fund and unleveraged fund and a separate account. From 1998 to April 2004, Mr. Fellows was a Senior Vice President at Columbia Advisors, where he served as Co-Portfolio Manager for two continuously offered closed-end funds and four structured product vehicles from their inception, including two CLOs. Prior to joining Columbia Advisors in 1998, Mr. Fellows was a Senior Credit Analyst for Van Kampen Investments in its Bank Loan Investment Group. While at Van Kampen, Mr. Fellows also served as a Credit Analyst for high-yield bonds and privately placed mezzanine bonds. Other responsibilities with Van Kampen included training junior credit analysts for its bank loans and high yield groups. Mr. Fellows brings extensive knowledge of high-yield bank loans and high-yield bonds, as well as in-depth workout, restructuring and distressed investment experience. Mr. Fellows earned his B.S. degree in Economics and Finance from the University of Nebraska and is a CFA charterholder and a member of The CFA Institute.

Michelle Handy. Ms. Handy is a Managing Director and Head of Portfolio & Underwriting for First Eagle Alternative Credit, LLC’s Direct Lending platform and is on the investment committee of First Eagle Alternative Capital BDC, Inc. (formerly THL Credit, Inc.). As a member of the Boston investment team, her role includes overseeing the underwriting and management of portfolio investments. Prior to joining THL Credit in 2016, Ms. Handy worked at GE Capital where she held several roles in underwriting, portfolio management and workouts. Most recently, she was the COO of GE Capital America’s workout function. Ms. Handy earned her M.S. in Finance from the University of Wisconsin-Madison and her B.S. in Finance and Spanish from Boston College.

 

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The table below shows the dollar range of shares of our common stock to be beneficially owned by the members of the Investment Committee as of December 31, 2020.

 

Name of Portfolio Manager

   Dollar Range of Equity Securities
Beneficially Owned(1)(2)(3)

Christopher J. Flynn

   $500,001—$1,000,000

James R. Fellows

   $500,001—$1,000,000

Michelle Handy

   None

 

(1)

Beneficial ownership has been determined in accordance with Rule 16a-1(a)(2) of the Securities Exchange Act of 1934, or the “Exchange Act.”

(2)

The dollar range of equity securities beneficially owned in us is based on the closing price for our common stock of $3.65 on December 31, 2020 on The Nasdaq Global Select Market.

(3)

The dollar range of equity securities beneficially owned are: none, $1—$10,000, $10,001—$50,000, $50,001—$100,000, $100,001—$500,000, $500,001—$1,000,000, or over $1,000,000.

Other Accounts Managed

The information below lists the number of other accounts for which each Primary Investment Committee Member was primarily responsible for the day-to-day management as of the fiscal year ended December 31, 2020.

 

Name of Primary Investment
Committee Member

  

Type of Accounts

   Total No.
of Other
Accounts
Managed
     Total
Other Assets
     No. of Other
Accounts
where
Advisory
Fee

is Based on
Performance
     Total Assets in
Other Accounts
where Advisory
Fee is Based
on Performance
 

Christopher J. Flynn

   Other Registered Investment Companies      1      $ 42.6 million        —        $ —    
   Other Pooled Investment Vehicles:      19      $ 4.3 billion        19      $ 3.2 billion  
   Other Accounts:      4      $ 88.7 million        4      $ 88.7 million  

James R. Fellows

   Other Registered Investment Companies      3      $ 344.4 million        —        $ —    
   Other Pooled Investment Vehicles:      58      $ 18.9 billion        55      $ 14.0 billion  
   Other Accounts:      7      $ 4.3 billion        4      $ 88.7 million  

Michelle Handy

   Other Registered Investment Companies      1      $ 42.6 million        —        $ —    
   Other Pooled Investment Vehicles:      19      $ 4.3 billion        19      $ 3.2 billion  
   Other Accounts:      4      $ 88.7 million        4      $ 88.7 million  

Investment management agreement

FEAC serves as our investment adviser. FEAC is registered as an investment adviser under the Advisers Act. Subject to the overall supervision of our board of directors, FEAC manages the day-to-day operations of, and provides investment advisory and management services to, the Company. The address of FEAC is 500 Boylston Street, Suite 1200, Boston, Massachusetts 02116.

For information about the Investment Management Agreement and the fees to be paid to the Advisor under the terms of the Investment Management Agreement, please see “Business—Investment Management

 

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Agreement” in Part I, Item 1 of our most recent Annual Report on Form 10-K, which is incorporated by reference herein. Note additionally that our Advisor has agreed to waive management and incentive fees for the Company for the period from July 1, 2020 through March 31, 2021, as described in Note 4 “Related Party Transactions” to our Consolidated Financial Statements in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2020 and Part I, Item 1 of our Quarterly Report on Form 10-Q for the three months ended March 31, 2021.

 

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UNDERWRITING

Keefe, Bruyette & Woods, Inc. is acting as representative of the underwriters named below. Subject to the terms and conditions set forth in an underwriting agreement among us, the Advisor and the underwriters, we have agreed to sell to the underwriters, and each of the underwriters has agreed, severally and not jointly, to purchase from us, the principal amount of Notes set forth opposite its name below.

 

Underwriter

   Principal
Amount
of Notes
 

Keefe, Bruyette & Woods, Inc.

   $                

Oppenheimer & Co. Inc.

  

ING Financial Markets LLC

  
  

 

 

 

Total

   $    
  

 

 

 

Subject to the terms and conditions set forth in the underwriting agreement, the underwriters have agreed, severally and not jointly, to purchase all of the Notes sold under the underwriting agreement if any of the Notes are purchased. If an underwriter defaults, the underwriting agreement provides that the purchase commitments of the nondefaulting underwriters may be increased or the underwriting agreement may be terminated.

We and the Advisor have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make in respect of those liabilities.

The underwriters are offering the Notes, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel, including the conditions contained in the underwriting agreement, such as the receipt by the underwriters of officers’ certificates and legal opinions. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.

Investors must pay for the Notes purchased in this offering on or about                 , 2021.

Commissions and Discounts

An underwriting discount of % per Note will be paid by us. This underwriting discount will also apply to any Notes purchased pursuant to the overallotment option.

The following table shows the total underwriting discounts and commissions that we are to pay to the underwriters in connection with this offering. The information assumes either no exercise or full exercise by the underwriters of their overallotment option.

 

     Per Note      Without
Option
     With
Option
 

Public offering price

   $                    $                    $                

Underwriting discounts and commissions

   $        $        $    

Proceeds, before expenses, to First Eagle Alternative Credit BDC, Inc.

   $        $        $    

The expenses of the offering, not including the underwriting discount, are estimated at $ million and are payable by us.

Overallotment Option

We have granted an option to the underwriters to purchase up to an additional $                 aggregate principal amount of the Notes offered hereby at the public offering price, less the underwriting discounts and

 

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commissions, within 30 days from the date of this prospectus supplement solely to cover any overallotments. If the underwriters exercise this option, each will be obligated, subject to conditions contained in the underwriting agreement, to purchase a number of additional Notes proportionate to that underwriter’s initial principal amount reflected in the table above.

No Sales of Similar Securities

We have agreed not to directly or indirectly sell, offer to sell, enter into any agreement to sell, or otherwise dispose of, any debt securities issued by the Company which are substantially similar to the Notes or securities convertible into such debt securities which are substantially similar to the Notes for a period of 30 days after the date of this prospectus supplement without first obtaining the written consent of Keefe, Bruyette & Woods, Inc. This consent may be given at any time without public notice.

Listing

The Notes are a new issue of securities with no established trading market. We intend to list the Notes on the NYSE and will use our reasonable best efforts to maintain such listing. We expect trading in the Notes on the NYSE to begin within 30 days after the original issue date under the trading symbol “            ”. Currently there is no public market for the Notes.

We have been advised by certain of the underwriters that they presently intend to make a market in the Notes or the Existing Notes after completion of the offering as permitted by applicable laws and regulations. The underwriters are not obligated, however, to make a market in the Notes and any such market-making may be discontinued at any time in the sole discretion of the underwriters without any notice. Accordingly, no assurance can be given as to the liquidity of, or development of a public trading market for, the Notes. If an active public trading market for the Notes does not develop, the market price and liquidity of the Notes may be adversely affected.

Price Stabilization, Short Positions

In connection with the offering, the underwriters may purchase and sell Notes in the open market. These transactions may include overallotment, covering transactions and stabilizing transactions. Overallotment involves sales of securities in excess of the aggregate principal amount of securities to be purchased by the underwriters in the offering, which creates a short position for the underwriters. Covering transactions involve purchases of the securities in the open market after the distribution has been completed in order to cover short positions. Stabilizing transactions consist of certain bids or purchases of securities made for the purpose of preventing or retarding a decline in the market price of the securities while the offering is in progress.

The underwriters also may impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representative has repurchased Notes sold by or for the account of such underwriter in stabilizing or short covering transactions.

Any of these activities may cause the price of the Notes to be higher than the price that otherwise would exist in the open market in the absence of such transactions. These transactions may be affected in the over-the-counter market or otherwise and, if commenced, may be discontinued at any time without any notice relating thereto.

Other Relationships

An affiliate of ING Financial Markets LLC is a lender under our Revolving Facility. Accordingly, the affiliate of such underwriter will receive a portion of the net proceeds from this offering. Certain of the underwriters and their affiliates have provided in the past and may provide from time to time in the future in the

 

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ordinary course of their business certain commercial banking, financial advisory, investment banking and other services to us, our portfolio companies or our affiliates for which they have received or will be entitled to receive separate fees. In particular, the underwriters or their affiliates may execute transactions with us, on behalf of us, any of our portfolio companies or our affiliates. In addition, the underwriters or their affiliates may act as arrangers, underwriters or placement agents for companies whose securities are sold to or whose loans are syndicated to us, our portfolio companies or our affiliates.

The underwriters or their affiliates may also trade in our securities, securities of our portfolio companies or other financial instruments related thereto for their own accounts or for the account of others and may extend loans or financing directly or through derivative transactions to us, any of our portfolio companies or our affiliates.

After the date of this prospectus supplement, the underwriters and their affiliates may from time to time obtain information regarding specific portfolio companies or us that may not be available to the general public. Any such information is obtained by the underwriters and their affiliates in the ordinary course of its business and not in connection with the offering of the Notes. In addition, after the offering period for the sale of the Notes, the underwriters or their affiliates may develop analyses or opinions related to us or our portfolio companies and buy or sell interests in one or more of our portfolio companies on behalf of their proprietary or client accounts and may engage in competitive activities. There is no obligation on behalf of these parties to disclose their respective analyses, opinions or purchase and sale activities regarding any portfolio company or regarding us to our noteholders or any other persons.

In the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve securities and/or instruments of ours or our affiliates. Certain of the underwriters and their affiliates that have a lending relationship with us routinely hedge their credit exposure to us consistent with their customary risk management policies. Typically, such underwriters and their affiliates would hedge such exposure by entering into transactions that consist of either the purchase of credit default swaps or the creation of short positions in our securities, including potentially the Notes offered hereby. Any such short positions could adversely affect future trading prices of the Notes offered hereby. The underwriters and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

The principal business addresses of the underwriters are: Keefe, Bruyette & Woods, Inc., 787 Seventh Avenue, 4th Floor, New York, NY 10019; Oppenheimer & Co. Inc., 85 Broad Street, New York, NY 10004; and ING Financial Markets LLC, 1133 Avenue of the Americas, New York, NY 10036.

