N-2/A
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As filed with the Securities and Exchange Commission on December 3, 2020

Securities Act File No 333-238621

 

 

 

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM N-2

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

(Check appropriate box or boxes)

Pre-Effective Amendment No. 1

Post-Effective Amendment No.

 

 

FIRST EAGLE ALTERNATIVE CAPITAL BDC, INC.

(Exact name of Registrant as specified in charter)

 

 

500 Boylston Street, Suite 1200

Boston, MA 02116

(Address of Principal Executive Offices)

Registrant’s Telephone Number, including Area Code: (800) 450-4424

Christopher J. Flynn

First Eagle Alternative Capital BDC, Inc.

500 Boylston Street, Suite 1200

Boston, MA 02116

(Name and address of agent for service)

 

 

COPIES TO:

David W. Blass, Esq.

Steven Grigoriou, Esq.

Simpson Thacher & Bartlett LLP

900 G Street, NW

Washington, DC 20001

 

 

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED PUBLIC OFFERING:

From time to time after the effective date of this Registration Statement.

 

 

 

 

Check box if the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans.

 

 

Check box if any securities being registered on this Form will be offered on a delayed or continuous basis in reliance on Rule 415 under the Securities Act of 1933 (“Securities Act”), other than securities offered in connection with a dividend reinvestment plan.

 

 

Check box if this Form is a registration statement pursuant to General Instruction A.2 or a post-effective amendment thereto.

 

 

Check box if this Form is a registration statement pursuant to General Instruction B or a post-effective amendment thereto that will become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act.

 

 

Check box if this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction B to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act.


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It is proposed that this filing will become effective (check appropriate box):

 

 

when declared effective pursuant to Section 8(c) of the Securities Act.

If appropriate, check the following box:

 

 

This [post-effective] amendment designates a new effective date for a previously filed [post-effective amendment] [registration statement].

 

 

This Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, and the Securities Act registration statement number of the earlier effective registration statement for the same offering is:                     .

 

 

This Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, and the Securities Act registration statement number of the earlier effective registration statement for the same offering is:                     .

 

 

This Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, and the Securities Act registration statement number of the earlier effective registration statement for the same offering is:                     .

Check each box that appropriately characterizes the Registrant:

 

 

Registered Closed-End Fund (closed-end  company that is registered under the Investment Company Act of 1940 (“Investment Company Act”)).

 

 

Business Development Company (closed-end company that intends or has elected to be regulated as a business development company under the Investment Company Act).

 

 

Interval Fund (Registered Closed-End Fund or a Business Development Company that makes periodic repurchase offers under Rule 23c-3 under the Investment Company Act).

 

 

A.2 Qualified (qualified to register securities pursuant to General Instruction A.2 of this Form).

 

 

Well-Known Seasoned Issuer (as defined by Rule 405 under the Securities Act).

 

 

Emerging Growth Company (as defined by Rule 12b-2 under the Securities Exchange Act of 1934 (“Exchange Act”).

 

 

If an Emerging Growth Company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of Securities Act.

 

 

New Registrant (registered or regulated under the Investment Company Act for less than 12 calendar months preceding this filing).

 

 

 


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CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933

 

 

Title of Securities Being Registered

 

Amount

Being Registered

 

Proposed

Maximum

Aggregate

Offering Price(1)

 

Amount of

Registration Fee(2)(3)

Common Stock, $0.001 par value per share(3)

           

Preferred Stock, $0.001 par value per share(3)

           

Warrants(3)

           

Subscription Rights(4)

     

Debt Securities(5)

           

TOTAL

      $250,000,000(5)   $4,102(7)

 

 

(1)

Estimated pursuant to Rule 457 solely for the purposes of determining the registration fee. The proposed maximum offering price per security will be determined, from time to time, by the Registrant in connection with the sale by the Registrant of the securities registered under this registration statement.

(2)

Pursuant to Rule 415(a)(6) under the Securities Act of 1933, this registration statement covers a total of $218,400,000 of unsold securities that had initially been registered under the registrant’s registration statement on Form N-2, filed with the Securities and Exchange Commission (the “SEC”) on April 7, 2017 (No. 333-217217) and declared effective on May 23, 2017 (the “Prior Registration Statement”) and that are being carried forward to this registration statement. The Prior Registration Statement initially registered securities for a maximum aggregate offering price of $300,000,000, and of that amount the registrant has previously sold securities for an aggregate offering price of $81,600,000 pursuant to the Prior Registration Statement, leaving a balance of unsold securities with an aggregate offering price of $218,400,000 on the Prior Registration Statement. Such unsold securities and the registration fee paid by the registrant for such unsold securities is being carried forward to this registration statement and will continue to be applied to such unsold securities pursuant to Rule 415(a)(6). The amount of the registration fee in the “Calculation of Registration Fee Under the Securities Act of 1933” table relates to the additional $31,600,000 in aggregate offering price of securities being registered hereunder. As a result, a filing fee of $4,102 is being paid herewith. Pursuant to Rule 415(a)(6), the offering of the unsold securities registered under the Prior Registration Statement will be deemed terminated as of the date of effectiveness of this registration statement. If the registrant sells any of such unsold securities pursuant to the Prior Registration Statement after the date of the initial filing, and prior to the date of effectiveness, of this registration statement, the registrant will file a pre-effective amendment to this registration statement which will reduce the number of such unsold securities included on this registration statement.

(3)

Subject to Note 6 below, there is being registered hereunder an indeterminate number of shares of common stock, preferred stock, or warrants as may be sold, from time to time. Warrants represent rights to purchase common stock, preferred stock or debt securities.

(4)

Subject to Note 6 below, there is being registered hereunder an indeterminate number of subscription rights as may be sold, from time to time, representing rights to purchase common stock and/or preferred stock.

(5)

Subject to Note 6 below, there is being registered hereunder an indeterminate principal amount of debt securities as may be sold, from time to time. If any debt securities are issued at an original issue discount, then the offering price shall be in such greater principal amount as shall result in an aggregate price to investors not to exceed $250,000,000.

(6)

In no event will the aggregate offering price of all securities issued from time to time pursuant to this registration statement exceed $250,000,000.

(7)

Previously paid.

 

 

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT OF SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

 

 

 


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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

PROSPECTUS (Subject to Completion)

December 3, 2020

$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            , 2020.


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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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LOGO

 

(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        —    

 

14


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

 

17


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  

 

18


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 Form 10-K filed with the SEC.

 

     For the nine
months

ended
September 30,
2020
    For the years ended December 31,  
  2019     2018     2017     2016     2015  

Per Share Data(1):

            

Net asset value attributable to First Eagle Alternative Capital BDC, Inc., beginning of period

   $ 7.64     $ 9.15     $ 10.51     $ 11.82     $ 12.58     $ 13.08  

Net investment income, after taxes(2)

     0.24       0.87       1.07       1.21       1.35       1.41  

Net realized (loss) gain on investments(2)

     (1.44     (1.27     (1.00     (0.53     (1.17     0.01  

Income tax provision, realized gain(2)

     0.03       —         —         (0.03     —         —    

Net change in unrealized appreciation (depreciation) on investments(2)(5)

     —         (0.40     (0.38     (0.96     0.33       (0.53

Benefit (provision) for taxes on unrealized gain on investments(2)

     0.01       0.01       (0.01     0.07       0.01       (0.04

Interest rate derivative periodic interest payments, net (2)

     —         —         —         —         (0.01     (0.01
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

     6.25       (0.79     (0.32     (0.24     0.51       0.84  

Accretive effect of repurchase of common stock

     0.01       0.12       0.04       0.01       0.02       0.02  

Dilutive effect of share issuance

     (0.18     —         —         —         —         —    

Accretive effect of tender offer

     0.34       —         —         —         —         —    

Distributions to stockholders from net investment income

     (0.40     (0.84     (1.08     (1.08     (1.29     (1.36
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

     (0.40     (0.84     (1.08     (1.08     (1.29     (1.36
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value attributable to First Eagle Alternative Capital BDC, Inc., end of period

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Per share market value at end of period

   $ 2.48     $ 6.31     $ 6.08     $ 9.05     $ 10.01     $ 10.70  

Total return(3)

     (54.51 %)      17.70     (22.38 %)      1.14     5.76     2.41

Shares outstanding at end of period

     30,109       30,022       32,318       32,674       32,925       33,311  

 

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Table of Contents
     For the nine
months

ended
September 30,
2020
    For the years ended December 31,  
  2019     2018     2017     2016     2015  

Ratio/Supplemental Data:

            

Net assets at end of period, attributable to First Eagle Alternative Capital BDC, Inc.

   $ 188,092     $ 229,455     $ 295,681     $ 343,327     $ 389,820     $ 418,899  

Ratio of total expenses to average net assets, attributable to First Eagle Alternative Capital BDC, Inc.(4)(6)(8)

     10.35     9.29     9.62     9.90     9.96     10.87

Ratio of net investment income to average net assets, attributable to First Eagle Alternative Capital BDC, Inc. (7)(9)

     4.96     10.21     10.34     10.43     11.19     10.81

Portfolio turnover, attributable to First Eagle Alternative Capital BDC, Inc.

     14.63     32.55     21.94     17.13     18.94     22.85

 

(1) 

Includes the cumulative effect of rounding.

(2) 

Calculated based on weighted average common shares outstanding.

(3) 

Total return is based on the change in market price per share during the period. Total return takes into account dividends and distributions, if any, reinvested in accordance with the Company’s dividend reinvestment plan.

(4) 

For the nine months ended September 30, 2020, the ratio components included 1.32% net base management fee, (0.28%) of incentive fee, 6.37% of borrowing costs, 2.71% of other operating expenses, and 0.05% of the impact of all taxes. For the years ended December 31, 2019, 2018, 2017, 2016, and 2015, the ratio components included 2.06%, 2.67%, 2.73%, 2.75% and 2.69% of net base management fee, (0.04%), (0.01%), 0.62%, 1.12% and 2.70% of net incentive fee, 5.27%, 4.97%, 4.92%, 3.06% and 3.29% of the cost of borrowing, 1.93%, 1.80%, 1.93%, 2.02% and 1.95% of other operating expenses, and 0.07%, 0.19%, (0.30%), 0.01% and 0.22% of the impact of all taxes, respectively.

(5) 

Includes the net change in unrealized appreciation (depreciation) on foreign currency transactions, as applicable.

(6) 

Ratio of total expenses before incentive fee waiver to average net assets attributable to First Eagle Alternative Capital BDC, Inc. was 10.13% and 10.12% for the years ended December 31, 2018 and 2017, respectively. The incentive fee waiver was not applicable to the period ended September 30, 2020 or fiscal years 2019, 2016 or 2015.

(7) 

Ratio of net investment income before incentive fee waiver to average net assets attributable to First Eagle Alternative Capital BDC, Inc. was 9.82% and 10.21% for the years ended December 31, 2018 and 2017, respectively. The incentive fee waiver was not applicable to the period ended September 30, 2020 or fiscal years 2019, 2016 or 2015.

(8) 

Ratio of total expenses before management fee waiver to average net assets attributable to First Eagle Alternative Capital BDC, Inc. was 10.96% for the nine months ended September 30, 2020 and 9.49% for the year ended December 31, 2019. The management fee waiver was not applicable to fiscal years 2018, 2017, 2016 or 2015.

(9) 

Ratio of net investment income before management fee waiver to average net assets attributable to First Eagle Alternative Capital BDC, Inc. was 4.35% for the nine months ended September 30, 2020 and 10.02% for the year ended December 31, 2019. The management fee waiver was not applicable to fiscal years 2018, 2017, 2016 or 2015.

 

22


Table of Contents
    For the years ended December 31,  
    2014     2013     2012     2011     2010  

Per Share Data:

         

Net asset value, beginning of period

  $ 13.36     $ 13.20     $ 13.24     $ 13.06     $ 12.99  

Net investment income, after taxes(1)

    1.42       1.37       1.38       1.04       0.31  

Net realized (loss) gains on investments(1)

    (0.38     0.09       0.01       0.05       —    

Income tax provision, realized gain(1)

    (0.01     —         —         —         —    

Net change in unrealized appreciation on investments(1)(2)

    0.06       0.01       (0.06     0.11       0.06  

Provision for taxes on unrealized gain on investments(1)

    —         (0.07     (0.02     —         —    

Net change in unrealized appreciation (depreciation) of interest rate derivative(1)(2)

    —         0.02       (0.06     —         —    

Interest rate derivative periodic interest payments, net

    (0.01     (0.01     —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase in net assets resulting from operations

    1.08       1.41       1.25       1.20       0.37  

Accretive effect of share issuance

    —         0.18       0.05       —         —    

Distributions to stockholders from net investment income

    (1.30     (1.42     (1.29     (1.02     (0.30

Distributions to stockholders from net realized gains

    (0.06     (0.01     (0.05     —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

  $ 13.08     $ 13.36     $ 13.20     $ 13.24     $ 13.06  

Per share market value at end of period

  $ 11.76     $ 16.49     $ 14.79     $ 12.21     $ 13.01  

Total return(3)

    (20.96 %)      22.10     33.43     1.87     2.38

Shares outstanding at end of period

    33,905       33,905       26,315       20,220       19,616  

Ratio/Supplemental Data:

         

Net assets at end of period

  $ 443,621     $ 452,942     $ 347,484     $ 267,617     $ 260,016  

Ratio of total expenses to average net assets(4)

    9.79     8.73     8.14     6.18     3.47

Ratio of net investment income to average net assets

    10.70     10.25     10.39     7.94     3.39

Portfolio turnover

    28.98     33.09     53.95     15.43     8.63

 

(1) 

Calculated based on weighted average common shares outstanding.

(2) 

Includes the cumulative effect of rounding.