It is expected that delivery of the notes will be made against payment therefor on or about                , 2021, which is the fifth business day following the date hereof (such settlement cycle being referred to as “T+ 5”). Under Rule 15c6-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), trades in the secondary market generally are required to settle in two business days unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade the notes on any date prior to the second business day before delivery thereof will be required, by virtue of the fact that the notes initially will settle in T+ 5, to specify an alternative settlement cycle at the time of any such trade to prevent failed settlement. Purchasers of the notes who wish to trade the notes prior to their date of delivery hereunder should consult their own advisors.

Other Jurisdictions

Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the Notes offered by this prospectus supplement in any jurisdiction where action for that

 

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purpose is required. The Notes offered by this prospectus supplement may not be offered or sold, directly or indirectly, nor may this prospectus supplement or any other offering material or advertisements in connection with the offer and sale of any such Notes be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus supplement comes are advised to inform themselves about and to observe any restriction relating to the offering and the distribution of this prospectus supplement. This prospectus supplement and the accompanying prospectus do not constitute an offer to sell or a solicitation of an offer to buy the Notes offered by this prospectus supplement and the accompanying prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.

 

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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS

The following is a summary of certain United States federal income tax consequences of the ownership and disposition of the notes. This summary deals only with notes that are held as capital assets by a non-U.S. holder (as defined below) who acquires the notes upon original issuance at their initial offering price.

A “non-U.S. holder” means a beneficial owner of the notes (other than an entity or arrangement treated as a partnership for United States federal income tax purposes) that is not, for United States federal income tax purposes, any of the following:

 

   

an individual who is a citizen or resident of the United States;

 

   

a corporation (or any other entity treated as a corporation for United States federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia;

 

   

an estate the income of which is subject to United States federal income taxation regardless of its source; or

 

   

a trust if it (1) is subject to the primary supervision of a court within the United States and one or more United States persons have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable United States Treasury regulations to be treated as a United States person.

This summary is based upon provisions of the Code, and regulations, rulings and judicial decisions as of the date hereof. Those authorities may be changed, perhaps retroactively, so as to result in United States federal income tax consequences different from those summarized below. This summary does not address all of the United States federal income tax consequences that may be relevant to you in light of your particular circumstances, nor does it address the Medicare tax on net investment income, United States federal estate and gift taxes or the effects of any state, local or non-United States tax laws. In addition, it does not represent a detailed description of the United States federal income tax consequences applicable to you if you are subject to special treatment under the United States federal income tax laws (including if you are a United States expatriate, “controlled foreign corporation,” “passive foreign investment company” or a partnership or other pass-through entity for United States federal income tax purposes). We cannot assure you that a change in law will not alter significantly the tax considerations that we describe in this summary.

If a partnership (or other entity or arrangement treated as a partnership for United States federal income tax purposes) holds the notes, the tax treatment of a partner generally will depend upon the status of the partner and the activities of the partnership. If you are a partnership or a partner of a partnership considering an investment in the notes, you should consult your tax advisors.

If you are considering the purchase of notes, you should consult your own tax advisors concerning the particular United States federal income tax consequences to you of the ownership and disposition of the notes, as well as the consequences to you arising under other United States federal tax laws and the laws of any other taxing jurisdiction.

United States Federal Withholding Tax

Subject to the discussions of backup withholding and FATCA below, United States federal withholding tax will not apply to any payment of interest on the notes under the “portfolio interest rule,” provided that:

 

   

interest paid on the notes is not effectively connected with your conduct of a trade or business in the United States;

 

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you do not actually or constructively own 10% or more of the total combined voting power of all classes of our voting stock within the meaning of the Code and applicable United States Treasury regulations;

 

   

you are not a controlled foreign corporation that is actually or constructively related to us through stock ownership;

 

   

you are not a bank whose receipt of interest on the notes is described in Section 881(c)(3)(A) of the Code; and

 

   

either (a) you provide your name and address on an applicable Internal Revenue Service (“IRS”) Form W-8, and certify, under penalties of perjury, that you are not a United States person as defined under the Code or (b) you hold your notes through certain foreign intermediaries and satisfy the certification requirements of applicable United States Treasury regulations. Special certification rules apply to non-U.S. holders that are pass-through entities rather than corporations or individuals.

If you cannot satisfy the requirements described above, payments of interest made to you will be subject to a 30% United States federal withholding tax, unless you provide the applicable withholding agent with a properly executed:

 

   

IRS Form W-8BEN or Form W-8BEN-E (or other applicable form) claiming an exemption from or reduction in withholding under the benefit of an applicable income tax treaty; or

 

   

IRS Form W-8ECI (or other applicable form) certifying that interest paid on the notes is not subject to withholding tax because it is effectively connected with your conduct of a trade or business in the United States (as discussed below under “—United States Federal Income Tax”).

The 30% United States federal withholding tax generally will not apply to any payment of principal or gain that you realize on the sale, exchange, retirement or other taxable disposition of a note.

United States Federal Income Tax

If you are engaged in a trade or business in the United States and interest on the notes is effectively connected with the conduct of that trade or business (and, if required by an applicable income tax treaty, is attributable to a United States permanent establishment), then you generally will be subject to United States federal income tax on that interest on a net income basis in the same manner as if you were a United States person as defined under the Code (although you will be exempt from the 30% United States federal withholding tax described above, provided the certification requirements discussed above in “—United States Federal Withholding Tax” are satisfied). In addition, if you are a foreign corporation, you may be subject to a branch profits tax equal to 30% (or lower applicable income tax treaty rate) of your effectively connected earnings and profits, subject to adjustments.    

Subject to the discussion of backup withholding below, any gain realized on the sale, exchange, retirement or other taxable disposition of a note generally will not be subject to United States federal income tax unless:

 

   

the gain is effectively connected with your conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, is attributable to a United States permanent establishment), in which case such gain generally will be subject to United States federal income tax (and possibly branch profits tax) in the same manner as effectively connected interest as described above; or

 

   

you are an individual who is present in the United States for 183 days or more in the taxable year of that disposition and certain other conditions are met, in which case, unless an applicable income tax treaty provides otherwise, you generally will be subject to a 30% United States federal income tax on any gain recognized, which may be offset by certain United States source losses.

 

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Information Reporting and Backup Withholding

Interest paid to you and the amount of tax, if any, withheld with respect to those payments generally will be reported to the IRS. Copies of the information returns reporting such interest payments and any withholding may also be made available to the tax authorities in the country in which you reside under the provisions of an applicable income tax treaty.

In general, you will not be subject to backup withholding with respect to payments on the notes that we make to you, provided that the applicable withholding agent does not have actual knowledge or reason to know that you are a United States person as defined under the Code, and such withholding agent has received from you the statement described above in the fifth bullet point under “—United States Federal Withholding Tax.”

Information reporting and, depending on the circumstances, backup withholding will apply to the proceeds of a sale or other disposition of notes within the United States or conducted through certain United States-related financial intermediaries, unless you certify under penalties of perjury that you are a non-U.S. holder (and the payor does not have actual knowledge or reason to know that you are a United States person as defined under the Code), or you otherwise establish an exemption.

Backup withholding is not an additional tax and any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against your United States federal income tax liability provided the required information is timely furnished to the IRS.

Additional Withholding Requirements

Under Sections 1471 through 1474 of the Code (such Sections commonly referred to as “FATCA”), a 30% United States federal withholding tax may apply to any interest paid on the notes to (i) a “foreign financial institution” (as specifically defined in the Code and whether such foreign financial institution is the beneficial owner or an intermediary) which does not provide sufficient documentation, typically on IRS Form W-8BEN-E, evidencing either (x) an exemption from FATCA, or (y) its compliance (or deemed compliance) with FATCA (which may alternatively be in the form of compliance with an intergovernmental agreement with the United States) in a manner which avoids withholding, or (ii) a “non-financial foreign entity” (as specifically defined in the Code and whether such non-financial foreign entity is the beneficial owner or an intermediary) which does not provide sufficient documentation, typically on IRS Form W-8BEN-E, evidencing either (x) an exemption from FATCA, or (y) adequate information regarding certain substantial United States beneficial owners of such entity (if any). If an interest payment is both subject to withholding under FATCA and subject to the withholding tax discussed above under “— United States Federal Withholding Tax,” an applicable withholding agent may credit the withholding under FATCA against, and therefore reduce, such other withholding tax. While withholding under FATCA would also have applied to payments of gross proceeds from the sale or other taxable disposition of the notes, proposed United States Treasury regulations (upon which taxpayers may rely until final regulations are issued) eliminate FATCA withholding on payments of gross proceeds entirely. You should consult your own tax advisors regarding these rules and whether they may be relevant to your ownership and disposition of the notes.

 

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CERTAIN CONSIDERATIONS APPLICABLE TO ERISA, GOVERNMENTAL AND OTHER PLAN INVESTORS

The following is a summary of certain considerations associated with the purchase and holding of the Notes by (i) “employee benefit plans” (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)) that are subject to the fiduciary responsibility or prohibited transaction provisions of Title I of ERISA, (ii) plans, individual retirement accounts (“IRAs”) and other arrangements that are subject to the prohibited transaction provisions of Section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”), or provisions under any other U.S. or non-U.S. federal, state, local or other laws or regulations that are similar to such provisions of Title I of ERISA or Section 4975 of the Code (collectively, “Similar Laws”), and (iii) entities whose underlying assets are considered to include the assets of any of the foregoing described in clauses (i) and (ii), pursuant to ERISA or otherwise (each of the foregoing described in clauses (i), (ii) and (iii) referred to herein as a “Plan”).

General Fiduciary Matters

ERISA and the Code impose certain duties on persons who are fiduciaries of a Plan subject to Title I of ERISA or Section 4975 of the Code (a “Covered Plan”) and prohibit certain transactions involving the assets of a Covered Plan and its fiduciaries or other interested parties. Under ERISA and the Code, any person who exercises any discretionary authority or control over the administration of such a Covered Plan or the management or disposition of the assets of such a Covered Plan, or who renders investment advice for a fee or other compensation to such a Covered Plan, is generally considered to be a fiduciary of the Covered Plan. In considering an investment in the Notes of a portion of the assets of any Plan, a fiduciary should determine whether the investment is in accordance with the documents and instruments governing the Plan and the applicable provisions of ERISA, the Code or any Similar Law relating to a fiduciary’s duties to the Plan including, without limitation, the prudence, diversification, delegation of control and prohibited transaction provisions of ERISA, the Code and any other applicable Similar Laws.

Prohibited Transaction Issues

Section 406 of ERISA and Section 4975 of the Code prohibit certain transactions (referred to as “prohibited transactions”) involving the assets of a Plan subject to ERISA or the assets of Plan, including an individual retirement account, subject to Section 4975 of the Code (each referred to as a “Covered Plan”), on the one hand, and persons who have certain specified relationships to the Plan (“parties in interest” within the meaning of ERISA or “disqualified persons” within the meaning of the Code), on the other. If we, and underwriter (or any of our respective affiliates) are considered a party in interest or disqualified person with respect to a Covered Plan, then the investment in Notes by the Covered Plan may give rise to a prohibited transaction, unless the investment is acquired and is held in accordance with an applicable statutory, class or individual prohibited transaction exemption. In this regard, the U.S. Department of Labor has issued prohibited transaction class exemptions (“PTCEs”) that may apply to the acquisition and holding of the Notes by a Covered Plan. These class exemptions include, without limitation, PTCE 84-14 respecting transactions determined by independent qualified professional asset managers, PTCE 90-1 respecting transactions involving insurance company pooled separate accounts, PTCE 91-38 respecting transactions involving bank collective investment funds, PTCE 95-60 respecting transactions involving life insurance company general accounts and PTCE 96-23 respecting transactions determined by in-house asset managers. In addition, the statutory exemption under Section 408(b)(17) of ERISA and Section 4975(d)(20) of the Code provides relief from the prohibited transaction provisions of ERISA and Section 4975 of the Code for certain transactions between a Covered Plan and a person who is a party in interest or disqualified person solely as a result of providing services to such Covered Plan (or as a result of being related to person who provides services to such Covered Plan). This relief applies only if neither the party in interest or disqualified person nor any of its affiliates (directly or indirectly) have or exercise any discretionary authority or control or render any investment advice with respect to the assets of the Covered Plan involved in the transaction and the Covered Plan receives no less, and pays no more, than adequate

 

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consideration in connection with the transaction. Each of the above-noted exemptions contains conditions and limitations on its application. Fiduciaries of Covered Plans considering acquiring and/or holding the Notes in reliance on these or any other exemption should carefully review the exemption to assure it is applicable. There can be no assurance that all of the conditions of any such exemptions will be satisfied, or that any exemption will cover all possible transactions involving Notes.

By purchasing and holding the Notes (including any interest in a Note), the fiduciary making the decision to invest on behalf of a Covered Plan is representing that the purchase and holding of the Notes will not result in a non-exempt prohibited transaction under ERISA or the Code. Therefore, a Covered Plan should not invest in the Notes unless the plan fiduciary acquiring Notes on behalf of the Covered Plan determines that neither we nor an affiliate is or (at any time during the term of the investment) will become a party in interest or a disqualified person and that no other prohibited transaction under ERISA or Section 4975 of the Code would occur in connection with the Covered Plan’s investment in Notes or, alternatively, that an exemption from the prohibited transaction rules is available. If a Covered Plan engaged in a prohibited transaction, the transaction may require “correction” and may cause the Covered Plan fiduciary to incur certain liabilities and the parties in interest or disqualified persons to be subject to excise taxes. There can be no assurance that any exemption would be available with respect to any particular Covered Plan’s investment in the Notes.

Plans that are governmental plans and non-U.S. plans, and certain church plans, may not be subject to the fiduciary responsibility or prohibited transaction rules of ERISA or the prohibited transaction rules of the Code. However, Similar Laws governing the investment and management of the assets of such Plans may contain fiduciary responsibility and prohibited transaction requirements similar to those under ERISA and Section 4975 of the Code discussed above. By purchasing and holding the Notes (including any interest in a Note), the person making the decision to invest on behalf of any such a Plan shall be deemed to represent that the purchase and holding of the Notes will not violate any Similar Law applicable to such Plan.

A fiduciary of a Plan, whether or not subject to ERISA, that proposes to invest in the Notes with the assets of a Plan, should consult its own legal counsel for further guidance. The sale of Notes (or any interest in a Note) to a Plan is in no respect a representation by us, the underwriters or any other person that such an investment meets all relevant legal requirements with respect to investments by Plans generally or any particular Plan or that such an investment is appropriate or recommended for Plans generally or any particular Plan.

 

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LEGAL MATTERS

Certain legal matters in connection with the securities offered hereby will be passed upon for us by Simpson Thacher & Bartlett LLP, Washington, D.C. Certain legal matters in connection with the securities offered hereby will be passed upon for the underwriters by Proskauer Rose LLP, Washington, D.C.

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

This prospectus supplement is part of a registration statement that we have filed with the SEC. The information incorporated by reference is considered to comprise a part of this prospectus supplement. Any reports filed by us with the SEC subsequent to the date of this prospectus supplement will automatically update and, where applicable, supersede any information contained in this prospectus supplement or incorporated by reference herein.

We incorporate by reference into this prospectus supplement our filings listed below and any future filings that we may file with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, subsequent to the date of this prospectus supplement until all of the securities offered by this prospectus supplement and the accompanying prospectus have been sold or we otherwise terminate the offering of these securities; provided, however, that information “furnished” under Item 2.02 or Item 7.01 of Form 8-K or other information “furnished” to the SEC that is not deemed filed is not incorporated by reference in this prospectus supplement.

This prospectus supplement incorporates by reference the documents set forth below that have been previously filed with the SEC:

 

   

our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (the “Annual Report”), filed with the SEC on March 5, 2021, including the information specifically incorporated by reference into Form 10-K from our Definitive Proxy Statement on Schedule  14A, filed with the SEC on April 26, 2021;

 

   

our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, filed with the SEC on May 6, 2021; and

 

   

our Current Reports on Form 8-K (other than information furnished rather than filed) filed with the SEC on January 20, 2021.

See “Available Information” in the accompanying prospectus for information on how to obtain a copy of these filings.

EXPERTS

The financial statements and the senior securities table of the Company incorporated in this prospectus supplement by reference to the Annual Report on Form 10-K for the year ended December 31, 2020 have been so incorporated in reliance on the reports of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

The financial statements of First Eagle Logan JV LLC (formerly, THL Credit Logan JV LLC) incorporated in this prospectus supplement by reference to the Annual Report on Form 10-K for the year ended December 31, 2020 have been so incorporated in reliance on the report of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

 

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AVAILABLE INFORMATION

We have filed a registration statement with the SEC on Form N-2, including amendments, relating to the Notes offered by this prospectus supplement and the accompanying prospectus. The registration statement contains additional information about us and the Notes being offered by this prospectus supplement and the accompanying prospectus.

We file annual, quarterly and current periodic reports, proxy statements and other information with the SEC under the Exchange Act. You may inspect and copy these reports, proxy statements and other information, as well as the registration statement of which this prospectus supplement and accompanying prospectus form a part and the related exhibits and schedules, at the Public Reference Room of the SEC at 100 F Street, N.E., Washington, D.C. 20549-0102. You may obtain information on the operation of the Public Reference Room by calling the SEC at (202) 551-8090. The SEC maintains an Internet website that contains reports, proxy and information statements and other information filed electronically by us with the SEC which are available on the SEC’s Internet website at http://www.sec.gov. Copies of these reports, proxy and information statements and other information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing the SEC’s Public Reference Section, Washington, D.C. 20549-0102. The information is available free of charge by contacting us at First Eagle Alternative Capital BDC, Inc., 500 Boylston Street, Suite 1200, Boston, MA 02116, or by calling us at (800) 450-4424 or on our website at www.feacbdc.com.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The information in “Management’s Report on Internal Control Over Financial Reporting” in Part II, Item 9A of our most recent Annual Report on Form 10-K is incorporated herein by reference.

 

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$250,000,000

First Eagle Alternative Capital BDC, Inc.

Common Stock

Preferred Stock

Warrants

Subscription Rights

Debt Securities

 

This prospectus relates to the offer, from time to time, up to $250,000,000 of shares of our common stock, par value $0.001 per share, preferred stock, par value $0.001 per share, warrants representing rights to purchase shares of our common stock, preferred stock or debt securities, subscription rights or debt securities, which we refer to, collectively, as the “securities.” We may sell our common stock directly or through underwriters or dealers, “at-the-market” to or through a market maker into an existing trading market or otherwise directly to one or more purchasers or through agents or through a combination of methods of sale. The identities of such underwriters, dealers, market makers or agents, as the case may be, will be described in one or more supplements to this prospectus, and any related free writing prospectuses. The securities may be offered at prices and on terms to be described in one or more supplements to this prospectus and any related free writing prospectuses.

We are an externally managed, non-diversified closed-end management investment company that has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended. We are managed by our investment adviser, First Eagle Alternative Credit, LLC (formerly, THL Credit Advisors LLC), or FEAC, which also provides the administrative services necessary for us to operate. Effective January 31, 2020, THL Credit Advisors LLC, the Company’s previous Advisor, merged into a newly formed subsidiary of First Eagle Investment Management, LLC (“First Eagle”), with THL Credit Advisors LLC as the surviving company. Immediately after closing of the transaction, THL Credit Advisors LLC changed its name to First Eagle Alternative Credit, LLC. Effective August 3, 2020, we changed our name from “THL Credit, Inc.” to “First Eagle Alternative Capital BDC, Inc.” In connection with our name change, the shares of our common stock began trading on the NASDAQ under the ticker symbol “FCRD.”

Our investment objective is to generate both current income and capital appreciation, primarily through investments in privately negotiated debt and equity securities of middle market companies. We are a direct lender to middle market companies and invest primarily in directly originated first lien senior secured loans, including unitranche investments. In certain instances, we also make second lien secured loans and subordinated, or mezzanine, debt investments, which may include an associated equity component such as warrants, preferred stock or similar securities, and direct equity investments. Our first lien senior secured loans may be structured as traditional first lien senior secured loans or as unitranche loans. Unitranche structures may combine characteristics of traditional first lien senior secured as well as second lien and subordinated loans and our unitranche loans will expose us to the risks associated with second lien and/or subordinated loans to the extent we invest in the “last-out” tranche or subordinated tranche (or piece) of the unitranche loan. We also may provide advisory services to managed funds.

Substantially all of the debt securities in which the Company invests are below investment grade debt securities and are often referred to as “high yield” or “junk” securities. Exposure to below investment grade securities involves certain risk, and those securities are viewed as having predominately speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal. A material amount of our debt investments contain interest reset provisions that may make it more difficult for the borrowers to make debt repayments. Further, our debt investments generally will not pay down principal during their term which could result in a substantial loss to us if the portfolio company is unable to refinance or repay the debt at maturity.

Our common stock is traded on the Nasdaq Global Select Market under the symbol “FCRD.” On December 1, 2020, the closing price of a share of our common stock on the Nasdaq Global Select Market was $3.88. The net asset value per share of our common stock at September 30, 2020 (the last date prior to the date of this prospectus on which we determined net asset value) was $6.25.

This prospectus contains important information about us that a prospective investor should know before investing in our securities. Please read this prospectus before investing and keep it for future reference. We file annual, quarterly and current reports, proxy statements and other information about us with the Securities and Exchange Commission. You may obtain this information free of charge or make stockholder inquiries by contacting us at First Eagle Alternative Capital BDC, Inc., 500 Boylston Street, Suite 1200, Boston, MA 02116, or by calling us at (800) 450-4424 or on our website at www.feacbdc.com. The Securities and Exchange Commission maintains a website at www.sec.gov where such information is available without charge. Information contained on or accessed through our website is not incorporated by reference into this prospectus, and you should not consider information contained on or accessed through our website to be part of this prospectus.

Investing in our securities involves a high degree of risk, including credit risk and the risk of the use of leverage. Before buying any securities, you should read the discussion of the material risks of investing in our securities in “Risks” beginning on page 10 of this prospectus.

 

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

This prospectus may not be used to consummate sales of securities unless accompanied by a prospectus supplement, and any related free writing prospectuses.

 

The date of this prospectus is December 11, 2020.