(3) 

Total return is based on the change in market price per share during the period. Total return takes into account dividends and distributions, if any, reinvested in accordance with the Company’s dividend reinvestment plan.

(4) 

For the years ended December 31, 2014, 2013, 2012, 2011 and 2010, the ratio components included 2.47%, 1.86%, 1.72%, 1.51% and 1.49% of base management fee, 2.48%, 2.64%, 2.43%, 1.80% and 0.00% of incentive fee, 2.47%, 1.76%, 1.43%, 0.65% and 0.00% of the cost of borrowing, 2.05%, 1.85%, 2.19%, 2.20% and 1.95% of other operating expenses, and 0.09%, 0.49%, 0.16%, 0.00% and 0.00% of the impact of all taxes, respectively.

 

23


Table of Contents

SENIOR SECURITIES

(dollar amounts in thousands, except per share data)

Information about our senior securities (including preferred stock, debt securities and other indebtedness) is shown in the following tables as of the end of the last 10 fiscal years. The report of our independent registered public accounting firm, PricewaterhouseCoopers LLP, on the senior securities table as of December 31, 2019, is attached as an exhibit to the registration statement of which this prospectus is a part. The “—” indicates information that the SEC expressly does not require to be disclosed for certain types of senior securities.

 

Class and Year    Total Amount
Outstanding
Exclusive of
Treasury
Securities(1)
     Asset
Coverage
Per Unit(2)
     Involuntary
Liquidating
Preference
Per Unit(3)
     Average
Market
Value
Per
Unit(4)
 

Revolving Facility

 

Fiscal 2020 (as of September 30, 2020, unaudited)

   $ 64,661      $ 2,055      $ —          N/A  

Fiscal 2019

   $ 66,161      $ 2,275      $ —          N/A  

Fiscal 2018

   $ 107,657      $ 2,332      $ —          N/A  

Fiscal 2017

   $ 167,317      $ 2,230      $ —          N/A  

Fiscal 2016

   $ 107,861      $ 2,314      $ —          N/A  

Fiscal 2015

   $ 152,151      $ 2,219      $ —          N/A  

Fiscal 2014

   $ 188,351      $ 2,286      $ —          N/A  

Fiscal 2013

   $ 111,300      $ 3,217      $ —          N/A  

Fiscal 2012

   $ —          —        $ —          N/A  

Fiscal 2011

   $ 5,000      $ 54,523      $ —          N/A  

Fiscal 2010

   $ —          —        $ —          N/A  
Term Loan Facility

 

Fiscal 2016

   $ 75,000      $ 2,314      $ —          N/A  

Fiscal 2015

   $ 106,500      $ 2,219      $ —          N/A  

Fiscal 2014

   $ 106,500      $ 2,286      $ —          N/A  

Fiscal 2013

   $ 93,000      $ 3,217      $ —          N/A  

Fiscal 2012

   $ 50,000      $ 7,950      $ —          N/A  

Fiscal 2011

   $ —          —        $ —          N/A  

Fiscal 2010

   $ —          —        $ —          N/A  

2021 Notes

 

Fiscal 2017

   $ 50,000      $ 2,230      $ —          $1,021  

Fiscal 2016

   $ 50,000      $ 2,314      $ —          $1,011  

Fiscal 2015

   $ 50,000      $ 2,219      $ —          $1,015  

Fiscal 2014

   $ 50,000      $ 2,286      $ —          $1,023  

2022 Notes

 

Fiscal 2020 (as of September 30, 2020, unaudited)

   $ 60,000      $ 2,055      $ —        $ 963  

Fiscal 2019

   $ 60,000      $ 2,275      $ —          $1,014  

Fiscal 2018

   $ 60,000      $ 2,332      $ —          $1,022  

Fiscal 2017

   $ 60,000      $ 2,230      $ —          $1,036  

Fiscal 2016

   $ 60,000      $ 2,314      $ —          $1,012  

Fiscal 2015

   $ 35,000      $ 2,219      $ —        $ 997  

2023 Notes

 

Fiscal 2020 (as of September 30, 2020, unaudited)

   $ 51,607      $ 2,055      $ —        $ 961  

Fiscal 2019

   $ 51,607      $ 2,275      $ —          $1,033  

Fiscal 2018

   $ 51,607      $ 2,332      $ —          $1,005  

 

24


Table of Contents
Class and Year    Total Amount
Outstanding
Exclusive of
Treasury
Securities(1)
     Asset
Coverage
Per Unit(2)
     Involuntary
Liquidating
Preference
Per Unit(3)
     Average
Market
Value
Per
Unit(4)
 

Total Senior Securities

 

Fiscal 2020 (as of September 30, 2020, unaudited)

   $ 176,268      $ 2,055      $ —          N/A  

Fiscal 2019

   $ 177,768      $ 2,275      $ —          N/A  

Fiscal 2018

   $ 219,264      $ 2,332      $ —          N/A  

Fiscal 2017

   $ 277,317      $ 2,230      $ —          N/A  

Fiscal 2016

   $ 292,861      $ 2,314      $ —          N/A  

Fiscal 2015

   $ 343,651      $ 2,219      $ —          N/A  

Fiscal 2014

   $ 344,851      $ 2,286      $ —          N/A  

Fiscal 2013

   $ 204,300      $ 3,217      $ —          N/A  

Fiscal 2012

   $ 50,000      $ 7,950      $ —          N/A  

Fiscal 2011

   $ 5,000      $ 54,523      $ —          N/A  

Fiscal 2010

   $ —        $ —        $ —          N/A  

 

(1)

Total amount of each class of senior securities outstanding at the end of the period presented.

(2)

The asset coverage ratio for a class of senior securities representing indebtedness is calculated as our consolidated total assets, less all liabilities and indebtedness not represented by senior securities, divided by total senior securities representing indebtedness. This asset coverage ratio is multiplied by $1,000 to determine the “Asset Coverage Per Unit.”

(3)

The amount to which such class of senior security would be entitled upon the involuntary liquidation of the issuer in preference to any security junior to it.

(4)

Not applicable, except for with respect to the 2021 Notes, the 2022 Notes and the 2023 Notes, as other senior securities are not registered for public trading on a stock exchange. The average market price per unit for each of the 2021 Notes, the 2022 Notes and the 2023 Notes is based on the average daily closing prices as reported on the NYSE during the period presented and is expressed per $1,000 of indebtedness.

 

25


Table of Contents

PORTFOLIO COMPANIES

The following tables set forth certain information as of September 30, 2020 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 — 120.51% of net asset value

               

1-800 Hansons, LLC

                 

977 E 14 Mile Rd,
Troy, MI 48083

  Consumer products and services   First lien senior secured debt   8.5% (LIBOR + 7.5%) (7.5% Cash + 1.0% PIK)   10/19/2017   10/19/2022     $ 3,318     $ 3,293     $ 3,053  
    First lien senior secured debt (8)   7.5% (LIBOR + 6.5%)   10/19/2017   10/19/2022       209       207       193  
               

 

 

   

 

 

 
                $ 3,500     $ 3,246  

3SI Security Systems

                 

101 Lindenwood Drive, Suite
200, Malvern, PA 19355

  Business services   First lien senior secured debt   6.8% (LIBOR + 5.8%)   12/17/2019   6/16/2023     $ 4,065     $ 4,033     $ 3,902  
               

 

 

   

 

 

 
                $ 4,033     $ 3,902  

ABC Legal Services, LLC

                 

633 Yesler Way,
Seattle, WA 98104

  Business services   First lien senior secured debt   6.8% (LIBOR + 5.3%)   6/21/2019   6/21/2024     $ 7,200     $ 7,105     $ 6,840  
    First lien senior secured debt (8)(9)   6.8% (LIBOR + 5.3%)   6/21/2019   6/21/2024       —         (9     —    
               

 

 

   

 

 

 
                $ 7,096     $ 6,840  

Alex Toys, LLC

                 

251 Union St.,
Northvale, NJ 07647

  Consumer products and services   Equity investments (10)(12)(13)(18)     5/22/2015     0.72%     154     $ 1,000     $ —    
    Equity investments (10)(12)(13)(17)     6/22/2016   6/12/2021   7.16%     121       887       —    
               

 

 

   

 

 

 
                $ 1,887     $ —    

Allied Wireline Services, LLC

                 

3200 Wilcrest Dr #170,
Houston, TX 77042

  Energy / utilities   First lien senior secured debt (11)(25)   10.0% PIK   6/15/2020   6/15/2025     $ 4,951     $ 4,971     $ 4,530  
    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     $ 4,530  

 

26


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)
 

Alpine SG, LLC

                 

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

  IT services   First lien senior secured debt   6.8% (LIBOR + 5.8%)   4/9/2019   11/16/2022     $ 1,316     $ 1,309     $ 1,303  
    First lien senior secured debt   6.8% (LIBOR + 5.8%)   4/9/2019   11/16/2022       659       655       652  
               

 

 

   

 

 

 
                $ 1,964     $ 1,955  

Apex Services Partners, LLC

                 

401 East Jackson Street, Suite 3300, Tampa, FL 33602

  Consumer products and services   First lien senior secured debt   6.3% (LIBOR + 5.3%)   2/11/2020   7/31/2025     $ 4,570     $ 4,529     $ 4,455  
    First lien senior secured debt (9)(23)   6.3% (LIBOR + 5.3%)   2/11/2020   7/31/2025       —         (7     —    
               

 

 

   

 

 

 
                $ 4,522     $ 4,455  

BCDI Rodeo Dental Buyer, LLC

                 

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

  Healthcare   First lien senior secured debt   6.0% (LIBOR + 5.0%)   5/14/2019   5/14/2025     $ 5,744     $ 5,699     $ 5,399  
    First lien senior secured debt (8)   6.0% (LIBOR + 5.0%)   5/14/2019   5/14/2025       1,615       1,603       1,518  
    First lien senior secured debt (8)   6.0% (LIBOR + 5.0%)   5/14/2019   5/14/2025       1,320       1,309       1,241  
               

 

 

   

 

 

 
                $ 8,611     $ 8,158  

Certify, Inc.

                 

20 York St., Suite 201,
Portland, ME 04101

  IT services   First lien senior secured debt   6.8% (LIBOR + 5.8%)   2/28/2019   2/28/2024     $ 1,544     $ 1,528     $ 1,536  
    First lien senior secured debt (24)   6.8% (LIBOR + 5.8%)   2/28/2019   2/28/2024       211       208       209  
    First lien senior secured debt (8)(9)   6.8% (LIBOR + 5.8%)   2/28/2019   2/28/2024       —         (1     —    
    Equity investments (18)     2/28/2019     0.02%     841       175       190  
               

 

 

   

 

 

 
                $ 1,910     $ 1,935  

Communication Technology Intermediate

                 

33 Locke Drive,
Marlboro, MA 01752

  Business services   First lien senior secured debt (7)   7.5% (LIBOR + 6.0%)   8/26/2019   8/26/2024     $ 8,032     $ 7,895     $ 7,871  
    First lien senior secured debt (7)(8)   7.5% (LIBOR + 6.0%)   8/26/2019   8/26/2024       761       749       745  
               

 

 

   

 

 

 
                $ 8,644     $ 8,616  

 

  27  


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)
 

EBS Intermediate LLC

                 

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

  Consumer products and services   First lien senior secured debt   6.5% (LIBOR + 5.5%)   10/2/2018   10/2/2023     $ 7,812     $ 7,729     $ 7,616  
    First lien senior secured debt (8)   6.5% (LIBOR + 5.5%)   10/2/2018   10/2/2023       833       816       813  
               

 

 

   

 

 

 
                $ 8,545     $ 8,429  

Evergreen Services Group, LLC

                 

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

  IT services   First lien senior secured debt   7.0% (LIBOR + 6.0%)   11/13/2018   6/6/2023     $ 9,362     $ 9,306     $ 9,362  
               

 

 

   

 

 

 
                $ 9,306     $ 9,362  

Finxera Intermediate, LLC

                 

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

  Financial services   First lien senior secured debt   6.8% (LIBOR + 5.8%)   2/25/2020   8/27/2024     $ 7,134     $ 7,072     $ 7,063  
               

 

 

   

 

 

 
                $ 7,072     $ 7,063  

Freeport Financial SBIC Fund LP

                 

300 North LaSalle, Suite 5300, Chicago, IL 60654

  Financial services   Investments in funds (14)(21)     6/14/2013         $ 2,957     $ 2,562  
               

 

 

   

 

 

 
                $ 2,957     $ 2,562  

Gener8, LLC

                 

500 Mercury Drive, Sunnyvale, CA 94085

  Business services   First lien senior secured debt   6.5% (LIBOR + 5.5%)   8/14/2018   8/14/2023     $ 5,872     $ 5,820     $ 5,872  
    First lien senior secured debt (8)(9)   6.5% (LIBOR + 5.5%)   8/14/2018   8/14/2023       —         (13     —    
               

 

 

   

 

 

 
                $ 5,807     $ 5,872  

Groundworks Operations, LLC

                 

1741 Corporate Landing Pkwy, Virginia Beach,
VA 23454

  Consumer products and services   First lien senior secured debt   8.0% (LIBOR + 7.0%)   7/9/2020   1/17/2026     $ 1,951     $ 1,914     $ 1,932  
    First lien senior secured debt (8)(9)   8.0% (LIBOR + 7.0%)   7/9/2020   1/17/2026       —         (2     —    
    First lien senior secured debt (9)(23)   8.0% (LIBOR + 7.0%)   7/9/2020   1/17/2026       —         (16     —    
               

 

 

   

 

 

 
                $ 1,896     $ 1,932  

Gryphon Partners 3.5, L.P.