Table of Contents

TABLE OF CONTENTS

 

     Page  

Incorporation by Reference

     ii  

Prospectus Summary

     1  

Fees and Expenses

     7  

Risks

     10  

Special Note Regarding Forward-Looking Statements

     11  

Use of Proceeds

     12  

Price Range of Common Stock and Distributions

     13  

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

     16  

Selected Consolidated Financial Data

     17  

Financial Highlights

     21  

Senior Securities

     24  

Portfolio Companies

     26  

The Company

     37  

Management of the Company

     38  

Certain Relationships

     39  

Control Persons and Principal Stockholders

     41  

The Advisor

     43  

Determination of Net Asset Value

     46  

Dividend Reinvestment Plan

     49  

Description of Our Capital Stock

     51  

Description of Our Preferred Stock

     55  

Description of Our Subscription Rights

     57  

Description of Warrants

     59  

Description of Our Debt Securities

     61  

Regulation

     75  

Tax Matters

     82  

Plan of Distribution

     89  

Custodian

     91  

Transfer Agent

     91  

Brokerage Allocations and Other Practices

     91  

Legal Matters

     91  

Experts

     91  

Additional Information

     92  

Management’s Report on Internal Control Over Financial Reporting

     92  

 

 

We have not authorized any dealer, salesperson or other person to provide you with different information or to make representations as to matters not stated in this prospectus or any accompanying prospectus supplement, or any free writing prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. This prospectus, any such supplement, and any related free writing prospectus do not constitute an offer to sell, or a solicitation of an offer to buy, any securities by any person in any jurisdiction where it is unlawful for that person to make such an offer or solicitation or to any person in any jurisdiction to whom it is unlawful to make such an offer or solicitation. The information in this prospectus and any such supplement or free writing prospectus is accurate only as of its date, and under no circumstances should the delivery of this prospectus and any such supplement or free writing prospectus or the sale of any security imply that the information in this prospectus is accurate as of any later date or that the affairs of First Eagle Alternative Capital BDC, Inc. (formerly, THL Credit, Inc.) have not changed since such date. This prospectus, any accompanying prospectus supplement and any free writing prospectus will be updated to reflect material changes.

 

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INCORPORATION BY REFERENCE

This prospectus is part of a registration statement that we have filed with the SEC. Pursuant to the Small Business Credit Availability Act, or SBCAA, we are allowed to “incorporate by reference” the information that we file with the SEC, which means we can disclose important information to you by referring you to those documents. We incorporate by reference into this prospectus the documents listed below and any future filings we make with the SEC under Sections 13(a), 13(c), or 14 of the Securities Exchange Act of 1934, as amended, including any filings on or after the date of this prospectus from the date of filing (excluding any information furnished, rather than filed), until we have sold all of the offered securities to which this prospectus relates or the offering is otherwise terminated. The information incorporated by reference is an important part of this prospectus. Any statement in a document incorporated by reference into this prospectus will be deemed to be automatically modified or superseded to the extent a statement contained in (1) this prospectus or (2) any other subsequently filed document that is incorporated by reference into this prospectus modifies or supersedes such statement. The documents incorporated by reference herein include:

 

   

our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed with the SEC on March  5, 2020 and the amendments thereto filed on March  30, 2020, June 30, 2020 and December 1, 2020;

 

   

our Quarterly Reports on Form 10-Q for the quarterly period ended March 31, 2020 filed with the SEC on May 7, 2020, for the quarterly period ended June 30, 2020 filed with the SEC on August 6, 2020 and for the quarterly period ended September 30, 2020 filed with the SEC on November 4, 2020;

 

   

our Current Reports on Form 8-K filed with the SEC on February 4, 2020, March 5, 2020, March  13, 2020, April 15, 2020, April  20, 2020, April  22, 2020, May 29, 2020, June  24, 2020, July 24, 2020, August  6, 2020 and October 20, 2020 (other than any information furnished rather than filed);

 

   

our definitive Proxy Statement on Schedule 14A filed with the SEC on April 29, 2020 (to the extent explicitly incorporated by reference into our Annual Report Form 10-K); and

 

   

the description of our common stock referenced in our Registration Statement on Form 8-A (No. 001-34410), as filed with the SEC on April 21, 2010, including any amendment or report filed for the purpose of updating such description prior to the termination of the offering of the common stock registered hereby.

To obtain copies of these filings, see “Available Information.” We will also provide without charge to each person, including any beneficial owner, to whom this prospectus is delivered, upon written or oral request, a copy of any and all of the documents that have been or may be incorporated by reference in this prospectus. You should direct requests for documents by writing to:

First Eagle Alternative Capital BDC, Inc.

500 Boylston Street, Suite 1200

Boston, MA 02116

Phone number: (800) 450-4424

 

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ABOUT THIS PROSPECTUS

This prospectus, any accompanying prospectus supplement and any free writing prospectus is part of a registration statement that we have filed with the Securities and Exchange Commission using the “shelf” registration process. Under the shelf registration process, which constitutes a delayed offering in reliance on Rule 415 under the Securities Act of 1933, as amended, we may offer, from time to time, up to $250,000,000 of our common stock, preferred stock, warrants representing rights to purchase shares of our common stock, preferred stock or debt securities, subscription rights or debt securities on the terms to be determined at the time of the offering. We may sell our securities through underwriters or dealers, “at-the-market” to or through a market maker, into an existing trading market or otherwise directly to one or more purchasers or through agents or through a combination of methods of sale. The identities of such underwriters, dealers, market makers or agents, as the case may be, will be described in one or more supplements or related free writing prospectuses to this prospectus. The securities may be offered at prices and on terms described in one or more supplements to this prospectus. This prospectus and any accompanying prospectus supplement or related free writing prospectus provides you with a general description of the securities that we may offer. Each time we use this prospectus to offer securities, we will provide a prospectus supplement and any related free writing prospectus that will contain specific information about the terms of that offering. The prospectus supplement and any related free writing prospectus may also add, update or change information contained in this prospectus or in the documents we have incorporated by reference into this prospectus. Please carefully read this prospectus, any such supplements and related free writing prospectuses together with the additional information described under “Incorporation by Reference,” “Additional Information” and “Risks” sections before you make an investment decision. The information contained or incorporated by reference in this prospectus is accurate of their respective dates. Our financial condition, results of operations and prospectus may have changed since those dates.

A prospectus supplement or a free writing prospectus may also add to, update or change information contained in this prospectus.

 

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PROSPECTUS SUMMARY

This summary highlights some of the information in this prospectus. It is not complete and may not contain all of the information that you may want to consider before investing in our securities. You should read the entire prospectus carefully, including “Risks” and any information incorporated by reference. Throughout this prospectus, we refer to First Eagle Alternative Capital BDC, Inc. (formerly, THL Credit, Inc.) and its consolidated subsidiaries as the “Company,” “we,” “us” or “our;” “First Eagle Alternative Credit,” “FEAC,” the “Advisor” or the “Administrator” refers to First Eagle Alternative Credit, LLC; “Greenway” refers to First Eagle Greenway Fund LLC; “Greenway II” refers to First Eagle Greenway Fund II LLC and related investment vehicle; “Logan JV” refers to First Eagle Logan JV LLC (formerly, THL Credit Logan JV LLC).

First Eagle Alternative Capital BDC, Inc.

We are an externally managed, non-diversified closed-end management investment company incorporated in Delaware on May 26, 2009, that has elected to be regulated as a business development company, or BDC, under the Investment Company Act of 1940, as amended, or the 1940 Act. In addition, we have elected to be treated for tax purposes as a regulated investment company, or RIC, under Subchapter M of the Internal Revenue Code of 1986, as amended, or the Code. Our investment activities are managed by First Eagle Alternative Credit, LLC (formerly, THL Credit Advisors LLC), or FEAC, and supervised by our board of directors, a majority of whom are independent of FEAC and its affiliates. Effective January 31, 2020, THL Credit Advisors LLC, the Company’s previous Advisor, merged into a newly formed subsidiary of First Eagle Investment Management, LLC (“First Eagle”), with THL Credit Advisors LLC as the surviving company. Immediately after closing of the transaction, THL Credit Advisors LLC changed its name to First Eagle Alternative Credit, LLC. Effective August 3, 2020, we changed our name from “THL Credit, Inc.” to “First Eagle Alternative Capital BDC, Inc.” In connection with our name change, the shares of our common stock began trading on the NASDAQ under the ticker symbol “FCRD.” As a BDC, we are required to comply with certain regulatory requirements. See “Regulation” for discussion of BDC regulation and other regulatory considerations. We are also registered as an investment adviser under the Investment Advisers Act of 1940, as amended, or the Advisers Act.

Our investment objective is to generate both current income and capital appreciation, primarily through investments in privately negotiated debt and equity securities of middle market companies. We are a direct lender to middle market companies and invest primarily in directly originated first lien senior secured loans, including unitranche investments. In certain instances, we also make second lien secured loans and subordinated, or mezzanine, debt investments, which may include an associated equity component such as warrants, preferred stock or similar securities, and direct equity investments. Our first lien senior secured loans may be structured as traditional first lien senior secured loans or as unitranche loans. Unitranche structures may combine characteristics of traditional first lien senior secured as well as second lien and subordinated loans and our unitranche loans will expose us to the risks associated with second lien and/or subordinated loans to the extent we invest in the “last-out” tranche or subordinated tranche (or piece) of the unitranche loan. We also may provide advisory services to managed funds.

We intend to co-invest, subject to the conditions included in the exemptive order we received from the SEC, with certain of our affiliates. See “Certain Relationships” in this prospectus. We believe that such co-investments may afford us additional investment opportunities and an ability to achieve greater diversification.

We define middle market companies to mean both public and privately-held companies with annual earnings before interest, taxes, depreciation and amortization, or EBITDA, generally between $5 million and $25 million. We expect to generate returns primarily through a combination of contractual interest payments on debt investments, equity appreciation, origination and similar fees. We can offer no assurances that we will achieve our investment objective.



 

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Since April 2010, after we completed our initial public offering and commenced principal operations, through September 30, 2020, we have been responsible for making, on behalf of ourselves, managed funds and separately managed account, over $2.3 billion in aggregate commitments to 135 separate portfolio companies through a combination of both initial and follow-on investments. Since April 2010 through September 30, 2020, we, along with our managed funds and separately managed accounts, have received $1.8 billion of proceeds from the realization of investments. The Company alone has received over $1.5 billion of proceeds from the realization of its investments. As of September 30, 2020, our managed funds, First Eagle Greenway, LLC, or Greenway, and First Eagle Greenway II, LLC and its separately managed account, collectively Greenway II, have received $190.8 million, or 127.2% of committed capital, and $208.0 million, or 111.2% of the committed capital, respectively.

As a BDC, we must not acquire any assets other than “qualifying assets” (i.e., those assets specified in Section 55(a) of the 1940 Act) unless, at the time the acquisition is made, at least 70% of our total assets are qualifying assets (with certain limited exceptions). Qualifying assets include investments in “eligible portfolio companies.” Under the relevant U.S. Securities and Exchange Commission, or SEC, rules the term “eligible portfolio company” includes all private companies, companies whose securities are not listed on a national securities exchange, and certain public companies that have listed their securities on a national securities exchange and have a market capitalization of less than $250 million, in each case organized in the United States and with their principal place of business in the United States. Investment companies and certain pooled investment vehicles excepted from the definition of investment company under the 1940 Act are not eligible portfolio companies.

We are also registered as an investment adviser under the Advisers Act.

We are permitted to borrow money from time to time within the levels permitted by the 1940 Act (which generally allows us to incur leverage equal to up to one half of our total assets). We have used, and expect to continue to use, our credit facilities and other borrowings, along with proceeds from the rotation of our portfolio and proceeds from public and private securities to finance our investment objectives. See “Regulation” for a discussion of BDC regulation and other regulatory considerations.

Recent legislation has modified the 1940 Act by allowing a BDC to increase the maximum amount of leverage it may incur under the 1940 Act from an asset coverage ratio of 200% to an asset coverage ratio of 150%, if certain requirements are met. At our Annual Meeting of Stockholders on June 14, 2019, stockholders approved a proposal to reduce our asset coverage ratio to 150%. Such asset coverage ratio became effective on June 15, 2019. Pursuant to our credit facility, it is an event of default if we have an asset coverage ratio of less than 150%.

We are required to make certain disclosures on our website and in SEC filings regarding, among other things, the receipt of approval to increase our leverage, our leverage capacity and usage, and risks related to leverage. See “Regulation” for a discussion of BDC regulation and other regulatory considerations.

Organizational Overview

The Company was organized as a Delaware corporation on May 26, 2009 and initially funded on July 23, 2009. We commenced principal operations on April 21, 2010 and on January 31, 2020 our Advisor was acquired by First Eagle. The Company has formed substantially owned subsidiaries which serve as tax blockers that hold equity or equity-like investments in portfolio companies organized as limited liability companies or other forms of pass-through entities. The Company also has formed substantially owned subsidiaries which serve as the administrative agents on certain investment transactions, including First Eagle Alternative Capital Agent, Inc. (formerly, THL Corporate Finance, Inc).



 

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(1) 

First Eagle Alternative Credit is owned and controlled by First Eagle Investment Management, LLC.

(2) 

Greenway I is an investment fund with $150 million of capital committed by affiliates of a single institutional investor, together with a nominal amount committed by the Company, all of which has been paid in and invested by Greenway I, which is managed by us.

(3) 

Greenway II is an investment fund and, together with a related vehicle, has $187 million of capital committed by third party investors, all of which has been paid in and invested by Greenway II, together with a nominal amount committed by the Company, which is managed by us.

(4) 

Logan JV is a joint venture entered into between the Company and Perspecta Trident LLC, or Perspecta, an affiliate of Perspecta Trust LLC, which invests primarily in senior secured first lien term loans. Logan JV has $250 million of capital commitments, of which the Company committed $200 million and Perspecta committed $50 million.

(5) 

First Eagle Investment Management, LLC is a subsidiary of First Eagle Holdings, Inc. (“FE Holdings”), a holding company incorporated in Delaware. A controlling interest in FE Holdings is owned by BCP CC Holdings L.P., a Delaware limited partnership (BCP CC Holdings”). BCP CC Holdings GP L.L.C., a Delaware limited liability company, is the general partner of BCP CC Holdings and has two managing members, Blackstone Capital Partners VI L.P. (“BCP VI”) and Corsair IV Financial Services Capital Partners L.P. (“Corsair IV”). BCP VI and Corsair IV are indirectly controlled by The Blackstone Group Inc. (“Blackstone”) and Corsair Capital LLC (“Corsair”), respectively. Investment vehicles indirectly controlled by Blackstone and Corsair and certain co-investors own a majority economic interest in FE Holdings and First Eagle through BCP CC Holdings.

First Eagle Alternative Credit, LLC

Our investment activities are managed by our investment adviser, First Eagle Alternative Credit, LLC (formerly, THL Credit Advisors LLC), or FEAC. FEAC is responsible for sourcing potential investments, conducting research on prospective investments, analyzing investment opportunities, structuring our investments, and monitoring our investments and portfolio companies on an ongoing basis. We pay FEAC a management fee as a percentage of our gross assets and may pay incentive fees as a percentage of our ordinary income and capital gains.

FEAC was formed as a Delaware limited liability company on June 26, 2009 and is registered as an investment adviser under the Advisers Act. FEAC is an alternative credit investment manager for both direct



 

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lending and tradable credit investments through public and private vehicles, commingled funds including collateralized loan obligations, and separately managed accounts. FEAC and its credit-focused affiliates managed assets of approximately $20.6 billion as of September 30, 2020 across its two primary investment strategies: Direct Lending and Tradable Credit.

FEAC benefits from a scaled and integrated business that draws on a diverse resource base and the credit and industry expertise of the entire platform. Fundamental credit analysis, rigorous and disciplined underwriting, well-structured investments and ongoing monitoring are the hallmarks of its credit culture.

FEAC’s Direct Lending strategy invests primarily in secured loans consisting of first lien senior secured, including unitranche investments, and, to a lesser extent, second lien facilities. In certain instances, FEAC’s Direct Lending strategy also makes subordinated debt investments and equity investments such as warrants, preferred stock or other similar securities.

FEAC’s Tradable Credit strategy manages investments in secured bank loans, structured credit and high-yield securities through CLOs, separate accounts, sub-advisory and various fund formats, including private funds, certain CLOs and as advisor to First Eagle Senior Loan Fund (NYSE: FSLF) (“FSLF”), a diversified, closed-end management investment company. The Advisor may serve as investment adviser to additional private funds, registered closed-end funds and CLOs in the future. See “Certain Relationships” in this prospectus for information regarding the allocation of investment opportunities.

FEAC is headquartered in Boston, with additional origination teams in Chicago, Dallas, Los Angeles and New York, allowing it to be close to its portfolio companies as well as its origination and syndication sources. Over the years, FEAC has developed deep and diverse national relationships that it leverages to maximize investment opportunities across its strategies.

FEAC’s Direct Lending investment committee, which serves as our investment committee, is comprised of four fixed members: Christopher J. Flynn, Terrence W. Olson, James R. Fellows and Michelle Handy (the “Primary Investment Committee Members”. In addition to the Primary Investment Committee Members, the investment committee has four rotating industry leads that serve on the investment committee for deals within their designated industry, and one rotating industry lead that serves on the investment committee for deals within other industries.

FEAC has received an exemptive order from the SEC permitting it to negotiate, subject to the conditions of the order, co-investments among us and certain of its other investment advisory clients. See “Business—Material Conflicts of Interests” in Part I, Item 1 of our most recent Annual Report on Form 10-K, which is incorporated by reference into this prospectus.

FEAC also serves as our Administrator and leases office space to us and provides us with equipment and office services. The tasks of the Administrator include overseeing our financial records, preparing reports to our stockholders and reports filed with the SEC and generally monitoring the payment of our expenses and the performance of administrative and professional services rendered to us by others.

First Eagle Investment Management, LLC

The Advisor is owned by First Eagle. First Eagle provides investment advisory services primarily to mutual funds, private investment funds and institutional accounts. First Eagle managed and advised assets of $103 billion as of September 30, 2020 across the following investment strategies: Global Value, International Value, High Yield,



 

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Gold, U.S. Value, and Global Income Builder. Through First Eagle and affiliates, we believe we achieve scale in Direct Lending, augmenting our competitiveness for originations as well as providing enhanced relationship network and sponsor relationships.

See “Investment Approach,” “Sourcing,” “Determining the Market,” “Market Opportunity,” “Investment Strategy,” “Competition,” “Competitive advantages,” “Selecting,” “Underwriting Process,” “Structuring,” “Supervising” and “Monitoring” in Part I, Item 1 “Business—” of our most recent Annual Report on Form 10-K for summary information regarding the Company’s investment program.

Dividend Reinvestment Plan

We have adopted a dividend reinvestment plan for our stockholders. This is an “opt in” dividend reinvestment plan. As a result, if we declare a cash dividend or other distribution, each stockholder that has not “opted in” to our dividend reinvestment plan will receive cash dividends, rather than having their dividends automatically reinvested in additional shares of our common stock. Stockholders who receive distributions in the form of shares of common stock will be subject to the same federal, state and local tax consequences as if they received their distributions in cash. See “Dividend Reinvestment Plan” in this prospectus.

Taxation

We have elected to be treated as a regulated investment company, or RIC, under Subchapter M of the Code. As a RIC, we generally do not have to pay corporate-level federal income taxes on any income that we timely distribute to our stockholders. To maintain our qualification as a RIC, we must, among other things, meet certain source of income and asset diversification requirements. In addition, in order maintain our RIC tax treatment, we must timely distribute to our stockholders, for each taxable year, at least 90% of our “investment company taxable income,” which is generally our net ordinary income plus the excess, if any, of realized net short-term capital gains over realized net long-term capital losses. See “Tax Matters” in this prospectus.

We intend to timely distribute to our stockholders, for each taxable year, substantially all of our taxable income, except that we may in the future decide to retain some or all of our net capital gain for reinvestment and, depending on the level of taxable income earned in a particular year, we may choose not to distribute all of such taxable income and pay a non-deductible 4% federal excise tax on the undistributed income.

Use of Proceeds

We intend to use the net proceeds from the sale of our securities for investing in debt and equity securities, repayment of any outstanding indebtedness and other general corporate purposes. The supplement to this prospectus relating to an offering will more fully identify the use of proceeds from such offering.

Leverage

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financial condition, liquidity and capital resources” in Part I, Item 2 of our most recent Quarterly Report on Form 10-Q and “Risk Factors” in Part I, Item 1A of our most recent Annual Report on Form 10-K and in Part II, Item 1A of our most recent Quarterly Report on Form 10-Q.



 

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Distributions

See Part II, Item 5, “Distributions” of our most recent Annual Report on Form 10-K and “Tax Matters” in this prospectus.

Recent Developments

From October 1, 2020 through December 1, 2020, we made new investments totaling $12.2 million and follow-on investments, including revolver and delayed draw fundings, totaling $2.8 million with a combined weighted average yield of 8.2%.

Risks

Investing in our securities may be speculative and involves certain risks relating to our structure and our investment objective that you should consider before deciding whether to invest. See “Risks” on page 10 of this prospectus, “Risk Factors” in Part I, Item 1A of our most recent Annual Report on Form 10-K, and “Risk Factors” in Part II, Item 1A of our most recent Quarterly Report on Form 10-Q for a more detailed discussion of these and other material risks you should carefully consider before deciding to invest in our securities.

Certain Anti-Takeover Provisions

Our certificate of incorporation and bylaws, as well as certain statutory and regulatory requirements, contain certain provisions that may have the effect of discouraging a third party from making an acquisition proposal for us. These anti-takeover provisions may inhibit a change in control in circumstances that could give the holders of our common stock the opportunity to realize a premium over the market price for our common stock. See “Description of Our Capital Stock.”

General Information

Our principal executive offices are located at 500 Boylston Street, Suite 1200, Boston, MA 02116, and we can be reached by telephone at (800) 450-4424. We maintain a website on the Internet at www.feacbdc.com. Information contained on or accessed through our website is not incorporated by reference into this prospectus, and you should not consider that information to be part of this prospectus.

We file annual, quarterly and current periodic reports, proxy statements and other information with the SEC under the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act. This information is available at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information about the operation of the SEC’s public reference room by calling the SEC at 202-551-8090. In addition, the SEC maintains an Internet website, at www.sec.gov, that contains reports, proxy and information statements, and other information regarding issuers, including us, who file documents electronically with the SEC.



 

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FEES AND EXPENSES

The following table is intended to assist you in understanding the various costs and expenses of the Company and its consolidated subsidiaries that an investor in our common stock will bear directly or indirectly. However, we caution you that some of the percentages indicated in the table below are estimates and may vary. The following table and example should not be considered a representation of our future expenses. Actual expenses may be greater or less than shown. Except where the context suggests otherwise, whenever this prospectus contains a reference to fees or expenses paid by “you” or “us” or that “we” will pay fees or expenses, stockholders will indirectly bear such fees or expenses as investors in the Company. In the event that shares to which this prospectus relates are sold to or through underwriters, a corresponding prospectus supplement and any related free writing prospectus will restate the information included in this table and example to reflect the applicable sales load and applicable fees and expenses.