                 

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

  Financial services   Investments in funds (14)(21)     11/20/2012         $ 399     $ 211  
               

 

 

   

 

 

 
                $ 399     $ 211  

HealthDrive Corporation

                 

888 Worcester Street, Wellesley, MA 02482

  Healthcare   First lien senior secured debt   6.8% (LIBOR + 5.8%)   12/21/2018   12/21/2023     $ 9,825     $ 9,760     $ 9,039  
    First lien senior secured debt (8)   6.8% (LIBOR + 5.8%)   12/21/2018   12/21/2023       352       341       324  
               

 

 

   

 

 

 
                $ 10,101     $ 9,363  

 

  28  


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)
 

Igloo Products Corp.

                 

777 Igloo Road, Katy, TX 77494

  Consumer products and services   First lien senior secured debt   11.5% (LIBOR + 10.0%) (10.8% Cash + 0.8% PIK)   3/28/2014   3/28/2023     $ 21,567     $ 21,550     $ 20,489  
    Equity investments (18)     4/30/2014     0.66%     1,902       1,716       —    
               

 

 

   

 

 

 
                $ 23,266     $ 20,489  

IRC Opco LLC

                 

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

  Healthcare   First lien senior secured debt   6.3% (LIBOR + 5.3%)   1/4/2019   1/4/2024     $ 5,359     $ 5,329     $ 5,225  
    First lien senior secured debt (8)   6.3% (LIBOR + 5.3%)   1/4/2019   1/4/2024       818       814       798  
               

 

 

   

 

 

 
                  6,143     $ 6,023  

Lash Opco LLC

                 

1256 Main Street, Suite 256, Southlake, TX 76092

  Consumer products and services   First lien senior secured debt   9.3% (LIBOR + 8.3%)   9/18/2020   3/18/2026     $ 3,030     $ 2,954     $ 2,954  
    First lien senior secured debt (8)(9)   9.3% (LIBOR + 8.3%)   9/18/2020   3/18/2026       —         (8     —    
               

 

 

   

 

 

 
                  2,946     $ 2,954  

Matilda Jane Holdings, Inc.

                 

4031 Merchant Road, Fort Wayne, IN 46818

  Consumer products and services   First lien senior secured debt   9.5% (LIBOR+ 8.5% PIK)   4/28/2017   4/28/2022     $ 11,956     $ 11,873     $ 9,207  
    Equity investments (12)(17)     4/28/2017     4.02%     2,587,855       489       —    
               

 

 

   

 

 

 
                $ 12,362     $ 9,207  

Merchants Capital Access, LLC

                 

525 Broadhollow Rd #200,
Melville, NY 11747

  Financial services   Second lien debt (14)   11.5% (LIBOR + 10.5%)   4/20/2015   4/20/2021     $ 12,000     $ 11,977     $ 11,700  
               

 

 

   

 

 

 
                $ 11,977     $ 11,700  

MeriCal, LLC

                 

2995 East Miraloma Avenue, Anaheim, CA 92806

  Consumer products and services   First lien senior secured debt   6.8% (LIBOR + 5.8%)   11/16/2018   11/16/2021     $ 7,434     $ 7,434     $ 7,360  

 

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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)
 
    Equity investments (10)(12)(17)     9/30/2016     0.75%     521       505       687  
    Equity investments (10)(12)(18)     9/30/2016     0.66%     5,334       10       126  
               

 

 

   

 

 

 
                $ 7,949     $ 8,173  

NCP Investor Inc

                 

631 24 1/2 Road, Suite C, Grand Junction, CO 81505

  Healthcare   First lien senior secured debt   6.5% (LIBOR + 5.5%)   10/19/2018   10/19/2023     $ 6,917     $ 6,853     $ 6,848  
    First lien senior secured debt (8)   6.5% (LIBOR + 5.5%)   10/19/2018   10/19/2023       667       657       660  
               

 

 

   

 

 

 
                $ 7,510     $ 7,508  

Neiman Marcus Group LTD LLC

                 

One Marcus Square, 1618 Main Street, Dallas, TX 75201

  Retail & grocery   First lien senior secured debt   9.5% (LIBOR + 8.5%)   9/25/2020   9/25/2024     $ 3,000     $ 2,940     $ 2,940  
               

 

 

   

 

 

 
                $ 2,940     $ 2,940  

PDFTron Systems Inc.

                 

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

  IT services   First lien senior secured debt (7)   7.3% (LIBOR + 6.0%)   5/15/2019   5/15/2024     $ 4,950     $ 4,914     $ 4,901  
    First lien senior secured debt (7)(23)   7.3% (LIBOR + 6.0%)   5/15/2019   5/15/2024       1,089       1,081       1,078  
    First lien senior secured debt (7)(23)   7.3% (LIBOR + 6.0%)   5/15/2019   5/15/2024       320       316       317  
    First lien senior secured debt (7)   8.8% (LIBOR + 7.5%)   6/9/2020   5/15/2024       398       389       398  
    First lien senior secured debt (7)(9)(22)   8.8% (LIBOR + 7.5%)   6/9/2020   5/15/2024       —         (11     —    
               

 

 

   

 

 

 
                $ 6,689     $ 6,694  

Quartermaster Newco, LLC

                 

428 Greenwich Street, New York, NY 10013

  Healthcare   First lien senior secured debt   8.3% (LIBOR + 7.0%)   7/31/2020   7/31/2025     $ 3,135     $ 3,105     $ 3,104  

 

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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)
 
    First lien senior secured debt (8)(9)   8.3% (LIBOR + 7.0%)   7/31/2020   7/31/2025       —         (4     —    
               

 

 

   

 

 

 
                $ 3,101     $ 3,104  

Riveron Acquisition Holdings, Inc.

                 

2515 MicKinney Avenue, Suite 1200, Dallas, TX 75201

  Business services   First lien senior secured debt   6.8% (LIBOR + 5.8%)   5/22/2019   5/22/2025     $ 8,198     $ 8,073     $ 8,034  
               

 

 

   

 

 

 
                $ 8,073     $ 8,034  

Sciens Building Solutions, LLC

                 

5925 Stoneridge Dr, Pleasanton, CA 94588

  Business services   Equity investments (10)(17)     7/12/2017     0.50%     194     $ 213     $ 345  
               

 

 

   

 

 

 
                $ 213     $ 345  

Simplicity Financial Marketing Holdings Inc.

                 

8700 E. Vista Bonita Drive, Suite 160, Scottsdale, AZ 85255

  Financial services   First lien senior secured debt   7.3% (LIBOR + 5.8%)   9/13/2019   9/13/2024     $ 3,446     $ 3,405     $ 3,446  
    First lien senior secured debt (8)   7.3% (LIBOR + 5.8%)   9/13/2019   9/13/2024       370       366       370  
    First lien senior secured debt (23)   7.3% (LIBOR + 5.8%)   9/13/2019   9/13/2024       1,107       1,092       1,107  
               

 

 

   

 

 

 
                $ 4,863     $ 4,923  

smarTours, LLC

                 

545 8th Ave, Suite 2250, New York, NY 10018

  Consumer products and services   First lien senior secured debt (19)   9.8% (LIBOR + 8.8%)   10/31/2017   10/31/2022     $ 5,141     $ 5,093     $ 2,571  
    First lien senior secured debt (8)(9)(19)   9.8% (LIBOR + 8.8%)   10/31/2017   10/31/2022       —         (7     —    
               

 

 

   

 

 

 
                $ 5,086     $ 2,571  

SolutionReach, Inc.

                 

2600 N. Ashton Blvd.
Lehi, UT 84043

  IT services   First lien senior secured debt   6.8% (LIBOR + 5.8%)   1/17/2019   1/17/2024     $ 6,272     $ 6,188     $ 6,178  
    First lien senior secured debt (8)   6.8% (LIBOR + 5.8%)   1/17/2019   1/17/2024       700       688       690  
               

 

 

   

 

 

 
                $ 6,876     $ 6,868  

 

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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)
 

SPST Holdings

                 

545 8th Ave, Suite 2250,
New York, NY 10018

  Consumer products and services   Equity investments (10)(13)(18)     10/31/2017     0.66%     215,827     $ 216     $ —    
               

 

 

   

 

 

 
                $ 216     $ —    

Specialty Brands Holdings, LLC

                 

1400 Old Country Rd, Westbury, NY 11590

  Restaurants   Equity investments (17)     6/29/2018     0.50%     58     $ —       $ —    
    Equity investments (18)     6/29/2018     1.00%     1,232       —         —    
               

 

 

   

 

 

 
                $ —       $ —    

SRS Acquiom Holdings LLC

                 

950 17th Street, Suite 1400, Denver, CO 80202

  Financial services   First lien senior secured debt   6.8% (LIBOR + 5.8%)   11/8/2018   11/8/2024     $ 4,763     $ 4,730     $ 4,143  
    First lien senior secured debt (9)(22)   6.8% (LIBOR + 5.8%)   11/8/2018   11/8/2023       —         (3     —    
               

 

 

   

 

 

 
                $ 4,727     $ 4,143  

SynteractHCR Holdings Corporation

                 

5759 Fleet Street, Suite 100, Carlsbad, CA 92008

  Healthcare   First lien senior secured debt   6.3% (LIBOR + 5.3%)   1/17/2020   5/25/2025     $ 6,167     $ 6,113     $ 6,074  
    First lien senior secured debt (8)(9)   6.3% (LIBOR + 5.3%)   1/17/2020   5/25/2025       —         (13     —    
               

 

 

   

 

 

 
                $ 6,100     $ 6,074  

Urology Management Associates, LLC

                 

1000 Corporate Blvd., Linthicum, MD 21090

  Healthcare   First lien senior secured debt   6.0% (LIBOR + 5.0%)   8/31/2018   8/31/2024     $ 8,371     $ 8,264     $ 8,203  
    Equity investments (18)     8/31/2018     0.48%     769       769       933  
               

 

 

   

 

 

 
                $ 9,033     $ 9,136  

Virtus Aggregator, LLC

                 

2649 Causeway Center Drive, Tampa, FL 33619

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

 

 

   

 

 

 
                $ 32     $ 32  

 

  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)
 

Wheels Up Partners, LLC

                 

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

  Transportation   Equity investments (10)(13)(18)     1/31/2014     0.35%     1,000,000     $ 1,000     $ 2,071  
               

 

 

   

 

 

 
                $ 1,000     $ 2,071  

Whitney, Bradley & Brown, Inc.

                 

11790 Sunrise Valley Dr #5, Reston, VA 20191

  Business services   First lien senior secured debt   8.5% (LIBOR + 7.5%)   10/18/2017   10/18/2022     $ 7,665     $ 7,629     $ 7,665  
               

 

 

   

 

 

 
                $ 7,629     $ 7,665  

Women’s Health USA

                 

22 Waterville Road, Avon, CT 06001

  Healthcare   First lien senior secured debt   7.8% (LIBOR + 6.8%)   10/9/2018   10/9/2023     $ 7,309     $ 7,290     $ 7,162  
    First lien senior secured debt (8)   7.8% (LIBOR + 6.8%)   10/9/2018   10/9/2023       429       417       420  
               

 

 

   

 

 

 
                $ 7,707     $ 7,582  
               

 

 

   

 

 

 

Total non-controlled/non-affiliated investments

              $ 239,803     $ 226,667  
             

 

 

   

 

 

 

—120.51% of net asset value

                 

Controlled investments

                 

—62.04% of net asset value

                 

C&K Market, Inc.

                 

615 5th Street, Brookings, OR 97415

  Retail & grocery   Equity investments (15)(18)     11/3/2010     31.97%     1,992,365     $ 2,271     $ 7,043  
    Equity investments (15)(17)     11/3/2010   7/1/2024   31.97%     1,992,365       10,956       9,962  
               

 

 

   

 

 

 
                $ 13,227     $ 17,005  

Loadmaster Derrick & Equipment, Inc.

                 

1084 S Cruse Ave, Broussard, LA 70518

  Energy / utilities   First lien senior secured
debt (15)(19)
  11.3% (LIBOR + 10.3% PIK)   7/1/2016   12/31/2020     $ 10,950     $ 7,307     $ —    
    First lien senior secured
debt (15)(19)
  13.0% (LIBOR + 12.0% PIK)   7/1/2016   12/31/2020       2,579       1,053       —    
    First lien senior secured
debt (15)(19)
  11.3% (LIBOR+ 10.3% PIK)   1/17/2017   12/31/2020       8,964       6,932       7,171  
    Equity investments (15)(17)     7/1/2016     81.93%     2,956       1,114       —    
    Equity investments (15)(18)     12/21/2016     73.83%     12,131       —         —    
               

 

 

   

 

 

 
                $ 16,406     $ 7,171  

 

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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)
 

OEM Group, LLC

                 

2120 W Guadalupe Road, Gilbert, AZ 85233

  Industrials and manufacturing   First lien senior secured
debt (15)
  8.5% (LIBOR + 7.5%)   9/30/2020   9/30/2025     $ 7,500     $ 7,500     $ 7,500  
    Second lien
debt (15)(25)
 

10.0% PIK

  9/30/2020   9/30/2026       44,090       22,202       22,125  
    Equity
investments (10)(12)(15)(20)
    3/16/2016     75.00%     10,000       8,890       —    
               

 

 

   

 

 

 
                $ 38,592     $ 29,625  

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         $ 92,221     $ 62,894  
               

 

 

   

 

 

 
                $ 92,221     $ 62,894  
Total controlled investments                  
               

 

 

   

 

 

 

—62.04% of net asset value

                $ 160,446     $ 116,695  
               

 

 

   

 

 

 

Non-controlled/affiliated investments

                 

—0.00% of net asset value

                 

First Eagle Greenway Fund LLC

                 

500 Boylston Street,
Suite 1200, Boston, MA 02116

  Investment funds and vehicles   Investments in
funds (10)(14)(18)(21)
    1/27/2011         $ 1     $ 1  
               

 

 

   

 

 

 
                $ 1     $ 1  

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

                $ 2     $ 2  
               

 

 

   

 

 

 

Total investments

               

—182.55% of net asset value

              $ 400,251     $ 343,364  
               

 

 

   

 

 

 

(1) All debt investments are income-producing, unless otherwise noted. Equity and member interests are non-income-producing unless otherwise noted. The Company generally acquires its investments in private transactions exempt from registration under the Securities Act of 1933, as amended, or the Securities Act. Its investments are therefore generally subject to certain limitations on resale, and may be deemed to be “restricted securities” under the Securities Act.