 

Stockholder Transaction Expenses

  

Sales Load (as a percentage of offering price)

     —   %(1) 

Offering Expenses (as a percentage of offering price)

     —   %(2) 

Dividend Reinvestment Plan Fees

     —   %(3) 

Total Stockholder Transaction Expenses (as a percentage of offering price)

     —   % 

Annual Expenses (as a Percentage of Net Assets Attributable to Common Shares)(4)

  

Base Management Fees

     1.98 %(5) 

Incentive Fees Payable Under the Investment Management Agreement (20% of ordinary income and capital gains)

     0.00 %(6) 

Interest Payments on Borrowed Funds (including Cost of Servicing Debt Securities and/or Preferred Stock)

     5.80 %(7) 

Other Expenses

     2.65 %(8) 

Acquired Fund Fees and Expenses

     5.29 %(9) 

Total Annual Expenses

     15.72 %(10) 

 

(1)

In the event that the securities to which this prospectus relates are sold to or through underwriters, a corresponding prospectus supplement and any related free writing prospectus will disclose the applicable sales load and the Example will be updated accordingly.

(2)

The related prospectus supplement and any related free writing prospectus will disclose the applicable offering expenses and total stockholder transaction expenses.

(3)

The expenses of the dividend reinvestment plan are included in “Other Expenses.” See “Dividend Reinvestment Plan.”

(4)

The consolidated net assets attributable to common shares used to calculate the percentages in this table is our net assets of $188.1 million as of September 30, 2020.

(5)

Our base management fee under the investment management agreement is based on our gross assets without deduction for any liabilities and is payable quarterly in arrears. See “The Advisor—Investment management agreement.” The management fee referenced in the table above is based upon the actual amounts incurred during the nine months ended September 30, 2020, annualized. Further, our Advisor has agreed to waive management and incentive fees for the Company for the period from July 1, 2020 through March 31, 2021. Such waivers are not included in this calculation. See Note 4 “Related Party Transactions—Investment Management Agreement” of our Consolidated Financial Statements in Part I, Item 1 of our most recent Quarterly Report on Form 10-Q, which is incorporated by reference into this prospectus and footnote 6 below. We do not expect to have significant expense accruals at the end of each quarter and accordingly do not expect our other liabilities will have an impact on our base management fee rate in relation to net assets attributable to our common stock.

(6)

Assumes incentive fees that would have been earned by the Advisor, excluding the impact of realized and unrealized losses in the portfolio, remain consistent for the nine months ended September 30, 2020, before giving effect to the waiver described below. We did not accrue any capital gain incentive fees during the nine months ended September 30, 2020. As we cannot predict whether we will meet the thresholds for

 

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  incentive fees under the Investment Management Agreement, the incentive fees paid in subsequent periods, if any, may be substantially different than the fees incurred, excluding the impact of realized and unrealized losses in the portfolio, during the nine months ended September 30, 2020. Further, our Advisor has agreed to waive management and incentive fees for the Company for the period from July 1, 2020 through March 31, 2021. Such waivers are not included in this calculation. For more detailed information about incentive fees payable to the Advisor under the terms of the Investment Management Agreement, please see Note 4 “Related Party Transactions—Investment Management Agreement” of our Consolidated Financial Statements in Part I, Item 1 of our most recent Quarterly Report on Form 10-Q which is incorporated by reference into this prospectus.
(7)

We may borrow funds from time to time to make investments to the extent that the economic situation is conducive to doing so. The costs associated with our borrowings are indirectly borne by our common stockholders. Interest payments on borrowed funds represents interest expense and non-use commitment fees related to our $100.0 million (amended from $120 million facility size) revolving credit facility with ING Capital LLC, or the Revolving Facility, interest expense related to our 2022 Notes and 2023 Notes, and amortization of deferred financing costs. Interest expense is calculated based upon $64.7 million outstanding on the Revolving Facility as of September 30, 2020 at an interest rate of 3.50% (interest rate as of October 16, 2020 reflecting adjusted interest spread and LIBOR floor from October 16, 2020 amendment) and amounts outstanding on our notes payable at an interest rate of 6.75% on $60.0 million 2022 Notes and 6.125% on $51.6 million 2023 Notes as of September 30, 2020. Non-use commitment fees related to the Revolving Facility is based upon unused commitments calculated as the current Revolving Facility commitment size of $100.0 million less $64.7 million outstanding on the Revolving Facility as of September 30, 2020. Amortization of deferred financing costs is based on actual amounts incurred during the three months ended September 30, 2020 for the 2022 Notes and 2023 Notes, annualized for a full year, plus expected annual amortization for the Revolving Facility after adjusting for impact of October 16, 2020 amendment.

(8)

Other expenses include overhead expenses for the current fiscal year based on amounts incurred during the nine months ended September 30, 2020, adjusted for one-time non-recurring charges, annualized for a full year, including payments under the administration agreement based on our allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under the administration agreement. Other expenses also include income tax provision, excise and other taxes incurred during the nine months ended September 30, 2020, annualized for a full year. The Administrator performs services under the Administration Agreement at cost. See “Business—Administration Agreement” in Part I, Item 1 of our most recent Annual Report on Form 10-K, which is incorporated by reference into this prospectus

(9)

Our stockholders indirectly bear the expenses of underlying funds or other investment vehicles in which we invest that (1) are investment companies or (2) would be investment companies under section 3(a) of the Investment Company Act but for the exceptions to that definition provided for in sections 3(c)(1) and 3(c)(7) of the Investment Company Act (“Acquired Funds”). This amount includes the estimated annual fees and expenses of Gryphon Partners 3.5, L.P., Freeport Financial SBIC Fund LP and First Eagle Logan JV LLC (formerly, First Eagle Logan JV LLC), which are our only Acquired Funds as of September 30, 2020. Such fees and expenses are netted against distributions received by the Company. The Total Annual Expenses presented in this table do not correlate to the Ratio of Expenses to Average Net Assets provided in the Financial Highlights section of the notes to our Consolidated Financial Statements contained in our most recent Quarterly Report on Form 10-Q, which is incorporated by reference into this prospectus, which reflects our operating expenses and does not include Acquired Fund Fees and Expenses.

(10)

Total annual expenses as a percentage of consolidated net assets attributable to common stock are higher than the total annual expenses would be for a company that is not leveraged.

 

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Example

The following example demonstrates the projected dollar amount of total cumulative expenses that would be incurred over various periods with respect to a hypothetical investment in our common stock. In calculating the following expense amounts, we have assumed that our annual operating expenses would remain at the levels set forth in the table above and have excluded performance-based incentive fees. See Note 8 above for additional information regarding certain assumptions regarding our level of leverage. In the event that shares to which this prospectus relates are sold to or through underwriters, a corresponding prospectus supplement and any related free writing prospectus will restate this example to reflect the applicable sales load.

 

     1 Year      3 Years      5 Years      10 Years  

You would pay the following expenses on a $1,000 investment, assuming a 5% annual return (none of which is subject to a capital gains incentive fee)

   $ 165      $ 440      $ 656      $ 1,012  

The example and the expenses in the tables above should not be considered a representation of our future expenses, and actual expenses may be greater or less than those shown. While the example assumes, as required by the SEC, a 5% annual return, our performance will vary and may result in a return greater or less than 5%. The incentive fee under the investment management agreement, which, assuming a 5% annual return, would either not be payable or would have a de minimis effect, is not included in the example. If we achieve sufficient returns on our investments, including through the realization of capital gains, to trigger an incentive fee of a material amount, our expenses and returns to our investors would be higher. For example, if we assumed that we received our 5.0% annual return completely in the form of net realized capital gains on our investments, which results in a capital gains incentive fee earned, the projected dollar amount of total cumulative expenses set forth in the above illustration and the capital gains incentive fee would be as follows:

 

     1 Year      3 Years      5 Years      10 Years  

You would pay the following expenses on a $1,000 investment, assuming a 5% annual return (all of which is subject to a capital gains incentive fee)

   $ 174      $ 460      $ 679      $ 1,029  

In addition, the example assumes no sales load. Also, while the example assumes reinvestment of all dividends at net asset value, participants in our dividend reinvestment plan will receive a number of shares of our common stock, determined by dividing the total dollar amount of the dividend payable to a participant by the market price per share of our common stock at the close of trading on the dividend payment date, which may be at, above or below net asset value. See “Dividend Reinvestment Plan” for additional information regarding our dividend reinvestment plan.

 

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RISKS

Before you invest in our securities, you should be aware of various risks, including those described under the caption “Risk Factors” in Part I, Item 1A of our most recent Annual Report on Form 10-K and under the caption “Risk Factors” in Part II, Item 1A of our most recent Quarterly Report on Form 10-Q, in any applicable prospectus supplement and any related free writing prospectus, and in our other filings with the SEC, pursuant to Sections 13(a), 13(c) or 14 of the Exchange Act. You should carefully consider these risk factors, together with all of the other information included in this prospectus, and any prospectus supplement and any related free writing prospectus accompanying this prospectus, before you decide whether to make an investment in our securities. The risks incorporated by reference are not the only risks we face, but they are the principal risks associated with an investment in us, which include the special risks of investing in a business development company, including the risks associated with investing in a portfolio of small and developing or financially troubled businesses. If any of the following events occur, our business, financial condition and results of operations could be materially and adversely affected. In such case, our net asset value and the trading price of our common stock could decline, and you may lose all or part of your investment. The risk factors described in our most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q, together with those set forth in any prospectus supplement and any related free writing prospectus accompanying this prospectus, are the principal risk factors associated with an investment in our securities, as well as those factors generally associated with an investment company with investment objectives, investment policies, capital structure or trading markets similar to ours.

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

In addition to factors previously identified elsewhere in this prospectus, including the “Risks” section of this prospectus, the following factors, among others, could cause actual results to differ materially from forward- looking statements or historical performance:

 

   

the introduction, withdrawal, success and timing of business initiatives and strategies;

 

   

changes in political, economic or industry conditions, the interest rate environment or financial and capital markets, which could result in changes in the value of our assets;

 

   

the relative and absolute investment performance and operations of our investment adviser;

 

   

the impact of increased competition;

 

   

the impact of future acquisitions and divestitures;

 

   

the unfavorable resolution of legal proceedings;

 

   

our business prospects and the prospects of our portfolio companies;

 

   

the impact, extent and timing of technological changes and the adequacy of intellectual property protection;

 

   

the impact of legislative and regulatory actions and reforms and regulatory, supervisory or enforcement actions of government agencies relating to us or FEAC, the Advisor;

 

   

the ability of the Advisor to identify suitable investments for us and to monitor and administer our investments;

 

   

the failure of our stockholders to approve a new investment management agreement with the Advisor;

 

   

our contractual arrangements and relationships with third parties;

 

   

any future financings by us;

 

   

the ability of the Advisor to attract and retain highly talented professionals;

 

   

fluctuations in foreign currency exchange rates;

 

   

the impact of changes to tax legislation and, generally, our tax position;

 

   

the impact of pandemics or other serious public health epidemics, such as the current novel coronavirus pandemic on our operations, our portfolio companies’ business, or the global economy;

 

   

our ability to exit a control investment in a timely manner; and

 

   

the ability to fund Logan JV’s unfunded commitments to the extent approved by each member of the Logan JV investment committee.

This prospectus, any prospectus supplement and any related free writing prospectus and other statements that we may make, may contain forward-looking statements with respect to future financial or business performance, strategies or expectations. Forward-looking statements are typically identified by words or phrases such as “trend,” “opportunity,” “pipeline,” “believe,” “comfortable,” “expect,” “anticipate,” “current,” “intention,” “estimate,” “position,” “assume,” “potential,” “outlook,” “continue,” “remain,” “maintain,” “sustain,” “seek,” “achieve” and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “may” or similar expressions.

Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made, and we assume no duty to and do not undertake to update forward-looking statements. These forward-looking statements do not meet the safe harbor for forward-looking statements pursuant to Section 27A of the Securities Act or Section 21E of the Securities Exchange Act of 1934. Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance.