(2) All investments are pledged as collateral under the Revolving Facility.

 

  34  


Table of Contents

(3) As of September 30, 2020, 30.7% and 27.0% of the Company’s total investments on a cost and fair value basis, respectively, are in non-qualifying assets. The Company may not acquire any non-qualifying assets unless, at the time of the acquisition, qualifying assets represent at least 70% of the Company’s total assets.

(4) Variable interest rate investments bear interest in reference to London Interbank offer rate, or LIBOR, or Alternate Base Rate, or ABR, which are effective as of September 30, 2020. LIBOR loans are typically indexed to 30-day, 90-day or 180-day LIBOR rates, at the borrower’s option, and ABR rates are typically indexed to the current prime rate or federal funds rate. Each of LIBOR and ABR rates may be subject to interest floors. As of September 30, 2020, the 30-day, 60 day, 90-day and 180-day LIBOR rates were 0.15%, 0.19%, 0.23% and 0.26%, respectively. There were no ABR loans outstanding at September 30, 2020.

(5) Principal includes accumulated PIK interest and is net of repayments.

(6) Unless otherwise indicated, all investments are valued using significant unobservable inputs. Refer to Level 3 fair value measurements quantitative information table in Note 3 “Investments” 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, for further detail.

(7) Foreign company or foreign co-borrower at the time of investment and, as a result, is not a qualifying asset under Section 55(a) of the 1940 Act.

(8) Company pays 0.50% unfunded commitment fee on delayed draw term loan and/or revolving loan facilities.

(9) The negative cost is the result of the capitalized discount being greater than the principal amount outstanding on the loan.

(10) Member interests of limited liability companies are the equity equivalents of the stock of corporations.

(11) In certain instances, at the option of the issuer, interest can be paid in cash or cash and PIK. The percentage of PIK shown is the maximum PIK that can be elected by the company. As of September 30, 2020, there were no issuers with this option.

(12) Equity ownership may be held in shares or units of companies related to the portfolio company.

(13) Interest held by a wholly owned subsidiary of First Eagle Alternative Capital BDC, Inc. (formerly, THL Credit, Inc.).

(14) Investments that the Company has determined are not “qualifying assets” under Section 55(a) of the 1940 Act. The status of these assets under the 1940 Act is subject to change. The Company monitors the status of these assets on an ongoing basis.

(15) As defined in Section 2(a)(9) of the 1940 Act, the Company is deemed to control this portfolio company because it owns more than 25% of the portfolio company’s outstanding voting securities. See Schedule 12-14 in the notes to our most recent Consolidated Financial Statements in Part I, Item 1 of our most recent Quarterly Report on Form 10-Q for transactions for the nine months ended September 30, 2020 in which the issuer was a portfolio company that the Company is deemed to control.

(16) On December 3, 2014, the Company entered into an agreement with Perspecta (as described in Note 3 hereto) to create First Eagle Logan JV LLC (formerly, THL Credit Logan JV LLC), or Logan JV, a joint venture, which invests primarily in senior secured first lien term loans. All Logan JV investment decisions must be unanimously approved by the Logan JV investment committee consisting of one representative from each of the Company and Perspecta. Although the Company owns more than 25% of the voting securities of Logan JV, the Company does not believe that it has control over Logan JV (other than for purposes of the 1940 Act or otherwise).

 

35


Table of Contents

(17) Preferred stock.

(18) Common stock and member interest.

(19) Loan was on non-accrual as of September 30, 2020.

(20) Includes $577 of cost and $0 of fair value related to a non-controlling interest as a result of consolidating a blocker corporation that holds equity in OEM Group, LLC as of September 30, 2020.

(21) Investment is measured at fair value using net asset value.

(22) Company pays 0.38% unfunded commitment fee on revolving loan facility.

(23) Company pays 1.00% unfunded commitment fee on delayed draw term loan facility.

(24) Company pays 0.25% unfunded commitment fee on revolving credit facility.

(25) Restructured loan for which income is not being recognized as of September 30, 2020.

Set forth below is a brief description of each portfolio company in which we have made an investment that represents greater than 5.0% of total assets:

First Eagle Logan JV LLC

As of September 30, 2020, we hold a controlling equity investment in First Eagle Logan JV LLC (formerly, THL Credit Logan JV LLC), or Logan JV, with an aggregate fair value of $62.9 million. Logan JV is a joint venture with Perspecta Trust LLC, or Perspecta, which invests primarily in senior secured first lien term loans. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Portfolio Composition and Investment Activity—THL Credit Logan JV LLC” in Part I, Item 2 of our most recent Quarterly Report on Form 10-Q and the audited financial statements of the Logan JV incorporated by reference in this prospectus for more information.

OEM Group, LLC

As of September 30, 2020, we hold debt and equity investments in OEM Group, LLC and affiliated entities, or OEM, with an aggregate fair value of $29.6 million. Our investments in OEM consist of a senior secured first lien term loan set to mature on September 30, 2025, a second lien term loan set to mature on September 30, 2026, and controlling common equity. OEM is a provider of capital equipment solutions to semiconductor fabrication plants and producers of emerging electronics around the world. See our Consolidated Financial Statements in Part I, Item 1 of our most recent Quarterly Report on Form 10-Q and the audited financial statements of OEM incorporated by reference in this prospectus for more information.

Igloo Products Corp

As of September 30, 2020, we hold debt and equity investments in Igloo Products Corp., or Igloo, with an aggregate fair value of $20.5 million. Our investments in Igloo consist of a senior secured first lien loan, which is set to mature on March 28, 2023, and common equity. Igloo is an international manufacturer and distributor of insulated hard side coolers, soft side coolers, food and beverage storage products, and ice products and other accessories.

 

36


Table of Contents

THE COMPANY

Please refer to “Business” in Part I, Item 1 of our most recent Annual Report on Form 10-K and “Legal Proceedings ”in Part I, Item 3 of our most recent Annual Report on Form 10-K and Part II, Item 1 of our most recent Quarterly Report on Form 10-Q for a description of the Company.

 

37


Table of Contents

MANAGEMENT OF THE COMPANY

Please refer to “Director and Executive Officer Information,” “Corporate Governance,” “Executive Compensation” and “Director Compensation” in our most recent definitive proxy statement, which is incorporated by reference into this prospectus, for information relating to the management of the Company.

 

38


Table of Contents

CERTAIN RELATIONSHIPS

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 (the “Transaction”). Immediately after closing of the Transaction, THL Credit Advisors LLC changed its name to First Eagle Alternative Credit, LLC.

The Transaction resulted in a change of control of the Advisor and an “assignment” of the prior investment management agreement (“Prior Investment Management Agreement”) between us and the Advisor under the 1940 Act, meaning that the Prior Investment Management Agreement terminated automatically by its terms. On January 28, 2020, our Board unanimously approved an interim management agreement (the “Interim Investment Management Agreement”) that includes substantially the same terms as the Prior Investment Advisory Agreement. On January 28, 2020, our Board also unanimously approved the new investment management agreement (the “New Investment Management Agreement”) between us and the Advisor. All material terms of the New Investment Management Agreement will remain unchanged from the material terms of the Prior Investment Advisory Agreement. The New Investment Management Agreement received stockholder approval at a special shareholder meeting held on May 28, 2020. Upon receipt of stockholder approval, the Interim Investment Management Agreement terminated immediately and the New Investment Management Agreement went into effect. Under the New Investment Management Agreement, the Advisor, subject to the overall supervision of the Board, manages the day-to-day operations of, and provides investment advisory services to us. Effective January 31, 2020, the Company has also entered into an administration agreement with the Advisor under which the Advisor will provide administrative services to the Company. Under the administration agreement, the Advisor performs, or oversees the performance of administrative services necessary for the operation of the Company, which include, among other things, being responsible for the financial records which the Company is required to maintain and preparing reports to the Company’s stockholders and reports filed with the SEC. See “Business—Administration Agreement” in Part I, Item 1 of our most recent Annual Report on Form 10-K incorporated herein by reference for additional information.

The Advisor and its affiliates may also manage other funds in the future that may have investment mandates that are similar, in whole and in part, with ours. For example, the Advisor presently serves as investment advisor to one or more additional private funds and to certain CLOs and is an advisor to a closed-end fund, First Eagle Senior Loan Fund (NYSE: FSLF).

The Advisor’s policies are also designed to manage and mitigate the conflicts of interest associated with the allocation of investment opportunities if we are able to co-invest, either pursuant to SEC interpretive positions or an exemptive order, with other funds managed by the Advisor and its affiliates. In addition, we note that any affiliated fund currently formed or formed in the future and managed by the Advisor or its affiliates may have overlapping investment objectives with our own and, accordingly, may invest in asset classes similar to those targeted by us. However, in certain instances due to regulatory, tax, investment, or other restrictions, certain investment opportunities may not be appropriate for either us or other funds managed by the Advisor. Generally, other than negotiated co-investments under our co-investment order and unless otherwise provided in the allocation policy, when making investment and disposition allocation decisions, the Advisor and its affiliates may consider a variety of factors, among others, on a relative or absolute basis, and may establish ratios, formulas or similar metrics to assist in making allocation decisions when the opportunity being considered may be appropriate for more than investment fund. As a result, the Advisor and/or its affiliates may face conflicts in allocating investment opportunities between us and such other entities. Although the Advisor and its affiliates will endeavor to allocate investment opportunities in a fair and equitable manner and consistent with applicable allocation procedures, it is possible that, in the future, we may not be given the opportunity to participate in investments made by investment funds managed by the Advisor or its affiliates.

The 1940 Act generally prohibits BDCs from making certain negotiated co-investments with affiliates absent an order from the SEC permitting the BDC to do so. Unless otherwise provided in the allocation policy or co-investment order, if an investment opportunity is appropriate for both us and other investment funds and the

 

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investment opportunity requires more than the price to be negotiated, the investment opportunity will be made available to us and the other investment funds with allocations being pro rata based on each requested allocation. As a result, the Advisor and/or its affiliates may face conflicts in allocating investment opportunities between us and such other entities. Although the Advisor and its affiliates will endeavor to allocate investment opportunities in a fair and equitable manner and consistent with applicable allocation procedures, it is possible that we may not be given the opportunity to participate in investments made by investment funds managed by the Advisor or its affiliates.

On September 19, 2018 the SEC granted us the relief we sought in an exemptive application that expands our ability to co-invest in portfolio companies with certain other funds managed by the Advisor or its affiliates (“Affiliated Funds”) and, subject to certain conditions, proprietary accounts of the Advisor or its affiliates (“FEAC Proprietary Accounts”) or in a manner consistent with our investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors, subject to compliance with certain conditions (the “Order”). Pursuant to the Order, we are permitted to co-invest with Affiliated Funds and/or “FEAC” Proprietary Accounts if, among other things, a “required majority” (as defined in Section 57(o) of the 1940 Act) or our independent directors make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transactions, including the consideration to be paid, are reasonable and fair to us and our stockholders and do not involve overreaching of us or our stockholders on the part of any person concerned, and (2) the transaction is consistent with the interests of our stockholders and is consistent with our investment objective and strategies.

See 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 fiscal year ended December 31, 2019 and Note 4 “Related Party Transactions” to our Consolidated Financial Statements in Part I, Item 1 of our Quarterly Report on Form 10-Q for the nine months ended September 30, 2020, which are incorporated by reference, for additional information regarding these relationships and transactions.

 

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CONTROL PERSONS AND PRINCIPAL STOCKHOLDERS

The following table sets forth, as of December 1, 2020, the beneficial ownership of each current director, the nominees for director, the Company’s executive officers, each person known to us to beneficially own 5% or more of the outstanding shares of our common stock, and the executive officers and directors as a group. Percentage of beneficial ownership is based on 30,109,384 shares of common stock outstanding as of December 1, 2020.

Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission (the “SEC”) and includes voting or investment power with respect to the securities. Ownership information for those persons who beneficially own 5% or more of our shares of common stock is based upon filings by such persons with the SEC and other information obtained from such persons, if available.

Unless otherwise indicated, the Company believes that each beneficial owner set forth in the table has sole voting and investment power and has the same address as the Company. The Company’s directors are divided into two groups-interested directors and independent directors. Interested directors are “interested persons” of First Eagle Alternative Capital BDC, Inc. (formerly, THL Credit, Inc.) as defined in Section 2(a)(19) of the 1940 Act. Unless otherwise indicated, the address of all executive officers and directors is c/o First Eagle Alternative Capital BDC, Inc., 500 Boylston Street, Suite 1200, Boston, MA 02116.

 

Name

  Number of Shares
Owned
Beneficially
     Percentage  

Interested Director:

    

Christopher J. Flynn

    141,478        *  

Independent Directors:

    

Edmund P. Giambastiani, Jr.

    1,440        *  

Nancy Hawthorne(1) (2)

    14,867        *  

James D. Kern

    4,000        *  

Deborah McAneny

    9,500        *  

Jane Musser Nelson

    3,650     

Executive Officers:

    

Terrence W. Olson(3)

    133,434        *  

Andrew James Morris

    —          *  

Sabrina Rusnak-Carlson

    21,290        *  

Jennifer Wilson

    —          *  
 

 

 

    

 

 

 

All Executive Officers and Directors as a group (9 persons)

    329,659        *  
 

 

 

    

 

 

 

5% or more holders(3):

    

First Eagle Investment Management LLC (4), (5)

    5,004,422        16.62%  

1345 Avenue of the Americas, 48th Floor

    

New York, NY 10105

    

Leon G. Cooperman(6)

    2,859,100        9.50%  

St. Andrew’s Country Club

    

7118 Melrose Castle Lane

    

Boca Raton, FL 33496

    

 

*

Represents less than 1%

(1)

Includes shares purchased through a dividend reinvestment plan.

(2)

Shares are held in the Nancy Hawthorne SEP FBO Nancy Hawthorne, for which Ms. Hawthorne has sole voting and dispositive power.

(3)

Information about the beneficial ownership of our principal stockholders is derived from filings made by them with the SEC.

(4)

Includes certain shares also deemed to be beneficially owned by Messrs. Flynn and Olson.

(5)

Includes shares owned by the Adviser, which is wholly owned by First Eagle.

 

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(6)

Based on information included in the Schedule 13G filed by Leon G. Cooperman on February 14, 2020, as of December 31, 2019, Mr. Cooperman beneficially owned 2,859,100 shares of the Company’s common stock and had sole voting and dispositive power over 2,659,100 shares of the Company’s common stock. Mr. Cooperman is married to an individual named Toby Cooperman. Mr. Cooperman has investment discretion over the Shares (as defined below) held by the Uncommon Knowledge And Achievement, Inc. (the “Uncommon”), a 501(c)(3) Delaware charitable foundation. As to the Shares owned by the Uncommon, there would be shared power to dispose or to direct the disposition of such Shares because the owners of the Uncommon may be deemed beneficial owners of such Shares pursuant to Rule 13d-3 under the Act as a result of their right to terminate the discretionary account within a period of 60 days. Mr. Cooperman has an adult son named Michael S. Cooperman. The Michael S. Cooperman WRA Trust (the “WRA Trust”), is an irrevocable trust for the benefit of Michael S. Cooperman. Mr. Cooperman has investment authority over the Shares held by Toby Cooperman, Michael S. Cooperman, the WRA Trust accounts, and the Individual Retirement Accounts of Toby and Michael S. Cooperman. Mr. Cooperman’s ownership consists of 2,117,000 shares owned by Mr. Cooperman; 225,500 shares owned by Toby Cooperman; 116,600 shares owned by Michael S. Cooperman; 200,000 shares owned by the WRA Trust; and 200,000 shares owned by the Uncommon.

The following table sets forth, as of December 1, 2020, the dollar range of our equity securities that is beneficially owned by each of our directors. We are not part of a “family of investment companies,” as that term is defined in the 1940 Act.

 

Name

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

Interested Directors:

  

Christopher J. Flynn(4)

     $500,001 –$1,000,000  

Independent Directors:

  

Edmund P. Giambastiani, Jr.

     $1 – $10,000  

Nancy Hawthorne

     $50,001 – $100,000  

James D. Kern

     $10,001 – $50,000  

Deborah McAneny

     $10,001 – $50,000  

Jane Musser Nelson

     $10,001 – $50,000  

 

(1)

Beneficial ownership has been determined in accordance with Rule 16a-1(a)(2) of 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 $3.88 on December 1, 2020 on The Nasdaq Global Select Market.

(3)

The dollar ranges 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.

(4)

Includes shares indirectly owned through acquisitions by the Advisor

 

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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, 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.

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, Terrence W. Olson, James R. Fellows and Michelle Handy. Biographical information with respect to Messrs. Flynn and Olson is set forth under “Management of the Company—Biographical information.”

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, an annual discretionary bonus. A portion of the base salary of Terrence W. Olson in his capacity as Chief Financial Officer and Chief Operating Officer is reimbursed by the Company pursuant to the Administration Agreement.

Christopher J. Flynn. Please refer to Mr. Flynn’s biography under “Management of the Company—Interested Directors.”

Terrence W. Olson. Please refer to Mr. Olson’s biography under “Management of the Company—Executive Officers Who Are Not Directors.”

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

 

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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.

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 1, 2020.

 

Name of Portfolio Manager

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

Christopher J. Flynn

   $500,001—$1,000,000

Terrence W. Olson

   $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 $3.88 on December 1, 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, 2019.

 

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           $—           $—
  Other Pooled Investment Vehicles:     11       $1.9 billion       11     $1.9 billion
  Other Accounts:     1       $795 million       1     $795 million
James R. Fellows   Other Registered Investment Companies     4       $561.7 million           $—
  Other Pooled Investment Vehicles:     47       $15.0 billion       39     $14.2 billion
  Other Accounts:     8       $1.1 billion       1     $795 million
Michelle Handy   Other Registered Investment Companies           $—           $—
  Other Pooled Investment Vehicles:           $—           $—
  Other Accounts:           $—           $—
Terrence W. Olson   Other Registered Investment Companies           $—           $—
  Other Pooled Investment Vehicles:     11       $1.9 billion       11     $1.9 billion
  Other Accounts:     1       $795 million       1     $795 million

 

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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 Agreement” in Part I, Item 1 of our most recent Annual Report on Form 10-K, which is incorporated by reference into this prospectus. 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, assuming the Company’s stockholders approve the new investment management agreement by and between the Company and the Advisor, as described in Note 4 “Related Party Transactions” to our Consolidated Financial Statements in Part I, Item 1 of our Quarterly Report on Form 10-Q for the nine months ended September 30, 2020.

 

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DETERMINATION OF NET ASSET VALUE

The net asset value per share of our outstanding shares of common stock is determined quarterly by dividing the value of total assets minus liabilities by the total number of shares of common stock outstanding at the date as of which the determination is made. Accordingly, under current accounting standards, the notes to our financial statements incorporated by reference in this prospectus refer to the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on our financial statements.

In calculating the value of our total assets, investments for which market quotations are readily available are valued using market quotations, which are generally obtained from an independent pricing service or one or more broker-dealers or market makers. Debt and equity securities for which market quotations are not readily available or are determined to be unreliable are valued at fair value as determined in good faith by our board of directors. Because we expect that there will not be a readily available market value for many of the investments in our portfolio, we expect to value many of our portfolio investments at fair value as determined in good faith by our board of directors in accordance with a documented valuation policy that has been reviewed and approved by our board of directors and in accordance with GAAP. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material. See “Risk Factors—Risks Related to our Business—There will be uncertainty as to the value of our portfolio investments.” in Part I, Item 1A of our most recent Annual Report on Form 10-K, which is incorporated by reference into this prospectus

With respect to investments for which market quotations are not readily available, our board of directors undertakes a multi-step valuation process each quarter, as described below:

 

   

the Company’s quarterly valuation process begins with each portfolio company or investment being initially valued by the investment professionals responsible for managing portfolio investments;

 

   

preliminary valuation conclusions are then documented and are reviewed with the investment committee of FEAC, or the Advisor;

 

   

valuation recommendations are then discussed with the pricing committee of the Advisor;

 

   

to the extent determined by the audit committee of the Company’s board of directors, independent valuation firms are used to conduct independent appraisals of all “Level 3” investments and review the Advisor’s preliminary valuations in light of their own independent assessment unless the amounts are immaterial or have closed near quarter-end;

 

   

the audit committee of the Company’s board of directors reviews the preliminary valuations approved by the pricing committee of the Advisor and such valuations provided by the independent valuation firms and, if necessary, responds and supplements the valuation recommendation of the independent valuation firms to reflect any comments; and

 

   

the Company’s board of directors discusses valuations and determines the fair value of each investment in the Company’s portfolio in good faith based on the input of the Advisor, the respective independent valuation firms and the audit committee.

The types of factors that the Company may take into account in fair value pricing its investments include, as relevant, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings and discounted cash flows, the markets in which the portfolio company does business, comparison to publicly traded securities and other relevant factors. The Company generally utilizes an income approach to value its debt investments and a combination of income and market approaches to value its equity investments. With respect to unquoted securities, the Advisor and the Company’s board of directors, in consultation with the Company’s independent third party valuation firms, values each investment considering, among other measures, discounted cash flow models, comparisons of financial ratios of peer companies that are public and other factors, which valuation is then approved by the board of directors.

 

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For debt investments, the Company generally determines the fair value primarily using an income, or yield, approach that analyzes the discounted cash flows of interest and principal for the debt security, as set forth in the associated loan agreements, as well as the financial position and credit risk of each portfolio investment. The Company’s estimate of the expected repayment date is generally the legal maturity date of the instrument. The yield analysis considers changes in leverage levels, credit quality, portfolio company performance and other factors. The enterprise value, a market approach, is used to determine the value of equity and debt investments that are credit impaired, close to maturity or where the Company also holds a controlling equity interest. The method for determining enterprise value uses a multiple analysis, whereby appropriate multiples are applied to the portfolio company’s revenues or net income before net interest expense, income tax expense, depreciation and amortization, or EBITDA.

Equity

We use a combination of the income and market approaches to value our equity investments. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The income approach uses valuation techniques to convert future cash flows or earnings to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors that we may take into account in fair value pricing our investments include, as relevant: available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, the current investment performance rating, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, transaction comparables, our principal market as the reporting entity, and enterprise values, among other factors.

Investments in Funds

In circumstances in which net asset value per share of an investment is determinative of fair value, we estimate the fair value of an investment in an investment company using the net asset value per share of the investment (or its equivalent) without further adjustment if the net asset value per share of the investment is determined in accordance with the specialized accounting guidance for investment companies as of the reporting entity’s measurement date.

In accordance with the authoritative guidance on fair value measurements and disclosures under GAAP, we disclose the fair value of our investments in a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The guidance establishes three levels of the fair value hierarchy as follows:

Level l—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2—Quoted prices in markets that are not considered to be active or financial instruments for which significant inputs are observable, either directly or indirectly;

Level 3—Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

The level of an asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment by management. For more information about our fair value measurements, see Note 3 “Investments” in Part II, Item 8 of our Consolidated Financial Statements in our most recent Annual Report on Form 10-K and Note 3 “Investments” of our Consolidated Financial Statements in in Part I, Item 1 of our most recent Quarterly Report on Form 10-Q, which is incorporated by reference into this prospectus.

 

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We consider whether the volume and level of activity for the asset or liability have significantly decreased and identify transactions that are not orderly in determining fair value. Accordingly, if we determine that either the volume and/or level of activity for an asset or liability has significantly decreased (from normal conditions for that asset or liability) or price quotations or observable inputs are not associated with orderly transactions, increased analysis and management judgment will be required to estimate fair value. Valuation techniques such as an income approach might be appropriate to supplement or replace a market approach in those circumstances.

We have adopted the authoritative guidance under GAAP for estimating the fair value of investments in investment companies that have calculated net asset value per share in accordance with the specialized accounting guidance for Investment Companies. Accordingly, in circumstances in which net asset value per share of an investment is determinative of fair value, we estimate the fair value of an investment in an investment company using the net asset value per share of the investment (or its equivalent) without further adjustment if the net asset value per share of the investment is determined in accordance with the specialized accounting guidance for investment companies as of the reporting entity’s measurement date. Redemptions are not generally permitted in our investments in funds. The remaining term of our investments in funds is expected to be two to six years.

Determinations in connection with offerings

In connection with certain offerings of shares of our common stock, our board of directors or one of its committees may be required to make the determination that we are not selling shares of our common stock at a price below the then current net asset value of our common stock at the time at which the sale is made. Our board of directors or the applicable committee will consider the following factors, among others, in making any such determination:

 

   

the net asset value of our common stock most recently disclosed by us in the most recent periodic report that we filed with the SEC;

 

   

our investment adviser’s assessment of whether any material change in the net asset value of our common stock has occurred (including through the realization of gains on the sale of our portfolio securities) during the period beginning on the date of the most recently disclosed net asset value of our common stock and ending two days prior to the date of the sale of our common stock; and

 

   

the magnitude of the difference between the net asset value of our common stock most recently disclosed by us and our investment adviser’s assessment of any material change in the net asset value of our common stock since that determination, and the offering price of the shares of our common stock in the proposed offering.

Importantly, this determination will not require that we calculate the net asset value of our common stock in connection with each offering of shares of our common stock, but instead it will involve the determination by our board of directors or a committee thereof that we are not selling shares of our common stock at a price below the then current net asset value of our common stock at the time at which the sale is made or otherwise in violation of the 1940 Act.

These processes and procedures are part of our compliance policies and procedures. Records will be made contemporaneously with all determinations described in this section and these records will be maintained with other records that we are required to maintain under the 1940 Act.

 

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DIVIDEND REINVESTMENT PLAN

We have adopted 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.

To enroll in the dividend reinvestment plan, each stockholder must notify American Stock Transfer and Trust Company LLC, the plan administrator, in writing so that notice is received by the plan administrator prior to the record date. The plan administrator will then automatically reinvest any dividends in additional shares of our common stock. The plan administrator will set up an account for shares acquired through the plan for each stockholder who has elected to participate in the plan and may hold such shares in non-certificated form under the plan administrator’s name or that of its nominee. The number of shares to be issued to a stockholder participating in the plan will be calculated by reference to all shares of common stock owned by such stockholder, whether held in such stockholder’s plan account or elsewhere. The plan administrator will confirm to each participant each acquisition made for such participant pursuant to the plan as soon as practicable but not later than 10 business days after the date thereof; provided all shares have been purchased. Upon request by a stockholder participating in the plan received in writing not less than three days prior to the payment date, the plan administrator will, instead of crediting shares to and/or carrying shares in the participant’s account, issue, without charge to the participant, a certificate registered in the participant’s name for the number of whole shares of our common stock payable to the participant and a check for any fractional share. Although each participant may from time to time have an undivided fractional interest (computed to three decimal places) in a share of our common stock, no certificates for a fractional share will be issued. However, dividends and distributions on fractional shares will be credited to each participant’s account.