 

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USE OF PROCEEDS

We intend to use the net proceeds from the sale of our securities for general corporate purposes, which include investing in debt and equity securities, repayment of any outstanding indebtedness, acquisitions and other general corporate purposes. The supplement to this prospectus and any related free writing prospectus relating to an offering will more fully identify the use of proceeds from such offering.

We anticipate that substantially all of the net proceeds from any offering of our securities will be used as described above within twelve months, but in no event longer than two years, depending on the availability of attractive opportunities and market conditions. However, there can be no assurance that we will be able to achieve this goal.

Pending such uses and investments, we will invest the net proceeds primarily in cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment. The management fee payable by us to our investment adviser will not be reduced while our assets are invested in such securities. Our ability to achieve our investment objective may be limited to the extent that the net proceeds of any offering, pending full investment, are held in lower yielding short-term instruments.

 

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PRICE RANGE OF COMMON STOCK AND DISTRIBUTIONS

Our common stock is traded on the Nasdaq Global Select Market under the symbol “FCRD.” The following table sets forth the range of high and low sales prices of our common stock as reported on the Nasdaq Global Select Market, the sales price as a percentage of net asset value for each fiscal quarter in each of the last two years and the most recent interim period. The stock quotations are interdealer quotations and do not include markups, markdowns or commissions.

 

     NAV(1)      Sales Price      Premium/
Discount of High
Sales Price to
NAV(2)
    Premium/
Discount of
Low Sales Price to
NAV(2)
    Declared
Distributions
 
   High      Low  

Year Ended December 31, 2020

 

 

First Quarter

   $ 5.22      $ 6.85      $ 1.56        31     (70 )%    $ 0.21  

Second Quarter

   $ 5.54      $ 3.36      $ 2.11        (39 )%      (62 )%    $ 0.10  

Third Quarter

   $ 6.25      $ 3.63      $ 2.39        (42 )%      (62 )%    $ 0.10  

Fourth Quarter (from October 1, 2020 to December 1, 2020)

     N/A      $ 3.88      $ 2.39        N/A       N/A     $ 0.10  

Year Ended December 31, 2019

 

 

First Quarter

   $ 8.96      $ 7.40      $ 6.19        (17 )%      (31 )%    $ 0.21  

Second Quarter

   $ 8.49      $ 6.96      $ 6.41        (18 )%      (24 )%    $ 0.21  

Third Quarter

   $ 8.34      $ 7.01      $ 6.42        (16 )%      (23 )%    $ 0.21  

Fourth Quarter

   $ 7.64      $ 6.98      $ 6.31        (9 )%      (17 )%    $ 0.21  

Year Ended December 31, 2018

 

 

First Quarter

   $ 10.44      $ 9.25      $ 7.75        (11 )%      (26 )%    $ 0.27  

Second Quarter

   $ 10.23      $ 8.40      $ 7.75        (18 )%      (24 )%    $ 0.27  

Third Quarter

   $ 10.10      $ 8.74      $ 7.84        (13 )%      (22 )%    $ 0.27  

Fourth Quarter

   $ 9.15      $ 8.12      $ 5.91        (11 )%      (35 )%    $ 0.27  

 

(1)

NAV per share is determined as of the last day in the relevant quarter and therefore may not reflect the NAV per share on the date of the high and low sales prices. The NAVs shown are based on outstanding shares at the end of each period and are attributable to First Eagle Alternative Capital BDC, Inc. (formerly, THL Credit, Inc.) and exclude the consolidated non-controlling interest.

(2)

Calculated as of the respective high or low sales price premium or discount divided by NAV, minus 1.

*

NAV for this period has not been determined.

The closing price for our common stock on December 1, 2020 was $3.88 per share.

Shares of business development companies may trade at a market price that is less than the value of the net assets attributable to those shares. The possibility that our shares of common stock will trade at a discount from net asset value or at premiums that are unsustainable over the long term is separate and distinct from the risk that our net asset value will decrease. At times, our shares of common stock have traded at a premium to net asset value and at times our shares of common stock have traded at a discount to the net assets attributable to those shares. It is not possible to predict whether the shares offered hereby will trade at, above, or below net asset value.

Distributions

We have elected to be taxed as a RIC under Subchapter M of the Code. In order to maintain our tax treatment as a RIC, we are required to distribute at least 90% of our investment company taxable income. To avoid a 4% excise tax on undistributed earnings, we are required to distribute each calendar year the sum of (i) 98% of our ordinary income for such calendar year (ii) 98.2% of our capital gain net income for the one-year period ending October 31 of that calendar year and (iii) any income recognized, but not distributed, in preceding years and on which we paid no federal income tax. We intend to make distributions to stockholders on a quarterly basis of substantially all of our net investment income. Although we intend to make distributions of net

 

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realized capital gains, if any, at least annually, out of assets legally available for such distributions, we may in the future decide to retain such capital gains for investment. We would make any such decision based on, among other things, our liquidity, leverage, current investment opportunities, and our determination as to whether the proceeds from such capital gains would be more accretive to stockholders in the long-term in the form of a distribution, growing our investment portfolio, or reducing our borrowings outstanding. In addition, the extent and timing of special dividends, if any, will be determined by our board of directors and will largely be driven by portfolio specific events and tax considerations at the time.

In addition, we may be limited in our ability to make distributions due to the BDC asset coverage test for borrowings applicable to us as a BDC under the 1940 Act or under the terms of our borrowings.

The following table summarizes our distributions declared and paid or to be paid on all shares including dividends reinvested, if any:

 

Date Declared

  

Record Date

  

Payment Date

   Amount per
Share
     Percentage
Attributable
to Return of
Investors’
Paid-In
Capital
 

August 5, 2010

   September 2, 2010    September 30, 2010    $ 0.05        —    

November 4, 2010

   November 30, 2010    December 28, 2010    $ 0.10        —    

December 14, 2010

   December 31, 2010    January 28, 2011    $ 0.15        —    

March 10, 2011

   March 25, 2011    March 31, 2011    $ 0.23        —    

May 5, 2011

   June 15, 2011    June 30, 2011    $ 0.25        —    

July 28, 2011

   September 15, 2011    September 30, 2011    $ 0.26        —    

October 27, 2011

   December 15, 2011    December 30, 2011    $ 0.28        —    

March 6, 2012

   March 20, 2012    March 30, 2012    $ 0.29        —    

March 6, 2012

   March 20, 2012    March 30, 2012    $ 0.05        —    

May 2, 2012

   June 15, 2012    June 29, 2012    $ 0.30        —    

July 26, 2012

   September 14, 2012    September 28, 2012    $ 0.32        —    

November 2, 2012

   December 14, 2012    December 28, 2012    $ 0.33        —    
December 20, 2012    December 31, 2012    January 28, 2013    $ 0.05        —    

February 27, 2013

   March 15, 2013    March 29, 2013    $ 0.33        —    

May 2, 2013

   June 14, 2013    June 28, 2013    $ 0.34        —    

August 2, 2013

   September 16, 2013    September 30, 2013    $ 0.34        —    

August 2, 2013

   September 16, 2013    September 30, 2013    $ 0.08        —    

October 30, 2013

   December 16, 2013    December 31, 2013    $ 0.34        —    

March 4, 2014

   March 17, 2014    March 31, 2014    $ 0.34        —    

May 7, 2014

   June 16, 2014    June 30, 2014    $ 0.34        —    

August 7, 2014

   September 15, 2014    September 30, 2014    $ 0.34        —    

November 4, 2014

   December 15, 2014    December 31, 2014    $ 0.34        —    

March 6, 2015

   March 20, 2015    March 31, 2015    $ 0.34        —    

May 5, 2015

   June 15, 2015    June 30, 2015    $ 0.34        —    

August 4, 2015

   September 15, 2015    September 30, 2015    $ 0.34        —    

November 3, 2015

   December 15, 2015    December 31, 2015    $ 0.34        —    

March 8, 2016

   March 21, 2016    March 31, 2016    $ 0.34        —    

May 3, 2016

   June 15, 2016    June 30, 2016    $ 0.34        —    

August 2, 2016

   September 15, 2016    September 30, 2016    $ 0.34        —    

November 8, 2016

   December 15, 2016    December 30, 2016    $ 0.27        —    

March 7, 2017

   March 20, 2017    March 31, 2017    $ 0.27        —    

May 5, 2017

   June 15, 2017    June 30, 2017    $ 0.27        —    

August 1, 2017

   September 15, 2017    September 29, 2017    $ 0.27        —    

November 7, 2017

   December 15, 2017    December 29, 2017    $ 0.27        —    

March 2, 2018

   March 20, 2018    March 30, 2018    $ 0.27        —    

May 1, 2018

   June 15, 2018    June 29, 2018    $ 0.27        —    

August 7, 2018

   September 14, 2018    September 28, 2018    $ 0.27        —    

November 6, 2018

   December 14, 2018    December 31, 2018    $ 0.27        —    

 

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Table of Contents

Date Declared

  

Record Date

  

Payment Date

   Amount per
Share
     Percentage
Attributable
to Return of
Investors’
Paid-In
Capital
 

March 5, 2019

   March 20, 2019    March 29, 2019    $ 0.21        —    

May 7, 2019

   June 14, 2019    June 28, 2019    $ 0.21        —    

August 6, 2019

   September 16, 2019    September 30, 2019    $ 0.21        —    

October 31, 2019

   December 16, 2019    December 31, 2019    $ 0.21        —    

March 3, 2020

   March 20, 2020    March 31, 2020    $ 0.21        —    

May 5, 2020

   June 15, 2020    June 30, 2020    $ 0.10        —    

August 4, 2020

   September 15, 2020    September 30, 2020    $ 0.10        —    

October 30, 2020

   December 15, 2020    December 31, 2020    $ 0.10        —    

We may not be able to achieve operating results that will allow us to make distributions at a specific level or to increase the amount of these distributions from time to time. If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including possible loss of our status as a regulated investment company. We cannot assure stockholders that they will receive any distributions at a particular level. We maintain an “opt in” dividend reinvestment plan for our common stockholders. As a result, unless stockholders specifically elect to have their dividends automatically reinvested in additional shares of common stock, stockholders will receive all such dividends in cash. Under the terms of our dividend reinvestment plan, dividends will primarily be paid in newly issued shares of common stock. However, we reserve the right to purchase shares in the open market in connection with the implementation of the plan. This feature of the plan means that, under certain circumstances, we may issue shares of our common stock at a price below net asset value per share, which could cause our stockholders to experience dilution.

Distributions in excess of our current and accumulated earnings and profits would generally be treated as a return of capital to the extent of a shareholder’s adjusted tax basis in our shares. If a shareholder’s tax basis is reduced to zero, the shareholder would generally treat any remaining distributions in excess of our current and accumulated earnings and profits as a capital gain. The determination of the tax attributes of our distributions is made annually as of the end of our taxable year and is generally based upon our taxable income for the full taxable year and distributions paid for the full taxable year. Therefore, a determination made on a quarterly basis may not be representative of the actual tax attributes of our distributions for a full year. If the Company had determined the tax attributes of its 2020 distributions as of September 30, 2020, 100% would be from ordinary income, 0% would be from capital gains and 0% would be a return of capital. Each year, a statement on Form 1099-DIV identifying the source of the distributions will be sent to our U.S. stockholders of record (other than certain exempt recipients). Our board of directors presently intends to declare and pay quarterly distributions. Our ability to make distributions could be affected by future business performance, liquidity, capital needs, alternative investment opportunities and loan covenants.