We will use primarily newly issued shares to implement the plan, whether our shares are trading at a premium or at a discount to net asset value. However, we reserve the right to purchase shares in the open market in connection with our implementation of the plan at a price per share equal to the average price for all shares purchased on the open market pursuant to the plan, including brokerage commissions. The number of shares to be issued to a stockholder is determined by dividing the total dollar amount of the dividend payable to such stockholder by the market price per share of our common stock at the close of regular trading on The Nasdaq Global Select Market on the valuation date fixed by our board of directors for such dividend. Market price per share on that date will be the closing price for such shares on The Nasdaq Global Select Market or, if no sale is reported for such day, at the average of their reported bid and asked prices. The number of shares of our common stock to be outstanding after giving effect to payment of the dividend cannot be established until the value per share at which additional shares will be issued has been determined and elections of our stockholders have been tabulated. Stockholders who do not elect to receive dividends in shares of common stock may experience accretion to the net asset value of their shares if our shares are trading at a premium at the time we issue new shares under the plan and dilution if our shares are trading at a discount. The level of accretion or discount would depend on various factors, including the proportion of our stockholders who participate in the plan, the level of premium or discount at which our shares are trading and the amount of the dividend payable to a stockholder.

There will be no brokerage charges to stockholders with respect to shares of common stock issued directly by us. However, each participant will pay the brokerage commissions incurred in connection with open-market purchases. The plan administrator’s fees under the plan will be paid by us. If a participant elects by written notice to the plan administrator to have the plan administrator sell part or all of the shares held by the plan administrator in the participant’s account and remit the proceeds to the participant, the plan administrator is authorized to deduct a $15.00 transaction fee plus a 10¢ per share brokerage commissions from the proceeds. If you have shares held through a broker, you should contact your broker to participate in the plan.

Stockholders who receive dividends in the form of stock are subject to the same federal, state and local tax consequences as are stockholders who elect to receive their dividends in cash.

 

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Participants may terminate their accounts under the plan by notifying the plan administrator via its website at www.amstock.com, by filling out the transaction request form located at bottom of their statement and sending it to the plan administrator at P.O. Box 922, Wall Street Station, New York, NY 10269-0560 or by calling the plan administrator at (866) 710-4835. You will need to know your AST ten (10) digit account number and your social security number to gain access to your account. Such termination will be effective immediately if the participant’s notice is received by the plan administrator at least three days prior to any payment date; otherwise, such termination will be effective only with respect to any subsequent dividend.

The plan may be terminated by us upon notice in writing mailed to each participant at least 30 days prior to any record date for the payment of any dividend by us. All correspondence concerning the plan should be directed to the plan administrator by mail at American Stock Transfer and Trust Company LLC, P.O. Box 922, Wall Street Station, New York, NY 10269-0560 or by telephone at (866) 710-4835.

The plan administrator will at all times act in good faith and use its best efforts within reasonable limits to ensure its full and timely performance of all services to be performed by it under the plan and to comply with applicable law, but assumes no responsibility and shall not be liable for loss or damage due to errors unless such error is caused by the plan administrator’s negligence, bad faith, or willful misconduct or that of its employees or agents.

 

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DESCRIPTION OF OUR CAPITAL STOCK

The following description summarizes the material provisions of the Delaware General Corporation Law and our certificate of incorporation and bylaws. This summary may not contain all of the information that is important to you, and we refer you to the Delaware General Corporation Law and our certificate of incorporation and bylaws for a more detailed description of the provisions summarized below.

General

We were incorporated on May 26, 2009 under the laws of the state of Delaware. Under the terms of our certificate of incorporation, our authorized capital stock will consist solely of 100,000,000 shares of common stock, par value $0.001 per share, of which 30,109,384 shares were outstanding as of December 1, 2020, and 100,000,000 shares of preferred stock, par value $0.001 per share, of which no shares were outstanding as of December 1, 2020. Our common stock is quoted on The Nasdaq Global Select Market under the ticker symbol “FCRD.” The table below sets forth our capital stock as of December 1, 2020.

 

Title of Class

   Amount
Authorized
     Amount Held
by Company
for its
Account
     Amount
Outstanding
 

Common Stock, $0.001 par value per share

     100,000,000        —          30,109,384  

Preferred Stock, $0.001 par value per share

     100,000,000        —          —    

Common stock

Under the terms of our certificate of incorporation, holders of common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders and do not have cumulative voting rights. Accordingly, holders of a majority of the shares of common stock entitled to vote in any election of directors may elect all of the directors standing for election. Holders of common stock are entitled to receive proportionately any distributions declared by our board of directors, subject to any preferential dividend rights of outstanding preferred stock. Upon our liquidation, dissolution or winding up, the holders of common stock are entitled to receive ratably our net assets available after the payment of all debts and other liabilities and subject to the prior rights of any outstanding preferred stock. Holders of common stock have no preemptive, subscription, redemption or conversion rights. The rights, preferences and privileges of holders of common stock are subject to the rights of the holders of any series of preferred stock which we may designate and issue in the future. In addition, holders of our common stock may participate in our dividend reinvestment plan.

Preferred stock

Under the terms of our certificate of incorporation, our board of directors is authorized to issue shares of preferred stock in one or more series without stockholder approval. The board has discretion to determine the rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences of each series of preferred stock. The 1940 Act limits our flexibility as to certain rights and preferences of the preferred stock that our certificate of incorporation may provide and requires, among other things, that immediately after issuance and before any distribution is made with respect to common stock, we meet a coverage ratio of total assets to total senior securities, which include all of our borrowings and our preferred stock, of at least 200%, and the holders of shares of preferred stock, if any are issued, must be entitled as a class to elect two directors at all times and to elect a majority of the directors if dividends on the preferred stock are unpaid in an amount equal to two full years of dividends on the preferred stock until all arrears are cured. The features of the preferred stock will be further limited by the requirements applicable to regulated investment companies under the Code. The purpose of authorizing our board to issue preferred stock and determine its rights and preferences is to eliminate delays associated with a stockholder vote on specific issuances. The issuance of preferred stock, while providing desirable flexibility in connection with

 

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providing leverage for our investment program, possible acquisitions and other corporate purposes, could make it more difficult for a third party to acquire, or could discourage a third party from acquiring, a majority of our outstanding voting stock.

Delaware law and certain charter and bylaw provisions; anti-takeover measures

Under Delaware law, directors may be removed with or without cause by the affirmative vote of the holders of a majority in voting power of the then outstanding shares of our capital stock entitled to vote.

Under our bylaws, subject to the rights of any holders of preferred stock, any vacancy on the board of directors, however the vacancy occurs, including a vacancy due to an enlargement of the board, may only be filled by vote of a majority of the directors then in office.

The limitations on the filling of vacancies could have the effect of making it more difficult for a third party to acquire us, or of discouraging a third party from acquiring us. Our certificate of incorporation also provides that special meetings of the stockholders may only be called by our board of directors, Chairman, Vice Chairman (if any), President (if any) or Chief Executive Officer.

Delaware’s corporation law provides generally that the affirmative vote of a majority of the outstanding shares entitled to vote thereon is required to amend a corporation’s certificate of incorporation, unless a corporation’s certificate of incorporation requires a greater percentage. Our certificate of incorporation permits our board of directors to adopt, amend or repeal our bylaws. Our bylaws generally can be amended by approval of at least 66 2/3% of the total number of continuing directors. Under Delaware law, our stockholders have the right to amend our bylaws by the affirmative vote of the majority of the shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter.

Our certificate of incorporation provides that directors may be removed with or without cause by approval of at least 66 2/3% of the “continuing” directors (as such term is defined in our certificate of incorporation) or for cause by the affirmative vote of the holders of 75% of the then outstanding shares of our capital stock entitled to vote. Our certificate of incorporation also provides that stockholders do not have the right to adopt, amend or repeal our bylaws. At our 2018 annual meeting of stockholders, stockholders were asked to approve amendments to our certificate of incorporation to revise these provisions in order to remove any inconsistency with Delaware’s corporation law. Stockholders did not approve the proposed amendments and, as a result, our certificate of incorporation was not amended. However, as disclosed in the proxy statement for our 2018 annual meeting of stockholders, the Board has determined that it will not enforce these provisions because they are inconsistent with Delaware’s corporation law. Therefore, our stockholders have the right to remove any or all of our directors by a vote of a majority of the outstanding shares of our capital stock entitled to vote and have the right to amend our bylaws as provided pursuant to Delaware’s corporation law and our bylaws, and our continuing directors will not have the right to remove other directors.

Limitations of liability and indemnification

Under our certificate of incorporation, we will fully indemnify any person who was or is involved in any actual or threatened action, suit or proceeding by reason of the fact that such person is or was one of our directors or officers; provided, however, that, except for proceedings to enforce rights to indemnification, we will not be obligated to indemnify any director or officer in connection with a proceeding initiated by such person unless such proceeding was authorized or consented to by our board of directors. So long as we are regulated under the 1940 Act, the above indemnification and limitation of liability is limited by the 1940 Act or by any valid rule, regulation or order of the SEC thereunder. The 1940 Act provides, among other things, that a company may not indemnify any director or officer against liability to it or its security holders to which he or she might otherwise be subject by reason of his or her willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office.

 

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Delaware law also provides that indemnification permitted under the law shall not be deemed exclusive of any other rights to which the directors and officers may be entitled under the corporation’s bylaws, any agreement, a vote of stockholders or otherwise.

We have obtained liability insurance for our officers and directors.

Anti-takeover provisions

The following summary outlines certain provisions of Delaware law and our certificate of incorporation regarding anti-takeover provisions. These provisions could have the effect of limiting the ability of other entities or persons to acquire control of us by means of a tender offer, proxy contest or otherwise, or to change the composition of our board of directors. These provisions are expected to discourage certain coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to negotiate first with our board of directors. These measures, however, may delay, defer or prevent a transaction or a change in control that might otherwise be in the best interests of our stockholders and could have the effect of depriving stockholders of an opportunity to sell their shares at a premium over prevailing market prices. These attempts could also have the effect of increasing our expenses and disrupting our normal operation. We believe, however, that the benefits of these provisions outweigh the potential disadvantages of discouraging acquisition proposals because the negotiation of the proposals may improve their terms.

Pursuant to Delaware law and our certificate of incorporation, a director may be removed from office with or without cause by a vote of the holders of at a majority of the shares then entitled to vote for the election of the respective director.

In addition, our certificate of incorporation requires the favorable vote of a majority of our board of directors followed by the favorable vote of the holders of at least 75% of our outstanding shares of each affected class or series, voting separately as a class or series, to approve, adopt or authorize certain transactions with 10% or greater holders of a class or series of shares and their associates, unless the transaction has been approved by at least 80% of our directors, in which case “a majority of the outstanding voting securities” (as defined in the 1940 Act) will be required. For purposes of these provisions, a 10% or greater holder of a class or series of shares, or a principal stockholder, refers to any person who, whether directly or indirectly and whether alone or together with its affiliates and associates, beneficially owns 10% or more of the outstanding shares of our voting securities.

The 10% holder transactions subject to these special approval requirements are: the merger or consolidation of us or any subsidiary of ours with or into any principal stockholder; the issuance of any of our securities to any principal stockholder for cash, except pursuant to any automatic dividend reinvestment plan; the sale, lease or exchange of all or any substantial part of our assets to any principal stockholder, except assets having an aggregate fair market value of less than 5% of our total assets, aggregating for the purpose of such computation all assets sold, leased or exchanged in any series of similar transactions within a twelve-month period; or the sale, lease or exchange to us or any subsidiary of ours, in exchange for our securities, of any assets of any principal stockholder, except assets having an aggregate fair market value of less than 5% of our total assets, aggregating for purposes of such computation all assets sold, leased or exchanged in any series of similar transactions within a twelve-month period.

To convert us to a closed-end or open-end investment company, to merge or consolidate us with any entity or sell all or substantially all of our assets to any entity in a transaction as a result of which the governing documents of the surviving entity do not contain substantially the same anti-takeover provisions as are provided in our certificate of incorporation or to liquidate and dissolve us other than in connection with a qualifying merger, consolidation or sale of assets or to amend certain of the provisions relating to these matters, our certificate of incorporation requires either (i) the favorable vote of a majority of our continuing directors followed by the favorable vote of the holders of at least 75% of our then outstanding shares of each affected class or series of our shares, voting separately as a class or series or (ii) the favorable vote of at least 80% of the then

 

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outstanding shares of our capital stock, voting together as a single class. As part of any such conversion to an open-end investment company, substantially all of our investment policies and strategies and portfolio would have to be modified to assure the degree of portfolio liquidity required for open-end investment companies. In the event of our conversion to an open-end investment company, the common shares would cease to be listed on any national securities exchange or market system. Stockholders of an open-end investment company may require the company to redeem their shares at any time, except in certain circumstances as authorized by or under the 1940 Act, at their net asset value, less such redemption charge, if any, as might be in effect at the time of a redemption. You should assume that it is not likely that our board of directors would vote to convert us to an open-end fund.

The 1940 Act defines “a majority of the outstanding voting securities” as the lesser of a majority of the outstanding shares and 67% of a quorum of a majority of the outstanding shares. For the purposes of calculating “a majority of the outstanding voting securities” under our certificate of incorporation, each class and series of our shares will vote together as a single class, except to the extent required by the 1940 Act or our certificate of incorporation, with respect to any class or series of shares. If a separate class vote is required, the applicable proportion of shares of the class or series, voting as a separate class or series, also will be required.

Our board of directors has determined that provisions with respect to the board of directors and the stockholder voting requirements described above, which voting requirements are greater than the minimum requirements under Delaware law or the 1940 Act, are in the best interest of stockholders generally.

 

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DESCRIPTION OF OUR PREFERRED STOCK

In addition to shares of common stock, our certificate of incorporation authorizes the issuance of preferred stock. We may issue preferred stock from time to time in one or more classes or series, without stockholder approval, although we have no immediate intention to do so. If we offer preferred stock under this prospectus we will issue an appropriate prospectus supplement and free writing prospectus. Prior to issuance of shares of each class or series, our board of directors is required by Delaware law and by our certificate of incorporation to set the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each class or series. Thus, the board of directors could authorize the issuance of shares of preferred stock with terms and conditions that could have the effect of delaying, deferring or preventing a transaction or a change in control that might involve a premium price for holders of our common stock or otherwise be in their best interest. You should note, however, that any such an issuance must adhere to the requirements of the 1940 Act, Delaware law and any other limitations imposed by law.

The following is a general description of the terms of the preferred stock we may issue from time to time. Particular terms of any preferred stock we offer will be described in the prospectus supplement and any related free writing prospectus accompanying each preferred share offering.

The 1940 Act requires, among other things, that (i) immediately after issuance and before any dividend or other distribution is made with respect to our common stock and before any purchase of common stock is made, such preferred stock together with all other senior securities must not exceed an amount equal to 50% of our total assets after deducting the amount of such dividend, distribution or purchase price, as the case may be, (ii) the holders of shares of preferred stock, if any are issued, must be entitled as a class to elect two directors at all times and to elect a majority of the directors if dividends or other distribution on the preferred stock are in arrears by two years or more, and (iii) such shares be cumulative as to dividends and have a complete preference over our common stock to payment of their liquidation in event of dissolution. Some matters under the 1940 Act require the separate vote of the holders of any issued and outstanding preferred stock. For example, holders of preferred stock would vote separately from the holders of common stock on a proposal to cease operations as a business development company. We believe that the availability for issuance of preferred stock will provide us with increased flexibility in structuring future financings and acquisitions.

For any series of preferred stock that we may issue, our board of directors will determine and the articles supplementary and the prospectus supplement and any related free writing prospectus relating to such series will describe:

 

   

the designation and number of shares of such series;

 

   

the rate and time at which, and the preferences and conditions under which, any dividends or other distributions will be paid on shares of such series, as well as whether such dividends or other distributions are participating or non-participating;

 

   

any provisions relating to convertibility or exchangeability of the shares of such series, including adjustments to the conversion price of such series;

 

   

the rights and preferences, if any, of holders of shares of such series upon our liquidation, dissolution or winding up of our affairs;

 

   

the voting powers, if any, of the holders of shares of such series;

 

   

any provisions relating to the redemption of the shares of such series;

 

   

any limitations on our ability to pay dividends or make distributions on, or acquire or redeem, other securities while shares of such series are outstanding;

 

   

any conditions or restrictions on our ability to issue additional shares of such series or other securities;

 

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if applicable, a discussion of certain U.S. federal income tax considerations; and

 

   

any other relative powers, preferences and participating, optional or special rights of shares of such series, and the qualifications, limitations or restrictions thereof.

All shares of preferred stock that we may issue will be identical and of equal rank except as to the particular terms thereof that may be fixed by our board of directors, and all shares of each series of preferred stock will be identical and of equal rank except as to the dates from which dividends or other distributions, if any, thereon will be cumulative. To the extent we issue preferred stock, the payment of dividends to holders of our preferred stock will take priority over payment of dividends to our common stockholders.

 

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DESCRIPTION OF OUR SUBSCRIPTION RIGHTS

The following is a general description of the terms of the subscription rights we may issue from time to time. Particular terms of any subscription rights we offer will be described in the prospectus supplement and any related free writing prospectus relating to such subscription rights.

We may issue subscription rights to our stockholders to purchase common stock and/or preferred stock. Subscription rights may be issued independently or together with any other offered security and may or may not be transferable by the person purchasing or receiving the subscription rights. In connection with a subscription rights offering to our stockholders, we would distribute certificates evidencing the subscription rights and a prospectus supplement and any related free writing prospectus to our stockholders on the record date that we set for receiving subscription rights in such subscription rights offering.

Our stockholders will indirectly bear all of the expenses of the subscription rights offering, regardless of whether our stockholders exercise any subscription rights.

A prospectus supplement and any related free writing prospectus will describe the particular terms of any subscription rights we may issue, including the following:

 

   

the period of time the offering would remain open (which shall be open a minimum number of days such that all record holders would be eligible to participate in the offering and shall not be open longer than 120 days);

 

   

the title and aggregate number of such subscription rights;

 

   

the exercise price for such subscription rights (or method of calculation thereof);

 

   

the currency or currencies, including composite currencies, in which the price of such subscription rights may be payable;

 

   

if applicable, the designation and terms of the securities with which the subscription rights are issued and the number of subscription rights issued with each such security or each principal amount of such security;

 

   

the ratio of the offering (which, in the case of transferable rights, will require a minimum of three shares to be held of record before a person is entitled to purchase an additional share);

 

   

the number of such subscription rights issued to each stockholder;

 

   

the extent to which such subscription rights are transferable and the market on which they may be traded if they are transferable;

 

   

the date on which the right to exercise such subscription rights shall commence, and the date on which such right shall expire (subject to any extension);

 

   

if applicable, the minimum or maximum number of subscription rights that may be exercised at one time;

 

   

the extent to which such subscription rights include an over-subscription privilege with respect to unsubscribed securities and the terms of such over-subscription privilege;

 

   

any termination right we may have in connection with such subscription rights offering;

 

   

the terms of any rights to redeem, or call such subscription rights;

 

   

information with respect to book-entry procedures, if any;

 

   

the terms of the securities issuable upon exercise of the subscription rights;

 

 

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the material terms of any standby underwriting, backstop or other purchase arrangement that we may enter into in connection with the subscription rights offering;

 

   

if applicable, a discussion of certain U.S. federal income tax considerations applicable to the issuance or exercise of such subscription rights; and

 

   

any other terms of such subscription rights, including exercise, settlement and other procedures and limitations relating to the transfer and exercise of such subscription rights.

Each subscription right will entitle the holder of the subscription right to purchase for cash or other consideration such amount of shares of common stock at such subscription price as shall in each case be set forth in, or be determinable as set forth in, the prospectus supplement and any related free writing prospectus relating to the subscription rights offered thereby. Subscription rights may be exercised as set forth in the prospectus supplement and any related free writing prospectus beginning on the date specified therein and continuing until the close of business on the expiration date for such subscription rights set forth in the prospectus supplement and any related free writing prospectus. After the close of business on the expiration date, all unexercised subscription rights will become void.

Upon receipt of payment and the subscription rights certificate properly completed and duly executed at the corporate trust office of the subscription rights agent or any other office indicated in the prospectus supplement and any related free writing prospectus we will forward, as soon as practicable, the shares of common stock purchasable upon such exercise. If less than all of the rights represented by such subscription rights certificate are exercised, a new subscription certificate will be issued for the remaining rights. Prior to exercising their subscription rights, holders of subscription rights will not have any of the rights of holders of the securities purchasable upon such exercise. To the extent permissible under applicable law, we may determine to offer any unsubscribed offered securities directly to persons other than stockholders, to or through agents, underwriters or dealers or through a combination of such methods, as set forth in the applicable prospectus supplement and any related free writing prospectus.

Under the 1940 Act, we may generally only offer subscription rights (other than rights to subscribe expiring not later than 120 days after their issuance and issued exclusively and ratably to a class or classes of our security holders) on the condition that (1) the subscription rights expire by their terms within ten years; (2) the exercise price is not less than the current market value at the date of issuance; (3) our stockholders authorize the proposal to issue such subscription rights, and a “required” majority of our Board of Directors approves of such issuance on the basis that the issuance is in the best interests of the Company and our stockholders; and (4) if the subscription rights are accompanied by other securities, the subscription rights are not separately transferable unless no class of such subscription rights and the securities accompanying them has been publicly distributed. A “required” majority of our Board of Directors is a vote of both a majority of our directors who have no financial interest in the transaction and a majority of the directors who are not interested persons of the company. The 1940 Act also provides that the amount of our voting securities that would result from the exercise of all outstanding warrants, options and subscription rights at the time of issuance may not exceed 25% of our outstanding voting securities.

For information regarding the dilutive impact of rights offerings, please see “Risk Factors—Risks Related to our Investments— Your interest in us may be diluted if you do not fully exercise your subscription rights in any rights offering.” in Part I, Item 1A of our most recent Annual Report on Form 10-K, which is incorporated by reference into this prospectus In addition, if the subscription price is less than our net asset value per share, then you will experience an immediate dilution of the aggregate net asset value of your shares.”

 

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DESCRIPTION OF WARRANTS

The following is a general description of the terms of the warrants we may issue from time to time. Particular terms of any warrants we offer will be described in the prospectus supplement and any related free writing prospectus relating to such warrants and will be subject to compliance with the 1940 Act.

We may issue warrants to purchase shares of our common stock, preferred stock or debt securities. Such warrants may be issued independently or together with shares of common stock, preferred stock or debt securities and may be attached or separate from such securities. We will issue each series of warrants under a separate warrant agreement to be entered into between us and a warrant agent. The warrant agent will act solely as our agent and will not assume any obligation or relationship of agency for or with holders or beneficial owners of warrants.

A prospectus supplement and any related free writing prospectus will describe the particular terms of any series of warrants we may issue, including the following:

 

   

the title and aggregate number of such warrants;

 

   

the price or prices at which such warrants will be issued;

 

   

the currency or currencies, including composite currencies, in which the price of such warrants may be payable;

 

   

if applicable, the designation and terms of the securities with which the warrants are issued and the number of warrants issued with each such security or each principal amount of such security;

 

   

in the case of warrants to purchase debt securities, the principal amount of debt securities purchasable upon exercise of one warrant and the price at which and the currency or currencies, including composite currencies, in which this principal amount of debt securities may be purchased upon such exercise;

 

   

in the case of warrants to purchase common stock or preferred stock, the number of shares of common stock or preferred stock, as the case may be, purchasable upon exercise of one warrant and the price at which and the currency or currencies, including composite currencies, in which these shares may be purchased upon such exercise;

 

   

the date on which the right to exercise such warrants shall commence and the date on which such right will expire (subject to any extension);

 

   

whether such warrants will be issued in registered form or bearer form;

 

   

if applicable, the minimum or maximum amount of such warrants that may be exercised at any one time;

 

   

if applicable, the date on and after which such warrants and the related securities will be separately transferable;

 

   

the terms of any rights to redeem, or call such warrants;

 

   

information with respect to book-entry procedures, if any;

 

   

the terms of the securities issuable upon exercise of the warrants;

 

   

if applicable, a discussion of certain U.S. federal income tax considerations; and

 

   

any other terms of such warrants, including terms, procedures and limitations relating to the exchange and exercise of such warrants.

 

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We and the warrant agent may amend or supplement the warrant agreement for a series of warrants without the consent of the holders of the warrants issued thereunder to effect changes that are not inconsistent with the provisions of the warrants and that do not materially and adversely affect the interests of the holders of the warrants.

Each warrant will entitle the holder to purchase for cash such common stock or preferred stock at the exercise price or such principal amount of debt securities as shall in each case be set forth in, or be determinable as set forth in, the prospectus supplement and any related free writing prospectus relating to the warrants offered thereby. Warrants may be exercised as set forth in the prospectus supplement and any related free writing prospectus beginning on the date specified therein and continuing until the close of business on the expiration date set forth in the prospectus supplement and any related free writing prospectus. After the close of business on the expiration date, unexercised warrants will become void.

Upon receipt of payment and a warrant certificate properly completed and duly executed at the corporate trust office of the warrant agent or any other office indicated in the prospectus supplement and any related free writing prospectus, we will, as soon as practicable, forward the securities purchasable upon such exercise. If less than all of the warrants represented by such warrant certificate are exercised, a new warrant certificate will be issued for the remaining warrants. If we so indicate in the applicable prospectus supplement and any related free writing prospectus, holders of the warrants may surrender securities as all or part of the exercise price for warrants.

Prior to exercising their warrants, holders of warrants will not have any of the rights of holders of the securities purchasable upon such exercise, including, in the case of warrants to purchase debt securities, the right to receive principal, premium, if any, or interest payments, on the debt securities purchasable upon exercise or to enforce covenants in the applicable indenture or, in the case of warrants to purchase common stock or preferred stock, the right to receive dividends or other distributions, if any, or payments upon our liquidation, dissolution or winding up or to exercise any voting rights.

Under the 1940 Act, we may generally only offer warrants (other than warrants expiring not later than 120 days after their issuance and issued exclusively and ratably to a class or classes of our security holders) provided that (i) the warrants expire by their terms within ten years, (ii) the exercise or conversion price is not less than the current market value at the date of issuance, (iii) our stockholders authorize the proposal to issue such warrants, and our board of directors approves such issuance on the basis that the issuance is in the best interests of the Company and its stockholders and (iv) if the warrants are accompanied by other securities, the warrants are not separately transferable unless no class of such warrants and the securities accompanying them has been publicly distributed. The 1940 Act also provides that the amount of our voting securities that would result from the exercise of all outstanding warrants, as well as options and rights, at the time of issuance may not exceed 25% of our outstanding voting securities.

 

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DESCRIPTION OF OUR DEBT SECURITIES

We may issue debt securities in one or more series. The specific terms of each series of debt securities will be described in this prospectus and in the particular prospectus supplement and any related free writing prospectus relating to that series. The prospectus supplement and any related free writing prospectus may or may not modify the general terms found in this prospectus and will be filed with the SEC. For a complete description of the terms of a particular series of debt securities, including any supplemental indenture, you should read both this prospectus and the prospectus supplement and any related free writing prospectus relating to that particular series.