The tax character of distributions declared and paid in 2019 represented $26.2 million from ordinary income, $0 from capital gains and $0 from tax return of capital. The tax character of distributions declared and paid in 2018 represented $35.2 million from ordinary income, $0 from capital gains and $0 from tax return of capital. Generally accepted accounting principles require adjustments to certain components of net assets to reflect permanent differences between financial and tax reporting. These adjustments have no effect on net asset value per share. Permanent differences between financial and tax reporting at December 31, 2019 and 2018 were $0.3 million and $0.3 million, respectively

We may generate qualified interest income and short-term capital gains that may be exempt from United States withholding tax when distributed to foreign accounts. A RIC is permitted to designate distributions in the form of dividends that represent interest income from U.S. sources (commonly referred to as qualified interest income) and short-term capital gains as exempt from U.S. withholding tax when paid to non-U.S. stockholders with proper documentation. As of September 30, 2020, the percentage of 2020 income estimated as qualified interest income for tax purposes was 82.5%.

 

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Table of Contents

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The information in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our most recent Annual Report on Form 10-K and in Part 1, Item 2 of our most recent Quarterly Report on Form 10-Q is incorporated herein by reference.

 

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Table of Contents

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected financial and other data as of and for the years ended December 31, 2019, 2018, 2017, 2016 and 2015 are derived from our consolidated financial statements, which have been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm whose report thereon is incorporated by reference in this Prospectus. The selected financial and other data as of and for the nine months ended September 30, 2020 and September 30, 2019 and other quarterly financial information is derived from our unaudited financial statements, but in the opinion of management, reflects all adjustments (consisting only of normal recurring adjustments) that are necessary to present fairly the results of such interim periods. Interim results as of and for the nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. The data should be read in conjunction with our consolidated financial statements and notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q and “Senior Securities” in our most recent Annual Report on Form 10-K.

FIRST EAGLE ALTERNATIVE CAPITAL BDC, INC. AND SUBSIDIARIES

SELECTED FINANCIAL DATA

As of and For the Nine Months Ended September 30, 2020 and September 30, 2019 (unaudited) and

As of and For the Years Ended December 31, 2019, 2018, 2017, 2016 and 2015

(in thousands, except per share data)

 

    As of and for the nine months
ended September 30,
    As of and for the years ended December 31,  
    2020     2019     2019     2018     2017     2016     2015  

Statement of Operations data:

             

Total investment income

  $ 22,256     $ 42,346     $ 52,494     $ 66,942     $ 78,773     $ 84,585     $ 94,195  

Incentive fees

    (411     —         (109     1,696       3,185       4,461       11,894  

Base management fees

    2,795       4,940       6,043       9,006       10,389       10,998       11,825  

All other expenses

    13,122       15,143       19,302       22,802       26,128       24,271       23,147  

Incentive fee waiver

    —         —         —         (1,741     (811     —         —    

Management fee waiver

    (895     (525     (525     —         —         —         —    

Income tax provision (benefit) and excise tax

    71       359       418       355       168       155       (243

Net investment income

    7,574       22,429       27,365       34,824       39,714       44,700       47,572  

Net realized (loss) gain on investments

    (45,732     (33,901     (39,735     (32,565     (17,307     (38,849     190  

Net change in unrealized appreciation (depreciation) on investments

    1,203       1,973       (12,494     (11,871     (31,606     11,141       (17,875

Net change in unrealized (depreciation) appreciation attributable to non-controlling interests

    —         —         —         (703     (13     140       —    

Provision for taxes on realized gain on investments

    —         —         —         —         (842     —         (8

Benefit (provision) for taxes on unrealized gain on investments

    192       335       254       (284     2,146       137       (1,226

Interest rate derivative periodic interest payments, net

    —         —         —         —         (46     (276     (443

 

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Table of Contents
    As of and for the nine months
ended September 30,
    As of and for the years ended December 31,  
    2020     2019     2019     2018     2017     2016     2015  

Net change in unrealized appreciation on interest rate derivative

    —         —         —         —         50       156       7  

Net (decrease) increase in net assets resulting from operations

    (36,763     (9,164     (24,610     (10,599     (7,904     17,149       28,217  

Per share data:

             

Net asset value per common share attributable to First Eagle Alternative Capital BDC, Inc. at period end

  $ 6.25     $ 8.34     $ 7.64     $ 9.15     $ 10.51     $ 11.82     $ 12.58  

Market price at period end

    2.48       6.80       6.31       6.08       9.05       10.01       10.70  

Net investment income

    0.24       0.71       0.87       1.07       1.21       1.35       1.41  

Net realized (loss) gain on investments

    (1.44     (1.07     (1.27     (1.00     (0.53     (1.17     0.01  

Provision for taxes on realized gain on investments

    —         —         —         —         (0.03     —         —    

Net change in unrealized appreciation (depreciation) on investments

    0.03       0.06       (0.40     (0.38     (0.96     0.33       (0.53

Benefit (provision) for taxes on unrealized gain on investments

    0.01       0.01       0.01       (0.01     0.07       0.01       (0.04

Interest rate derivative periodic interest payments, net

    —         —         —         —         —         (0.01     (0.01

Net (decrease) increase in net assets resulting from operations attributable to First Eagle Alternative Capital BDC, Inc.

    (1.16     (0.29     (0.79     (0.32     (0.24     0.51       0.84  

Distributions declared

    0.41       0.63       0.84       1.08       1.08       1.29       1.36  

Consolidated Statement of Assets and Liabilities data at period end:

             

Total investments at fair value

  $ 343,364     $ 403,542     $ 384,125     $ 493,653     $ 608,691     $ 669,203     $ 754,163  

Cash

    10,536       14,278       5,890       6,860       3,617       6,376       3,850  

Other assets

    12,708       22,217       21,883       17,938       15,376       15,825       18,371  

Total assets

    366,608       440,037       411,898       518,451       627,684       691,404       776,384  

Loans payable, net

    64,661       69,161       66,161       107,657       167,317       181,655       258,651  

Notes payable, net

    109,471       108,669       108,866       108,067       107,015       106,347       85,000  

Other liabilities

    4,384       7,135       7,416       7,046       9,323       13,582       13,834  

Total liabilities

    178,516       184,965       182,443       222,770       283,655       301,584       357,485  

Total net assets attributable to First Eagle Alternative Capital BDC, Inc.

    188,092       255,072       229,455       295,681       343,327       389,105       418,899  

Net assets attributable to non-controlling interest

    —         —         —         —         702       715       —    

Total net assets

    188,092       255,072       229,455       295,681       344,029       389,820       418,899  

 

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Table of Contents
    As of and for the nine months
ended September 30,
    As of and for the years ended December 31,  
    2020     2019     2019     2018     2017     2016     2015  

Other data:

             

Weighted average annual yield on debt and income-producing investments (1) (2) (3)

    6.6     9.9     8.2     10.4     10.1     10.9     11.2

Weighted average annual yield on debt and income-producing investments including Logan JV (2) (3)

    7.0     10.1     8.7     10.7     10.7     11.2     11.3

Number of portfolio investments at year end

    47       47       52       42       47       47       55  

 

(1)

Excludes yield on the Logan JV.

(2)

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.

(3)

Includes all loans on non-accrual status and restructured loans for which income is not being recognized as of period-end.

Selected Quarterly Financial Data (Unaudited):

(in thousands, except per share data)

 

Quarter

Ended

  Investment
Income
    Net Investment
Income
    Net Change in
Unrealized
Appreciation
(Depreciation) on
Investments
    Net Realized
(Loss) on
Investments,
net of taxes
    Provision for
taxes (benefit)
on unrealized
gain on
investments
    Net Increase
(Decrease) In

Net Assets From
Operations
 
    Total     Per
Share
    Total     Per
Share
    Total     Per
Share
    Total     Per
Share
    Total     Per
Share
    Total     Per
Share
 

September 30, 2020

  $ 7,329     $ 0.23     $ 3,182     $ 0.10     $ 29,392     $ 0.93     $ (17,490   $ (0.55   $ 165     $ 0.01     $ 15,249     $ 0.49  

June 30, 2020

    7,041       0.22       1,731       0.05       39,483       1.24       (26,628     (0.84     (443     (0.01     14,143       0.44  

March 31, 2020

    7,888       0.24       2,661       0.09       (67,673     (2.14     (1,614     (0.05     470       0.01       (66,156     (2.09

 

Quarter

Ended

  Investment
Income
    Net Investment
Income
    Net Change in
Unrealized
Appreciation
(Depreciation) on
Investments
    Net Realized
Gain (Loss) on
Investments,
net of taxes
    Provision for
taxes (benefit)
on unrealized
gain on
investments
    Net Increase
(Decrease) In

Net Assets From
Operations
 
    Total     Per
Share
    Total     Per
Share
    Total     Per
Share
    Total     Per
Share
    Total     Per
Share
    Total     Per
Share
 

December 31, 2019

  $ 10,148     $ 0.32     $ 4,938     $ 0.16     $ (14,468   $ (0.46   $ (5,834   $ (0.19   $ (81   $ —       $ (15,445   $ (0.49

September 30, 2019

    12,793       0.41       6,872       0.22       1,237       0.04       (7,862     (0.25     64       —         311       0.01  

June 30, 2019

    15,362       0.49       8,851       0.28       5,382       0.17       (24,067     (0.77     164       0.01       (9,670     (0.31

March 31, 2019

    14,191       0.44       6,704       0.21       (4,645     (0.15     (1,972     (0.06     107       —         194       0.00  

 

19


Table of Contents

Quarter

Ended

  Investment
Income
    Net Investment
Income
    Net Change in
Unrealized
Appreciation
(Depreciation) on
Investments
    Net Realized
Gain (Loss) on
Investments,
net of taxes
    Provision for
taxes (benefit)
on unrealized
gain on
investments
    Net Increase
(Decrease) In

Net Assets From
Operations
 
    Total     Per
Share
    Total     Per
Share
    Total     Per
Share
    Total     Per
Share
    Total     Per
Share
    Total     Per
Share
 

December 31, 2018

  $ 15,819     $ 0.49     $ 7,325     $ 0.23     $ (36,690   $ (1.13   $ 6,172     $ 0.19     $ 61     $ —       $ (23,132   $ (0.71

September 30, 2018

    16,078       0.50       8,573       0.27       (3,444     (0.10     (284     (0.01     (192     (0.01     4,653       0.15  

June 30, 2018

    18,357       0.57       10,099       0.31       16,897       0.52       (25,336     (0.78     (121     —         1,539       0.05  

March 31, 2018

    16,688       0.51       8,827       0.26       10,663       0.33       (13,117     (0.40     (32     —         6,341       0.19  

 

20


Table of Contents

FINANCIAL HIGHLIGHTS

The financial data set forth in the following table as of and for the years ended December 31, 2019, 2018, 2017, 2016, 2015, 2014, 2013, 2012, 2011 and 2010 are derived from our consolidated financial statements, which have been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm whose reports thereon are incorporated by reference in this Prospectus, certain documents incorporated by reference in this Prospectus or the accompanying prospectus supplement, or our Annual Reports on Form 10-K filed with the SEC, which may be obtained from www.sec.gov or upon request. The financial data set forth in the following table as of and for the nine months ended September 30, 2020 is derived from our unaudited financial statements, but in the opinion of management, reflects all adjustments (consisting only of normal recurring adjustments) that are necessary to present fairly the results of such interim period. Interim results as of and for the nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. You should read these financial highlights in conjunction with our consolidated financial statements and notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this Prospectus, any documents incorporated by reference in this Prospectus or the accompanying prospectus supplement, or our Annual Reports on