As required by federal law for all bonds and notes of companies that are publicly offered, the debt securities are governed by a document called an “indenture.” An indenture is a contract between us and U.S. Bank National Association, a financial institution acting as trustee on your behalf, and is subject to and governed by the Trust Indenture Act of 1939, as amended. The trustee has two main roles. First, the trustee can enforce your rights against us if we default. There are some limitations on the extent to which the trustee acts on your behalf, described in the second paragraph under “Events of Default—Remedies if an Event of Default Occurs.” Second, the trustee performs certain administrative duties for us.

Because this section is a summary, it does not describe every aspect of the debt securities and the indenture. The following description summarizes the material provisions of the indenture. We urge you to read the indenture because it, and not this description, defines your rights as a holder of debt securities. For example, in this section, we use capitalized words to signify terms that are specifically defined in the indenture. We have filed the form of the indenture with the SEC. See “Available Information” for information on how to obtain a copy of the indenture.

A prospectus supplement, which will accompany this prospectus, and any related free writing prospectus will describe the particular terms of any series of debt securities being offered, including the following:

 

   

the designation or title of the series of debt securities;

 

   

the total principal amount of the series of debt securities;

 

   

the percentage of the principal amount at which the series of debt securities will be offered;

 

   

the date or dates on which principal will be payable;

 

   

the rate or rates (which may be either fixed or variable) and/or the method of determining such rate or rates of interest, if any;

 

   

the date or dates from which any interest will accrue, or the method of determining such date or dates, and the date or dates on which any interest will be payable;

 

   

the terms for redemption, extension or early repayment, if any;

 

   

the currencies in which the series of debt securities are issued and payable;

 

   

whether the amount of payments of principal, premium or interest, if any, on a series of debt securities will be determined with reference to an index, formula or other method (which could be based on one or more currencies, commodities, equity indices or other indices) and how these amounts will be determined;

 

   

the place or places, if any, other than or in addition to the City of New York, of payment, transfer, conversion and/or exchange of the debt securities;

 

   

the denominations in which the offered debt securities will be issued;

 

   

the provision for any sinking fund;

 

   

any restrictive covenants;

 

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any Events of Default;

 

   

whether the series of debt securities are issuable in certificated form;

 

   

any provisions for defeasance or covenant defeasance;

 

   

if applicable, a discussion of certain U.S. federal income tax considerations, including any U.S. federal income tax considerations relating to original issue discount;

 

   

whether and under what circumstances we will pay additional amounts in respect of any tax, assessment or governmental charge and, if so, whether we will have the option to redeem the debt securities rather than pay the additional amounts (and the terms of this option);

 

   

any provisions for convertibility or exchangeability of the debt securities into or for any other securities;

 

   

whether the debt securities are subject to subordination and the terms of such subordination;

 

   

the listing, if any, on a securities exchange; and

 

   

any other terms.

The debt securities may be secured or unsecured obligations. Unless the prospectus supplement or any related free writing prospectus states otherwise, principal (and premium, if any) and interest, if any, will be paid by us in immediately available funds.

We are permitted, under specified conditions, to issue multiple classes of indebtedness if our asset coverage, as defined in the 1940 Act, is at least equal to 150% immediately after each such issuance. In addition, while any indebtedness and other senior securities remain outstanding, we must make provisions to prohibit any distribution to our stockholders or the repurchase of such securities or shares unless we meet the applicable asset coverage ratios at the time of the distribution or repurchase. We may also borrow amounts up to 5% of the value of our total assets for temporary or emergency purposes without regard to asset coverage. For a discussion of the risks associated with leverage, see “Risk Factors—Risks Relating to Our Business—Regulations governing our operation as a BDC may limit our ability to, and the way in which we, raise additional capital, which could have a material adverse impact on our liquidity, financial condition and results of operations” in Part I, Item 1A of our most recent Annual Report on Form 10-K, which is incorporated by reference into this prospectus

General

The indenture provides that any debt securities proposed to be sold under this prospectus and the relevant accompanying prospectus supplement and any related free writing prospectus (“offered debt securities”) and any debt securities issuable upon the exercise of warrants or upon conversion or exchange of other offered securities (“underlying debt securities”), may be issued under the indenture in one or more series.

For purposes of this prospectus, any reference to the payment of principal of or premium or interest, if any, on debt securities will include additional amounts if required by the terms of the debt securities.

The indenture does not limit the amount of debt securities that may be issued thereunder from time to time. Debt securities issued under the indenture, when a single trustee is acting for all debt securities issued under the indenture, are called the “indenture securities.” The indenture also provides that there may be more than one trustee thereunder, each with respect to one or more different series of indenture securities. See “Resignation of Trustee” section below. At a time when two or more trustees are acting under the indenture, each with respect to only certain series, the term “indenture securities” means the one or more series of debt securities with respect to which each respective trustee is acting. In the event that there is more than one trustee under the indenture, the powers and trust obligations of each trustee described in this prospectus will extend only to the one or more series of indenture securities for which it is trustee. If two or more trustees are acting under the indenture, then

 

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the indenture securities for which each trustee is acting would be treated as if issued under separate indentures. We refer you to the prospectus supplement and any related free writing prospectus for information with respect to any deletions from, modifications of or additions to the Events of Default or our covenants that are described below, including any addition of a covenant or other provision providing event risk or similar protection.

We have the ability to issue indenture securities with terms different from those of indenture securities previously issued and, without the consent of the holders thereof, to reopen a previous issue of a series of indenture securities and issue additional indenture securities of that series unless the reopening was restricted when that series was created.

We expect that we will usually issue debt securities in book entry only form represented by global securities.

Conversion and Exchange

If any debt securities are convertible into or exchangeable for other securities, the prospectus supplement and any related free writing prospectus will explain the terms and conditions of the conversion or exchange, including the conversion price or exchange ratio (or the calculation method), the conversion or exchange period (or how the period will be determined), if conversion or exchange will be mandatory or at the option of the holder or us, provisions for adjusting the conversion price or the exchange ratio and provisions affecting conversion or exchange in the event of the redemption of the underlying debt securities. These terms may also include provisions under which the number or amount of other securities to be received by the holders of the debt securities upon conversion or exchange would be calculated according to the market price of the other securities as of a time stated in the prospectus supplement and any related free writing prospectus.

Issuance of Securities in Registered Form

We may issue the debt securities in registered form, in which case we may issue them either in book-entry form only or in “certificated” form. Debt securities issued in book-entry form will be represented by global securities. We expect that we will usually issue debt securities in book-entry only form represented by global securities.

Book-Entry Holders

We will issue registered debt securities in book-entry form only, unless we specify otherwise in the applicable prospectus supplement or any related free writing prospectus. This means debt securities will be represented by one or more global securities registered in the name of a depositary that will hold them on behalf of financial institutions that participate in the depositary’s book-entry system. These participating institutions, in turn, hold beneficial interests in the debt securities held by the depositary or its nominee. These institutions may hold these interests on behalf of themselves or customers.

Under the indenture, only the person in whose name a debt security is registered is recognized as the holder of that debt security. Consequently, for debt securities issued in book-entry form, we will recognize only the depositary as the holder of the debt securities and we will make all payments on the debt securities to the depositary. The depositary will then pass along the payments it receives to its participants, which in turn will pass the payments along to their customers who are the beneficial owners. The depositary and its participants do so under agreements they have made with one another or with their customers; they are not obligated to do so under the terms of the debt securities.

As a result, investors will not own debt securities directly. Instead, they will own beneficial interests in a global security, through a bank, broker or other financial institution that participates in the depositary’s book- entry system or holds an interest through a participant. As long as the debt securities are represented by one or more global securities, investors will be indirect holders, and not holders, of the debt securities.

 

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Street Name Holders

In the future, we may issue debt securities in certificated form or terminate a global security. In these cases, investors may choose to hold their debt securities in their own names or in “street name.” Debt securities held in street name are registered in the name of a bank, broker or other financial institution chosen by the investor, and the investor would hold a beneficial interest in those debt securities through the account he or she maintains at that institution.

For debt securities held in street name, we will recognize only the intermediary banks, brokers and other financial institutions in whose names the debt securities are registered as the holders of those debt securities and we will make all payments on those debt securities to them. These institutions will pass along the payments they receive to their customers who are the beneficial owners, but only because they agree to do so in their customer agreements or because they are legally required to do so. Investors who hold debt securities in street name will be indirect holders, and not holders, of the debt securities.

Legal Holders

Our obligations, as well as the obligations of the applicable trustee and those of any third parties employed by us or the applicable trustee, run only to the legal holders of the debt securities. We do not have obligations to investors who hold beneficial interests in global securities, in street name or by any other indirect means. This will be the case whether an investor chooses to be an indirect holder of a debt security or has no choice because we are issuing the debt securities only in book-entry form.

For example, once we make a payment or give a notice to the holder, we have no further responsibility for the payment or notice even if that holder is required, under agreements with depositary participants or customers or by law, to pass it along to the indirect holders but does not do so. Similarly, if we want to obtain the approval of the holders for any purpose (for example, to amend an indenture or to relieve us of the consequences of a default or of our obligation to comply with a particular provision of an indenture), we would seek the approval only from the holders, and not the indirect holders, of the debt securities. Whether and how the holders contact the indirect holders is up to the holders.

When we refer to you, we mean those who invest in the debt securities being offered by this prospectus, whether they are the holders or only indirect holders of those debt securities. When we refer to your debt securities, we mean the debt securities in which you hold a direct or indirect interest.

Special Considerations for Indirect Holders

If you hold debt securities through a bank, broker or other financial institution, either in book-entry form or in street name, we urge you to check with that institution to find out:

 

   

how it handles securities payments and notices,

 

   

whether it imposes fees or charges,

 

   

how it would handle a request for the holders’ consent, if ever required,

 

   

whether and how you can instruct it to send you debt securities registered in your own name so you can be a holder, if that is permitted in the future for a particular series of debt securities,

 

   

how it would exercise rights under the debt securities if there were a default or other event triggering the need for holders to act to protect their interests, and

 

   

if the debt securities are in book-entry form, how the depositary’s rules and procedures will affect these matters.

 

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Global Securities

As noted above, we usually will issue debt securities as registered securities in book-entry form only. A global security represents one or any other number of individual debt securities. Generally, all debt securities represented by the same global securities will have the same terms.

Each debt security issued in book-entry form will be represented by a global security that we deposit with and register in the name of a financial institution or its nominee that we select. The financial institution that we select for this purpose is called the depositary. Unless we specify otherwise in the applicable prospectus supplement or any related free writing prospectus, The Depository Trust Company, New York, New York, known as DTC, will be the depositary for all debt securities issued in book-entry form.

A global security may not be transferred to or registered in the name of anyone other than the depositary or its nominee, unless special termination situations arise. We describe those situations below under “Special Situations when a Global Security Will Be Terminated”. As a result of these arrangements, the depositary, or its nominee, will be the sole registered owner and holder of all debt securities represented by a global security, and investors will be permitted to own only beneficial interests in a global security. Beneficial interests must be held by means of an account with a broker, bank or other financial institution that in turn has an account with the depositary or with another institution that has an account with the depositary. Thus, an investor whose security is represented by a global security will not be a holder of the debt security, but only an indirect holder of a beneficial interest in the global security.

Special Considerations for Global Securities

As an indirect holder, an investor’s rights relating to a global security will be governed by the account rules of the investor’s financial institution and of the depositary, as well as general laws relating to securities transfers. The depositary that holds the global security will be considered the holder of the debt securities represented by the global security.

If debt securities are issued only in the form of a global security, an investor should be aware of the following:

 

   

An investor cannot cause the debt securities to be registered in his or her name, and cannot obtain certificates for his or her interest in the debt securities, except in the special situations we describe below.

 

   

An investor will be an indirect holder and must look to his or her own bank or broker for payments on the debt securities and protection of his or her legal rights relating to the debt securities, as we describe under “Issuance of Securities in Registered Form” above.

 

   

An investor may not be able to sell interests in the debt securities to some insurance companies and other institutions that are required by law to own their securities in non-book-entry form.

 

   

An investor may not be able to pledge his or her interest in a global security in circumstances where certificates representing the debt securities must be delivered to the lender or other beneficiary of the pledge in order for the pledge to be effective.

 

   

The depositary’s policies, which may change from time to time, will govern payments, transfers, exchanges and other matters relating to an investor’s interest in a global security. We and the trustee have no responsibility for any aspect of the depositary’s actions or for its records of ownership interests in a global security. We and the trustee also do not supervise the depositary in any way.

 

   

If we redeem less than all the debt securities of a particular series being redeemed, DTC’s practice is to determine by lot the amount to be redeemed from each of its participants holding that series.

 

 

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An investor is required to give notice of exercise of any option to elect repayment of its debt securities, through its participant, to the applicable trustee and to deliver the related debt securities by causing its participant to transfer its interest in those debt securities, on DTC’s records, to the applicable trustee.

 

   

DTC requires that those who purchase and sell interests in a global security deposited in its book-entry system use immediately available funds. Your broker or bank may also require you to use immediately available funds when purchasing or selling interests in a global security.

 

   

Financial institutions that participate in the depositary’s book-entry system, and through which an investor holds its interest in a global security, may also have their own policies affecting payments, notices and other matters relating to the debt securities. There may be more than one financial intermediary in the chain of ownership for an investor. We do not monitor and are not responsible for the actions of any of those intermediaries.

Special Situations when a Global Security will be Terminated

In a few special situations described below, a global security will be terminated and interests in it will be exchanged for certificates in non-book-entry form (